CASE 31/97
Members:J Block SM
PM Greenwood M
Tribunal:
Administrative Appeals Tribunal
J Block (Senior Member) and PM Greenwood (Member)
This matter relates to decisions by the Respondent to disallow objections by the Applicant against notices of assessment in respect of each of the years of income ending 30 June 1983 to 30 June 1987 (both years inclusive and referred to as the ``relevant years''), against the Trustee under section 99A of the Income Tax Assessment Act 1936 (the ``Act''). The notices (T5, T8, T11, T14 and T17 of the T Documents) disallowing the objections were issued on 19 October 1994; accordingly, the burden of proof on the Applicant is that imposed by section 14ZZK of the Taxation Administration Act 1953.
2. It is relevant, at the outset, to note that this matter was heard together with matter NT95/76-82 between a man who is referred to as W, and the Respondent; that matter is referred to in brief as the ``W Matter'' or the ``W Case''.
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3. The Applicant was represented by Mr D.K.L. Raphael and Ms D. Conway of Counsel and the Respondent was represented by Mr D. B. McGovern of Counsel and Mr P. Poulos of the office of the Australian Government Solicitor. At the commencement of the hearings (both of this matter and the W Matter) the Tribunal admitted into evidence the T Documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 in respect of this matter and the W Matter. The T Documents in the W Matter consist of 4 large volumes containing in aggregate nearly 2,000 pages of documentation; the T Documents in this matter number nearly 300 pages. The Tribunal also accepted into evidence a large number of exhibits tendered by both parties; however, as set out later in these Reasons, W, during the second day of the hearings, withdrew the whole of his application in the W Matter; in addition the Applicant withdrew all interest claims in respect of this matter, which then proceeded alone. In the circumstances, references to exhibits in this matter are confined, for the most part, to those exhibits, which are most relevant or which were most often referred to, being in particular Exhibit A8 which is a statement by a man who is referred to as J, Exhibits A10 and A11, a statement and codicil (respectively) by a woman who is referred to as T, and Exhibit A12 which is a statement by woman who is referred to as R. Reference will also be made to Exhibits A5 and A6, which are respectively two of the six statements made by W, Exhibit A7 which is a sworn statement by a man who is referred to as ``CJ'', Exhibit A21 which is the minute book of B Company, Exhibit R8 which is a record of an examination of W which took place in the Supreme Court on 7 April 1989, Exhibits R9 and R10, which are respectively an application to set aside a judgment debt, and a related statement by T dated 25 July 1986. Evidence was given by W but in respect of the W case only; evidence was also given by each of T and R. To distinguish the T Documents tendered in this matter from those tendered in the W Case, all references to documents or pages which are preceded by the designation ``WT'' should be treated as references to the T Documents in the W Case; accordingly the term ``T Documents'' thus refers to the T Documents tendered in this matter. Auscript has produced a transcript in respect of each day's hearing, each of which commences with a page numbered 1. Accordingly, each ``TS'' reference which is preceded by a number, refers to the transcript for that day in February 1997 which is indicated by that number, while the number after each reference to TS is a reference to the relevant page of the transcript. For example, 18TS5 refers to page 5 of the Transcript for the 18 February 1997. These Reasons contain a number of extracts from the evidence, and there are also references to documents, all of which have been edited so as to preserve anonymity; edits are indicated by square brackets. We note in particular that the extracts (sometimes quite lengthy) from the evidence included in these Reasons have deliberately been inserted because, in the view of the Tribunal, they graphically illustrate the unsatisfactory nature of that evidence.
4. It is necessary in the first instance to set out, in brief terms, the circumstances in which the W case came to be withdrawn. Specifically in respect of the W case:
(a) W was asked at the commencement of his evidence whether he was able to confirm the truth of his sworn statements (Exhibits A1-A6 both inclusive); this occurred at the end of the first day of the hearing. See in this context 17TS46 as follows:
``MR RAPHAEL: Mr [W], is your full name, [W] and you presently reside at [ Sydney]? - Yes.
Have you prepared and sworn a series of statements in this matter? - Yes
Are the contents of those statements true and correct to the best of your knowledge? - I'd like to look at those again and answer that tomorrow if I could.
That is something of a nonplus.''
(This last comment was made by Mr Raphael who understandably enough was surprised by W's reply, given that all the relevant statements were sworn statements.)
(b) When the hearing commenced on the following day, W said that he affirmed his statements, excepting that and in relation to Exhibit R8, he said that he would have answered questions referable to a certain company incorporated in Hong Kong (and referred to as the ``Hong Kong Company'') if it had been referred to as ``Hong Kong Company Limited'', whereas it had in fact been referred
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to as ``Hong Kong Company Pty Limited''. See 18TS2 as follows:``MR RAPHAEL: Mr [W], could I perhaps assist your memory by saying that on page 12 of the section 541 examination there is a reference to a company called [Hong Kong Company] Pty Limited and you gave an answer to a query put to you as to what did you know of a company called [Hong Kong Company] Pty Limited. You made a certain reply and I understand you want to explain and to amplify that answer? - I answered no. On reflection I think the answer should've been [Hong Kong Company] Limited. I do know a company [Hong Kong Company] Limited and the reason I said no was because there was Pty Limited in the name of the company but I'd clarify that, yes, I do know [Hong Kong Company] Limited.''
(c) W's denial in respect of the Hong Kong Company as referred to in Exhibit R8 was untruthful; (in fact a reading of Exhibit R8 indicates that he was generally evasive in those proceedings). It would seem indeed that the Hong Kong Company was closely connected with W, in that he paid its running expenses: see in particular T Document 27 (pages 81 and 82). Page 81 is a letter dated 6 July 1989 addressed to W & Co (W's accounting firm) by a firm in Hong Kong enclosing an invoice for annual charges and concluding ``Please inform us if you do not need to continue using our service''. Page 82 is the invoice which includes charges for providing the registered office, and providing nominee shareholders and directors for the Hong Kong Company.
(d) W was asked whether he regarded himself as honest; see 18TS4 as follows:
``MR RAPHAEL: Mr [W], do you regard yourself as an honest man? - Basically honest, yes.
Is there anything you want to add to that? - Well, I admit I have probably done wrong things previously. I've paid for those mistakes but now I consider myself an honest person.
So you accept that you have -? - I've paid for my faults and I want to get on with my life now.''
(e) Mr Raphael also asked W another question in relation to Exhibit R8; see in this context 18TS5 as follows:
``MR RAPHAEL: Page 45, Mr [W]? - During the examination there were two deeds there on the desk and he showed me at some distance a deed. If that deed which I recognise as the current deed was the deed dated 16 October 1982, my answer would be no. If it was the deed dated 17 December 1982 the answer would be yes. I was confused there because there were two deeds on the desk, he was at some distance when he showed it to me.
MR BLOCK: Mr [W], do you remember that there was a deed which was typewritten and there was a deed which is basically a printed form or, at least a large chunk of it is printed -? - The printed form is the current -
The printed form is the one which bears the later date and you say that is the correct deed? - That is the current, yes.
I allowed you to carry on even after Mr Raphael had sat down. What you are now saying to us is; except for those two amendments the answers that you gave to Mr Montgomery, the Deputy Registrar in this examination were true and correct? - That's correct, yes.''
That evidence may usefully be considered in relation to the evidence by W recorded in Exhibit R8 at p 48 as follows:
``Q Now was that signed sometime in 1982?
A It would've been, yes.
Q Right -
A The date there, on the document.
Q Were you involved in the instructing of solicitors to prepare that Deed?
A Not, it was prepared by [R-S-].
Q Did you instruct that firm to prepare to prepare [sic] the Deed?
A Well instructions would've come from my office. Whether I specifically did it or, or (not transcribable) -
Q You probably don't recall. Would that be right?
A That'd be right.
Q And if I asked you -
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A Well, see [R-S-], I think you'd have to go to them and get copies of instruction from them.
Q Right, if I ask you the question, whether you can recall who the solicitor was who attended to the preparation of the Deed, would your answer be that you couldn't recall?
A All I know is the documents, I was busy at that time. The documents came back to my office, they were signed and registered. Stamped.''
It should be noted in particular that in the hearing recorded in Exhibit R8, W stated that the deed had been stamped.
(f) Clauses 44 and 45 of WT2 of the WT Documents read as follows:
``44. On 7 September 1988 a further notice pursuant to paragraph 264(1)(a) of the ITAA was issued to the applicant. Refer to folio T63. The applicant failed to answer that notice. The applicant was prosecuted for contravention of s 8C(1)(a) of the Taxation Administration Act 1953 with respect to his failure to answer that notice. In his defence to the prosecution the applicant alleged that he complied with the s 264(1)(a) notice of 7 September 1988 and produced to the Court a copy of his reply. The reply was allegedly stamped as having been received by the Taxation Office on the 7 November 1988. Refer to folio T64. Evidence was given that on that date the relevant office was closed to the public due to an industrial dispute. Refer to paragraph 45 below. On [date] the applicant was convicted by [Magistrate]. Upon conviction the applicant was ordered to comply with the notice within two months of [date]. Refer to... at folio T65.
45. On [date] search warrants were executed by the Australian Federal Police on the applicant's residential premises and also his business address [omitted]. During both searches, items of property were found which subsequently became the subject of charges. Some of the items found were rubber stamps. These included a Taxation Office stamp (which still had the date as referred to in paragraph 44 above still showing on it), a Federal Court of Australia stamp, and an Australia Post stamp.... On [ date] the applicant was charged with false testimony, fabrication of evidence, forging a document, receiving stamps, stealing stamps and possessing a prohibited weapon.''
(g) W was cross-examined in particular with reference to Exhibit A8, which is a sworn statement by J. Put in brief, Mr McGovern in his cross-examination of W elicited the fact that that sworn statement was concocted; this emerged in particular because, having regard to the numbers on certain annexed pages, some of the annexures to that statement were not, notwithstanding clause 13 of the Exhibit, extracts from J's passport (or for that matter as alleged by W, but only after his attention had been drawn to the number discrepancy, the passport of J's wife) but rather from the passport of someone else, known to W but not according to him, a ``mate''. That sworn statement, Exhibit A8 sought to establish the grant of a loan by a woman in the Philippines to W's wife. See in this context 18TS12 as follows:
``MR McGOVERN: Well, let us not be distracted, Mr [W], let us just ask about the witness statement. I would like you to tell me and to tell the Tribunal why it was that you knew that a man who had more than one passport, you allowed him to swear a witness statement in Sydney which said:
`A copy of my passport is attached to this statement.'
It does not explain that he had two, does it? - I think you are being confused. There were three passports all in the one name. He had lost one and that was two. He didn't have a passport under another name and maybe it should have said a copy of an extract of my passport is attached.
Well, Mr [W], would you turn through to the second last - perhaps the third last page of the document. This is Mr [Js] witness statement. You will see it is slightly faint, but in the top left hand corner there is a number that says G -? - Actually, I have not got that there. I've only got two sheets.
Well, we will help you with another document there. Just turn through to about the third last page and at the top you will see a G number? - Yes.
You see it says G625 and then it is slightly obscured? - No.
Just look to the back page if you would not mind. I think this will be very clear to you.
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The last page that is attached to his witness statement, if you look at the top right hand corner, it is actually a mirror image. If you held this up to a mirror you would get the correct passport number, but you see if you look at it from the right to the left, it stars [ sic] with an inverted `k'? - Yes.That is a quite different passport number to all of the other passport numbers that are attached to that witness statement, Mr [W], as you well know? I believe or I will repeat that one page of his new passport went onto the page of another passport because all the passports - here for example, this `k' here indicates that there were two passports were photocopied, `g' is one passport and `k' is another passport.
Mr [W], you have been up to your old tricks? - No.
You have attempted to deceive the Tribunal? - No.
That is not Mr [Js] passport number at all, as I will later prove and what you have said is a tissue of lies? - I don't believe that.
And you were a party to this deception? - I don't believe that.''
and again from 18TS13, 14 and 15:
``You heard Mr McGovern tell you that he is going to be able to establish that that is not Mr [Js] passport, reflect -? - That could be a copy of his wife's passport. Which was inadvertently somehow got onto his, but I wouldn't be sure.
MR McGOVERN: When I started asking you some questions about Mr [Js] witness statements and the circumstances in which it happened to have been prepared you were sliding all over the place, Mr [W], because you knew that that document has been falsely affixed to the document? - No, that is not correct. I believe that they have accidentally got into Mr [Js] file, that I would believe that `k' passport is probably entries of his wife.
What is his wife's name? - He has just recently married. She's Filipino and her name is or would be [MMJ] and probably back in that time because actually I went to the wedding up there in [LR], would be a Filipino name.
It would not be [L]? - I don't think so.
You do not think so because no [L] exists? - That's incorrect. But they, I would assume, would be from his wife.
Well would you be able to [sic] the Tribunal how it was that Mr [Js] wife's copy of a page from her passport happened to be attached to this witness statement which you prepared on his behalf? - Quite possibly, I can recall the incident, she wanted to get an extension here in Australia to stay. Now quite possibly when he faxed down these a while ago he also included hers in because she was going for an application for an extension of time to stay here in Australia and if you look at her passport here or, the entries which I would assume would be her passport, it has got no relevance in relation to the period we are discussing here at the Tribunal.
It has a lot of relevance, I suggest to you, if Mr [Js] passport showed that he was not in the Philippines at a particular time and that is why the substitution was made? - I don't think that's correct. I think if you check your facts he was there at specified times.
MR BLOCK: Is Mr [J] going to give evidence? - Yes.
MR McGOVERN: We will be taking it up with Mr [J]. Now you recall this incident, do you? You introduced this part of your explanation by saying that you recalled the incident and that she wanted to get an extension of time for her passport; is that right? - He came down -
No, no, answer my question, please. Return the courtesy of answering my questions, if you would be so kind? - Could you repeat it? Do you recall this incident, they were the words you used, and you said words to the effect: I recall the incident. She wanted to get an extension of time for her passport. When he faxed down the documents he included all of her documents. That is what you told us? - I'm not quite sure what happened there, but he wanted me I think to do something on her passport or make the application for the extension or witness something, but I believe when you questioned Mr [Js] -
Mr [W], I am going to cut you off if I may, you are not being responsive. You now say that you recalled this particular incident that
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involved Mr [J] and his wife; is that correct or not? Do I understand you to say that you recall the incident, yes or no? - I can recall, yes, I can, yes.And when was it that you recalled the incident, was it last year? - No, just when you triggered my mind there because I can recall that he was going or she was going for a extension of her passport. Now I'm not sure whether it was in her new name, her married name, or her old name. But I would assume, and time will prove me correct, that that is an extract of his wife's passport or [ sic] bit of it.
Could you tell me, were you with him when he met his wife or his `to be' wife? Well, no. No, I attended their wedding in [LR].
Did he meet her in the Philippines, as you understand it? - No, I don't think so.
Where did he meet her, as you understand it? - In [LR].
In [LR]? - Yes.
Have you got any idea of what her name was before marriage? - All I know is it is [ MMJ], I don't know what her surname would be.
Well, her name before marriage was not [Mr SM]; was it? [Mr SM]?
Yes, unless he met her in [address], it was not [Mr SM], was it? Mr [W], you can assume from me, if you do not already know it and I suggest you do, that the passport page, the K number is a passport issued in the name [Mr SM]? - [Mr SM]?
Date of birth, [1939] at [LC]? - [LC].
That is one of your mates from the abattoirs; is it not? Did you not have a bit of a problem with the Building Royal Commission inquiring into [LC] and into a company called GO7; do you remember Mr [M]? - Yes.
And GO7? - Yes.
There was lots of problems for you in relation to [LC]? - No, there were no problems.
Well, eventually things may have sorted themselves out, but [Mr SM] of [LC] is, I suggest, one of your mates. Do you agree or not? - I wouldn't call him a mate.
Just an acquaintance? You are nodding, just answer the question. You have just nodded, yes, have you not? - He's not a mate of mine.
No, but you just nodded when I put to you that he was an acquaintance, you nodded your head to indicate yes, did you not? - Well, -
Now it has been seen. Now are you going to retract that or are you going to agree with it? - Well, he's not a mate of mine.
No, he is an acquaintance of yours? - Yes.
Yes, thank you. Now could you kindly explain to the Tribunal why it is that your acquaintance, [Mr SM] has his passport attached to Mr [Js'] witness statement? -I can't explain that.''
Put succinctly, Mr McGovern, in the evidence by W quoted in this subclause (g), established that Exhibit A8 was false and that it had been concocted.
(h) Before W's cross-examination could be completed, Mr Raphael sought an adjournment in order to consult with him. When the hearing resumed, W withdrew the whole of his application in the W case. In addition the Applicant in this case withdrew all claims in respect of interest deductions made by it, thus (in the context of this matter) implicitly admitting (inter alia) that the loan alleged by the Applicant to have been made by a person referred to as ``Chook'' (and referred to in Exhibit A12) had not in fact been made.
(i) W, after the withdrawal of the W Case, absented himself and did not attend any subsequent hearings. The Tribunal was told that, on Counsel's advice, he was not prepared to give any further evidence. He also failed to answer a summons to produce documents issued against him (21TS5 and Exhibit R12). A summons issued against B Company, a company alleged to have taken office in 1988 as trustee of a trust which is referred to in these Reasons as the ``B Trust'', and being the Trust in respect of which the relevant assessments was also not answered, in the latter case on the basis that W is not now a director. W's failure to give evidence in respect of this matter was not helpful to the Tribunal. W was (as Mr McGovern aptly noted) the ``puppeteer'' who pulled all of the strings. Mr McGovern's reference to ``old tricks'' in his cross-
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examination of W was, in the light of the T Documents and the WT Documents, appropriate. His failure to give evidence in respect of the B Trust must of necessity result in an adverse inference against the Applicant; seeJones v Dunkel and Ors (1959) 101 CLR 298; the Tribunal does indeed, as submitted by the Respondent, accept that the Applicant's failure to call W and his ``flight'' from the witness box, results in an inference that any evidence to have been given by W which might have been expected to be called, would not have assisted the Applicant. The Tribunal notes that there are references in the WT Documents to certain other legal difficulties and problems experienced by W. However, aside from a part of T's evidence (referred to later in these Reasons) which related to her attempt to assist W in an application to set aside a judgment against him, the Tribunal does not think that it is necessary to refer specifically to those other instances. The Tribunal considers, in all the circumstances, that W is completely untrustworthy and unscrupulous, and that none of his evidence (or for that matter any of the evidence procured by him) is worthy of any credit.
(j) The Tribunal does not intend, except to the extent necessary, to deal in detail with the WT Documents. However, they were before the Tribunal in this matter and they cannot, because the W Case was withdrawn, be ignored. Some of the WT Documents (and in particular WT Document 38) relate to a shadowy world in which events are often strange or do not admit of rational explanation, where documentary evidence may not be genuine, or which may not have been produced on the dates indicated. In relation to the various companies referred to in the WT Documents, persons appear and disappear, sometimes as directors or other officers of those companies; WT Document 38 (and see as examples pages 201 and 209 of the WT Documents) contains allegations, (not canvassed before the Tribunal presumably because, in the light of W's withdrawal of the W matter, it became unnecessary to do so), that some of these persons do not exist. Some of those persons were apparently connected as employees of W; this is so in respect of each of T, R and also B (a man who was and apparently still is a director of B Company). R is even more closely associated with W because she is and has been in a relationship with him. The withdrawal of interest deductions in this matter indicates that there is no truth in the evidence as to a loan alleged to have been made (in cash) by a person referred to as ``Chook''. There is doubt also as to the loan from the Hong Kong Company (more fully referred to later in these Reasons) and there is even greater doubt (given that the statement by J was concocted) as to an alleged loan (made in cash and bullion) by a woman in the Philippines, to W's wife, in consideration of some promises; these promises were, given that W's wife had no relevant qualifications, strange, and almost certainly unenforceable. The deponents to Exhibits A7 and A17 were not called to give evidence; those sworn statements are directly referable to this matter, and the failure by the Applicant to call them must also give rise to adverse inferences.
(k) The WT Documents reveal transactions which may be explicable only on the basis of an attempt to confuse. One example of this (not canvassed before the Tribunal, presumably because it became unnecessary to do so) relates to a residence in which W lived. It was purchased in 1975 and registered in the name of W; it was then transferred in 1979 to a company (referred to as W Company); W Company then in 1980 transferred that residence to an employee (N) of W or one of the companies associated with him, and was in 1985 transferred on her behalf by W acting under a power of attorney granted by N in favour of W. (See pages 187 and 188 of the WT Documents.)
(l) Under section 33 of the Administrative Appeals Tribunal Act 1975, the Tribunal has a discretion as to the evidence to be admitted. In this instance, the Tribunal received a number of copies of documents, where the originals and, in particular stamped and executed originals, were not furnished. The Tribunal considers that having regard to all of the surrounding circumstances, evidence which is not the best evidence, must be considered with caution.
5. (a) We deal next with the evidence of T. T worked for W for a number of years from 1981 to 1995. T was asked at the commencement of her statement (Exhibit A10) whether she wanted to make any correction to her statement; she replied (20TS20) that she wished to correct one date error in clause 23, in that the date ``29 July 1985'' should have read ``29 July 1987''.
(b) W's accounting firm consisted either of himself alone, or, but only in the first few years of her employment, W and a partner C. T's
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evidence as to when she returned to work for W after the birth of her daughter in 1984, was in conflict with sworn evidence given by her in other proceedings involving W. It would seem that she returned to work for him, on a part time basis, either in 1985 or 1986 depending on whether her evidence in the other proceedings was correct. (20TS29 to 31.)(c) T was cross-examined (inter alia) as to her statement that she had at no time signed any document which was undated or in blank. (See 20TS37 and 38):
``To my sure and certain recollection I have at no time signed any document in any capacity which was undated.
-? - Exactly. That's what I was concerned about.
That is false, is it not -? - I'd already made this statement and that material came about after I'd signed and presented this statement. at the time I made out this statement that was a correct statement. I had no idea.
You did not correct your statement in any way when you were given an opportunity to before I started cross-examining you, did you? - Well, I'm tell [sic] you now that this happened.
No. Would you answer my question, please. You did not correct that statement when you were given the opportunity to? - I'm not used to being cross-examined. I'm sorry, I didn't know which point you wanted me to actually speak up on.
We want you to tell the truth -? - I'm trying to.
You knew when that statement was put in front of you today -? - It wasn't part of what's in this statement. They were documents that had come up at a later time. They are not documents as part of this statement. They are not included.
Ma'am, will we agree on one thing: that some time very shortly after the 8 August you knew that the first sentence of paragraph 19 was false. Do we agree on that or not? - I had tried to actually place another statement. Prepared another one.
Where is that other statement? - I think Mr [ W] said I am not allowed to include a - a codicil?
The codicil does not correct paragraph 19, does it? - No, it doesn't.
Well, what is the point of telling me about the codicil? - Well, I - because I was told there wasn't much point in adding it. As far as I was concerned I was only going to be examined on what was in this statement. So that was all I was told it would be of no real consequence, but I was under the impression - as far as I know it may not have even have been used for anything - that particular blank transfer form. It may have just been in - picked up - out of papers in Mr [W's] office -
Would you do me the courtesy of addressing my question now. Do you agree with me, yes or no, that some time shortly after 8 August of this year, you were aware that the first sentence in paragraph 19 was false? - Well, I don't look at it that way, I'm sorry.
You do not look at it that way? - No, I don't.
So, even though you were aware at about 8 August of this year that you had signed documents in blank and which were undated, you do not regard the statement, To my sure and certain recollection I have at no time signed any document in any capacity which was undated . You regard that as an accurate statement, do you? - Accordingly, I was told it wasn't really importance [sic] since there was no other information on the share transfer. It wasn't possibly part of any proceedings.
Is that the best you can do? - I just wasn't happy with it, that's all, but I knew it wasn't part of the statement, this statement I had made or the documents attached to it.
But do not you appreciate that in the first sentence in paragraph 19 you were swearing to the truth of a statement which we all know now is not correct. You appreciate that do not you? [sic] - Well this had already been placed with the barrister at that point in time.
But when you were given the chance today, when that statement was invited to your attention and you were asked whether you wanted to make any corrections you might recall that the only correction you asked for was in paragraph 23 in the second line where you wished to change the date to 29
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July 1987? - Well, I must have misinterpreted it. I was discussing this in connection with this statement and what was attached to this statement. You have brought up other information since then. At the time I interpreted in this statement was correct. When I actually made this statement I assumed it to be correct.But you know and you did know that paragraph 23 contained an incorrect date, did not you? - I knew that, yes I did know that.''
(d) T was then cross-examined with reference to three annexures to her statement (Exhibit A10) which purport to be resolutions of the B Trust distributing its income to S (W's son). These resolutions purport to have been dated on 30 June 1984, 1985 and 1986 respectively.
(e) It may be noted in passing that all of the resolutions referred to in subclause (d) conflict with annexure A to W's statement (Exhibit A6) which purported on 22 February 1993 to vest the corpus of the Trust in S in the following terms:
``RESOLVED that in accordance with Provision 6 of the Deed Governing the [B] Trust dated 17th December, 1982, the Corpus of the Trust vests as at 22nd February, 1983 on the descendant of [W] being [S].
IT WAS FURTHER RESOLVED that the Corpus of the Estate be liquidated or at the discretion of [S] such assets be transferred into his name on attaining thirty (30) years of age.)''
T was firm about the fact that the resolutions referred to in subclause (c) were executed on the dates appearing on the face of them. That these statements were untrue is demonstrated by the following extract from 20TS46 and following pages:
``Do you have an actual recollection of what happened? - No, I do not.
In giving the witness statement in the form that you do, do you suggest that you were present somewhere on 30 June 1985 and saw Mr [W] sign his name? - Well, if I had signed it I would have signed it at that time.
Do you have an actual recollection of the event under which -? - No, I can't recall the event time. I sign so many documents, it's just that normally apart from that exception, I would make sure that the dates were correct.
When you say you make sure that the dates were correct, what do you mean by that exactly? - I would read that the documentation was accurate for what I was signing, as far as I understood it.
Do you mean by that -? - but I was only witnessing.
- you would look at your watch and make sure it was 30 June, is that what you are saying, or are you saying something else? - No, I would just - it would be signed on the date, it would be that day that you'd sign it, so it would all add up at that time. It would be relevant.
Did you focus your mind on 30 June 1985 and have a look at that resolution at the time that you signed up your witness statement and to further assist you, you have annexed a couple of these resolutions. You have annexed one which has been dated 30 June 1986 and one that is 30 June 1984. I just picked the one in the middle 30 June 1985. So you much [sic] have appreciated what you were doing when you swore your witness statement and you were discussing these matters, did you not? - Yes.
Did you take your mind back to 30 June 1985 and to what happened that day? - No, I wouldn't have need to.
Why is that? - Because at the time I sign something, Mr [W] would have it in order. I have never found him to be faulty.
You simply signed anything that he put in front of you, did you? - I didn't actually need to understand what the context was, I needed to just check that his signature was on it and that the dates were correct. That was all I was looking for, not the context.
And how did you check that the dates were correct? - Well, normally it would be on the day it was signed.
What is it about that document that I [sic] showing you, the one that says, signed 30 June 1985, that enables you after all this time to say that that was the correct date? - Only the fact that they were usually signed, everything was signed at the day or date that was on the forms.
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Whereabouts was it signed? - I wouldn't have a clue where it was signed. What do you mean?
Not a clue? - In the office I should imagine. That's where most of our activities took place.
But were you not working between 1984 and 1986? - I thought I'd already made it clear that I was called in at times to take the place of someone that was sick, someone on holidays or when they were busy. I made myself available. I didn't want to lose track of that office.
But in that statement you gave in the criminal proceedings, you said that you started part-time in 1986 and you said that you were not working between 1984 and 1986? - I wouldn't have considered that working if I was only filling in at times.
Does that evidence not cause you to have some doubt as to whether or not you signed that document on 30 June 1985? - I must have signed it because if I wasn't there somebody else would have signed it. So if I wasn't there on that date there would have been someone else to witness it.
It is quite possible that it may have been signed at some other time, is it not? - I don't believe it is.
What is it that enables you to say that what I have put to you is definitely incorrect? - I'm not saying that you're - I'm saying that if I signed it I would have checked the date. As far as I would have been aware, it would have been signed at the correct date.
You just answered me and you cut yourself off. You said to me, I'm not saying that you're incorrect. That is what you were about to say, was it not? - Was I? I'm sorry.
What I am putting to you is that document was not signed on 30 June 1985 at all, do you deny that or do you agree or do you not know one way or the other? - I'm just saying that I would have signed something and as it was dated. There would have been no reason to sign it at some other date.
And is your best recollection that you signed it in your position as a secretary working for [ W] on that date? - I was just a witness, that was all I was asked to sign it as. I would have been just a witness. It didn't matter what my capacity was.
...
But allied with the fact that you indicated in the transcript of the criminal proceedings that you were not working that year? - I thought I'd already made that clear. I was only filling in at time when people away [ sic], on holidays, or as the work required., I'd come in and help out. I wasn't there on a regular basis but if I sign something it was because I was in the office at the time.
So far as executing any other documents are concerned, you have got no specific recollection of signing any other documents, have you? - I don't have any true recollection of signing any documents apart from the fact that I made sure that the dates were correct as [sic] the time I signed them. I don't know what's in the documents. It wasn't up to me to say what was in it. I was only a witness to a signature.
When you say that you filled in and you helped out, did you go into the office when for example, other staff were not available, is that what you mean? - Yes, if somebody was ill and they weren't there, someone had to cover the office.
What was the office arrangement? Was it a five-day week? - They operated under a five-day week, yes. Monday to Friday.
When you were saying that you filled in or helped out, it would be to complete things, I think you said, was that right? - No, I don't recall saying that.
Could you define the occasions when you filled in and helped out? - It would have been times when some of their staff wanted to go on holidays or they couldn't get in, I'd be called to say could you come in, fill in for a few hours for us or whatever. I had a young baby to look after. I couldn't spend all my time working.
So, the occasions when you, in the period between 1984 and 1986, went in a [sic] filled in or helped out were limited by the fact that you had your own baby? - From October '84 I did, yes.
When did you resume work? - I would have resumed work in the '86 year. I would
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have to go back and have a look at my records to know exactly when.Bearing in mind that you had a young baby, do I understand you to be saying that the circumstances in which you filled in or helped out were very limited and confined to occasions when they were short-staffed at the office? - Yes.
That is the only occasion when you were involved in doing anything for [W] in the period between 1984 and 1986? - Yes.
You are quite sure of that? - From October 1984, yes.
As at 30 June 1985 that was the position? - Yes, it would have been because [my daughter] would have been six months old by then and I could leave her with my mother.
Do you remember some occasions where you left her with your mother? - Yes, on many occasions I left her with my mother.
Was one of those occasions when you went in and signed the resolution? - No, look, I can't recall that. I wouldn't have gone in specifically to sign it. There would have been some reason for me to be there. Anybody else could have signed it.
Did you work any weekends? - No. I wasn't interested in weekend work.
30 June 1985 was a Sunday, ma'am? - Was it?
Yes? - Well, obviously the date is wrong then. Aren't you correct? It must have been signed on the Monday.
You have got a recollection now, have you, that it was signed on Monday? - No, I don't have a recollection at all. Obviously it was so close to the following day it didn't matter.
At around midnight? - No, I shouldn't think so but since 1 July must have been on Monday, that's probably when it got signed.
You recall that, do you? - No, I don't. I would have thought the dates were correct.
Are you just making it up as you go along, are you? - Yes, of course. No, I am not making it up. As far as I am concerned, that statement is correct. I signed it. Things were dated. I signed them and I only acted as a witness.
I think you answered my question agreeing with me at first, did you not? - sorry, that was facetious.
...
MR McGOVERN: I am sorry, I do have one other question, I beg your pardon. 30 June 1984 was a Saturday, ma'am? - Was it?
What do you tell us about 30 June 1984? Was that signed up around midnight? - Probably it was signed on the following day or it could have been signed on the Friday.
Or a couple of days later? - I'm not saying that. It would have been the first working day after the end of the financial year.
You are prepared to say anything that you perceive will advantage Mr [W] and any interests that he may have or the [B] Trust? - That is not correct.''
That T's evidence as to the dates on which the resolutions were brought into being was untruthful, is demonstrated by the extract from her evidence quoted in this subclause (e).
(f) T furnished a statement (Exhibit R10) in proceedings involving the setting aside of a judgment against W (Exhibit R9) to the effect that service of the originating document had not taken place, that service had been attempted on her but that she had refused service because she was in the employ of W & Co. and not W; (all of this is reminiscent of W's attitude in relation to the Hong Kong Company). (20TS21, 22, 23 and 24)
(g) T's demeanour can in general terms be characterised as belligerent and unhelpful. When caught out in clear untruths she was not in any way embarrassed or shaken. At one stage, towards the end of her evidence, she sent the Tribunal a note to the effect that she would have to leave in five minutes. (20TS42)
(h) The Tribunal finds, as a matter of fact, that the resolutions referred to in subclauses (d) and (e) were not signed on the dates reflected in them. On the contrary they were prepared, in all probability, at some time thereafter, and possibly after 1988, perhaps having regard to the fact that the assessments in this matter were issued in 1988, and returns were furnished on behalf of the Applicant after the date of the assessments.
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(i) The Tribunal finds that the evidence of T was untruthful. She lied (inter alia) in the document (Exhibit R10) when confronted with the fact that she had acknowledged employment with either W or W & Co., and responded that she had misinterpreted what was meant (20TS24). T was plainly prepared to give untruthful evidence in support of W's interests; it may be that as suggested by Mr McGovern, W was the ``puppeteer'' and she was merely one of the puppets.
6. (a) The evidence of R was also untruthful. R in her statement gave as her address (at the date thereof and being 19 September 1996) an address in [F], New South Wales. However, her evidence revealed that she was then living in a unit owned by one of the companies associated with W and referred to in the WT Documents. See in this regard 20TS54 and 55:
``MR McGOVERN: How long have you been living at [CS]? - I was originally at - up in [M] which is [F] and when I come down and stay in Sydney I stay at [CS], so I guess I've been there about two years - oh, no, one year, I've only been there one year, yes.
That is where you were living when you swore your witness statement? - No, I was living up at [F] - well I was living half way between [F] and [CS], because I was living part time down here in Sydney and part-time up at [F]. I have friends up at [F] and I spend a lot of my time up there.
You were living in [CS] from about September 1995, were you? - No I part- time moved in there about January 1996.
And do you live there by yourself? - I live there mainly by myself. I have friends come and stay there as well.
Do you pay any rent there? -I pay the expenses which is the body corp fees which is about 4000 a year and I pay all the expenses from the rates to the electricity to the living expenses.
So you do not have to pay any rent? -I don't pay any rent but it just about comes to the same thing.
Well you have got an arrangement there -? - No, it comes to about over $150 to $200 a week, worked out. So it's the same as rent.
In your witness statement you gave your address as [address in F]? - Yes. What was that date, sorry?
Well I think it was 19 September 1995? - Well, I wasn't living at [CS] on 19 September 1995. I was living at [F].
I thought we had established that you had at least lived there for a year? - I moved into [ CS] in January 1996.
You have a very lengthy criminal history, do not you? - That was my past and I am rehabilitated now.''
(b) R has a criminal record involving a number of convictions involving false pretences and drugs. That her relationship with W is one of long standing appears from the WT Documents; page 251 of the WT Documents refers to her attempt to cash a cheque while under the influence of drugs; that diary memo is dated 7 November 1986 and notes that the bank employee concerned contested T, and noted:
``I spoke to T [of W&C] who advised that R was well known to her and confirmed that she was a drug addict and she had obtained several cheques forms from their office in the course of her employment. She also advised that the principal of the firm [W] was well aware of the problem however he would not wish to pursue the matter and later in the same diary note `The reason for W's reluctance to pursue the matter became obvious when I contacted him on 7/11/86'. R is the daughter of his partner. He confirmed that he did not wish to pursue the matter and even offered to indemnify the bank...''
(c) The WT Documents indicate that R's legal costs were paid from the B Trust; WT Documents, page 330 and following refer to other financial assistance by W to R.
(d) R said that many of the events during the relevant period occurred at a time when she was suffering black-outs, caused by drugs, and which adversely affected her memory.
(e) Reduced to its essence, R's evidence as set out in Exhibit A12 sought to establish the existence of the B Trust and its terms, the purchase by the B Trust of real property in Sydney (the ``Property'') and the manner in which that purchase was financed. She was faced with one substantial difficulty. The ``script'' (for so it was aptly characterised by
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Mr McGovern) required her to testify to a loan by Chook and moreover in notes counted by her. Chook was described by her in vague terms as an opal dealer who gave her an opal. Chook may or may not exist, but he did not lend the purchase price of the property to the B Trust; so much is evident from the withdrawal of interest deductions claimed by the Applicant, and including interest alleged to have been paid to Chook.(f) R gave evidence in relation to another property in which, so she alleged, she and others were interested. She was apparently, so she said, able to find $6,000 towards its acquisition, and being moneys furnished by her parents; to say that R was confused and in some respects incoherent as to the other property and the surrounding circumstances is to put it kindly. See 20TS61; the extract quoted is included to demonstrate the confused nature of some of R's evidence
``Do you remember a property at [D]? - Yes, I do; yes, I do.
You were asked some questions later on by -? - Yes, I was.
- some investigators from the Tax Department about the [D] property? - They weren't very truthful when I got the statement afterwards actually.
I am sorry? - They weren't very truthful when I got the statement afterwards actually, that that's okay.
You say they were not very truthful? - No, no.
What did they say that was wrong? - Oh, there's just certain things that I said over the telephone that when I received the statement that was pretty much opposite. It was really quite surprising.
Well, in 1983, at the time that you gave the power of attorney to Mr [W], what occupation did you have? - I was either secretary or administrator, because that's my position, administrator.
For whom were you working? - I've no idea, in 1983 - probably Mr [W]. It might have been Mr [W] at the time but I only part-time worked for him. I honestly don't know, in 1983. It was probably Mr [W].
The situation is that in 1983 you did not have $130,000, did you? - No.
There was a property at [D], purchased in your name for $130,000 in about August 1983. You know the property that I am referring to? - Yes, I do.
When you were in New Zealand much later on you were asked some questions by some tax investigators about that property, were you not? - That's right.
You told them that you did not know anything about it? - that's not right at all. That's not right. That's the thing that I'm talking about. The last question they asked me was actually incorrect when they gave it to me.
Well, what do you say that you told them? - Well, I do know. I'm the trustee of the [ D] Trust. I know I'm involved. I said I don't - I don't know what they asked me but I know it can be back as a different answer than what I actually said to them. I was very surprising.
So if you said to them words to the effect, `I'm the trustee of the [D] Trust' -? - No, of course I didn't. No. They said, `Do you own - are you the trustee of -' I don't know. What was the last question they asked me on that whole - they asked me on the telephone? They rang me about two or three times that day. I took that to a barrister and I said there had been wrong information in it.
You told your barrister? - Yes, I did.
Who was your barrister at the time? - Oh, it was New Zealand man. I can't even remember his name now. He wrote to you a couple of times so -
So, if you will forgive me I will show you a document as soon as I can, but I want to suggest to you that you gave Mr [W] a power of attorney in August 1983 and then in September 1983 the property at [D], was purchased in your name for $130,000? - Yes.
I want to suggest to you that in about 1987 or 1988 you were contacted when you were in New Zealand and you were asked about this property and you indicated that you did not know anything about it? - I do not believe that because I'm telling you now there was wrong information and I know I'm involved with the [D] Trust and I would not say otherwise.
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Well, I want you to tell me -? - Well, I don't know. You tell me the documents and I'll tell you which question it is.
No. You tell me -? - I have no idea. I've taken it to my barrister and I said there was wrong information in this when it came back to me.
Can you tell me now what you replied to the tax -? - I replied that I - I think he asked me a question like, `Are you involved with the [D] Trust?' and I said, `Yes'; and the last question that they actually said, I said, `No', and that was an actual fact; and I've told my barrister and it's on record in New Zealand. I can't understand why they put `No' when I said `Yes'.''
(g) As to the B Trust, R gave evidence to the effect that there were two trust deeds; one settled by T (the ``First Deed'') and the other settled by her, R (the ``Second Deed''); copies of those Trust Deeds are annexed to her statement (Exhibit A12) as annexures A and B. R said that the settlement by T became of no effect (although how this occurred was not explained) when W's wife discovered that she, R, was named in it in relation to the class of Specified Beneficiaries and that it was in these circumstances that the Second Deed settled by her was executed. It may be noted that W was the trustee named as such under each of the First Deed and the Second Deed.
(h) The Second Deed in respect of which R was the settlor is in substantially the same terms as those contained in the First Deed settled by T. It is odd that the Second Deed appears to be printed whereas the First Deed appears to have been typed, since they would appear to have been procured from the same source i.e. R.S. (referred to previously in W's evidence). R was unclear as to whether the Deed was entered into before or after the auction sale at which the property was purchased; that sale took place on 17 December 1982. She was in fact clear about very little, although she did adhere to her statement in relation to the loan from Chook. (See 20TS70.)
``No, but on the day of the auction, was the agreement reached on the day of the auction? - I think so.
Then a deposit had to be paid that day did it not? - Well, I don't think - not that I remember. Not that I remember.
Well, what is the next thing that happened after the auction? - I honestly don't remember. I don't know if we went out to lunch or if we went over to the office. I honestly don't remember.
Did you find yourself back at the office? - Possibly.
Do you remember anything apart from the fact that the auction took place? Anything else about that day? - No. I can only remember the auction that day.
You have got no other recollection of 17 December 1982? - Well, I think that's when - I can't remember if it was that day we discussed about me going out as a beneficiary from the first Trust, whether Mr [ W] was telling me I've got to be taken out and I can go in this settler. I don't remember when that conversation was either.
Do you remember anything that happened in relation to the trust? - Not really. A lot of my memory is vague.
Just pardon me please.
After the property was acquired, do you know what happened to the property, what it was used for? - I think it was rented out to people.
Do you know to whom it was rented? - I know there was a woman involved at the time that she wanted to rent it, I can't even remember her name, but I know that she was at the solicitors when the signing was done, she wanted to rent if for her, but I think she went in there for a while but I don't know for how long.
Did you at some stage have a solicitor, [C]? - Yes.
And part of the money that was received by way of rent was used to pay some of your legal costs, was it not? - Probably, I had a - yes.''
(i) R exhibited considerable anxiety while in the witness box. Her obvious state of discomfort led the Tribunal to inquire as to her ability to continue; (20TS67). Her memory was vague, and her evidence was at times (especially in relation to the D Property), difficult to comprehend. In general the Tribunal considers that her evidence was at times untruthful and at times confused and incoherent. The Tribunal cannot accept her
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evidence, and in particular as to the establishment of the B Trust and its acquisition of the Property.7. This brings the Tribunal squarely to the B Trust itself and to two important questions; the first relates to the question of whether there is a trust, and the second deals with the question of what, if there is a trust, are its terms.
8. (a) As is so often the case in this matter, some of the surrounding circumstances are distinctly odd.
(b) The Property was purchased at a mortgagee sale in December 1982, and the vendor executed a transfer in favour of W on 22 February 1983. A copy of the contract of sale (annexed to Exhibit A5) indicates that W was the purchaser (and an inserted reference to him as trustee was deleted, although the words ``as trustee'' follow his signature).
(c) The T Documents in relation to the Trust contain references which would tend to indicate that there was a trust; however there are other references in the T Documents which tend to indicate the contrary. Some of those T Documents are dealt with in the succeeding subclauses of this clause 8; the Tribunal notes in general that the absence of a reference in a conveyancing document to a trust would not, (having regard to the decision in
Farrer v CSD (NSW) (1975) 5 ATR 364), be decisive.
(d) T19 is the transfer in respect of the Property. It was executed by the parties constituting the transferor, whose precise identities are irrelevant for the purposes of these Reasons, in favour of W. It was signed by W as trustee of the B Trust; W's signature as transferee was witnessed by T.
(e) T18 is the Certificate of Title in respect of the Property. It indicates that the Property was transferred to W on 11 March 1988 and on the same day transferred to B Company in accordance with an application. The Second Schedule notes that a mortgage in favour of the Hong Kong Company was registered on 11 March 1988; the Second Schedule notes also that a lease in favour of a company which is referred to as ``J Company'', including an option to purchase, was registered on 6 April 1988.
(f) Page 98 of the T Documents is a copy of the application pursuant to which B Company became the registered proprietor of the Property; it is relevant to note that that application appears to have been stamped nominally with $10.
(g) T21 is a letter by solicitors dated 23 February 1983 to which is attached a statement which refers to the sale by certain persons as mortgagees of the property, to W; there is no mention of a trust.
(h) T22 is a letter by a Council addressed to W advising him that that Council had received notice that the Property had been transferred to him and seeking a payment of certain arrear rates; T23 is W's reply which reads simply ``I advise that I am experiencing a short term financial problem and would be pleased if payment of this account could be postponed for a period of 6 months''. (Again there is no mention of a trust.)
(i) T24 is a management agency agreement between W and a firm of estate agents; there is a reference in it to the Trust; page 72 of the T Documents indicates that although the contract was originally framed on the basis that statements and cheques would be sent to W, that reference was altered so as to refer to the B Trust.
(j) T25 relates to an application to a trading bank in respect of the opening of a bank account in the name of the B Trust and in respect of which W had signing powers. That bank is referred to as the ``First Bank''. Page 76 of the T Documents indicates that that account was opened in March 1983.
(k) T26 refers to an application to a second trading bank (``Second Bank'') in respect of the opening of an account with the Second Bank for the B Trust in January 1988 and in respect of which was again W had signing powers.
(l) T39 of the T Documents indicates that in March 1988 $1,143.13 was paid for R to her solicitor in respect of her legal expenses. The Tribunal did not receive evidence as to how the income (being rent) was otherwise utilised. Rental in respect of the property was, as appears from T Document 34, paid to the B Trust.
(m) It is strange, in the view of the Tribunal, that the transfer of the Property was not registered until 1988 and so that apparently the property remained in the name of the transferors during the intervening 5 years after it was purchased. As set out previously, the transfer was registered (in 1988) in favour of W and legal title was then transferred into the
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name of B Company. The fact that the application referable to the transfer of legal title was stamped nominally would tend to indicate that the Commissioner of Stamp Duty accepted that there was a trust and a change in the identity of the trustee. But there was no evidence before us as to what was required by the Commissioner of Stamp Duty for this purpose. The Applicant's claim in Clause 8 of Annexure A to its written submissions that the late registration was an irrelevance and a ``furphy'' may be correct as a matter of law; the Tribunal nevertheless considers it strange (and relevant) in the circumstances of this matter, that registration of the transfer should have been so long delayed.(n) The events referred to in the preceding subclause took place at or about the time of registration of a mortgage over the Property in favour of the Hong Kong Company.
(o) The amount lent under the mortgage referred to in subclause (n) was paid into the account with the Second Bank. There was no evidence before us in respect of the First Bank and the Second Bank as to whether each or either of them required the production to it of a stamped and executed deed in respect of the B Trust as a pre- condition of the opening of the account. Following the grant of the mortgage by the Hong Kong Company (a company associated with, and having regard to clause 4(c), probably controlled by W) a number of cheques were drawn in favour of Chook; those cheques were then cashed by W; (see T28 of the T Documents and also Exhibit R8).
(p) There is only one reasonable inference to be drawn in relation to the Property. The original price was furnished by W himself, and his withdrawal of the W Case supports this inference. Moreover the mortgage moneys ex the Hong Kong Company were appropriated by him for his own use. Chook's alleged involvement as a lender in relation to the Property is in no way credible.
(q) The Second Deed may be invalid as a deed, having regard to section 38 of the Conveyancing Act in that parties to the deed witnessed it. We do not place much emphasis on this aspect since if it fails as a deed it may operate to the same effect as a contract.
(r) The Tribunal does not accept that the various resolutions, (in some respects contradictory), in respect of the B Trust previously referred to were executed on the dates indicated. It is likely in the view of the Tribunal that they were prepared and signed after the assessments were issued. (The Applicant has indeed, as set out in Annexure A to its written submissions, disclaimed reliance on the resolutions; however, it is relevant that the Applicant, having sought to rely on the resolutions, and reference is made in this context to T's sworn statement and evidence, disclaimed reliance on them only after it became clear that they had been back-dated.)
(s) One of the annexures to Exhibit A6 is a copy of a deed dated 27 January 1988 pursuant to which W appointed B Company as trustee of the B Trust. Moreover the minute book of B Company (Exhibit A21) discloses resolutions dealing with the appointment of B Company as trustee of the B Trust.
(t) The directors of B Company in 1988 included W, B and a man referred to as H. The WT Documents indicate that each of B and H (who apparently still are directors) in separate interviews denied all knowledge of B Company; (see T31 and T32 respectively). The registered office of B Company in 1988 was situated at W's then residence. In later proceedings each of B and H reversed their previous denials and accepted that they were directors of B Company. As set out previously B was employed by W at the relevant time; the precise relationship between H and W was not in evidence before us.
(u) We think it significant also that the Property was let in 1988 to J Company, a company associated with W, at a low rent and including an option to purchase for a nominal amount of $100.
(v) As set out previously in these Reasons, the Tribunal did not receive any original stamped deeds. Assuming that they were duly executed on the dates appearing in them, they would have been stamped at those times, or perhaps later but in the latter event with penalties for late payment. In the absence of original stamped deeds, the Tribunal has very real doubt as to whether these documents were executed when indicated, and considers that there is a very real possibility of their later execution and conceivably after the issue of the assessments.
9. (a) The verbal evidence before this Tribunal consisted only of that given by W, T and R all of whom were unreliable and
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untruthful witnesses, whose evidence cannot be accepted.(b) The Tribunal considers it strange in all the circumstances that notwithstanding the size of the documentary evidence produced to it, that evidence does not include any original stamped deeds and more specifically the deed establishing the B Trust, or the deed pursuant to which B became the trustee of the B Trust. Another extremely odd omission relates to the books of the B Trust. W was a practicing accountant; there would presumably have been books of account in respect of the B Trust; how else (unless they were simply concocted) could tax returns have been produced? The Tribunal wonders why no present director or past director of B Company gave evidence as to the creation of the B Trust and other relevant aspects of it; W could have testified as to the creation of the B Trust. See in particular in this context Exhibit A17 which is a sworn statement by B, which refers to the B Trust; however, and as set out previously B did not give evidence. The Tribunal was not furnished with any explanation for the failure of B or for that matter H to give evidence as to the B Trust. Similarly, CJ, who was the deponent to Exhibit A7 (as to the passing of a resolution referable to the B Trust) did not give evidence; this latter omission is explicable on the basis that no reliance could be placed on that resolution, or the sworn statement by CJ as to its provenance.
10. (a) Section 14ZZK(b) of the Taxation Administration Act 1953 provides that the burden of proof is on the party applying for review of a reviewable objection decision. The Applicant bears the burden of proving that the assessment is effective [sic]. Section 14ZZK(b) effectively (as the Respondent contends) creates a rebuttable presumption that an assessment is not excessive; (See
McCormack v. FC of T 79 ATC 4111; (1979) 143 CLR 284). The Applicant must rebut that presumption and there is no onus on the Respondent to show that the assessment is correct; (
Gauci & Ors v. FC of T 75 ATC 4257; (1975) 135 CLR 81;
Macmine Pty Ltd v. FC of T 79 ATC 4133). There is no requirement that an assessment be sustained by evidence (
Politis v. FC of T 88 ATC 5029 at 5032).
(b) In
FC of T v Dalco 90 ATC 4088; (1989-1990) 168 CLR 614 the High Court confirmed that in the context of assessments the term ``excessive'' refers to the amount of the assessment and not to any unauthorised step in the process of its calculation. The burden is not necessarily discharged by showing an error by the Commissioner forming a judgment as to the amount of the assessment. The taxpayer may be obliged to show positively what correction should be made to the assessment to correct it. As Mason J. (as he then was) pointed out Gauci, if the evidence relied upon by the taxpayer to prove that an assessment was excessive is rejected, that taxpayer's case must fail.
(c) In Gauci at ATC 4261; CLR 89 Mason J. said:
``The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with (the onus provision) for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail.''
(d) The standard of proof to be applied is the civil standard of proof on the balance of probabilities.
(e) The Applicant has clearly not discharged the onus on it. Having submitted quantities of written evidence, the Applicant called (in relation to this matter) only T and R both of whom were untruthful and unsatisfactory.
(f) The Applicant relies on the terms of either the First Deed or the Second Deed (relevantly in the same terms) and the default beneficiary provisions contained within. However, the Applicant did not discharge the onus on it and in particular did not satisfy the Tribunal that the terms applicable in respect of the B Trust during the relevant years were those contained in the First Deed or the Second Deed.
(g) If the Applicant had discharged its onus, the Tribunal would have been obliged to make findings as to the effect (if any) of the resolutions previously referred to, whether (if at all) there had been any attempt to accumulate any of the income of the B Trust, (although there was no evidence before the Tribunal as to any accumulations or indeed any intent to accumulate), and generally as to the effect of the default provisions.
FC of T v. Marbray Nominees Pty Ltd 85 ATC 4750 held in relation
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to a deed in the same terms that the default beneficiary took, but it may be relevant that in that case there was a concession that purported determinations were made out of time and were thus ineffectual. It may be noted also that if S (W's son) was in such an event the default beneficiary, he was during the relevant years a minor so that the trustee of the B Trust would in such event have been assessable under section 98 of the Act although the rate of tax may have been different. The Tribunal notes in passing, the judgment of Kitto J inFC of T v. Wade (1951) 9 ATD 337 at page 344; (1951) 84 CLR 105 at pages 116 and 117, where he said that no conduct of the Respondent operates as an estoppel against the operation of the Act. The Tribunal does not consider it necessary in the circumstances, to make a specific finding as to the operation of the default provisions contained in the First Deed or the Second Deed.
(h) The question of sham was raised in oral argument and has been developed in the Respondent's written submissions. The Respondent has submitted that the Tribunal is entitled to conclude (in relation to either of the First Deed or the Second Deed) that it was not intended to operate according to its tenor but was simply a facade or sham; (
Snook v. London & West Riding Investments Limited [1967] 2 QB 786;
Sharrment Pty Ltd. and Others v. Official Trustee in Bankruptcy (1988) 82 ALR 530;
Sonenco (No.87) Pty Limited v. FC of T 92 ATC 4704; (1992) 38 FCR 555.
There was almost no evidence before the Tribunal as to how the rental income, during the relevant years, was utilised. Some of it was used for the benefit of R (and she was not a beneficiary under the Second Deed); similarly when a capital amount was borrowed from the Hong Kong Company, the money so borrowed appears to have been appropriated by W, who was also not a beneficiary under either the First Deed or the Second Deed. But breaches of trust (and even serious breaches of trust) do not necessarily lead to a conclusion that there was no trust at all; the circumstances are unquestionably suspicious, and it is possible that the Property was treated by W as if it was his own, but there are a number of references to the existence of a trust (albeit on terms not established to the Tribunal), and the Tribunal does not consider that it can or should, on the evidence, make any finding as to sham.
As set out previously in these Reasons there is (conflicting) evidence before the Tribunal as to the existence of a trust; it is not inconceivable, in the view of the Tribunal, that there was from the time of the purchase of the Property, some intention that it would be held on trust, but that W did not attend to the creation of the trust until a later time; that later time might be when the transfer was first registered and when the assessments in this matter had been issued. The evidence in this case is so unsatisfactory that the Tribunal, while it does not consider it appropriate to make a finding of sham, is equally unable to find that it has been demonstrated that the B Trust was established on the terms of the First Deed or the Second Deed in 1982, or thereafter during the relevant years.
11. Following the conclusion of the hearings, and although there were closing addresses on behalf of each of the parties, written submissions were, in accordance with a direction by the Tribunal, furnished by each of the parties. (The Tribunal has previously in these Reasons dealt with certain aspects of the Applicant's submissions.) In respect of some of the Applicant's written submissions, further comment is desirable; that comment is set out in this clause 11 as follows:-
(a) The Applicant contended in clause 6(a) of its written submissions that the Tribunal must not ``invert the onus'' and referred in this context inter alia to
Allied Pastoral Holdings Pty Ltd v. FC of T 83 ATC 4015 at 4023; [1983] 1 NSWLR 1 at 13(c). The Applicant contended further that the Tribunal should take note only of the fact that W had not been called. The Tribunal notes as set out previously that the failure of W to give evidence must give rise to a negative inference; similarly this must be also in respect of the failure of B and H (or any other director or officer of B Company) to give evidence as to the B Trust generally, or B Company taking office as trustee; as set out previously the failure to call CJ is explicable on the basis set out previously in these Reasons.
(b) In clause 9 of its written submissions the Applicant contended in the alternative that the assessments in this matter are bad by virtue of the fact that the assessments in the W Matter have been confirmed. Although W withdrew the W Matter on the second day of the hearing, this alternative contention was not argued during the hearing and appears to be something
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of an afterthought on the part of the Applicant. It may be noted that (20TS15) Mr Raphael said somewhat picturesquely ``all duck or no dinner on the trust deed''; this was understood by the Tribunal as meaning that the Applicant, having abandoned the resolutions, would stand or fall on the default provisions of either the First Deed or the Second Deed. Having failed to raise this alternative contention at the hearings, the Applicant cannot do so thereafter; (see generally the arguments in 20TS). The assessments in this matter were made in the alternative; the correctness or otherwise of alternative assessments was never in issue before the Tribunal and the Tribunal does not consider that the withdrawal of the W Case can have the result that the alternative assessments in this matter are bad. This contention is therefore rejected.(c) As set out previously, the Applicant's written submissions make it clear that the Applicant relies not on any of the resolutions (admitted to be nullities) but rather on the default beneficiary provisions of the First Deed or the Second Deed. Having accepted that the resolutions are nullities the Applicant in effect contends that the Tribunal must accept that the terms of the B Trust during the relevant years are those contained in either of the First Deed or the Second Deed (relevantly the same). In support of this contention, the Tribunal was furnished with verbal and written evidence which was unsatisfactory. The fact that original stamped deeds were not tendered, and having regard to the surrounding circumstances and especially the admission that resolutions had been back-dated and evidence had been concocted, the Tribunal has grave doubts as to when the First Deed and the Second Deed were executed.
The Applicant contends that there was evidence before the Tribunal as to the settlement of the B Trust under either the First Deed or the Second Deed. The evidence in this context in respect of the First Deed is presumably irrelevant if indeed the First Deed was superseded. If the First Deed was not superseded, T's evidence was untruthful and the Tribunal does not accept her evidence as to settlement under the First Deed. In respect of the Second Deed, the Applicant contends that R's confirmation (in general terms) of certain clauses of her sworn statement including as to the settlement of the B Trust was not called in issue. Such a contention is disingenuous. R's sworn statement was, as her oral evidence revealed, untruthful; this is so in particular (but not exclusively) in relation to Chook and the loan by Chook. Mr McGovern cross-examined R as to the circumstances in which the B Trust was settled. Her evidence in this context, which was presumably intended to constitute the whole of her evidence on the subject, was extremely vague, and the fact that she did not state specifically that she had paid the settlement moneys is not in all circumstances, relevant. The Tribunal does not accept that a confirmation (in general terms) of a number of clauses in a sworn statement, an important part of which proves to be untruthful, allows the Applicant to contend that any statement confirmed in this general and non-specific fashion must require the Tribunal to accept that it was true, simply because there was no specific question directed to this particular aspect on behalf of the Respondent. The Tribunal does not accept that the rule in
Brown v. Dunn (1894) 6 R 67 applies to the advantage of the Applicant.
(d) The Applicant, in clause 1 of its concluding submissions in annexure A to its written submissions, states that, ``It is clear and of the utmost importance that the Respondent issued the relevant assessments prior to the Commissioner's investigation of the affairs of W'' (emphasis by the Applicant). The assessments were issued on 16 March 1988. Clause 1 of the ``Statement of Findings on Material Questions of Fact, Evidence and Reasons for the Decision'' in the WT Documents states, ``There has been an ongoing audit investigation into the taxation affairs of the Applicant. The audit commenced on 4 May 1987''. See also the Applicant's Statement of Facts and Contentions in the W case, dated 7 February 1996 in which he referred in Clauses 1 and 2 to an audit investigation period from 1976 to 1982; the reference in clause 1 (but not the reference to clause 2) is qualified by a reference (not clear to the Tribunal) to the ``relation back period''. It is clear though that this contention, considered by the Applicant to be important, is not tenable.
(e) The Applicant contends that if the Tribunal finds that the evidence of T and R is unsatisfactory in certain respects it should be accepted, at least in relation to the B Trust and its terms. The Tribunal does not accept that
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such a contention is valid; in effect it requires the Tribunal to find that that part of their evidence which was not demonstrably untruthful, must be accepted as truthful. The Tribunal repeats that the oral evidence before it was unsatisfactory; the quotations from the transcripts set out previously in these Reasons illustrate just how unsatisfactory that evidence (and the evidence of W who procured that evidence) was. The remedy lay with the Applicant; it should have been a simple matter to prove the existence of the B Trust on the terms of the First Deed or the Second Deed as from 1982. However, the Applicant failed to do so.12. (a) We note in passing that there was no issue before us as to the fact that B Company has been in receivership and that there was no evidence of its discharge. As Mr McGovern pointed out, the Respondent did not question the Applicant's retainer.
(b) In summary, the issue before the Tribunal is as to whether the Applicant has discharged its onus under section 14ZZK of the Taxation Administration Act and the Tribunal finds that it clearly has not. Accordingly, the objection decisions are affirmed.
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