In a directions hearing on Friday before NSW Supreme Court Justice Michael Ball, solicitor for the class action Toni Di Bello, said he was seeking instructions from the 153 group members about terminating the proceedings after the last remaining defendant, Sydney lawyer Leigh Johnson, declared herself bankrupt.

“I don’t think the matter will proceed,” said Di Bello. 

In July last year, the NSW Court of Appeal found that Johnson engaged in misleading and deceptive conduct by failing to disclose Foster’s involvement in the Sports Trading Club betting scheme, which was “material” information for investors.

“It is self-evident that the involvement of a notorious conman as principal architect of an investment scheme would be highly material to potential investors, and indeed that if it were revealed, no-one would invest,” the court said.

“One can hardly conceive of a matter more requiring disclosure to the public, in the context of the promotion of an investment scheme, than the fact that its architect and a person involved in its management is a notorious conman.”

Over 400 people invested $29.6 million in STC, court found

After ruling in February 2019 that Foster had caused investor losses as controlling partner of the STC Ponzi scheme, NSW Supreme Court Justice James Stevenson expanded these findings to lawyer Leigh Johnson in a judgment delivered in December 2019.

The judge set the stage for a future damages hearing in the class action, ruling that Johnson caused loss to over 150 investors by failing to reveal that Foster — using the alias Mark Hughes — was the mastermind behind STC despite having numerous opportunities to divulge her strong suspicions about the fraudulent nature of the partnership.

Johnson was one of two partners in the STC partnership, which allegedly held itself out to investors as operating a betting scheme guaranteed to provide high returns.

More than 400 people allegedly invested $29.6 million between 2013 and 2014 to STC and successor STC Sports Trading Club, of which Johnson resigned as member in January 2014.

Lead applicant of the 153 group members who invested in the scheme, Ian Mackinnon, allegedly advanced $200,000 to STC. The judge found Johnson engaged in misleading and deceptive conduct and was liable to compensate Mackinnon for his entire investment.

Johnson engaged in misleading and deceptive conduct because she represented that the proposal document was true and did not disclose Foster’s involvement in the scheme, Justice Stevenson said.

Johnson argued on appeal that Justice Stevenson was wrong to find that Mackinnon relied on the alleged representations and that they caused him the loss of his investment. The lawyer also claimed the judge was wrong to find that she was liable for misleading and deceptive conduct by failing to disclose Foster’s involvement in STC.

‘The gullible are not disentitled to protection’

The appeals court found that if the investors knew of Foster’s involvement in STC, it would have been a strong “deterrent” to investing.

While Mackinnon was “somewhat gullible”, that did not mean Johnson’s alleged misleading representations did not cause his loss, the appeals court found.

“The gullible are not disentitled to protection against misleading and deceptive conduct; indeed, it is for the protection of those who believe and trust what they hear and see that the cause of action exists,” the appeals court said.

The appeals court also found Johnson knew of Foster’s “notoriety” and that he was using an alias in his involvement with STC. The judges said Johnson’s involvement was being used to “add respectability” to STC.

Johnson was actively involved in concealing Foster’s role in STC by pretending investors were dealing with a person called “Mark Hughes”, the appeals court said.

The lawyer “admitted that she was ‘vaguely’ aware of the allegations made against Foster, and she said that the reason why Foster’s name was not on the partnership deed was that she was expecting him to be jailed,” said the court.

Johnson was “extremely concerned” about improper management of STC in September 2013, knew that investor accounts were being falsified and that a Ponzi scheme may be involved, the appeals court heard.

The appeals court found Johnson was aware of the misleading statements in the proposal because she provided her photo to be included for marketing, her resume appeared in the document and her accountants were listed on the front of the proposal as accountants for STC.

Johnson was also the only person who provided the seed capital to start the business, being $182,500, the appeals court said.

Justice Brereton disagreed with the majority that Johnson knew the proposal was false, saying she had “adamantly denied” that she knew the proposal was false and there was no direct evidence to refute her claims.

The group members are represented by Thomas Dixon and Haren Pararajasingham, instructed by Nelson McKinnon Lawyers. Johnson did not appear.

The case is Ian Henry Mackinnon (formerly Paul Baker) as representative plaintiff of 153 group members v The partnership of Anne Patricia Larter, Alan Jones, Miraleste Pty Ltd trading as USG Partner and Leigh Johnson, trading as “STC Sports Trading Club”.

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