FC of T v Rawson Finances Pty Ltd

Members:
Perry J

Tribunal:
Federal Court of Australia

MEDIA NEUTRAL CITATION: [2023] FCA 617

Decision date: 9 June 2023

Perry J

1. INTRODUCTION

1. According to the Greek myth, Theseus was able to escape from the labyrinth by the use of Ariadne's string, which helped guide him to the end of the twists and turns of that famous maze. No amount of string, however, would have saved Theseus from the labyrinth of lies and deceit which lie at the core of this case.

2. The applicant, the Commissioner of Taxation, seeks to set aside the decision of the Full Federal Court in
Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26; (2013) 133 ALD 39 ( Rawson (FCAFC) ) on the ground that it was procured by fraud. Further, or in the alternative, the Commissioner seeks to set aside on the same ground both the decisions in Rawson (FCAFC) and of the Administrative Appeals Tribunal ( Tribunal or AAT ) in
Re Areffco and Commissioner of Taxation [2011] AATA 628; (2011) 84 ATR 924 ( Rawson (AAT) ). Areffco was the pseudonym used by the AAT for the respondent, Rawson Finances Pty Ltd, which was one of a number of entities owned and controlled by members of the Binetter family.

3. By way of overview, the decisions in Rawson (AAT) and Rawson (FCAFC) arose in context of Project Wickenby, a project by the Australian Taxation Office ( ATO ) which investigated whether Australian taxpayers were returning profits earned abroad to Australia disguised as "loans" from overseas banks. Following an audit commenced in July 2006, the Commissioner issued under s 167 of the Income Tax Assessment Act 1936 (Cth) ( ITAA 36 ) notices of assessment and amended assessment of the amount of taxable income of Rawson for the financial years ending 30 June 1997 to 30 June 2008 (the relevant period ) and penalty assessments for the years ended 30 June 2001 to 30 June 2008 inclusive (the taxation assessments and the penalty assessments respectively). First, the Commissioner disallowed amounts which Rawson claimed for the relevant period were allowable deductions representing interest incurred by it on alleged loans from the Mercantile Discount Bank ( MDB ) in Israel to Rawson. Secondly, by assessments for the years of income ended 30 June 1997 and 1998, the Commissioner included in Rawson's assessable

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income, amounts received by Rawson in Australia from MDB by way of purported loans. This resulted in the Commissioner assessing Rawson's taxable income in the sum of $3,007,550.00 for the year ending 30 June 1998 and in the sum of $1,971,088 for the year ending 30 June 1999.

4. Rawson, however, contended that the amounts that the Commissioner had assessed as taxable income for the years ending 30 June 1998 and 1999 were loans made to it from MDB and claimed deductions over the relevant period for interest allegedly paid by Rawson on those loans. It lodged taxation objections to the taxation assessments (the taxation objections ), and objections to the penalty assessments (the penalty objections ) in September 2009.

5. Rawson's taxation and penalty objections were disallowed by the Commissioner on 27 May 2010.

6. On 11 June 2010, Rawson commenced merits review proceedings against the Commissioner's decision in the AAT under Part IVC of the Taxation Administration Act 1953 (Cth) ( TAA 53 ). The proceedings were heard from 9 to 13 May 2011, 8 to 10 June 2011, and on 17 June 2011. Section 14ZZK of the TAA 53 imposed the onus of proving that the Commissioner's assessments were excessive upon Rawson.

7. In the course of the Rawson (AAT) proceedings, Rawson adduced evidence from several witnesses. Shortly stated, the effect of that evidence and Rawson's submissions was as follows:

8. In Rawson (AAT), the Tribunal accepted that Rawson had established that the taxation assessments were excessive. Accordingly, on 6 September 2011, the Tribunal set aside the Commissioner's decisions insofar as the Commissioner had: (a) included in Rawson's assessable income any part of the funds transferred from MDB; and (b) disallowed deductions for interest. As the Commissioner submitted, in so finding, the Tribunal accepted that:

Rawson, a recently incorporated Australian company with no net assets and issued share capital of $2 was able to obtain a loan for AUD4.75 million from a reputable Israeli bank whilst providing no security and was able to seemingly default on its interest payment obligations for lengthy periods of time without any recovery steps being taken, or without any apparent response from MDB.

(Applicant's Outline of Submissions ( AS ) at [10].)

9. The Commissioner instituted an appeal against the AAT decision in the Federal Court under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) ( AAT Act ). This was an appeal on a question of law only and not as to the merits of the AAT decision. In other words, as Jessup J held in Rawson (FCAFC) at [60],

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disagreement, or even strong disagreement, with the findings by the AAT would not suffice to establish a basis on which the Court could interfere with the AAT's decision.

10. On 17 July 2012, Edmonds J allowed the Commissioner's appeal on the ground that the AAT's conclusion, that the Tribunal's characterisation of Rawson's funds received from MDB in 1997 as "loans", was not open on the evidence, and Rawson had not therefore discharged its onus of proof under s 14ZZK(b)(i) of the TAA:
Commissioner of Taxation v Rawson Finances Pty Ltd [2012] FCA 753; (2012) 89 ATR 357 ( Rawson (FCA) at [18]). Rawson then appealed from that decision to the Full Court, alleging that the primary judge had erred in failing to consider evidence which supported the inference that the 1997 transfers were by way of loans. On 5 March 2013, the Full Court in Rawson (FCAFC) allowed Rawson's appeal, set aside the orders of the primary judge, and in lieu thereof, ordered that the application by way of appeal from the AAT be dismissed.

11. Nonetheless, in so holding, Jagot J (with whose reasons Nicholas J agreed) accepted the inherent implausibility of the Tribunal's decision, observing that (at [78]-[80]):

This is a difficult case.

One reason it is difficult is that, after a hearing over 9 days and through a meticulous analysis of some 77 pages of the whole of the material before it, the Administrative Appeals Tribunal (the Tribunal) reached a conclusion which seems inherently implausible - that the appellant, Rawson Finances Pty Ltd (Rawson) had proved on the balance of probabilities that in 1997 an Israeli bank lent $4.75 million to an Australian company with an issued share capital of $2 without having any form of security or guarantee and thereafter took no step to require the payment of interest on the outstanding loan amounts of about $1.75 million over two periods of more than 3 years each between 2001 and 2009, the loans ultimately having been fully repaid by December 2009. This conclusion was reached despite : (i) the lack of any loan agreements, (ii) the lack of any witness who had any involvement in the establishment of the loans being called to give evidence, (iii) the evidence that Israeli banking practices usually would require security for such loans, (iv) Rawson's lack of financial capacity at the time of the loans to repay the money, and (v) the lack of any action taken by the bank despite Rawson having failed to pay interest for some 7.5 years in total out of the 12 years over which the loans existed.

By contrast, after a hearing confined to a question of law on an appeal under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act), the primary judge concluded that it was not open on the evidence for the Tribunal to conclude that the funds transferred by the Israeli bank to Rawson in 1997 were by way of a loan because, in the circumstances of this case, the transfer of funds "may be equally explicable" as a transfer through the Israeli bank of Rawson's own money and, indeed, an analysis of the evidence made it far more likely that this was so than the conclusion reached by the Tribunal. The primary judge's conclusion that it was far more likely on the evidence that the funds transferred were not a loan to Rawson, given the circumstances to which brief reference has been made above and which the Tribunal itself considered warranted the characterisation of the funds transfer as at least "unusual", has the advantages of immediate plausibility and apparent common sense . The primary judge's conclusion, in contrast to that of the Tribunal:

  • • explains the otherwise apparently inexplicable (that any bank was willing to lend a company with no assets and no apparent means of repayment $4.75 million without any security and was content to take no action whatsoever when the asserted borrower failed to pay interest for more than 7 years in total);
  • • recognises that the respondent in this appeal, the Commissioner of Taxation (the commissioner) has no means of compelling the Israeli bank to produce the whole of its records to the commissioner;

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  • • recognises that the commissioner has no means of testing the assertions of the fund transfers relating to a "loan" in documents in circumstances where no officer of the Israeli bank was willing to give evidence and no person associated with Rawson who had any involvement in the establishment of the loans was available to give evidence; and
  • • recognises that the kind of documents of the bank and Rawson which were located and put before the Tribunal were not only an incomplete record which may well not disclose the whole of the dealings between Rawson and the bank relevant to the question whether the funds were transferred by way of a loan or otherwise but also were, as the commissioner put it, precisely the type of documents that would be brought into existence if a company such as Rawson wished it to appear that it was obtaining loan funds when in reality it was moving into Australia its own funds or funds it already controlled overseas for the purpose of avoiding incurring a tax liability on those funds as part of its assessable income.

(Emphasis added.)

12. The Commissioner contends that he subsequently obtained a substantial body of new evidence since judgment in Rawson (FCAFC). The new evidence (which, together with the evidence and other documents pertaining to the Rawson (AAT) proceedings, comprised 56 volumes) includes the following:

13. The Commissioner contends that the new evidence establishes first that the loans to BCI, Advance, Civic and EGL were in fact secured by secret cash deposits and described as back-to-back loans, and that these matters were known to witnesses who gave false or misleading evidence to the contrary on behalf of, and to the knowledge of, Rawson in the Rawson (AAT) proceedings. Secondly , the Commissioner alleges that the new evidence establishes that the Rawson loans were supported by a secret linked deposit account in a code name and that Rawson's case that they were secured only by personal guarantees was knowingly false. Thirdly , and also based upon the new evidence, the Commissioner alleges that the decisions in Rawson (AAT) and Rawson (FCAFC) were obtained by fraud and that the fraud was material to the outcome of the Rawson (AAT) proceedings.

14. For the reasons given below, the new evidence overwhelmingly establishes that the decisions of the AAT and the FCAFC were obtained by fraud on the part of Rawson (but not on the part of the legal practitioners making submissions in the Rawson (AAT) and Federal Court proceedings). First , this is now established by direct evidence of Rawson's loan arrangements with MDB and Rawson's knowledge of the fraud through its director and company secretary, Andrew Binetter. Secondly , the Commissioner also adduced new evidence in relation to other Binetter family entities (including BCI, Advance, Civic and EGL) because Rawson ran an inferential case before the AAT that it followed the same "business practice" as its related entities. Accordingly, the new evidence of the actual business practices of those entities was relied upon by the Commissioner in support of the alleged fraud perpetrated by Rawson. While, given direct evidence of the fraud, it might not be strictly necessary for me to make findings in relation to Rawson's case in the AAT to the extent that it was based upon the

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alleged business practices of those related entities, I have nonetheless addressed that evidence. In particular, as trial judge, it is incumbent upon me to make findings with respect to all material issues. Furthermore, that evidence further strengthens the finding of fraud that I have made and exposes the extent of the fraud perpetrated by Rawson on the AAT and the Full Court. It also exposes the lengths to which Rawson went to conceal the back-to-back nature of its arrangement with MDB, seeking at every stage to conceal the fraud. Thirdly , I have no doubt that the fraud was material to the outcome of the AAT and in turn to the decision of the Full Court.

15. In short, this is a case of extraordinary deceit and subterfuge involving a multitude of overseas accounts and highly suspicious and unexplained transactions of labyrithal complexity. The evidence plainly establishes that Andrew Binetter, who was the company secretary and a director of Rawson since 1998, and was responsible for conducting the Part IVC proceedings and Federal Court appeals on Rawson's behalf, knew the true nature of the arrangements between Rawson and MDB. Yet Rawson, through Andrew, ran a case known to be false and misleading in the Tribunal and pressed that case on appeal to the Federal Court and the Full Court. Indeed Andrew himself gave patently false evidence to the Tribunal. It is therefore no overstatement to say that the evidence establishes highly egregious and fraudulent conduct by Rawson, through Andrew, in the case run in the AAT and in the Federal Court. In the words of Lord Sumption in
Takhar v Gracefield Developments Ltd [2019] UKSC 13; [2020] AC 450 at [61], this is a case where the Commissioner has established that he is "absolutely entitled" to have the Full Court's decision set aside by reason of the fraud.

2. DRAMATIS PERSONAE

16. The dramatis personae is largely taken from the Commissioner's opening submissions which was non-contentious, save where I otherwise identify.

2.1 Rawson

17. Rawson was incorporated in the Australian Capital Territory on 21 April 1997[2] KDB Vol 1 Tab 15; TCA1-1 1/21/353. . At all material times Rawson was the wholly owned subsidiary of Ligon 158 Pty Ltd as trustee of the Caringbah Investment Trust (applicant's second further amended statement of claim ( 2FASOC ) and defence ( Def ) at [2]). Margaret Binetter and her husband, Erwin Binetter, beneficially held the majority of the shares in Ligon 158[3] KDB Vol 8 Tab 259; TCA1-2 9/3961. . The directors of Rawson were Erwin from the date of incorporation until his death on 25 August 2009, Margaret also from the date of incorporation, and their son, Andrew, from 9 March 1998, who was also appointed as company secretary on the same date (2FASOC and Def at [3]).

18. Rawson's sole business was ostensibly the borrowing and lending of money[4] KDB Vol 4 Tab 150; TCA1-1 5/284/2563 [88]. . As the Commissioner submits, its balance sheets for the relevant tax years reveal that it had no net assets and that the so-called "loans" from MDB were its only significant liability[5] KDB Vol 6 Tab 201; TCA6-1 9/51.0/51.2/51.5/51.8/51.11/51.13 – .20. .

19. In June, July and December 1997, a total of AUD$4.75 million was transferred in three tranches from MDB to Rawson, which was said to constitute the principal of a loan from MDB to Rawson (the Rawson loans )[6] KDB Vol 1 Tab 17; TCA1-1 1/26/394 (AUSTRAC records); KDB Vol 4 Tab 144; TCA1-1 4/278/ 1991 [6], [9], [12] (Rawson’s statement of facts, issues and contentions). . Between February 1998 and 2009, Rawson purportedly made a series of transfers to MDB in respect of the "loans"[7] See, Areffco [25]; KDB Vol 4 Tab 160; KDB Vol 7 Tab 211; TCA1-1 5/298/2742 [34] – [35] (affidavit of Andrew Binetter 17 November 2010). .

20. There was no direct evidence before the Tribunal of any security or guarantee in support of the Rawson loans. As earlier explained, the case led by Rawson was one based on circumstantial evidence in which the AAT was asked to draw inferences from the alleged business practices engaged in by Erwin with banks in Israel. In so saying, I do not disagree with Jagot J in Rawson (FCAFC) at [88] that "permissible inference may be based on direct evidence or circumstantial evidence. The mere fact that evidence is circumstantial rather than direct does not convert permissible inference based on that evidence into impermissible conjecture". However, the present is a case in which direct evidence is now available which establishes the false and misleading nature of the circumstantial case which Rawson fraudulently ran in the AAT and to which it adhered in defending the AAT decision in the Rawson (FCA) and Rawson (FCAFC) proceedings.

21. Furthermore, at all relevant times, Rawson and the other Binetter family entities

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were represented by Mark Douglass, initially of MDA Lawyers and subsequently of Signet Lawyers.

2.2 Other entities controlled by members of the Binetter family (BCI, Binqld, EGL, Ligon 268, Advance, Civic, and the GERM entities)

22. In addition to Rawson, various members of the Binetter family controlled several entities (the Binetter family entities ). These relevantly included:

23. The last four entities, Gerobin, Erbin, Rawbin and Marbin, are collectively referred to as the GERM entities .

24. Aside from Rawson, each of the entities listed above is now subject to external administration[18] KDB Vol 8 Tab 268, 269, 270, 271, 272 and CB Vol 8 Tab 499; TCA1-1 11/494 – 499/6368 – 6413 (BCI, Binqld, Ligon 268, EGL, Advance and Civic); KDB Vol 8 Tab 281, 282, 283, 284; McGregor NEM1-2 Tabs 156 – 159 (GERM). .

25. BCI,[19] KDB Vol 7 Tab 216; TCA1-1 8/373/4715 [10]ff, [29]ff (amended appeal statement). Binqld,[20] KDB Vol 7 Tab 221; TCA1-1 8/388/5026 [6]ff (further amended statement of facts, issues and contentions). EGL,[21] KDB Vol 7 Tab 222; TCA1-1 8/389/5040 [15]ff (statement of facts, issues and contentions). Ligon 268,[22] KDB Vol 7 Tab 223; TCA1-1 8/390/5056 [14]ff (statement of facts, issues and contentions). Advance[23] KDB Vol 7 Tab 234; TCA1-1 9/413/5486 [17]ff, [24]ff (statement of facts, issues and contentions). and Civic[24] KDB Vol 7 Tab 235; TCA1-1 9/414/5500 [16]ff, [22]ff (statement of facts, issues and contentions). each separately commenced proceedings pursuant to Part IVC of the TAA 53 in the Federal Court or the AAT and contended that they borrowed funds from banks in Israel as follows:

26. However, Advance and Civic withdrew their Part IVC proceedings on 4 March 2013 prior to the Tribunal hearing and shortly after going into administration. BCI discontinued its Part IVC proceedings in the Federal Court on 10 March 2014 after the Commissioner obtained documents demonstrating that its loans were in fact supported by cash deposits. Binqld, Ligon 268 and EGL also withdrew their respective Part IVC proceedings in the Tribunal shortly thereafter on 22 May 2014.

27. Taking each of these entities in turn:

28. I later discuss the evidence before the Tribunal in detail. I note at this stage, however, that Andrew, Margaret, Gary, and Baruch Etzion gave evidence[39] KDB Vol 4 Tab 150; Andrew Binetter: KDB Vol 4 Tab 160; TCA1-1 5/284/2563 (21 October 2010); TCA1-1 5/298/2742 (17 November 2010); KDB Vol 5 Tab 177; TCA1-1 6/326/3008 (15 April 2011); KDB Vol 5 Tab 182 ; TCA1-1 6/330/3053 (4 May 2011); KDB Vol 5 Tab 185; TCA1-1 6/333/3074 (6 May 2011). Baruch Etzion: KDB Vol 3 Tab 129; TCA1-1 3/211/1238; (16 December 2009); KDB Vol 5 Tab 167; TCA1-1 5/303/2804 (15 February 2011); KDB Vol 5 Tab 175; TCA1-1 6/324/2988 (1 April 2011). and were cross-examined[40] Andrew Binetter: KDB Vol 5 Tab 191; TCA1-1 6/337/3231; KDB Vol 6 Tab 197; TCA1-1 7/345/3577; KDB Vol 6 Tab 198; TCA1-1 7/346/3659; KDB Vol 6 Tab 199; TCA1-1 7/347/3745; KDB Vol 6 Tab 202; TCA1-1 7/350/3872. Baruch Etzion: KDB Vol 5 Tab 191; TCA1-1 6/337/3231. in the Rawson (AAT) proceedings. Mr Etzion had approved loans to BCI when he was employed by Bank Hapoalim and was said to be an expert with respect to the likelihood of a loan being granted on the strength of a bare personal guarantee. Their evidence was relied upon as indirect evidence of aspects of the purported loans from MDB. Their affidavits were also filed and served in Part IVC proceedings commenced by BCI in the Federal Court[41] Andrew Binetter: KDB Vol 7 Tab 215; TCA1-1 8/370/4658 (31 October 2011); KDB Vol 7 Tab 220; TCA1-1 8/387/5022 (13 April 2012); KDB Vol 7 Tab 236; TCA1-1 9/415/513 (28 September 2012). Baruch Etzion: KDB Vol 7 Tab 212 ; TCA1-1 8/365/4619 (4 October 2011); KDB Vol 7 Tab 218; TCA1-1 8/379/4789 (15 March 2012); KDB Vol 7 Tab 219; TCA1-1 8/380/4800 (15 March 2012). .

2.3 Binetter family code names

29. As I later explain, the Binetter family members operated the "loan" accounts with the Israeli banks using various code names. These are conveniently set out in the table below.

Binetter family member Belan code name
Erwin Binetter family
Erwin George Belan
Michael Arthur Belan
Andrew Frank Belan
Margaret Ida Belan
Ronald Benjamin Belan
Peter Belan Henry Belan
Emil Binetter family
Emil David Belan
Gary John Belan
Debbie Rose Belan
Lisa Rita Belan

30. In addition, as the Commissioner submitted (applicant's submissions ( AS ) at [248]), the Belan code names may not be the only pseudonyms used by the Binetter family. The MDB documents reveal large payments being made to names such as "Peter Babis"[42] SCB Vol 9 Tab 897; MDB Documents pp 43 (AUD$1,060,000 converted to Swiss Francs to Peter Babis at the instruction of Frank Belan (Andrew Binetter) on 21 July 2009) ; , SCB Vol 9 Tab 908; MDB Documents p 44 (CHF917,000 to Peter Babis by order of Michael Binetter on 22 July 2009), and SCB Vol 9 Tab 942 MDB Documents p 76; (AUD$648,049.84 to Peter Babis in Swiss Francs at the instruction of Andrew Binetter on 13 October 2009) ; SCB Vol 9 Tab 943 ; MDB Documents p 77 (CHF595,000 to Peter Babis by order of Michael Binetter on 13 October 2009). , "David Israel"[43] SCB Vol 7 Tab 722; MDB Documents p 486. and "M&D Lobelson"[44] SCB Vol 7 Tab 721; MDB Documents p 485. . The identity of these persons has never been explained by Rawson and may also be code names.

3. EVIDENCE

3.1 Rawson

31. Rawson filed its defence to the 2FASOC on 8 July 2020[45] CB Vol 1 Tab 3 . . However, by orders made on 29 April 2015, Rawson was excused from pleading to paragraphs 14, 16, 18, 20, 22, 24, 26, 29(c), 31, and 33 of the Commissioner's 2FASOC on the basis that its directors, Andrew and Margaret, asserted the privilege against self-incrimination. Rawson did not tender any evidence and no witnesses gave evidence for Rawson.

3.2 The Commissioner's evidence

32. The Commissioner relied upon a number of affidavits (including exhibits and annexures) of Thomas Charles Arnold, solicitor, namely:

33. In addition, the Commissioner relied upon the affidavits of the following additional witnesses:

34. The documentary material was voluminous and comprised:

35. The parties also filed:

3.3 Grant of leave to use certain documents obtained in Part IVC proceedings instituted by BCI in the Federal Court in these proceedings

36. As I have earlier mentioned, BCI instituted proceedings in the Federal Court of Australia challenging assessments by the Commissioner which treated as taxable income, monies transferred to it from Bank Hapoalim in Israel pursuant to alleged loans. On 9 August 2012, orders were made by Jagot J in the BCI proceedings:
BCI Finances Pty Ltd v Commissioner of Taxation [2012] FCA 855; (2012) 89 ATR 861. Among other orders, Jagot J made orders for the BCI letter of request to be sent to judicial authorities in Israel for the taking of evidence from Mr Ilan Mazur, an officer of Bank Hapoalim[46] KDB Vol 7 Tab 233; TCA1-1 9/407/5424. . Jagot J also made orders for there to "be discovery by [BCI] of documents in Schedule E to these orders". In broad terms, the documents in Schedule E primarily pertained to:

37. On 26 January 2014 (and after the Full Court's decision in Rawson (FCAFC)), BCI filed a motion in the Israeli proceedings which concerned the letters of request. That motion requested a short delay in proceedings, on the basis that BCI had not yet received all of the documents relevant to that letter of request held by Bank Hapoalim[47] KDB Vol 8 Tab 247; TCA1-1 10/463/6020. . Implicitly, that document therefore indicated that BCI had obtained at least some documents from Bank Hapoalim.

38. Following the filing of that motion in the Israeli proceedings, on 29 January 2014, the Commissioner filed and served a notice to produce document in this Court, requiring the applicant to produce "all documents provided by Bank Hapoalim [to BCI] … following the directions hearing before … the Magistrate's Court Tel-Aviv Jaffa … as referred to in the Applicant's motion filed in those proceedings on or about 26 January 2014".[48] CB Vol 8 Tab 467; TCA1-1 10/464/6020.

39. Finally, on 9 April 2014, the Commissioner issued a subpoena (returnable on 30 April 2014) in the BCI proceeding to Signet Lawyers (formerly MDA Lawyers).[49] KDB Vol 8 Tab 252; TCA1-1 10/479/6199. By that subpoena, the Commissioner sought production of "all documents provided by Bank Hapoalim to you [Signet Lawyers] or to the applicant [BCI] following the directions hearing before … the Magistrate's Court Tel-Aviv Jaffa … as referred to in the Applicant's motion filed in those proceedings on or about 26 January 2014".[50] KDB Vol 8 Tab 251 ; TCA1-1 10/477/6138.

40. On 10 June 2014, the Commissioner filed an interlocutory application and supporting affidavit in the BCI proceedings[51] CB Vol 38 Tab 1953 – 1954 . seeking leave to use certain documents obtained in those proceedings:

41. That application identified various documents sought to be released, including the following:

Affidavit and documentary evidence

  • 1. Affidavit of Baruch Etzion filed on 12 October 2011 [TCA1-1 8/365/4619].
  • 2. Exhibit "BE18" to the affidavit of Baruch Etzion filed on 12 October 2011, being a letter from Bank Hapoalim to BCI Finances Pty Ltd dated 10 November 2009 in relation to the balance of account for account no. 343415 as at 30 September 2009 [TCA1-1 3/187/1211].
  • …
  • 5. Affidavit of Margaret Binetter filed on 14 October 2011 [TCA1-1 8/367/4636].
  • …
  • 7. Affidavit of Andrew Binetter filed on 1 November 2011 [TCA1-1 8/370/4658].
  • 8. Affidavit of Baruch Etzion filed on 13 April 2012 [TCA1-1 8/379/4789 and 8/380/4800]
  • …

Documents produced by Andrew Binetter under subpoena and discovered

  • …
  • 12. Letter from Bank Hapoalim to BCI Finances Pty Ltd dated 15 October 2009 in relation to account balance for account number 343415 as at 30 September 2009 [TCA1-1 3/184/1162].
  • …

Documents produced by Signet Lawyers under subpoena

  • …
  • 15. All documents produced by Signet Lawyers Pty Ltd on 22 May 2014 in an envelope pursuant to the subpoena to produce documents issued on 9 April 2014, being:
    • a. a letter from Bank Hapoalim (Switzerland) Ltd to Bank Hapoalim, Tel Aviv dated 25 May 2004 [TCA1-1 1/93/541]; and

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    • b. a letter from Bank Hapoalim (Switzerland) Ltd to Bank Hapoalim, Tel Aviv dated 1 June 2004 [TCA1-1 1/94/543].

42. On 19 August 2014, Edmonds J heard that application. On 10 September 2014, in
BCI Finances Pty Ltd (in liq) v Commissioner of Taxation (No 3) [2014] FCA 958; (2014) 320 ALR 747, his Honour made orders that:

43. Between February and April 2015, the Commissioner obtained further documents from Bank Hapoalim pursuant to the BCI letter of request, necessitating a further application for leave to use those documents in the present proceeding.

44. On 4 June 2015, the Commissioner filed an interlocutory application and supporting affidavit in the BCI proceedings. That application sought, amongst other orders, for the Commissioner to be released from the implied obligation not to make use of documents filed in those proceedings for purposes other than those of the proceedings, so far as necessary to enable the Commissioner to use the documents identified in Schedule A in the present proceeding[52] CB Vol 38 Tabs 1957-1958 . .

45. On 7 July 2015, Jagot J made orders, amongst others, that the Commissioner be released from the implied obligation not to make use of documents filed in the BCI proceedings for purposes other than those of the proceedings, so far as is necessary to enable the Commissioner to use, in the present proceeding, the documents identified in Schedule A and B as attached to the Commisioner's interlocutory application dated 3 June 2015:
B.C.I Finances Pty Limited (in liq) v Commissioner of Taxation [2015] FCA 679.

46. The orders made on 7 July 2015 were opposed by Andrew. An appeal by Andrew from that decision was dismissed unanimously by the Full Court on 27 August 2015:
Binetter v BCI Finances Pty Ltd (in liq) [2015] FCAFC 122; (2015) 235 FCR 410. Andrew further sought special leave to the High Court. On 12 February 2016, Keane and Gageler JJ refused special leave with costs, on the basis that the appeal "would have insufficient prospects of success to warrant the grant of special leave to appeal":
Binetter v BCI Finances Pty Ltd [2016] HCATrans 33.

3.4 Manner of citing documents and glossary

47. For reasons of consistency, I have adopted the manner of referring to documents in the footnotes which was used by the Commissioner in his written submissions, namely:

a reference to a document that is part of an exhibit is a reference to, first, the mark identifying the exhibit, second, the volume number describing where the document is located, third, the tab number the document is behind and fourth, the page number of the document contained in the exhibit. For example, TCA1-1 1/13/296 refers to the document at page 296 behind tab 13 in volume 1 of exhibit TCA1-1.

48. In addition, the Commissioner provided a glossary of terms used in the applicant's submissions in chief. As I have adopted the same terminology as the Commissioner, I have reproduced the glossary in Appendix A (with appropriate amendments) to these reasons to assist the reader.

49. Finally, footnote references to the evidence have been included for the convenience of the parties only and are not intended to comprehensively identify the location of all documents or every location in the evidence where a particular document is found. Nor, while there are some cross-references included to the agreed chronology, does the judgment contain comprehensive cross-references to the agreed chronology.

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4. OVERVIEW OF THE ISSUES

50. The Commissioner submitted that the decision of the Full Court should be set aside on the ground that it was procured by fraud. The way in which the Commissioner put the case of fraud in oral and written submissions can be summarised as follows.

51. In the face of overwhelming evidence of the existence of the back-to-back loans in the case of Rawson and the Binetter family entities, Rawson admitted the existence of the back-to-back loans for the first time in its written submissions in this proceeding, but contends

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that the Commissioner still cannot succeed for essentially the following reasons.

52. First, Rawson contends that in order to succeed on his pleaded case, the Commissioner must establish that the Andrew and Margaret, as well as the the other witnesses on which Rawson's case depended (who are referred to in the 2FASOC) including Mr Zamir, perjured themselves or were suborned into giving false evidence. In Rawson's submission, this is the case which has been pleaded by the Commissioner. (I note that this submission also explains why Rawson says that the decision which must be set aside is the AAT's decision because the perjury occurred at the level of the AAT, and why it contends that there would be no inconsistency between the decision of this Court setting that decision aside and the decision in Rawson (FCAFC), because the Full Court simply determined whether the AAT's decision was open to it on the basis of the evidence before the AAT). Rawson therefore denies that the Commissioner has pleaded that Rawson ran an entire case before the AAT, the Federal Court and the Full Court which was knowingly fraudulent. Given that fraud must be strictly pleaded and proved, Rawson says that the Commissioner must be held to his pleaded case which he cannot establish. Rawson also alleges that the 2FASOC is largely based upon a wrong assumption, because it does not suffice to establish fraud that the evidence give was "misleading" or "materially misleading" as pleaded. Instead, Rawson contends that perjury must be proved to the standard articulated in
Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 and the elements are those applicable to a criminal prosecution.

53. However, for reasons which I later develop, the Commissioner's submissions as to the adequacy of its pleaded case to establish fraud is, in my view, unquestionably correct. Rawson's submissions impermissibly conflate the question of whether Rawson had the requisite fraudulent intent with the means by which the fraud was allegedly perpetrated, namely, by the leading of false or misleading evidence, including by material non-disclosures.

54. Secondly, Rawson also submits that when regard is had to the new evidence (including produced by MDB and the witnesses examined in Israel pursuant to the letters of request), the result would be the same: the evidence of the witnesses in the AAT was truthful as Rawson itself had no overseas assets, and the new evidence confirms that the Rawson loans were genuine and enforceable loans in respect of which interest was payable. To the contrary, Rawson submits that the new evidence makes it clear that these were genuine loans. As Rawson submitted in its written submissions ( RS ) at [3]:

The evidence obtained pursuant to the Letters of Request to Israel unequivocally confirms that the funds received from the bank were genuine loans at interest. Had the 'undisclosed evidence' been before the Tribunal, namely that there were cash deposits (in an account owned by a person other than Rawson), which secured the loans from the bank, the Tribunal and the Full Court would have reached the same conclusion, a fortiori.

55. The Commissioner however alleges that Rawson is effectively seeking to impose the onus upon the Commissioner to establish that these were not genuine loans, rather than Rawson being required to establish that the assessments were excessive in accordance with the statutory onus on the basis of the case which it chose to run in the AAT. As the Commissioner submitted orally in reply:

… we disagree, on a matter of [principle], with Mr Hutley's [Rawson's counsel's] submissions. That your Honour's job is to look at the decision of the Tribunal, and impose, on the Senior Members decision, the existence of the deposit. And determine whether, in the context of some of his - of the Tribunal's - findings, Rawson would still have satisfied the onus. Now we say that that's not the right approach and that's inconsistent with authority; that the approach your Honour has to undertake is your Honour has to undertake an assessment of the evidence that was led and the submissions put and assess the new evidence in light of that. And whether the new evidence would have had an impact.

(See also the Commissioner's written submission in reply ( AR ).)

56.

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As the Commissioner also submitted:

… the significant issue that was put by Mr Hutley today was an argument he has run on various occasions, which is the idea of this being a genuine loan. Well, the three loans being genuine. As your Honour now knows, it was every year it had to be redone. We now know that. It wasn't just one loans or three loans in 1997. It was in fact extended every single year, including by Andrew Binetter prior to the hearing and that was never revealed. But everything that Mr Hutley submitted this morning, your Honour, would not have been an argument that could have been [r]un in the tribunal.

Mr Hutley's client would have been constrained by the terms of its objection, and the objection that it had articulated and ran was - these were loans, and the interest was as paid, by Mr Andrew Binetter, and in the 90s by his father. So what your Honour's task actually is, is not whether MDB as an enforceable right under a loan contract, but whether or not your Honour is satisfied that the commissioner has proved the fraud that is pleaded, whether if that material had been available, whether for each year of income, Rawson would have been able to satisfy the commissioner, that the assessments were not excessive.

(T 22/09/20 at pp. 517.38-518.8 (Ms Morgan); emphasis added.)

5. RELEVANT PRINCIPLES

5.1 Principles applying where it is sought to impeach a judgment on the ground of fraud

57. First , the Federal Court has implied jurisdiction to set aside orders procured by fraud:
Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd [1986] FCA 248; (1986) 12 FCR 14 at 15 (Morling J) and the authorities cited therein. This is reflected in r 39.05(b) of the Federal Court Rules 2011 (Cth) ( FCR ) which provides that the Federal Court may set aside or vary any judgment or order after it has been entered if it was "obtained by fraud".

58. Secondly , as the Commissioner submitted, while the fraud alleged by the Commissioner commenced with the case presented by Rawson to the Tribunal, unlike a court, the Tribunal lacks any equitable jurisdiction to set aside its decision on the basis that it was procured by fraud. Nor does a decision of the Tribunal authoritatively determine the rights of the parties, in contrast to an exercise of judicial power.

59. However, as the Commissioner also submitted, the effect of the orders of the Full Court was to restore the operation of the Tribunal's decision which itself merged into the judgment of the Full Court. Thus, by analogy in
Thiess Pty Ltd and Hochtief Ag v Industrial Court of NSW [2010] NSWCA 252; (2010) 78 NSWLR 74, Spigelman CJ held (at [74]) that:

In a case such as the present, it is not sufficient to make orders directed only at the outcome of the proceedings in the Local Court. An order dismissing the appeal, as made by the Full Bench of the Industrial Court in this case, has the consequence that the orders of the Local Court become merged in the judgment of the Full Bench: see
Wishart v Fraser (1941) 64 CLR 470 especially at 482-483 … It is, accordingly, necessary to make orders directed to the order of an appellate court dismissing an appeal.

60. The case to which Spigelman CJ referred to in Thiess was
Wishart v Fraser [1941] HCA 8; (1941) 64 CLR 470 which concerned an appellant who sought special leave from a decision of the then Court of Quarter Sessions, and at the same time sought to overturn, by order nisi, a conviction from the then Court of Petty Sessions. Although Wishart involved a special leave application to the High Court, the Commissioner placed particular reliance on Dixon J's proposition (at 482-3) that:

It is not denied that the order of the Court of Quarter Sessions was within its jurisdiction and was validly made. While it stands it is a judicial declaration by a competent court exercising Federal jurisdiction establishing the order of the magistrate and preventing its being called in question. If this court made an order setting aside the conviction, there would be two inconsistent judicial orders in operation at the same time, that of the Court of Quarter Sessions confirming the conviction and that of this court discharging it.

61.

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Equally, if this Court were to set aside the Tribunal's decision on the ground of fraud, there would be two inconsistent judicial orders in operation at the same time, namely, the Full Court's decision upholding the Tribunal's decision and the decision of this Court setting the Tribunal's decision aside. It follows as the Commissioner submitted (AS at [130]), that, consistently with authorities concerning the effect of an appellate court's order, the only operative decision, and the one which should be set aside if it was indeed procured by fraud, is that of the Full Court in Rawson (FCAFC). Nonetheless, as the fraud was perpetrated on the Full Court by reason of Rawson pressing, on appeal, the fraudulent case that it ran before the Tribunal, it is necessary in the first place to establish that the decision of the Tribunal was induced by fraud.

62. Thirdly , as the Commissioner has done in these proceedings, it is generally appropriate for a party wishing to impeach a judgment on the ground of fraud to institute independent proceedings for that purpose: Australasian Meat at 15;
Clone Pty Ltd v Players Pty Ltd (In Liquidation) (Receivers & Managers Appointed) [2018] HCA 12; (2018) 264 CLR 165 at [32] (the Court); see also e.g.
Tjiong v Tjiong [2021] NSWSC 1389 at [74] (Parker J). In this regard, Lord Sumption (with whom Lord Hodge, Lord Lloyd-Jones and Lord Kitchin JJSC agreed) in
Takhar v Gracefield Developments Ltd [2019] UKSC 13; [2020] AC 450 at [60]-[61] explained that:

An action to set aside an earlier judgement for fraud is not a procedural application but a cause of action . As applied to judgments obtained by fraud, the historical background was explained by Sir George Jessel MR in
Flower v Lloyd (1877) 6 Ch D 297, 299-300. Equity has always exercised a special jurisdiction to reverse transactions procured by fraud. A party to earlier litigation was entitled to bring an original bill in equity to set aside the judgment given in that litigation on the ground that it was obtained by fraud. Such a bill could be brought without leave, because it was brought in support of a substantive right. If the fact and materiality of the fraud were established, the party bringing the bill was absolutely entitled to have the earlier judgment set aside. In this respect, an original bill differed from a bill of review on the basis of further evidence, which was essentially procedural and did require leave. After the fusion of law and equity in the 1870s, the procedure by way of original bill was superseded by a procedure by action on the same juridical basis.

The cause of action to set aside a judgment in earlier proceedings for fraud is independent of the cause of action asserted in the earlier proceedings. It relates to the conduct of the earlier proceedings, and not to the underlying dispute. There can be no question of cause of action estoppel. Nor can there be any question of issue estoppel, because the basis of the action is that the decision of the issue in the earlier proceedings is vitiated by the fraud and cannot bind the parties:
R v Humphrys [1977] AC 1, 21 (Viscount Dilhorne). If the claimant establishes his right to have the earlier judgement set aside, it will be of no further legal relevance qua judgment. It follows that res judicata cannot therefore arise in either of its classic forms.

(Emphasis added.)

63. Fourthly , the High Court in Clone held (at [55] and [69]) that the power to set aside a judgment on the ground of fraud requires actual fraud, reflecting the public interest in the finality of litigation. In so holding, their Honours at [55] approved inter alia the statement by Sir John Rolt LJ in
Patch v Ward (1867) LR 3 Ch App 203 at 212-213 that:

… the fraud must be actual positive fraud, a meditated and intentional contrivance to keep the parties and the Court in ignorance of the real facts of the case, and obtaining that decree by that contrivance. Mere constructive fraud not originating in actual contrivance, but consisting of acts tending possibly to deceive or mislead without any such intention or contrivance, would probably not be sufficient … What, therefore, the Appellant has to do is to satisfy the Court that the decree was obtained by the positive and actual fraud and contrivance of the party obtaining it.

64.

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Thus, the High Court held that serious malpractice by the respondent's lawyers did not suffice; nor would accident, surprise, mistake or a lack of frankness alone: Clone at [55] and [57] (quoting The
Ampthill Peerage [1977] AC 547 at 571 (Lord Wilberforce) and 591 (Lord Simon of Glaisdale)); see also e.g.
Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 538 (Kirby P). As, for example, Lord Simon of Glaisdale said in Ampthill Peerage at 591 (on which Rawson relied):

To impeach a judgment on the ground of fraud it must be proved that the court was deceived into giving the impugned judgment by means of a false case known to be false or not believed to be true or made recklessly without any knowledge on the subject. No doubt, suppression of the truth may sometimes amount to suggestion of the false:
The Alfred Nobel [1918] P. 293. But, short of this, lack of frankness or an ulterior or oblique or indirect motive is insufficient.

65. Rawson submitted that the decision in Ampthill Peerage is authority for the proposition that merely failing to disclose evidence without a positive duty to do so is not fraud (T403.15-17), relying upon the following passage from the judgment of Lord Kilbrandon at 595-596:

It is fraudulent conduct to represent to another what is not true with the intention of inducing that other to act contrary to his own interest or, sometimes, his duty. If the conduct has succeeded, fraud has been committed. Fraud is a civil wrong when it breaches a duty not to deceive; the deception may consist of the imparting of false information or the non-disclosure of true information. In either case the duty binds the representer not in the abstract, whatever his moral obligation may do, but because he stands in a relationship with the recipient which calls in law for truthful communication.

66. In support of this proposition, Rawson also placed reliance on
The Alfred Nobel [1918] P 293 at 296 where the President of the Prize Court, Sir Samuel Evans, held that:

Every Court has the inherent right to set aside an order which it has made if it has been procured by fraud; and that rule applies to the Prize Court certainly as strongly as it does to any other Court. It cannot be too well known that claimants who desire to establish their claims [for a decree for release of the proceeds of consignments to them in Admiralty] must put their cases honestly, fairly, candidly, and fully before the Court. That has been said in the course of the last three years or so over and over again. So far from having done that, the deponent in this particular case unfortunately stated what was untrue, and impliedly what was false, by suppressing material facts which ought to have been laid before the Court.

67. Thus, the thrust of Rawson's submission was that where it is sought to impugn a judgment on the ground of fraud by reason of a material non-disclosure, it is necessary to establish that there was a positive duty to disclose the true facts, such as that duty which exists in the case of proceedings in the Prize Court. Specifically, Rawson submitted that, in the Prize jurisdiction, a positive duty lay upon a person claiming release of the consignment to make full disclosure to the Court, akin to the duty imposed on a party on an ex parte application.

68. Rawson's submission, with respect, misstates the law. In the first place, it takes the statement by Lord Kilbrandon in Ampthill Peerage out of context. That case concerned an action to set aside a declaration of legitimacy by the court under s 8 of the Legitimacy Declaration Act 1858 (UK) on the ground that it had been obtained by fraud. Following the passage on which Rawson relies, Lord Kilbrandon continued to explain at 596 that he understood "fraud" to be used in s 8 of the Legitimacy Declaration Act to have the same meaning as at common law and that:

Thus if a declarator of legitimacy has been obtained by the dishonest misrepresentation of facts, whether by assertion or by non-disclosure, made by or on behalf of the petitioner, to a person whom from his relationship with the representer was entitled to have the truth disclosed by the representer, that declaration is not binding upon any person prejudiced by it. Since the section is concerned with obtaining a decree

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of the court by fraud, I shall assume that it is the relationship of a duty owed to the court which will render fraudulent in the legal sense any misrepresentation which succeeded in deceiving the court.

(Emphasis added.)

69. This approach is entirely consistent with that taken in The Alfred Nobel. That case does not stand for the proposition that there is a special duty of full disclosure only in the Przie jurisdiction imposed upon a claimant seeking to establish their claims for a decree for release of the proceeds of consignments to them in Admiralty. The correct view is simply that the person claiming release of the consignment has the onus of proving that the ship was not bound towards an enemy state, and therefore that any material non-disclosure may provide a basis on which adverse inferences might be drawn. Thus, for example, Halsbury's Laws of England (5th ed, 2020) Vol 85, The Law of Prize, "Condemnation of Prize" states (at [737]) that:

The object of bringing in a captured ship or cargo for adjudication is that a sentence of condemnation may be pronounced by a competent court, namely, the Prize Court, decreeing the capture to have been rightly made. It is for the claimant to show that there was no reasonable suspicion justifying the seizure or to displace such reasonable suspicion as in fact exists. If there is concealment of material matters within the claimant's knowledge, the court may draw inferences adverse to his claim and condemn the goods in question, and, it seems, ships.

(Citations omitted.)

70. This view accords with the decision in
The Louisiana and Other Ships [1918] AC 461. In that case, the neutral appellants shipped conditional (in the sense that they could not be condemned as lawful prize unless destined for the enemy) contraband goods purportedly to neutral traders in Sweden. The Privy Council held on appeal from the Prize Court, England, that the goods were properly condemned as being destined for Germany. In particular, Lord Parker of Waddington (who delivered the judgment of their Lordships) held at 464-465 that:

For a belligerent State is entitled to seize the goods in transit on reasonable suspicion that, being in their nature absolute contraband, they are destined for the enemy country, or, being in their nature conditional contraband, they are destined for the enemy Government or the enemy naval or military forces. The goods when seized must of course be brought into the Prize Court for adjudication, but in the Prize Court the neutral trader is not in the position of a person charged with a criminal offence and presumed to be innocent unless his guilt is established beyond reasonable doubt. He comes before the Prize Court to show that there was no reasonable suspicion justifying the seizure or to displace such reasonable suspicion as in fact exists. The State of the captors is necessarily unable to investigate the relations between the neutral trader and his correspondents in enemy or neutral countries, but the neutral trader is or ought to be in a position to explain doubtful points. If his goods had no such destination as would subject them to condemnation by the Prize Court, it is his interest to make full disclosure of all the details of the transaction. Only if his goods had such destination can it be in his interest to conceal anything or leave anything unexplained. If he does conceal matters which it is material for the Court to know , or if he neglect to explain matters which he is or ought to be in a position to explain, or if he puts forward unsatisfactory or contradictory evidence in matters the detail of which must be within his knowledge, he cannot complain if the Court draws inferences adverse to his claim and condemns the goods in question.

(Emphasis added.)

71. In the fifth place, as the essence of the action is fraud, it "must be pleaded distinctly and with particularity and clearly proved":
Krakowski v Eurolynx Properties Ltd [1995] HCA 68; (1995) 183 CLR 563 at 573; Clone at [62]; see also r 16.42 of the FCR. Furthermore, where a condition of mind such as a fraudulent intention is alleged as part of the fraud, this must also be properly particularised: r 16.43 of the FCR. Thus, as Wright J held in
Dickson v Commissioner of Australian Federal Police [2019] NSWSC 1293 at [124] (upheld on appeal in
Dickson v The Queen [2020] NSWCA 125):

… in order properly to plead and particularise the fraud alleged fraud sufficient to provide a basis for setting aside the restraining orders, Mr Dickson [the plaintiff] had to identify each person who allegedly engaged in a meditated and intentional contrivance to keep the Court in ignorance of the real facts of the case, what the contrivance was, what the real facts of the case were and how the contrivance was alleged to be meditated and intentional.

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72. Sixthly , the circumstances in which a judgment may be set aside for fraud were considered by the NSW Court of Appeal in Wentworth (No 5) by Kirby P (with whose reasons Hope and Samuels JJA agreed) (approved, eg. in
Spalla v St George Motor Finance Limited (No 5) [2004] FCA 1262 at [60]-[61] (French J (as his Honour then was)). In Wentworth (No 5) at 538-539, Kirby P (as his Honour then was) identified a number of principles governing proceedings in which it is sought to set aside a judgment on the basis of fraud. These may be summarised as follows (per French J in Spalla at [60]):

73. Kirby P concluded at 539, with respect to the party seeking to set aside the judgment, that:

… he or she must establish that the case is based on newly discovered facts; that the facts are material and such as to make it reasonably probable that the case will succeed; that they go beyond mere allegations of perjury on the part of witnesses at the trial; and that the opposing party who took advantage of the judgment is shown, by admissible evidence, to have been responsible for the fraud in such a way as to render it inequitable that such party should take the benefit of the judgement.

74. A consideration of the second and third of Kirby P's propositions in Wentworth (No 5), as approved by French J in Spalla, necessarily

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involves a consideration of the impact of the false evidence and concealment upon the decision of the Court (or Tribunal) which it is sought to challenge on the ground of fraud. In this regard, the words of Aikens LJ in
Royal Bank of Scotland PLC v Highland Financial Partners LP [2013] EWCA Civ 328; [2013] 1 CLC 596 at [106] (to which the Commissioner referred) are apt:

The principles are, briefly: first, there has to be a 'conscious and deliberate dishonesty' in relation to the relevant evidence given, or action taken, statement made or matter concealed, which is relevant to the judgment now sought to be impugned. Secondly, the relevant evidence, action, statement or concealment (performed with conscious and deliberate dishonesty) must be 'material'. 'Material' means that the fresh evidence that is adduced after the first judgment has been given is such that it demonstrates that the previous relevant evidence, action, statement or concealment was an operative cause of the court's decision to give judgment in the way it did. Put another way, it must be shown that the fresh evidence would have entirely changed the way in which the first court approached and came to its decision. Thus the relevant conscious and deliberate dishonesty must be causative of the impugned judgment being obtained in the terms it was

(Citations omitted.)

75. However, insofar as Aikens LJ further stated that the question of materiality is not to be assessed "by reference to its impact on what decision might be made if the claim were to be retried on honest evidence", that does not accord with the principles enunciated in Spalla which the parties implicitly accepted as correctly stating the position under Australian law. In this regard, as I later explain, the parties did in fact make submissions assuming the relevance both of the inquiry as to the impact of the previous false evidence upon the Tribunal's reasoning as well as the likely impact, hypothetically speaking, of the new evidence on the decision which the Tribunal would make on a rehearing.

76. The principles enunciated by Aikens LJ in Highland Financial in this passage were subsequently quoted with approval in Takhar at [56] (Lord Kerr) and in Tjiong at [205] (Parker J). In Tjiong at [204]-[205], Parker J described the requirement of materiality as a "control factor" designed to ensure that challenges can be made only in limited circumstances so as to preserve the fundamental tenet of the finality of litigation. Similarly, but more colourfully, Lord Briggs JSC in Takhar (at [68]) described the inherent tension in actions to set aside fraud as "a bare-knuckle fight between two important and long-established principles of public policy. The first is fraud unravels all. The second is that there must come an end to litigation".

77. However, judicial statements to the effect that an action to set aside a civil judgment must be based on new evidence, which could not reasonably have been discovered in the earlier proceedings, have been discredited:
McDonald v McDonald [1965] HCA 45; (1965) 113 CLR 529 at 533 (Barwick CJ (with whose reasons Kitto J concurred)), 535 (Taylor J) and 542 (Menzies J);
Toubia v Schwenke [2002] NSWCA 34; (2002) 54 NSWLR 46 at [22]-[45] (Handley JA); Takhar at [480] (Lord Sumption, agreeing with the Australian decisions in McDonald and Toubia); Clone at [63]-[68] (the Court). The requirement of reasonable diligence was one of the conditions for leave attaching to the bill of review, which did not survive the Judicature Reforms (Clone at [47] and [53]). As such, it is not a precondition to the exercise of power that reasonable diligence must have been exercised to discover the fraud in the course of the proceedings: Clone at [63]-[68]. As Brennan J explained in
Gould v Vaggelas [1984] HCA 75; (1984) 157 CLR 215 at 252, "[a] knave does not escape liability because he is dealing with a fool." The Commissioner's written submissions in chief assumed the contrary, citing the decisions in Spalla at [61] and
Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (No 2) [1992] FCA 548; (1992) 37 FCR 234 as approving the "stringent principles" set out in Gordon QC's "Fraud or New Evidence as Grounds for Actions to Set Aside Judgments"
(1961) 77 LQR 358 and in
Owens Bank Limited v Bracco [1992] 2 AC 443 at 483 (Lord Bridge) (AS at [133] and [136]-[137]). However, as the Commissioner submitted in oral address (T377.1-9), it is clear that insofar as

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Spalla, Monroe and other authorities imposed a requirement that the evidence relied upon to set aside an earlier decision for fraud could not have been discovered by the time of the trial with reasonable diligence, they do not represent the current state of authority.

78. Furthermore and in any event, even before the decision in Clone, it had been held that no such restraint applies in public law and that the Court can, subject to any applicable procedural and evidentiary rules, take account of any relevant material before it:
SZSXT v Minister for Immigration and Border Protection [2014] FCAFC 40; (2014) 222 FCR 73 at [65]-[78] (the Court) (citing among other authorities
SZFDE v Minister for Immigration and Citizenship [2007] HCA 35; (2007) 232 CLR 189 at [16]-[17] (the Court) and
Craig v South Australia [1995] HCA 58; (1995) 184 CLR 163 at 175-176 (the Court)).

5.2 Principles concerning fact-finding: Briginshaw

79. In approaching my assessment of the evidence I have borne firmly in mind the seriousness of the allegations of fraud against Rawson and its directors, including the allegations that Andrew and other witnesses gave false and/or misleading evidence before the Tribunal. In this regard, in arriving at a state of satisfaction in civil proceedings that a case has been proved on the balance of probabilities, s 140(2) of the Evidence Act 1995 (Cth) provides that:

  • (2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account-
    • (a) the nature of the cause of action or defence; and
    • (b) the nature of the subject-matter of the proceeding; and
    • (c) the gravity of the matters alleged .

(Emphasis added.)

80. The considerations which s 140(2) of the Evidence Act now requires a court to take into account align with Dixon J's consideration in Briginshaw of how the civil standard of proof at common law operates: see e.g.
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132; (2007) 162 FCR 466 at [31] (the Court). Thus, in an oft-quoted passage at 362 from Briginshaw, Dixon J observed that:

reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect inferences. Everyone must feel that, when, for instance, the issue is on which of two dates an admitted occurrence took place, a satisfactory conclusion may be reached on materials of a kind that would not satisfy any sound and prudent judgment if the question was whether some act had been done involving grave moral delinquency.

81. In other words, as explained by Barwick CJ, Kitto, Taylor, Menzies and Windeyer JJ the "degree of satisfaction for which the civil standard of proof calls may vary according to the gravity of the fact to be proved":
Rejfek v McElroy [1965] HCA 46; (1965) 112 CLR 517 at 521. This principle, as Flick and Perry JJ observed in
Sullivan v Civil Aviation Safety Authority [2014] FCAFC 93; (2014) 226 FCR 555 at [99], "is ultimately founded upon principles of fairness and common sense".

5.3 Failure to call witnesses and lead evidence

5.3.1 Relevant principles

82. Without detracting from the weight to be given to the Briginshaw principle in the context of this case, the question arises as to whether adverse inferences should be drawn on the basis of the rule in
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 by reason of the failure by Rawson to call evidence in determining whether the Commissioner has discharged its onus establishing that the decision of the Tribunal and, in turn, the Full Court should be set aside on the basis of fraud. This is subject, as I

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shortly explain, to the fact that the directors of Rawson relied upon the privilege against self-incrimination.

83. The rule in Jones v Dunkel is also based on common sense, namely, that an unexplained failure by a party to call a witness may, in appropriate circumstances, give rise to an inference that the evidence of that witness would not have assisted that party's case: Jones v Dunkel at 308 (Kitto J), 312 (Menzies J) and 320-321 (Windeyer J). While the rule may make certain evidence or the inferences which may be drawn from the evidence more probable, it cannot fill gaps in the evidence, or convert conjecture and suspicion into inference: Jones v Dunkel;
Schellenberg v Tunnel Holdings Pty Ltd [2000] HCA 18; (2000) 200 CLR 121 at [53] (Gleeson CJ and McHugh J). As, for example, Newton and Norris JJ held in
O'Donnell v Reichard [1975] VR 916 at 929 in explaining the proper manner in which the rule may be applied:

… where a party without explanation fails to call as a witness a person whom he might reasonably be expected to call, if that person's evidence would be favourable to him, then, although the jury may not treat as evidence what they may as a matter of speculation think that that person would have said if he had been called as a witness, nevertheless it is open to the jury to infer that that person's evidence would not have helped that party's case; if the jury draw that inference, then they may properly take it into account against the party in question for two purposes, namely:

  • (a) in deciding whether to accept any particular evidence, which has in fact been given, either for or against that party, and which relates to a matter with respect to which the person not called as a witness could have spoken; and
  • (b) in deciding whether to draw inferences of fact, which are open to them upon evidence which has been given, again in relation to matters with respect to which the person not called as a witness could have spoken.

(Emphasis in the original.)

84. Similarly, in
Paul's Retail Pty Ltd v Sporte Leisure Pty Ltd [2012] FCAFC 51; (2012) 202 FCR 286, the Full Court said (at [95]) that:

The purpose of the rule [in Jones v Dunkel] is to enable the tribunal of fact to more readily draw an inference "fairly to be drawn from the other evidence" if a witness able to contradict that inference has not been called:
State Bank (NSW) v Brown (2001) 38 ACSR 715 at [17]-[18] per Spigelman CJ. Such an inference is drawn, if at all, once all the evidence in the case is in. Before that can happen, there must first be an available inference against the party on the evidence:
Manly Council v Byrne [2004] NSWCA 123 per Campbell J, Beazley JA and Pearlman AJA agreeing at [54].

85. Underpinning the rule in Jones v Dunkel is the general principle tracing back to the remarks of Lord Mansfield in
Blatch v Archer [1774] EngR 2; (1774) 1 Cowp 63 at 65 that "all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted". As Hodgson JA (with whose reasons Beazley JA agreed) explained in
Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572 at [14]-[15]:

in deciding facts according to the civil standard of proof, the court is dealing with two questions: not just what are the probabilities on the limited material which the court has, but also whether that limited material is an appropriate basis on which to reach a reasonable decision. …

In considering the second question, it is important to have regard to the ability of parties, particularly parties bearing the onus of proof, to lead evidence on a particular matter, and the extent to which they have in fact done so. …

(Citations omitted; see also e.g.
Coshott v Prentice [2014] FCAFC 88; (2014) 221 FCR 450 at [80] (the Court).)

86. Importantly, this principle is not limited to the failure to call a particular witness: other instances where it may be relied upon include a failure to adduce any evidence at all, a failure to produce a particular document, or a failure to prove a particular fact (
Payne v Parker [1976] 1 NSWLR 191 at 201 [proposition (3)] (Glass JA)).

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87. Thus, as Gleeson J, for example, explained in
BCI Finances Pty Ltd (in liq) v Binetter (No 4) [2016] FCA 1351; (2016) 348 ALR 227 ( BCI v Binetter (No 4) ) at [123]-[124]:

Where a fact is peculiarly within the knowledge of a party to litigation, slight evidence of that fact may suffice to prove the fact unless that evidence is explained away by the party with the knowledge of the fact:
Hampton Court Ltd v Crooks [1957] HCA 28; (1957) 97 CLR 367 at 375;
Tyco Australia Pty Ltd v Optus Networks Pty Ltd [2004] NSWCA 333 at [121];
Parker v Paton (1941) 41 SR (NSW) 237 at 243;
Ex parte Ferguson; Re Alexander (1944) 45 SR (NSW) 64 at 67, 70.

A failure by respondents to deny or explain facts when it was in the respondents' exclusive power to do so allows increased strength or weight to be given to primary facts favourable to the applicants and allows inferences favourable to the applicants to be more confidently drawn:
United Group Resources Pty Ltd v Calabro (No 5) [2011] FCA 1408; (2011) 198 FCR 514 at [75]-[76]. The silence of a party may serve to resolve a doubt or an ambiguity regarding the existence of a fact, especially where the facts are peculiarly within the knowledge of the silent party:
Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125; (1996) 9 ANZ Insurance Cases ¶61-385 at 142.

88. Furthermore, as Gleeson J also pointed out in BCI v Binetter (No 4) at [125], the maxim in Blatch v Archer "also bears upon the appropriateness of deciding whether a fact has been proved when only limited evidence is available".

89. Importantly, Glass JA in Payne at 201 identified three conditions for the application of the principle in Jones v Dunkel, namely: "(a) the missing witness would be expected to be called by one party rather than the other, (b) his [or her] evidence would elucidate a particular matter, (c) his [or her] absence is unexplained". As to the first condition, Glass JA explained at 201 that:

The first condition is also described as existing where it would be natural for one party to produce the witness … or the witness would be expected to be available to one party rather than the other … or where the circumstances excuse one party from calling the witness, but require the other party to call him … or where he might be regarded as in the camp of one party, so as to make it unrealistic for the other party to call him … or where the witness' knowledge may be regarded as the knowledge of one party rather than the other … or where his absence should be regarded as adverse to the case of one party rather than the other … It has been observed that the higher the missing witness stands in the confidence of one party, the more reason there will be for thinking that his knowledge is available to that party rather than his adversary. … If the witness is equally available to both parties, for example, a police officer, the condition, generally speaking, stands unsatisfied. There is, however, some judicial opinion that this is not necessarily so. … Evidence capable of satisfying this condition has been held to exist in relation to a party's foreman … his safety officer … his accountant … his treating doctor.

(Citations omitted.)

90. While Glass JA was in dissent in the result in Payne, these passages were accepted as correctly stating the relevant principles in
RHG Mortgage Limited v Rosario Ianni [2015] NSWCA 56 ( RHG Mortgage ) at [78] per McColl JA (Sackville AJA agreeing).

91. As to Glass JA's second condition, McColl AJA in RHG Mortgage at [76] explained that "[t]he circumstances for drawing a Jones v Dunkel inference are found where the uncalled witness is 'a person presumably able to put the true complexion on the facts relied on [by a party] as the ground' for any inference favourable to the plaintiff".

92. As to the third condition, her Honour explained in RHG Mortgage at [75] that:

Any "explanation" such as unavailability or absence of recollection for the failure to call the witness must be established by evidence :
West v Government Insurance Office (NSW) [1981] HCA 38; (1981) 148 CLR 62 (at 70) per Murphy J;
Rowell v Larter (1986) 6 NSWLR 21 (at 24 - 25) per Young J (as his Honour then was).

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(Emphasis added.)

5.3.2 Should adverse inferences be drawn from the failure by Rawson to call Andrew, Margaret, Michael and/or Gary?

93. The Commissioner submitted that I may draw adverse inference from the failure by Rawson to call Michael to give evidence in the Rawson (AAT) proceedings despite his critical involvement in the establishment of the Rawson loans and deposit accounts in 1997 and use of a code name, as disclosed by the new evidence. I note that, while the Tribunal is not bound by the rules of evidence, that does not mean that the common law rules of evidence may not guide an administrative tribunal in making findings of fact based upon material which is logically probative, bearing in mind that the rules of evidence are generally founded upon principles of common sense and fairness: Sullivan at [82]-[97] (Flick and Perry JJ).

94. Furthermore, Rawson did not call any witnesses or tender any documentary evidence in this proceeding. In particular:

95. Each of these witnesses were squarely within Rawson's "camp" so as to make it natural for Rawson to have called them and unrealistic for the Commissioner to call them to give evidence. Furthermore, each could have been able to put a "true complexion" on the facts relied upon by Rawson, such as its claim that the new evidence established that Michael owned the monies in the Arthur Belan linked deposit account with MDB and that the loans were "genuine" and "enforceable" loans. However, no evidence was led as to why none of these witnesses were called, and no explanation was proffered in submissions save for Michael, Andrew and Margaret.

96. With respect to Andrew and Margaret , I note that Rawson was excused from pleading to those allegations which lay at the heart of the Commissioner's fraud case on the basis that the directors of Rawson, Margaret and Andrew, asserted the privilege against self-incrimination. Specifically, Rawson was not required to plead, and did not plead, to the following parts of the 2FASOC by orders made by consent on 29 April 2015 and 3 September 2020:

(I note that the pleading in 2FASOC at [18.1] was not pressed.)

97. Andrew and Margaret could, of course, have given evidence in this proceeding willingly and sought a certificate under s 128 of the Evidence Act which would have protected them against their own evidence, and any evidence obtained as a direct or indirect consequence of their having given evidence, being used against them in any proceeding in an Australian court. No such application however was made. Nonetheless, ultimately, I have not drawn any adverse inferences by reason of the failure by Rawson to call Margaret or Andrew in this trial as it was unnecessary. The new evidence that Andrew, in particular, knowingly gave false evidence and that Rawson, through Andrew, knowingly ran a false and misleading case before the AAT and in the Federal Court is overwhelming. No other reasonable inference is necessary in light of that finding. Nor was it a significant part of the Commissioner's case that such an inference should be drawn, given the scale of the evidence of the fraud and Andrew's direct involvement in it.

98. With respect to Michael , I agree that adverse inferences should be drawn from Rawson's failure to call Michael to give evidence in the AAT and in the present trial given the new evidence as to and Rawson's knowledge, through at least Andrew, of the true arrangements between Rawson and MDB from 1997. In particular, the failure to call Michael in the AAT and this trial enables me more confidently to draw the following inferences:

(As to the first proposition, I also note that the new evidence of Michael's involvement in establishing the MDB loan arrangements also directly contradicts Rawson's contention in the AAT that there was no person directly involved in obtaining the Rawson loans from MDB who could give evidence.)

99.

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In this regard, I reject Rawson's submission that no adverse inference could be drawn against Rawson's failure to call Michael in the Rawson (AAT) proceedings, because it would have exposed him to the risk of self-incrimination without the capacity to seek a certificate under s 128 of the Evidence Act protecting him against the use of incriminating evidence in other proceedings.

100. First , as the Commissioner submitted, it was Rawson's choice to institute the Part IVC proceedings in the AAT. If Rawson had wished Michael to have the protection of a s 128 certificate, it was equally open to it to have instituted those proceedings in the Federal Court.

101. Secondly , Rawson's submission suffers from a logical inconsistency. As the Commissioner observed, if Rawson was concerned about the apparent criminality of Michael's conduct, then it should not have advanced the arguments that it did before the AAT. Rawson's submissions indicate, on the one hand, it would have continued to deny the existence of the Arthur Belan linked deposit account, whilst on the other hand, accepting that Michael had exposed itself to criminal conduct by creating the linked deposit account. In other words, Rawson cannot be heard to say both that Michael could not give evidence in the Tribunal because he might have incriminated himself through setting up the code named deposit account, while also maintaining a case before the Tribunal that there was no deposit account whatsoever.

102. Thirdly , Rawson has offered no explanation as to why Michael was not called in the present proceeding (where a s 128 certificate was potentially available) so as to explain why he did not give evidence in the Rawson (AAT) proceedings, as well as other issues now raised by the new evidence which identifies him as instrumental in establishing the Rawson loan and linked deposit account in his code name.

103. In any event, I note for completeness that, given the overwhelming material before me establishing that the deposit account was set up by Michael in the code name, Arthur Belan, as "security" for the purported loans to Rawson, my findings on this point were not dependent on the drawing of this adverse inference. Numerous documents establish that Michael, as the primary account holder under false name, Arthur Belan, was well aware that that the deposit and loan accounts were linked from the time of their establishment in 1997 - indeed, that the loan was dependent upon the deposit account being kept in funds at least equal to the value of the loans - and was intimately involved in their establishment.

104. Finally , I infer from Rawson's failure to call Gary in this proceeding (for which there was no explanation) that Gary would not have been able to give a legitimate explanation for his evidence before the AAT as to the sufficiency of the documents from Mr Zamir to establish that the Advance loans "were genuine", given the new evidence that the evidence produced by Rawson in the AAT was highly selective in that it disclosed only the alleged loan side of Rawson's arrangements with MDB and not the linked deposit account. As such, to the extent necessary, the failure to call Gary enables me more confidently to infer that Rawson, through Andrew, intentionally concealed evidence from the AAT as to the true nature of its arrangements with MDB and, in particular, the back-to-back nature of those arrangements.

5.4 Attributing knowledge to Rawson

105. The conventional approach is that, while a corporation has legal personhood, its actions and knowledge must be attributed to it via the actions and knowledge of natural persons who may be reasonably considered the "directing mind and will" of the company. In
Tesco Supermarkets Ltd v Nattrass [1972] AC 153 (affirmed in
Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121 at 127 (the Court)), Lord Reid described the person who is the "directing mind and will" at 170 as follows:

He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company.

106.

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This principle has equally been applied to corporate attribution in cases of fraud. As von Doussa J held in
Beach Petroleum NL v Johnson [1993] FCA 283; (1993) 43 FCR 1, the knowledge and state of mind of the director will ordinarily be attributed to the company taking the benefit of the fraud, if the director was acting within the scope of his or her actual or apparent authority as a director of the benefiting company. However, as Beach J has pointed out in
Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751; (2018) 266 FCR 247 at [1660], there are no rigid categories for identifying the "directing mind and will" (which his Honour suggests might perhaps best be a concept "allowed to fade away"). Rather, Beach J considered that the question in determining whether a particular state of mind of the corporation has been established becomes "whose state of mind was for the purpose of the relevant rule of responsibility to count as the knowledge or state of mind of the corporation?" (at [1660]).

107. It is clear on any approach that there is no general proposition as to the inferences of knowledge that may be drawn from the mere fact that a person holds office as a director. Similarly, as Gleeson J held in BCI v Binetter (No 4) at [137]-[138]:

this must depend upon the circumstances of the case and, in particular, any evidence about the director's participation in the management of the company. …

A director's continuing obligation to keep informed about the activities of the corporation (
Daniels v Anderson (1995) 37 NSWLR 438; (1995) 118 FLR 248 ("Daniels") at 503) does not permit a general inference as to knowledge, not least because the relevant director may not have complied with that obligation.

108. The new evidence establishes that, from at least 2006, Andrew was the primary director involved in interactions on behalf of Rawson with MDB, including in giving instructions to MDB. In addition, his active inovlement in Rawson's affairs with MDB traces back to 1997. Furthermore, the proceedings in the AAT and the Federal Court were run on the basis of Andrew's instructions, including in relation to obtaining evidence with respect to the Rawson (AAT) proceedings. In those circumstances, his knowledge is properly to be attributed to Rawson; his state of mind is in all relevant respects to be treated as Rawson's state of mind.

6. THE COMMISSIONER'S PLEADED CASE OF FRAUD

109. The question as to what was pleaded in the 2FASOC and its adequacy to establish fraud was a matter in issue between the parties, as I have already mentioned. It is therefore important to consider the nature of the Commissioner's pleaded case which may be summarised as follows.

110. First , the Commissioner pleaded that the evidence of various witnesses relied upon by Rawson in the Tribunal (namely, Baruch Etzion (allegedly as an expert witness), Emil, Andrew, Israel Zamir (an officer of MDB), Gary, and Margaret) was "false or misleading" or "false and misleading" or "false or materially misleading" (I note in this regard that nothing turns upon the different descriptions of specific evidence in parts of the Commissioner's pleadings as "misleading" or "materially misleading" as ultimately the Commissioner pleaded that all the false or misleading evidence was material to the outcome of the Rawson (AAT) proceedings.)

111. However, it sufficed that Rawson, through Andrew as its director, knew that it was presenting a completely false case to the AAT as to why the assessments were excessive. In accordance with the principles I have earlier explained, Andrew had exclusive control over Rawson and had carried out its business affairs from at least 2006, and was plainly Rawson's "directing mind and will" despite not being the sole director of the company. Andrew's knowledge of Rawson's back-to-back loan arrangements, the intentionally false and misleading evidence which he gave in the Rawson (AAT) proceedings, and the deliberately false case ran, to Andrew's knowledge, in the those proceedings, is therefore to be attributed to Rawson, which stood to significantly benefit if the monies from the loans were not characterised as 'income'. Therefore, it is not then strictly necessary for me to make any findings in relation to

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Margaret's knowledge and intent. Nonetheless, I note that there is no evidence that Margaret had any active involvement in Rawson's affairs beyond acting as a signatory of, and being authorised to transact from, the Arthur Belan deposit account using her code name, Ida Belan. In addition, while Erwin had initially controlled Rawson since its incorporation, he passed away on 25 August 2009 before the Tribunal proceedings, which commenced on 11 June 2010.

112. Further, as Sir John Rolt LJ explained in Patch, the Commissioner has to satisfy the Court that, relevantly, the decision of the AAT and in turn the FCAFC "was obtained by the positive and actual fraud and contrivance of the party obtaining it " (emphasis added). As his Honour recognised, misleading or deceptive acts, if accompanied by a meditated and intentional contrivance to keep the adjudicator of fact in ignorance of the real facts of the case, will suffice to establish fraud. Contrary to Rawson's submissions, it is therefore unnecessary to demonstrate that third parties giving evidence for Rawson were aware of and party to the fraud, perjured themselves, or were suborned in giving false testimony. As I have earlier explained, that submission wrongly conflates the need to establish actual and positive fraud by the party against whom it is alleged with the means by which the fraud was perpetrated. As counsel for the Commissioner succinctly put it in explaining why there was no pleading by the Commissioner of perjury or that false evidence had been suborned:

Much of Mr Hutley's submissions yesterday and today were conducted as if this was a perjury trial of Mr Andrew Binetter, Mr Michael Binetter, or Mr Etzion, Mr Emil Binetter, and whoever else. This is not a perjury trial of those people. What this is, is an application to set aside orders of the full court, we say, obtained by fraud on the tribunal, originally. … [Y]our Honour should not be convinced that the path your Honour has to go down is a criminal analysis of whether or not there is perjury, or whether or not someone had suborned perjury.

(T501.43-502.3 (Ms Morgan).)

113. Secondly , the Commissioner alleged a failure by Rawson, the other Binetter family entities, Andrew, Gary, and Emil to disclose, in response to the exercise of compulsive statutory powers, documents and information that the monies sent by the Israeli banks to the Binetter family entities were connected with cash deposits. More specifically, the Commissioner alleges as follows:

114. Thirdly , during the pendency of the Rawson (AAT) proceedings, there were various Part IVC proceedings in the AAT instituted by various other Binetter family entities, namely, Binqld, EGL, Ligon 268, Advance, and Civic, and one proceeding in the Federal Court against BCI. In common with Rawson, in each Part IVC proceeding, the Binetter family entity concerned sought to challenge assessments by the Commissioner which treated as taxable income, monies transferred to that entity from Israeli banks pursuant to alleged loans. In each case, the entities concerned were also represented by the same solicitor, Mr Douglass. Also in common with Rawson, these entities

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did not disclose, in any of their Part IVC proceedings, the fact that the monies sent by the Israeli banks (i.e. Bank Hapoalim, MDB and IDB) to the Binetter family entities concerned were connected with cash deposits. Instead they "conducted their respective cases on the (false) basis that the monies transferred were not connected with cash deposits" (2FASOC at [24.15]-[24.17.b]; emphasis added). However, once evidence of the existence of the secret cash deposits securing the purported loans came to light, the entities concerned discontinued their proceedings.

115. Fourthly , the new evidence obtained since the Rawson (AAT) trial by the Commissioner establishes that the evidence given in those proceedings was "false or materially misleading", and in particular:

  • a. with respect to BCI and the true arrangements with Bank Hapoalim:
    • (i) documents provided by BH to Signet Lawyers (the lawyers acting for BCI at the time) and produced by Signet Lawyers to the Federal Court on 22 May 2014 in response to a subpoena;
    • (ii) documents provided by BH to Heskia-Hacmun, (the lawyers acting for the Commissioner in Israeli in relation to a letter of request made in the BCI proceedings) on 18 February 2015;
    • (iii) documents provided by BH to Heskia-Hacmun, (the lawyers acting for the Commissioner in Israeli in relation to the letter of request) on 1 April 2015;
  • b. with respect to the true arrangements between Mercantile Discount Bank and Advance and Israel Discount Bank and Civic and EGL:
    • (i) documents obtained from the liquidator for Advance and Civic on, or about, March 2015;
    • (ii) documents obtained by the liquidator for Advance and Civic from MDB and IDB respectively, which were provided to the Commissioner on or about 7 July 2015.

(2FASOC at [24.18]).

116. t between the GERM entities and IDB (2FASOC at [24.19]-[24.22]).

117. In the fifth place, Rawson made submissions in the AAT to the effect (among other things) that:

(2FASOC at [25(a)-(c)]; see further at sub-paras [25(d)-(h)].)

118. However, the Commissioner pleaded that Rawson's submissions in the AAT as to the absence of cash deposits:

were, to the knowledge of Rawson (but not to the knowledge of the legal practitioners making those submissions), based upon evidence which was false or materially misleading in that:

  • a. the "loans" made to BCI by BH Tel Aviv were in fact "back-to-back transactions" to two clients of BH Tel Aviv (or alternatively to BCI);
  • b. the funds transferred to BCI by BH Tel Aviv were transferred pursuant to an arrangement which included security other than by way of personal guarantees and, in particular, included substantial monetary deposits;
  • c. Bank Hapoalim (Switzerland) Ltd had placed fiduciary deposits with BH Tel Aviv

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    as "security" or "collateral" for the transaction which Andrew Binetter asserted was secured only by personal guarantee;
  • d. it was not Erwin Binetter's business practice to provide personal guarantees as the only form of security for borrowings from Israeli banks;
  • e. "loans" made to EGL, Advance Finances Pty Limited and Civic Finances Pty Limited were supported by deposits.

    Particulars

    • (i) The applicant repeats the particulars to paragraphs 14 and 24.

  • f. The "loans" made by MDB to Rawson were in fact, and at all relevant times, part of a back to back arrangement and supported by deposits.

(2FASOC at [26].)

119. Sixthly , the Commissioner alleged (at 2FASOC at [28]) that the false or misleading evidence identified in the preceding paragraphs was material to the outcome of the Rawson (AAT) proceedings on the basis that:

120. Further and in the alternative, the Commissioner alleged at 2FASOC at [29(a)-(d)] that:

121. Finally, neither in Rawson's s 44 appeal to the Federal Court nor in the Full Court proceedings did Rawson disclose to the Court that the evidence it had adduced in the AAT was "false or materially misleading" in the respects identified above (but not to the knowledge of the legal practitioners making the submissions (2FASOC at [30]-[34]).

122. In short, therefore, and at the risk of oversimplification, the Commissioner's case may be summarised as follows:

7. THE RAWSON AUDIT AND SUBSEQUENT AAT AND FEDERAL COURT PROCEEDINGS

7.1 The audit, objection and taxation disputes

7.1.1 Rawson

123. The starting point is s 166 of the ITAA 36 which imposes a duty upon the Commissioner to make an assessment. Section 166 is in the following terms:

From the returns, and from any other information in the Commissioner's possession, or from any one or more of these sources, the Commissioner must make an assessment of:

  • (a) the amount of the taxable income (or that there is no taxable income) of any taxpayer; and
  • (b) the amount of the tax payable thereon (or that no tax is payable); and
  • (c) the total of the taxpayer's tax offset refunds (or that the taxpayer can get no such refunds).

124. In the present case, as I shortly explain, the Commissioner made an assessment under s 167(b) which reads:

If:

  • (a) any person makes default in furnishing a return; or
  • (b) the Commissioner is not satisfied with the return furnished by any person; or
  • (c) the Commissioner has reason to believe that any person who has not furnished a return has derived taxable income;

the Commissioner may make an assessment of the amount upon which in his or her judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166.

125. By letter dated 31 July 2006, the Deputy Commissioner advised Erwin in his capacity as the Public Officer, copied to Mark Douglass of MDA Lawyers, that the Commissioner was conducting an audit into the taxation affairs of Rawson, BCI and Ligon 158 for the financial years commencing 1 July 1996 to 30 June 2005[53] KDB Vol 2 Tab 55; TCA1-1 2/125/636. . The letter referred to the Commissioner's particular concern with "the prevalence of offshore schemes" (as stated in his media release dated 10 June 2005 encouraging persons involved in such schemes to "come forward and clear up their tax position"), and advised that "[f]ull and true disclosure … may reduce any penalty". The attachment to the letter requested information with respect to each of the entities over the relevant period including details of all funds

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received by the entity from overseas, details of funds sent overseas by the entity, details of any loans held by the entity (including the terms of the loan and interest rate, and a copy of the loan agreement), and copies of the general ledger accounts for interest and other expenses.

126. During the course of the audit, a number of written requests were made by the Australian Tax Office ( ATO ) to inspect all documentation used to compile Rawson's income tax returns, and notices to attend and give evidence pursuant to s 264 of the ITAA 36 were issued ( s 264 notices ), with evidence being given by Andrew and Mark Douglass.[54] KDB Vol 3 Tab 115 . A notice to produce offshore information was also issued pursuant to s 264A on 7 November 2007 ( s 264A notices ) requesting all documents for or on behalf of Rawson including: correspondence, meeting notes, memos, and emails, of all communications held by any Israel bank; loan applications and loan contracts of all borrowings held by any Israel financial institution; documents explaining how security was valued, what rights Israeli financial institutions have over assets held as security, and identification of all assets secured; and documents with respect to interest repayments on any borrowings.[55] Ibid.

127. In July 2009, the Commissioner issued to Rawson taxation assessments [56] 2FASOC and Def at [4]. as follows:

Date Assessment Year Ended Taxable Income
15 July 2009 Notice of Assessment 30 June 1997 3,007,550
15 July 2009 Notice of Assessment 30 June 1998 1,971,088
15 July 2009 Notice of Assessment 30 June 1999 373,773
15 July 2009 Notice of Assessment 30 June 2000 128,833
24 July 2009 Notice of Assessment 30 June 2001 141,654
16 July 2009 Notice of Assessment 30 June 2002 148,209
16 July 2009 Notice of Assessment 30 June 2003 160,428
16 July 2009 Notice of Assessment 30 June 2004 174,397
20 July 2009 Notice of Assessment 30 June 2005 187,948
20 July 2009 Notice of Amended Assessment 30 June 2006 167,537
20 July 2009 Notice of Amended Assessment 30 June 2007 131,540
20 July 2009 Notice of Amended Assessment 30 June 2008 161,071

128. The taxation assessments included as income an amount of AUD$4.75 million which had been transferred from MDB to Rawson, and disallowed, as deductions, amounts said to be paid to MDB as interest: see the ATO reasons for decision dated 14 August 2009.[57] KDB Vol 3 Tab 115; TCA1-1 2/178/952 and 966. The taxation assessments were default assessments issued pursuant to s 167 of the ITAA 36 on the ground that the Commissioner was not satisfied with Rawson's income tax returns and formed a judgment of the amount of Rawson's taxable income for each of the relevant tax years.

129. The Commissioner also made penalty assessments for the years ended 30 June 2001 to 30 June 2008[58] 2FASOC and Def at [7]. . Rawson lodged the taxation objections and penalty objections pursuant to s 175A of the ITAA 36 in September 2009[59] 2FASOC and Def at [5] and [8]; KDB Vol 3 Tab 116; TCA1-1 2/179/995; KDB Vol 3 Tab 117; TCA1-1 2/180/1054; KDB Vol 3 Tab 118; TCA1-1 2/181/1091; KDB Vol 3 Tab 119; Kinsella Annexure “CK1-1”. . Section 175A relevantly provides that:

(1) A taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.

130. Specifically, and taking the objection dated 15 September 2009 for the year ended 30 June 1997 as an example, Rawson objected to the assessments of taxable income and allowable deductions on the basis that $3 million received by Rawson represented payment of a loan to it from MDB while $13,640 represented interest expense.[60] KDB Vol 3 Tab 116 ; TCA1-1 2/179/1001. Rawson alleged, under the hearing "Relevant Matters" at Annexure A to the taxation objection, that:

16. The income tax return lodged prior to 3 June 1998 accurately reflects the assessable

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income of the Taxpayer and the allowable deductions of the Taxpayer.

17. The Relevant Amount is constituted of the following:

  • (a) the receipt of an amount of loan principal from Mercantile Discount Bank (" MDB ") in Israel; and
  • (b) interest payments on that loan which were properly claimed as deductions from assessable income.

18. The Taxpayer maintained an account with ABN-AMRO Bank, account number 312-200 20674-1007 where the loan funds were deposited as verified by AUSTRAC report.

19. There was a loan from MDB to the Taxpayer, Loan Number: 971-18-650013

20. That loan was a principal and interest loan established upon the basis that until the principal was due for repayment only interest payments need be made.

21. That loan was drawn down in a transfer from the Taxpayer's loan account with MDB to the Taxpayer's ABN- AMRO Bank account on 5 June 1997 in the amount of $3,000,000.00. Substantiation of the draw down has been provided to the Commissioner in the form of a statement from MDB dated 24 January 2008 previously provided by the Taxpayer under cover of letter from mda lawyers dated 15 April 2008. The MDB statement shows that the bank has charged interest for the period commencing 4 June 1997 which is the date that the Taxpayer understands the funds were released by the bank.

22. The business of the Taxpayer is as a financier for various entities.

23. The Taxpayer on-lent the loan funds to related companies or trusts ( Inter-group loans ). The terms of the Inter-group loans included a term(s) to pay to the Taxpayer, at least, the amount of interest as the Taxpayer was required to pay to MDB and also to repay the principal, to the Taxpayer, no later than the date that the Taxpayer was required to repay principal to MDB.

24. The Taxpayer's only assets are the loans made to other entities in Australia.

25. Interest payments to MDB were not regular as an agreement had been reached to capitalise the interest on the loan.

26. Related entities also made payments on behalf of and at the direction of the Taxpayer to MDB.

27. The Taxpayer repaid the principal loan amount of $3,000,000.00 on or about 21 September 1998 by causing Ligon 158 Pty Limited (as trustee of the Caringbah Investment Trust) to make payment directly to MDB. Evidence of the repayment of the principal amount was provided to the Commissioner under cover of a letter from [MDA] lawyers dated 15 April 2008 enclosing a statement from MDB.

28. The Taxpayer has not, including for the legitimate reasons described below, been in a position to produce the loan documents or any further evidence of payments than already produced to the Commissioner with respect to the amount and repayment of the loans:

  • (a) A former director of the Taxpayer, Erwin Binetter was responsible for maintaining the financial and statutory records of the company;
  • (b) Erwin Binetter passed away on 25 August 2009;
  • (c) Prior to that date, Erwin Binetter had suffered from dementia for several years;
  • (d) On 27 May 2004 the premises at Pagewood, NSW at which the majority of the Taxpayer's books and records were kept was destroyed by a fire;
  • (e) 11 years have elapsed since the time of the transactions and the due date for filing of an assessment for 1997:
  • (f) In view of the repayment, in 1998, of the Taxpayer's $3.000,000.00 loan relating to the year of income the record keeping period requiring the Taxpayer to maintain records expired well prior to the date of the audit which gave rise to the Assessment;
  • (g) The only documents which MDB has been in a position to provide, to date, to the Taxpayer with respect to its loans to the Taxpayer are the statements referred to in paragraph 29.

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29. The Taxpayer provided copies of written statements from MDB setting out the amount of interest payable for the periods 4June 1997 to 30 June 2007 to the Commissioner on 15 April 2008.

…

32. The loan from MDB was in accordance with the banking practices of MDB at the time it was negotiated.

33. The Taxpayer does not have any overseas assets.

(Emphasis added.)

131. In its objection for the assessment relating to the year ending 30 June 1997 at [41], Rawson also identified a list of what were said to be irrelevant matters which the Commissioner took into account in his reasons for decision dated 14 August 2009 including the absence of documents such as loan contracts or statements, and that there was no evidence of security provided in respect of the loans.

132. The same position was taken by Rawson in its taxation objections for the years ended 30 June 1998 to 2000.

133. Significantly, none of those objections mentioned the now disclosed and admitted linked deposit account with MDB, ownership of which remains unexplained, or of the fact that the true cost of the loans was not 8.65% as claimed, but rather the margin between the interest rate for the loans and the interest rate for the deposit account. Further, it is now apparent that MDB had in fact substantial documentation regarding the loans and linked deposit account which it would have provided, if requested, but clearly had not been requested by Rawson.

134. On 27 May 2010, the Commissioner disallowed the taxation objections with reasons, finding that the "loan arrangement" between Rawson and MDB "was part of a sham arrangement and therefore, ineffective for tax purposes".[61] KDB Vol 4 Tab 138; TCA1 3/219/1490.

135. Rawson initiated the Rawson (AAT) proceedings under Part IVC of the TAA 53 on 11 June 2010 seeking review of the Commissioner's decision to disallow the objections[62] KDB Vol 4 Tab 140; TCA1-1 4/220/1558. . Both parties exchanged SFICs[63] KDB Vol 4 Tab 144; TCA1-1 4/278/1991 (Rawson’s SFIC); KDB Vol 4 Tab 146; TCA1-1 5/280/2202 (the Commissioner’s SFIC). . By its SFIC, Rawson contended it entered into three loans with MDB totalling AUD$4.75 million and that it was entitled to deductions in respect of interest payments made under those loans[64] KDB Vol 4 Tab 144; TCA1-1 4/278/1991[6], [9], [12], [40], [41] (Rawson’s SFIC). .

136. As I have previously explained, the Tribunal conducted a 9-day hearing in relation to the primary tax issues in the period 9 - 13 May 2011, 8 - 10 June 2011, and 17 June 2011[65] KDB Vol 7 Tab 211; TCA1-1 8/361/4218. . Transcripts of the hearing were in evidence in the present proceeding[66] CB Vol 5 Tab 338; TCA1-1 6/335/3088 (9 May 2011); KDB Vol 5 Tab 190; TCA1-1 6/336/3163 (10 May 2011); KDB Vol 5 Tab 191; TCA1-1 6/337/3231 (11 May 2011); KDB Vol 5 Tab 192; TCA1-1 6/338/3334 (12 May 2011); KDB Vol 5 Tab 194; TCA1-1 6/340/3429 (13 May 2011); KDB Vol 6 Tab 197; TCA1-1 7/345/3577 (8 June 2011); KDB Vol 6 Tab 198; TCA1-1 7/346/3659 (9 June 2011); KDB Vol 6 Tab 199; TCA1-1 7/347/3745 (10 June 2011); KDB Vol 6 Tab 202; TCA1-1 7/350/3872 (17 June 2011). .

137. On 6 September 2011, the Tribunal set aside the Commissioner's objection decision[67] KDB Vol 7 Tab 211; TCA1-1 8/361/4218. . The Tribunal used pseudonyms in its reasons, describing:

7.1.2 Information provided in relation to the audits of Rawson, BCI, Binqld, Ligon 268, EGL, Advance and Civic (2006-2007)

138. As previously mentioned, on 31 July 2006, the Commissioner advised that he had commenced an audit of Rawson, BCI and Ligon 158's tax affairs. In addition, on 8 September 2006, the Commissioner confirmed that he had instigated an audit into the taxation affairs of Ligon 268 and EGL for the financial years commencing 1 July 1996 to 30 June 2005[68] KDB Vol 2 Tab 56; TCA1-2 5/2421. . Commencing in September 2006, audits were also undertaken of Advance for the financial years ended 30 June 1998 to 30 June 2004 and Civic for the financial years ending 30 June 1999 to 30 June 2004[69] KDB Vol 7 Tab 224; TCA1-1 9/394/5087 [232] (objection decision: Advance); KDB Vol 7 Tab 225; TCA1-1 9/395/5164 [213] (objection decision: Civic). .

139. As also earlier mentioned, notices were issued in the context of these audits pursuant to the (former) ss 264[70] KDB Vol 2 Tab 61; TCA1-1 2/127/644 (EGL, BCI, Rawson, Ligon 158); KDB Vol 2 Tab 71; TCA1-1 2/137/718 (Binqld); KDB Vol 2 Tab 58; TCA3 Annexure “TCA3-1” (Advance and Civic). and 264A[71] KDB Vol 2 Tab 77; TCA1-1 2/144/755 (Rawson); KDB Vol 2 Tab 78; TCA1-1 2/145/758 (BCI); KDB Vol 2 Tabs 79-84; TCA3 Annexures “TCA3-4” – “TCA3-9” (Civic, Advance, Ligon 158, Ligon 268, Binqld and EGL). of the ITAA 36 requiring the recipients to give information

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to the Commissioner, provide documents to the Commissioner, and have persons attend and give evidence on oath or affirmation before the Commissioner. The response to these notices is important primarily in that it demonstrates that Rawson's position vis-à-vis the lack of any overseas assets securing the loans to Rawson and the other entities was consistent, but is now known to be false and misleading.

140. In common with Rawson, BCI and EGL also responded to the s 264 notices (which essentially sought the same information with respect to each entity) by stating "No Overseas assets" or "No assets Overseas."[72] KDB Vol 2 Tab 62; TCA1-1 2/128/648 (Rawson); KDB Vol 2 Tab 63; TCA1-1 2/129/650 (BCI); KDB Vol 2 Tab 68; TCA1-1 2/135/710 (EGL). The only assets asserted in each case were assets in Australia in the form of loans to inter-group entities.[73] Ibid. Advance and Civic simply responded to the question of whether they had any international dealings or overseas interests by referring to the fact that each company was deregistered on 26 November 2006[74] KDB Vol 2 Tab 60; TCA3 Annexure “TCA3-3”. .

141. Similarly, at his interview pursuant to s 264 of the ITAA 36 on 19 June 2007 in respect of BCI, Rawson, EGL and Ligon 158[75] KDB Vol 2 Tab 64; TCA1-1 2/130/652 (BCI); KDB Vol 2 Tab 65; TCA1-1 2/131/662 (Rawson); KDB Vol 2 Tab 69; TCA1-1 2/136/712 (EGL); KDB Vol 2 Tab 66; TCA1-1 2/132/670 (Ligon 158). , Andrew denied that each of those companies owned any real property or significant assets, aside from inter-group loans (being, in Rawson's case, to Ligon 158[76] KDB Vol 2 Tab 65; TCA1-1 2/131/664. ) and two properties in Australia in Ligon 158's case.[77] KDB Vol 2 Tab 66; TCA1-1 2/132/680-681 (Ligon 158). Andrew further said that he had "no idea" when Rawson first obtained its loan with MDB and did not know what the funds were put to when they were remitted to Australia from MDB, but considered that there may have been instances where one of the other entities paid interest directly to MDB for the Rawson loan rather than transfer it to Rawson.[78] KDB Vol 2 Tab 65; TCA1-1 2/131/666. With respect to Binqld, Andrew said at the s 264 interview on 9 August 2007 that he did not recall if there was security required for the loan from IDB to Binqld.[79] KDB Vol 2 Tab 72; TCA1-1 2/140/738.

142. Importantly, no documents or information were provided in response to the s 264 or s 264A notices disclosing the existence of any back-to-back loan arrangement or any overseas assets; to the contrary, the existence of any overseas assets was positively denied.

143. The audits of BCI, Binqld, Ligon 268, EGL, Advance and Civic culminated in the Commissioner issuing several taxation assessments, amended taxation assessments and penalty assessments, including to Rawson, BCI, Binqld, EGL, Ligon 268, Advance and Civic.[80] CB Vol 1 Tab 4; TCA1 [12] – [14]. Summaries of all the assessments, objections and objection decisions are at Annexures “A”, “B” and “C” to TCA1.

7.1.3 Review and appeal proceedings by Rawson, Binqld, Ligon 268, EGL, Advance and Civic and onus under s 14ZZK of TAA 53

144. The taxation assessments and penalty assessments issued after the audits gave rise to taxation objections and penalty objections, objection decisions disallowing the objections, and the commencement of the following proceedings under Part IVC of the TAA 53:

145. The taxpayers in each case were represented by Mark Douglass as solicitor, as was Rawson in the Rawson (AAT) proceedings[87] KDB Vol 4 Tab 140; TCA1-1 4/220/1558 (Rawson application for review). .

146. Section 14ZZK of the TAA 53 importantly provides with respect to the scope and nature of a review before the Tribunal that:

On an application for review of a reviewable objection decision:

  • (a) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
  • (b) the applicant has the burden of proving that:
    • (i) if the taxation decision concerned is an assessment (other than a franking assessment) - the assessment is excessive…

147. Thus, by virtue of s 14ZZK in a case where (as here) the taxpayer is issued with

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default assessments on unexplained deposits, the onus lies upon the taxpayer positively to prove the provenance of the deposits in order to establish that the assessments were excessive:
Vu v Commissioner of Taxation [2006] FCA 889; (2006) 63 ATR 341 at [27] (Finn J);
Federal Commissioner of Taxation v Dalco [1990] HCA 3; (1990) 168 CLR 614 at 623-625 (Brennan J (as his Honour then was)) and 626-627 (Deane J); and
Zappia v Federal Commissioner of Taxation [2017] FCAFC 185; (2017) 106 ATR 875 ( Zappia (FCAFC ) at [3] (Pagone J (with whose reasons Robertson and Bromwich JJ agreed)). Thus, it has been said that s 14ZZK(b)(i) gives rise to "a rebuttable presumption of law that an assessment is not excessive":
McCormack v Federal Commissioner of Taxation [1979] HCA 18; (1979) 143 CLR 284 at 314 (Jacobs J); see also
Trautwein v Federal Commissioner of Taxation [1936] HCA 77; (1936) 56 CLR 63 at 88 (Latham CJ). Importantly, therefore, there was no requirement on the part of the Commissioner to establish that the assessments issued to Rawson could be sustained or supported by evidence:
Gauci v Federal Commissioner of Taxation [1975] HCA 54; (1975) 135 CLR 81 at 89 (Mason J). Rather, as Brennan J held in Dalco at 624, absent a case where the Commissioner and taxpayer agree to confine an appeal to a point of law or fact on which the amount of the assessment depends, "the Commissioner is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment".

148. Furthermore by virtue of s 14ZZK(a) Rawson could not expand the grounds of its taxation objection before the Tribunal absent a grant of leave: Dalco at 620-621, 624 (Brennan J).

149. Leaving aside the Rawson (AAT) proceedings, each SFIC filed by the taxpayers in their respective Part IVC proceedings alleged that the transfers of funds received by them from their respective banks in Israel were secured only by personal guarantees from members of the Binetter family or entities controlled by them, subject to two exceptions in the cases of Binqld and BCI.[88] KDB Vol 7 Tab 221 ; TCA1-1 8/388/5026 ( Binqld’s Further Amended SFIC); KDB Vol 7 Tab 222 ; TCA1-1 8/389/5040 ( EGL’s SFIC); KDB Vol 7 Tab 223; TCA1-1 8/390/5056 ( Ligon 268’s SFIC); KDB Vol 7 Tab 234 ; TCA1-1 9/413/5486 ( Advance’s SFIC); KDB Vol 7 Tab 235 ; TCA1-1 9/414/5500 ( Civic’s SFIC); KDB Vol 7 Tab 216 ; TCA1-1 8/373/4715 ( BCI’s amended appeal statement). In Binqld's case, equitable mortgages were also allegedly held by the bank over certain assets of other Binetter family entities. In BCI's case, the bank also held a floating charge over BCI's assets, although the charge was of little significance given that BCI had no significant assets and was merely a conduit for loan funds to other entities (as the AAT found in Rawson (AAT) at [97]). The allegations in the SFICs filed in these proceedings were conveniently summarised by the Commissioner as follows:

  • a. in the Binqld proceedings, the taxpayer contended in its further amended SFIC (at [6] - [15]) that it entered into 10 loans with IDB. It further contended (at [16]) that these loans were secured by "written guarantees by Erwin Binetter and Andrew Binetter and equitable mortgages over redeemable notes, shares and units from Ligon 158 Pty Ltd and Ligon 237 Pty Ltd";
  • b. in the EGL proceedings, the taxpayer contended in its SFIC (at [15] - [17] and [29] - [39]) that it entered into various loans with IDB. It further contended (at [16]) that the loan referred to at [15] was secured by "written guarantees from Erma Nominees Pty Ltd, Milgerd Nominees Pty Ltd, Erwin Binetter and Emil Binetter", the loan extension (at [32]) was secured "on the guarantees previously provided" and the loans at [37] and [38] were "secured by guarantees by Erwin Binetter, Emil Binetter, Milgard Nominees Pty Ltd [sic] and Erma Nominees Pty Ltd" (at [39]);
  • c. in the Ligon 268 proceedings, the taxpayer contended in its SFIC (at [14] - [18]) that it obtained a series of loans from IDB. It further contended (at [16]) that the loans were secured "by way of guarantees" and (at [17]) on the loans being consolidated "[t]he security referred to in paragraph 16 continued to apply" (at [18]);
  • d. in the Advance proceedings, the taxpayer contended in its SFIC (at [14]) that Advance is a "financier" and that it obtained a loan in July 1997 for AUD4 million from MDB (at [17]) and that it obtained a further loan of AUD2.5 million on 27 May 2004 (at [24]). It further contended (at [18] and [25]) that the loan at [14] was secured "by way of a written guarantee given by Emil Binetter" and the loan at [24] was "secured by way of the personal guarantee given to MDB by Emil Binetter";

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  • e. in the Civic proceedings, the taxpayer contended in its SFIC (at [16]) that it borrowed AUD5 million from IDB on or about 25 May 1999 and borrowed a further AUD3.69 million on 27 May 2004 (at [22]). It further contended (at [17] at [23]) that the loans at [16] and [23] were secured by way of "written personal guarantees given by Emil Binetter";
  • f. in the BCI proceedings, the taxpayer contended in its amended appeal statement that it entered into a series of loans with Bank Hapoalim (at [10] and [28] - [29]). It further contended (at [11]) that the loan at [10] was secured by "[w]ritten guarantees dated 10 November 1992 executed by Milgerd Nominees Pty Limited, Erma Nominees Pty Ltd, Ligon 159 Pty Limited, Ligon 158 Pty Ltd, Emil Binetter and Erwin Binetter" and a "[w]ritten deed of Floating Charge dated 25 April 1993 over the assets of BCI Finances". BCI contended that the loan at [10] was extended (at [18]) and secured by the existing security (at [19]). According to BCI, the existing guarantees were reaffirmed on 10 November 2003 (at [21]). The taxpayer also contended that the loans at [28] - [29] were "secured by way of Deed of Continuing Guarantee provided by Erma Nominees Pty Ltd, Ligon 158 Pty Limited and Erwin Binetter dated 18 July 2004 and a deed of Floating Charge dated 25 April 1993 over the assets of BCI Finances".

(AS at [45]; emphasis added; footnotes omitted.)

150. In response, by his SFICs in the Binqld, EGL, Ligon 268, Advance and Civic proceedings, the Commissioner put each taxpayer to proof on the arrangements under which the funds were transferred by the Israeli bank in question and contended that each taxpayer had the onus of proving "that the circumstances surrounding the transactions affirmatively establish that there is or were no associated or collateral transactions or arrangements" with the relevant Israeli bank.[89] KDB Vol 7 Tab 226 ; TCA1-1 9/396/5233 (Commissioner’s SFIC in Binqld ); KDB Vol 7 Tab 227; TCA1-1 9/397/5242 (Commissioner’s SFIC in EGL ); KDB Vol 7 Tab 228; TCA1-1 9/398/5254 (Commissioner’s SFIC in Ligon 268 ); KDB Vol 8 Tab 237; TCA1-1 9/416/5526 (Commissioner’s SFIC in Advance ); KDB Vol 8 Tab 238; TCA1-1 9/417/5535 (Commissioner’s SFIC in Civic ). Similarly, in the BCI proceedings, the Commissioner contended in his appeal statement at [33] that BCI had not discharged its burden of establishing that the assessments were excessive because the available evidence indicated that the parties did not intend the documents purporting to evidence the existence and terms of the loan arrangements would fully record or evidence the parties' respective rights and obligations, and the available documentation did not substantiate, and was not capable of substantiating, the existence of the loan arrangements relied on by BCI or their purported terms.[90] KDB Vol 6 Tab 204 ; TCA1-1 7/351/2845 (Commissioner’s appeal statement in BCI ).

151. Thus in each proceeding (including, as I explain below, in the Rawson (AAT) proceedings) the ultimate issue was whether the taxpayers had discharged their onus under s 14ZZK(b) of proving that the relevant assessments were excessive, by providing a sufficient explanation of the arrangements by which they had received the funds in question from banks in Israel.

7.2 Rawson's case before the Tribunal

7.2.1 Rawson's SFIC

152. Rawson's SFIC[91] KDB Vol 4 Tab 144 ; TCA1-1 4/278/1991 ( Rawson’s SFIC); in the Tribunal, dated 2 September 2010, contended that:

(Rawson's SFIC at [6]-[15], [40].)

153. With respect to each of the loans described above, Rawson further contended that:

(Rawson's SFIC at [16]-[27]).

154. Under the heading "contentions", Rawson contended relevantly that:

(Rawson's SFIC at [40]-[49].)

155. Critically, however, Rawson's SFIC did not refer to any of the loans being linked to any deposit or otherwise secured.

7.2.2 Rawson's inferential case in the AAT

156. In the AAT, Rawson did not tender or produce any documents establishing the purported loans and their terms, any bank statements showing transfers into the Rawson's current account with MDB during the relevant years, any evidence of any security, whether by way of linked deposits or otherwise, or any evidence of the information provided by Rawson to MDB to obtain the original loans or the extensions to the second and third loans: see the convenient summary of the documentary evidence in Rawson (AAT) at [27]-[29] and omissions noted at [33] and [99]. However, as I later explain, the Commissioner was able to obtain these documents, including the documents establishing the Rawson loan accounts and linked

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deposit account, in February 2020 and April 2020 pursuant to the letters of request issued in this proceeding. Given the evidence that MDB would have provided documents and disclosed the deposit account if requested (which I later discuss), the only reasonable inference available is that these documents were available at all times to Rawson and Rawson therefore deliberately did not request them.

157. Furthermore, Rawson contended in the AAT that there was no person directly involved in obtaining the Rawson loans from MDB who could give evidence in the Rawson (AAT) proceedings, as Erwin had passed away on 25 August 2009 prior to the proceedings being commenced. Rather, Rawson's case proceeded on a form of "similar fact evidence", including a "mud map", which was intended to demonstrate a business method adopted by Erwin and Emil to use Australian incorporated companies to borrow funds from banks in Israel on the basis of personal guarantees and lists of assets only. Those funds, in turn, were said to have been on-lent to associated entities. These features of the alleged loan scheme were described by counsel for Rawson, Ms Seiden, in opening submissions before the AAT as the "essence" of its case in the following passage:[92] AAT 9 May 2011 T57.43-58.4; CB Vol 5 Tab 338; TCA1-1 6/335/3088.

The essence of the applicant's case is that there is sufficient documentary evidence for the tribunal to form a view that the loans were entered into and the existence of the business practice indicates that loans were routinely taken out with personal guarantees and no link deposits and that the evidence of bankers in Israel, that these loans could and would have been taken out.

(Transcript of AAT hearing in 2010/2360 dated 9 May 2011 at T58; emphasis added.)

158. In support of its case before the AAT, Rawson relied on so-called "expert opinion" evidence from Orly Brown, a banker at Bank Hapoalim at the relevant times,[93] KDB Vol 4 Tab 168; TCA1-1 5/304/2807; KDB Vol 5 Tab 176; TCA1-1 6/325/2995. and Baruch Etzion, a lawyer also formerly employed at Bank Hapoalim,[94] KDB Vol 4 Tab 167; TCA1-1 5/303/2804; KDB Vol 5 Tab 175; TCA1-1 6/324/2988. who each gave evidence of banking practices in Israel. Rawson also relied upon evidence from the following witnesses:

159. I interpolate that the first statutory declaration of Israel Zamir declared on 15 February 2010[100] KDB Vol 3 Tab 132; TCA1-1 3/216/1398. deposed to the MDB having lent AUD$4,750,000 over three loans to Rawson commencing June 1997 "against sufficient securities", while his second statutory declaration declared on 14 February 2011[101] KDB Vol 4 Tab 166; TCA1-1 5/302/2803. was in identical terms, save that the words "against sufficient securities" were omitted. This amendment to his statutory declaration assumed prominence in the argument for the Commissioner in this proceedings for reasons I later explain.

160. Furthermore, as the Commissioner submits and I later find, the documents obtained from MDB in Israel on 2 February 2020 establish that:

7.2.3 The business practice evidence

161. While the subject of objections by the Commissioner, Rawson relied upon two kinds of so-called "similar fact" evidence.

7.2.3.1 EVIDENCE OF EMIL BINETTER

162. First , Rawson relied upon the detailed affidavit of Emil Binetter, then 83 years of age, affirmed on 6 October 2010, in which he deposed among other things to his alleged attempts to obtain documents to demonstrate to the ATO that the money received by EGL, BCI, Advance and Civic from the Israeli banks "

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were for loans they had got from the banks". He also deposed that (at [162]):

At no time up to 1988 did I or, to my knowledge, did Erwin or companies that we were directors of, have any assets of any kind, including any bank accounts with deposits, in any overseas country. All assets were in Australia. If Erwin had property or assets overseas, then I would have known because Erwin and I had no secrets.

163. Rawson also relied upon Emil's affidavit affirmed on 29 November 2010 as to various medical conditions from which he allegedly suffered. In this affidavit, Emil further deposed that (at [2]-[3]):

I have never made any deposits overseas or had any other money in overseas banks or any assets overseas at all which were used as security for any of the loans from the Israeli Banks.

I have been told what a "back to back" loan is and I think this is what the ATO think has happened. However, I have never had this sort of loan using Israeli banks or any other bank overseas.

(Emphasis added.)

164. I note that the Commissioner objected to these affidavits on the grounds of hearsay and relevance, as well as procedural fairness given that Emil was not made available for cross-examination due to illness.

165. With respect to Emil's evidence, Rawson submitted in the Tribunal (at [41] of its written outline of submissions dated 15 April 2011[102] KDB Vol 5 Tab 178 ; TCA1-1 6/327/301. ) that:

the evidence of Emil Binetter (affidavits affirmed on 6 October 2010 and 12 November 2010) goes to the business practice of obtaining loans from Israeli banks. Thus, providing corroborative evidence as to Rawson's case that Rawson again in 1997 borrowed funds from an Israeli bank for the purposes of on-lending to whichever companies required the funds for business investments.

166. More particularly, in its opening submissions to the Tribunal dated 9 May 2011[103] KDB Vol 5 Tab 187; TCA1-1 6/334/3081. , Rawson submitted that (at [21]-[22]):

The following evidence given by Emil Binetter [TCA1-1 5/283/2396] tends to logically show the existence of facts relevant to the issue to be determined or to show the likelihood of the occurrence of there being a loan in this case … :

  • …
  • (b) the close personal relationship between Emil and Erwin: paragraph 253;
  • …
  • (d) the initial contact in 1988 with Israel Discount Bank in Israel and the granting of loans to entities in Australia and the provision to that bank for the purpose of satisfying the bank that the borrower was a good risk for the bank, of a list of assets and guarantees to support the loans: paragraphs 149, 160, 161, 164, 166, 167, 170 … ;
  • (e) the business practice of the use of corporate structures to set up a specific company to borrow money … ;
  • (f) obtaining of loans by companies in which Erwin and Emil were directors from Bank Hapoalim in Israel and the provision of guarantees as securities … ;
  • …
  • (h) in 1997 Emil set up a company called Advance Finances Pty Ltd to borrow money from Mercantile Discount Bank and Erwin set up the company Rawson to borrow money from Mercantile Discount Bank. Advance borrowed money from Mercantile Discount Bank and provided [a] list of assets and guarantees as security for the loan: Paragraphs 260-267, 268, 270;
  • …
  • (j) evidence as to borrowing by Civic from Israeli [sic] Discount Bank: … paragraphs 300 to 306.

Affidavit of Emil Binetter 29 November 2010 [TCA1-1 5/300/2799] provides evidence of his never having used a linked deposit as security for a loan to the Israeli banks (or at all).

(Emphasis added.)

167. Similarly, in answer to a question from the Tribunal at the hearing on 9 May 2011 as to whether "the only thing that is proffered as meriting the description "security" is the

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suggestion that there was a guarantee?", Ms Seiden confirmed that:[104] T54.18-.26; CB Vol 5 Tab 338; TCA1-1 6/335/3088.

And that is based on business practice … I mean obviously the only thing that the applicant has been able to put evidence forward on is a business practice of Mr Emil and Mr [Erwin] Binetter entering into personal guarantees …

The Commissioner's experts say that personal guarantee is not security, but the applicant's experts say it was. Personal guarantee is treated in Israel as security and the applicant has put on evidence of other loan transactions where personal guarantees have been used as security by Israeli banks.

168. Further, at the Tribunal hearing on 10 June 2011, Rawson submitted that[105] T581.52ff, KDB Vol 6 Tab 199; TCA1-1 7/347/3745. :

MS SEIDEN: At paragraph 170 [of Emil Binetter's 6 October 2011 affidavit] … - Mr Emil Binetter describes the practice of giving guarantees to Israeli banks as security for the loan. He signed the guarantee. This was - this one is described at page - paragraph 170 is the Israeli - Israel Discount Bank and a copy of that guarantee is also in the tender bundle. At paragraph 204 on page 14 of that affidavit there is a reference to a conversation:

Either Erwin or I said words to the effect of, "It will be secured first of all with the company that is getting the loans and personal guarantees of us and our four main companies".

This was a conversation with Mr Etzion, who was the bank manager at Bank Hapoalim, and then at paragraph 264 - - -

MR TAYLOR: Where is the borrower for this?

MS SEIDEN: BCI … [paragraph] 264 … and this is a conversation with Mr Septon in relation to Emil Binetter's borrowing in relation to Advance. The Advance company was incorporated about the same time as Rawson and was Emil Binetter's company - was the first of the entities he incorporated after separating from Erwin Binetter. And at [paragraph] 264:

We then discussed how the money was going to be secured. I said words to the effect, "I'll give you a guarantee so you can be sure that Advance will pay your money back".

And at [paragraph] 267 he recounts that Mr Septon gave him some papers to take home which was the loan agreement and guarantees but he no longer has a copy of those documents. At [paragraph] 270 he says that he remembers signing the guarantees but he can't find a copy and at paragraph 304 there is a reference to guarantees, Ms Cohen, which was from Israel Discount Bank borrowing for Civic which was another of Emil Binetter's companies:

… gave me some documents to sign including a loan application and maybe guarantees.

In the evidence we have only the physical guarantees, it's just the two that are in the tender bundle.

…

MR TAYLOR: When was the Civic borrowing?

MS SEIDEN: 1999.

7.2.3.2 DOCUMENTS SAID TO ESTABLISH SIMILAR LOANS FROM ISRAELI BANKS, INCLUDING THE MUD MAP AND SUMMARY OF ASSETS

169. Secondly , Rawson relied upon documents said to establish similar loans from Israeli banks to other companies controlled by Erwin or Emil. Specifically, in its opening submissions dated 9 May 2011[106] KDB Vol 5 Tab 187; TCA1-1 6/334/3081. at [16] under the heading "Rawson's evidence", Rawson identified a list of documents with respect to EGL loans from IDB, BCI loans from Bank Hapoalim, and Advance loans from MDB, submitting that the documents:

support the business practice of Erwin and Emil Binetter, and the companies in which they were directors of, to obtain loans from Israeli banks to show: that Israeli banks did accept personal guarantees as security for the loans from Australian companies and that the loans were commercial; payment of interest to Israeli banks; on-lending of the loans to Australian companies and the payment of interest by those companies.

170.

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Particular reliance was placed by Rawson upon the chronology setting out the alleged "matching conduct" between Erwin and Emil[107] KDB Vol 6 Tab 196 ; TCA1-1 6/343/3560; CB Vol 26-27 Tab 1227 ; TCA6-1 8/47/4257; KDB Vol 6 Tab 196 ; TCA6-1 10/22A/5832. . Rawson's AAT reply submissions at [49] and [171] respectively described this chronology as disclosing that "the relationship of Emil and Erwin Binetter was such that they engaged in the same type of loan arrangements" and as evidencing "the business practice of the Binetter family providing guarantees".

171. Rawson also relied by way of submission upon a "mud map" and a "summary of assets" for Emil and Erwin, which were handed up on the seventh day of the hearing in the AAT (8 June 2011).[108] AAT 8 June 2011 T402-403 ( KDB Vol 6 Tab 197 ; TCA1-1 7/345/3577). The summary of assets was prepared for the purposes of the Tribunal hearing, being described in oral submissions as:

the applicant's listing, if you like, of the assets in a format that was akin to the list of assets that was given to Baruch Etzion at Bank Hapoalim. So this is the type of document that from the evidence Mr Emil Binnetter had previously given before to Israeli Bank. So this is a document the applicant has created just recently, of a style that the applicant contends is consistent with past business conduct.[109] AAT 8 June 2011 T402 ( KDB Vol 6 Tab 197 ; TCA1-1 7/345/3577).

172. In other words, Ms Seiden for Rawson also submitted in the AAT that the summary of assets:

is simply a list of the assets that could have been given to a bank in 1997 if a bank had asked for a list of assets, in the same way that Emil Binetter's evidence discloses that a list of assets was provided and Mr Baruch Etzion gave evidence that he requested a list of assets and there is a copy of a list of assets that was provided to Bank Hapoalim in the evidence. So this is a document the applicant has prepared as an example of what could have been given to a bank if asked for a list of assets.[110] AAT 8 June 2011 T418 ( KDB Vol 6 Tab 197 ; TCA1-1 7/345/3577).

(Emphasis added.)

173. In relation to the mud map, Rawson submitted in the AAT on 10 June 2011 at T589.27ff[111] KDB Vol 6 Tab 199; TCA1-1 7/347/3745. :

The Senior Member then asked me to be specific about the inferences to be drawn from the mud map and it's as follows. The mud map and the list of assets, [Rawson] contends, support the following inferences. That there were sufficient assets available to satisfy rule 318, which is the rule that Mr Hackman refers to in his report of acceptable collateral … Also there were sufficient real property assets available to Mercantile Discount Bank, over which mortgages could be taken to secure a loan.

Further, there were companies over which floating charges could be taken and if unregistered these would not be known or able to be readily seen. There were liabilities to Israel Discount Bank and, therefore, Mercantile Discount Bank, as the subsidiary of IDB, would have known that the entity, Emil and Erwin, had a prior banking history and Mercantile Discount Bank would have been aware of the assets of the group. That inference arises not only from the mud map and the list of assets, but also from Emil's evidence, that he gave MDB a list of assets for Advance and that previously that list had been - it had been his practice to give such a list of assets … there is an available inference that MDB was aware of some, at least, of Rawson's assets …

7.2.3.3 EXPERT EVIDENCE OF MR ETZION AND MR ORLY BROWN

174. Thirdly , as earlier indicated, Rawson relied upon the evidence of Mr Etzion as an "expert" to establish the existence of a similar loan from Bank Hapoalim to BCI secured only by guarantees and possibly a deed of charge from BCI (Rawson's AAT reply submissions at [61]-[72]).[112] KDB Vol 4 Tab 167; TCA1-1 5/303/2804; KDB Vol 5 Tab 175 ; TCA1-1 6/324/2988. In its opening submissions dated 9 May 2011[113] KDB Vol 5 Tab 187; TCA1-1 6/334/3081. at [25], Rawson submitted that:

Baruch Etzion is a lawyer in Israel and ex-banker from Bank Hapoalim who has provided a report dated 15 February 2011 [TCA1-1 5/303/2801] who gives evidence of a loan which was granted in similar terms to the one in the present proceedings … He also gives evidence that the banking practice of Bank Hapoalim included the use of personal guarantees as security when lending to an Australian resident. His opinion is that the Rawson Loan could have been entered into by an Israeli bank

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(paragraph 7) and that guarantees are sufficient securities (paragraph 16).

(Emphasis added.)

175. I note that the Commissioner objected to Mr Etzion's evidence on the basis that he lacked independence as he was called to give evidence both as a witness of fact and as an expert, and his statements were expressed essentially as ipse dixit, lacking in both reasoning and support.[114] AAT 10 May 2011 T137-138: KDB Vol 5 Tab 190 ; TCA1-1 6/336/3163.

176. In opening submissions before the AAT, Ms Seiden for Rawson explained with respect to Mr Etzion's evidence:

in relation to a previous loan which Mr Etzion gives evidence about, the business practice was for the borrower to provide the bank with a list of assets … That was a company that both Irwin [sic] and Emil were directors of. Mr Emil Binetter gives evidence in relation to loans taken out for companies Advance and Civic, that he provided the bank with a list of assets.

177. Ms Seiden also described his evidence as " highly relevant because he gives evidence of a loan, the BCI loan from which Erwin and Emil were directors. That was at a spread very similar to the spread that this loan was taken out. It was secured on only a personal guarantee and also had a five-year interest only loan, so the terms were very similar . He is available to be cross-examined. So the applicant's expert evidence is very much that this loan was commercial "[115] AAT 9 May 2011 T57 ( CB Vol 5 Tab 338 ; TCA1-1 6/335/3088). (emphasis added).

178. Rawson relied in particular upon Mr Etzion's evidence before the AAT "of a good personal relationship developing so that [MDB] could grant a substantial loan on the basis of guarantees and a floating charge (over a company whose only assets were unsecured loans to related entities) after talking to the borrowers, learning their stories, that they were Jewish Holocaust survivors who had made a new start in Australia and become men of substance who had built up assets" and that "'there was no cash deposit in the Bank Hapoalim' as a form of security for the loan Bank Hapoalim granted to BCI" (Rawson's AAT reply submissions at [70] and [71]; emphasis added).

179. In submissions in reply in the AAT at [8(f)], Rawson contended that:

On the basis of Mr Etzion's evidence that he granted loans on the strength of guarantees and the fact that neither Mr Ben Zeev nor Dr Shapira could discount completely such a possibility and Rawson's evidence as to the absence of cash deposits and availability of assets in Australia for security , the Tribunal would find, on the balance of probabilities, that the loans that were made were supported by guarantees or some other form of security which did not have the character of "income".

(Emphasis added.)

180. In addition, Rawson relied upon the evidence of Mr Orly Brown as an expert in Israeli banking law in support of its submission that a personal guarantee could be accepted by a bank as security[116] Rawson’s AAT reply submissions dated 15 August 2011 at [79] ( KDB Vol 6 Tab 209; TCA1-1 7/359/4158). . Mr Brown had been with Bank Hapoalim from 1987 and produced two expert reports[117] Expert Opinion of Orly Brown affirmed 15 February 2011 ( KDB Vol 4 Tab 168; TCA1-1 5/304/2807); Further Expert Opinion of Orly Brown affirmed on 8 April 2011 ( KDB Vol 5 Tab 176; TCA1-1 6/325/2295). and a third unsigned and undated report.[118] CB Vol 22 Tab 1208; TCA6-1 3/29/1377. In cross-examination in the AAT, Mr Brown gave evidence that whether or not the bank accepted a personal guarantee was part of the assessment of risk and in his view (at T311.19-25):

personal guarantee which you go after the person itself personally, that is the best case scenario for the bank. When a personal guarantee also means that the bank might have looked at his whole portfolio, meaning shares and companies, ownership of buildings, ownership of production factories and say "You know what? This is sufficient for me that that person would not harm his personal reputation by paying a loan or giving us back".

7.2.3.4 EVIDENCE OF ANDREW AND MARGARET AS TO EMIL'S BUSINESS PRACTICE

181. Fourthly , Andrew gave evidence as to his father's business practice of providing personal guarantees as a form of security for loans from Israeli banks in his affidavit affirmed on 15 April 2011. Specifically he deposed that (at [26]-[30]):

As I state in my First Affidavit, I was not actively involved in the business of Rawson and was not aware of the borrowings that

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Rawson had with Mercantile Discount Bank until around 2004.

I was therefore not aware at the time the loan was entered into what the security for the borrowings from Mercantile Discount Bank was. However, as a result of the Australian Taxation Office investigations into my father's business affairs, I have become aware that it was my father's business practice to provide personal guarantees as a form of security for any borrowings he and my uncle, Emil Binetter, had from Israeli banks . I became aware of this by looking through old business documents my uncle had for a related entity, EGL Development (Canberra) Pty Limited, by reviewing the Statutory Declaration of Baruch Etzion dated 16 December 2009 by reading the Affidavit of Emil Binetter affirmed on 6 October 2010.

Further, I am now aware that my uncle also had borrowings from Mercantile Discount Bank to his company Advance Finances Pty Limited. At paragraphs 269 to 270 of the Affidavit of Emil Binetter affirmed 6 October 2010, Emil states that personal guarantees and a list of assets were provided to Mercantile Discount Bank for the borrowings to Advance.

As I have set out in my First Affidavit, my father and my uncle were extremely close and on many occasions, my father would say to me words to the effect:

"Your uncle, Emil, and I make all business decisions together and we always do the same thing".

From this, I knew that my uncle and my father's business practices were the same and I observed that their investments and their decisions were made in a unified approach .

(Emphasis added.)

182. While it is now known that Andrew's evidence was false in that the Binetter family did not have a business practice of providing personal guarantees as the only form of security for the loan, I accept his evidence that Erwin and Emil made business decisions together and that their business practices were "unified". This accords with the independent evidence, which I discuss below, in relation to the business practice of Advance and Civic, which were controlled by Emil and his son Gary, as well as BCI which was jointly controlled by Erwin and Emil. It is clear that there was a high degree of collaboration between the Erwin and Emil sides of the Binetter family.

183. Andrew further gave the evidence in cross-examination (at T172.22-T173.12):

And is this the only transaction that any of the companies with which you're concerned has had with the Mercantile Discount Bank? ---The three loans that were taken out in 1997 before I became a director, yes.

…

Mr Binetter, have any of the companies with which you're associated had moneys on deposit with either the Mercantile Discount Bank or the Israel Discount Bank?---No.

Have any of the companies with which you're associated made investments with either the Mercantile Discount Bank or the Israel Discount Bank?---No.

184. Andrew gave additional evidence in cross-examination (at T516.37 and T517.16) as follows:

Mr Binetter, at paragraph 27 [of your affidavit affirmed on 15 April 2011] you said in about the fourth line that you've become aware it was father's business practice to provide personal guarantees as a form of security. By that, do you mean circumstances where there was a personal guarantee that was the only security?---Yes.

So you say it was your father's business to borrow in circumstances where - your father's practice to borrow in circumstances where the only security was a personal guarantee?---I'm saying I'm reading my uncle's affidavit and seeing what his business practices, and knowing that they almost throughout their whole life mirrored each other, that their business practice was to give personal guarantees as a form of security for what they were doing. Their name was their word and their name was their bond. was always the first thing that they offered, not the last thing.

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What personal guarantees do you identify that your father gave?---1 believe he gave the personal guarantees of Mercantile Discount Bank for the loan.

185. And (at T528.7):

Mr Binetter, you were asked about several discussions you had with your late father?---Yes

In all of those discussions … do you recall a conversation or did he tell you that there were ever any cash deposits held as security in overseas banks?---He never said any such thing.

And what about other assets overseas?---No other assets overseas.

186. Similarly, in her affidavit affirmed on 6 October 2010,[119] KDB Vol 4 Tab 147; TCA1-1 5/282/2391 Margaret deposed at [12] that "Erwin and his brother Emil did everything together. All of their business dealings were together and equal". She also gave evidence at [7] that:

I do not have any assets overseas and I have never been aware of assets that my husband had overseas. I believe that if Erwin had assets overseas he would have told me.

187. With respect to the evidence of Andrew and Margaret, Rawson submitted in its opening submissions before the Tribunal dated 9 May 2011 that (at [20] and [23]):

Andrew Binetter in his affidavit affirmed on 21 October 2010 [TCA1-1 5/284/2563] explains: his relationship with his father (paragraphs 13 to 40) … Andrew Binetter's affidavit of 4 May 2011 [TCA1-1 6/330/3053] [provides] evidence of cooperation … (paragraphs 1 to 117) and that there were no linked deposits (paragraphs 119 to 121). Andrew Binetter's affidavit 6 May 2011 [TCA1-1 6/333/3074] is also evidence of no linked deposits.

…

Affidavit of Margaret Binetter 6 October 2010 [TCA1-1 5/282/2391]: never having assets overseas (paragraph 7) awareness as to overseas loans (paragraphs 8-11); close relationship between Erwin and Emil (12) …

(Emphasis added.)

188. There is no question that the absence of the linked deposits was at the heart of Rawson's case, and the adamant evidence of Andrew in the AAT to the contrary was deliberately and knowingly false in light of the new evidence, as I later explain.

7.2.4 The secondary documentary evidence establishing the loans to Rawson from MDB and the evidence of Israel Zamir, formerly Foreign Exchange Department Manager, MDB

189. The documents relied upon by Rawson to establish the existence of the loans from MDB and their terms were accurately described by the Commissioner in this proceeding as "scant".[120] Rawson’s AAT Opening Submissions dated 9 May 2011 at [17] ( KDB Vol 5 Tab 187; TCA1-1 6/334/3076); see also Rawson’s Outline of Submissions dated 15 April 2011 at [38]–[39] ( KDB Vol 5 Tab 178; TCA1-1 6/327/301). No evidence was given by any bank officer from MDB who approved, managed, or supervised the loan; nor was any loan agreement for any of the three alleged loans produced. However, I interpolate that Elie Septon, formerly the General Manager Assistant (also known as the Deputy General Manager) at MDB who had been involved in the arrangements with Rawson and MDB, gave evidence at his examination in July 2020 pursuant to the letters of request that the Rawson loans were in fact supported at all times by parallel cash deposits in the same currency. As Mr Septon said in his evidence taken pursuant to the letters of request on 26 July 2020:[121] SCB Vol 1 Tab 2 , T22.5-12. See also T27.18-20.

Avd. Heskia [the Judicial Inquiry Appointee]: … Would it be correct to say that whenever there was a repayment there was also a continuing deposit, and in fact during the entire time you were there, there were always loans against deposits in the same amounts?

Mr. Septon: Loans versus deposits in the same amounts, but there was not many transactions of withdrawals and so on, usually none, yes, there always been. There is no such thing as a loan which is not against a deposit .

(Emphasis added.)

190. In the AAT, Rawson had obtained two short statutory declarations of Israel Zamir, dated 15 February 2010 and 14 February 2011, which were before the Tribunal. Mr Zamir, it will be recalled, was formerly the Foreign Exchange Department Manager at MDB. In his

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statutory declarations, Mr Zamir said that MDB lent Rawson a total of AUD$4,750,000 over three loans. Letters were attached to Mr Zamir's declarations which he said were created by MDB and sent to Rawson's directors in January 2008 at Rawson's request (as accepted in the agreed chronology at items 371-377) which were said to set out the loan account and interest details for each loan which Rawson had with MDB.[122] KDB Vol 3 Tab 132; TCA1-1 3/216/1398 (15 February 2010) and KDB Vol 4 Tab 166; TCA1-1 5/302/2803 (14 February 2011) respectively. Mr Zamir signed each of these letters. However, Mr Zamir's evidence could not be tested by cross-examination as he declined to make himself available to give evidence before the AAT either in person or by video link.[123] Affidavit of Andrew Binnetter affirmed on 21 October 2010 at [5] ( KDB Vol 4 Tab 150; TCA1-1 5/284/2563); Affidavit of Mark Craig Douglass sworn 25 October 2019 at [22] ( CB Vol 21 Tab 1195; TCA6-1 2/17/483.

191. As I have also earlier mentioned, his first and second statutory declarations were identical save that in his first statutory declaration, Mr Zamir stated the Rawson loans were "against sufficient securities", which words were omitted in his later affidavit. The Tribunal did not regard the omission of the "3 contentious words as a matter of significance in the weight that can properly be attributed to Mr [Zamir's] statutory declaration" (Rawson (AAT) at [131]). Rather, the AAT inferred that Mr Zamir:

as an apparently senior officer in a reputable and major Israeli bank, verified the existence of bank records and payments that were consistent with the reality of the loan liabilities that [Rawson] asserts. Although he did so without indicating specific knowledge of either the nature, or the existence, of any particular security for the loan transaction, he had certainly been informed of the Commissioner's scepticism about the reality of the liability. He was also well aware of the use that [Rawson] proposed to make of his statutory declaration.

(Rawson (AAT) at [131].)

192. We now know that this was not the true state of affairs. As I later discuss, Mr Zamir had initially deposed that the loans were "against sufficient securities", and was outraged that this evidence was omitted by subterfuge. Moreover, Mr Zamir was only asked to address the loans aspect of the arrangements between MDB and Rawson, and not the deposits in his statutory declaration. Finally, he gave evidence that he was not in fact told anything at the time about an ongoing legal proceeding against Rawson (or any other related proceedings).[124] Examination of Israel Zamir, 12 August 2020, 329.2-5 (Supp CB at tab 3).

193. Without knowledge of the above matters, the AAT considered Mr Zamir's statutory declaration to be "significant" for four principal reasons (at [132]):

First, the objective details of MDB's loan records which he describes are consistent with such apparently contemporaneous records as have been produced. Secondly, it is consistent with what I regard as the probable reality of the fund movements - having regard to [Rawson's] date of incorporation, reputed activities and interest income. Thirdly, it is consistent with the objective evidence of fund movements and [Rawson's] evidence disavowing knowledge of any relevant overseas assets. Finally, the formality of the statutory declaration, and the persistent approaches that produced its execution, provide a degree of comfort about the reliability and significance of the information [Andrew] attributes to [Mr Zamir] - that there was no record of any relevant security deposit held by MDB .

(Emphasis added.)

194. The Tribunal returned to the fourth matter to which it referred in this passage later in its reasons, where it found as follows (at [172]-[173]):

In November 2010, the Commissioner issued 9 summonses in the present proceedings. They were addressed to various persons and entities related to [Erwin]. They required the production of a range of documents. The documents sought were those recording or evidencing any deposit or moneys held with any financial institution outside Australia (in the period from 1 July 1995 to 30 June 2008) that was used for security for any of the contentious 1997 [Rawson] loans from MDB (and any other Israeli bank referred to in [Rawson's] affidavit evidence).

In response to the summons [Andrew] telephoned [Mr Zamir] at MDB in Israel. He gave [Mr Zamir] the names of each of the persons to whom a summons had been addressed. [Andrew] asked [Mr Zamir] to search MDB's records and report whether it had ever held any

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deposits for any of them, or for [Rawson]. He also asked [Mr Zamir] to check the bank's records to determine whether any deposits had ever been held in the name of either [Erwin] or [Erwin's] wife. [Mr Zamir] told him that MDB had no record of any such deposits.

195. However, during his examination in August 2020 pursuant to the letters of request, Mr Zamir said that he was asked only to "confirm the loan" and was not asked by Rawson to disclose in his statutory declaration the existence of the cash deposits securing the loans, which he would have disclosed if asked by Rawson. It is also clear from his evidence in August 2020 that Mr Zamir was aware that the Rawson loans were supported by cash deposits[125] SCB Vol 1 Tab 3, T238.11-28, T239.1. For example, in his evidence on 6 August 2020 taken pursuant to the letters of request, when asked if he knew that the loans were backed by deposits before he was contacted by the applicant's lawyer and asked to participate in the proceeding, Mr Zamir stated:[126] SCB Vol 1 Tab 3 , T308.12-14.

Previously I knew that it was back to back. That was the foundation of establishing the account, that the account is back to back. Certainly, I cannot deny that I knew.

196. Furthermore it is now clear, as the Commissioner submits, that the documents annexed to Mr Zamir's statutory declaration "were a very small selection of the entirety of MDB's records in respect of its dealings with Rawson and were a reconstruction of the selection of documents" (AS at [65]).

7.2.5 Evidence of witnesses for Rawson in relation to the Rawson MDB loans

197. In the AAT, Rawson also relied, as indirect evidence of aspects of the Rawson loans from MDB, on:

198. As the Commissioner contends, Rawson particularly relied upon the following parts of Andrew's evidence in relation to the question of whether the loans were secured:

199. Further, as the Commissioner also contends, it is implicit in this evidence that Andrew "sought to convey that he had no personal knowledge of the fact that the Rawson

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loans were secured by cash deposits" (AS at [69]). Yet it is now apparent that Andrew was in fact aware of the security well before the Rawson (AAT) proceedings (as I later find).

200. With respect to Advance and Civic, both of which Gary was a director, Gary affirmed an affidavit on 1 June 2011 at [5]-[16] in relation to documents which he obtained from Mr Zamir at MDB when he attended MDB's offices in Israel in December 2009. Those documents included a bundle of documents that appeared to be a copy of a loan file for Advance (being the documents attached to Mr Zamir's statutory declaration dated 10 December 2009). Gary deposed that he believed at that time that these documents would be sufficient to satisfy the ATO that the loans were genuine (at [16]). With respect to these documents, Rawson submitted before the AAT that:

Mr Gary Binetter's evidence is that he asked Advance for the whole loan file and believes he was given it and these are the documents that were given. So there is an available inference that it is the Advance loan file and that these are the documents. There was evidence from Mr Emil Binetter in relation to Advance, that he signed a guarantee and he sent a list of assets, yet those documents didn't turn up when Gary Binetter made the inquiry, which suggests that Mercantile's record keeping wasn't necessarily - this was all that was able to be obtained after so many years …

(Transcript of AAT hearing in 2010/2360 dated 17 June 2011 at T643.)

201. However, it is now known that only a small, selective number of the documents in fact available from the Advance loan file held by MDB were produced by Gary. Documents obtained subsequently reveal the existence of a cash deposit as security in respect of Advance's loan. Furthermore, despite Gary's signature (with others) appearing on a document dated June 1997 requesting that MDB open a "free foreign currency account" which was either "a non-interest earning current account" or "an interest earning deposit account" (the option on the form was unticked),[139] KDB Vol 1 Tab 16; TCA1-1 1/23/367; Donnelly Annexure “MCD-1” pp 289 and 346. Gary did not disclose to the AAT the existence of the cash deposit securing Advance's loan. I also note that Gary apparently signed at the same time the applications to effect banking operations with respect to the Advance account by phone instructions and facsimile, and that Michael signed the certificate also apparently on 1 June 1997 certifying that Advance had lawfully passed a resolution to sign a requestion for execution of banking acts by means of facsimile.

202. Gary also gave evidence in his affidavit of 1 June 2011 (at [27]-[32]) that he also met with Ophira Perry at IDB in December 2009 in relation to the loans to Civic, and that Ms Perry provided him with documents from IDB's file that, in her opinion, "would satisfy an Israeli Court that the loans from this bank are genuine and the terms of the loan"[140] Affidavit of Andrew Binetter affirmed 1 June 2011 at [31] and Annexure F ( KDB Vol 6 Tab 195; TCA1-1 6/342/3465). (at [31]).

7.3 The Commissioner's case before the Tribunal

203. The Commissioner's case before the AAT relied upon the following circumstances:

Funds totalling AUD4,750,000 were transferred to Rawson by MDB on 5 June 1997, 4 July 1997 and 11 December 1997 in the following circumstances:

  • a. Rawson was recently incorporated;
  • b. Rawson had no net assets;
  • c. Rawson had issued capital of $2;
  • d. the funds transferred were denominated in Australian dollars from a bank in Israel;
  • e. there was no direct evidence to establish that the funds were provided with the provision of any security;
  • f. there were no periodic repayments of principal, so that the total amount remained outstanding until the date on which they were finally repaid;
  • g. the funds were transferred in 1997 at an interest rate of 8.298%. There was no evidence of that interest rate ever being varied or reviewed;
  • h. there were seemingly lengthy periods of default, involving the non-payment of interest, which did not lead to any enforcement or recovery action being taken by MDB;
  • i. the loans were extended in December 2002 for 2 years, six months after the 5-year term of the loans had ended and when

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    interest and AUD1,550,000 of principal remained unpaid from February 2001 and seemingly further extended in 2004 when principal and interest continued to remain outstanding (which was unusual given the loans were "bullet" or "interest only" loans); and
  • j. the loans were said to have been fully repaid despite calculations showing that amounts of interest totalling AUD85,181.34 never being paid.

(AS at [79]; footnotes omitted.)

204. As against those circumstances, the Commissioner's case before the AAT can be summarised as follows.

205. First , as the Commissioner submitted, its primary contention was "orthodox" (at [80]):

As required by s 14ZZK(b) of the TAA 53, Rawson had the burden of establishing that its taxable income in each year was less than the amounts assessed. It had the onus of showing what the assessment ought to be [see respondent's SFIC at [16]]. To discharge its burden of proof it was necessary for Rawson to provide a full explanation of the circumstances in which the loans were made, including but not limited to, security.

(Footnotes omitted.)

206. Secondly , the Commission submitted in his AAT submissions dated 10 June 2011 at [21] that:

the existence of some security or other associated transaction, is a matter of critical importance:-

  • (a) if there was an associated transaction, it would cast a completely different light on the nature of the dealing with [MDB], and the basis upon which Rawson received moneys from the bank;
  • (b) for example, if there was some associated deposit with MDB, or other assets to which the bank had access by way of set off, then the nature of the dealing would clearly be quite different. If those were the facts then the circumstances may be far removed from a routine commercial loan, but rather the bank would in that case merely be used as a conduit to pay to Rawson funds kept offshore by it or an associated entity. If the bank was merely a conduit for the payment of moneys to Rawson, then it may have been effectively indifferent as to the basis on which funds were provided by it, and to the return it received for the provision of those funds .[141] Respondent’s AAT submissions dated 10 June 2011 at [21] (KDB Vol 6 Tab 200; TCA1-1 7/348/3833).

(Emphasis added).

207. The new evidence supports the view that MDB was "effectively indifferent" as to the basis of the funds. Indeed, MDB's only profit on the back-to-back loan arrangement was the margin of 0.6%. As long as this margin was maintained, the interest rates for the loans and the deposit could be (and in fact were) dictated by Rawson.

208. That matter was, in the Commissioner's submission before the AAT (at [22]), "a critical matter for proof by [Rawson]" and could be addressed only on the basis that:

there is evidence which effects a complete disclosure of the dealings between Rawson and [MDB], and the basis upon which monies were paid to Rawson in 1997. It is not a matter which can adequately be addressed on the basis of an incomplete or partial evidentiary account of the transaction. Nor is it a matter which can be addressed on the basis of inferences drawn from other transactions.

(Emphasis added.)

209. On 14 July 2011, in submissions on the characterisation of the contended loan funds as income in the AAT,[142] KDB Vol 6 Tab 206; TCA1-1 7/353/3955. the Commissioner further contended that (at [2.8]-[2.12]):

The Respondent has put forward a case to the effect that the moneys were received from [MDB] as loan funds pursuant to transactions which had the characteristics identified at paragraph [20] of the Respondent's Primary Submissions, which included:-

  • "(a) second, that the loan was unsecured - i.e. that no security was given over any assets or property either by Rawson, or by any other entity;
  • (b) third, the only additional rights given to MDB were in the form of a personal guarantee given by Mr Erwin Binetter (see

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    Applicant's Opening Submissions at [16]); and
  • (c) fourth, that the provision of the funds by MDB did not occur in connection with any other transaction which affected the preparedness of MDB to advance the funds - i.e. such as security over some other assets, or rights of set-off against some other assets or other funds deposited with MDB by Rawson or some other entity, or inter-bank back-to-back dealings with other banks (for example by utilising letters of credit between banks)."

That being the case that the Applicant has put forward, it must prove those matters.

If the Applicant has not adduced evidence sufficient to prove those three matters, then it has failed to establish the case which it has put forward, and has failed to discharge its onus of proof.

An evaluation of the evidence reveals that the Applicant has failed to adduce evidence to establish any of those three matters. Consequently it has failed to establish the essential propositions on which its case is based, and has failed to discharge its onus of proof.

The Applicant's failure to establish the fourth matter (lack of connection with some other unrevealed transaction) is crucial. It is necessary for [Rawson] to establish that the putative loan transaction was not a cloak for arrangements which amounted to payment to [Rawson] of the proceeds of a profit fund held offshore by Binetter family entities . The only way in which that could be proved would be through comprehensive evidence revealing the totality of the dealings between the Binetter family entities and a number of Israeli banks.

(Emphasis added.)

210. The Commissioner further submitted, at [15] of his AAT submissions dated 14 July 2011, that evidence with respect to the dealings between the Binetter family entities and Israeli banks "is essential if a full account of the putative loan transaction [between Rawson and MDB] is to be put before the Tribunal. Such evidence has not been adduced, notwithstanding that it is within the power of the Applicant to adduce it".

211. It is now known that the submission was correct. It was at all times within Rawson's power to require production of the records held by MDB, but it chose not to do so. Instead it put forward selective evidence, some of which was manufactured by Mr Douglass on Andrew's instructions and presented to MDB to put on its letterhead, to establish the so-called loan side of the equation while deliberately withholding evidence of the deposit side.

7.4 The Tribunal's decision in Rawson (AAT)

212. By its decision dated 6 September 2011, the Tribunal set aside the Commissioner's decision insofar as it included in Rawson's assessable income any part of the fund transfers by MDB in June, July and December 1997. It also set aside the decisions under review insofar as they disallowed deductions for interest liabilities incurred by Rawson to MDB in relation to the loan funds provided by MDB in those fund transfers.

7.4.1 The critical issue

213. The Tribunal identified the critical issue at [1] of its reasons ( AAT Reasons ) in the following terms:

[Rawson's] financial statements for the financial years from June 1997 to June 2008 record a loan liability to an Israeli bank ("MDB"), and substantial related interest expenses. The liability amount characteristically approximates the total value of [Rawson's] assets. The interest expenses approximate [Rawson's] own total income. The reality of the recorded liability, and the character of the asserted interest expenses, are the principal matters for decision in these proceedings.

7.4.2 The Tribunal's findings with respect to the unusual terms of the loans and their lack of security, and acceptance of Mr Etzion and Mr Brown's evidence

214. First , the Tribunal characterised the Rawson loans as "unusual" given the lack of any requirement for periodic repayments of principal during the loan term, the provision for early repayment without penalty, and the fact that "usual Israeli banking practice would require security for the loan" (at [90]-[91]). However,

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the Tribunal accepted Mr Etzion's and Mr Brown's opinion that loans of this kind occurred, and considered that the 1993 Bank Hapoalim loan to BCI was an example of such a loan, given the similarity in its terms and the fact that there were guarantors and evidence of their net asset value but no evidence of any actual (and significant) security (at [65]-[79], [96]-[97]). The Tribunal also found (at [93]), contrary to the evidence of the Commissioner's experts, Dr Shapira and Mr Ben Zeev, that "the 5 year original loan term, the nominated interest rate, and the repayment provisions for the loans asserted by [Rawson] were comparatively unusual, but not to an extent that meaningfully contradicts the likely reality of the MDB's loans."

7.4.3 The Tribunal's finding that the incomplete state of the loan documentation did not contradict the reality of the loans

215. Secondly , while acknowledging that there was a conflict in the expert evidence relied upon by Rawson and the Commissioner with respect to the degree of completeness and sufficiency of the available documentation, especially those provided by MDB to Rawson, the Tribunal considered at [32]-[33] that:

[t]here is some evidence to indicate that ordinary Israeli banking practice would be consistent with the existence of the following documents in relation to the loan transactions for which [Rawson] contends:

  • (a) documentation demonstrating the verification of [Rawson's] identification details and its capacity and authority to operate a bank account;
  • (b) a description of [Rawson's] business, including financial accounts and business history and MDB's independent background check on Rawson…;
  • (c) a formal Loan Agreement;
  • (d) a list or file containing material such as details of any guarantee and collateral security for a principal loan, perhaps including evidence of charged assets and assessments of their realisable value.

There is no evidence of any formal Loan Agreement between [Rawson] and MDB - other than the two signed December 2002 "Extension" documents … There is no evidence of any charge [Rawson] provided as security. There is no evidence that [Erwin] or any entity associated with him, provided any guarantee of [Rawson's] asserted borrowings from MDB.

216. Thus, the Tribunal found that there was no evidence demonstrating that the loans were supported by any kind of security or guarantee, despite Rawson's contention that such a guarantee was at least likely to have been given consistently with Mr Brown's evidence that "an unsecured personal guarantee was a commonplace feature of similar foreign currency loans" (AAT Reasons at [99]). (I interpolate that it is now apparent from the fresh evidence that MDB had in fact imposed a 0.6% margin for facilitating the back-to-back arrangement, as a result of which there was no need for a personal guarantee because the Rawson loans were wholly secured by liquid collateral. As a result, the new evidence produced by MDB shows that it regarded Rawson as having an "open debt" in the amount of $0 (meaning that the extent of the debt which is not covered by the back-to-back deposit is "0" or nil). This in turn likely explains why there was no documentation evidencing any personal guarantee. To the contrary, MDB's internal reports stated explicitly that personal guarantees would not be accepted as security.)

217. However, despite the obvious and highly suspicious deficiencies in the available loan documentation, the Tribunal found that there were good reasons to accept the reality of the fact of the loan Rawson asserted, including: objective corroboration of fund movements; the allocation by MDB of separate loan account numbers to the asserted loans and to Rawson's deposit account, into which all subsequent payments were made; and the implicit assumption in the application/extension documents of the prior existence of the designated loans (at [104]). In all the circumstances, the Tribunal inferred that it was unlikely that MDB would have engaged in a procedure of contriving the appearance of a genuine loan transaction with Rawson in 1997, that any such contrivance would have escaped detection subsequently, and that, in response to Rawson's repeated enquiries, MDB

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would have continued to dishonestly assert the existence of genuine loans (at [105]).

7.4.4 The Tribunal's finding that the interest payment irregularities were not material

218. Thirdly , the Tribunal then turned to consider whether Rawson could discharge its onus of proof about the reality of the asserted loan transactions given the apparently substantial interest payment irregularities (at [106]), in particular:

219. However, the Tribunal ultimately concluded that the discrepancies were not material, finding (at [116]-[117]) that:

I accept that MDB regards [Rawson] as having fully discharged its interest obligations. I regard that acceptance as somewhat ambiguous, given MDB's evident reluctance to provide evidence from any of its staff in the present proceedings. Furthermore, even accepting the likely mathematical correctness of the Commissioner's evidence, I do not regard the disputed amount contended for by the Commissioner as sufficiently material to be of any real probative value in assessing the reality of [Rawson's] asserted loans. It represents a tiny proportion of the $6.8m total payments [Rawson] made, and a tiny proportion even of the $2.05m that [Rawson] asserts it paid by way of interest on the contentious loans.

The interest discrepancy, and its potential significance, has to be assessed in the light of broader aspects of [Rawson's] asserted loans, and the issues to which [Rawson's] claims, and the Commissioner's assessment decision, give rise. Assessed against that evidence, to which I refer below, the apparent shortfall in [Rawson's] interest payment obligations is immaterial in detracting from the satisfaction with which I have otherwise concluded that the contentious loan liability was real, as [Rawson] asserts.

220. It is now known, from the new evidence, that there were no such periods of default in interest payments.

7.4.5 The comfort derived by the Tribunal from Mr Zamir's statutory declaration in accepting Andrew's evidence as to the absence of any security deposit

221. Fourthly , as I have earlier explained, the Tribunal regarded Mr Zamir's statutory declaration as significant for a number of reasons including that it provided "a degree of comfort about the reliability and significance of the information [Andrew] attributes to [Mr Zamir] - that there was no record of any relevant security deposit held by MDB". (I interpose, however, that during his examination in August 2020, Mr Zamir gave evidence that "They asked that I give a certificate as to the loans only. So, I gave a certificate as to the loans. I did not refer. Besides they did not ask me to note collateral or anything like that. So that is why I did not refer to the accounts that served as collateral" (at T283.7-12)). Furthermore, while the Tribunal agreed with the Commissioner that Mr Zamir's absence from the hearing deprived both the parties and the Tribunal of the opportunity to explore various issues, including the completeness of the MDB documents and the reasons for its apparent forbearance in enforcing Rawson's interest obligations, the Tribunal was nonetheless satisfied that "[Rawson] persistently tried to induce his participation as a witness" (at [135]). The Tribunal considered that Mr Zamir's refusal to participate as a witness in the proceedings was idiosyncratic, and did not draw any adverse inference from the idiosyncrasy of his refusal, finding that (at [136]):

It is not irrelevant to observe (i) that the objective MDB records do appear to reflect the reality of the contentious loans, (ii) [Mr Zamir] was apparently not involved with the original transactions in 1997, (iii) by 2011 [Mr Zamir] had been providing [Rawson] with confirmatory information about the loans over a 3 year period and (iv) the prospect of cross examination in foreign proceedings in

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which he had no personal interest, was unlikely to have been a preferred activity for [Mr Zamir] to undertake. In these circumstances, there would not be a proper evidentiary basis to refrain from making other, apparently properly available findings, because of an apprehension that either [Mr Zamir] or [Rawson] may have withheld material information.

7.4.6 The Tribunal's acceptance of Rawson's case disavowing any overseas security assets, including its acceptance of the evidence of Andrew and Margaret

222. Fifthly , the Tribunal considered the Commissioner's expert evidence from the Israeli banking experts to the effect that Rawson's asserted loans were unlikely to have been provided by MDB unless it had security for the loans which it provided. It summarised Rawson's case denying the Commissioner's contentions to this effect as follows (at [141]):

[Rawson's] evidence denies the existence of any foreign asset to which MDB did resort, or could have resorted - either for the purpose of (i) being willing to co-operate in contriving the appearance of genuine loan transactions, or (ii) satisfying any relevant repayment obligations under the asserted loans. [Rawson's] evidence to that effect consists of (i) the extensive documentary evidence of the business and assets of many entities associated with [Erwin] (and to which I have referred in paragraph 11 above), (ii) the affidavit evidence of [Emil], [Erwin's] brother, (iii) the evidence given by [Erwin's] wife, and (iv) [Andrew's] evidence.

(Emphasis added.)

223. The Tribunal then turned to consider the evidence of these witnesses. In this regard, the Tribunal considered Emil's "disavowal of any overseas security asset" as "potentially significant" to the extent that that evidence was consistent with the evidence of Margaret and Andrew: Rawson (AAT) at [148]. In that regard, the Tribunal was of the view that Margaret's evidence that Erwin would have told her if he had any foreign assets was "compelling": Rawson (AAT) at [150]. The Tribunal also considered that there was "persuasive force" in Andrew's evidence of (among other things) his "disavowal of any knowledge of any assets that could have served as the postulated security asset for the contentious loans": Rawson (AAT) at [186]. It also accepted that Andrew's testimony was given honestly, including his evidence that, after the final payment to MDB, no information was conveyed to him by MDB suggesting that it had released any security (at [184] and [187]).

224. The Tribunal further considered the Commissioner's criticisms of Rawson's failure to attempt to enforce its right, under Israeli law, to compel MDB to produce relevant records of the contentious loans. The Tribunal, however, doubted that Rawson could reasonably have been expected to obtain any further material by way of formal demands of MDB given the totality of the evidence, including the objective evidence corroborating the movement of funds between MDB and Rawson, the evidence of Andrew's and Rawson's repeated enquiries of MDB between July 2009 and May 2011, and Andrew's evidence that Mr Zamir had told him that the original 1997 loan documents were likely to have been destroyed (at [195]-[196]). The Tribunal also found (at [196]) that "it would be wrong to conclude that [Rawson] refrained from making any formal demand on MDB because of any apprehension that further production by MDB would undermine its assertions about the reality of the loans, or the interest payments it claims to have made". It concluded on this issue (at [200]-[202]) that:

the real question to be decided is not whether there is a reasonable basis to suspect the likely existence of other loan related records in MDB's possession. Instead the more significant questions are whether (i) such additional documents as might reasonably be supposed to exist, or (ii) [Rawson's] failure to pursue their production by a more formal process, provide a basis for concluding that [Rawson] has failed to discharge its onus of proof in the present proceedings. I answer both of those questions in the negative. I do so for two main reasons.

The first reason is that I do not consider there is any real basis for concluding that either [Rawson], or any other [Erwin] related

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entity, ever had any overseas asset. (I have set out my reasoning for that conclusion in paragraphs 140 to 175.) I am satisfied therefore, that it is highly unlikely anything MDB might have produced, in response to even the most formal procedures invoked by [Rawson], would have disclosed the existence of such an asset .

The second reason is that even if I was of the view that [Rawson] had failed to discharge its onus of proof in establishing that no [Erwin] related entity had provided an overseas located asset as tangible security for the contentious loans, I am satisfied that [Rawson] has discharged its onus of establishing that [Rawson] itself did not provide any such security. It has discharged that onus because the recency of [Rawson's] incorporation, as at both June and December 1997, its inconsequential capital, its restricted business activities, and its contemporaneous tax returns and balance sheet for the years ended 30 June 1997 and 1998, combine to warrant the finding that [Rawson] had no meaningful assets or income at the time MDB granted its loans. In these circumstances any tangible security that MDB might have obtained for any of the contentious loans was not [Rawson's] own asset. Consequently the hypothesis of some kind of tangible security for the loans does not, in my opinion, cast any doubt on the reality and substance of the asserted loan transactions between [Rawson] and MDB.

(Emphasis added.)

225. (By contrast, it is now known that Rawson and the other Binetter family members and related entities did in fact have overseas assets and that Andrew's evidence to the contrary and as to his alleged efforts to obtain documents from MDB were false.)

7.4.7 The Tribunal's rejection of the Commissioner's "hypothesis" as to the existence of back-to-back arrangements and weight given to the evidence of Andrew and Margaret in so finding

226. Sixthly , the Tribunal addressed the Commissioner's submission that the absence of any evidence of security for the loans implies that there were in fact back-to-back arrangements which explain the fund transfers. The Tribunal considered that this "hypothesis" had to be assessed against the available evidence, finding that (at [226]-[228]):

The ultimate question remains whether on the available evidence, including any inferences that can and should be drawn from the absence of evidence that it was within [Rawson's] power to produce (and ignoring any question of the destruction or loss of relevant records) [Rawson] has satisfied the Tribunal of the reality of the contentious loans.

The answer to that question inevitably involves testing the hypothesis, of some other explanation for the contentious loans, against the available evidence. It is here, in my opinion, that the strength of [Rawson's] case lies. There is simply no evidence of any other kind of transaction. As the Commissioner's submissions implicitly accept, perhaps the most readily conceived possible explanation for the contentious loans is the existence of some other asset, located in Israel, to which MDB could have resorted. But not only is there no evidence of any such asset, I accept the evidence of [Andrew] and [Margaret], that they were not aware of any such asset. Their ignorance of any such asset is, to my mind, powerfully persuasive in justifying satisfaction that no such asset existed.

Similarly there is no evidence of any "back to back" arrangement . A difficulty in evaluating the possibility of such a transaction is that the Commissioner's submissions never gave the arrangement any particular form. Again I do not suggest that the Commissioner had any onus in that regard. But the practical reality is that it is unhelpfully facile merely to suggest the possibility of such an arrangement without articulating the rational process by which the possibility might be properly assessed . In the present case the Commissioner's submissions gave the example of "utilising letters of credit between banks" - implicitly suggesting that this clothed the possibility with a form capable of meaningful assessment. But I do not accept that suggestion. I assume the

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hypothesis contemplated by this example is that some other bank might have provided MDB with an enforceable undertaking that it would put it in funds to either facilitate the 1997 fund transfers or to reimburse it after they had been made, in the event of default. But the example merely prompts the questions (i) which bank would, or did do this, (ii) is it likely that the unnamed bank would undertake such a liability to MDB, without first securing a right of recourse against [Rawson] (or perhaps some other entity associated with [Erwin]) and (iv) in what circumstances would any entity associated with [Erwin] contemplate undertaking such a liability to the unnamed bank, when the liability seems to have contemplated interest payments that [Rawson]would remit to MDB in Israel.

(Emphasis added.)

227. The Tribunal concluded that (at [230]-[231]):

Once it is fleshed out, the hypothesised example suggested by the Commissioner is nothing more than a conceivable possibility. But it is not one that has any evidentiary foundation. There is simply no evidence that [Rawson] had any dealings with any banking institution anywhere that are in any way actually relevant to the contentious loan transactions. Moreover I am unable to articulate to my own satisfaction, and nothing anywhere in the Commissioner's submissions attempted to articulate, a scenario where any kind of suppositious dealings with other banks could both contradict the objective evidence tending to show the reality of the contentious loans, and be consistent with acceptance of the evidence (i) that [Rawson] had no asset that was capable of having been used as any kind of security for the loans, and (ii) that neither [Andrew] nor [Margaret] were aware of any relevant asset.

Notwithstanding the Commissioner's various submissions, [Rawson's] evidence satisfies me that it had no asset, nor did it ever assume any liability, consistent with any kind of "back to back" arrangement. Consequently, whilst I do not consider that [Rawson's] evidence had to go so far as positively disproving even the possibility of such an arrangement, I am satisfied that [Rawson's] evidence does discharge its onus of proving that the contentious loans were real and that its asserted liabilities for repayment and interest reflect the intended and enforceable reality of the transactions with MDB.

(Emphasis added.)

7.4.8 Summary of the Tribunal's conclusions

228. In short, the Tribunal considered that the "critical matter" for Rawson to establish was the "reality of the loan transactions and liabilities": Rawson (AAT) at [220]. The Tribunal made three critical findings of fact:

229. Underlying these findings was a series of subsidiary findings:

7.5 The s 44 appeal to the Federal Court

230. The Commissioner brought an appeal on a question of law, pursuant to s 44 of the AAT Act, from the Tribunal's decision to set aside the Commissioner's objection decisions. Edmonds J allowed that appeal on 17 July 2012: Rawson (FCA). His Honour observed (at [8]-[10]) that, "[a]t all times", Rawson contended that:

231. As his Honour also held at [11]-[13], the Tribunal accepted Rawson's case and therefore concluded that Rawson had discharged its onus of showing that the assessments or amended assessments were excessive in terms of s 14ZZK(b)(i) of TAA 53.

232. On the appeal, the Commissioner contended that the Tribunal had erred in reversing the onus borne by Rawson under s 14ZZK(b)(i) and that Rawson had not discharged the onus imposed upon it by that section in that it had failed to prove, on the balance of probabilities, that the assessments or amended assessments were excessive (Rawson (FCA) at [14]-[15]). That appeal was allowed by Edmonds J on the basis that:

7.6 The decision of the Full Court of the Federal Court

233. Rawson appealed to the Full Court of the Federal Court from the decision of Edmonds J: Rawson (FCAFC). As the Commissioner submitted before me, Rawson's case on its appeal to the Full Court proceeded in a largely similar manner to its case before the Tribunal. Specifically, and contrary to the decision of Edmonds J, Rawson sought to uphold the Tribunal's findings that the international funds transfers between Rawson and MDB were by way of loans (albeit that the question before the Full Court was whether those findings were open to make as a matter of law). As such, the Commissioner in the current proceeding contended that the fraud on the Tribunal perpetrated by Rawson was perpetuated by its challenge to the decision of Edmonds J setting aside the Tribunal's decision (T309.38-46).

234. As earlier explained, the Full Court unanimously allowed the appeal. For present purposes, the Full Court's reasoning may be summarised as follows.

235.

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First , the Full Court held that there was no legal error in the Tribunal's fact-finding process. In that regard, Jessup J held it to be "clear … that the Tribunal was conscious of the appellant's burden of proof under s 14ZZK of the Administration Act and undertook its fact-finding task accordingly" (at [71]). Relevantly, his Honour held that the Tribunal commenced its reasoning (at [70]):

by considering the evidence on which the appellant relied. Indirect though it was, that evidence reasonably provided a basis for the inference that the transfers were indeed loans. … I am disposed to view the totality of the reasons as involving a conventional fact-finding exercise, albeit a difficult one, in which the moving party was first required to establish the facts upon which its inferential case was based, and then the weaknesses in that case were investigated by reference to the evidence relied on, and the arguments advanced, by the responding party.

236. Jagot J (with whose reasons Nicholas J agreed) agreed that there was material before the Tribunal from which the existence of an obligation to repay could have been inferred (at [102]). Accordingly, her Honour considered that Edmonds J's references to there being "no evidence" to support the Tribunal findings of loans must be understood as there having been no "direct evidence" of the existence of any obligation to repay the funds (at [102]). That being so and given the material before the Tribunal from which the existence of an obligation to repay could have been inferred by the Tribunal, her Honour held at [103] that:

the relevant question of law cannot be that the Tribunal's finding of the existence of loans was based on no evidence or, worded another way, was not based on "some evidence".… In other words, irrespective of the commissioner's assertion in its notice of appeal that the "the Tribunal made findings of fact that were not supported by admissible, relevant or probative evidence" the Commissioner's case, in truth, was one of "suggested illogicality, or a faulty inferential reasoning". As such, the test for error of law is whether the material before the Tribunal could "give rise to different processes of reasoning and if logical or rational or reasonable minds might differ in the respect of the conclusions to be drawn from that evidence". If the material could do so then the Tribunal did not err in law. At worst the Tribunal made an unsound decision. An unsound decision, which is nevertheless justifiable, does not give rise to any question of law.

(Citations omitted)

237. Secondly , Jagot J held that the Tribunal did not rely upon the fact that MDB paid funds to Rawson (in three tranches) in 1997 as a fact which supported the character of those payments as loans (at [104]-[105]). On the contrary, her Honour found that "the Tribunal appreciated that the issue in dispute was the character of the funds transfers to Rawson and that the fact of the transfers was the predicate of the competing cases of Rawson and the Commissioner about that character" (at [105]). Her Honour thus concluded that the Tribunal did not use "the mere fact of the funds transfers as evidence supporting Rawson's, as opposed to the Commissioner's, case" (at [106]).

238. Thirdly , as concerned Rawson's burden of proof, her Honour found that the Tribunal rightly concluded at [220] of its reasons that Rawson did not have to prove the lack of overseas security or back-to-back arrangements (at [117]).

239. Fourthly , Jagot J held that the Commissioner's argument faced a conceptual "difficulty" (at [118]). Before the Full Court, the Commissioner had submitted that all of the evidence was "equally consistent" with his factual contentions and "tellingly inconsistent" with Rawson's factual contentions (at [119]). However, Jagot J held that arguments concerning the consistency and inconsistency of evidence involve considerations of the weight to be given to particular evidence, which were matters for the Tribunal alone to determine (at [118]-[119]). Her Honour held that, so long as the Tribunal "did not lose sight of the decision it had to make" and made conclusions that were reasonably open on the evidence, then it was "entitled to [weigh] the evidence as it saw fit" (at [119]).

240. Her Honour then held that, despite concerns about aspects of the

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Tribunal's decision, "there was material from which a justifiable, even if not sound, inference could be drawn that the funds transfers represented genuine loans" (at [119]). Her Honour expanded upon the last of these conclusions as follows in her reasons (at [120]-[124]):

For example, let it be assumed that all of the documents said to have been produced by MDB and by Rawson referring to the funds transfers as "loans" were, as the Commissioner put it, precisely the kind of documents that a person intent on executing some other form of arrangement not being a loan would bring into existence. On that assumption, made in favour of the Commissioner, those documents themselves could not rationally support an inference of the funds transfers having the character of a loan as opposed to the character of some other arrangement not being a loan. But the documents were not the only material before the Tribunal. The Tribunal also had before it unchallenged evidence that MDB was one of Israel's seven largest banks and wholly owned by Israel's third largest bank since 1993, the latter being a publicly listed company. Further, that all banks in Israel are licensed and supervised by the Bank of Israel including in respect of credit approval procedures which are supervised by the Bank of Israel via an audit process of compliance with mandatory guidelines. At [222] the Tribunal referred to evidence that MDB was a major and reputable Israeli bank. The Commissioner challenged this finding as not open on the evidence. Yet that finding plainly was open given the unchallenged evidence just described. MDB was clearly a major Israeli bank and an inference was open on the evidence that it was "reputable".

In addition to this evidence the Tribunal had before it the evidence of Andrew Binetter. True it is that, as the Commissioner stressed, Andrew Binetter was not involved in the establishment of the transactions between Rawson and MDB in 1997. But Andrew Binetter had been responsible for Rawson's affairs since 2004 including by way of what was said to be the final repayment of the alleged loans to MDB in 2009. Andrew Binetter was cross-examined. The Commissioner made submissions adverse to his credit (for example, as recorded by the Tribunal at [183]). The Tribunal rejected the attack on Andrew Binetter's credit at [187]. At [187] the Tribunal said:

Finally there is [Andrew Binetter's] evidence that, after the final payment to MDB, no information was conveyed to him by the bank suggesting that it had released any security following repayment of the loan. It is difficult to conceive a persuasive basis on which this, or the other evidence to which I have just referred, could be mistaken or relevantly unreliable. I accept that [Andrew Binetter] gave this evidence honestly. It is evidence which I regard, for the reasons I have principally alluded to in paragraphs 104, 105, 174 and 175, as persuasive of the reality of the asserted loan liability.

It may be accepted that Andrew Binetter's evidence, as accepted by the Tribunal, was not necessarily decisive of the ultimate issue. First, the Tribunal could have made a different credit finding. But credit, as is often said, is quintessentially a matter for the arbiter of fact. Second, the Tribunal could have seen the evidence as equivocal about the character of the funds transfers rather than persuasive of their character as loans. The relevant matter, however, is that reasonable and rational minds could differ about the relevance of Andrew Binetter's evidence. The Tribunal's process of reasoning was not necessarily sound, in the sense of what the primary judge clearly considered to be correct or preferable, but it was justifiable. It was reasoning from facts as found which a reasonable and rational person in the position of the Tribunal could engage in. Whether or not it led to the correct or preferable decision on the material is neither here nor there. That was a matter for the Tribunal alone provided its decision was reasonably open. Even on the basis of the status of MDB and the Andrew Binetter's evidence about repayment alone, the Tribunal's decision was reasonably open.

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In any event, there was other evidence which was rationally capable of supporting the Tribunal's decision. Again, this evidence did not necessarily lead to an outcome in Rawson's favour. Another Tribunal, differently constituted, could well have reached a different view about the facts the evidence permitted to be found and their relevance to the ultimate issue. But the facts as this Tribunal found and the inferences it drew based in part thereon were justifiable in the sense of reasonably open. Andrew Binetter, who had been involved in running Rawson's affairs since 2004, gave evidence that he had no knowledge of any offshore assets which might have served as security for the asserted loans. The Tribunal accepted this evidence (at [186]). The Tribunal's assessment of the relevance of Andrew Binetter's evidence at [176]-[187] was not irrational. It was not the assessment for which the Commissioner contended and no doubt a different assessment would also have been rational. But the assessment of the weight of the evidence was a matter for the Tribunal and it assessed Andrew Binetter's evidence as supporting a positive state of satisfaction that the burden of proof had been discharged.

There was also the evidence of Margaret Binetter, Erwin Binetter's wife. Margaret Binetter gave evidence and was cross-examined. Again, it readily may be acknowledged that it would have been rational for the Tribunal to have treated Margaret Binetter's evidence as having no real weight because she had effectively said that her husband did not discuss business issues with her. But she had been married to Erwin Binetter since 1954. She thought her husband would have told her of any overseas assets and she was not aware of any such assets. Just as it would have been rational to give this evidence little if any weight it also was rational for the Tribunal to consider it to be "compelling" (at [150]) especially given Erwin Binetter's deteriorating medical condition. The reasoning of the Tribunal, while not spelt out in terms is clear. If a life partner is old and declining it might be expected that one partner would disclose to the other (or, in the case of Andrew Binetter, to his son who was going to take over the responsibilities of the company) the existence of all assets including offshore assets. But Margaret Binetter and her son said they knew nothing about any offshore assets and the Tribunal, as it was entitled to do, believed them. This was a rational and hence justifiable process of reasoning.

241. For these reasons, Jagot J was satisfied that Rawson had established that the Tribunal's decision was reasonably open on the material before it, and thus allowed the appeal (at [125]).

8. NEW EVIDENCE ESTABLISHING THE FALSITY OF RAWSON'S INFERENTIAL CASE BASED ON THE BUSINESS PRACTICE OF RELATED BINETTER FAMILY ENTITIES

8.1 Introduction

242. It will be recalled that Rawson ran an inferential case before the Tribunal, contending that the Tribunal could infer that Rawson's loans from MDB followed the same business practice as other Binetter family entities: namely, that funds were borrowed by those entities (including BCI, Advance, Civic and EGL) on the basis of personal guarantees and lists of assets only. As I explain in this Part, the Commissioner commenced audits of each of these companies and Rawson in 2014 as part of "Project Wickenby" which investigated whether Australian taxpayers were returning profits earned abroad to Australia disguised as "loans" from overseas banks. Notices were issued in furtherance of those audits requiring documents to be produced and Andrew and others to attend examinations. Subsequently, as was also the case for Rawson, the Commissioner issued assessments disallowing the claimed deductions for interest and treating the "loans" as income for tax purposes. That led to the lodgement of objections by the various Binetter family entities and, when those objections were disallowed, Part IVC proceedings.

243. Against that background and at the risk of oversimplification, this Part establishes the following matters:

244. These issues are addressed in the remainder of this Part by examining each of Advance, Civic, BCI, and EGL save that the sequence of events which led to withdrawal of the Part IVC proceedings by each of these entities (referred to at (3) above) is separately addressed at the end of this Part. I also briefly consider the Commissioner's submissions with respect to Binqld and the GERM entities.

8.2 Advance

8.2.1 The new evidence in relation to Advance's "loan" from MDB

245. It will be recalled that Advance was set up by Erwin's brother, Emil, who was a director of Advance appointed on 21 April 1997 ceasing on 11 April 2011. Gary was appointed a director also on 21 April 1997. In the proceedings before me, the Commissioner relied upon various documents in relation to Advance obtained by the liquidators of Advance and Civic, together with the more extensive evidence obtained by the Commissioner in response to the letters of request with respect to Rawson. Importantly, in his examination pursuant to the letters of request, Mr Zamir explained that the Advance and Rawson loans and deposit accounts were, in effect, in lockstep. As Mr Zamir explained, "what [occurred in] one … was the other … there was such a kind of symmetry."[143] KDB Vol 1 Tab 3.1 ; Examination of Israel Zamir, 12 August 2020, T339.24-27. In this regard, it is significant that MDB provided a large volume of material concerning Advance in response to the Rawson letters of request. Further, as I later explain, summary documents prepared by MDB for its own use referred to Advance and Rawson as a "Finance group" and the "Belan Family Group", and summarised the financial arrangements of the two companies with MDB together in the same summary documents. As a further example, the MDB summary report dated 12 June 1997 identified the link between the arrangements for Advance and Rawson, stating that this "account related to account Advance Finance Pty Ltd". Plainly, MDB regarded the arrangements with respect to Advance as intrinsically connected to the arrangements with respect to Rawson. The fact that the Advance and Rawson transactions mirrored each other was also part of Rawson's business practice case before the Tribunal.

246. Documents obtained by the liquidators also revealed a link between a non-resident's deposit account (980188-351113), which secured three loan accounts in the name of Advance (being 971189-660019, 971189-660108 and 971189-660035) (the Advance loan accounts ).[144] KDB Vol 1 Tab 16 at pg 260. The documents

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show that MDB allowed the Binetters to use code names, and to sign documents using the code names, to open bank accounts and authorise transactions in relation to Advance, as was also the case with respect to Rawson.

247. The documents establish that the following key events occurred on 12 June 1997 when Gary was apparently in Tel Aviv, Israel, none of which were disclosed by the evidence in the Rawson (AAT) proceeding.

248. On 17 June 1997, Gary sent a note to Elie Septon at MDB in relation to the John Belan deposit account, advising that all

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correspondence should be sent to "John Belan"[159] SCB Vol 2 Tab 90 ; MDB Documents p 1063. c/o Mapledown Pty Ltd (about which there was no evidence) and an address (4/207 Old South Head Road, Bondi Junction) (the existence and relevance of which was not established). As I explain below, this address was also used in relation to Rawson, purportedly as the business address of "Belan Brothers Financial Services Investment Brokers", about which, again, there was no evidence[160] SCB Vol 7 Tab 721 ; MDB Documents p 485. .

249. On 8 July 1997, Emil, signing as David Belan, wrote to Mr Septon at MDB. In this letter, Emil referred to an arrangement in which AUD$4,000,000 was to be sent to Advance, with the remaining AUD$30,000 to be placed on the money market on a three monthly roll-over.[161] KDB Vol 1 Tab 20 ; TCA1-1 1/33/417. Yet Emil gave evidence in an affidavit relied on before the Tribunal in the Rawson (AAT) proceedings that he had "never made deposits overseas or had any other money in overseas banks or any assets overseas at all".[162] KDB Vol 4 Tab 162 ; TCA1-1 5/300/2799. The Commissioner submitted, and I agree, that his evidence is now shown to be clearly and knowingly false.[163] T65.19-20.

250. On 9 July 1997:

251. On 24 February 2000, Emil, on behalf of Advance, sent a letter to Mr Septon at MDB[166] KDB Vol 1 Tab 24; TCA1-1 1/68/490. in relation to Advance's loan and stated:

I request that any fiduciary investments that you hold on behalf of Advance Finances Pty Ltd should not be put on term deposits past 31 May 2000, but should be placed on daily call.

I shall be in Israel at the beginning of June and shall discuss further arrangements with you then.

I look forward to meeting you again soon.

(Emphasis added.)

This letter explicitly refers to a "fiduciary" investment being placed on deposit. As will become clear, the reference to a fiduciary deposit in the context of Advance was a reference to the deposit account which provided the security for the Advance loans, establishing that the Advance loans were also made pursuant to a back-to-back arrangement.

252. On 20 September 2000, an MDB summary in table format of the "Belan family group - Positions in thousands of Israeli Shekels" (Advance and Rawson) accounts reveals that Advance had a credit of "2,192" and securities of "2,192" (Israeli Shekels), with an open debt of "0"[167] SCB Vol 3 Tab 300 ; MDB Folder 2 p 747. . In the same table, Rawson's credit amount also matches its securities exactly, and equally had an open debt of "0".

253. On 16 March 2004, a handwritten note by "Eli Safdon" (presumably Elie Septon) recorded a meeting between Gary, Emil, Israel Zamir, and "Safdon, Eli" "[o]n the subject of Advance"[168] SCB Vol 5 Tab 513 ; MDB Folder 1 p 185. . The note records that:

Mr Binetter examined the status of his accounts, signed a money laundering statement and announced that he was interested in buying a property in Australia through the above company.

Mr Binetter announced that if he purchases the property, he would transfer a deposit in his name for the amount of $2.5 million Australian Dollars and will request a loan from the company for a similar amount.

Mr. Binetter has also requested to sign the loan forms which will only take effect if he forwards the deposit and purchases the property.

Mr. Binetter also asked to lower the interest rate to 6.5% on the loan and to receive 5.9% on the respective deposit.

254. Given that another letter dated 23 March 2004 (which I discuss next) relating to the same transaction is marked to Emil's attention, it is likely that the "Mr Binetter"

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referred to is Emil. The meeting record suggests that it was Emil who proposed the loan structure where MDB would "lend" Advance approximately AUD$2.5m after he placed a corresponding amount on deposit with MDB. That record is also evidence of Emil, as opposed to MDB, proposing the interest rates for the loan and the deposit, so as to maintain a 0.6% margin between the deposit and loan accounts. As I later explain, by reason of the back-to-back arrangement, the 0.6% margin represented the true price of the loan. Plainly in this regard the deposit and the loan accounts were inextricably linked. In line with other evidence, it is clear that the loan was reliant upon the maintenance of a deposit account in the same amount and in the same currency for the life of the loan. The transaction demonstrates that, in circumstances where Emil already had the $2.5m for the purchase of the property in Australia, there was no apparent legitimate purpose to be served by depositing that amount as security for a loan with MDB in the same amount before transferring the "loan" monies to Australia in order to purchase the property. Such evidence illustrates the fundamental flaw in Rawson's ambitious submission that evidence of the back-to-back arrangements would only have reinforced the Tribunal's alleged finding that the loans were genuine.

255. In accordance with Emil's decision to purchase the property, a letter was purportedly sent from MDB addressed to Advance (for the attention of Emil, Director), bearing the date 23 March 2004, allegedly confirming the agreement between Advance and MDB[169] KDB Vol 1 Tab 32; TCA1-1 1/89/535. . The typed document states that:

This letter is to confirm the agreement between the Mercantile Discount Bank Ltd and [Advance].

Advance Finances Pty Limited agreed that from 27 May 2004 the existing loan of AUD1,000,000 (one million Australian Dollars) will be amalgamated with an additional loan of AUD2,500,000 (two million, five hundred thousand Australian dollars) at an interest rate of 6% p.a. (including Australian Withholding Tax) provided that the interest on these amounts is paid on or before the due date (that is to say, 30 June and 31 December each year). That is to say, Advance. Finances Pty Ltd will pay Israel Discount Bank Ltd 5.4% interest and Withholding Tax in Australia, when interest is paid on time.

We note that the above facility relates to the loan by your company to Ligon 159 Pty Ltd.

All the aforesaid is in accordance with the abovementioned loan documents signed by you and in any instance the loan documents will prevail.

256. However, at the top of the document, some handwriting (unsigned but I infer written by Emil) states:

Dear Mr Zamir & Mr Septon,

Kindly have this re-typed on MDB letterhead (as it is, including the date) and post it to us at the address below.

Thank you!

257. Significantly, while the letter itself conspicuously omits any reference to any back-to-back deposit account, further down the page, there is a handwritten note in Hebrew which, when translated, states "[t]his is a back to back loan with a margin of 0.6 between the deposit and the loan". The letter is stamped by MDB as received on an illegible date in 2004. The handwriting at the top of the page makes clear that it was Emil, rather than MDB, who drafted this letter at first instance dictating the terms of the loan for Advance. The meeting that took place on 16 March 2004 is also evidence that it was Emil who decided to set the interest rate at 6% per annum. This accords with other evidence of a business practice applied in connection with Rawson whereby Rawson determined the interest rates on the loan and linked deposit account rather than MDB, subject to ensuring that MDB received its negotiated margin between the loan and the deposit accounts as the price of the transaction. The handwriting in Hebrew on the letter appears to be a note by an officer of MDB and is further evidence of the existence of Advance's back-to-back loan.

258. The Commissioner submits that this evidence demonstrates an attempt by Emil to create the perception of a 'clean' documentary trail which did not require recourse to bank records and, on its face, could be relied

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upon to prove the existence of a genuine loan[170] T140.4-11 (Hearing Day 2 on 15 September 2020). . If this evidence were assessed independently, I would not consider that an adequate basis had been established for the drawing of the inference for which the Commissioner contends. However, when taken together with other evidence, and in particular the use of the code names in relation to the deposit accounts for Advance and Rawson, it is clear that steps were taken from the outset to conceal the existence of the back-to-back deposit accounts for those "loans" with MDB, given that there was always a risk that these arrangements might attract the attention of the ATO. In that context, and given that the letter discloses only half of the transaction which supports the claimed deductions and not the other half of the transaction being the back-to-back deposit which undermines it, I agree with the Commissioner that the letter was generated as part of an attempt to create such a 'clean' documentary trail.

259. On 14 June 2004, another summary of "Rawson Finance & Advance Finance group - Positions in thousands of Israeli Shekels" financial position, in table format in thousands of Israeli shekels, reveals that Advance had a credit of "0" and securities of "0", with an open debt of "0", while Rawson had a credit of "5,350" and securities of "5,350" with an open debt of "0"[171] SCB Vol 5 Tab 530 ; MDB Folder 3 p 908. . In the same table, both Advance's and Rawson's credit amounts continue to match their securities exactly.

260. On 21 June 2004, Mr Zamir issued a handwritten letter to "the person in charge of fulfilling obligations under the Prohibition of Money Laundering Law" regarding a loan provided to Advance, notifying that the transaction of AUD$2,500,000 was performed in accordance with instructions provided by Gary, as manager of Advance, and that as part of the transaction, Advance had received a loan of AUD$2,500,000 with an interest rate of 6.5%. The letter states that at the same time, a deposit of AUD$2,500,000 in the name of Emil was deposited with interest of 5.9%[172] SCB Vol 5 Tab 532 ; MDB Folder 1 p 205-206. .

261. From May to July 2005, Advance paid off its "loan" to MDB. The sequence of events occurred as follows:

262. These documents establish that Advance repaid its "loan" to MDB on 10 June 2005. The approximate amount of the loan was then transferred to an account with IDB, with instructions to remit the funds to a UBS account in Switzerland held by Emil.

8.2.2 The Advance audit and preparation of draft correspondence to be sent by the Israeli banks to misrepresent the so-called loan arrangements

263. On 16 April 2007, the Commissioner issued a s 264 notice to Emil Binetter in relation to Advance, Civic, Ligon 159 Pty Ltd and Milgerd Nominees Pty Ltd[182] KDB Vol 2 Tab 58 . . Schedule A to that notice contained a list of questions for each entity. On 27 April 2007, Emil was interviewed[183] KDB Vol 2 Tab 59. and also provided written responses[184] KDB Vol 2 Tab 60. pursuant to that notice. In written responses to questions in Schedule A about whether Advance had any international dealings, overseas interests or significant assets in Australia or overseas (Questions 6, 7 and 8), Emil simply referred to his first answer which stated "Company was deregistered on 26 November 2006. Company discharged all of its' [sic] liabilities". There was, notably, no reference to the John Belan deposit accounts.

264. On 7 November 2007, the Commissioner commenced an audit into Advance by issuing an offshore information notice pursuant to s 264A of the ITAA 36[185] KDB Vol 2 Tab 80 . The s 264A notice required the production of a number of documents, namely:

265. On 14 November 2007, Mr Douglass from MDA Lawyers sent a memorandum to Michael referring to the s 264A notices sent to all of the Binetter family entities including Advance, BCI, Civic, EGL and Rawson, stating that:[186] KDB Vol 2 Tab 85 .

As discussed with you earlier today I am of the opinion that these notices have been issued as a precursor to the issue of amended assessments to each entity to deny deductions claimed for interest (amongst other things) where applicable.

Given the very serious implications of these notices in the assessment/appeal process you

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Andrew and I should meet very soon to discuss a range of matters that need to be considered including both immediate responses and longer term strategies in connection with the documents that the ATO seeks in relation to the various loans from the Israeli banks.

266. On 30 November 2007, Mr Douglass sent a letter to the Commissioner in relation to the s 264A notice issued to Advance[187] KDB Vol 2 Tab 87. . Among other things, Mr Douglass wrote that "[o]ur client is endeavouring to comply with the Notice by actively seeking to obtain the documents which are required by the Notice", and asked the Commissioner to withdraw the notice or alternatively grant Advance an extension of 90 days within which to comply. Mr Douglass further wrote that:

The service of a notice of this kind has placed our client in an invidious position whereby unless it can obtain the documents to comply with the Notice, it may lose the right to use the documents covered by the Notice in subsequent proceedings to challenge any assessment which you may issue …

267. (I note that in oral submissions, the Commissioner pointed to the irony of this response, given that Advance would not have been able to challenge the assessment if the documents covered by the notice had in fact been produced.)

268. On 18 December 2007, the Commissioner wrote to Emil in relation to the s 264A notices sent to Advance and Civic, responding to Advance's request for details on the basis of which the decision was made to issue the s 264A notices[188] KDB Vol 2 Tab 90. . In the letter, the Commissioner referred to the ATO's focus in respect of "Project Wickenby" to act on information suggesting individuals had entered into offshore schemes directed at creating fictitious deductions or concealing income from tax. The Commissioner explained that the audits on the Binetter family entities had been commenced as part of Project Wickenby. The letter also stated that the written responses provided in Advance's response to the s 264 notices, as described above, were "not satisfactory" as they did not provide any specific details or documentation. Similar letters were sent by the Commissioner in relation to the other Binetter family entities, including Rawson, regarding the inadequacy also of their responses to the s 264A notices issued to them, as I later explain.

269. On 19 December 2007, a file note records a meeting between Michael, Andrew, Mr Douglass and another in relation to "letters from banks to Binetters"[189] KDB Vol 2 Tab 91 ; TCA1-2 Volume 5 Page 2567. . While this document was admitted only as evidence of the fact that the meeting took place and who attended the meeting, the parties agreed, in the agreed chronology, that at this meeting, "Mr Douglass was instructed to prepare letters from Israeli banks in relation to advances made to the Binetter entities". As such, this was ultimately not a matter in dispute.

270. On 20 December 2007, Mr Douglass of MDA Lawyers sent a letter to Andrew, c/o Michael, in relation to "Binetter family + related entities".[190] KDB Vol 2 Tab 93 ; TCA1-2 Volume 5 Page 2569. The letter enclosed (among other documents) a number of draft letters to be inserted onto the letterheads of MDB, IDB and Bank Hapoalim purporting to confirm the loan arrangements of relevant Binetter family entities (Advance, Civic, EGL and Binqld), together with a schedule of tables to be inserted into draft letters on the letterheads of IDB, Bank Hapoalim and MDB as applicable, namely:

271. Tables addressing the same matters were also included for Rawson to be inserted into letters on the letterhead of MDB, and for BCI to be inserted into letters on the letterhead of Bank Hapoalim.

272. The covering letter from Mr Douglass also stated that[191] KDB Vol 2 Tab 93; TCA1-2 Volume 5 Page 2569. :

Please note that the above draft letters should be considered to be a "first-cut" working draft of our suggested inclusions for your consideration and by no means is settled.

We note that we are very concerned that if identical letters are sent to the ATO from the

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respective banks that this will serve to heighten rather than allay the suspicions of the ATO. It may therefore be prudent to amend the letters so that they are structurally and linguistically different to ensure that suspicions of this nature do not arise.

Would you please review the enclosed documents and provide us with your further instructions.

273. The draft letter relating to Advance was dated 20 December 2007 and addressed to the Director, Advance. It stated that it was to be placed "on the letterhead of Mercantile Discount Bank", purported to confirm that MDB provided a loan of AUD$2.5million to Advance on 30 June 2004, and stated that:

MDB has held a long standing banking relationship with [Advance]. The foundation of MDB's relationship with the customer is derived from the personal relationship developed with the Binetter Family and, in particular, Mr Erwin Binetter and Mr Emil Binetter. …

MDB has been involved in financing some of the business operations of the two brothers for many years through formal loans with various companies through which they conducted their business or investment interests in Australia.

The loan funds have been advanced at various times on the MDB's prevailing commercial terms and either with or without additional security. However, all have been based upon personal guarantees secured by the MDB with Mr Erwin Binetter or Mr Emil Binetter.

274. It further claimed that "the amounts remitted to [MDB] constitute interest amounts incurred by" Advance.

275. As later explained, the other draft letters were in essentially the same terms and also contain similar misrepresentations as to true nature of the arrangements between the Binetter family entities and the Israeli banks.

276. It can safely be inferred that Mr Douglass was acting on instructions in preparing the draft correspondence for Andrew to review. The fact that the covering letter from Mr Douglass asks Andrew to "review" the draft correspondence and provide " further instructions" confirms this inference (emphasis added). This evidence demonstrates a blatant attempt by Mr Douglass on Andrew's instructions to deliberately mislead the Commissioner as to the true nature of the arrangements between the Binetter family entities with the Israeli banks, so as to conceal the underlying documents which would reveal the existence of the back-to-back deposit, in the context of: s 264A notices seeking information precisely of this kind in relation to each Binetter entity; and the concerns about possible back-to-back arrangements identified by the Commissioner in correspondence with the Binetter family entities.

8.2.3 The impact of the new evidence in relation to Advance on Rawson's business practice case

277. The key evidence in relation to Advance, which I have outlined above, unequivocally establishes the existence of back-to-back loans for Advance. As I later explain, once this new material emerged, the advice received from the Binetters' legal advisors was to discontinue the Advance proceedings on the basis that it was not possible to discharge the onus that the taxation assessments were excessive. As the example of Advance's "loan" to purchase property in Australia against a deposit in the same amount illustrates, it is difficult to conceive of any legitimate explanation that could be given for the back-to-back deposit arrangements and the efforts taken by Emil to conceal those arrangements only confirm the importance that he attached to so doing.

278. The new evidence has significant implications for the current proceeding against Rawson. Not only does the evidence undermine Rawson's "business practice" submission, it also directly contradicts crucial pieces of evidence given in the Rawson (AAT) proceedings.

279. Specifically, it is now apparent that significant sections of Emil Binetter's affidavit affirmed on 6 October 2010 in the Rawson (AAT) proceedings[192] KDB Vol 4 Tab 148; TCA1-1 5/283/2396. were intentionally false or misleading, in that Emil failed to refer to any cash deposit securing the Advance loans. Emil falsely deposed that Advance's loan was secured only by a personal guarantee from

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him. In this regard, he described a conversation with Mr Septon in his 6 October 2010 affidavit as follows (at [262]-[265]):

262. In 1997, I went to Israel to see Mr Elie Septon a manager at Mercantile Discount Bank and I had a conversation with Mr Septon in Israel in words to the following effect:

"My company Advance would like to have some money, a loan from the bank. … Advance would like to borrow 4 million Australian Dollars, if you can agree then I would to talk about the conditions of the loan."

…

Mr Septon then said words to the effect:

"What assets do Advance and related entities have and how will Advance pay the loan?"

I said words to the effect:

"The related entities have properties and repayment will come from the rent from those properties and once the building work at the shopping centre is finished the big tenant be paying a much higher rent. I can send you a copy of the list of assets."

I also said words to the effect:

"What will the interest rate be?"

263. I remember there was a discussion about the interest rate and Mr Septon wanted a high interest rate, and we discussed it and then Mr Septon said words to the effect:

"Okay, the interest rate can be 8.298%. The interest rate is after any withholding tax you have to pay in Australia and that is your responsibility. Advance needs to pay it every six months. If interest is late you need to pay another 1% for each month it is late"

…

264. We then discussed how the money was going be secured.

265. I said words to the effect:

"I will give you a guarantee, so you can be sure that Advance will pay your money back."

Mr Septon said words to the effect:

"Okay."

280. In this regard, Mr Septon gave evidence at his examination about paragraph 263 of his affidavit. Mr Septon stated that the 1% charged for late payment was "the exceptional interest rate… If he deviates from the loan, in the repayment of the loan. This is arrears interest." However, he confirmed that Advance "did not deviate. They always worked the right way. They had no deviation."[193] Transcript of examination of Elie Septon on 26 July 2020 at T32.3-19.

281. The new material also contradicts Emil's evidence in relation to an additional borrowing of AUD$2.5 million in 2004 (Emil's 6 October 2010 affidavit at [358]-[364]):

358. I then decided I had to go to see Mercantile Discount Bank and talk to them to see if they could lend me the money to help pay back Bank Hapoalim.

359. In 2004, Advance wanted to borrow additional money.

…

361. Gary and I went to see Mr Elie Septon at Mercantile Discount Bank. I said to Mr Septon words to the effect:

"Advance would like to borrow another $2.5 million for a short time."

Mr Septon said words to the effect:

"What is a short time?"

I said words to the effect:

"About a year".

…

363. Mr Septon said words to the effect:

"Sure no problem".

364. Gary and I then saw Mrs Sadka (who was Mr Israel Zamir's assistant) at Mercantile Discount Bank, who gave us some documents to sign.

282. These new documents further establish the falsity of the evidence given by Emil in his affidavit affirmed on 29 November 2010[194] KDB Vol 4 Tab 162; TCA1-1 5/300/2799. where (as I have earlier quoted) he stated at [2] and [3]:

I have never made any deposits overseas or had any other money in overseas banks or any assets overseas at all which were used as

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security for any of the loans from the Israeli banks.

I have been told what a "back to back" loan is and I think this is what the ATO think has happened. However, I have never had this sort of loan using Israeli banks or any other bank overseas.

283. Emil's two affidavits were relied upon by Rawson in the Rawson (AAT) proceeding in support of its "business practice" submission. Neither Gary nor Emil produced any information or documents pertaining to Advance's back-to-back loan. Contrary to the real state of affairs, as revealed by the new documentary evidence, Emil did not refer to the John Belan deposit account, or to the fact that he was also known by the code name of David Belan. The evidence by him that there were no such deposits makes it clear that the decision not to refer to the deposit could only have been deliberate and intended to conceal the true state of affairs, given the fact that disclosure of the back-to-back arrangement would almost certainly have undermined any chance that Advance had of challenging the assessments.

284. The new evidence also contradicts Rawson's opening written submissions in the Tribunal dated 9 May 2011. The submissions state (at [21(h)]) that "in 1997 Emil set up a company called Advance Finances Pty Ltd to borrow money from Mercantile Discount Bank and Erwin set up the company Rawson to borrow money from Mercantile Discount Bank. Advance borrowed money from Mercantile Discount Bank and provided list of assets and guarantees as security for the loan"[195] KDB Vol 5 Tab 187 ; TCA1-1 6/334/3076. . As the Commissioner submitted, this is self-evidently misleading and deliberately so because there is no reference to the back-to-back loan securing the transfer of money to Australia from MDB by way of the alleged loan.

285. Finally, Mr Septon admitted unequivocally in his examination pursuant to the letters of request that the Advance loans were secured by deposits (at T40.3-6):[196] KDB Vol 1 Tab 2 ; Examination of Elie Septon, 26 July 2020, T40.3-6.

Adv. Heskia: And do you remember enough to say whether Advance also has deposits against loans?

Mr. Septon: Advance's credit line approval is against deposits. Yes [t]he credit line approval is against deposits.

8.3 Civic

8.3.1 The new evidence in relation to Civic's "loan" from IDB

286. It will be recalled that Civic was incorporated on 17 May 1999 by Gary Binetter. In the Civic proceedings against the Commissioner (Tribunal Ref No. 2012/2921-2926), Civic alleged that it had borrowed AUD$5 million from IDB on or about 25 May 1999 (Civic's SFIC at [16]) and a further AUD$3.69 million on or about 27 May 2004 (Civic's SFIC at [22]). It further contended that both loans were secured by way of personal guarantees given by Emil to IDB (Civic's SFIC at [17] and [23]).[197] KDB Vol 7 Tab 235; TCA1-1 9/414/5500.

287. However, the documents provided to the Commissioner by the liquidators of Advance and Civic paint an entirely different picture of Civic's real state of affairs.

288. On 25 May 1999, the following events occurred:

289. On 16 March 2004 in Tel Aviv, Emil and Gary signed a "[l]etter of stipulation, guarantee, assignment, pledge and charge of monies and rights (given not by the borrower or debtor but by another customer securing all debts of the borrower or debtor) in Israeli currency and foreign currency accounts" in respect of Civic's account with IDB[201] KDB Vol 1 Tab 28 ; TCA1-1 1/85/524. . Civic's customer account number (791628) is the guarantor "account holder", whereas the customer "borrower or debtor" is Civic's borrower's deposit account (955159). By that letter, Emil and Gary charged and pledged to IDB's credit and benefit the amount in the accounts as set forth in the books of IDB and added to in the future "[a]s security for the full and exact payment of all of the secured amounts" (at [4]). They agreed that IDB's obligation to pay the amount in the account to them or in accordance with their instructions "ceased to be a customary obligation of the Bank towards a customer or depositor" (at [6B]) and that IDB had a banker's lien and right of set off with respect to the amount in the account (at [7B]).

290. On 18 March 2004, Gary and Emil executed an application for a "medium/long term deposit in foreign currency for a non-resident" in relation to "Non-Resident account No. 791628", at a fixed interest rate of 5.40% per annum[202] KDB Vol 1 Tab 29 ; TCA1-1 1/86/528. .

291. On 19 March 2004, Gary and Emil executed a "[f]ramework instrument for the creation of an approved deposit for the grant of loans in foreign currency"[203] KDB Vol 1 Tab 30; TCA1-1 1/87/530. . Under the heading, "particulars of the depositor customer (hereinafter 'the lender')", customer account number 791628 is provided. The borrower is identified as Civic, the "deposit account number" identified is 852-791628, and the "Borrower's Deposit Account No." is identified as 955159 being the accounts created by Emil on 25 May 1999. The framework instrument records that the deposit period for the amount of AUD$3,690,000 was for 5 years, with interest on the deposit stated as 5.4% and interest on the loan at 6% per annum. It follows that, as in the case of Rawson and Civic, IDB charged a margin again of 0.6% for the cost of the back-to-back arrangement. It also stated that IDB shall in its discretion "grant loans in the deposit currency against the deposit " to referred borrowers (at [1.1], emphasis added) and that "the amount of the balance of the loans shall not exceed the balance of the deposit monies less an appropriate safety margin in the Bank's sole discretion" (at [1.4], emphasis added).

292. An unsigned letter bearing the date 19 March 2004 was purportedly sent from IDB to Civic, for the attention of Emil, confirming the agreement between Civic and IDB.[204] KDB Vol 1 Tab 31; TCA1-1 1/88/534. The letter stated that:

This letter is to confirm agreement between the Israeli Discount Bank Ltd and your company.

Civic Finances Pty Ltd agreed that from 27 May 2004 interest of 6.00% p.a. (including Australian Withholding Tax) will be paid on the existing loan of AUD1,000,000 (one million Australian Dollars) and an additional loan amount of AUD3,690,000 (three million, six hundred and ninety thousand Australian dollars), provided that the interest on these amounts is paid on or before the due date (that is to say, 30 June and 31 December each year).

Civic Finances Pty Ltd will pay Israel Discount Bank 5.40% p.a.Civic Finances will pay the Withholding Tax of 0.60% due in Australia.

We note that the above facility relates to the loan by your Company to Ligon 159 Pty Ltd.

This confirms the content of the loan documents signed by you. However, in any

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event, the loan documents will always prevail.

293. At the top of the document, in handwriting (presumably written by Emil), it stated:

Dear Hagai [Peled],

Kindly have this re-typed on IDB letterhead (as it is, including the date) and post it to us at the address below. Thank you!

294. The handwritten note makes it clear that the note was a draft and intended to be sent by IDB on its letterhead. The reference to Hagai is a reference to Hagai Peled at IDB who was involved in the management of Civic's accounts. As I have earlier discussed, a similar letter was sent in relation to Advance on 23 March 2004[205] KDB Vol 1 Tab 32. , with respect to which I found that the evidence established that this was an attempt by Emil (or someone else at his direction) to create the perception of a 'clean' documentary trail which, on its face, would suggest that Civic had taken out a genuine loan with IDB.

295. On 20 May 2004, a SWIFT record shows a transfer of AUD$3,690,000 marked to "ATTENTION HAGAI PELED 791628"[206] KDB Vol 1 Tab 33 ; TCA1-2 5/2305. being a reference to Civic's customer number. The sender is a UBS account in Zurich, Switzerland and the ordering customer is identified as the "Batorove Kesy Foundation". While the Commissioner did not point to evidence before me suggesting that the Batorove Kesy foundation in fact exists, it was not in issue that Erwin and Emil Binetter's father, Michael Binetter, was born in Bátorove Kosihy, Slovakia, on 8 July 1887. Bátorove Kosihy is also known as Bátorove Kesy, and therefore the name can be linked to the Binetter family. The SWIFT record of the transfer of funds also corresponds with Civic's contention in its SFIC that on or about 27 May 2004, it obtained a further loan from IDB in the amount of AUD$3.69 million, although Civic's SFIC alleged that the additional loan was "secured by way of the personal guarantee given to IDB by Emil Binetter" (at [23])[207] KDB Vol 7 Tab 235; TCA1-1 9/414/5500 [22]; see also, KDB Vol 4 Tab 148; TCA1-1 5/283/2396 [368] (affidavit of Emil Binetter 6 October 2011). .

296. Civic purportedly repaid its "loan" on 27 June 2005[208] CB Vol 30 Tab 1398 ; TCA6-2 12/24A/6823. .

8.3.2 The Civic audit and preparation of draft correspondence to be sent by the Israeli banks to misrepresent the so-called loan arrangements

297. On 7 November 2007, the Commissioner commenced an audit into Civic by issuing an offshore information notice pursuant to s 264A of the ITAA 36[209] KDB Vol 2 Tab 79 . , which, save for referring to Civic, was expressed in the same terms as the s 264A notice issued to Advance.

298. I have already explained that on 14 November 2007, Mr Douglass of MDA Lawyers sent a memorandum to Michael referring to the "very serious implications" of the s 264A notices including to Civic.

299. On 30 November 2007, Mr Douglass sent a letter to the Commissioner in relation to the s 264A notice issued to Civic[210] KDB Vol 2 Tab 86 . . In common with the letter for Advance, this letter stated that "[o]ur client is endeavouring to comply with the Notice by actively seeking to obtain the documents which are required by the Notice", and made a request for the Commissioner to withdraw the notice or alternatively to grant an extension of 90 days within which to comply with the notice.

300. On 14 December 2007, Mr Douglass sent a further letter to the Commissioner in relation to the s 264A notice issued to Civic[211] KDB Vol 2 Tab 88 . , reiterating that "[a]s stated in our previous correspondence our client is 'actively seeking to obtain the documents which are required by the Notice'".

301. As I have previously found:

302. One of the documents attached to Mr Douglass' 20 December 2007 letter is described as a "[d]raft letter on the letterhead of Israel Discount Bank which relates to Civic … and EGL". This document is purportedly also dated 20 December 2007 and includes a placeholder for "the letterhead of Israeli Discount Bank". It states:

IDB has held a long standing banking relationship with each of the companies named above. The foundation of IDB's relationship with the customer is derived from the personal relationship developed with the Binetter Family and, in particular, Mr Erwin Binetter and Mr Emil Binetter. The Banking relationship commenced in approximately [## to be inserted ##] .

…

The loan funds have been advanced at various times on IDB's prevailing commercial terms and either with or without additional security. However, all loans have been based upon personal undertakings secured by IDB with either one or both of Mr Erwin Binetter and Mr Emil Binetter.

IDB has throughout the period of its lengthy dealings with the borrower company, related to the Binetter Family, placed utmost reliance upon the personal relationship with members of the Binetter Family.

(Emphasis in original.)

303. The document then purports to confirm that amounts set out in "Table A" describes loan funds remitted by IDB to the borrower companies, EGL and Civic, and amounts said to constitute interest received by IDB from the borrower companies.

304. There is also an earlier, shorter draft of the above letter which includes handwritten notations[214] KDB Vol 2 Tab 92. . At the top of the page, "MB" (which I infer is a reference to Michael Binetter) annotated in handwriting "[s]ee later version".

305. The later and unsigned version of that letter with respect to Civic was produced on IDB's letterhead and is dated 22 February 2009[215] KDB Vol 2 Tab 95. . The letter purported to confirm that all loan funds (principal and interest) were repaid to IDB on 27 June 2005, and stated that:

The loan funds which have been, granted by IDB, upon commercial terms, having regard to IDB's view of the circumstances at the relevant time. All loans have been supported by the personal guarantees obtained by IDB from Mr. Emil Binetter and Milgerd Nominees Pty Limited.

IDB has throughout the period of its dealings with the Company, placed utmost reliance upon the personal obligations of Mr. Emil Binetter. The terms governing the loans by IDB to the Company have been varied from time to time and the personal undertakings given by Mr. Emil Binetter have always been met.

306. A final, signed letter dated 2 March 2009 in substantially similar terms sent from IDB to the Directors of Civic, c/o Emil, was annexed to a letter to the Commissioner on 8 July 2009 sent by Mark Douglass (then principal of Argyle Lawyers).[216] KDB Vol 2 Tab 97 . The covering letter stated:

As previously indicated to you our clients have been making continuous endeavours to obtain loan documentation in respect of certain overseas loan facilities. As a result of a recent trip to Israel Our Client has been able to obtain documentation from the Israel Discount Bank (IDB). In this regard, please find enclosed self-explanatory loan documentation.

You will no doubt glean from the enclosed documentation that the loan arrangements are precisely as are [sic] client has represented to you and are now confirmed, in writing, by IDB.

Please note that the enclosed represents the balance of documentation held by the IDB in respect of the loans for the above entity. We are instructed that there is no further documentation held by the IDB in respect of these loans .

(Emphasis added.)

8.3.3 The impact of the new evidence in relation to Civic on Rawson's business practice case

307. The new evidence discussed above establishes the existence of back-to-back loans

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for Civic, contrary to the business practice case put by Rawson in the Rawson (AAT) proceeding. As I later explain, once this new evidence emerged, the advice received from the Binetters' legal advisors was to discontinue the Civic proceedings on the basis that it was not possible to discharge the onus that the taxation assessments were excessive[217] CB Vol 15 Tabs 894 and 895. .

308. First, these documents contradict the evidence of Emil Binetter, in his affidavit affirmed on 6 October 2010 in the Rawson (AAT) proceedings. In that affidavit, he deposed (at [301]-[305]) that he had discussions with Miriam Cohen of IDB in relation to Civic's loan and "maybe guarantees"[218] KDB Vol 4 Tab 148 ; TCA1-1 5/283/2396 [304]. . Emil further deposed that:

302. In early to mid 1999, I went to see Mrs Miriam Cohen at Israel Discount Bank in Israel. I was known to Israel Discount Bank through my involvement with EGL, which my brother was also a director of, which had previously borrowed money from Israel Discount Bank. Mrs Cohen was a manager at Israel Discount Bank. At the meeting with Mrs Cohen, I said words to the effect:

"I would like to separate the account of EGL. I want my companies' share of the loan that EGL has got from your bank separate from my brother's companies' share of the loan."

…

"My new company will borrow and it will pay it straight back to you. It will only need the loan for a short time, maybe a year and then I will pay it all back."

Mrs Cohen said words to the effect:

"All okay. The interest will be 7.2% plus withholding tax."

…

304. Mrs Cohen gave me some documents to sign, including a loan application and maybe guarantees. … The loan application sets out the terms of the loan and I believe was partially completed by Mrs Cohen who wrote some details on the application form including the amount and the currency of the loan, the term, the interest repayment period, and the interest rate (" the Civic Loan ").

$5 million lent by Israel Discount Bank to Civic and then on lent to Ligon 159 as trustee of the EBC Investment Trust

305. On about 16 June 1999, Israel Discount Bank lent Civic $5 million. Civic followed the terms of the Civic Loan and paid interest at a rate of 7.2% plus withholding tax.

309. In this affidavit, Emil further deposed in relation to an additional borrowing of AUD$3.69 million in 2004:

Civic borrows a further $3,690,000 from Israel Discount Bank

365. In the afternoon, Gary and I then went to see Mrs Fernanda Barisaac, Manager at Israel Discount Bank (who was Mrs Cohen's replacement). I said to Mrs Barisaac words to the effect:

"We need help for a short while. Perhaps you can help us out. Civic would like to borrow $3,690,000."

Ms Barisaac said words to the effect:

"Certainly."

366. Civic was to be the borrower of the $3,690,000 from Israel Discount Bank.

310. Significantly, Emil Binetter's 6 October 2010 affidavit did not refer to any cash deposit securing the Civic loans.

311. Additionally, as I have earlier explained above, these documents also establish the falsity of Emil Binetter's evidence that he "never made any deposits overseas or had any other money in overseas banks at all which were used as security for any of the loans from the Israeli Banks" (affidavit of Emil Binetter affirmed on 29 November 2010 at [2][219] KDB Vol 4 Tab 162; TCA1-1 5/300/2799 [2] and [3]. ).

312. Again, each of these affidavits were relied upon by Rawson in the Rawson (AAT) proceeding in support of its business practice case. Neither Gary nor Emil Binetter produced these documents or informed either the Tribunal or the Commissioner of their existence. To the contrary, the letters to the Commissioner from Mr Douglass on instruction was that there were no documents apart from those attached to his letter of 8 July 2009.

8.4 BCI

8.4.1 The new evidence in relation to BCI's "loans" from Bank Hapoalim

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8.4.1.1 PRELIMINARY

313. By way of overview, it will be recalled that on 10 September 2014 leave was granted in the BCI proceedings for the Commissioner to use various documents obtained in those proceedings including:

314. The letters from Bank Hapoalim to BCI dated 15 October 2009 and 10 November 2009 both relate to the balance for BCI's account no. 343415 as at 30 September 2009. However, in contrast to the first letter, the second letter conspicuously omitted any reference to "B.T.B Loans" and did not attach a bank statement. The relevance of those differences is explained shortly below.

315. It will also be recalled that orders were made by Jagot J on 7 July 2015 (and upheld on appeal) in the BCI proceedings that the Commissioner be released from the implied obligation not to make use of documents filed in the BCI proceedings for purposes other than those of the BCI proceedings, so far as necessary to enable the Commissioner to use those documents identified in Schedules A and B to the 7 July 2015 orders in the present proceeding:
B.C.I Finances Pty Limited (in liq) v Commissioner of Taxation [2015] FCA 679. The documents covered by the orders comprised (B.C.I Finances at [17]-[18]):

(I note that the BCI letter of request was issued pursuant to orders made on 9 August 2012 by Jagot J in the BCI proceedings:
BCI Finances Pty Limited v Commissioner of Taxation [2012] FCA 855; (2012) 89 ATR 861.)

316. As I develop below, the new evidence available in this proceeding, as a result of those orders, confirms the false and misleading case advanced by Rawson in the Rawson (AAT) proceeding as to the loan arrangements allegedly put in place by BCI, which formed part of Rawson's inferential business practice case before the AAT. Of particular significance in this regard is the evidence obtained as a consequence of the BCI letter of request, a statement from Bank Hapoalim of BCI accounts as at 30 September 2009 (once it was translated on 8 July 2013) which was attached to a letter from the Bank dated 15 October 2009, and expert evidence obtained by Commissioner from Mr Ben Zeev following the translation of this bank statement. Contrary to Rawson's case in the AAT, the new evidence unequivocally discloses that the true nature of the BCI loan arrangements was (as the Commissioner submitted at T172.35-39) that:

letters of undertaking and pledge were provided by the directors and they operated so that the funds remained in Switzerland, securing the transfer originally of Swiss francs from BCI to Australia and then the Australian dollar - the conversion from Swiss francs to Australian dollars in the loan account in Israel.

8.4.1.2 ESTABLISHMENT OF THE BCI LOAN

317. The BCI loan with Bank Hapoalim, established in May 1993, was approved by Baruch Etzion in his capacity as an employee of Bank Hapoalim. Mr Etzion also gave evidence subsequently in the Rawson (AAT) proceedings, as a purported expert, on the likelihood of a

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loan being granted on the strength of a personal guarantee.

318. However, new evidence made available pursuant to the BCI letter of request makes reference to a deed of pledge regarding the deposit account which secured the BCI loan. The first reference to the deed of pledge appears in a letter dated 6 January 1993 headed "Australian Deal" sent by facsimile from Mr Eilat of Bank Hapoalim, Switzerland to Mr Ben Zeev, Tel Aviv branch, and copied to Mr Etzion. In that letter, Mr Eilat stated that[220] KDB Vol 1 Tab 3 ; TCA1-1 1/5/209. :

I would like to draw your attention to Mrs R Zmiri's memo in Hebrew to Mr Rashef dated October 5, 1992, in which he states in paragraph 3 that both deed of pledge and our confirmation to Central Branch are kept with us and not sent to Tel Aviv as written in your message.

(Underlining appears in handwriting in the original; emphasis otherwise added.)

319. A number of events took place on 25 April 1993 as follows:

320. Shortly thereafter, on 27 April 1993, Bank Hapoalim, Tel Aviv wrote to Bank Hapoalim, Switzerland in relation to the "Australian transaction"[224] KDB Vol 1 Tab 8 ; TCA1-1 1/10/255. stating:

Attached hereto in the last draft of the letter of irrevocable instructions to be issued to you by the pledgor in connection with the a/m [sic] translation.

Please note that in order to proceed we require your agreement to the wording of the said draft .

… Please note that our customer has agreed to said wording.

(Emphasis added.)

321. It will be recalled that Erwin and Emil were originally the only directors of BCI, being appointed on 4 May 1992, with Gary, Margaret and Andrew being appointed directors subsequently on 25 January 1994 after the establishment of the loans.

322. On 13 May 1993, Erwin applied on behalf of BCI to Bank Hapoalim, Tel Aviv for the provision of credit in Swiss Francs ( BCI loans 1 - 12 ).[225] KDB Vol 1 Tab 10 ; TCA1-1 1/12/260. On 27 May 1993, Emil made further applications on behalf of BCI for the provision of credit in Swiss Francs ( CHF ) by Bank Hapoalim ( BCI loans 13 - 24 ).[226] KDB Vol 1 Tab 12 ; TCA1-1 1/17/311. In each case the applications were for a loan in the sum of CHF500,000[227] KDB Vol 1 Tabs 10 and 12 . . As Emil deposed in his affidavit affirmed on 6 October 2010 (at [207]) which was relied upon in the Rawson (AAT) proceedings:

The facility was structured so that 24 parcels of 500,000 Swiss Franc would be advanced on 14 May 1993. The funds were structured into lots of 500,000 …

323. The documents each stated that the credit was to be provided on 14 May 1993 and that the interest rate was 6.20% per annum (in handwriting) less Australian interest withholding tax, and included a number of terms in relation to principal and interest repayments.

324. I will refer to BCI loans 1 - 12 and BCI loans 13 - 24 together as the BCI loans .

325. Subsequently:

8.4.1.3 EXTENSIONS TO THE LOANS BY BANK HAPOALIM, TEL AVIV AND CORRESPONDING ROLLOVER OF THE FIDUCIARY DEPOSITS WITH BANK HAPOALIM, SWITZERLAND (2003-2004)

326. By a letter dated 20 November 2003,[230] KDB Vol 1 Tab 25 ; TCA1-1 1/81/519. Bank Hapoalim, Switzerland wrote to Bank Hapoalim, Tel Aviv. The subject matter of the letter was stated as:

Back-to-back transaction

Australian Dollar Loan Facility granted by yourselves to one of your clients

Our fiduciary deposit for AUD 6,177,288.17 placed with yourselves as security

327. The letter stated that "your Bank [Bank Hapoalim, Tel Aviv] will extend the loan until May 2004 and that we [Bank Hapoalim, Switzerland] are to rollover our fiduciary deposit until May 31, 2004". Save for a difference of three cents, the amount of the fiduciary deposit referred to in this letter corresponds directly with the total amount of BCI loans 1 - 12 when they were converted into Australian dollars on 20 November 1997 at Erwin's request.[231] KDB Vol 7 Tab 215; TCA1-1 8/370/4658 [49] and [66] – [67]; CB Vol 2 Tab 113; TCA1-1 2/110/591; CB Vol 2 Tab 117; TCA1-1 2/114/607. The effect of the correspondence is that the fiduciary deposit in the same amount as the loan facility was rolled over together with the loan, thereby ensuring that the "loan" was secured by the fiduciary deposit without interruption. For Bank Hapoalim, the benefit of having the fiduciary deposit rolled over together with the loan was that there was no risk associated with the "loan".

328. A further letter dated the following day from Bank Hapoalim, Switzerland to Bank Hapoalim, Tel Aviv[232] KDB Vol 1 Tab 27 ; TCA1-1 1/82/520. , bearing the same subject-matter heading, read:

As already stated in our faxletter of November 20, 2003 Bank Hapoalim Tel Aviv has granted an Australian Dollars loan. As collateral for your Bank, we have placed a fiduciary deposit with you, which matured value November 20, 2003.

On November 18, 2003 Mr Goldberg (Credit Department …) has given us instructions to roll over the deposit until May 31, 2004 since your Bank is also extending the loan facility until May 2004.

329. A telex printed on 24 November 2003 from Bank Hapoalim, Switzerland to Bank Hapoalim, Tel Aviv provided a "Fixed Loan/Deposit Confirmation" in respect of a deposit of AUD$6,177,288.17 at an interest rate of 5.1%[233] KDB Vol 1 Tab 26 ; TCA1-2 5/2297. .

330. On 25 May 2004, Bank Hapoalim, Switzerland sent a letter by facsimile to Bank Hapoalim, Tel Aviv[234] KDB Vol 1 Tab 36 ; TCA1-1 1/93/541. stating as follows:

Two Back-to-back transactions, concerning

Two Australian Dollar Loan Facilities granted by yourselves to two of your clients

As security for the above loans, we have placed with yourselves:Our fiduciary deposit for AUD6,188,757.00 maturing May 31, 2004Our fiduciary deposit for AUD6,177,288.17 maturing May 31, 2004

…

Please be informed that we have two back-to-back Australian Dollar transactions whereby we have placed the following fiduciary deposits with your Bank as collateral for two loans you have granted to two Australian clients:

AUD 6,188,757.00

From: November 28, 2003

Maturity date: May 31, 2004

Interest rate: 5.1 %

Interest amount: AUD 162,197.01

Interest days: 185

AUD 6,177,288.17

From: November 20, 2003

Maturity date: May 31, 2004

Interest rate: 5.1 %

Interest amount: AUD 168,897.35

Interest days: 193

We understand, that your Loans will not be repaid and that the transactions will be rolled over for a further 6 months (from May 31, 2004 until November 30, 2004) with the same conditions.

(Emphasis in the original.)

331. The amount of the fiduciary deposit in the sum of AUD$6,188,757.00 corresponds to

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the total amount of BCI loans 13 - 24 when they were converted into Australian dollars on 25 November 1997 at Emil's request[235] KDB Vol 7 Tab 215 ; TCA1-1 8/370/4658 [49]. . According to BCI's Amended Appeal Statement in the BCI proceedings, this amount was apparently repaid on or about 29 May 2004[236] See, KDB Vol 7 Tab 216 ; TCA1-1 8/373/4715 [22]; KDB Vol 7 Tab 214 ; TCA1-1 8/368/4642 [34], [48] – [53]; KDB Vol 7 Tab 215 ; TCA1-1 8/370/4658 [58]; KDB Vol 4 Tab 148 ; TCA1-1 5/283/2396 [355] – [357]. . That repayment occurred, therefore, at about the time as deposit for that amount matured, according to the letter from From Hapoalim, Switzerland dated 25 May 2004.

332. I have already referred to the correlation between the fiduciary deposit in the sum of AUD$6,177,288.17 and BCI loans 1 - 12 associated with Erwin's side of the business. The amount of AUD$6,177,288.17 also corresponds with each of Erwin and Andrew's side of the BCI "loan".[237] KDB Vol 7 Tab 215 ; TCA1-1 8/370/4658 [49] and [66] – [67]; CB Vol 2 Tab 113 ; TCA1-1 2/110/591; CB Vol 2 Tab 117 ; TCA1-1 2/114/607. That amount also accords with BCI's amended appeal statement in the BCI proceeding at [23] that: "[f]rom about May 2004 until 1 March 2005 Bank Hapoalim agreed with BCI Finances to extend the loan balance for Loan 1 for periods of six month intervals"[238] See, KDB Vol 7 Tab 216 ; TCA1-1 8/373/4715 [23]; KDB Vol 7 Tab 215 ; TCA1-1 8/370/4658 [62] – [65]. .

8.4.1.4 REPAYMENT OF THE FIDUCIARY DEPOSIT ON 2 JUNE 2004 FOLLOWING REPAYMENT OF EMIL'S HALF OF THE BCI LOANS AT THE END OF MAY 2004

333. On 1 June 2004, Bank Hapoalim, Switzerland wrote to Bank Hapoalim, Tel Aviv in relation to "[o]ur fiduciary deposit for AUD 6,188,757.00 maturing May 31, 2004".[239] KDB Vol 1 Tab 38 ; TCA1-1 1/94/543. The letter confirmed that AUD$6,188,757.00 was due to be repaid to Bank Hapoalim, Switzerland on 2 June 2004. This corresponds with Emil's half of the BCI loans (i.e. BCI loans 13 - 24) being repaid on or about 29 May 2004, as just outlined.

334. On 6 July 2004, Bank Hapoalim, Tel Aviv issued a letter to Bank Hapoalim, Switzerland referring to a "[b]ack-to-back transaction - roll-over dollar loan facility"[240] KDB Vol 1 Tab 40 ; TCA1-1 1/101/563. .

335. On 26 November 2004, Bank Hapoalim, Switzerland sent a letter by facsimile to Bank Hapoalim, Tel Aviv again referring in the subject-matter heading to a "[b]ack-to-back transaction", "Australian Dollar Loan Facility granted by yourselves to one of your clients" and "[o]ur fiduciary deposit for AUD6,177,288.17 placed with yourselves as security"[241] KDB Vol 1 Tab 43 ; TCA1-1 2/105/584. . In the letter, Bank Hapoalim, Switzerland stated that it had "been trying to roll-over our fiduciary deposit with [Bank Hapoalim, Tel Aviv]" and provided instructions that "[n]o payment of the Capital is to be effected to us value November 30, 2004. (Only the interest due is to be remitted)".

8.4.1.5 THE BCI APPLICATION FOR CREDIT AND DEED OF PLEDGE SIGNED BY ANDREW IN 2006

336. On 26 January 2006, Andrew on behalf of BCI signed a "limited power of representation" appointing and empowering Mr Baruch Etzion[242] KDB Vol 2 Tab 49 ; agreed chronology item 282. :

to represent and negotiate on our behalf all or any agreements or documents connected with loan or loans to be executed to us by Bank Hapoalim B.M., except that such appointment and empowerment does not include the authority to bind us …

Until this power has not been revoked, we also empower the said Mr Etzion to receive from Bank Hapoalim B.M. all information about any of our loan accounts with the Bank.

337. Pursuant to the orders made by the Magistrate's Court in Tel Aviv in furtherance of the BCI letter of request[243] KDB Vol 8 Tab 260 ; TCA1-1 10/488/6229; TCA1-1 10/488/6232. , on 18 February 2015 the Commissioner obtained a deed of pledge dated 8 March 2006 signed by Andrew as pledger of the security for BCI's loan from Bank Hapoalim[244] CB Vol 1 Tab 4 ; TCA1 [425]; KDB Vol 2 Tab 50 ; TCA1-1 2/118/613; CB Vol 38 Tab 1961, 1962 . ( 2006 deed of pledge ). That deed of pledge was signed pursuant to a Letter of Undertaking dated 11 June 2004 between Bank Hapoalim BM Central Branch (abbreviated in some documents as BHBM ) and BCI.[245] KDB Vol 2 Tab 50 ; TCA1-1 2/118/613. The 2006 deed of pledge was signed four months before BCI and Rawson were notified that the Commissioner had commenced an audit of their affairs (that notification being given on 31 July 2006[246] KDB Vol 2 Tab 55 ; TCA1-1 2/125/636; agreed chronology item 311. ).

338. On the same day as he signed the 2006 deed of pledge, Andrew also signed an application for provision of credit for AUD$6,177,288.20 to BCI to be provided on 9 March 2006. That application and the deed of pledge were transmitted by facsimile from Bank Hapoalim, Switzerland to Bank Hapoalim, Tel Aviv also on 8 March 2006[247] KDB Vol 2 Tab 51 ; agreed chronology item 286. .

339. Notably, the credit application (but not the deed of pledge) was provided to the Commissioner and exhibited to

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Andrew's affidavit affirmed on 31 October 2011 (Exhibit "AJB28") and filed in the BCI proceedings. There are two variations of this document[248] KDB Vol 2 Tab 51; TCA1-1 2/119/618 and KDB Vol 2 Tab 52; TCA1-1 2/120/620. , with one specifying interest at 7% and the other at 6.67%.

340. The recitals to the 2006 deed of pledge[249] KDB Vol 2 Tab 50; TCA1-1 2/118/613. provide that:

Re: Deed of Pledge and Declaration of Assignment executed by us on Account No. 7196960 (hereinafter: "Deed of Pledge")

WHEREAS pursuant to a Letter of Undertaking dated 11 June 2004 (hereinafter: "the Letter of Undertaking") made between [Bank Hapoalim, Tel Aviv] and B.C.I. Finances Pty Limited (hereinafter: "the Debtor") the Debtor may request provision of credit by requests in writing to [Bank Hapoalim, Tel Aviv] (hereinafter: "the Requests") and [Bank Hapoalim, Tel Aviv] may determine to make loans to the Debtor pursuant to the Requests ("Disbursements").

The Letter of Undertaking and the Requests shall be hereinafter referred to as "the Documents of Undertaking";

WHEREAS pursuant to the Documents of Undertaking the Debtor will undertake to repay the Disbursements in accordance with the Documents of Undertaking;

WHEREAS pursuant to the Deed of Pledge we have pledged a deposit with you as specified in the Deed of Pledge (hereinafter: "the Deposit") as collateral for all claims vested in [Bank Hapoalim, Tel Aviv] at the time of signature of said Deed of Pledge and thereafter arising, inter alia, on the basis of the Documents of Undertaking [being the Letter of Undertaking and the Requests].

WHEREAS the Deposit and the credit balance hereof are to create a fund that, in accordance with the Deed of Pledge and this letter are to serve for the satisfaction of payment of any and all amounts due and payable by the Debtor to [Bank Hapoalim, Tel Aviv] pursuant to the Documents of Undertaking.

(Underlining in the original; emphasis otherwise added.)

341. The deed of pledge provides that neither the pledger nor the debtor, or others, are entitled to receive any monies from the deposit account to the extent of the amount outstanding by BCI to Bank Hapoalim from time to time. It also provides that the pledger does not have the right to take any action with respect to the deposit to the extent of the amount outstanding from time to time by BCI to the Bank without the Bank's written consent. The provisions in the pledge are expressed to be "irrevocable since the rights of BHBM are dependant thereon."

342. The deed of pledge identifies an account numbered 7196960 but does not disclose the location of the account or details of the account holder (noting that BCI's account with Bank Hapoalim, Tel Aviv was account number 343415[250] KDB Vol 7 Tab 218; TCA1-1 8/379/4789 [9]; see also, KDB Vol 1 Tab 14; TCA1-2 9/4339 – 4422. ). Nor, as the Commissioner submits (at AS [183]), have the details of the account holder ever been explained by Andrew although he is identified in the deed of pledge as the pledger.

343. There was no challenge to the existence or authenticity of the deed of pledge, and the execution of the deed of pledge is included in the agreed chronology. I note, however, that the chronology wrongly states that it was "executed between Bank Hapoalim (Switzerland) and BCI" instead of between Andrew (as the "Pledger") and Bank Hapoalim, Switzerland. It is plain from the face of the document that BCI was the debtor, not the pledger.

8.4.1.6 THE BTB LETTER DATED 15 OCTOBER 2009

344. On 15 October 2009, Bank Hapoalim, Tel Aviv wrote to BCI advising as follows:[251] KDB Vol 3 Tab 121 ; TCA1-1 3/184/1109.

Balance of Account

At your request we are pleased to confirm the balances at the close of business on 30 september 2009 in your account N.343415 with us:

-Current Account: AUD 304457.80

-B.T.B. LOANS AUD10061353.96

(The BTB letter .)

345. The BTB letter also attached a bank statement in Hebrew which, translated into English, refers to "Credit in Foreign Currency" described as "Back to Back: Fixed

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Interest" in the following amounts: AUD$6,197,878.96 and AUD$3,863,475.00.

346. The Commissioner was first advised of the existence of this letter when Andrew, in his capacity as director of BCI (noting that he had been a director since 25 January 1994), affirmed an affidavit on 28 September 2012 in response to the order for discovery made by Jagot J in the BCI proceedings.[252] KDB Vol 7 Tab 236; TCA1-1 9/415/5513; see also KDB Vol 3 Tab 121 ; TCA1-1 3/184/1109. Andrew annexed the BTB letter to his affidavit and described it (at item 253 of the annexed list of documents in BCI's control) only as "[a] copy of a letter from Bank Hapoalim to BCI confirming the balance as at 30 September 2009 in account 343415"[253] KDB Vol 7 Tab 236; TCA1-1 9/415/5513. . In this regard, it seems most likely that when Andrew did so, he failed to appreciate that the BTB letter and attached Hebrew bank statement disclosed the existence of the BCI fiduciary deposit, given that the description referred to Rawson's current account.

347. As the Commissioner submits (AS at [113]), that letter bears a resemblance to the 10 November 2009 letter exhibited to Baruch Etzion's affidavit, dated 4 October 2011.[254] KDB Vol 3 Tab 126; TCA1-1 3/187/1211. However, the crucial difference between the documents is that the BTB letter in Andrew's affidavit refers to the back-to-back loans, whereas the letter exhibited to Mr Etzion's affidavit notably fails to mention any back-to-back arrangements and does not attach a bank statement.

348. The significance of the BTB letter and attached bank statement was not apparent to the Commissioner until the Hebrew statement was translated into English on 8 July 2013, after the Full Court's decision in Rawson's appeal. As I later explain, an expert report by Mr Ben Zeev was also subsequently filed in the BCI proceedings on behalf of the Commissioner in which Mr Ben Zeev expressed his view that this correspondence evidenced the existence of a back-to-back deposit account.

8.4.2 The BCI audit commencing 24 May 2007 and preparation of draft correspondence to be sent by the Israeli banks to misrepresent the so-called loan arrangements

349. On 24 May 2007, Andrew Binetter received a s 264 notice issued by the Commissioner in respect of BCI, EGL, Rawson and Ligon 158[255] KDB Vol 2 Tab 61 ; TCA1-1 2/127/645. . Schedule A to that notice provided a list of questions relating to the notice which included questions about BCI's international dealings and whether BCI had any overseas interest or significant assets.

350. Andrew made a statutory declaration[256] KDB Vol 2 Tab 67; TCA1-1 2/133/706. dated 19 June 2007 with respect to the transfer of funds to BCI from Bank Hapoalim for the purposes of the Commissioner's s 264 examination held on that day[257] KDB Vol 2 Tab 64; TCA1-1 2/130/657 T6.7. . The statutory declaration attached an unexecuted application dated 8 March 2006 for the provision of credit in the sum of AUD$10,000,000 and was described by Andrew as his "file copy". The unexecuted application provided that "Interest Rate shall be at the rate of ___ % (___ percent) per annum less Australian Interest Withholding Tax". The space for insertion of the interest rate for the loan in the unexecuted application was therefore left blank. Andrew also declared that "the original Application was signed by me and remitted to Bank Hapoalim" but that he did not have a copy of the "Credit in Foreign currency dated 11 June 2004 Application to open an Account". More fundamentally, Andrew's statutory declaration did not attach or mention the deed of pledge dated 8 March 2006 with respect to the loan from Bank Hapoalim,[258] KDB Vol 2 Tab 50; TCA1-1 2/118/613. despite the fact that Andrew had signed the pledge and clearly had knowledge of its existence, and despite his knowledge that the BCI loan was secured by the fiduciary deposit in the same amount and currency as the loan. In this context, the only reasonable inference to draw is that the failure by Andrew to refer to the deed of pledge in his statutory declaration was deliberate.

351. During his examination pursuant to the s 264 notice,[259] KDB Vol 2 Tab 64; TCA1-1 2/130/652. Andrew said (at T7.1) that BCI's "activities were simply to receive money and to lend money. Borrow and lend, that's all it did". He described BCI as a "finance company" that borrowed "funds from Bank Hapoalim" which it on-lent to companies or trusts within the group for further investments in a range of activities, or to enable other companies with cash flow difficulties to fulfil interest obligations: at T2.12 to T4.3. He said that BCI had no loans in Australia. When asked whether BCI Finances had any other international dealings aside from the loan in Israel, Andrew responded "No. Other than a loan and interest expenses associated with that

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loan" (at T3.1-5). Andrew was also asked "[d]oes BCI own any real property or any other significant assets in Australia or overseas" and responded "No, its only significant asset is loans within the group" (at T4.5). Andrew further denied that BCI owns any properties or has any offshore transactions "other than the loan and the interest expense. That is the only transaction" (T7.43-44). Again, in light of the evidence considered above, the failure to refer to the deed of pledge and deposit account securing the BCI loan in this examination can only be regarded as deliberate.

352. On 18 December 2007, the ATO wrote to Andrew to explain the basis on which it had issued the offshore information notices pursuant to s 264A of the ITAA 36 to BCI, Binqld, Blanford, EGL, Ligon 158 and Rawson respectively.[260] KDB Vol 2 Tab 89 ; TCA1-1 2/148/702. In common with the equivalent letter of the same date from the Commissioner to Advance and Civic, the letter stated that:

The Commissioner in June 2005 … announced the ATO's focus in respect of Project Wickenby:

… the Tax Office has acted on information suggesting that individuals have entered into offshore schemes directed at creating fictitious deductions or concealing income from tax. The schemes rely on the use of offshore structures put in place by scheme promoters. The information indicates that in some cases deductions are claimed for payments for expenses and services that are fictitious," Tax Commissioner Michael Carmody said.

In other cases assessable income derived offshore is not brought to account in Australia. This income is secretly returned to Australia disguised as a loan …

…

The typical types of responses, although obviously there are some differences in detail from company to company, generally are as follows:

  • • Does the relevant entity have any liabilities (e.g. loans, charges etc) with financial institutions either in Australia and/or overseas? If yes, please provide details.

Answer - Yes, overseas and none (or loan) in Australia.

  • •Does the relevant entity have any international dealings? If yes, please provide details.

Answer - Yes, loans from Israel Bank.

  • •Does the relevant entity have any overseas interest, foreign income or foreign expenses? If yes, please provide details.

Answer - Other than referred to above, no.

Responses provided as per the above are not satisfactory as it does not provide any specific details.

No documentation or further details have been provided other than detailed below.

353. In the letter, the Commissioner referred to Andrew's statutory declaration dated 19 June 2007 and attached application for credit but stated that the application "does not show details of the loan amount, dates of the term of the loan, repayment amounts, date of principal repayment and interest rate nor it is signed by any party".[261] KDB Vol 2 Tab 67; TCA1-1 2/133/706.

354. The Commissioner's letter also referred to a formal interview for Ligon 158 on 19 June 2007. According to the ATO's letter (dated 18 December 2007), in that interview, an employee of the ATO asked Andrew "[i]n respect of the actual loan itself that is being repaid, would there be documentation in respect of that? The loan documents." Andrew is said to have responded that:

These Israeli banks are very, very different to the Australian banks. How do I explain this? Banks in Israel work on relationship, they don't work on black and white like Australian banks do. There is incredible cultural differences between the Israelis and the Australians. So asking a question that seems innocuous by Australian standards can be actually very confronting by Israeli standards and can undermine the relationship. My father established the relations with the Israeli banks for many years and it was all relationship-based. It was all people based. That's what I have done as well to the extent that I brought in new loans since 2004 and they rely on

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confidence, confidence in the person they are dealing with and relationship with the person they are dealing with. We've received new loans since 2004, we've repaid loans since 2004, we have new loan agreements. If I went to them and said I need a copy of the loan agreement relating back to I don't know when, they're going to say what for, what do you need it for. As soon as I go down that path, that starts to tear away at the confidence they have in me and the confidence they have in our businesses. That type of path can lead to destruction and can lead to them saying we are losing faith in you, repay your money, repay your loans. The circumstances the group is in at the moment, a call like that will put us into bankruptcy. The assets that we have at the money have not realised their potential. It will be five to 10 years before they do and at that time we will sell those assets, we will repay our loans and we will hopefully be left with some profit. But today something like that would completely undermine everything that my father did for the last 40 years and what I have been doing for the last number of years.

(Emphasis added.)

355. I have already found (in the context of discussing the Advance audit) that a meeting subsequently took place on the day after the letter from the ATO which was attended by Michael, Andrew and Mr Douglass, and that Mr Douglass was instructed by Andrew at that meeting to prepare letters from the Israeli banks in relation to advances made to the Binetter family entities. I have also already found that Mr Douglass then prepared draft letters relevantly dated 20 December 2007 to be engrossed on the letterhead of the Israeli banks, with tables allegedly disclosing the loan side of each Binetter family entity's arrangements with their respective Israeli bank, but not their linked deposit arrangements. The finding that I have already made, that the preparation of this correspondence was a blatant attempt by Mr Douglass on Andrew's instructions to deliberately mislead the Commissioner in the context of s 264A notices and notice of Project Wickenby, applies equally with respect to BCI. That is because, as I have already found, Mr Douglass's letters not only referred to Advance, but also attached a schedule of tables in relation to BCI intended to be placed on the letterhead of Bank Hapoalim.

8.4.3 The BCI Part IVC proceeding in the Federal Court commenced on 12 May 2011

8.4.3.1 THE FALSE AND MISLEADING EVIDENCE GIVEN BY ANDREW AND MR ETZION THAT THE BCI LOANS WERE SECURED ONLY AGAINST PERSONAL GUARANTEES AND A CHARGE

356. On 12 May 2011, BCI commenced proceedings in the Federal Court pursuant to Part IVC of the TAA 53 challenging the Commissioner's assessments, amended assessments and penalty assessments for the financial years ending 30 June 1997-2008.[262] KDB Vol 5 Tab 193; TCA1-1 6/339/3426. Those proceedings continued during and after the conclusion of the Rawson (AAT) proceedings and the subsequent Rawson appeals: see, eg,
BCI Finances Pty Ltd (in liq) v Commissioner of Taxation (No 3) [2014] FCA 958; (2014) 320 ALR 747.

357. With respect to the BCI loans, Andrew affirmed an affidavit in the BCI proceedings on 31 October 2011[263] KDB Vol 7 Tab 215; TCA1-1 8/370/4658. (which as I have explained was in evidence in this proceeding pursuant to leave). In that affidavit, Andrew deposed (at [72]) that the security for the BCI loans was by way of personal guarantees and a deed of charge, and that "[t]here were no cash deposits or assets overseas given to Bank Hapoalim to support the BCI loan from Bank Hapoalim" (emphasis added). Given the new evidence described above, it is now known that this evidence by Andrew was false. Further, given that Andrew had signed the 2006 BCI deed of pledge, he must have known this information was false when he affirmed this affidavit.

358. Baruch Etzion also affirmed three affidavits in the BCI proceedings: the first on 4 October 2011[264] KDB Vol 7 Tab 212; TCA1-1 8/365/4619. , and the second and third on 15 March 2012[265] KDB Vol 7 Tab 218; TCA1-1 8/379/4789 and KDB Vol 7 Tab 219; 8/380/4800. . The effect of Mr Etzion's evidence was consistent with the evidence given by him in the Rawson (AAT) proceedings. Mr Etzion stated in his 4 October 2011 affidavit, in a section titled 'Security for the Loans' that (at [35]-[37]):

I was aware that BCI was a newly established company and did not have at the time assets of its own. The Bank relied upon

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the guarantees in Exhibits 'BE4' [by other Binetter family entities] and 'BE5' [by Emil and Erwin] and the statement of assets issued by Emeric Szanto dated 6 November 1992…

My opinion was that Erwin and Emil Binetter were honest and hardworking men, so I accepted the statement from Emeric Szanto as to the value of the assets.

The security for the loan to BCI from the Bank received by the Bank was the guarantees and the floating charge , copies of which are in Exhibit 'BE4', 'BE5' and 'BE6'.

(Emphasis added.)

359. In relation to the application for a loan in 2006 by BCI, Mr Etzion also deposed (at [65]-[67])[266] KDB Vol 7 Tab 212; TCA1-1 8/365/4619. that:

In early 2006 as a result of my negotiations on behalf of BCI, [Bank Hapoalim] agreed to provide an additional loan amount of $3,850,000 for a period of five years. This brought the total loan facilities agreed to by the Bank to just over $10,000,000.

Exhibit 'BE16' is a copy of the Application for Provision of credit dated 8 March 2006 provided by BCI and signed by Andrew Binetter on behalf of BCI being the application for the provision of the continuation of the loan of $6,177,288.20 for the period to March 2011. The Bank's documentation for this loan was the Second Letter of Undertaking and continuing guarantees and the continuing Deed of Charge.

Exhibit 'BE17'is a copy of the Application for Provision of credit dated 8 April 2006 provided by BCI and signed by Andrew Binetter on behalf of BCI being the application for the provision of this further loan amount for the period to March 2001. The Bank's documentation for this loan was the Second Letter of Undertaking and continuing guarantees and the continuing Deed of Charge.

360. Notably, in common with Andrew, Mr Etzion conspicuously fails to mention the 2006 deed of pledge, despite the fact that the 2006 deed of pledge was used to secure the extension to BCI's loan, and despite Mr Etzion's role as BCI's representative in negotiating the extension.

361. Finally, Mr Etzion gave further evidence in his affidavit affirmed on 4 October 2011 (at [68]-[69]) that:[267] KDB Vol 7 Tab 212; TCA1-1 8/365/4619.

In early November 2009 I received a telephone call from Andrew Binetter at which time I was requested to contact [Bank Hapoalim] and obtain a statement of account from the Bank. Andrew Binetter and I had a conversation in words to the following effect:

Andrew Binetter: "Can you get me a statement showing the current status of BCI's account with the Bank?"

Me: "I will go to the Bank and ask for it."

Exhibit 'BE18' is a copy of the statement on Bank Hapoalim letterhead and dated 10 November 2009 which I obtained from the Bank in accordance with Andrew Binetter's request.

362. The so-called "statement" from Bank Hapoalim dated 10 November 2009 at Exhibit BE18 to Mr Etzion's affidavit is in fact a letter from the Bank entitled "balance of accounts" and relevantly states that:

At your request, we are pleased to confirm the balance in your account 34315 with us at the Close of business on 30.09.2009 as follows:

CURRENT ACC:

AUD -304,457.80

LOANS AUD 10,061,353.96

363. As I have noted above, the statement dated 10 November 2009 letter annexed to Mr Etzion's affidavit bears a resemblance to the BTB letter dated 15 October 2009, in that both documents purport to confirm the balance in BCI's accounts as at 30 September 2009. Significantly, however, the 10 November 2009 letter omits any reference to the loans as "B.T.B. Loans" and does not attach a bank statement setting out the back-to-back deposits, in contrast to the BTB letter. In my view, it can reasonably be inferred that Andrew requested that the 10 November 2009 letter be prepared so as to refer only to the loan side of the BCI arrangements with Bank Hapoalim, and thereby conceal the existence of the back-to-back

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deposit. Indeed, in my view, this is the only reasonable inference available in all of the circumstances given in particular that:

364. Furthermore, even though Andrew had produced the BTB letter and annexed untranslated bank statement in his affidavit dated 28 September 2012, Andrew failed to correct the misleading contents of the 10 November 2009 letter. To the contrary, BCI continued its Part IVC proceedings in the Federal Court on this misleading basis until March 2014, when it went into voluntary administration and the liquidators discontinued the BCI proceedings. Equally, Rawson (through Andrew) had continued to press the false case that BCI did not have any back-to-back loans as part of Rawson's business practice case on the appeal before Edmonds J and before the Full Court.

8.4.3.2 THE EXPERT EVIDENCE OF MR BEN ZEEV THAT THE BCI LOANS WERE BACK-TO-BACK LOANS BASED ON THE BTB LETTER

365. Following the translation on 8 July 2013 of the statement attached to the BTB letter, on 6 February 2014 the Commissioner filed in the BCI proceedings an affidavit of Barry Ben Zeev, Strategic Business Consultant in Israel, annexing his expert report[268] KDB Vol 8 Tab 248; TCA1-1 10/467/6031. . Mr Ben Zeev had been an employee of Bank Hapoalim for over 30 years from 1978 to 2008, completing his employment as the Chief Financial Officer and Deputy Chief Executive Officer of the bank[269] KDB Vol 8 Tab 248 ; TCA1-1 10/467/6035. . Mr Ben Zeev's earlier positions at the bank included head of client asset management, head of international private banking, and head of international operations[270] KDB Vol 8 Tab 248 ; TCA1-1 10/467/6035. .

366. In that report, Mr Ben Zeev referred to a list of "security documents" that BCI alleged it had provided to Bank Hapoalim which formed the basis of the bank's approval of the loans to BCI (at [6]). Mr Ben Zeev was also asked to provide his opinion as to whether acceptance of these documents as security accorded with Bank Hapoalim's ordinary practice when the loans were made and if so, what inquiries the bank might have made when considering whether to make the loans. In response to that question, Mr Ben Zeev pointed out that BCI did not refer to the existence of a cash deposit or back-to-back deposit when describing the loans (at [11]). Accordingly, Mr Zeev answered the question by considering what inquiries the bank would have made on the assumption that the only collateral was that described by BCI. On that basis, he answered the question as follows (at [12]):

There are 4 types of collateral document presented to me: letters from Emeric Szanto, undertaking from BCI Finances, guarantees from the shareholders and companies controlled by the shareholders and letters from Michael Binetter. The Bank would not have approved the loans described to me on the basis of these documents because the credit committee would have required further investigations and protections to be in place for the reasons I set out below. (However my opinion is that the Bank would have granted the loans on the basis of these documents if there was also a cash deposit or back to back loan deposit . This is because the Bank would not have needed to ensure that the value, and its legal rights to the collateral's [sic] described below, were protected because [the] Bank's exposure is protected by the cash deposit).

(Emphasis added.)

367. Furthermore, when asked for his opinion about whether the terms and conditions of the asserted loans were in accordance with the bank's ordinary banking practice, Mr Ben Zeev opined that (at [19]):

The terms of the loans when viewed together are not in accordance with the Banks's ordinary practice. In light

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of the security described by BCI Finances, which are personal guarantees from foreign residents and guarantees from companies owned by the guarantors without collateral (as described in my first answer) the Bank would not have made the loans on the terms asserted. I was employed by the bank for over 30 years and in all my years of experience I have never heard of the Bank making commercial or private banking loans on the terms described. In my view, the loan terms are so unusual that they can only be explained by the existence of a cash deposit or similar security .

(Emphasis added.)

368. However, separately from the alleged "security documents" which BCI contended formed the basis of the loan approvals, Mr Ben Zeev had also been provided by the Commissioner with the attachment to the BTB letter, being the bank statement as at 30 September 2009 (at [7]-[9]). Based on that attachment, his experience with the Bank, and his opinions which I have described above, Mr Ben Zeev considered that the BCI loans from Bank Hapoalim were "back to back loans … secured by a cash deposit" (at [10])[271] KDB Vol 8 Tab 248 ; TCA1-1 10/467/6052 Annexure “BBZ2-3” [10]. . He explained in this regard that[272] KDB Vol 8 Tab 248; TCA1-1 10/467/6052 Annexure “BBZ2-3” [8]. :

In some cases when the collateral is a deposit, the loans are defined as "back to back" loans. Back to Back loans are loans w[h]ere the loan matches the deposit in terms of the maturity date. That is, if the loan term is for 5 years then the deposit will also be given a 5 year term and applicable interest rate. The deposit will have to be at least the same size as the loan. The deposit for the back to back loan will also be in the same currency as the loan because otherwise the Bank would be exposed to foreign exchange risk.

369. Mr Ben Zeev's evidence is not only relevant because it was a significant factor in the decisions by BCI and other Binetter family entities to abandon their Part IVC proceedings (as I shortly explain). His evidence was admitted without any limitation upon the uses to which it could be put in this proceeding. There was no suggestion that Mr Ben Zeev lacked the specialised knowledge and experience required to express the opinions which he did in his report and his report complied with the Guidelines in Practice Note CM7 - Expert Witnesses in Proceedings in the Federal Court of Asutralia (see Mr Ben Zeev's affidavit at [4]-[6]). As such, to the extent that it is necessary, his expert evidence lends further weight to the strength of the evidence on the basis of which I have found that the BCI loans were secured by a back-to-back deposit account and would not have been made but for the existence of the back-to-back deposit account. His expert evidence also lends further weight to my findings that the loans to Rawson, Advance, Civic and EGL, which mirrored the same business practice, would not have been made absent a back-to-back deposit arrangement.

8.4.3.3 EXAMINATIONS OF BANK HAPOALIM OFFICERS PURSUANT TO THE BCI LETTER OF REQUEST CONFIRMING THE BACK-TO-BACK ARRANGEMENT FOR THE BCI LOANS

370. Mr Baruch Etzion was examined pursuant to the BCI letter of request on 4 March 2015 and admitted that he knew that the loans to BCI were back-to-back loans as at the date of the BTB letter[273] KDB Vol 8 Tab 261 ; TCA1-1 10/489/6254. . Thus, when presented with the BTB letter, Mr Etzion stated (at T4-5):

A. I see this letter and I can't say that I have seen it for the first time. This letter testifies to and reflects the balances for that date.

Q. ls it true that the letter and its appendix refer to back to back loans in relation to account 34315?

A. There is no doubt that this is what is written. It is Bank Hapoalim's letter, not mine.

Q. Did you know that the arrangement with [BCI] was back to back loans?

A. At that time, certainly .

Q. Do you mean on 15/10/09?

A. Yes.

Q. Please confirm that according to the terms or the loan from 1993, the loans taken by [BCI] were secured by trusts.

A. I cannot confirm this because l have not seen a document that represents it. It could be, but I have not seen a document. I know that the financial source of these loans was a trust which in my opinion was guaranteed.

(Emphasis added.)

371.

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Mr Etzion explained what is meant by a back-to-back arrangement as follows[274] KDB Vol 8 Tab 261 ; TCA1-1 10/489/6259-60. :

There is a financial back to back and a security back to back. Back to back means you deposit a trust in order to get a loan. In both cases you deposit a trust to get a loan. In a financial back to back, the conditions of the deposit are adapted to the terms of the loan but the trust is not used as collateral for the loan. It is the physical source of the loan funds. In a security back to back loan, the money is also used as collateral.

372. It follows from Mr Etzion's admission at his 2015 examination that that he knew as at 15 October 2009 that the arrangement between BCI and Bank Hapoalim was a back-to-back arrangement and was aware of this when he affirmed his affidavits in the BCI proceedings. It follows that his evidence to the contrary in 2011 in the Rawson (AAT) proceedings was knowingly false.

373. The Credit Department Manager of Bank Hapoalim, Tel Aviv, Emilia Mandel, was also examined on 15 March 2015 pursuant to the BCI letter of request[275] KDB Vol 8 Tab 262 ; TCA1-1 10/490/6320. . She also admitted that she knew of the back-to-back arrangements in the follow passage of her evidence (at T5):

Q. In the case of the Binetter family, do you know of a back to back loan that took place?

A. Yes. There was a loan that was established long before I arrived at the Central Branch. I dealt with renewals of the loan for additional periods. I confirmed the margin, terms, and according to these we renewed. On the contrary, one loan was repaid when I arrived and one loan they continued after I left the Central Branch.

374. The reference to one loan being repaid corresponds to Emil's loan which was repaid on or about 29 May 2004. Ms Mandel further stated in her examination (at T5-6):

Q. The loans were backed with the trust from the beginning?

A. I don't know, most likely, yes. If it is a back to back loan transaction, it must be.

Q. They did not change the trust while you were there?

A. I don't have a clue. What they confirmed with me was there is a trust with these dates and with this interest. …

…

Q. When Baruch Etzion presented himself and the [Binetter] family to you, did he tell you about the trust in Switzerland?

A. Yes, I think that yes.

Q. This means that Baruch Etzion and the Binetters know about the trust in Switzerland?

…

A. … I know that our legal adviser verified that a trust existed, other wise [sic] the loan could not be prolonged.

8.4.4 BCI is placed into voluntary administration and the BCI proceedings are discontinued on 10 March 2014

375. Shortly after the Commissioner filed Mr Ben Zeev's affidavit, BCI's solicitors wrote to the Commissioner on 6 March 2014 indicating that BCI had been placed into voluntary administration by Andrew and Gary and that the administrators wished to discontinue the BCI proceedings in the Federal Court[276] KDB Vol 8 Tab 249; TCA1-1 10/470/6106. .

376. On 10 March 2014, Jagot J made orders dismissing the BCI proceedings[277] KDB Vol 8 Tab 250; TCA1-1 10/471/6110. . Jagot J also made orders that BCI pay the Commissioner's costs as agreed or taxed, but made orders granting "liberty to the respondent to apply to vary the costs order within 14 days" of making that order.

377. On 31 March 2014, the Commissioner applied, pursuant to s 43 of the Federal Court of Australia Act 1976 (Cth), for an order that BCI and its directors (Andrew, Gary and Margaret) be jointly and severally liable to pay the Commissioner's costs in the BCI proceedings on a full indemnity basis.[278] KDB Vol 8 Tab 251; TCA1-1 10/477/6138. To that end, the Commissioner also sought orders joining Andrew, Gary and Margaret as parties to the BCI proceedings. Prior to the hearing of that application, liquidators were appointed to BCI on 23 April 2014 at a second meeting of the creditors of BCI[279] KDB Vol 8 Tab 253; TCA1-2 6/3578. . Shortly thereafter at the directions hearing on 22 May 2014, Jagot J made orders with the consent of the parties with

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respect to the Commissioner's application that[280] KDB Vol 8 Tab 256; TCA1-1 10/485/6226; KDB Vol 8 Tab 255; TCA1-1 10/484/6220. :

8.4.5 The impact of the new evidence in relation to BCI on Rawson's business practice case

378. The new evidence considered above confirms the expert opinion of Mr Ben Zeev that Bank Hapoalim would not have approved the loans to BCI without a cash deposit, and the evidence of Ms Mandel that the loans must have been linked by a cash deposit from the beginning. Internal correspondence from Bank Hapoalim also confirms that the back-to-back arrangement with respect to Emil's side of the BCI loans remained in place until the loans were repaid in 2004.

379. Importantly, the 2006 deed of pledge unequivocally establishes that BCI's loans from Bank Hapoalim were supported by a cash deposit, and were therefore part of a back-to-back loan arrangement of which Andrew would have been aware when he gave evidence in Rawson (AAT) and affirmed his affidavit in BCI.[281] See, KDB Vol 8 Tab 248 ; TCA1-1 10/467/6052 [10] (Barry Ben Zeev 6 February 2014). It follows that Andrew's evidence in his affidavit affirmed on 31 October 2011 filed in the BCI proceeding (and tendered in this proceeding by the Commissioner) that "[t]here were no cash deposits or assets overseas given to Bank Hapoalim to support the BCI loan" (at [72])[282] KDB Vol 7 Tab 215 ; TCA1-1 8/370/4658. was known by Andrew and therefore Rawson to be false.

380. The same conclusion follows with respect to the evidence given by Andrew in cross-examination in the Rawson (AAT) proceedings.[283] KDB Vol 6 Tab 198; TCA1-1 7/346/2659 T515.12ff; T516.37-40ff and T517.16-18ff; T528.7-12; T529.31-33. Specifically, it was Andrew's evidence in cross-examination that:[284] KDB Vol 6 Tab 198 ; TCA1-1 7/346/2659 T516.44-517.02 and T517.16-18.

I'm saying I'm reading my uncle's [Emil's] affidavit and seeing what his business practices, and knowing that they [Emil and Erwin] almost throughout their whole life mirrored each other, that their business practice was to give personal guarantees as a form of security for what they were doing. Their name was their word and their name was their bond. It was always the first thing that they offered, not the last thing.

…

He gave a guarantee to Bank Hapoalim and I believe he gave a guarantee to Mercantile Discount Bank.

381. It also follows from the fact that from at least 2006, Rawson, through Andrew, was aware of the back-to-back nature of BCI's arrangements with Bank Hapoalim and that Rawson knew throughout the Rawson (AAT) proceedings that its business practices case, insofar as it relied upon BCI's alleged business practice, was false.

382. Further, it will also be recalled that Rawson relied upon Mr Etzion's evidence in the Rawson (AAT) proceedings,[285] KDB Vol 4 Tab 167 ; TCA1-1 5/303/2801; KDB Vol 5 Tab 175 ; TCA1-1 6/324/2988. in which he claimed that there was no cash deposit as security for the loan from Bank Hapoalim to BCI, with the only security being a personal guarantee: see also above at Part 7.2.3.3. Based on the evidence above, Andrew must have also known that that evidence was false or materially misleading. It was also false to Mr Etzion's knowledge, given the evidence that he was in charge of the approval and execution of the BCI loans in 1992 as Deputy General Manager of Bank Hapoalim (Central Branch in Tel Aviv), the evidence that he represented BCI in relation to the extension to the BCI loans in 2006, and the admissions which he made in the course of his examination pursuant to the Rawson letters of request. Equally the evidence given by Mr Etzion in re-examination in the Rawson (AAT) proceeding that "there was no cash deposit in the Bank Hapoalim" in respect of the BCI loan[286] KDB Vol 5 Tab 191; TCA1-1 6/337/3231 T244.12. was false to both Andrew's and Mr Etzion's knowledge.

8.5 EGL

8.5.1 The new evidence in relation to EGL's "loan" from IDB

383. EGL was incorporated on 20 June 1975 by Erwin. Emil was a director from 31 January 1990 until 28 September 2001, and Andrew became a director on 28 September 2001.

384. In proceedings before the Tribunal, EGL contended in its SFIC (at [15]-[17] and [29]-[39]) that it entered into various loans with IDB. It further contended (at [16]) that the loan referred to at [15] was

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secured by "written guarantees from Erma Nominees Pty Ltd, Milgerd Nominees Pty Ltd, Erwin Binetter and Emil Binetter", the loan extension (at [32]) was secured "on the guarantees previously provided", and the loans at [37] and [38] were "secured by way of guarantees by Erwin Binetter, Emil Binetter, Milgard Nominees Pty Ltd and Erma Nominees Pty Ltd" (at [39])[287] KDB Vol 7 Tab 222; TCA1-1 8/389/5040. . As I have earlier explained in Part 7.2.3 above, these contentions are consistent with the evidence and submissions made by Rawson in the Rawson (AAT) proceedings as to EGL's alleged business practice as part of Rawson's inferential business practice case.

385. The newly obtained documents now demonstrate that EGL did not reveal the true nature of its loan with IDB or the real sequence of events, which I describe below.

386. On 11 April 2000, an IDB form signed by Erwin in his capacity as a director of EGL, to which the common seal of EGL was affixed, was sent by facsimile addressed to IDB. The form was entitled "[f]ramework instrument for the creation of an approved deposit for the grant of loan in foreign currency"[288] CB Vol 13 Tab 710; TCA1-2 5/2285. . The "depositor customer (hereinafter "the Lender")" is identified as EGL. This document is the same form as the 'framework instrument' discussed above in respect of Civic's borrowing from IDB. A table described as "the deposit" identifies the type of currency as Australian dollars. The annual adjusted interest on the loan is identified as 7.2%. However, none of the other details provided for in the form with respect to the deposit or the loan have been completed, namely, the deposit period, the amount of deposit, the deposit account number, the interest on the deposit, or the identity of the borrower. Despite the form not being fully completed, it relevantly provides:

We the undersigned hereby request to deposit with you, to the credit of a deposit account that shall be opened in our names, the amount particularised below in connection with the grant of loans by you:

…

INTEREST

On the deposit:

… % per annum (annual adjusted interest … %) (The interest rates mentioned in this instrument shall be changed from time to time in accordance with the Bank's determination and in coordination with the customer)

On the loan:

… % per annum (annual adjusted interest 7.2%) (or shall be specifically prescribed for every borrower separately in a notice to be sent separately).

387. On 12 April 2000, Erwin executed an IDB form headed "[l]oan application in foreign currency for a foreign resident"[289] CB Vol 13 Tab 711 ; TCA1-2 5/2286. on behalf of EGL requesting a loan for AUD$10 million from IDB. The interest rate of the loan was recorded as 7.2% per annum to be determined for every period of 6 months. Clause 8 of that document refers to a lien that IDB would have "on all monies and/or securities that we have deposited and will deposit with you until payment by us in full". Clause 9 provides that "[t]he collaterals held by you … will serve as security for the repayment of the said loan and the interest thereon".

388. While the amount of the deposit is not disclosed, these documents clearly indicate that IDB, in line with its practice in relation to Civic, required a deposit to be made and maintained in Australian dollars which at least matched the amount of the loan also in Australian dollars to EGL as security pending repayment of the loan to IDB in full.

389. That inference is strengthened by the fact, as I have explained, that EGL was treated together with Advance, Civic, BCI and Rawson by Andrew and other members of the Binetter family in their efforts to prepare correspondence for the Israeli banks to issue on their letterheads in order to conceal the true arrangements with the Israeli banks and mislead the Commissioner and the AAT. In other words, Andrew and other members of the Binetter family had exactly the same concerns about their Israeli loan practices vis-à-vis EGL as they had with respect to Advance, Civic, BCI and Rawson, where I consider the existence of the back-to-back deposit arrangements to be unequivocally established.

390. Furthermore, no evidence in this proceeding was led by Rawson explaining the reference to "collaterals" which served as security for repayment of the EGL loan in the

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IDB form executed by Erwin in 2000 or the inclusion of draft correspondence relating to EGL's loan arrangements manufactured on instructions by Andrew and other members of the Binetter family. The invocation by Andrew of the privilege against self-incrimination and the death of Erwin may explain this lacuna in the evidence from those persons (even though no s 128 certificate was ever sought by Andrew). However, no documentary evidence or evidence from other persons who were available, Mr Douglass for example, was led to the contrary. Nor was it ever suggested by Rawson that EGL's loan arrangements were different from any other Binetter family entities.

391. As such, considered cumulatively, the evidence contradicts Rawson's business practice case in the Rawson (AAT) proceedings that EGL's business practice was to borrow funds from IDB simply on the basis of personal guarantees.

8.5.2 The EGL audit and preparation of draft correspondence to be sent by the Israeli banks to misrepresent the so-called loan arrangements

392. On 24 May 2007, Andrew Binetter received a s 264 notice issued by the Commissioner in respect of EGL and other Binetter family entities including Rawson and BCI[290] KDB Vol 2 Tab 61 ; TCA1-1 2/127/644. . Schedule A to that notice provided a list of questions which asked, amongst other things, about EGL's international dealings and whether EGL had any overseas interest or significant assets. On 19 June 2007, Andrew provided a written response with respect to EGL. When asked if EGL had any liabilities with financial institutions either in Australia and/or overseas, Andrew answered that "[u]ntil recently a loan with Israel Discount Bank, Israel, existed, however this loan has been repaid". When asked if EGL has any international dealings, overseas interests, foreign income, or significant assets overseas, Andrew stated that it had "no ongoing international dealings" and "[n]o assets Overseas".

393. On 7 November 2007, the Commissioner commenced an audit into EGL by issuing an offshore information notice pursuant to s 264A of the ITAA 36[291] KDB Vol 2 Tab 84 . . The notice was relevantly expressed in the same terms as the notices issued to Advance and Civic.

394. I have already explained that on 14 November 2007, Mr Douglass sent a memorandum to Michael referring to the "very serious implications" of the s 264A notices.

395. As earlier mentioned, on 18 December 2007, the Commissioner sent a letter to Andrew, c/o MDA Lawyers, in relation to the s 264A notices issued to BCI, Binqld, Blanford, EGL, Ligon 158 and Rawson[292] KDB Vol 2 Tab 89 ; TCA1-1 2/148/764. . It will be recalled that in that letter, the Commissioner explained that the notices were issued seeking information from these entities because of concerns that they may be utilising the tax avoidance structure of "back to back loans" from Israeli banks.

396. As previously explained, on 19 December 2007, there was a meeting between Michael, Andrew, Mr Douglass, and another, at which Mr Douglass was instructed to prepare letters from Israeli banks in relation to advances made to the Binetter family entities[293] KDB Vol 2 Tab 91 ; TCA1-2 5/2567; agreed chronology at item 362. .

397. As also previously explained in relation to Civic, Mr Douglass sent a letter on 20 December 2007 to Andrew in relation to "Binetter family + related entities"[294] KDB Vol 2 Tab 93 ; TCA1-2 5/2569. , which attached, amongst other documents, a "[d]raft letter on the letterhead of Israel Discount Bank which relates to Civic … and EGL". It is not necessary to repeat the contents of that letter here. For the reasons outlined, it is clear that the draft letter to EGL and Civic was prepared by Mr Douglass and that the instructions to him (from Andrew) were to send the draft letter to IDB for it to engross on IDB letterhead and return to him. Indeed, Foster J similarly held in
Binqld Finances Pty Ltd (in liq) (ACN 119 243 220) v Israel Discount Bank (No 2) [2020] FCA 1208; (2020) 384 ALR 148 ( Binqld v IDB ) at [128] with respect to a similar draft letter purportedly sent to the ATO with respect to Advance, Civic and EGL. Furthermore, I agree with Foster J in Binqld (at [128]) that:

It is quite clear that the letter was drafted so as to suggest that the only security for the loans made by IDB referred to in the letter were personal guarantees provided by one or more of the individual Binetters. This was clearly an endeavour to conceal from the Australian Taxation Office the existence of

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the deposit account and its back to back relationship with the loan accounts. The expectation on the part of Andrew and Michael Binetter was that IDB would provide to them a letter in these terms.

398. On 29 January 2008, a further draft letter, with handwritten amendments, was prepared in relation to EGL only to be placed "on the letterhead of Israeli Discount Bank"[295] KDB Vol 2 Tab 94 ; TCA1-2 5/2593 . .

399. The final signed version of that letter with respect to EGL, engrossed on IDB's letterhead, is dated 2 March 2009.[296] KDB Vol 2 Tab 96 ; TCA1-2 5/2626; TCA1-1 2/157/874 . The letter stated as follows:

IDB has a long standing banking relationship with the Company. The basis of IDB's relationship with the Company is derived from the relationship between IDB with Mr. Erwin Binetter and Mr. Emil Binetter. IDB's relationship with the Company, with Mr. Erwin Binetter and Mr. Emil Binetter commenced in 1987.

IDB had provided loans to the Company in various amounts, over time (the "loans"). …

The loans had been granted by IDB, upon commercial terms, according to IDB's decision at the relevant time. All loans had been supported by the personal guarantees obtained by IDB from Mr. Erwin Binetter and Mr. Emil Binetter and by the guarantees from Erma Nominees Pty Limited and Milgred Nominees Pty. Limited.

IDB has throughout the period of its dealings with the Company, placed utmost reliance upon the personal obligations of Mr. Erwin Binetter and Mr. Emil Binetter. The terms governing the loans by IDB to the Company had been varied from time to time and the personal guarantees given by Mr. Erwin Binetter and Mr. Emil Binetter and the guarantees from Erma Nominees Pty Limited and Milgred Nominees Pty. Limited had always been to our full satisfaction.

400. In common with the letters prepared by Mr Douglass for Advance and Civic, this letter also set out a number of tables summarising EGL's loans with IDB, transfers received by IDB from EGL, and principal loan amounts repaid to IDB by EGL, and confirmed that all of the loans (principal and interest) were repaid by EGL on 11 May 2007.

401. I agree with Foster J's finding in Binqld v IDB (at [133]) that:

The letter is utterly misleading. It conspicuously fails to mention the deposit accounts.

402. The letter was exhibited by Andrew in his affidavit affirmed on 27 July 2012 in the EGL proceedings (at [45]-[47])[297] KDB Vol 2 Tab 96; TCA1-2 5/2626; TCA1-1/2/157/874; KDB Vol 7 Tab 232; TCA1-2 6/3020.001. . In his affidavit, Andrew deposed to a conversation he had with Ophira Perry of IDB on or around 2 March 2009 in relation to the preparation of the letter, when in fact the letter, as noted above, had been prepared by Mr Douglass and settled by Andrew and Michael. Specifically, Andrew gave evidence in his affidavit which is now known to be false and misleading (and would have been to Andrew's knowledge at the time) that (at [45]-[47]):

Sometime before 2 March 2009, I said to Ophira Perry words to the effect of:

"Ophira could you please prepare a letter from the bank to EGL setting out the background of my father's and my uncle's relationship with the bank such that the bank made loans to their company EGL Development (Canberra) Pty Limited. May you also please set out the principal amounts lent by the bank to the company, the amounts of interest that has been paid to the bank on those loans, and all amounts repaid as loan repayments from the company to the bank."

Ophira Perry said to me words to the effect of:

"This may take me a bit of time I have to go through the bank[']s records but I'll set that out but I can't go back before 2000 because those records are now unavailable."

Tab 181 of Exhibit AB3 [TCA1-1 2/157/874] contains a letter dated 2 March 2009 from Ophira Perry of IDB.

8.5.3 The impact of the new evidence in relation to EGL on Rawson's business practice case

403.

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As the Commissioner submits (AS at [285]), these letters are evidence of the deliberate scheme implemented by Andrew and other members of the Binetter family to conceal and mislead not only the Commissioner, but also the Tribunal in the EGL proceedings. Importantly, as I have noted above, EGL's conduct was relied upon in the Rawson (AAT) proceedings as part of the "business practice" of the Binetter family to justify the terms of the alleged loan to Rawson from MDB.

404. Thus, in Rawson's submissions before the Tribunal dated 9 May 2011[298] KDB Vol 5 Tab 187 ; TCA1-1 Vol 6 Tab 334. , Rawson relied on EGL's "Guarantee[s] and Indemnitie[s]" from Emil, Erwin, and other Binetter family entities to (at [16]):

support the business practice of Erwin and Emil Binetter, and the companies in which they were directors of, to obtain loans from Israeli banks to show: that Israeli banks did accept personal guarantees as security for loans from Australian companies and that these loans were commercial; payment of interest to Israeli banks; on-lending of the loans to Australian companies and the payment of interest by those companies.

405. Importantly, Rawson did not disclose to the Commissioner or the Tribunal (or to this Court upon its s 44 appeals) that EGL's loans were in fact secured by cash deposits.

406. Before the Tribunal, Emil gave evidence of loans obtained by EGL from IDB in 1988, provided on the security of guarantees, as follows (at [166]-[167])[299] KDB Vol 4 Tab 148 ; TCA 1-1 5/283/2396. :

Late in 1987 or 1988, Erwin and I went to Israel and met with Mr Loewbeer at the Israel Discount Bank at the bank's branch in Tel Aviv. At that meeting Erwin or I said words to the following effect:

"Did you receive the list of assets?"

Mr Loewbeer said words to the effect:

"Yes, I received it and I have sent it to higher management, who have agreed to lend money, but the bank needs security as you would know. We are happy with guarantees from you both and your family trust companies."

…

At the meeting with Mr Loewbeer, Erwin and I discussed and negotiated an interest rate for the loan and repayment terms. I cannot now remember what the interest rate and repayment terms were in 1988.

407. At [171]-174], Emil discussed four personal guarantees signed by himself, Milgerd and Erwin and Erma Nominees as security for the EGL loan. Further, he deposed that the interest rate paid to IDB was 8.077% (at [177]), and that the "money [for the loan] was sent after Erwin and I had signed documents that [IDB] wanted and after Erwin and I signed the guarantees as I said earlier" (at [169]). Notably, and contrary to the new material, Emil did not refer to any cash deposit securing the EGL loans.

408. As such, Rawson's case was also intentionally misleading and/or false insofar as it relied upon the alleged business practice between EGL and IDB.

8.6 Binqld

409. It will be recalled that Andrew was the sole director of Binqld from its incorporation on 12 April 2006[300] KDB Vol 8 Tab 269; TCA1-1 11/495/6378 (company search). . As was the case with the other Binetter family entities, the Commissioner issued a s 264 notice to Binqld on 12 July 2007. Binqld commenced review proceedings in the Tribunal on 24 January 2011, contending that it entered into ten loans with IDB secured by "written guarantees by Erwin Binetter and Andrew Binetter and equitable mortgages over redeemable notes, shares and units from Ligon 158 Pty Ltd and Ligon 237 Pty Ltd"[301] KDB Vol 7 Tab 221; TCA1-1 8/388/5026. . On 22 May 2014, Binqld withdrew its applications for review in the Tribunal[302] KDB Vol 8 Tab 254; TCA1-1 10/483/6218 (Ligon 268); KDB Vol 8 Tab 257; TCA1-1 10/486/6227 (Binqld); KDB Vol 8 Tab 258; TCA1-1 10/487/6229 (EGL). .

410. On or about 4 April 2007, a file note (later produced by the liquidators of Binqld, with privilege therefore being waived) records a conference held between Mark Douglass, Andrew, and Michael. It records that moneys, wherever available and accumulated, were "sent offshore" to "discount bank" and "re-borrowed to Binqld"[303] KDB Vol 2 Tab 57; TCA1-1 2/126/640. . The Commissioner submits (at T182.39-40) that that is a "neat statement of exactly what the Binetter family was doing in relation to all of its entities", and certainly was the practice of Binqld at the time of April 2007. However, I am not inclined to give much probative weight to this piece of evidence standing on its own, especially in the

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absence of any explanation of this file note and any confirmation as to its veracity.

411. As was the case for Advance, Civic, and EGL, Mr Douglass prepared draft correspondence to be sent by IDB in relation to Binqld's loan arrangements. The letter for Binqld stated that "[t]he loan funds have been advanced at various times on IDB's prevailing commercial terms and either with or without additional security. However, all have been based upon personal guarantees secured by IDB with Mr Erwin Binetter or Mr Emil Binetter"[304] KDB Vol 2 Tab 93; TCA1-2 5/2575 and 5/2578. .

412. Ultimately, while the evidence of back-to-back deposits in relation to Binqld is not strong, it is not necessary for me to make any findings in this respect because Binqld was not one of the related entities relied upon by Rawson before the Tribunal as having the same "business practice".

8.7 GERM entities

413. As earlier mentioned, at all relevant times, Andrew Binetter was the sole director and shareholder of the GERM entities[305] KDB Vol 8 Tabs 281, 282, 283, 284; McGregor NEM1-2 Tabs 156 – 159. . Erbin was incorporated on 13 July 2009, and Gerobin, Marbin and Rawbin were incorporated on 16 November 2009[306] KDB Vol 8 Tabs 281-284; McGregor NEM1-2 Tabs 156 – 159. . The liquidator of the GERM entities has informed the Commissioner that each entity had received from IDB the following amounts: AUD$12 million (Gerobin), AUD$10.73 million (Erbin), USD$23.66 million (Rawbin) and USD$25million (Marbin)[307] KDB Vol 8 Tab 275; McGregor NEM1-2 Tab 176. . As is the case for the other Binetter family entities, the Commissioner submitted that all of these loans were secured by cash deposits.

414. At various times between around August 2010 and October 2011, Andrew signed a number of documents for each of the GERM entities, including "framework instrument[s] for the creation of an approved deposit" and "[l]etter[s] of stipulation, guarantee, assignment, pledge and charge of monies and rights" given by another customer securing all debts of the borrower or debtor[308] KDB Vol 3 Tab 109; McGregor NEM1-2 Tab 95 (Erbin); KDB Vol 5 Tab 179; McGregor NEM1-2 Tab 123 (Rawbin); KDB Vol 6 Tab 205; McGregor NEM1-2 Tab 125 (Gerobin); KDB Vol 6 Tab 208; McGregor NEM1-2 Tab 126 (Marbin). . Taking Marbin as an example, on some occasions there was a discrepancy between the interest rates on the deposit and loan accounts (eg. an interest rate of 1.9% on the deposit but 2% on the loan), but on other occasions the interest was left blank with a note stating "please see separate signed forms for each of the deposits"[309] KDB Vol 6 Tab 208; NEM1-2 Tab 126 (Marbin) .

415. In a letter to the Commissioner dated 5 May 2020, the liquidator for the GERM entities, John Sheahan of Sheahan Lock Partners, identified all payments of funds from IDB to those entities. Significantly, the liquidator admitted that[310] KDB Vol 8 Tab 275; NEM1-2 Tab 176. :

all movements on loan accounts, including payments of interest and capital. The total amount of funds drawn down rose steadily throughout the period of the Binetters' dealings with the bank. Just prior to the closure of these accounts in June 2014, the total loans outstanding exceeded US$46 million plus A$6 million. The bank's security, being the deposits, must have exceeded those sums.

The accounts were closed apparently without funds being returned from Australia to discharge outstanding loans.

We have also identified the use to which the majority of drawdowns by GERM were put after receipt in Australia. Most funds drawn down by GERM were returned, eventually, to IDB (in some cases, Bank Hapoalim) to extinguish the debts of another Binetter company.

(Emphasis in original.)

416. As the Commissioner submits, the admissions indicate that the loans obtained from IDB by each GERM entity were again secured by deposits in excess of the loan amounts. As sole director of the GERM entities, Andrew must have been responsible for administering the back-to-back arrangements with IDB which were in place when Andrew was cross-examined in the Rawson (AAT) proceedings in May 2011. As such, it is likely that Andrew knew, when he gave evidence in the Tribunal denying that any of the companies with which he was associated with had moneys on deposit with IDB, that this was false. However, ultimately the focus before the Tribunal and in evidence before me was on Advance, Civic, EGL and BCI which were the entities at the heart of Rawson's business practice case and it is unnecessary for me to determine the issue.

8.8 The materiality of the new evidence from the perspective of the BCI, Advance, Civic and EGL Part IVC proceedings

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417. For reasons I shortly explain, the new evidence obtained in the BCI proceeding and produced by the liquidators of Advance and Civic was a crucial element in uncovering the falsity of Rawson's case before the Tribunal and the Part IVC proceedings instituted by other Binetter family entities. That evidence included the bank statement attached to the BTB letter from Bank Hapoalim which had been discovered by Andrew in the BCI proceedings, but was not translated until 8 July 2013, and the expert opinion evidence of Mr Ben Zeev that the BCI loans were back-to-back loans secured by a cash deposit in light of that bank statement. This Part focuses on the impact of the new evidence on decisions made by the Binetter family entities aside from Rawson to withdraw or discontinue their Part IVC proceedings, and explains why I have ruled that the evidence of legal advice apparently underpinning those decisions is relevant.

418. Turning first to the evidential question, it will be recalled that in each of their Part IVC proceedings challenging the Commissioner's assessments, Advance, Civic, BCI, and EGL had propounded a case that their loans from the Israeli banks were advanced without any cash asset as security for the borrowings (see Part 7.1.3), in common with the case run by Rawson in the AAT (see Part 7.2). These Binetter family entities, as well as Binqld and Ligon 268, eventually discontinued their Part IVC challenges (see Part 2.2).

419. In support of his case as to the materiality of the new evidence in the context of the present proceedings, the Commissioner sought to rely, among other things, on evidence that each of these entities had withdrawn their Part IVC proceedings based upon legal advice that it would not be possible for them to discharge the onus of proving that their assessments were excessive once the evidence of the linked deposit accounts emerged. The evidence of that legal advice is predominately contained in file notes recording conferences between various Binetter family members and their legal advisors. The parties accepted that legal professional privilege over these documents was waived because the evidence was produced by the liquidators of the relevant Binetter family entities[311] T354.5-7. : see s 122 of the Evidence Act.

420. At the trial, I expressed concerns regarding the relevance of this material. After being taken through the documents, I indicated that I would rule on the admissibility of this evidence in my final judgment but, in the interim, the parties could proceed on the basis that I had admitted the evidence for the limited purposes of demonstrating the fact of the meetings and what was said in those meetings, including the advice that was communicated in those meetings, but not for the purpose of establishing the truth of the representations recorded as having been made in the file notes.

421. In determining whether evidence is relevant, the starting point is s 55 of the Evidence Act. As the High Court has held in
IMM v The Queen [2016] HCA 14; (2016) 257 CLR 300 at 312 [38] (French CJ, Kiefel, Bell and Keane JJ):

By s 55, evidence is relevant if it "could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding". There can be no doubt that the reference to the effect that the evidence "could" have on proof of a fact is a reference to the capability of the evidence to do so. The reference to its "rational" effect does not invite consideration of its veracity or the weight which might be accorded to it when findings come to be made by the ultimate finder of fact …

Because evidence which is relevant has the capability to affect the assessment of the probability of the existence of a fact in issue, it is "probative". Therefore, evidence which is relevant according to s 55 and admissible under s 56 is, by definition, "probative". But neither s 55 nor s 56 requires that evidence be probative to a particular degree for it to be admissible. Evidence that is of only some, even slight, probative value will be prima facie admissible, just as it is at common law.

(Emphasis added.)

422.

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I accept the Commissioner's submission that the file notes are capable of supporting the materiality of the new evidence discovered after the Rawson (AAT) proceeding and that this is of some probative value. This is because Advance, Civic, BCI, and EGL, in common with Rawson, falsely contended in their Part IVC proceedings that their loans with Israeli banks were not supported by any cash securities but by personal guarantees. However, they withdrew their proceedings once it was known that that case was false thereby implicitly accepting that the falsity of the cases pressed in those proceedings was material. This demonstrates that Rawson (through Andrew) must have been aware that the existence of the linked deposit account, which it had taken such steps to conceal, was equally material in the context of the case which it ran in the Rawson (AAT) proceeding.

423. Standing alone, I would place limited weight on the file notes themselves given that the authors of the file notes are unknown, and the accuracy and completeness of the file notes has not been verified. However, taken together including with other contextual evidence as explained below, I am satisfied that the evidence establishes that each of the Advance, Civic, BCI, and EGL Part IVC proceedings, as well as the Binqld and Ligon 268 proceedings, were withdrawn on the basis of legal advice that it was no longer possible for these entities to discharge their onus of proving that the assessments in each case were excessive given the evidence of cash deposits supporting the loans to these other entities.

424. Turning then to the evidence of the legal advice, first, with respect to Advance and Civic, handwritten file notes record that advice was given at conferences on 8 February 2013[312] CB Vol 15 Tab 892 ; TCA1-2 Vol 6 Page 3304-3304.011 (with counsel, solicitors and Gary in attendance), 19 February 2013[313] CB Vol 15 Tab 894 ; TCA1-2 Vol 6 Page 3319. (with counsel and solicitors), and 25 February 2013[314] CB Vol 15 Tab 895 ; TCA1-2 Vol 6 Page 3330. (with counsel, solicitors and Andrew) that:

425. Shortly thereafter, Advance and Civic withdrew their Part IVC applications on 4 March 2013.[315] KDB Vol 8 Tab 239; TCA1-1 9/424/5748 (Advance) and KDB Vol 8 Tab 240; TCA1-1 9/425/5749 (Civic).

426. Secondly , the BCI Part IVC proceedings were dismissed by consent on 10 March 2014 following a meeting on 8 February 2014 attended by (among others) Andrew and Michael. That meeting occurred on the day after the Commissioner filed in the BCI proceedings the affidavit of Mr Ben Zeev expressing the opinion that, having regard among other things to the Bank Hapoalim statement attached to the BTB letter, the BCI loans were back-to-back loans secured by a cash deposit[316] KDB Vol 8 Tab 248 ; TCA1-1 10/467/6052 Annexure “BBZ2-3” [10]. .

427. In the meeting on 8 February 2014, the legal representatives for the Binetter family entities, including BCI and Rawson, apparently advised along the following lines[317] CB Vol 8 Tab 472 ; TCA1-1 Vol 10 Tab 469. :

We need to know about what's happened about all the facts across all of the entities.

BCI - foreign deposits - need to understand the facts surrounding it.

impossible for us to give [you] advice as to what to do.

may need advice from others. We need instructions, can't play games about what documents etc. We need to know the truth.

428. That document also recorded advice from the legal advisers to the effect that:

can't win cout an explanation of the deposit.

…

Technical games cannot work - ct will give up + doomed. Wasting $$ on us.

…

Steps may be taken to set aside the judgment in Rawson.

(I note that it is common knowledge that the c symbol is shorthand for "with" and therefore "cout" is a reference to "without".)

429. Thirdly , on 6 May 2014, Jagot J made orders in the BCI proceedings[318] CB Vol 38 Tab 1952 (6 May 2014 orders). relevantly granting the Commissioner leave to use

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documents obtained in those proceedings in the Binqld, Ligon 268 and EGL proceedings in the AAT which were listed for a four week hearing commencing on 23 June 2014. These documents included the BTB letter: see item 12, schedule to the orders made on 6 May 2014[319] CB Vol 38 Tabs 1949, 1950, 1951 (Tribunal listing for Binqld, Ligon 268 and EGL). . At the same time, Jagot J ordered that the subpoena addressed to Signet Lawyers be made returnable before her Honour on 22 May 2014.

430. Shortly thereafter on 19 May 2014, Ms Sutton of Signet Lawyers sent an email to Andrew which stated:[320] CB Vol 15 Tab 944 ; TCA1-2 Vol 6 Page 3597.

I understand that Mark spoke with you about the issues pertaining to the AAT proceedings for BINQLD, Ligon 268 and EGL.

We have formed the view, in conjunction with Counsel, that the proceedings are untenable in circumstances where we are unable to discharge our onus of proving that the Assessments are excessive .

Accordingly, we are at the point where we need your urgent instructions to withdraw the applications in the AAT because the hearing is listed to commence on 23 June 2014 and there is an extensive pre-hearing timetable in place. Unfortunately, if we are not in an instructed position then we will no longer be able to act for the entities in the AAT proceedings.

(Emphasis added.)

431. Subsequently on 22 May 2014:

432. There are no reasons to doubt the veracity of the evidence above, insofar as it concerns the tenor of the legal advice given to the Binetter family entities (and, among others, Andrew and Michael) that those entities would not be able to discharge their legal onus in light of the linked deposit accounts. To the contrary, that advice was entirely consistent with the Binetter family entities' decisions shortly thereafter to withdraw their Part IVC applications.

8.9 Conclusion

433. I agree with the Commissioner that, having regard to the entirety of the new evidence available since the Rawson (AAT) proceedings with respect to Advance, Civic, BCI, and EGL, the new evidence establishes that Rawson's "business practice" case before the Tribunal that the loans obtained by Advance, Civic, BCI, and EGL were not secured by a cash deposit but by personal guarantees only was knowingly false. This material reveals that the true business practice of the Binetter family entities was to arrange for the transfer of large sums of money described as "loans" to Australia in Australian currency from banks in Israel, which were secured against secret and unexplained cash deposits in Switzerland and Israel in the same currency.

434. The documents obtained by the Commissioner and evidence taken in Israel pursuant to the letters of request establish that the same practice was engaged in with respect to the loans to Rawson by MDB to the knowledge of (at least) Andrew, to which I now turn.

9. FRAUDULENT EVIDENCE IN THE RAWSON (AAT) PROCEEDINGS IN LIGHT OF MATERIAL DISCOVERED AFTER CONCLUSION OF THE PROCEEDINGS - RAWSON

435. Following the Rawson (FCAFC) proceedings, the Commissioner obtained new evidence establishing that key elements of Rawson's case before the AAT were false. This Part addresses that evidence.

9.1 The letters of request issued in these proceedings

436. By two interlocutory applications dated 23 September 2016, the Commissioner sought orders for three letters of request to be sent to the judicial authorities of Israel to take or cause to be taken the evidence of employees or former employees of MDB, namely:

437. Each letter of request also sought the issue, in aid of or ancillary to the examination, of a subpoena duces tecum, summons or equivalent order requiring the Proper Officer of MDB to produce documents falling within categories described in the Schedule to Attachment B of the respective letters of request. The request for production of documents in each case was cross-referenced to specific questions to be asked of each proposed witness. An attachment also contained a list of "Questions to be put to the person to be examined or statement of the subject-matter about which they are to be examined": for the full letters of request, see the annexures to the orders in Commissioner
of Taxation v Rawson Finances Pty Ltd (No 4) [2016] FCA 1436 ( Rawson (No 4) ).

438. The orders were sought by the Commissioner so as to obtain evidence which was likely, in the Commissioner's submission, to provide direct evidence of the fraud alleged in these proceedings, as opposed to the inferential evidence only which was then available to the Commissioner: Rawson (No 4) at [4] (Perry J). This was the second occasion on which such applications were made in this proceeding. Orders made earlier for a letter of request to be sent to the judicial authorities of Israel to take, or cause to be taken, the evidence of the Chairwoman of the Board of MDB, Ms Lilach Asher-Topilsky, were set aside on appeal:
Rawson Finances Pty Ltd v Federal Commissioner of Taxation [2016] FCAFC 95; (2016) 103 ATR 630.

439. On 30 November 2016, I made orders that the letters of request be sent to the judicial authorities of Israel to take, or cause to be taken, evidence from Elie Septon, Israel Zamir and Shaul Antebi: Rawson (No 4).

440. In furtherance of the letters of request, the Magistrates Court in Tel Aviv issued a subpoena to MDB for documents falling within the categories of documents mentioned in the letters of request. Notwithstanding that request, MDB resisted handing over the documents, and sought to set aside the subpoena in the Israeli courts. MDB was unsuccessful in setting aside the subpoena before an Israeli Magistrates Court (dated 24 October 2018, CJI 18657-05-17) and on appeal before the District Court (28 January 2020, CA 75450-10-18). Leave to appeal to the Supreme Court was refused on 30 January 2020: Mercantile Discount Bank Ltd v Federal Court of Australia and Ors CAA 798/20. With respect to the decisions of the Magistrates Court and on appeal of the District Court, Justice Mazuz explained (at [1]) that:

In a detailed and well reasoned decision … the Magistrates Court granted the Motion [for presentation of documents against MDB] stating that there is nothing legitimate in keeping the requested documents secret, and that this represents the Bank's attempt to delay the inevitable, while unduly refraining from presenting the requested documents. The district court dismissed the Bank's appeal with all its arguments after adopting the Magistrate's Court's ruling, and adding that the conduct of the Bank, which is detrimental to the investigation of the truth, constitutes bad faith, and that its arguments were intended to attempt to futile the exercise of the order for the presentation of documents.

441. His Honour then refused leave to appeal on the grounds that "the determinations in the district court's judgment are well-founded, do not raise a fundamental legal question that goes beyond the parties' case and the granting of [l]eave to appeal is not necessary to avoid miscarriage of justice" (at [2]).

442. The decision of Justice Mazuz was not tendered in evidence. However, the decision was before the Court both in the joint list of authorities, and was referenced at item 603 of the agreed chronology. The fact of the decision and reasons was not therefore in issue and no objection was taken to the Commissioner citing the decision in his written submissions in chief.

443.

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In answer to the subpoena issued pursuant to these decisions, MDB produced approximately 2000 pages of material in two tranches on 2 February 2020 and 21 April 2020. All of these documents are contained in the supplementary court book, save that duplicates were removed. These documents, together with the transcript of the examination of Mr Antebi, were transmitted from Israel to Australia on 16 July 2020. The transcripts of the examinations of Mr Zamir and Mr Septon were provided later. Where necessary, the documents were translated from Hebrew into English.

9.2 Overview of the documents produced by MDB and examinations undertaken pursuant to the letters of request

444. As I have earlier explained, fraud must be strictly proved. In this case, the fraud case against Rawson was based upon extensive documentary evidence and the evidence taken in Israel pursuant to the letters of request. The parties agreed an extensive agreed chronology of 100 pages drawn from the documents. In both written and oral submissions, I was taken to the significant documents on which the parties relied.

445. As the Commissioner submits (AS at [238]) and for the reasons I develop below, the documents produced by MDB, together with the examinations of Mr Septon and Mr Zamir, disclose that:

446. These propositions directly contradict the case run by Rawson before the AAT and show it to have been knowingly false and misleading.

447. Further, as I have earlier found, the new evidence with respect to BCI, EGL, Civic and Advance establishes that the common business practice engaged in by the Binetter family, of which Emil, Erwin, Andrew and Michael were plainly aware, was that these entities did not secure so-called loans from the Israeli banks on the basis of personal relationships, guarantees and lists of Australian assets. To the contrary, the so-called loans were secured on the basis of back-to-back deposits in the same amount and currency as the so-called loans and for the same period as the so-called loans.

448.

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The case therefore run by Rawson in the Tribunal and defended before the Full Court was a fraud.

9.3 The Rawson loans were secured by a linked cash deposit in an account in the code name of "Arthur Belan"

449. As the Commissioner submits, the new evidence clearly establishes that the Rawson loans were supported by a back-to-back deposit in an account in the code name of Arthur Belan (Michael Binetter) which was in the same currency and amount as the loans to Rawson. This was confirmed by Elie Septon during his examination in July 2020 where he gave evidence that Rawson "had a loan against deposits. Loans to the companies against personal deposits" and that the Arthur Belan deposit account was bank security for the money borrowed by Rawson[325] Examination of Elie Septon, 26 July 2020, 12.4-10 and 110.27-111.2 respectively. . The following Parts examine the evidence which unequivocally establish that finding. I also note that, critically, the following evidence was not produced before or during the Rawson (AAT) hearing.

9.3.1 17 March 1997: establishment of the "Arthur Belan" deposit account with MDB

450. It is now known from the MDB documents that, on 17 March 1997, Michael Binetter authorised a number of transactions with respect to the establishment of a free foreign currency deposit account with MDB. These accounts were to be operated in Michael's code name, Arthur Belan. The relevant evidence in that regard is as follows, all of which occurred on 17 March 1997.

451. Significantly, in his examination pursuant to the letters of request, Mr Zamir, whose department within MDB managed the deposit side of the loan and the company account through which the interest payments were transferred[334] Examination of Israel Zamir, 27 August 2020, 241. , explained that it was his understanding that using a code "was the wish of the account owners".[335] Examination of Israel Zamir, 27 August 2020, 238.19-21. Mr Septon, who had managerial responsibility over the Rawson loan side of the account, also gave evidence that the customer had asked for the code, although he did not remember why they did so.[336] Examination of Elie Septon, 26 July 2020, 65.25 - 66.3-4. In questioning, Mr Septon was further asked if there was "something unusual here regarding the code names here in the account opening". Mr Septon responded as follows:

They asked. They asked for the code. We asked to the Legal Department whether such an option was possible, they said it was legal, they gave us the forms to have them sign and gave them a code.

452. Mr Septon's response plainly indicates that the customer's request to use code names was not common practice.

9.3.2 17 March 1997: application by Michael on behalf of Rawson for the foreign currency loan

453. Also on 17 March 1997, Michael in the stated capacity of a director of Rawson (albeit that Rawson was not incorporated until 21 April 1997[337] KDB Vol 1 Tab 15 . and Michael was never appointed as director of Rawson, at least formally) completed an application for a foreign resident loan "in the amount agreed in foreign currency".[338] SCB Vol 1 Tab 17 ; MDB Folder 3 p 994. The application provided simply that the repayment of the principal would occur "as agreed". Under the heading "Additional Collateral", the loan application stated "[t]he collaterals held by you will serve as security for the repayment of the said loan and the interest thereon". Furthermore, the application identified the rate of interest as "compound interest at the rate of LIBO plus agreed % per annum". These funds were ultimately transferred at an interest rate of 8.298%.

454. Significantly the Commissioner submits that this evidence, taken together with other evidence, establishes that the percentage of interest ostensibly "charged" by MDB on the loan account was chosen by the customer, as opposed to being negotiated with MDB save for the margin which represented the true cost charged by MDB for the arrangement. In this regard, the Commissioner referred to evidence of a loan application signed by Michael which includes, in handwriting and initialled by Michael, an interest rate of 8.298% (that rate being the rate at which the funds were ultimately transferred).[339] SCB Vol 2 Tab 95 . As such, the Commissioner submitted that the evidence indicated that "the customer [was] telling the bank what interest rate it wants, not in the nature of … a commercial file loan arrangement". In isolation, I do not consider that this evidence is a sufficient basis on which to draw that inference. However, together with other evidence to which I later refer, I am satisfied that this is the appropriate and only reasonable inference to draw. This inference indicates that Rawson selected the interest rate for the loan, and could be considered akin to a circumstance in which, if undetected, effectively allowed the customer to dictate the extent of the tax deduction under s 8-1 of the ITAA 97 in Australia for interest on the Rawson loans.

455. The evidence that Michael selected the interest rate for the Rawson loan must also be understood against the composite commercial arrangement between Rawson and MDB. Critically, the real price of the transactions between Rawson and MDB was not the interest rates on these loans. This is because, as I will further explain, the purported Rawson loans were secured by funds held in the Arthur Belan deposit account, the interest rate of which was 7.698%.[340] SCB Vol 1 Tab 67 . Accordingly, the real price of the transactions was the margin between the interest earned on the code account which provided security for the transfer of funds to Rawson (or another relevant Binetter family entity), and the interest charged on the funds

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"loaned" to Rawson (or another Binetter family entity). In the case of Rawson and Advance, that margin was 0.6%, and not the so-called interest rate on the loan accounts of 8.298% as claimed. Ultimately, so long as that 0.6% margin was maintained, MDB was content to allow the customer to select the specific interest rate on the Rawson loan account (which, in this instance, was selected to be 8.298%). So much was confirmed by Mr Septon in his examination pursuant to the letters of request in the following passage[341] Examination of Elie Septon, 26 July 2020, 28.2-9. :

Adv Heskia: I would like to see how much did the client paid in practice and not have 8.298 written there.

Mr Septon: It's certain that the client paid 8.298, the company let's call it that, Rawson certainly paid 8.298. What the [Binetter] family received, received 7.298.

Adv Heskia: This means that the bank actually received the difference in interest.

Mr Septon: Right.

456. This evidence indicating that the customer had selected the interest rate was not adduced before the AAT. As the Commissioner submitted and as I later discuss, had such evidence been before the Tribunal, it would have been incumbent on Rawson to explain how an interest rate selected by it as the customer could fit within s 8-1 of the ITAA 97 pursuant to which Rawson claimed a tax deduction for the interest repayments allegedly at the greater rate.

457. Also on 17 March 1997, a "Free Foreign Currency Account" form was signed by Michael as an authorised signatory of Rawson (for Rawson's account number 980180-51083) (the Rawson current account ).[342] SCB Vol 1 Tab 23 ; MDB Folder 3 p 553-554, SCB Vol 1 Tab 19 ; MDB Folder 3 pp 637-638; SCB Vol 1 Tab 18 ; MDB Folder 5 p 134; SCB Vol 1 Tab 20 ; MDB Folder 5 pp 247-248. The form identifies the "Attorneys" as Erwin, Margaret and Michael who each signed the form, and provided that "Each of the attorneys may operate the account separately".

458. The final document dated 17 March 1997 was a "Condition statement, foreclosure and lien of money and rights, to secure any debt of the borrower or debtor who is also the account holder for foreclose, in current accounts, savings accounts and deposits in Israeli Shekels and foreign currency" form.[343] SCB Vol 1 Tab 21 . This form was completed in the name of Rawson as borrower to MDB.

459. All of these documents were available for Rawson to have requested MDB to produce in the Rawson (AAT) proceedings. Rawson did not do so. Importantly, Mr Septon's evidence at his examination was clear that if a customer asked for documents relating to any loans, deposits and related arrangements held by MDB, those documents would have been provided by the bank.[344] Examination of Elie Septon, 26 July 2020, 64.13-65.22. Furthermore, as I later explain, the decision of the Credit Committee on 28 May 1997[345] SCB Vol 1 Tab 64 ; MDB Documents p 1043. and subsequent MDB summary reports concerning Rawson's dealings with the bank recorded that if asked, MDB would report that the credit was given against financial deposits.[346] E.g. SCB Vol 7 Tab 663 ; MDB Documents p 413. Moreover, despite his intimate and critical involvement in the establishment of the Rawson loan account and the Arthur Belan deposit account, Michael was not called to give evidence at the AAT hearing. Indeed, Rawson contended (falsely) before the Tribunal that no one was available to be called who could give evidence as to the establishment of the Rawson loans. The relevance of the failure to call Michael to give evidence has been explained at Part 5.3 above.

9.3.3 April 1997: Grant of the approved credit line of AUD$4,705,900 to Michael and the Binetter family entities by MDB secured by the back-to-back deposit

460. On 13 April 1997, MDB issued a summary report entitled a "framework allocation". That report explicitly stated that the customer "seeks to utilise credit BACK TO BACK" arrangements, thereby confirming the back-to-back nature of the deposit and loan accounts then proposed.[347] SCB Vol 1 Tab 25 ; MDB Folder 3 p 977, SCB Vol 1 Tab 26 ; MDB Folder 3 p1005. The document was a preliminary, internal MDB document created, before any money had been approved for deposit or transfer. The summary report identifies the customer as Michael. A table headed "credit" refers to an offer of a loan in Australian dollars of $4,705,900 (shekel value NIS16,000,000). A table headed "securities" identifies a deposit in the same amount in shekel (I note that, whilst the table refers to the "Deposit - AUD" as being 16,000,000, this is clearly a reference to Israeli currency). The table also identifies the "total securities" as

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being NIS16,000,000 (AUD$4,705,900), and the "open debt" as $0.

461. A further internal MDB summary report was issued on 21 April 1997.[348] SCB Vol 1 Tab 27 ; MDB Folder 3 p 978. That document read:

Customer name: Binetter Michael Thomas Robert, lawyer, and / or his family owned companies

…

Credit

Code Note/periodical repayment Current Status 13/04/97 Approved Offered Change Spread Valid
34 Loan in Australian Dollars 0 0 16,000,000 16,000,000    
200 Total unlinked Israeli currency IS
0		 IS
0		 IS
16,000,000		 IS
16,000,000		    
510 Total shekel value IS
0		 IS
0		 IS
16,000,000		 IS
16,000,000		    
520 Total in $ terms $
0		 $
0		 $
4,705,9000		 $
4,705,9000		    

Securities Comments:

Code Note/periodical repayment Current Status 13/04/97 Approved Offered Change Spread Valid
621 Deposit - AUD 0 0 16,000,000 16,000,000 0%  
700 Total securities in Israeli currency IS
0		 IS
0		 IS
16,000,000		 IS
16,000,000		    
  Total securities in AUD $
0		 $
0		 $
4,705,900		 $
4,705,900		    
  Open debt $ 0 $ 0 $ 0 $ 0    

1. General Details

The customer is an Australian citizen.

Various companies in Australia are owned by his father and other family members. Due to various foreign exchange restrictions in Australia, the client seeks to utilize credit BACK TO BACK in Israel . The client has been referred to Mercantile Discount Bank by [Israel] Discount Bank.

2. The request

Loan of foreign currency for a year. Renewal at customer's request. Interest will be paid on a regular basis, principal at the end of the period. The account in the main branch has been opened already.

The loan is in the amount of 6 million Australian dollar against a deposit in Australian dollar in the same amount.

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Deposits will be transferred to the bank before the loan is placed, mortgage will be recorded on the deposit and personal guarantees will be accepted if the credit is made on behalf of the companies .

(Emphasis added.)

462. It will be recalled that Rawson was incorporated also on 21 April 1997 with a total issue share capital of $2.[349] KDB Vol 1 Tab 15; KDB Vol 6 Tab 201 ; TCA6-1 9/51.0/51.2/51.5/51.8/51.11/51.13 – .20. Shortly thereafter, on 2 May 1997, Michael signed a certification to MDB, in his capacity as the lawyer for Rawson, that Erwin and Margaret were directors of Rawson.[350] SCB Vol 1 Tab 37 ; MDB Folder 3 p 989. Michael is also identified in that document as an authorised signatory. On 30 May 1997, Michael wrote to Elie Septon at MDB confirming that MDB's "copy of the certificate of registration and Memorandum and Articles of Association of Rawson" as certified by Erwin, was a true copy of the certificate.[351] SCB Vol 1 Tab 56 ; MDB Folder 3 p. 1014, 1022; see also SCB Vol 1 Tab 60 ; MDB Folder 3 pp. 1030; 1034; 1377, 1429 and 1430. On 2 June 1997, Michael enclosed a copy of the Rawson's memorandum and articles of association.[352] SCB Vol 1 Tab 60 .

463. It is significant that Michael represented himself as the lawyer acting on behalf of Rawson (despite his clear lack of independence) from the outset. It must be inferred on this basis that Michael was acting on instructions from the directors of Rawson, and more specifically Erwin, who appears to have been the only director of Rawson who was actively involved in its operations at this time. (It will be recalled that Andrew became a director of Rawson only in 1998.) The fact that Michael was acting as the lawyer for Rawson in his dealings with MDB is also reflected in MDB's internal documents relating to Rawson's loan and linked deposit arrangements, as is apparent from documents discussed below. This is important, as I later explain, in considering Rawson's contention that Michael had full legal and beneficial ownership of the monies in the Arthur Belan deposit account.

464. On 29 April 1997, MDB issued a document entitled "Approved credit line", indicating that MDB had granted Michael "and/or his family owned companies" an approved credit line of AUD$4,705,900 (NIS16,000,000).[353] SCB Vol 1 Tab 28 ;MDB Folder 3 p 979; Agreed chronology item 21. That approval document states that "This framework is valid until 28/10/97". Consistent with the earlier internal MDB summary reports on 13 April 1997 and 21 April 1997, the approval document explicitly refers to the arrangement as utilising a "BACK TO BACK" arrangement. The document also identifies the total sum of the loan in Australian dollars as $4,705,900 (NIS16,000,000), the total securities as the deposit in Australian dollars as $4,705,900 (NIS16,000,000), and the "open debt" as $0. The authorised translation of the text under the heading "Comments" states that:

1. General Details

The customer is an Australian citizen.

Various companies in Australia are owned by his father and other family members,. Due to various foreign exchange restrictions in Australia, the client seeks to utilise credit BACK TO BACK in Israel. The client has been referred to Mercantile Discount Bank by Bank Discount.

2. The request:

Loan of foreign currency for a year. Renewal at customer's request. Interest will be paid on a regular basis, principal at the end of the period. The account in the main branch has been opened already.

The loan is in the amount of 6 million Australian dollar against a deposit in Australian dollar in the same amount.

The deposit will be transferred to the bank before the loan is placed, mortgage will be recorded on the deposit and personal guarantees will be accepted if the credit is made on behalf of the companies.

(Correct to 14.14.97 $1 Australian dollar = NIS 2.67)

The deposit is without margin.

The rates on the loan will be adjusted with the bank's accountant

The credit and deposit will be in the name of the borrower or in the name of foreign companies owned by him/or his family members, for which we have no information.

465. The text of the comments on the loan approval document largely replicates those in the earlier internal MDB summary reports on 13 April 1997 and 21 April 1997. The primary difference in the documents is that the earlier

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reports state that "The rates on the loan have not yet been agreed". Unlike the earlier reports, the 29 April 1997 report also outlines that "[t]he deposit will be transferred to the bank before the loan is placed, mortgage will be recorded on the deposit and personal guarantees will be accepted if the credit is made on behalf of the companies".

466. On 2 May 1997, Rawson completed an "Application to effect banking operations as per phone instructions" form directed to MDB. The common seal of Rawson was affixed to this document, and the document was also signed by Michael (as the authorised signatory) and Erwin and Margaret (as directors of Rawson).[354] SCB Vol 1 Tab 42 ; MDB Folder 2 p 633; SCB Vol 1 Tab 43 ; MDB Folder 3 p 1017; agreed chronology at item 26.

467. By a letter dated 20 May 1997, Michael contacted Elie Septon of MDB regarding the "opening of bank account in the name of Rawson Finances Pty Limited".[355] SCB Vol 1 Tab 46 ; MDB Folder 3 p 1001; agreed chronology at item 29. In that letter, Michael confirmed a number of matters relating to the Rawson company, including that:

468. That letter was signed by Erwin, Margaret and Michael.

469. On 28 May 1997, Elie Septon prepared a handwritten letter to the Financial Department of the Main Branch, Tel Aviv, of MDB.[356] SCB Vol 1 Tab 48 . That letter sought confirmation for an oral request by Michael "to start operating its approved framework of 16 million New Israeli Shekls against a deposit in $ Australian for a corresponding period". The message also stated:

Prices requested by the customer:

A loan for one year 8.28% (That is L +2.405)

A deposit for one year 7.68% (That is L + 1.805)

The Australian L for a period of the year is 5.875

470. This document, which was not before the Tribunal, confirms that the interest rate of Rawson's "loan" was "requested by the customer". As I have explained previously, the margin between the two proposed interest rates in the loan and the deposit was therefore 0.6%. As the Commissioner submitted at T60.38-42 and as I have earlier found, had this document been before the Tribunal, it would have been incumbent on Rawson to explain how an interest rate selected by it as the customer could fit within s 8-1 of the ITAA.

471. Also on 28 May 1997, MDB recorded a decision of the Credit Committee in the following terms[357] SCB Vol 1 Tab 64 ; MDB Documents p 1043. :

  • 1. To confirm to give a spread of L + 1.805 on the deposit, and accordingly determine the interest rate on the credit.
  • 2. The customer should be informed now that if we are required or asked in the future about the credit, we can confirm that the credit was given against financial securities . We cannot give any other answer.

The customer has a credit framework of [New Israeli Sheckels] 16,000[,000] against full securities.

(Emphasis added.)

472. Mr Septon was taken to the Credit Committee's decision in his examination and confirmed in the following passage that the customer had been advised that, if asked, MDB would disclose the existence of the deposits (at T122.18-124.4):

Mr. Septon: Approved the loan at Libor plus 1.805. It should be noted that if you are to be asked in the future about the credit, we could confirm that the credit is given against financial collateral, we will not be able to give any other answer. That's exactly what we did .

Adv. Heskia: What does it mean we will not be able to give? Why should another answer be given?

Mr. Septon: We cannot present any answer that is not true . Namely, the client should should [sic] think that we will say this is not a correct number, but give the details as the bank,

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how do you say? Covers itself vis-a-vis the client, because there are names, that the bank can give in full details if required, legally. That's all.

Adv. Heskia: And is the bank required to give these details?

Mr. Septon: Not in my time. We also informed the client of this thing.

Adv. Heskia: Who informed the client?

Mr. Septon: Me, once I got it, once I got it, what I got here I passed on to the client. That this is the situation, before it takes the money.

Adv. Heskia: And how did he react?

Mr. Septon: He had no problem with that.

Adv. Heskia: Basically you tell him, if I understand correctly, we will not be able to hide your deposits in our bank.

Mr. Septon: Right. Exactly .

…

Adv. Heskia: The bank is aware that questions may arise as to what security Rawson's loans have.

Mr. Septon: The bank is aware that if there are any questions it will give full and correct answers, full answers that it is Binetter. This means that the bank will give full answers if required. Right. The customer must know this .

Adv. Heskia: It will actually have to reveal the truth?

Mr. Septon: Right. Exactly.

(Emphasis added.)

473. It is clear from this evidence that, if the information were lawfully requested, MDB would have revealed the existence of the deposit account and that Mr Septon personally advised Rawson of this. In accordance with this position, Mr Zamir in fact deposed, in his first statutory declaration dated 15 February 2010, that (at [2])[358] KDB Vol 3 Tab 132; TCA1-1 3/216/1398. :

The Bank lent a total of AUD4, 750,000 (Australian dollars) over 3 loans, against sufficient securities to Rawson Finances Pty Limited ("Rawson") commencing June 1997. The Loan Numbers were: 971-18-:650013, 971-18-650021 and 971-18-650048. "971" indicates a loan account. "18" indicates Australian dollars. "650013" and "650021" and "650048" are Rawson's specific Loan Account numbers for these loans. Each specific Loan account of Rawson is the account from which the loan capital was transferred to Rawson. It remained in debit until the Loans were repaid.

(Emphasis added.)

474. However, as I later explain, the words "against sufficient securities" were omitted, without his knowledge[359] Examination of Israel Zamir, 6 August 2020, 323.26-324.11 (Supp CB at tab 3). , in Mr Zamir's second statutory declaration declared on 14 February 2011[360] KDB Vol 4 Tab 166; TCA1-1 5/302/2803. .

475. By a form in Hebrew (and translated into English) dated 30 May 1997, MDB described "Arthur Belan" as a "guarantor" and Rawson as the "borrower" of money owed to MDB (the Arthur Belan pledge ).[361] SCB Vol 1 Tab 54 ; MDB Folder 3 p 1011; agreed chronology at item 32. Specifically, the somewhat awkward translation of the document reads:

Condition statement, guarantee, foreclosure and lean of money and rights (not provided by the borrower or debtor), but by another client to secure any debt of the borrower or debtor in current accounts, savings accounts and deposits in NIS in foreign currency. (All current and future accounts balances).

Name of the borrower: Rawson Finance Pty Limited (A/C 078 272 956)

…

2. Guarantor name: [signed] Arthur Belan …

To: Mercantile Discount Bank Pty

Date: 30 May 1997

Branch:

  • 1. The borrower

It is known to us that Mr Arthur Belan, Rawson Finance Pty Limited Account 078 272 956 hereinafter "the borrower" owes, or will owe or might owe to Mercantile Discount Bank Ltd (hereinafter "the Bank"), alone or together with others, various amounts of money, existing or coming in the future, inter alia the provision of various credits, loans, … In the past or in the future… and all types of bank services

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at his/her request, (together or individually, hereinafter "the bank services").

2. The liens accounts

In exchange for your consent to provide the borrower with banking services as described above, a nd to ensure the full and accurate repayment of the amount secured are set out below, we mortgage and lend it in pledge at your instructions, in your favour and to your credit , as well as assigning a full and final check by way of a lien in respect of all such funds, which will stand from time to time to our credit including any amount that will be added to them in the future from any source, and in any way, and of any of your accounts, and/or entered into the account (including interest and/or earnings). Which will be referred to, together and separately, as "the above amount in the account".

07-03 1. To the bank Arthur Belan [signature] 2. To the customer file 3. To the customer (Arthur Belan) 7.95

(Emphasis added.)

476. The form was signed by Michael in the name of Arthur Belan. A simlar document was signed on the same day, by Michael and Erwin in their own names, both purportedly as directors of Rawson, to which Rawson's company seal was affixed.[362] SCB Vol 1 Tab 55 ; MDB Folder 3 p 1012-1013. By that document, Rawson acknowledged that it may become indebted to MDB in various amounts of money and pledged "[t]he liens account" "[a]s a security for the full and accurate repayment of all of our obligations and debts to you … indefinitely … all the monies that will be available from time to time to our credit". In addition this document contained instructions applying to the lien account that Rawson would not make any withdrawals from the account until full payment of the guaranteed amounts.

477. While the second form provides context to the Arthur Belan pledge, there was no evidence of any lien account in Rawson's name (unless in fact this form related to the Arthur Belan deposit account because the monies in that account were beneficially owned by Rawson (matters which are not established by the evidence)). It is therefore the Arthur Belan pledge which is important. Despite the clumsy language and description of Arthur Belan in the translation as a "guarantor", the intent of the document signed by Arthur Belan is clear, namely: that all of the funds in an account (translated as a reference to a "liens account") in the name of Arthur Belan, including future deposits, are pledged in favour of the Bank in exchange for the provision of loans to Rawson, for the purpose of "ensuring the full and accurate repayment" of those loans (emphasis added). This construction is consistent with the MDB summary report dated 12 June 1997 which stated that "[t]he deposit is in the name of Arthur Belan" and "Mr Belan's personal guarantees will not be accepted in favor of the borrowing companies" (emphasis added).[363] MDB Summary report dated 12 June 1997 ( SCB Vol 2 Tab 85 ; MDB Documents p 1066). It is also consistent with later summary reports, as I shortly explain, which make it clear that the no personal guarantees or financial statements from Rawson were required because the loans were fully covered by deposits.

478. It is therefore clear from these documents that both MDB and Rawson intended to create an arrangement in which Rawson was under an obligation to MDB to ensure that its loan accounts were secured by a cash deposit dollar-for-dollar in the Arthur Belan deposit account. Indeed, when asked about whether there were "already deposits equal in value to the approved credit line" in May 1997, Mr Septon explained in his examination that "[i]f there were no deposits we would not approve a loan" (at T75.24-76.3).

9.3.4 The relationship between the transfer of unexplained funds into the Arthur Belan deposit account and drawings on the Rawson loan accounts

479. It will be recalled that Rawson obtained three "loans" from MDB. These were an amount of AUD$3 million transferred on 5 June 1997, an amount of AUD$1 million transferred on 4 July 1997, and an amount of AUD$750,000 transferred on 11 December 1997. The new documents show that, before obtaining each of these "loans", unexplained funds correlating to the amount of the loans were first transferred into the Arthur Belan deposit account with MDB from another,

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seemingly unrelated, bank account held with IDB. It was necessary for this security to be deposited into the Arthur Belan deposit account before Rawson could obtain its "loan". I explain each of these three transactions in turn.

480. The June 1997 transaction occurred in a number of stages.

481. This June 1997 transaction is recorded in a handwritten note in Hebrew dated 4 June 1997 in relation to the Arthur Belan deposit account 982180-350982. When translated, the note states that there is a deposit of $3,030,000 and an interest rate of 7.698%, and a reference to the margin as follows: "Import / Export the difference of 0.6%"[369] SCB Vol 1 Tab 68. .

482. A summary of the June 1997 transaction is also recorded in an internal "Credit allocation request" form dated 5 June 1997[370] SCB Vol 2 Tab 71. . A handwritten note in Hebrew, dated 8 June 1997, stated "I reported to Yael that no guarantees by the owners were received, or will be received, in the company's accounts. The customer refuses to give a personal guarantee." Under the heading "The nature of the application", the form states that there is "A loan in Australian dollar against a deposit in an equivalent amount, with a gap of 0.6 … The loans will be given to Australian companies against a deposit in the name of Mr. Michael Binetter".

483. The July 1997 transaction followed the same pattern:

484. The final transaction, having the appearance of a "loan", seemingly correlates to a loan application signed by Michael dated 3 July 1997 for the amount of AUD$1 million at an interest rate of 8.298%[376] SCB Vol 2 Tab 95. which would again maintain the 0.6% margin between the interest rates of the two accounts. It further correlates to a letter dated 4 July 1997 from Erwin, as director of Rawson, to Mr Elie Septon of MDB which "serves to confirm the request of this company to draw down a further one million Australian dollars" at an interest rate of 8.298%[377] SCB Vol 2 Tab 99. .

485. The December 1997 transaction again followed the same pattern:

486. Interestingly, there are two loan applications which relate to the December 1997 transaction. Both are dated 11 December 1997 and for a loan amount of AUD$750,000. One of these documents which is signed by an unknown person refers to Rawson loan account 3 (971189-650048), and requests a credit to the Rawson current account (980188-351083) at an interest rate of 8.298%, with repayment in full on 4 June 2002[384] SCB Vol 2 Tab 123 . . The other document, signed by Erwin as a director of Rawson and Michael purportedly as a director, stated that the loan amount was "agreed", repayment of the principal was "as agreed", and the interest rate was "as agreed"[385] SCB Vol 2 Tab 122. .

487. Although the source of the funds from IDB has not been explained, there was evidently a pattern which suggested an agreed arrangement whereby the IDB funds would be transferred to the Arthur Belan deposit account with MDB, which then secured the "loans" provided to Rawson.

9.3.5 MDB internal records confirming that the Rawson loans were secured against the Arthur Belan deposit account at all times

488. MDB updated the record of its arrangements with Rawson from time to time[386] On 13 April 1997 ( SCB Vol 1 Tab 25; MDB Documents p 977), 21 April 1997 ( SCB Vol 1 Tab 27; MDB Documents p 978), 5 June 1997 ( SCB Vol 2 Tab 71; MDB Documents p 1048), 8 June 1997 ( SCB Vol 2 Tab 73; MDB Documents p 1064), 12 June 1997 ( SCB Vol 2 Tab 85; MDB Documents p 1066), 8 July 1997 ( SCB Vol 2 Tab 100; MDB Documents p 1088), 4 February 2000 ( SCB Vol 3 Tab 276; MDB Documents p 701), 14 February 2000 ( SCB Vol 3 Tab 278; MDB Documents p 711), 21 September 2000 ( SCB Vol 3 Tab 279; MDB Documents p 713), 5 March 2000 ( SCB Vol 3 Tab 280; MDB Documents p 718), 2 October 2000 ( SCB Vol 3 Tab 304; MDB Documents p 748), 4 October 2000 ( SCB Vol 3 Tab 305; MDB Documents p 753), 20 May 2001 (SCB Vol 4 Tab 324 ; MDB Documents p 770), 18 December 2001 (SCB Vol 4 Tab 337 ; MDB Documents p 793), 20 December 2001 ( SCB Vol 4 Tab 338; MDB Documents p 798), 27 December 2001 ( SCB Vol 4 Tab 340; MDB Documents p 806), 23 December 2002 ( SCB Vol 5 Tab 418; MDB Documents p 801), 29 December 2002 ( SCB Vol 5 Tab 431; MDB Documents p 808), 2 January 2003 ( SCB Vol 5 Tab 438; MDB Documents p 811), 2 February 2004 ( SCB Vol 5 Tab 493; MDB Documents p 168), 11 February 2004 ( SCB Vol 5 Tab 500; MDB Documents p 174), 25 May 2004 ( SCB Vol 5 Tab 520; MDB Documents p 192), 1 June 2004 ( SCB Vol 5 Tab 526; MDB Documents p 201), 14 June 2004 ( SCB Vol 5 Tab 528; MDB Documents p 204), 28 July 2005 ( SCB Vol 7 Tab 658; MDB Documents p 407), 2 August 2005 ( SCB Vol 7 Tab 663; MDB Documents p 413); 3 August 2005 ( SCB Vol 7 Tab 666; MDB Documents p 420), 8 November 2006 ( SCB Vol 7 Tab 753; MDB Documents p 527), 20 November 2006 ( SCB Vol 7 Tab 756; MDB Documents p 532), 28 November 2007 ( SCB Vol 8 Tab 803; MDB Documents p 589). . Those records establish that at all times, the Rawson loans were supported by a deposit in an account in the name of Arthur Belan and "[t]he deposit [was] in the same amount as the loan at a

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0.6% interval"[387] SCB Vol 5 Tab 500; MDB Documents p 174. . At all times, therefore, MDB's margin on the Rawson loans was 0.6% (described in MDB documents as the "gap between the interest rate of the loan and the interest rate of the deposit")[388] SCB Vol 5 Tab 500; MDB Documents p 174; SCB Vol 5 Tab 520; MDB Documents p 192. . Later MDB summary reports indicate that "[a]ccording to the client's statement at the meeting, the purpose of the credit is for the purchase of real estate in Australia, but on our part we informed the client that if required to give a statement on the loan, we will report that the credit is fully covered by financial deposits".[389] SCB Vol 7 Tab 663; MDB Documents p 413. Moreover, throughout their commercial arrangement, MDB documents referred to the back-to-back nature of the deposit and loan accounts. One letter dated 28 November 2007 referred to the arrangement as being "B+B [back-to-back] to foreign currency deposit against a deposit against the name of (Arthur Belan) … in the same currency, the gap between the interest rate of the loan and the interest rate of the deposit is 0.6%".[390] SCB Vol 8 Tab 803; MDB Documents p 589. I note that some of the MDB summary reports by 2000 refer to Arthur Belan as the guarantor. While there is nothing in the evidence to suggest that any personal guarantee was given by Michael, as Arthur Belan, it would appear that this refers to the Arthur Belan pledge which describes Arthur Belan as a guarantor.

489. Other summary reports explain that no personal guarantees (from anyone) were given in support of the loan as the "credit [was] covered by deposits" (i.e., "credit against liquid collateral")[391] SCB Vol 5 Tab 500; MDB Documents p 174; SCB Vol 7 Tab 658; MDB Documents p 407. and financial statements from Rawson were "[n]ot received; the company does not have to submit them as all credits are covered with deposits"[392] MDB summary report dated 14 February 2000 ( SCB Vol 3 Tab 278; MDB Documents p 711). . Accordingly, in a document confirmed by Elie Septon as branch manager, the loans were evaluated as having a "[v]ery low level of risk"[393] SCB Vol 7 Tab 662; MDB Documents p 416. and recorded as "[b]orrowing rating general weighted score 10, credit against liquid collaterals"[394] MDB summary report dated 14 February 2000 ( SCB Vol 3 Tab 278; MDB Documents p 711). (I interpose that it is not precisely clear what is meant by a weighted score of 10, although presumably it refers to the low risk of the alleged loans in question).

490. The MDB summary report dated 8 June 1997 illustrates MDB's margin on the loans, the fact that no personal guarantees were given in support of the loans, and the fact that the lien was not registered in the name of Arthur Belan (that is, Michael). That document identified the customer as "Binetter Michael Thomas Robert - lawyer, or companies own [sic] by his family" and identified securities in equal amounts to each of the loans, with "Open debt" being "$0". The document further stated that:

2. The request :

Increase foreign currency loan for a year against deposit from Australian dollar $6 million to Australian dollar $10 million. The loan will be renewed at the customer's request. Interest will be paid on a regular basis, principal at the end of the period . The deposit is in the same amount as the loan at 0.6% spread per annum.

The deposits will be transferred to the bank before the loan is issued, a lien will be recorded on the deposit. The credit is given to various companies owned by Mr. Binetter and his family. The deposit is in the name of Michael Binetter.

Mr Binter's [sic] personal guarantees will not be accepted in favour of the borrowing companies.

Correct to 8.6.97: $1 Australian dollar = 2.61 NIS)

Rates

The spread between the interest rate on the deposit and the interest rate on the loan will be 0.6%.

The rate itself will be matched with the bank's accountant.

Approved as follows:

Interest on the deposit: L _+ 1.805

Interest on the loan: L + 2.405

If we are asked about credit in the future, we can only confirm that the credit is given against financial securities. We will not provide any further details.

(Underlining in the original; emphasis in bold and italics added.)

491. Similarly, an MDB summary report dated 10 November 1998 in relation to Rawson listed the shareholders as the "Belan family" and stated that the "Account related to account Advance Finance Pty Ltd". The report stated that "in accordance with actual execution of

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foreign currency loan in $Australian dollar, Back to Back for deposit in foreign currency in the same currency"[395] SCB Vol 3 Tab 212 ; MDB Folder 3 p 1168-1169. . The report further stated:

The credit is intended to finance various companies owned by Arthur Belan and his family.

The deposit is in the name of Belan, Arthur

The lien was registered in the name of the company and in the name of Mr. Belan, Arthur.

Mr. Belan's personal guarantees will not be accepted in favor of the borrowing companies.

4. The bank informed the customer that if we are asked about the credit in the future, we can only confirm that the credit is given against financial securities. We will not provide any further details.

…

6. Financial reports:

Not received - the company does not have to submit them, since all credit is covered by deposits.

(Underlining in the original.)

492. As is apparent from the earlier evidence which I have discussed, Michael, as the representative of Rawson, initiated contact with MDB in order to place the deposit and obtain the loan in May 1997[396] SCB Vol 1 Tab 46; MDB Documents p 1001; SCB Vol 1 Tab 47 ; MDB Documents p 1002; SCB Vol 1 Tab 48; MDB Documents p 1004; SCB Vol 1 Tab 56; MDB Documents p 1014; SCB Vol 1 Tab 51; MDB Documents p 1019; SCB Vol 1 Tab 59; MDB Documents p 1020; SCB Vol 1 Tab 60; MDB Documents p 1030. . That included confirming that the company had authorised Erwin, Margaret and Michael "to each severally operate bank accounts … of the company, to receive loans, pledge assets" and to sign all documents in connection therewith[397] SCB Vol 1 Tab 46; MDB Documents p 1001. .

9.3.6 Conclusion as to the link between the Arthur Belan deposit account and the Rawson loan account from the outset

493. Not only does the new evidence to which I have referred establish that the Arthur Belan deposit account and the Rawson loan accounts were linked from the time of their establishment in 1997, but they also establish that the loans were required to be secured by the linked deposit account in the same amount and in the same currency before any "loan" monies could be drawn, and for the life of any borrowings by Rawson. Not surprisingly, in the face of that evidence, Rawson finally admitted the existence of the Arthur Belan deposit account even though (as I later address) it submitted that that evidence only reinforces its case that the Rawson loans were genuine.

9.4 Rawson never defaulted in paying "interest" on the Rawson loans

494. It will be recalled that before the Tribunal, the Commissioner sought to rely upon a number of unusual circumstances relating to Rawson's loans in support of its case that Rawson had not discharged its onus of establishing that the assessments were excessive. One of those circumstances was MDB's apparent failure to enforce the asserted loans, despite there being substantial periods of default in paying interest on the Rawson loans between February 2001 and January 2005 and between January 2006 and July 2009 (Tribunal's reasons at [25]-[26] and [30]). Rawson contended that, despite these defaults and the consequential higher interest "penalty" obligation which the defaults triggered, the full amount of interest allegedly due to MDB was eventually paid.

495. In support of Rawson's case, Rawson relied upon its own copies of letters written by it to its Australian bankers requesting the transfer of interest payments to MDB (Tribunal's reasons at [29]; Rawson (FCAFC) at [25] and [26] (Jessup J)). These included a letter dated 4 January 2006 signed by Andrew to Premium Business Services instructing them to transfer AUD$553,121.11 from Rawson to MDB marked to the attention of Mr Elie Septon, being (allegedly) "Interest from 1 July 2002 to 31 December 2005 on the total drawdown of $1 550 000.00 on behalf of Rawson Finances Pty. Limited on Current Account No. 980 188 35 10 83". This account number was the Rawson current account with MDB[398] SCB Vol 7 Tab 695; MDB Documents p 452. . Similarly, by a letter dated 8 October 2009, Andrew purportedly instructed ANZ Private Bank in Sydney to transfer AUD$643,563.44 (comprised of AUD$268,563.44 interest and AUD$375,000.00 principal) from an account in the name of Ligon 158 to the Rawson current account with MDB with the following message:[399] SCB Vol 9 Tab 930; MDB Documents p 70.


496. As the Commissioner submits (AS at [252]), it is clear from the documents produced by MDB pursuant to the letters of request that interest was never overdue for any substantial amount or for any substantial period of time because the payments were met out of other accounts. The case presented by Rawson in this regard was patently false.

497. First , a signed MDB document dated 4 January 1998, referring to the Arthur Belan deposit account, stated "t/f from dep a/c to c/a interest will be paid every quarterly"[400] SCB Vol 2 Tab 140 ; MDB Folder 5 p 127. . I infer from this that the arrangement was for interest to be paid quarterly from the (Arthur Belan) deposit account to the Rawson current account and from there, to the Rawson loan accounts.

498. Secondly , the MDB bank records reveal that this arrangement was implemented, albeit with repayments being made every six months rather than quarterly. Thus in general, over the period between 1 July 2001 to 31 December 2004, "interest" was being paid for Rawson loan account 2 (650021) and Rawson loan account 3 (650048) under the following regime:

499. This arrangement is illustrated by the table in Appendix B to these reasons, "Payments of interest on Rawson's loans from July 2001 to December 2004", albeit that that table does not include every payment.

500. Furthermore, in some cases, there was an excess of funds available in the Arthur Belan deposit account or the Rawson current account, that is, there was more money in those accounts than was required to cover the interest on the Rawson loans. (In these cases, as I illustrate below, Rawson or Arthur Belan (i.e. Michael) instructed MDB to transfer the excess funds to unknown persons and entities.)

501. None of these facts were ever disclosed by Rawson to the Tribunal.

502. Three examples suffice as illustrations of Rawson engaging in highly suspicious and unexplained transactions of this nature.

503. First , in relation to the interest payments owing to 31 December 1997, an additional and unnecessary payment described as "interest" was made from Rawson's AMRO Australian account to the Rawson

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current account with MDB. The excess funds were then channelled out of the Rawson current account to unexplained persons. While this transaction is likely to have been a "round robin" arrangement intended to create the illusion of a legitimate loan repayment by Rawson, it is unnecessary to make a finding to this effect. It suffices that the transactions were not disclosed to the Tribunaland remain unexplained.

504. The process in this example was effected as follows:

(See also the agreed chronology at items 81-89.)

505. Secondly , as a variation on this theme, the following transactions were undertaken with respect to interest payments owing to 30 June 1998 of $195,003:

(See the agreed chronology at items 94-99.)

506. Thirdly , the following example of a transfer of funds from Australia to Israel is also instructive:

507. The pattern of transactions described above which emerged from the documents now available is replicated throughout the documents obtained from the Israeli banks pursuant to the letters of request. In short, as the Commissioner submitted:

508. This pattern of transactions accords with Mr Zamir's explanation of the arrangements to pay interest on the loan accounts in his examination pursuant to the letters of request (at T264.15-22):

The interests that were credited to the deposit account of the client, the interest element was transferred to the current account. The principal remained in the deposit account because the principal served as a lien against the loan. The interest did not serve as a lien against the loan so it is transferred to the current account, and this is done automatically by the computer.

509. It is evident therefore that Rawson was never in fact in default of its loans. The new evidence therefore directly contradicts Rawson's case in the AAT that interest was capitalised and the default was dealt with by the repayments in a lump sum, which was one of the factors taken into account by the Tribunal in deciding that Rawson's loans were genuine.

510. This was also confirmed by both Mr Septon and Mr Zamir during their respective examinations pursuant to the Rawson letters of request. In this regard, Mr Zamir was asked if there was ever a state of affairs in which the Binetter family did not pay the margin interest to the bank (which Mr Zamir confirmed was "the profit of the bank out of this arrangement"). Mr Zamir responded:[426] T239-240 (6 August 2020), SCB Vol 1 Tab 3 .

A. To the best of my recollection such a case never occurred.

Q. If such a case had occurred, that the interests that they were required to pay were not being paid, what would the bank have done?

A. I do not know. Such a state of affairs never occurred, so I cannot say what the bank would have done. …

…

Q. So your testimony is that throughout the entire period, a long period in which the loans were against the deposits the Binetter family members in Rawson Company paid everything that the bank charged them to pay.

A. To the best of my knowledge yes.

Q. And there was never a state of affairs in which interest accounts were not paid by the family or by Rawson for such loans.

A. No. Such a situation never occurred.

511. Logically Mr Zamir's evidence that Rawson never defaulted in paying the margin of .6% (being the difference between the amount earned on the deposit account and the interest charged on the loans) must mean that Rawson never defaulted in its interest payments at the nominal rate of 8.298%.

512. Similarly, Mr Septon confirmed in his evidence that there was no deviation in the

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repayment of the loan.[427] SCB Vol 1 Tab 2 ; Transcript 26 July 2020, T81-T82. In this regard, it is clear from his evidence in relation to Advance that the word "deviation" is being used (by the translator) to mean default.

513. Finally, there was one occasion where the Arthur Belan deposit account was in deficit of approximately $5,000 in July 2002. However, MDB followed this up on a number of occasions with Rawson and, as a consequence, Andrew transferred funds of $20,000 into that account in December 2002, which more than covered the deficiency[428] See SCB Vol 4 Tab 389 ; SCB Vol 4 Tab 389; SCB Vol 4 Tab 389; SCB Vol 5 Tab 420. .

9.5 Andrew Binetter knew the Rawson loans were secured by a cash deposit, agreed to MDB's margin of 0.6% on the Rawson loans, and gave instructions with respect to transactions involving the Arthur Belan deposit account

9.5.1 Andrew knew of the Rawson loans and Arthur Belan deposit account from 1997

514. As the Commissioner submitted (at T164.43-45), Andrew has "always had, from 1997, the power to conduct transactions from the [Arthur] Belan account". Furthermore, and bearing in mind the Briginshaw principle, taken as a whole the evidence establishes that Andrew had knowledge of the Rawson loan accounts and linked Arthur Belan deposit account from their establishment in 1997 or shortly therefore. In particular:

515. Furthermore, despite the very substantial number of documents produced by MDB in answer to the letters of request and the fact that those documents can safely be assumed to comprise all of the records now held by MDB in relation to Rawson, there is no evidence of the code names ever being used in relation to the Rawson loans. They were used only in relation to the transactions concerning the Arthur Belan deposit account. Moreover, there is no evidence suggesting that the Arthur Belan deposit account had any purpose other than providing risk-free collateral to MDB for the "loans" extended to Rawson and as a fund for the payment of interest on the Rawson loans. The new evidence, including the evidence given on examination by officers of MDB pursuant to the letters of request, establishes the contrary.

516. Having regard to this evidence, the only reasonable inference to draw (having had due regard to the Briginshaw principle) is that Andrew knew of the Rawson loans, knew of the existence of the linked Arthur Belan deposit account from 1997 or shortly thereafter, and knew at least that the Arthur Belan deposit

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account provided security for the Rawson loans (even if he was not then aware that interest payments were intended to be made from that account).

517. The following Part addresses Andrew's subsequent involvement in transactions with respect to the Rawson loan accounts and the Arthur Belan deposit account. Standing alone, the weight which might have been given in particular to file notes by MDB officers of conversations with Andrew and other Binetter family members would be limited. Taken together, however, and with the other evidence of Andrew's involvement from the earliest days of the Rawson loans, the evidence establishes that Andrew at least from time to time interacted with MDB on Rawson's behalf, and undertook transactions on Rawson's behalf.

9.5.2 Evidence of transactions involving Andrew with respect to the Rawson loan accounts and deposit account

9.5.2.1 EVIDENCE OF TRANSACTIONS INVOLVING ANDREW FROM 1999

518. An MDB file note dated 11 March 1999 by Raymonde Sadka, MDB, records conversations with Andrew and Michael in relation to "Rawson Fin Pty Ltd" and "Belan Arthur"[433] SCB Vol 3 Tab 232 ; MDB Folder 4 p 1242. . The note records that:

8:15 I called - I called Michael and left a message with his secretary to call me, after one of the brothers called Elie Septon the day before, to receive information about the accounts and intentionally was denied receive all of it.

09:00 Andrew called to get information, I refused to give it to him.

09:35 Michael called to ask to give information to Andrew.

09:40 Andrew called and I tried to give him as little information as possible on the phone. We arranged that I will send him bank statements to Michael's fax.

519. On the same day, Ms Sadka sent a facsimile to "Michael" (fax number 061293166496) which included copies of the bank statements for the Arthur Belan deposit account, the Rawson current account, and the Rawson loan accounts[434] SCB Vol 3 Tab 233. .

520. A handwritten file note on 13 September 1999 referred to a call from Michael informing MDB that "his brother, John Binetter, will contact us in the next few days. Please give him any information he wants"[435] SCB Vol 3 Tab 255. . I note that John is Andrew's middle name and Michael had no brother with the first name John. As such, this is clearly a reference to Andrew.

521. These notes indicate that MDB had some hesitancy in giving information directly to Andrew without Michael's explicit authorisation, despite the documentation concluded in 1997 authorising Andrew to operate Rawson's various accounts. This hesitancy is no doubt due to the fact that Michael established the loans and linked deposit account and was the primary point of contact between Rawson and MDB at this stage (even though he was not a director of Rawson but represented himself as Rawson's lawyer). Furthermore, as I later explain, MDB rated the Arthur Belan deposit account as one requiring a high level of supervision because it was a "code account" providing security for a loan to a foreign company and the deposit amount was required to be equal to the amount of the loans at all times.

9.5.2.2 EVIDENCE OF TRANSACTIONS INVOLVING ANDREW FROM 2002

522. A file note headed "Sefton" also produced by MDB in response to the letters of request refers to a telephone call (it may be inferred) by Mr Septon at MDB on 25 June 2002, and records that he spoke "to Erwin Binetter (father), he knows what the matter is - Michael my son is very busy, but he will make sure that in an hour his second son Andrew will call Eli Sefton."[436] SCB Vol 4 Tab 360; MDB Documents p 828. The note also refers to the fact that "Michael Binetter no longer works there, just the father". The document suggests (as the Commissioner submits at T129.31-35) that MDB was setting up an alternative line of communication with Andrew rather than Michael. That accords with documents suggesting an increased involvement by Andrew in Rawson's transactions with MDB around this time.

523. A handwritten telephone note from MDB records a call at 8:30am on 3 July 2002 which was apparently returned by Andrew who is identified as "Andrew Binetter (the son) (Michael's brother)" and also provided his fax

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number (ending in …496)[437] SCB Vol 4 Tab 389. . The note recorded that:

Account in deficit (A$5319.-) money must be transferred

Telephone number of Andrew + Fax

Loan extension form + (do not know for how long and the forms must be faxed)

Why is he not contacting Sefton [sic], he is asking for all the private account pages + the company + the loans

524. From the evidence before me, this appears to be the only instance where the Arthur Belan deposit account was in deficit. As the Commissioner submitted, this situation appears to have arisen because there were insufficient funds in the Arthur Belan deposit account to cover the interest on the Rawson loans (T513.5-6). When faced with this situation, the documents to which I refer below record various telephone conversations in which MDB followed up this issue up with Rawson to ensure that there were sufficient funds in the account. This accords with the purpose of the back-to-back deposit account being to wholly secure the Rawson loans, and with MDB's clear intention that it not be exposed to any risk in relation to the Rawson "loans": see, for example, the earlier discussion of the MDB summary reports above. As I also explain shortly, in December that year Andrew finally transferred sufficient funds which more than covered the short-fall.

525. An MDB handwritten file note stated that two hours later on 3 July 2002[438] SCB Vol 4 Tab 389; MDB Documents p 860. :

I called Andrew to his mobile [number redacted], he agrees to the interests:

Deposit 4.5875

Loan 5.1875

Gap 0.06% [sic 0.6%]

526. As the Commissioner submits, this file note not only demonstrates that Andrew was in communication with MDB in relation to Rawson in 2002, but evidences "communication about the very issue that Rawson [was] purporting to prove did not exist to the [T]ribunal", being the existence of a linked deposit account securing the Rawson loans (T513.6-10).

527. A little later on the same day, seven pages of bank statements were transmitted by facsimile to Andrew (number …496)[439] SCB Vol 4 Tab 388. in relation to the extension of certain of the Rawson loans. These documents included:

528. The evidence of the gap or margin between the interest rates of the loans and the deposit in these documents corresponds with an MDB record also dated 3 July 2002 to which a handwritten amendment to the interest rate from 8.298% to 5.1875% is recorded for the Rawson loan accounts 2 and 3 (account nos. 654-0971-18-650021 and 654-0971-18-650048) in the sums of AUD$800,000 and AUD$750,000 due on 31 December 2002[440] SCB Vol 4 Tab 390; MDB Documents p 862. . From these records it is apparent that Andrew was telephoned on 3 July 2002 by MDB on his mobile number and agreed to the margin of 0.6% between the interest rates on the deposit and the two loans.

529. On 26 August 2002, an MDB file note was prepared by Ms Sadka apparently again following up on the issue of the deficit in the Arthur Belan deposit account. The note stated that[441] SCB Vol 4 Tab 397. :

I called the mobile of Andrew Binetter [redacted]

Apparently I woke him up from sleep because he was in the US and not in Australia.

Will return to Australia in a week and address the matters:

  • 1. Will transfer money
  • 2. Sign the forms

530.

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A further file note records two telephone calls between Ms Sadka from MDB and Andrew on 23 December 2002 advising that Andrew "recognized my voice without me introducing myself", and subsequently that Andrew had sent AUD$20,000 to MDB on 20 December 2002.[442] SCB Vol 5 Tab 420; MDB Documents p 876 Two days later on 25 December 2002, a fax transmission to Andrew included a note that "we have followed your instructions dated 27/12[/]02 to deposit payment in the amount of" $20,000 in the Arthur Belan deposit account (98018-350982)[443] SCB Vol 5 Tab 426. .

531. As the Commissioner submitted, this transfer to the Arthur Belan deposit account appears to have been intended to cover the deficit of $5319 in that account which had concerned MDB. It is also consistent with other evidence as to Andrew's knowledge of the Arthur Belan deposit account and of its relationship to the Rawson loans. Furthermore, MDB's record of the transfer of the funds (which is referred to at item 185 of the agreed chronology) raises a number of unexplained questions, as it states that the monies were sent by the "ordering Customer: Peter Holdings Ltd" and identifies the "beneficiary customer" as "Belan Brothers" which is another code name. Who, for example, were those persons? Were those merely code names for Binetter family members?

9.5.2.3 EVIDENCE OF TRANSACTIONS INVOLVING ANDREW FROM 2006

532. By a letter sent via facsimile on 31 March 2006 (and erroneously dated 31 August 2006), Michael advised MDB that "Andrew Binetter is authorised to conduct any business and undertake any activity and sign any documents on behalf of Rawson"[444] SCB Vol 7 Tab 718; MDB Documents pp 463, 464. . That letter gave effect to a resolution of a meeting of directors of Rawson on 17 March 2006 chaired by Andrew authorising him to conduct any business and sign any document on behalf of Rawson.[445] SCB Vol 7 Tab 699; MDB Documents p 458; On 23 May 2006, handwritten notes of MDB's minutes of a meeting of directors in relation to Rawson and "Belan Arthur" headed "Subject: Andrew" referred to the "Decision of Board of Directors assigning Andrew authorised by apostile or notary and consular". In addition, the note stated that "A letter confirming that Andrew's signature is mandatory and also does not require a company stamp" (emphasis in original)[446] SCB Vol 7 Tab 702. . (I note that earlier on 2 May 2006, Andrew provided a specimen signature to MDB with respect to the Rawson current account (number 980188-351083) on a form identifying him as a "signing authority"[447] SCB Vol 7 Tab 727; MDB Documents p 497. .)

533. The reason for MDB's caution before accepting that Andrew could undertake transactions with respect to the Arthur Belan deposit account is explained by an MDB "Know Your Customer" record for the Arthur Belan deposit account[448] SCB Vol 6 Tab 575. . That record is dated 26 January 2005 but includes an update for 2006.

534. The record explained that a "Code account" is:

A private deposit to provide (security) is held for a loan given to a foreign company owned by the account holder.

According to an agreement with the customer, the deposit amount will be equal, at any given moment, to the loan amount of Rawson's company, and the interest rate difference between the deposit and the loan will be 0.6% per annum, with interest rates to be counted on calculated on the same basis (360 days).

Date: 26/1/2005 Completed by: Zamir, Israel

535. The "know your customer" record, under the heading "Confirmation to open the account" identified that the Arthur Belan deposit account had a "91 High supervision level". It also gave reasons for this "prescribed level of supervision" and updated that level as follows:

Due to the fact that the deposit is held in a code account, the level of supervision 91 was determined as required by the bank's management.

Update : During 2006, a signature right was given in the Rawson account to Andrew John Binetter

Date: 26.1.2005 Confirmed by: Zamir, Israel Branch manager signature: Zamir

(Emphasis in the original.)

536. On 1 May 2006 Andrew made a handwritten request for MDB to convert

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AUD$750,000 to Israeli Shekels and prepare a bank cheque in favour of "David Israel" for collection by Andrew the next day.[449] SCB Vol 7 Tab 722; MDB Documents p 486. Andrew signed the request beside the code name "Frank Belan" using his Andrew Binetter signature.

537. On the same day, "Arthur Belan" (Michael) instructed MDB Tel Aviv by letter to provide a bank cheque in favour of so-called "M&D Lobelson" in the sum of AUD$750,000, to be collected the following day from the Tel Aviv offices of MDB by Andrew [450] SCB Vol 7 Tab 721; MDB Documents p 485. . The letter signed by "Arthur Belan" was on the letterhead of "Belan Brothers Financial Services Investment Brokers"which appears to be a code name but is unexplained.

538. While Andrew initially identified the "recipient" of the cheque as "David Israel", the only reasonable inference to draw is that a decision was made to change the identity of the "recipient". This is because, on 2 May 2006, in accordance with Michael's instructions, a cheque was drawn to "M&D Lobelson" for an amount of AUD$750,000 by order of "Arthur Belan"[451] SCB Vol 7 Tab 726. . That cheque was signed for MDB by Ms Sadka and Mr Zamir, and was deposited, presumably by Andrew, at an IDB branch on Mapu Street.[452] SCB Vol 7 Tab 725. This was one of the highly suspicious transactions undertaken on the Arthur Belan deposit account which has never been explained.

9.5.2.4 EVIDENCE OF TRANSACTIONS INVOLVING ANDREW FROM 2009

539. On 21 July 2009, Andrew (using the code name, Frank Belan) gave written instructions to MDB to convert "approximately AUD$1,060,000" from the Arthur Belan deposit account (980188-350982) to Swiss Francs and to "issue a bank cheque in favour of PETER BABIS".[453] SCB Vol 9 Tab 897; MDB Documents p 43; SCB Vol 9 Tab 919 . The transaction voucher (dated 22 July 2009) was executed by Andrew, signing as "Frank Belan", in the presence of Israel Zamir.[454] SCB Vol 9 Tab 919; MDB Documents p 58. MDB's hand written file note of that transaction recorded that the "[d]eposit must be reduced accordingly" as result of the transaction.[455] SCB Vol 9 Tab 893; MDB Documents p 52; SCB Vol 8 Tab 832; MDB Documents p 52. The cheque (dated 22 July 2009) in the sum of CHF917,000 was said to be by order of Michael[456] SCB Vol 9 Tab 908 ; MDB Documents p 44. .

540. On 22 July 2009, MDB recorded Andrew, by power of attorney, giving instructions on the Arthur Belan deposit account with respect to placing an amount of AUD$750,000 on term deposit for 162 days[457] SCB Vol 9 Tab 918; MDB Documents p 55-56. .

541. Subsequently Andrew gave instructions on 13 October 2009 for the transfer of money (AUD$286,000) from an account in the name of Rawson (0001351089) to an account in the name of Arthur Belan (0001350988)[458] SCB Vol 9 Tab 936; MDB Documents p 78. . Evidence given in the Rawson (AAT) proceedings establishes that Andrew was in Israel on 13 October 2009[459] KDB Vol 3 Tab 120; TCA1-1 3/183/1161; KDB Vol 3 Tab 122; TCA1-1 3/185/1166; KDB Vol 3 Tab 121; TCA1-1 5/284/2563 [4]; see also, KDB Vol 8 Tab 273 ; Layoun Annexure “RL1” page 10; agreed chronology items 428 and 438 (albeit that the reference at item 438 should have stated incoming passenger card for Andrew Binetter). . The document confirming the instructions to execute the transaction was signed both by Andrew (described on the form as the Transaction Executor) and an officer of MDB[460] SCB Vol 9 Tab 936; MDB Documents p 78. . Mr Zamir also testified at his examination on 13 August 2020 that Andrew/Frank Belan gave instructions on 13 October 2009 for a bank cheque for a total of 917,000 Swiss francs to be drawn and in return, the Arthur Belan deposit account to be charged AUD$1,057,469.82 and therefore "a rate benefit of 0.6"[461] SCB Vol 1 Tab 3.2; Transcript 13 August 2020, T467.2-T469.6. . It was Mr Zamir's evidence that Andrew signed the form before him as Frank Belan. This accords with the finding by the Tribunal in Rawson (AAT) (at [166]) that Andrew returned to Tel Aviv and spoke to Mr Zamir on 13 October 2009.

542. A further transaction involving Andrew occurred on or about 13 October 2009[462] SCB Vol 9 Tab 942; MDB Documents p 76; SCB Vol 9 Tab 943 ; MDB Documents p 77. . Specifically, on 13 October 2009, instructions were given by Andrew for a bank cheque to be drawn from the Arthur Belan deposit account in CHF595,000 (converted from AUD$648,049.84) in favour of "Peter Babis".[463] SCB Vol 9 Tab 942; MDB Documents p 76. (I note that the Arthur Belan deposit account by this stage had a new number, namely, 1350988, as is expressly stated on the instructions.) A bank cheque was then drawn in favour of "Peter Babis" which was said to be by order of Michael in the sum of CHF595,000 on 13 October 2009[464] SCB Vol 9 Tab 943; MDB Documents p 77 . As I have earlier held, the identity of "Peter Babis" has never been explained, nor has the purpose of these drawings.

9.6 Rawson did not ask MBD to provide all of its files in respect of Rawson's arrangements with MDB

543. In Rawson's letter to the Commissioner dated 15 September 2009, enclosing objections to the notices of assessment issued to Rawson in respect of the 1997, 1998, 1999 and 2000 income years[465] KDB Vol 3 Tab 116. , Rawson provided a list of

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allegedly "legitimate reasons" as to why it was not "in a position to produce the loan documents or any further evidence of payments than already produced to the Commissioner with respect to the amount and repayment of the loans" (at [28]). These included that "[t]he only documents which MDB has been in a position to provide, to date, to the Taxpayer with respect to its loans to the Taxpayer are" written statements from MDB setting out the interest payable from 4 June 1997 to 30 June 2007 (at [28(g)] (emphasis added) and [29]).

544. On 8 November 2010, a summons to produce documents was issued by the Commissioner upon Andrew[466] KDB Vol 4 Tab 151; TCA1-1 Vol 5 Tab 289. for:

545. Andrew affirmed in his affidavit dated 4 May 2011 (at [119]) in the Rawson (AAT) proceedings[467] KDB Vol 5 Tab 182; T CA6-1 Tab 36.0 – 36.96 pp 1578-2387. that on 26 November 2010, Rawson and the Commissioner agreed (before the AAT) that the summons would be read (in summary) as requesting documents recording or evidencing any deposit with any bank between 1 July 1995 and 30 June 2008 related to any loan from the Israeli banks described in affidavits filed by the applicant, namely, MDB, IDB and Bank Hapoalim.

546. Andrew further deposed that (at [120]-[121]):

For the purpose of complying with the Summons, in or about late 1 December 2010 I telephoned the MDB to enquire whether they could provide any documentation falling within this request. I also contemplated that a similar request would be made to Erwin Binetter and Margaret Binetter and accordingly spoke with the officers from the MDB. I spoke with Israel Zamir of the MDB and we had a conversation with words to the following effect:

I said: "Mr Zamir I need some further help please. I have received Summonses from the ATO enquiring as to whether there are any deposits held by a number of my father's entities which may have been used as securities for the loans that your bank made to Rawson. If I give you the names may you please check the bank's records and tell me if the bank at any time held any deposits."

Mr Zamir: Yes please, give me the names and I will check."

I then read the list of names in the Summonses. After reading each name Mr Zamir said words to the effect of:

"no deposits were ever held in that name at any time".

I then further said to Mr Zamir words to the effect of:

"Also please check if any deposits were held in my father's name Erwin or my mother's name, Margaret."

Mr Zamir said word[s] to the effect of:

"No, there were no deposits in your father's or mother's names".

Deposit with Mercantile Discount Bank

When Rawson made the final repayment of the loan to MDB on or about 11 December 2009, no-one at MDB told me that MDB was holding, or had access to, any bank account with a deposit that had been securing the loan from MDB to Rawson.

547. Similarly (in response to a further notice to produce issued to him on 26 October 2010), Andrew deposed in his affidavit affirmed on 6 May 2011 that, in addition to the steps taken above, he asked Mr Zamir to "check if any deposits were held in the name of Rawson". Mr Zamir replied that "No, there were no deposits in that name", as a result of which Andrew deposed that he "knew that that [sic] there were no documents to produce" in response to the further notice to produce[468] KDB Vol 5 Tab 185; TCA6-1 8/41/4120-4123. .

548. The Commissioner submitted (AS at [262]) that there is an ample evidence that Rawson (through Andrew) intentionally did not ask MDB for the totality of its files concerning its commercial arrangements with MDB, and in particular that no documents evidencing the linked Arthur Belan deposit account were ever requested. I agree. It is apparent that Rawson was determined not to reveal the existence of the

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linked Arthur Belan deposit account whether through the production of documents held by MDB or otherwise or the existence of any deposit accounts in relation to any loans to Binetter family entities by any Israeli bank. For the following reasons, Andrew's evidence that he asked for the totality of documents from MDB must be taken to have been knowingly false.

549. First , MDB produced a huge volume of new material in response to the Rawson letters of request issued in this proceeding. That material disclosed for the first time the true arrangement between Rawson and MDB, including the existence of the linked "Arthur Belan" deposit account, Michael's involvement in establishing the Rawson loans, the involvement of Rawson in setting interest rates, the use of code names in relation to the deposit account, and Andrew's involvement in transactions with respect to the Rawson loan accounts and deposit account. Critically, Rawson did not lead any evidence to explain why this material - which plainly fell within the scope of the notices to produce - was not produced in answer to the notices to produce and was never disclosed before the AAT despite its obvious relevance to the issues in that proceeding.

550. Secondly , the evidence establishes that if Andrew (as a person authorised to undertake transactions on the Rawson and Arthur Belan deposit account from at least May 2006) had in fact requested the whole of the files held with MDB and, in particular, those relating to the Arthur Belan deposit account, they would have been provided by MDB.

551. In particular, at his examination pursuant to the letters of request, Mr Septon testified that:[469] Examination of Elie Septon, 26 July 2020, 65.17-22 ( SCB Vol 1 Tab 2 ).

If the company asks for its books approvals for the loans it gets them. If that person wants confirmations of his deposits, he gets them … if you ask with respect to a specific loan you get for a specific loan. If you apply for 2 specific loans, you get for each specifically.

552. Mr Septon also explained in his evidence that "[i]f you want a statement on the deposits, you ask for a statement on the deposits. If you want a statement on the loans, you get a statement on the loans."[470] Examination of Elie Septon, 26 July 2020, 64.26-65.1 ( SCB Vol 1 Tab 2 ).

553. Mr Zamir's evidence on examination pursuant to the letters of request is to similar effect. However, Mr Zamir's evidence goes further as he gave direct evidence that Rawson requested information from MDB only about its loans and not about the deposit account. Specifically, when questioned about why his affidavits of 15 February 2010 and 14 February 2011 described only the loans and did not discuss the deposit account with MDB against which the "loans" were "secured", Mr Zamir responded that:[471] Examination of Israel Zamir, 6 August 2020, 283.3-17 ( SCB Vol 1 Tab 2 ).

Here I referred only to what they asked. They asked that I give a certificate as to the loans. I did not refer. Besides they did not ask me to note collateral or anything like that. So that is why I did not refer to the accounts that served as collateral. They said, provide details. Give us a certificate. They want to know about the loans that we took. The loans that we took is this. Yes, this is the answer. There is no hiding of anything here. Simply this is what they asked us to certify to them that Rawson had such and such loans. That is what I wrote.

554. Upon further examination, Mr Zamir claimed that he provided full information on the loan accounts, but not the deposit accounts. In that respect, Mr Zamir observed that "[n]o. I did not reconstruct the deposits. They did not ask, and I did not reconstruct"[472] Examination of Israel Zamir, 6 August 2020, 326.21-327.1 ( SCB Vol 1 Tab 3 ). (I note here that Mr Zamir's use of the term "reconstruct" refers to Mr Zamir's process of re-assembling documents which had been previously closed on MDB's computer servers[473] Examination of Israel Zamir, 6 August 2020, 286.13-26 ( SCB Vol 1 Tab 3 ). ).

555. Mr Zamir further gave evidence at his examination that he did not manage the loans, but was in another department where the deposit file was maintained. When asked why, in that case, he provided an affidavit about the loans, he said:[474] Examination of Israel Zamir, 6 August 2020, 286.11-289.4 ( SCB Vol 1 Tab 3 ). See also id at 308.15-20.

A. I do not know. Because I gave them, they came and said that they lost the documents under certain circumstances and that they need such documents. The branch manager requested me to sit and reconstruct. This request came in retrospect when those loans were already closed and all that. This request came in retrospect when those loans

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were already closed and discharged and all that. The computer cannot issue certificates about closed accounts. Moreover, in matters of these loans I discovered that the notice that is issued to the client with the interest charges is like a one-time notice and there is no copy of it at the bank. It exists in the form of reports with all sorts of numbers that is old Greek to anyone looking at it and does not understand anything. So, because the manager asked me, I took and sat for about two, three weeks and reconstructed all the documents of each and every interest and gave it to them. Because they said that they needed it. So, since that time the entire matter as they say if you started it you should finish it, so they continue to bombard me with anything pertaining to the loans. Instead of contacting the department that should give them all these things they contact me.

…

I was not requested to reconstruct all the Rawson accounts and all the private accounts that existed. I was not requested. So, I would not have gone and reconstructed. They said, we lost this, and this is what I want. The interest. This is for Rawson company. I want to get the certificate, to give me a certificate about what interests I was charged, and I was requested by the other party. If they had asked me I would have had to sit down. No, there it is simpler to reconstruct because we have copies of each credit interest. The computer print set out in two copies every credit interest in deposit accounts it prints out, and we file it together with the interest logs that exist. So, I would have gone with that in no time and made a photocopy. It turns out that as to the loans it does not work this way, foreign resident's loans. It prints out one notice. I do not even know how it looks like in the original because I have never seen it. Only the letters that I have reconstructed, according to the logs I reconstructed.…

Q. You are telling me that the information as to the interests that they were credited from the deposits was a cinch to reconstruct.

A. In a jiffy.

Q. If only the client asked, I would have given it to him.

A. Yes certainly. I would have made a copy and give it to some clerk there and photocopy it. I would go from interest to interest. The interest is semi-annual something like that according to what I se. And tell him, make a copy of it and send it to him.

Q. Please explain.

A. What should I explain? What they were, there is nothing to explain here. He did not want. He did not ask . This is what he said he lost. So, what is there for me to speculate on? That the other ones he did not lose. I did not even ask myself why he is not asking for the other ones.

(Emphasis added.)

556. Thirdly , the appropriateness of inferring that Rawson, through Andrew, did not in fact request the whole of MDB's file with respect its loan arrangements is supported by correspondence from the bank dated 24 January 2008 which states that the correspondence was provided at Rawson's request and confirms only the loan account details as at various dates[475] KDB Vol 2 Tab 93.1 ; TCA1-1 Vol 2 Tab 151; TCA6-2 Tab 24A Page 6917-6959; TCA6-2 Tab 25A Page 7084-7127; see items 371-377 of the agreed chronology. (drafts of which curiously had previously been provided by MDB to Rawson on 27 December 2007[476] SCB Vol 8 Tab 822 ; MDB Folder 5 p 395; SCB Vol 8 Tab 823 ; MDB Folder 5 p 397; SCB Vol 8 Tab 824 ; MDB Folder 5 p 399. ). By seeking evidence of this kind from MDB, in other words, Rawson was able to avoid relying upon original bank records which would have disclosed the true arrangements between Rawson and MDB, including the linked Arthur Belan deposit account. As such, the letters requested from MDB by Rawson are "precisely the kind of documents which a person intent on executing some other form of arrangement which is not a loan would bring into existence": Rawson (FCAFC) at [120] (Jagot J). By way of contrast, for example, MDB statements in respect of the Rawson loans would have disclosd transfers of monies into the Rawson current account "from Belan Arthu[r]",[477] SCB Vol 9 Tab 909; MDB Documents p 34; SCB Vol 8 Tab 783; MDB Documents pp 1333 and 1478. See also SCB Vol 8 Tab 781; MDB Documents p 28; as well as transfers from other sources.

557. Considered as a whole, it is clear that Rawson chose to be selective in its evidence, and deliberately chose to present the Tribunal with documents that did not reference the Arthur Belan deposit account.

558.

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While strictly unnecessary, this finding is further reinforced by Mr Zamir's evidence about the undisclosed deletion of the words "against sufficient securities" from his second statutory declaration, consistently with Rawson's concerted endeavours to conceal the true nature of its arrangements with MDB.

559. In this regard, it will be recalled that in his first statutory declaration declared on 15 February 2010[478] KDB Vol 3 Tab 132; TCA1-1 3/216/1398. , Mr Zamir deposed to the MDB having lent AUD$4,750,000 over three loans to Rawson commencing June 1997 "against sufficient securities". His second statutory declaration declared on 14 February 2011[479] KDB Vol 4 Tab 166; TCA1-1 5/302/2803. was in identical terms, save that the words "against sufficient securities" were omitted. Mr Zamir was examined on this discrepancy on 6 August 2020 pursuant to the letters of request.

560. Mr Zamir's evidence was that his first statutory declaration had been witnessed by the notary, Adv Ivan Kantor (also referred to as Jacob Cantor in the translation of Mr Zamir's examination pursuant to the letters of request).[480] Examination of Israel Zamir, 6 August 2020, 340-3-11 ( SCB Vol 1 Tab 3 ). Mr Zamir also said that Mark Douglass subsequently indicated that "he wants this declaration [i.e. the first declaration signed on 15 February 2010] again …" because "they want the declaration to be by an Australian advocate. … he said to me that previous signature was not good because they want it to be before an Australian advocate."[481] Examination of Israel Zamir, 6 August 2020, 323.26-324.11 ( SCB Vol 1 Tab 3 ).

561. However, Mr Zamir was adamant that he did not notice any changes between his first and second statutory declarations at the time that he signed the second declaration[482] Examination of Israel Zamir, 12 August 2020, 329.2-5 ( SCB Vol 1 Tab 3 ). ; nor, he said, was he told anything at the time about an ongoing legal proceeding against Rawson (or any other related proceedings).[483] Examination of Israel Zamir, 12 August 2020, 329.2-5 ( SCB Vol 1 Tab 3 ). Rather, he said that Mark Douglass "brought it with him ready, he brought it with him ready for this print."[484] Examination of Israel Zamir, 12 August 2020, 329.13-15 ( SCB Vol 1 Tab 3 ). Mr Zamir was then asked who made the relevant changes, to which he replied:[485] Examination of Israel Zamir, 12 August 2020, 329.9-11 ( SCB Vol 1 Tab 3 ).

I say that these changes were made by the person who printed this new version of the declaration, neither by nor [sic] on my opinion nor with my consent.

562. Mr Zamir said he discovered some time later that the changes had been made to the second statutory declaration.[486] Examination of Israel Zamir, 12 August 2020, 329.22-330.11, 334.17-21 and 335.8-12 ( SCB Vol 1 Tab 3.1 ). Mr Zamir reiterated that those changes had not been brought to his intention, and was clearly furious about the amendment:[487] Examination of Israel Zamir, 12 August 2020, 329.22-330.11, 334.17-21 and 335.8-12 ( SCB Vol 1 Tab 3.1 ).

some time measured I think in weeks or months, I cannot remember it, and then to my amazement, I realised I was wrong here to sign declaration in which changes were made. I was immediately very upset by this discovery. Very upset and even when I speak today, the same mental turmoil and literally on the verge of rage. I brought it to the attention of the Commissioner immediately, I think he was the Commissioner or Deputy Director of the branch, who also dealt with, among other things, credit matters, and in parallel with the Legal Department. And I asked, I asked what do you do with it? Who to complain to about this? Who do you turn to for this? Because here I was in fact deceived, Roman. A scoundrel was committed here. Here I was inadvertently reduced to a situation in which I was certainly unaware, of a document being rewritten I am presumed, according to someone's needs and thus taken out of me.

…

I say here just as I have given a statement, about which [sic] a scoundrel was committed. It's a scoundrel. Giving someone a re-edited document and not drawing their attention to changes is an act not to be done! … I insist that this document was obtained from me by deception, by deception, by deliberate deception, by a deliberate deception that I was outraged, that I was agitated, that I was protesting that such a thing was done.

563. Mr Zamir further stated that he "absolutely and unequivocally den[ies] the wording of the second falsified "Declaration""[488] Examination of Israel Zamir, 12 August 2020, 3.31.16-17 ( SCB Vol 1 Tab 3.1 ). .

564. This full state of affairs, including the omission of the words "against sufficient securities", was not disclosed by Mr Douglass in his affidavit sworn on 8 March 2011 filed in the Rawson (AAT) proceedings[489] KDB Vol 4 Tab 172. , to which he annexed Mr Zamir's statutory declaration dated 14 February 2011. To the contrary, Mr Douglass deposed in his affidavit that he had a conversation with Mr Zamir to the following effect (at [13]):

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MCD: "Mr Zamir, are you still employed as the Foreign Exchange Department Manager. Is that still correct?"

Mr Zamir: "Yes, I am."

MCD: "I have travelled to Israel to again execute various statutory declarations and affidavits. The reason I am here is basically because the Australian Taxation Office does not believe there was a loan with your bank. The statutory declaration that I ask you to sign is in the same form as the one you executed on February 2010 . Can I ask that you please sign the document again?"

Mr Zamir: "Why do I have to sign it again?"

MCD: "Because some of the litigation is taking place in the Administrative Appeals Tribunal, we need to execute a newly signed document."

(Emphasis added.)

565. Both of Mr Zamir's statutory declarations were before the Tribunal which, as I have briefly discussed above, reasoned in the following manner (at [129]-[131]):

Mr Douglass sought to explain the difference as a merely typographical error in the retyping of the February 2011 version of the statutory declaration. He emphasised that he had told Mr [Zamir] that the new version of the statutory declaration was in the same terms as the February 2010 document. It was merely being re-executed in a different format, more appropriate for use in the present proceedings.

The substantial similarity of the two versions of the statutory declaration, and the minor difference in format, does suggest it had been prepared in Australia before Mr Douglass went to Israel in February 2011. The omission of the struck through words from the retyped draft might have been a mere typographical error, but it is an unlikely error in the content of a document that must be taken to have been a matter of some importance. Moreover, I would not readily come to the conclusion, in the absence of cross examination of Mr [Zamir], that the existence and nature of any security for the contentious loans was a matter to which his mind was directed, in connection with either the February 2010 or the February 2011 version of the document. The expression "against sufficient securities" is itself imprecise and could reasonably be regarded as a comparatively weightless expectation about details that had not in fact been actually determined. Consistent with such an interpretation of the expression, there is no specific reference anywhere else in the short affidavit to any record of security. This is despite the fact that the statutory declaration otherwise explains the significance of various codes and identifiers in MDB's records. That explanation includes reference to the various accounts that were maintained in relation to the loan, and to the payments [Rawson] made, including the procedure for transferring [Rawson's] payments to MDB's own ledger account for the receipt of payments against the loan.

For these reasons I do not regard either the presence, or the omission, of the three contentious words as a matter of significance in the weight that can properly be attributed to Mr [Zamir's] statutory declaration . What I do infer is that [Mr Zamir], as an apparently senior officer in a reputable and major Israeli bank, verified the existence of bank records and payments that were consistent with the reality of the loan liabilities that [Rawson] asserts. Although he did so without indicating specific knowledge of either the nature, or the existence, of any particular security for the loan transaction, he had certainly been informed of the Commissioner's scepticism about the reality of the liability. He was also well aware of the use that [Rawson] proposed to make of his statutory declaration.

(Emphasis added.)

566. It is now known in light of Mr Zamir's examination that the omission of those three words was not "merely [a] typographical error", as Mr Douglass successfully asserted in the Rawson (AAT) proceedings, but rather a calculated act intended to conceal the existence of those securities. Although the Tribunal gave little weight to this deletion, this was because there was no evidence of any securities before

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the Tribunal and in particular none were referred to anywhere else in Mr Zamir's affidavit. Had the Tribunal been provided with the new evidence, which overwhelmingly establishes the existence of loans "against sufficient securities" (the fact of which is now accepted by Rawson) as well as Mr Zamir's rage at the deletion of those words, it is almost inconceivable that the Tribunal would have reasoned as it did.

567. Taking this evidence cumulatively, therefore, in my view there is only one tenable inference open: that Rawson (and Andrew in particular) deliberately requested MDB to provide only documents and correspondence in relation to the loan side of the transaction and were selective in the evidence presented to the Tribunal so as to ensure that the back-to-back nature of the Rawson loans was concealed. Furthermore, as I find below, this accords with other evidence, such as the use of code names in relation to the Arthur Belan deposit account, showing that it was indeed Rawson's intention from 1997, when the arrangements with MDB were first entered into, to conceal the true nature of those arrangements.

9.7 Were Andrew and Michael involved in drafting or finalising Mr Etzion's statutory declaration?

568. Finally, while the Commissioner alleges that Andrew and Michael were, to Rawson's knowledge, involved in preparing, drafting, and finalising Mr Etzion's statutory declaration, it is unnecessary to make a finding on this issue. It suffices (as I have already found) that Rawson through Andrew knew that Mr Etzion's evidence was false or misleading, yet still tendered that evidence in the Rawson (AAT) proceedings in support of its knowingly false case that the Rawson loans were supported by personal guarantees only.

569. In any event, the evidence upon which the Commissioner relied in support of the allegation of collusion by Andrew and Michael in the preparation of Mr Etzion's statutory declaration was insufficient to sustain so serious an allegation. First , the Commissioner relied upon the fact that Rawson admitted in its defence that Andrew and Michael met with Mr Etzion in October 2009, and that Andrew returned to Israel in December 2009. That evidence goes no further than to establish the existence of an opportunity for Andrew and Michael to engage in the conduct alleged. Secondly , the Commissioner relied upon a file note dated 27 October 2009[490] KDB Vol 3 Tab 123; TCA1-2 5/2631 – 2632. which records a conference between staff of Mr Douglass' firm and (I am asked to infer) Michael ("MB") and Andrew ("AB"). The file note headed "Bin Ent" relevantly stated as follows:

A + MB met with Baruch Etzion

AB is going back end of Nov + early Dec.

Went to fix the statement. Then will organise the statement

570. However, the author of the file note is unknown and the note itself is entirely unclear as to what is meant by "fix the statement" and "organise the statement". That description could bear a completely innocent meaning, such as ensuring that the statement addresses relevant matters.

10. CONSIDERATION AND DISPOSITION OF THE APPLICATION

571. As I have earlier explained, in order to set aside a judgment on the ground of fraud, it is necessary for the moving party to establish "actual positive fraud, a meditated and intentional contrivance to keep the parties and the Court in ignorance of the real facts of the case, and obtaining that decree by that contrivance" (Clone at [55] (the Court)). For the reasons set out below, and bearing in mind the Briginshaw principle, I am of the view that the evidence that the decisions in Rawson (AAT) and Rawson (FCAFC) were procured by fraud is overwhelming.

10.1 Extent to which the fraud was sought to be concealed

572. It is difficult, if not impossible, to conceive of a legitimate reason why a genuine loan might be sought when the monies "borrowed" by Rawson were already available to it by way of the "security" in the Arthur Belan back-to-back deposit account. This is particularly so when monies in at least the same amount were required to be maintained in that account throughout the life of any loans to Rawson and withdrawals were not permitted which would reduce the amount on deposit below the amounts outstanding on the Rawson loans. In other words, if Michael as the Arthur

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Belan deposit account holder had cash equal to the amount of the Rawson loans, which was available to be lodged in a deposit account with MDB to cover all of Rawson's loans until they were fully repaid, why would Michael not make those funds available directly to Rawson, as opposed to engaging in the elaborate ruse of using a code name to "borrow" monies in the same amount and pay MDB for the privilege of doing so in the margin of 0.6%? Tellingly, in submissions, Rawson could provide no explanation as to why a "loan" of this nature might have been sought when the sums borrowed were already available to it.

573. The illogicality is compounded by the alleged reason that Rawson provided to MDB to set up the back-to-back loan in the first place. It will be recalled that MDB's internal reports in April 1997 stated that Rawson sought to utilise the back-to-back loan arrangement "[d]ue to various foreign exchange restrictions in Australia"[491] SCB Vol 1 Tab 27 ; MDB Folder 3 p 978; SCB Vol 1 Tab 28 ; MDB Folder 3 p 979; agreed chronology item 21. . With the benefit of hindsight, that reason is self-evidently false as all monies, whether kept in the Arthur Belan deposit account or loaned to Rawson, were always in the currency of AUD.

574. The absurdity of the arrangement, absent a tax avoidance motive, can be illustrated by one of the "loans" from MDB to Rawson's sister company, Advance, which used the same business practice. It will be recalled that in March 2004, Emil sought a loan from MDB for Advance to borrow AUD$2.5m to purchase a property in Australia. This involved Emil transferring a deposit of AUD$2.5m into an account in his name, then obtaining a "loan" from MDB to Advance, with Emil proposing an interest rate of 6.5% on the loan and 5.9% on the deposit account (see Part 8.2.1 above). Why, it may be asked rhetorically, would Emil need to deposit and borrow AUD$2.5m from MDB in order to purchase the Australian property, paying MDB a 0.6% margin, when that money was already available for him or Advance to purchase the property outright?

575. It is therefore unsurprising that, from the outset, it was Rawson's intention (through at least Michael, Erwin and Andrew) to conceal the true nature of its arrangements with MDB via the use of code names as requested by Michael. That intention was subsequently evidenced among other things by the following matters:

576. Added to this, Rawson actively resisted the Rawson letters of request, including through the Israeli courts, while Andrew actively resisted the Commissioner's application

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to use documents produced in answer to the BCI letter of request in this proceeding, including to the point of seeking special leave in the High Court from orders granting that leave:
Binetter v BCI Finances Pty Ltd [2006] HCATrans 33. While Andrew was of course legally entitled to challenge those decisions, this conduct lends further weight to the proposition that Rawson (through Andrew) fully appreciated the significance of disclosure of the linked deposit accounts, including the Arthur Belan deposit account, to the Commissioner's allegation that the Tribunal and Full Court decisions had been obtained by fraud: see by analogy BCI Finance (FCAFC) at [575].

10.2 Scope of the false or materially misleading evidence before the Tribunal

577. Bearing the Briginshaw rule in mind, the cumulative weight of the evidence in the present case overwhelmingly establishes the fraud perpetrated on the Tribunal by Rawson and, as a result of pressing that case before the Full Court, on the Full Court. That fraud was perpetrated both through the provision of false and misleading evidence and submissions made on instructions given by Rawson, and through the deliberate concealment of true information. In this regard, irrespective of any fraudulent intent on the part of Margaret who was also a director, Andrew had sufficient control over Rawson as to establish that his knowledge should be attributed to Rawson in the running of the Rawson (AAT) proceedings and appeals in the Federal Court. Nor was any submission to the contrary put, or any evidence to the contrary led. Further, the new evidence obtained since the Rawson (FCAFC) decision is damning, including when critical aspects of the examinations of Messrs Zamir and Septon in Israel pursuant to the letters of request are taken into account. So much was effectively accepted by Rawson insofar as it admitted the existence of the back-to-back deposit account for the first time in its written submissions in these proceedings, following the production of documents and taking of examinations pursuant to the letters of request, and by the extent of agreement reached in the lengthy agreed chronology. In so saying, I do not suggest that the fraud was admitted. Among other contentions, Rawson, in one of its more creative arguments, alleged that the new evidence supported its case before the Tribunal that the loans were genuine (a submission which is misconceived at every level for reasons I later explain).

578. As the Commissioner submits (applicant's reply submissions ( AR ) at [9]), in order to assess the materiality of Rawson's conduct, it is necessary to identify with particularity the scope of the false or materially misleading evidence before the Tribunal. In this regard I agree with the Commissioner's submissions that Rawson's case before the Tribunal was intentionally false and materially misleading in the following respects in order to conceal from the Tribunal the true nature of the arrangements between Rawson and MDB.

579. First , I agree with the Commissioner (AR at [10]) that Andrew knew when he swore his affidavits and gave evidence before the Tribunal that the Rawson, BCI, EGL, Advance, and Civic loans were all secured by cash deposits. Yet he gave the following false or misleading evidence:

580. Further, the documents drafted on MDB and IDB's letterheads in 2007 were false and misleading in that they deposed only to the loan side exhibited to Andrew's affidavit,[500] KDB Vol 2 Tab 96; TCA1-2 5/2626; KDB Vol 7 Tab 232; TCA1-2 6/3020.001 at [45]-[47]. and were not prepared by the Israeli banks but by Mr Douglass on Andrew's instructions to be inserted by the banks onto their letterhead.

581. As such, I agree with the Commissioner that Andrew gave evidence before the Tribunal which was knowingly and deliberately false and misleading (AS at [317]).

582. Secondly , in addition to Andrew's false evidence, Rawson through Andrew led evidence and made submissions before the Tribunal which were deliberately and knowingly intended to falsely represent that the loans were made by MDB to Rawson on the basis of personal guarantee(s) and lists of assets only in accordance with the alleged business practice of other Binetter family entities and not on the basis of back-to-back cash deposits. Rawson's case to this effect in the Rawson (AAT) proceedings included reliance upon the following evidence and submissions which were known to Rawson, through Andrew, to be false and/or misleading:

583. In short, I agree with the Commissioner's submission (AS at [320]) that:

Those involved in the running of the Rawson AAT proceedings, being Andrew Binetter in the main, intended to suppress the existence of offshore deposits and dealings that would be revealed by banks statements and other MDB records to ensure that Rawson's records, along with the records of BCI, EGL, Advance and Civic, would create a false or materially misleading impression of the terms of transactions and specifically that each transaction was not supported by deposits offshore. The case was run on a deliberately planned and carefully executed scheme to mislead not only the Commissioner, but also the Tribunal - the scheme was perpetuated on appeal . This false impression advanced in the evidence was not solely on the basis of documents tendered before the Tribunal, but also from witnesses of fact, being Andrew, Margaret, Emil and Gary Binetter and Baruch Etzion. Andrew Binetter was responsible for the litigation and would have known that these witnesses, including his mother, gave false evidence. The evidence before the Tribunal was deliberately misleading, in a material way, as Rawson's transactions with MDB did, in fact, involve the provision of security, namely, and critically, a cash deposit. It was the same for BCI and EGL. Cash deposits also supported the funds transferred to Advance and Civic and this was known by Gary and Emil Binetter.

(Emphasis added.)

10.3 Rawson's contention that the alleged fraud could not affect the issues before, or decision of, the Full Court by reason of the limited nature of a s 44 appeal

584. As indicated above, Rawson contended that the alleged fraud could not affect the issues before, or the decisions of, the Federal Court including the Full Court given the limited nature of an appeal under s 44 of the AAT Act to the Federal Court from the Tribunal.

585. Rawson submitted that (respondent's submissions ( RS ) at [41]-[43]):

586. Both of these propositions may be accepted save that, of course, a decision of the Tribunal does not authoritatively determine the rights of the parties, in contrast to an exercise of judicial power.

587. Based on these propositions, Rawson submitted that (RS at [41]-[43]):

What is presently material is that the error complained of by the Commissioner, and found by the primary Judge, was an error of law only: that the finding was not open on the evidence led. The alleged error was not, and under s.44 could not have been, an error brought about by the absence of other evidence, nor was it an error comprising the reaching of a wrong factual conclusion brought about by the admission of perjured evidence which should not have been before the Tribunal; it was, and could only (as an error of law) have been, an error in assessing the evidence actually led before the Tribunal.

The significance of the limited nature of the error which grounds an appeal under s.44 is that it is not concerned with what evidence was, or should have been, before the Tribunal, but only with the Tribunal's reasoning from the evidence that it did receive. The alleged fraud on the Tribunal goes only to what evidence should have been available to it, not to its reasoning processes. The alleged fraud cannot therefore affect the issues before, or the decision of, the Federal Court in a s.44 appeal.

(Emphasis in original.)

588. Rawson also submitted that (RS at [46]):

It is not pleaded that Rawson had any obligation to disclose such matters to the Court on appeal. This is unsurprising as there is no obligation on a party or a witness to disclose to an appellate court that the evidence it adduced or gave at first instance was false or misleading - an appeal, particularly one limited to a question of law, is not a 'second throw of the dice' on disputed questions of fact. As the reasons of Kirby P in Wentworth v Rogers disclose, if the evidence given at trial is untruthful, it is a failure of the cross-examiner to expose the falsity - the opportunity to exact the truth from the evidence is only available at trial, not on "a second throw of the dice" on appeal: see
Calder v FCT (2005) 61 ATR 267 at [85]. In the absence of an obligation to make disclosure (and the Commissioner does not submit there was), Rawson did not engage in any relevant fraud on the Court even if the alleged fraud is proved and consequently there is no basis to set its judgment aside . The Commissioner's claim to set aside the Full Court's decision is therefore misconceived - it mistakes the nature and basis of the proceedings in the Federal Court.

(Emphasis added.)

589. However, Rawson's submissions must be rejected for the following reasons.

590. First , for the reasons already given, where a party seeks to impugn a judgment on the ground of fraud by reason of a material non-disclosure, there is no requirement that there must be an positive duty to disclose the true facts (which is independent of any duties owed to the Court). As I have earlier held, the authorities do not support the existence of any such requirement. To accept Rawson's submission to the contrary would enable a party to retain the benefit of a judgment obtained by its fraud merely because the fraud was perpetrated by means of the deliberately dishonest concealment of evidence rather than by the leading of deliberately dishonest evidence. Furthermore, the short point is that Rawson did not merely perpetrate the fraud by concealment but led knowingly false

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evidence in the Rawson (AAT) proceedings, and continued to rely upon that knowingly false evidence in the Rawson (FCAFC) proceeding. In any event, to the extent that there is any obligation to disclose, "it is the relationship of a duty owed to the court which will render fraudulent in the legal sense any misrepresentation which succeeded in deceiving the court": Ampthill Peerage (Lord Kilbrandon at 595-596).

591. Secondly , Rawson's submission that the Full Court's decision was not liable to be set aside for fraud on the basis that the issue before the Full Court was simply whether, as a matter of law, the Tribunal's decision was open to it on the evidence before it, must also be rejected. The difficulty with that argument is that it ignores the reality that, in defending the Tribunal's decision, Rawson perpetuated the fraud. The fact that the fraudulent case was put initially by Rawson before the Tribunal in the context of merits review does not mean that that deception ceased to exist once the matter was before the Federal Court on judicial review. Among other things, this must follow from the fact that the deception manifested itself in the selective and deliberately false and misleading body of evidence placed before the Tribunal. In other words, the fraud perpetrated before the Tribunal shaped the issues before and decision of the Tribunal and therefore on the s 44 appeal and Full Court appeal. It cannot be said that the fraud perpetrated on the Tribunal could not affect the issues before or decision of the Full Court. It follows that Rawson's submission is flawed as it seeks to avoid the issue of fraud by confining the Full Court's decision to a narrow question of law, despite that decision being based upon the deliberately false universe of evidence presented to the Tribunal.

592. Furthermore , it was always open to Rawson to have accepted the decision of Edmonds J on the s 44 appeal on a question of law which effectively accorded with the true position as known to Rawson, namely that: if the true facts had been known to the Tribunal as revealed by the new evidence, including the existence of the back-to-back deposit account as "security" for the Rawson loans, it would likely, if not inevitably, have found that Rawson had failed to discharge its onus of establishing that the loans did not have the character of income and therefore that the assessments were excessive. However, Rawson chose to appeal that decision and seek to uphold the decision of the Tribunal, knowing that it had been obtained through deliberate deception, thereby perpetuating the fraud.

593. It follows that Rawson's argument that, in seeking to defend the Tribunal's decision before the Full Court on the basis that there was evidence before the Tribunal capable of sustaining its decision in law, there could be no fraud on the Full Court, must be rejected.

10.4 Materiality of the fraud

10.4.1 Introduction

594. The parties' submissions on the materiality of the fraud perpetuated by Rawson addressed this issue from two perspectives, namely:

(I also note that in Highland Financial Lord Aitken also considered that "the question of materiality of the fresh evidence is to be assessed by reference to its impact on the evidence supporting the original decision, not by reference to its impact on what decision might be made if the claim were to be retried on honest evidence" (at [106]; emphasis added). However, this aspect of Highland Financial does not accord with the Australian authorities.

595. Applying this approach, I have no doubt that the Commissioner has established that if the new evidence were before the Tribunal on a rehearing (including the translation of the BTB letter, the documents produced by the liquidators of Advance and Civic, and the documents produced by MDB in response to, and examinations conducted in Israel pursuant to, the letters of request), it

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would reasonably be expected to be decisive and to lead the Tribunal to find that Rawson had failed to discharge its onus of establishing that the assessments were excessive. Indeed, if the new evidence were unanswered, it is inevitable, in my view, that the Tribunal would reach that decision: see Monroe at 241. On that scenario, the Tribunal would have had no alternative but to affirm the Commissioner's objection decision under review and the taxation assessments or amended assessments on 15, 18, 21 and 28 September 2009 would have remained in force, as would the penalty assessments.

10.4.2 Was the fraud an operative cause of the Tribunal's decision?

596. Rawson submitted that " fatally for the Commissioner's present application, the alleged falsity of the business method evidence could not have rationally changed the outcome for several reasons" (emphasis added). In support of this submission, Rawson relied on the finding by the Tribunal that the evidence as to loans transactions between other Israeli banks and Binetter family entities aside from Rawson was only " general background which is relevant to the Commissioner's characterisation of the contentious loans as uncommercial … They also provide a background which lends some appearance of regularity to [Erwin Binetter's] borrowings from Israeli banks. But I do not regard them as providing any more than relevant background which suggests the possible regularity of the contentious [Rawson] loans." (at [218] (emphasis added); RS at [53]). Rather, in Rawson's submission, the Tribunal's decision "was principally founded on the contemporaneous (and uncontradicted) documentary evidence relating to the alleged loan between Rawson and MDB", referring to the Tribunal's reasons at [104]-[105].

597. That the documentary evidence relating to the loan between Rawson and MDB was uncontradicted, however, is a consequence of Rawson's successful strategy in the Rawson (AAT) proceedings of concealing the true nature of its arrangements with MDB by, among other things, producing what is now known to be a small fraction of the documents held by MDB which disclosed only the "loan" side of the transactions. It is scarcely a matter on which Rawson can now rely in support of its argument that the fraud was not material. If anything, this submission asserts that the Tribunal's decision was "principally founded" upon false and misleading evidence led by Rawson, lending weight to the proposition that the new evidence would have been material to the outcome of the Tribunal proceedings.

598. Furthermore, the question of materiality is not determined by the fact that the Tribunal considered that the evidence as to loan transactions between other Israeli banks and the Binetter family entities aside from Rawson was only "general background", which tended to lend some regularity to Rawson's contentious loans. Even without the new evidence establishing that that Rawson's loans were secured by the back-to-back deposits, it can scarcely be suggested that if the new evidence about the other Binetter family entities' business practices were known, the Tribunal's decision would have been the same. By the Tribunal's own reasoning, this "background … lends some appearance of regularity to [Erwin Binetter's] borrowings". In the same vein, and adapting the language of the Tribunal, the new evidence in relation to the other Binetter family entities "lends some appearance" of a different kind of regularity to Erwin's borrowings - one that involves security in the form of back-to-back deposits rather than mere personal guarantees.

599. In any event, the short point is that quite apart from the new evidence regarding the business practices of the other Binetter family entities, the evidence now discloses the true nature of Rawson's arrangements with MDB and for the reasons that follow, is material in the requisite sense.

600. First , it is now apparent that the documents said to have been produced by MDB and Rawson referring to the funds transfers as "loans" were, as Jagot J assumed (in favour of the Commissioner), "precisely the kind of documents which a person intent on executing some other form of arrangement which is not a loan would bring into existence": Rawson (FCAFC) at [120]). Indeed, it is now known that some letters from MDB purporting to confirm Rawson's loan arrangements were in

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fact drafted by Mr Douglass, on Andrew's instruction, to be issued on MDB letterhead. On the other side of the equation, the new evidence now reveals the extraordinary lengths to which Rawson and the other Binetter family entities went to in order to limit disclosure to the so-called "loan" side of the arrangements and conceal the existence of the back-to-back deposits, including from the Tribunal (as explained in Part 10.1 above). That evidence, coupled with the new evidence establishing the existence of the back-to-back deposit account, completely undermines the findings by the Tribunal that:

601. In this regard, it is also relevant that the Tribunal found in Rawson (AAT) that:

602. Secondly , in Rawson (FCAFC), Jagot J (with whose reasons Nicholas J agreed) held that the Tribunal's decision was reasonably open to it, given the unchallenged evidence before it as to: (1) the status of MDB; and (2) its acceptance of Andrew's evidence about the repayment of the Rawson loans in 2009.

603. As to the first point (the status of MDB), the Tribunal found (at [104]-[105]) that there were some "good reasons to accept the reality of the fact of the loan [Rawson] asserts", including fund movements which appear to be objectively corroborated and the evidence that MDB allocated separate loan account numbers to the asserted loans and to the Rawson current account into which the subsequent "interest" payments and "loan repayments" were made. Specifically, the Tribunal found (at [105]) that:

MDB did record the asserted loans within its ordinary management and accounting systems. I would infer that it is unlikely to have done so unless the reality was that it had advanced the loan funds as [Rawson] asserts. I have previously referred to the fact that MDB was a large Israeli bank, and a wholly owned subsidiary of an even larger Israeli bank that was a publicly listed corporation. I would infer the likelihood that such an institution would have appropriate management and accounting systems and a lawful, responsible, ethical approach to the conduct of its business. The expert witnesses, in their descriptions of MDB, confirmed the reasonableness of drawing such an inference. The significance of this inference is that, to my mind, it makes it unlikely that MDB would, in 1997, have engaged in a procedure of merely contriving the appearance of a genuine loan transaction with [Rawson]. It also makes it unlikely that any such contrivance would have escaped detection over the whole of the subsequent years. Finally it make it unlikely that, in response to [Rawson's] repeated enquiries, including enquiries that came to the attention of MDB's legal department and senior managers who were apparently not involved in the events of 1997, MDB would have continued dishonestly to assert the existence of genuine loans.

604. Similarly, the Tribunal found (at [222]) that:

The various fund movements [between MDB and Rawson] and payments are also

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established by apparently regular records of MDB as involving genuine loan transactions. Both former and current officers of MDB, in admittedly untested attributions, have declared the transactions to be genuine loans. There is also the evidence that MDB is a major and reputable Israeli bank. Both relevant senior management of MDB (I so characterise Mr [Zamir]) and its legal department, are aware of the nature of matters in contention in the present case. They have nevertheless provided the material I have identified, knowing the purpose to which it would be used in the present proceedings.

605. However, it is now apparent that MDB did in fact permit the creation of the back-to-back deposit account and the use of code names in relation to it, notwithstanding at the least the obvious questions which those arrangements cast over the reality of the "loans" and the inherently suspicious nature of any request to operate a deposit account in a code name. MDB also required the back-to-back deposit account to be in the name of a person other than Rawson and to be kept in funds at least equivalent to the amount of the loans to Rawson and in the same currency, and for the duration of the loans. It is also now apparent, as I have found, that while MDB would have produced all of the documents held by it with respect to the Rawson loan and the back-to-back deposit account if requested by Rawson, it was never asked to do so. In particular, it will be recalled that Mr Septon gave evidence in his examination that "[i]f you want a statement on the deposits, you ask for a statement on the deposits. If you want a statement on the loans, you get a statement on the loans."[522] Examination of Elie Septon, 26 July 2020, 64.26-65.1 ( SCB Vol 1 Tab 2 ). Equally, Mr Zamir gave evidence during his examination in August 2020 that "[t]hey asked that I give a certificate as to the loans only. So, I gave a certificate as to the loans. I did not refer. Besides they did not ask me to note collateral or anything like that. So that is why I did not refer to the accounts that served as collateral".[523] Examination of Israel Zamir, 6 August 2020, 283.3-17 ( SCB Vol 1 Tab 3 ). It will also be recalled that the decision of the Credit Committee on 28 May 1997and MDB's summary reports for Rawson and Advance expressly recorded that if MDB was asked about credit in the future, it would report that the credit was given against financial securities and the customer needed to be informed that this was MDB's position.

606. This evidence makes it clear that, while the Tribunal (at [174]) accepted Andrew's evidence of "his persistent enquiries of MDB for the purpose of obtaining both objective and testimonial evidence corroborating the reality of the asserted 1997 loans", including asking Mr Zamir to check the bank's records to determine whether it had any deposits for Rawson, Andrew's evidence as to these inquiries was false. The new evidence establishes that only a deliberately small selection of MDB's records with respect to Rawson and its related entities were ever produced to the Tribunal by Rawson, which omitted any reference to the back-to-back deposit accounts.

607. As to the second point (the Tribunal's acceptance of Andrew's evidence about repayment of the Rawson loans in 2009), the Tribunal accepted Andrew's evidence as supporting the positive state of satisfaction it reached that Rawson had discharged its onus of establishing that the assessments were excessive (as Jagot J held in Rawson (FCAFC) at [123]). Specifically, it will be recalled that the Tribunal rejected the Commissioner's attack on Andrew's credit (at [187]). Instead it accepted as truthful Andrew's evidence that, after the final payment of the alleged loans in 2009 to MDB, "no information was conveyed to him by the bank suggesting that it had released any security following repayment of the loan" (at [187]). Further, the Tribunal regarded this evidence "as persuasive of the reality of the asserted loan liability" (at [187]) and specifically accepted Andrew's (and Margaret's) evidence that they were not aware of any assets in Israel to which MDB could have resorted (at [227]). As the Full Court accepted, the Tribunal's findings in this regard were "not necessarily decisive of the ultimate issue" because the Tribunal might have made a different credit finding or have regarded Andrew's evidence "as equivocal about the character of the funds transfers" (at [122]). However, the point is that the Tribunal did not. It found Andrew's evidence on this issue to be persuasive and clearly gave it weight in finding that Rawson had discharged its onus. Yet it is now known that Andrew's evidence was

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false and/or misleading and intentionally so. As such, on this critical issue alone, Rawson's deception materially affected the Tribunal's reasoning.

608. Thirdly , as Jagot J also held in Rawson (FCAFC) at [123], the Tribunal accepted Andrew's evidence that, despite being involved in running Rawson's affairs since 2004, he had no knowledge of any offshore assets which might have served as security for the alleged loans. Specifically, the Tribunal held at [175] that, against the context of the "persistent enquiries" made by Andrew of MDB for documents:

[Andrew] said in cross examination he knew nothing about the existence of any asset or investment, specifically involving MDB or IDB, relating to either [Rawson] or any other entity related to [Erwin]. No such asset is evident from any of the extensive documentary evidence adduced in the present proceedings. If any such, otherwise unrecorded, asset had existed then [Andrew] was one of the persons to whom [Erwin] was most likely to have confided its existence - certainly after April 2004. And [Erwin] would have had an irresistible motivation to disclose its existence to either his wife or [Andrew], particularly during the course of the accounting records reconstruction that [Andrew] had to undertake after April 2004. Unless at least one of these people was informed about the nature and location of such an asset, and provided with a relevant capacity to resort to it, [Erwin] risked its loss to himself and his surviving family. The force of that motivation is not significantly diminished by recognising that [Erwin's] cognitive functioning had become compromised by April 2004. [Erwin's] initiation of, and participation in, the March 2004 meeting with [Elie Septon] suggests his appreciation of the desirability of [Andrew] knowing of the loan transaction with MDB, and of establishing contact with the relevant MDB manager.

609. In this regard, it will be recalled that the Commissioner submitted to the Tribunal that "the existence of some security or other associated transaction, is a matter of critical importance" which "would cast a completely different light on the nature of the dealing with [MDB], and the basis on which Rawson received moneys from the bank". By way of example, the Commissioner referred to a scenario where, by virtue of an associated deposit with MDB, MDB was merely used as a conduit to pay (unexplained) funds to Rawson kept offshore "by it or an associated entity"[524] Respondent’s AAT submissions dated 10 June 2011 at [21] (KDB Vol 6 Tab 200; TCA1-1 7/348/3833). . Conversely, as earlier explained, Rawson's counsel submitted in opening submissions before the AAT that "[t]he essence of the applicant's case is that there is sufficient documentary evidence for the tribunal to form a view that the loans were entered into and the existence of the business practice indicates that loans were routinely taken out with personal guarantees and no link deposits " (emphasis added)[525] AAT 9 May 2011 T57.43; CB Vol 5 Tab 338; TCA1-1 6/335/3088. . That this should be a central issue is not surprising given that this was the Commissioner's concern from the outset, when he issued the s 264A notice to Rawson on 7 November 2007 which sought all documents from any Israeli financial institution for Rawson explaining all borrowings, what rights the Israeli financial institution(s) had over assets held as security, and identification of all assets secured[526] KDB Vol 2 Tab 77. . It will also be recalled that in his letter dated 18 December 2007, the Commissioner explained that the s 264A notices were issued to Rawson and other Binetter family entities pursuant to Project Wickenby in order to determine whether structures were being used by them which were designed to avoid Australian taxpayers being connected to various trust or company structures established for or by them, identifying, in particular, a concern about the use of "back to back loans"[527] KDB Vol 2 Tab 89. . The discussion earlier as to the nature of the Commissioner's and Rawson's respective cases unequivocally bears out the centrality of this issue between the parties in the Rawson (AAT) proceedings and the significance of the issue to the Tribunal's decision.

610. Against this, Rawson pointed to the Tribunal's finding that "the security hypothesis" did not advance the Commissioner's case but rather considered the hypothesis supported the existence of a genuine loan. The passages in the Tribunal's reasons on which Rawson relied were as follows:

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205. But the hypothesis that some other related entity provided security for the asserted 1997 loans, even if it was to be accepted, only serves to confound any rational basis for the Commissioner's assessment decision, especially for the 1997 and 1998 years. If the hypothesised security asset belonged to some other related entity it is necessary to postulate the mechanism by which it served as security for the funds MDB provided [Rawson]. It is also necessary to postulate the mechanism by which MDB provided the funds to [Rawson] and the true character of that transaction.

206. The most likely answer to those enquiries is that the hypothesised asset was a surety security, and supported the existence of a true loan transaction between MDB and [Rawson]. I would not readily come to the conclusion that the hypothesised security provider was willing simply to "gift" the contentious funds to [Rawson], to forego any interest income on those funds, or to forego any rights of subrogation it might otherwise have, in the event that MDB called on the security.

…

208. I accept the generality of the Commissioner's basic contention. But it is immaterial in the circumstances of the present case. There is in my view simply no factual basis for the Commissioner's assessment in relation to the characterisation of the 1997 fund transfers as [Rawson's] assessable income. [Rawson's] evidence demonstrates convincingly that it conducted no business other than the onlending of funds to other entities related to [Erwin]. It did not conduct any income producing activities before it received the funds from MDB. There is no factual circumstance that would permit [Rawson's] receipt of those funds, even in the unlikely event that MDB held some kind of realisable security on which it had relied in making the transfers, to be characterised as income .

(Emphasis by Rawson in RS at [55]).

611. Contrary to Rawson's submission, however, these findings do not suggest that knowledge of the back-to-back deposits would have made no difference to the Tribunal's decision, or indeed would reinforce its conclusion that Rawson had discharged its onus of establishing that the loans were genuine. Rather, in the passages relied upon, the Tribunal found in effect that, if the hypothesis that a related entity provided security for the 1997 loans was accepted, it would be necessary to postulate the nature of that security and of the transfer of funds by MDB to Rawson. As to the first postulate, the Tribunal did not accept that a related entity would simply have gifted the contentious funds to Rawson without interest or any rights of subrogation (as would effectively have been the case on the Commissioner's hypothesis as to the existence of a back-to-back deposit). The Tribunal found instead that the most likely form of any such security would have been "a surety security", i.e., that the related entity was prepared to act as a surety, accepting liability in other words for repaying the loans in the event of default by Rawson. Properly read, therefore, the findings at [205]-[208] of the Tribunal's reasons do not support Rawson's contention that, even if the evidence of the back-to-back deposit account had been before the Tribunal, the Tribunal would have made the same decision.

10.4.3 Is the new evidence so material that it could reasonably be expected to lead to a different result at a rehearing?

612. Having regard to the impact which the fraudulent case run by Rawson had upon the Tribunal's decision and, for the reasons earlier given, upon the Full Court's decision, the question is then whether the new evidence is so material that on the balance of probabilities it could be expected that the new evidence would lead to a different result at a rehearing.

613. It will be recalled that by virtue of s 14ZZK(b), the burden of proof lay upon Rawson to positively establish that the default assessments issued by the Commissioner under s 167 of the ITAA 36 were excessive (and not merely affected by error) and what the assessment should have been. It is not sufficient for the taxpayer merely to establish error by the Commissioner: Zappia (FCAFC) at [3] (Pagone J) (with whose reasons Robertson and Bromwich JJ agreed). Conversely, no onus is

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placed upon the Commissioner to show that the assessments were correctly made:
Gashi v Federal Commissioner of Taxation [2013] FCAFC 30; (2013) 209 FCR 301 at [61] (the Court).

614. As I have also explained, the Commissioner was "entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment": Dalco at 624 (Brennan J). As such, it is well-established that "the onus rests upon the taxpayer of establishing the facts upon which he relies and if it is necessary for him to establish a particular fact in order to displace the assessment he must satisfy the court [or Tribunal] with respect to that fact":
Danmark Pty Ltd v Federal Commissioner of Taxation (1944) 7 ATD 333 at 337 (Latham CJ). Specifically, and relevantly for present purposes, if a taxpayer "did not adequately explain the source or sources for the otherwise unexplained increase in wealth, the taxpayer would not discharge the onus under s 14ZZO [or 14ZZK] of the TAA [53]": Gashi at [66]; see also,
Zappia v Commissioner of Taxation [2017] FCA 390 at [108] (Perram J) (upheld on appeal: Zappia (FCAFC)). In other words, the taxpayer must show that unexplained accumulated wealth was from non-income sources: Gashi at [63].

615. As the Commissioner submits (AS at [298]), the fact that it is now known that the Rawson "loans" with MDB (as well as the BCI, Advance, Civic and EGL arrangements with Israeli banks) were supported by unexplained cash deposits, and that this was known by Rawson given the knowledge of (at least) Andrew, as director, establishes the existence of a critical evidentiary deficiency in Rawson's case before the Tribunal as a result of which it could not have discharged its burden of proof. As I have held above, that evidence is irreconcilable with Rawson's case before the Tribunal, and in particular:

616. Further, I agree with the Commissioner (AS at [299]) that, because Rawson deliberately concealed the existence of the Arthur Belan deposit account, it could not have discharged its onus of proving the excessiveness of the assessments and the correct amount of its taxable income. The true arrangement between Rawson, MDB, and the Arthur Belan deposit account, the true position vis-à-vis the price of the alleged "loans" (i.e. the margin between the interest rates as opposed to the actual interest rates of the loan), and the true position vis-à-vis alleged repayments of "interest" on the Rawson loans (i.e. that there were in fact no substantial periods of default and the source of the repayments) were deliberately concealed and therefore left unexplained by Rawson. Thus, as the Commissioner submitted (AS at [301]):

Simply put, given that the loans were secured by unexplained cash deposits Rawson had not apprised the Tribunal of all the material facts. Rawson has offered no explanation as to:

  • a. the source of the deposited funds;
  • b. why the unexplained deposits are / are not assessable income in Rawson's hands;
  • c. if the unexplained deposits have the character of income and are not Rawson's income, whose income it is;
  • d. the identity of the beneficial owner of the Arthur Belan account (if it is not Rawson);
  • e. what arrangements were in place between Rawson and Michael Binetter (or the beneficial owner of the account if it was not Rawson or Michael Binetter) as to the transfers to and from the Arthur Belan account; and
  • f. if "interest" on the Rawson loan was being paid by transfers to it from the Arthur Belan account, and Rawson was not the beneficial owner of the account, why

    ATC 26706

    Rawson says it was entitled to claim interest deductions in circumstances where it had not incurred the outgoing, or alternatively why those transfers were not income of Rawson, noting Rawson's tax returns did not disclose any other loan other than from MDB.

(See also AR at [12].)

617. Added to this, for example, are the unexplained transactions with respect to the Arthur Belan deposit account by George Belan (Erwin), Arthur Belan (Michael) and Frank Belan (Andrew), and the fact that the monies from the Arthur Belan deposit account did not return to Michael (as the account holder) but went to "M&D Lobelson", "Peter Babis" and "David Israel" at various times. The arrangements (if any) with "M&D Lobelson", "Peter Babis" and "David Israel" have not been explained and indeed these may well also have been code names.

618. Furthermore, as the Commissioner also submitted (AR at [18]), in light of the new evidence, on a rehearing before the Tribunal it would be open to the Commissioner (with apparent merit) to raise further arguments to meet Rawson's false case, namely, sham, s 99B of the ITAA 36 (trust income not previously subject to tax) and Part IVA of the ITAA 36 (schemes entered into for the dominant purpose of obtaining a tax benefit).

619. In addition, as I have earlier found (at Part 8.8 above), Advance, Civic, BCI, and EGL each withdrew their Part IVC proceedings, as well as Binqld and Ligon 268, on the basis of legal advice that those entities would be unable to discharge their onus of proving that the assessments in each case were excessive given the evidence of cash deposits supporting the loans to these other entities. As such, those entities implicitly accepted that the evidence of the cash deposits materially undermined their chances of succeeding in their Part IVC proceeedings as they contended in those proceedings that the loans in question were made on the basis of personal guarantees only. Equally, as Rawson's case before the AAT was essentially to the same effect, the Commissioner submitted that it must follow that the new evidence of a linked cash deposit would have the same material effect upon Rawson's chances of succeeding were the Tribunal to embark upon a rehearing. Whilst I understand the logic of the submission, ultimately, nothing turns on the argument as it is completely clear for the reasons I have already given that the fraud was material.

620. Finally, for the reasons which I give below, Rawson's submission that the loans were "genuine loans at interest" does not answer these issues in the context of the onus of proof imposed upon Rawson by s 14ZZK of the TAA 53 and the issues before the Tribunal.

10.4.4 Rawson's genuine loans submission

10.4.4.1 RAWSON'S CONTENTION THAT THE NEW EVIDENCE CONFIRMS THE FUNDS FROM MDB WERE GENUINE LOANS AT INTEREST

621. On the basis of the new documents produced by MDB and the witnesses examined in Israel pursuant to the letters of request, Rawson submitted in response to the applicant's written submissions in this proceeding that "[t]hree indisputable facts emerged", namely:

  • (a) The monies received by Rawson from MDB (which the Commissioner assessed as income) were genuine loans from [MDB's] own funds;
  • (b) Interest was payable by Rawson under those loans and the amount of interest was accurately reflected in the letters from MDB signed by Mr Zamir that were adduced into evidence in the Tribunal (being the amounts of interest for which a deduction was claimed); and
  • (c) The loans were secured by cash deposits held by Michael Binetter (using the pseudonym account name "Arthur Belan").

(RS at [27].)

622. Rawson also accepted "in arguendo" that the business method evidence given by Mr Etzion, Andrew, Emil and Margaret in the Tribunal was false or misleading in omitting mention of cash deposits as security "without the Court being troubled to make findings that it was" (albeit that its primary position was that such an omission could not constitute a deliberate falsehood necessary to establish perjury) (RS at [61]-[62]).

623. Significantly, this was the first time that Rawson conceded that its loans from MDB were secured by cash deposits and that the

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deposit account was held under the code name "Arthur Belan" for Michael. That concession was made only after fresh evidence obtained pursuant to the letters of request (which were themselves vigorously contested by Rawson in Australia and Israel) overwhelmingly established the existence of the linked cash deposit account under the code name, supporting an inference that Andrew, as the director of Rawson, appreciated the significance of disclosure of the deposit account in the context of the Rawson (AAT) proceedings, subsequent Federal Court appeals, and this proceeding: see by analogy
BCI Finances Pty Ltd (in liq) v Binetter [2018] FCAFC 189; (2018) 362 ALR 592 ( BCI Finances (FCAFC) ) at [575]. Indeed, in circumstances where BCI, Binqld, Ligon 268, EGL, Advance and Civic withdrew their Part IVC proceedings once the same practice of "securing" loans by secret linked deposit accounts was revealed, the inference is an irresistible one. As one of the legal representatives for the Binetter family entities reportedly advised, in the absence of an explanation of the deposit, the Part IVC proceedings were "doomed".

624. Despite Rawson's concession, it submitted that the Commissioner had not established that the evidence as to the non-existence of any security for the loans was material for the purposes of setting aside the Full Court's orders. This was because the new evidence obtained in response to the letters of request was said by Rawson to confirm that the funds received by Rawson from the MDB were "genuine loans at interest" enforceable by the bank ( Rawson's genuine loans submission ) on the basis that:

625. Rawson's genuine loans submission first assumes the correctness of its characterisation of the issues before the Tribunal, namely that:

the fundamental contest between the parties was whether the amounts were, as claimed by Rawson, received as loans, or as claimed by the Commissioner, were "completely uncommercial" and were not "genuine loans" upon which there was an obligation to pay interest.

(RS at [17].)

626. Secondly , Rawson's genuine loans submission assumes that:

627. Thus counsel for Rawson submitted in oral closing address that (at T430.25-35):

the allegation in 14(a) [of the 2FASOC] is premised on there being some distinction between a loan and what's called a back-to-back transaction, such that the former is somehow legally distinct from the latter and the latter can't involve a loan.

However, we say there is in fact no such distinction and the Commissioner has singularly failed to prove that the arrangement was not a loan, and with respect, the repeated use of inverted commas and reference to purported interests don't advance the case. So much is clear from the bank's own records which universally describe the arrangement as a loan, and your Honour will see a plethora of bank records to that effect …

628. Rawson also submitted (RS at [77]) that:

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It is obvious that any non-disclosure of the existence of the cash deposit used to secure the loans from MDB (even if proven to be 'fraudulent') was patently not directed to trick the Tribunal in finding in favour of Rawson. As the submissions of the Commissioner and the observations of Jagot J (at [78]-[79]) reveal, any "concealment" of such evidence only served to undermine Rawson's case. The only logical inference to be drawn, if one is needed to be drawn and it is submitted it is not, is that the nondisclosure of that fact was to protect the owner of the deposit (Michael Binetter) from being assessed by the Commissioner on what he describes as the "unexplained" cash deposit. It is beyond dispute that this cash was never Rawson's and could never form a basis of an assessment against it .

(Emphasis added.)

629. In support of its characterisation of the issues before the Tribunal, Rawson submitted first that (RS at [7]):

In its objections [to the Commissioner], Rawson contended that the assessments were highly excessive because the alleged income was a loan from MDB and that the interest on the loan was deductible because it carried on business as a financier for entities associated with the Binetter family and had on lent the funds at a rate of interest at the rate payable by Rawson on its loans from MDB.

630. 630 Rawson further argued that, consistently with this, its case before the Tribunal was that (RS at [9]):

The amounts received were not assessable income because they were loans it was obliged to repay, and did repay with interest. The interest was deductible because the funds borrowed from the MDB were on-lent at rates of interest equal to the rate of interest payable on the MDB loans.

631. In addition, whilst the Commissioner had found the loans to be a sham when disallowing Rawson's taxation objection, by the time of the Rawson (AAT) hearing, Rawson contended that the Commissioner "had expressly eschewed the sham contention [but] incongruously contended that Rawson had nevertheless engaged in fraud or evasion because there was no loan and there were no payments of interest giving rise to the deduction claimed" (RS at [13]). Rawson further contended that the Commissioner's position had narrowed further during the Tribunal hearing so as to contend that (at [14]-[15]):

in the absence of an adequate explanation as to the nature of receipts (i.e. proof they were genuine loans), [the Commissioner] was entitled to assess the amounts received from MDB as income and that the taxpayer had failed to discharge its burden of proof that the amounts received were loans. No positive case as to the income nature of the receipts was put; only that the amounts had been received and that it was incumbent on Rawson to show that they were not receipts of income. Importantly, the Commissioner did not dispute the evidence of the facts that Rawson had on-lent the funds received from MDB to other group entities at rates of interest equal to the rates on the MDB loans and did not contend the interest was otherwise not deductible if the loans were genuine.

The Commissioner accepted that the contentious receipts were from MDB and that the contentious payments by Rawson were to MDB. It was only the character of the amounts that was in issue. The Commissioner's principal position was that Rawson had not satisfied its burden of proving the amounts were a loan (and thus that the interest thereon was a deductible expense), which he supported by pointing to the irregularities in Rawson's evidence.

10.4.4.2 RAWSON'S GENUINE LOANS SUBMISSION MUST BE REJECTED

632. Rawson's genuine loans submissions must be rejected for the following reasons.

633. First , broadly speaking, it is correct to say that the Commissioner's case before the Tribunal was that Rawson had failed to discharge its onus under s 14ZZK(b) of the TAA 53 of establishing that its taxable income in each year was less than the amounts assessed by the Commissioner. It is also correct to say that the Commissioner accepted that the so-called loan monies were transferred by MDB to Rawson in Australia. However,

ATC 26709

Rawson's submissions characterise the case put by Rawson before the Tribunal at a superficially high level of generality. In fact Rawson's position before the Tribunal was that, save for a personal guarantee which it characterised as "security", no security was given over any assets or property either by Rawson or by any other entity or person, whether by way of a back-to-back deposit account or otherwise, in line with the business practice said to be evidenced by Binetter loan arrangements with other Israeli banks. That being so, the Commissioner submitted to the Tribunal that it was incumbent upon Rawson to prove that:

634. This, in the Commissioner's submission, could be done only if Rawson gave full disclosure of the dealing between Rawson and MDB. If there were some security or an associated transaction such as an associated deposit with MDB to which the bank had access by way of a set off , the Commissioner submitted to the Tribunal that it would cast a completely different light on the nature of the dealing with MDB and the basis upon which Rawson received moneys from the bank (at [21] of the Commissioner's written submissions before the Tribunal).

635. Secondly , as the Commissioner submitted in this proceeding:

by characterising the relevant conduct as the security alone and asserting the "genuineness" of the loans, Rawson's submission do not confront the calculated deceit of its own conduct in presenting the evidence relied upon by Rawson before the Tribunal to establish the opposite of the true position; including the evidence of its apparent sole directors: Andrew Binetter and his mother, Margaret Binetter.

(AR at [5]; emphasis in original.)

636. It is no answer to this to point to the fact that the plurality in the Full Court accepted at [122] that Andrew's evidence, as accepted by the Tribunal, was not necessarily decisive of the ultimate issue, for the reasons I have already given at [604] above. The entire case put by Rawson was patently false and, had the new documents been provided, would have been determined in an entirely different manner. Nor is it an answer to rely upon the Full Court's finding at [108] that the Tribunal was correct to reject the Commissioner's submission that it was incumbent on Rawson to prove "as independent matters additional to the reality of the loan transaction and liabilities, that there was no security for the loans, or no security other than a personal guarantee" and that there was no back-to-back arrangement. The point is that the new evidence incontrovertibly established the existence of the back-to-back loans which, if it had been available before the Tribunal, would have contradicted the positive case put by Rawson and cast an entirely different complexion on the alleged loans.

637. Thirdly , it is common ground that the Tribunal did not make an order permitting Rawson to raise additional grounds to those stated in the taxation objection decision. As such, Rawson was limited to the grounds stated in its taxation objections by force of s 14ZZK of the TAA 53. As a result, I accept Ms Morgan's submission in closing address that:

the significant issue that was put by [counsel for Rawson] today was an argument he has run on various occasions, which is the idea of this being a genuine loan. Well, the three loans being genuine. As your Honour now knows, it was every year it had to be redone. We now know that. It wasn't just one loans or three loans in 1997. It was in fact extended every single year, including by Andrew Binetter prior to the hearing and that was never revealed. But everything that Mr Hutley submitted this morning, your Honour, would not have been an argument that could have been [r]un in the tribunal.

Mr Hutley's client [Rawson] would have been constrained by the terms of its objection, and the objection that it had articulated and ran was - these were loans, and the interest was as paid, by Mr Andrew Binetter, and in the 90s by his father. So what your Honour's task actually is, is not

ATC 26710

whether MDB [has] an enforceable right under a loan contract, but whether or not your Honour is satisfied that the [C]ommissioner has proved the fraud that is pleaded , whether if that material had been available, whether for each year of income, Rawson would have been able to satisfy the [C]ommissioner, that the assessments were not excessive.

(T518.38-519.8; emphasis added.)

638. It follows that the materiality of the new evidence, for the purposes of determining its impact on the evidence supporting the original decision of the AAT and Full Court, cannot be assessed by reference to the question of whether this evidence may have satisfied the Tribunal that MDB had enforceable rights under the loan contracts. That proceeds on a false counterfactual as to the live issues raised by Rawson's objection and, therefore, before the Tribunal.

639. Fourthly , the question of whether Rawson was contractually bound to repay the loans and they were therefore enforceable by MDB also misses the point. Rather, among other things, as the Full Court held in BCI Finances (FCAFC) at [575], "[w]hile the existence of the offshore deposits and their provision as security for the advances, support the proposition that the advances were repayable, this does not address the questions whether the 'interest' payments were truly interest and whether the interest deductions were honestly claimed." In this regard, it will be recalled that the interest rates for the Rawson loans and the linked Arthur Belan deposit account were set by Rawson, as the customer, and not by MDB whose profit was not in those rates but in the margin charged by MDB as the fee for facilitating the back-to-back arrangement negotiated by the Binetter family.

640. Furthermore, the submission ignores the fact that, from whatever perspective one considers the true arrangements between Rawson and MDB (and indeed the other Binetter family entities and the Israeli banks), the monies transferred from MDB to Rawson were not obtained pursuant to an ordinary commercial loan agreement, as:

641. In the fifth place, Rawson's submission is premised upon a misapprehension of the test of materiality. Rather, as the Commissioner submits:

this Court does not evaluate the findings of the Tribunal and determine in light of those findings, whether the fact of security would have altered the outcome. Rather, what this Court must do is consider whether, had the Tribunal had all the material now available to this Court, the Commissioner's submissions and contentions would have been different and that the evidence obtained after the trial would probably have affected the outcome of the proceedings, and to the extent the fraud consists of perjury, that evidence remains unanswered and is so strong that it would reasonably be expected to have been decisive at a rehearing.

(AR at [6]; emphasis added.)

642. Applying the correct test, it is incontrovertible that if the new evidence now available to the Court of the linked Arthur Belan deposit account with MDB by Michael had been available to the Tribunal: the

ATC 26711

Commissioner's submissions and contentions before the Tribunal would have been different; the issues between the parties would have been fundamentally different; the secretive transactions now revealed would have formed specific issues in the proceeding; and the fresh evidence would have entirely changed the way in which the Tribunal approached its decision. As the Commissioner submitted (at AR at [11]):

The existence of a cash deposit securing the Rawson loans (indeed all the loans relied upon by Rawson in the Binetter family companies) means that the issues in which the dispute before the Tribunal proceeded would have been altered, as the secretive transactions, now brought to light, would have formed specific issues in the proceeding (though they were generally stated in the Commissioner's case, including in his Statement of Facts, Issues and Contentions).

(Emphasis in original.)

643. Sixthly , Rawson did not lead any evidence in support of its submission in this proceeding that the funds in the Arthur Belan deposit account belonged to Michael. The fact that Michael opened the loan account in his code name, was a signatory to the account, and could operate it does not establish that he was the legal or beneficial owner of the funds deposited in the account. Indeed, on the same day that the Arthur Belan deposit account was opened (17 March 1997), Michael signed an authority authorising his parents and siblings, including Andrew, to make deposits and withdrawals from the account, two of whom were the original directors of Rawson (i.e. Margaret and Erwin), together with a power of attorney applying to all accounts and transactions with MDB also in their favour. Furthermore:

644. These matters, and in particular the fact that Michael was holding himself out to MDB as Rawson's lawyer, strongly suggest that Michael was in fact holding those monies on behalf of his client, Rawson, or at the very least that he did not have beneficial ownership of the monies in that account. Added to this, Michael has not given evidence in support of Rawson's case for which no explanation has been given. This enables me more confidently to conclude that Michael would not have been able to give evidence which supported the inference for which Rawson contends, namely, that he had full beneficial ownership of the funds in the Arthur Belan deposit account.

645. Furthermore, as the Commissioner submits (AR at [14]), Rawson has neither addressed nor explained the dealings by Erwin (George Belan) and Andrew (Frank Belan) with the Arthur Belan deposit account and the fact that, as I have earlier found, monies withdrawn from the Arthur Belan deposit account went to "M&D Lobelson", "Peter Babis" and "David Israel" at various times.

646. All of these circumstances make it plain that there would have been real questions raised as to the legal and beneficial ownership of, and control over, the monies in the Arthur Belan deposit account if the fresh evidence of the account had been before the Tribunal. These questions would have included whether Rawson had legal or equitable ownership of the funds in the account, contrary to the Tribunal's finding that Rawson had discharged its onus of establishing that Rawson itself did not provide any security (at [202]), and that Rawson itself had no means of providing such security (at [231]). This highlights, among other difficulties, the fundamental difficulty with Rawson's submission that the deposit could not be assessed as income because Rawson

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had assets of only $2. As the Commissioner submitted (AR at [51]), that submission:

is inconsistent with the onus imposed on a taxpayer under s 14AAK of the TAA 1953 in review proceedings. To reason from that proposition that it had to be Michael Binetter's income should be rejected; such a suggestion was never put to the Tribunal, or the Commissioner prior to the receipt [of Rawson's written submissions in this proceeding], and is not supported by any evidence from Michael Binetter.

647. Nor could the Tribunal have found, as it did, that it was satisfied that Rawson never assumed any liability consistent with any kind of back-to-back arrangement (at [231]). Yet this finding was pivotal to the Tribunal's conclusion that Rawson had discharged its onus "of proving that the contentious loans were real and that its asserted liabilities for repayment and interest reflect the intended and enforceable reality of the transactions with MDB" (at [231]).

648. Furthermore, even if Michael had legal and beneficial ownership of the monies in that account as Rawson contends, that would not mean that the existence of the deposit account confirmed that the funds received from MDB were genuine loans at interest. There would remain a number of unusual circumstances and apparent irregularities on which the Commissioner relied to oppose Rawson's review application before the Tribunal, including: the fact that the Arthur Belan deposit account secured the monies loaned to Rawson; that transactions were made using code names which concealed the true identities of the Binetter family members; and the apparent commercial unreality of the asserted loans with MDB. There can also be no real doubt that Rawson's determination to oppose in Australia and in Israel the letters of request process to obtain the documents and evidence from Israel arose from its motivation to conceal this evidence, given MDB's position that, if asked, it would disclose the existence of the Arthur Belan deposit account. That determination, as the Commissioner submits (AR at [2]), is in itself demonstrative of the materiality of the underlying evidence that would inevitably have been revealed (and which Andrew and Michael knew would be revealed) if the MDB account files were provided to this Court and the witnesses in Israel were examined.

649. Nor did Rawson lead any evidence in support of its submission that any witnesses for Rawson who gave false evidence or were permitted to mislead the Tribunal (and the Commissioner) did so in order to protect Michael. It is, with respect, untenable to suggest that "[t]he only logical inference to be drawn … is that the non-disclosure of that fact was to protect the owner of the deposit (Michael Binetter) from being assessed by the Commissioner on what he describes as the "unexplained" cash deposit." Furthermore, it cannot be said, as Rawson submitted, that any concealment of the evidence of the Arthur Belan deposit account could only have undermined Rawson's case in the Tribunal (RS at [77]). To the contrary, the fresh evidence directly contradicts the case put by Rawson before the Tribunal that the loans were made solely on the basis of a personal guarantee, and vindicates the Commissioner's "hypothesis" (as it was described by the Tribunal at [202]) as to the existence of a linked deposit account with MDB that belonged either to Rawson or to some other related entity associated with Erwin (at [6]).

650. In the seventh place, in support of Rawson's genuine loan submission, Rawson relied on the fact that that MDB described the transaction as a loan and that the loan was an enforceable one. Rawson's written submissions state (at [75]):

Despite the Commissioner's use of inverted commas when describing the amount received by Rawson from MDB as a loan, he does not dispute that both the voluminous documentary evidence produced by MDB in response to the subpoena issued by the Magistrate's Court in Tel Aviv and the evidence of Elie Septon and Israel Zamir, former bank officers of MDB familiar with the Rawson loans, unequivocally supports the Tribunal's finding that the amounts received by Rawson from MDB were genuine loans of the banks own funds that were repayable with interest.

651. This submission must be rejected. It simply repeats an argument put before Tribunal

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without factoring in the new evidence of the deposit account which reveals that Rawson already had the monies available to it, whether they were strictly speaking its own funds or not. The existence of that deposit account denies the reality of the loans for present purposes and would have opened up entirely different lines of inquiry. MDB's description of the "loans" as such is part of the ruse that Rawson was manufacturing, and cannot now be relied upon as evidence that the loan was genuine. Such an argument is ultimately circular: as Rawson initially called the arrangement a "loan" as part of the ruse, it cannot now rely on the fact that it was called a "loan" to deny the ruse.

652. In short, as counsel for the Commissioner submitted before this Court:

Importantly, your Honour has never been provided with any explanation of the .6 per cent price or the source of the Arthur [Belan] funds. Your Honour has received no explanation why Andrew Binetter, a director of Rawson and authorised representative on the Arthur [Belan] account as Frank [Belan], did not tell the AAT about the Arthur [Belan] account, nor about its relationship with the Rawson so-called loans. Nor did Andrew Binetter, when asked by Mr Sullivan [in the Rawson (AAT) proceedings], reveal the BCI deposits in the Swiss account in Bank Hapoalim.

Your Honour has not been provided with an explanation as to why Margaret Binetter, also a director of Rawson and authorised representative on the Arthur [Belan] account as Ida [Belan], did not tell the AAT about the Arthur [Belan] account, nor about its relationship with the funds transferred to Rawson in Australia. There has been no explanation as to why Andrew's brother and Margaret's son, Michael Binetter, who set-up both the Arthur [Belan] account and the Rawson account, did not give evidence about this material - about these events to the AAT, nor why the Arthur [Belan] account was opened with a code name - where the money came from into the Arthur [Belan] account and who paid, if any, tax on it.

Your Honour has been given no explanation why Emil Binetter said he had no overseas assets and said that only personal guarantees existed for all his related companies where we now know the opposite was true. Your Honour hasn't been given any explanation as to why [Gary] Binetter did not tell the tribunal about his own code-name account as John [Belan] ….. that account. Your Honour hasn't been given any explanation as to why Rawson had ….. lied about the existence of a cash deposit in the name of BCI Finance in Switzerland and why he lied to say that the same conduct would be explicable for Rawson and its relationship to the Arthur [Belan] account.

Your Honour has not been given any explanation as to why the directors of Rawson, Andrew and Margaret Binetter, permitted all of this evidence to be relied upon and the submissions to be made to the AAT that Rawson had obtained a loan on the basis of a personal guarantee and there was not any more to the transaction such as a back-to-back loan when that is exactly what the true facts were.

There is no explanation offered for any of this because there is no explanation except that if the tribunal had discovered the transfer of funds to Australia was supported by one-for-one deposits - that the margin between the two bank accounts was the price at .6 per cent, there was no interest rates not paid because they were paid by Arthur [Belan] account, the tribunal would not have found that Rawson had established the assessments were excessive.

And that's why, your Honour, for each of the corporations that were used for matching conduct the Binetters upon the revelations of the cash deposits overseas for BCI, EGL, … Civic and Advance withdrew their tax review hearing. Andrew Binetter - I will take you to an email, your Honour, where Andrew Binetter was advised to withdraw all appeal proceedings because of cash deposits - because the cash deposits prevented establishing the onus of proof, and, indeed, in that email the solicitors advise they could no longer act if the matters proceeded.

And that's why, your Honour, in BCI and in Rawson, Andrew and Margaret

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Binetter, as directors of both BCI and of Rawson, resisted the Commissioner's attempts to examine relevant bank officers in relation to the deposits held by the bank to facilitate the transfer of funds back to Australia.

(T41.37-42.42.)

653. In light of the evidence above, I accept those submissions as entirely compelling.

11. CONCLUSION

654. For the reasons set out above, the orders of the Full Court of the Federal Court in Rawson (FCAFC) should be set aside on the ground that it was procured by fraud. I note in this regard, that while Rawson sought to defend the Tribunal's decision in the Federal Court at first instance on the same fraudulent basis as it prosecuted the appeal against that judgment in the Full Court, the judgment in Rawson (FCA) was not affected by the fraud. In other words, as the primary judge rejected Rawson's fraudulent case, the fraud was not material. As such, there is no basis to set aside the orders in Rawson (FCA).

655. The Commissioner seeks an order for indemnity costs. However, as this has not yet been the subject of argument, I make no order as to costs at present and will allow the parties an opportunity to address me on this issue if agreement on the issue of costs is not reached.

THE COURT ORDERS THAT:

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

APPENDIX A: GLOSSARY
Term Description
2006 deed of pledge deed of pledge dated 8 March 2006 signed by Andrew as pledger of the security for BCI's loan from Bank Hapoalim
AAT or Tribunal Administrative Appeals Tribunal
Advance ACN 078 272 867 Pty Limited, formerly Advance Finances Pty Limited (in liq)
Advance loans the purported loans between Advance and MDB entered into in 1997 in the amount of AUD$4million and in 2004 in the amount of AUD$2.5million
Advance proceedings proceedings initiated in the Tribunal (AAT Ref 2010/2936-2642) by Advance under Part IVC of the Taxation Administration Act 1953 on 10 July 2012

ATC 26715

Areffco 		pseudonym for Rawson Finances Pty Ltd adopted in Areffco
Arthur Belan deposit account MDB term deposit account number 98018-350982 in the name of Arthur Belan (Michael Binetter) with George Belan (Erwin Binetter), Ida Belan (Margaret Binetter), Benjamin Belan (Ronald Binetter), Henry Belan (Peter Binetter) and Frank Belan (Andrew Binetter) having powers of attorney
Arthur Belan pledge an MDB form in Hebrew (and translated into English) dated 30 May 1997, which described Arthur Belan as a "guarantor" and Rawson as the "borrower" of money owed to MDB
BCI BCI Finances Pty Ltd (in liq)
BCI letter of request letter of request sent to judicial authorities in Israel for the taking of evidence from Mr Ilan Mazur, an officer of Bank Hapoalim, issued in the BCI proceedings:
BCI Finances Pty Ltd v Commissioner of Taxation [2012] FCA 855; (2012) 89 ATR 861
BCI loans BCI loans 1 - 12 and BCI loans 13 - 24
BCI loans 1 - 12 the purported loan between BCI Finances Pty Ltd and Bank Hapoalim entered into on or about 25 April 1993 by way of twelve documents bearing the date 13 May 1993 and signed by Erwin Binetter
BCI loans 13 - 24 the purported loan between BCI Finances Pty Ltd and Bank Hapoalim entered into by way of twelve documents bearing the date 27 May 1993 and signed by Emil Binetter
BCI proceedings proceedings initiated in the Federal Court (NSD626/2011) by BCI under Part IVC of the Taxation Administration Act 1953 on 12 May 2011
BCI v Binetter (No 4)
BCI Finances Pty Ltd (in liq) v Binetter (No 4) [2016] FCA 1351; (2016) 348 ALR 227, being a judgment by Gleeson J dated 18 November 2016 in the BCI proceedings
BH Bank Hapoalim
Binqld Binqld Finances Pty Limited (in liq)
Binqld proceedings proceedings initiated in the Tribunal (AAT Ref 2011/0275-0277) by Binqld under Part IVC of the Taxation Administration Act 1953 on 24 January 2011
Binqld v IDB
Binqld Finances Pty Ltd (in liq) (ACN 119 243 220) v Israel Discount Bank (No 2) [2020] FCA 1208; (2020) 384 ALR 148, being a judgment by Foster J dated 20 August 2020 in the Binqld proceedings
BTB a back-to-back loan arrangement
CB Court Book
Civic ACN 087 623 541 Pty Limited, formerly Civic Finance Pty Limited (in liq)
Civic loans the purported loans between Civic and IDB entered into on 25 May 1999 in the amount of AUD$5million and on or about 27 May 2004 in the amount of AUD$3.69million

ATC 26716

Civic proceedings 		proceedings initiated in the Tribunal (AAT Ref 2012/2921-2926) by Civic under Part IVC of the Taxation Administration Act 1953 on 10 July 2012
Commissioner Commissioner of Taxation
EGL EGL Development (Canberra) Pty Limited (in liq)
EGL loans the purported loans between EGL and IDB entered into in about 21 December 1988 in the amount of up to 19.5 million Swiss Francs and in about August 1993 in the amount of up to 4 million Swiss Francs
EGL proceedings proceedings commenced in the Tribunal (AAT Ref 2011/1704-1719) by EGL under Part IVC of the Taxation Administration Act 1953 on 31 May 2011
GERM entities collective reference to Gerobin, Erbin, Rawbin and Marbin
Gerobin Gerobin Finances Pty Ltd (in liq)
IDB Israel Discount Bank
KDB Key Documents Bundle
Letters of request three letters of request sent to Israel to take evidence from Elie Septon, Israel Zamir and Shaul Antebi in these proceedings: Commissioner
of Taxation v Rawson Finances Pty Ltd (No 4) [2016] FCA 1436
Ligon 268 proceedings proceedings commenced in the Tribunal (AAT Ref 2011/1721-1730) by Ligon 268 under Part IVC of the Taxation Administration Act 1953 on 5 May 2011
Ligon 158 Ligon 158 Pty Limited (in liq), the parent company of Rawson
Ligon 268 Ligon 268 Pty Limited (in liq)
Marbin Marbin Finances Pty Ltd (in liq)
MDA Lawyers First law firm of Mr Douglass
MDB Mercantile Discount Bank
MDB Documents the documents produced by MDB on 2 February 2020 and 21 April 2020 pursuant to the letters of request issued in these proceedings on or about 30 November 2016
Rawbin Rawbin Finances Pty Limited (in liq)
Rawson Rawson Finances Pty Limited
Rawson current
account 		MDB current account number 98018-351083 in the name of Rawson
Rawson loan account 1 MDB loan account number 971118-650013 in the name of Rawson for the purported loan of AUD$3,000,000
Rawson loan account 2 MDB loan account number 971118-650021 in the name of Rawson for the purported loan of AUD$800,000
Rawson loan account 3 MDB loan account number 971-118-650048 in the name of Rawson for the purported loan of AUD$750,000
Rawson loans a collective reference to Rawson loan account 1, Rawson loan account 2 and Rawson loan account 3

ATC 26717

Rawson (AAT)
Re Areffco and Commissioner of Taxation [2011] AATA 628; (2011) 84 ATR 924, being the Tribunal's decision dated 6 September 2011
These proceedings were initiated by Rawson under Part IVC of the Taxation Administration Act 1953 on 11 June 2010 in the AAT Ref 2010/2360 seeking review of the Commissioner's objection decision in respect of notices of assessment, notices of amended assessment and notice of penalty issued to Rawson for the income years ended 30 June 1997 to 30 June 2008
Rawson (FCA)
Commissioner of Taxation v Rawson Finances Pty Ltd [2012] FCA 753; (2012) 89 ATR 357, being Edmond J's decision dated 17 July 2012 allowing the Commissioner's appeal from Rawson (AAT)
Rawson (FCAFC)
Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26; (2013) 133 ALD 39, being the decision of the Full Federal Court dated 5 March 2013 allowing Rawson's appeal from Rawson (FCA)
Rawson (No 4) Commissioner
of Taxation v Rawson Finances Pty Ltd (No 4) [2016] FCA 1436, being the decision of Justice Perry dated 30 November 2016 allowing a letter of request to be sent to Israel to take evidence from Elie Septon, Israel Zamir and Shaul Antebi
SCB Supplementary Court Book
Signet Lawyers Second law firm of Mr Douglass
APPENDIX B: PAYMENTS OF INTEREST ON RAWSON'S LOANS FROM JULY 2001 TO DECEMBER 2004

Rawson current account: 98018-351083

Arthur Belan deposit account: 98018-350982

Rawson l oan account 2 : ending 650021

Rawson loan account 3 : ending 650048


Agreed chronology item Date Description Document reference
163 31 December 2001 Rawson instructs MDB to debit Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083) in the amount AUD$66,000 SCB Vol 4 Tab 341; MDB Folder 2 p 813; SCB Vol 4 Tab 341; MDB Folder 5 p 240; SCB Vol 4 Tab 342; MDB Folder 2 p 812

ATC 26718

164
165		 1 January 2002 MDB debits interest amount AUD$34,114 in Rawson loan account 2 (654-971-18-650021) for the period 29 June 2001 to 31 December 2001
MDB debits interest amount AUD$31,981.88 in Rawson loan account 3 654-971-18-650048 for the period 29 June 2001 to 31 December 2001		 SCB Vol 4 Tab 345; MDB Folder 5 p 86
SCB Vol 4 Tab 347; MDB Folder 5 p 88
168 3 June 2002 MDB debits interest amount of AUD$28,382 in Rawson loan account 2 (654-971-18-650021) for the period 31 December 2001 to 4 June 2002 SCB Vol 4 Tab 362; MDB Folder 2 p 830
171 6 June 2002 "Arthur Belan" instructs MDB to transfer the amount AUD$53,757.90 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083) SCB Vol 4 Tab 373; MDB Folder 2 p 834-835
173
174		 2 July 2002 "Arthur Belan" instructs MDB to withdraw amount AUD$59,959.26 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98218-350982)

"Arthur Belan" instructs MDB to withdraw amount AUD$1,618.72 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083)		 SCB Vol 4 Tab 382; MDB Folder 2 p 848; SCB Vol 4 Tab 382; MDB Folder 5 p 231;
SCB Vol 4 Tab 383; MDB Folder 2 p 849
SCB Vol 4 Tab 383; MDB Folder 5 p 232;
SCB Vol 4 Tab 385; MDB Folder 2 p 850-851
184 25 December 2002 "Arthur Belan" instructs MDB to deposit payment in the amount AUD$20,000 into Arthur Belan deposit account (98018-350982) SCB Vol 5 Tab 426; MDB Folder 3 p 894-895
190 1 January 2003 MDB debits interest amount of AUD$38,724 in Rawson loan account 2 (654-971-18-650021) for the period 4 June 2002 to 31 December 2002 SCB Vol 5 Tab 437; MDB Folder 3 p 906
191 2 January 2003 "Arthur Belan" instructs MDB to withdraw the amount AUD$75,027.75 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083) SCB Vol 5 Tab 439; MDB Folder 3 p 909;
SCB Vol 5 Tab 440; MDB Folder 3 p 910
193 1 July 2003 "Arthur Belan" instructs MDB to withdraw the amount AUD$59,394.35 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083) SCB Vol 5 Tab 451; MDB Folder 3 p 920
199 1 January 2004 "Arthur Belan" instructs MDB to withdraw AUD$52,489.28 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083) SCB Vol 5 Tab 486; MDB Folder 1 p 159

ATC 26719

200
201		 1 January 2004 MDB advises Rawson that it executed the payment of interest of AUD$31,809 for loan account 3 (650048) and that Rawson current account (654-098018-351083) was debited of this amount
MDB advises Rawson that it executed the payment of interest of AUD$33,929 for loan account 2 (650021) and that Rawson current account (654-098018-351083) was debited of this amount		 SCB Vol 5 Tab 487; MDB Folder 1 p 160
SCB Vol 5 Tab 488; MDB Folder 1 p 161
202 3 January 2004 Rawson instructs MDB to debit Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083) for the amount of AUD$9,961.29 SCB Vol 5 Tab 491; MDB Folder 1 p 247-248
228 1 July 2004 "Arthur Belan" instructs MDB to withdraw AUD$65,024.05 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083) SCB Vol 5 Tab 535; MDB Folder 1 p 207-208
236 2 January 2005 Rawson instructs MDB to debit Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083) for the amount of AUD$54,850.18 SCB Vol 6 Tab 552;
MDB Folder 1 p 242;
SCB Vol 6 Tab 553;
MDB Folder 1 p 238;
SCB Vol 6 Tab 553;
MDB Folder 1 p 240;
SCB Vol 6 Tab 553;
MDB Folder 5 p 373-374;
SCB Vol 6 Tab 544;
MDB Folder 5 p 376
244 7 January 2005 Rawson orders the transfer of AUD$63,428.55 to MDB with the description "Att Mr Elie Septon Int 6 months to 300601 Amt 1550000 behalf Rawson Fi…" SCB Vol 6 Tab 570;
MDB Folder 1 p 271;
SCB Vol 6 Tab 570; MDB Folder 5 p 367

Footnotes

[1] KDB Vol 7 Tab 233; TCA1-1 9/407/5424.
[2] KDB Vol 1 Tab 15; TCA1-1 1/21/353.
[3] KDB Vol 8 Tab 259; TCA1-2 9/3961.
[4] KDB Vol 4 Tab 150; TCA1-1 5/284/2563 [88].
[5] KDB Vol 6 Tab 201; TCA6-1 9/51.0/51.2/51.5/51.8/51.11/51.13 – .20.
[6] KDB Vol 1 Tab 17; TCA1-1 1/26/394 (AUSTRAC records); KDB Vol 4 Tab 144; TCA1-1 4/278/ 1991 [6], [9], [12] (Rawson’s statement of facts, issues and contentions).
[7] See, Areffco [25]; KDB Vol 4 Tab 160; KDB Vol 7 Tab 211; TCA1-1 5/298/2742 [34] – [35] (affidavit of Andrew Binetter 17 November 2010).
[8] KDB Vol 8 Tab 268; TCA1-1 11/494/6368 (company search).
[9] KDB Vol 8 Tab 269; TCA1-1 11/495/6378 (company search).
[10] KDB Vol 8 Tab 270; TCA1-1 11/496/6383 (company search).
[11] KDB Vol 8 Tab 271; TCA1-1 11/497/6392 (company search).
[12] KDB Vol 8 Tab 272; TCA1-1 11/498/6401 (company search).
[13] CB Vol 8 Tab 499; TCA1-1 11/499/6408 (company search).
[14] KDB Vol 8 Tab 281; McGregor NEM1-2 Tab 156 (company search).
[15] KDB Vol 8 Tab 282; McGregor NEM1-2 Tab 157 (company search).
[16] KDB Vol 8 Tab 283; McGregor NEM1-2 Tab 158 (company search).
[17] KDB Vol 8 Tab 284; McGregor NEM1-2 Tab 159 (company search).
[18] KDB Vol 8 Tab 268, 269, 270, 271, 272 and CB Vol 8 Tab 499; TCA1-1 11/494 – 499/6368 – 6413 (BCI, Binqld, Ligon 268, EGL, Advance and Civic); KDB Vol 8 Tab 281, 282, 283, 284; McGregor NEM1-2 Tabs 156 – 159 (GERM).
[19] KDB Vol 7 Tab 216; TCA1-1 8/373/4715 [10]ff, [29]ff (amended appeal statement).
[20] KDB Vol 7 Tab 221; TCA1-1 8/388/5026 [6]ff (further amended statement of facts, issues and contentions).
[21] KDB Vol 7 Tab 222; TCA1-1 8/389/5040 [15]ff (statement of facts, issues and contentions).
[22] KDB Vol 7 Tab 223; TCA1-1 8/390/5056 [14]ff (statement of facts, issues and contentions).
[23] KDB Vol 7 Tab 234; TCA1-1 9/413/5486 [17]ff, [24]ff (statement of facts, issues and contentions).
[24] KDB Vol 7 Tab 235; TCA1-1 9/414/5500 [16]ff, [22]ff (statement of facts, issues and contentions).
[25] KDB Vol 7 Tab 216; TCA1-1 8/373/4715 (BCI); KDB Vol 7 Tab 221; TCA1-1 8/388/5026 (Binqld); KDB Vol 7 Tab 222; TCA1-1 8/389/5040 (EGL), KDB Vol 7 Tab 223; TCA1-1 8/390/5056 (Ligon 268), KDB Vol 7 Tab 234; TCA1-1 9/413/5486 (Advance), KDB Vol 7 Tab 235; TCA1-1 9/414/5500 (Civic).
[26] KDB Vol 8 Tab 268; TCA1-1 11/494/6386 (company search).
[27] KDB Vol 8 Tab 268; TCA1-1 11/494/6386 (company search).
[28] KDB Vol 8 Tab 269; TCA1-1 11/495/6378 (company search).
[29] KDB Vol 8 Tab 269; TCA1-1 11/495/6378 (company search).
[30] KDB Vol 8 Tab 270; TCA1-1 11/496/6383 (company search).
[31] KDB Vol 8 Tab 271; TCA1-111/497/6392 (company search).
[32] KDB Vol 8 Tab 271; TCA1-111/497/6392 (company search).
[33] KDB Vol 8 Tab 272; TCA1-1 11/498/6401 (company search).
[34] KDB Vol 8 Tab 272; TCA1-1 11/498/6401 (company search).
[35] CB Vol 8 Tab 499; TCA1-1 11/499/6408 (company search).
[36] CB Vol 8 Tab 499; TCA1-1 11/499/6408 (company search).
[37] KDB Vol 8 Tabs 281, 282, 283, 284; McGregor NEM1-2 Tabs 156 – 159.
[38] KDB Vol 8 Tabs 281-284; McGregor NEM1-2 Tabs 156 – 159.
[39] KDB Vol 4 Tab 150; Andrew Binetter: KDB Vol 4 Tab 160; TCA1-1 5/284/2563 (21 October 2010); TCA1-1 5/298/2742 (17 November 2010); KDB Vol 5 Tab 177; TCA1-1 6/326/3008 (15 April 2011); KDB Vol 5 Tab 182 ; TCA1-1 6/330/3053 (4 May 2011); KDB Vol 5 Tab 185; TCA1-1 6/333/3074 (6 May 2011). Baruch Etzion: KDB Vol 3 Tab 129; TCA1-1 3/211/1238; (16 December 2009); KDB Vol 5 Tab 167; TCA1-1 5/303/2804 (15 February 2011); KDB Vol 5 Tab 175; TCA1-1 6/324/2988 (1 April 2011).
[40] Andrew Binetter: KDB Vol 5 Tab 191; TCA1-1 6/337/3231; KDB Vol 6 Tab 197; TCA1-1 7/345/3577; KDB Vol 6 Tab 198; TCA1-1 7/346/3659; KDB Vol 6 Tab 199; TCA1-1 7/347/3745; KDB Vol 6 Tab 202; TCA1-1 7/350/3872. Baruch Etzion: KDB Vol 5 Tab 191; TCA1-1 6/337/3231.
[41] Andrew Binetter: KDB Vol 7 Tab 215; TCA1-1 8/370/4658 (31 October 2011); KDB Vol 7 Tab 220; TCA1-1 8/387/5022 (13 April 2012); KDB Vol 7 Tab 236; TCA1-1 9/415/513 (28 September 2012). Baruch Etzion: KDB Vol 7 Tab 212 ; TCA1-1 8/365/4619 (4 October 2011); KDB Vol 7 Tab 218; TCA1-1 8/379/4789 (15 March 2012); KDB Vol 7 Tab 219; TCA1-1 8/380/4800 (15 March 2012).
[42] SCB Vol 9 Tab 897; MDB Documents pp 43 (AUD$1,060,000 converted to Swiss Francs to Peter Babis at the instruction of Frank Belan (Andrew Binetter) on 21 July 2009) ; , SCB Vol 9 Tab 908; MDB Documents p 44 (CHF917,000 to Peter Babis by order of Michael Binetter on 22 July 2009), and SCB Vol 9 Tab 942 MDB Documents p 76; (AUD$648,049.84 to Peter Babis in Swiss Francs at the instruction of Andrew Binetter on 13 October 2009) ; SCB Vol 9 Tab 943 ; MDB Documents p 77 (CHF595,000 to Peter Babis by order of Michael Binetter on 13 October 2009).
[43] SCB Vol 7 Tab 722; MDB Documents p 486.
[44] SCB Vol 7 Tab 721; MDB Documents p 485.
[45] CB Vol 1 Tab 3 .
[46] KDB Vol 7 Tab 233; TCA1-1 9/407/5424.
[47] KDB Vol 8 Tab 247; TCA1-1 10/463/6020.
[48] CB Vol 8 Tab 467; TCA1-1 10/464/6020.
[49] KDB Vol 8 Tab 252; TCA1-1 10/479/6199.
[50] KDB Vol 8 Tab 251 ; TCA1-1 10/477/6138.
[51] CB Vol 38 Tab 1953 – 1954 .
[52] CB Vol 38 Tabs 1957-1958 .
[53] KDB Vol 2 Tab 55; TCA1-1 2/125/636.
[54] KDB Vol 3 Tab 115 .
[55] Ibid.
[56] 2FASOC and Def at [4].
[57] KDB Vol 3 Tab 115; TCA1-1 2/178/952 and 966.
[58] 2FASOC and Def at [7].
[59] 2FASOC and Def at [5] and [8]; KDB Vol 3 Tab 116; TCA1-1 2/179/995; KDB Vol 3 Tab 117; TCA1-1 2/180/1054; KDB Vol 3 Tab 118; TCA1-1 2/181/1091; KDB Vol 3 Tab 119; Kinsella Annexure “CK1-1”.
[60] KDB Vol 3 Tab 116 ; TCA1-1 2/179/1001.
[61] KDB Vol 4 Tab 138; TCA1 3/219/1490.
[62] KDB Vol 4 Tab 140; TCA1-1 4/220/1558.
[63] KDB Vol 4 Tab 144; TCA1-1 4/278/1991 (Rawson’s SFIC); KDB Vol 4 Tab 146; TCA1-1 5/280/2202 (the Commissioner’s SFIC).
[64] KDB Vol 4 Tab 144; TCA1-1 4/278/1991[6], [9], [12], [40], [41] (Rawson’s SFIC).
[65] KDB Vol 7 Tab 211; TCA1-1 8/361/4218.
[66] CB Vol 5 Tab 338; TCA1-1 6/335/3088 (9 May 2011); KDB Vol 5 Tab 190; TCA1-1 6/336/3163 (10 May 2011); KDB Vol 5 Tab 191; TCA1-1 6/337/3231 (11 May 2011); KDB Vol 5 Tab 192; TCA1-1 6/338/3334 (12 May 2011); KDB Vol 5 Tab 194; TCA1-1 6/340/3429 (13 May 2011); KDB Vol 6 Tab 197; TCA1-1 7/345/3577 (8 June 2011); KDB Vol 6 Tab 198; TCA1-1 7/346/3659 (9 June 2011); KDB Vol 6 Tab 199; TCA1-1 7/347/3745 (10 June 2011); KDB Vol 6 Tab 202; TCA1-1 7/350/3872 (17 June 2011).
[67] KDB Vol 7 Tab 211; TCA1-1 8/361/4218.
[68] KDB Vol 2 Tab 56; TCA1-2 5/2421.
[69] KDB Vol 7 Tab 224; TCA1-1 9/394/5087 [232] (objection decision: Advance); KDB Vol 7 Tab 225; TCA1-1 9/395/5164 [213] (objection decision: Civic).
[70] KDB Vol 2 Tab 61; TCA1-1 2/127/644 (EGL, BCI, Rawson, Ligon 158); KDB Vol 2 Tab 71; TCA1-1 2/137/718 (Binqld); KDB Vol 2 Tab 58; TCA3 Annexure “TCA3-1” (Advance and Civic).
[71] KDB Vol 2 Tab 77; TCA1-1 2/144/755 (Rawson); KDB Vol 2 Tab 78; TCA1-1 2/145/758 (BCI); KDB Vol 2 Tabs 79-84; TCA3 Annexures “TCA3-4” – “TCA3-9” (Civic, Advance, Ligon 158, Ligon 268, Binqld and EGL).
[72] KDB Vol 2 Tab 62; TCA1-1 2/128/648 (Rawson); KDB Vol 2 Tab 63; TCA1-1 2/129/650 (BCI); KDB Vol 2 Tab 68; TCA1-1 2/135/710 (EGL).
[73] Ibid.
[74] KDB Vol 2 Tab 60; TCA3 Annexure “TCA3-3”.
[75] KDB Vol 2 Tab 64; TCA1-1 2/130/652 (BCI); KDB Vol 2 Tab 65; TCA1-1 2/131/662 (Rawson); KDB Vol 2 Tab 69; TCA1-1 2/136/712 (EGL); KDB Vol 2 Tab 66; TCA1-1 2/132/670 (Ligon 158).
[76] KDB Vol 2 Tab 65; TCA1-1 2/131/664.
[77] KDB Vol 2 Tab 66; TCA1-1 2/132/680-681 (Ligon 158).
[78] KDB Vol 2 Tab 65; TCA1-1 2/131/666.
[79] KDB Vol 2 Tab 72; TCA1-1 2/140/738.
[80] CB Vol 1 Tab 4; TCA1 [12] – [14]. Summaries of all the assessments, objections and objection decisions are at Annexures “A”, “B” and “C” to TCA1.
[81] KDB Vol 4 Tab 165; TCA1 -1 5/301/2801.
[82] KDB Vol 5 Tab 193; TCA1-1 6/339/3426.
[83] KDB Vol 5 Tab 183; TCA1-1 6/332/3071.
[84] KDB Vol 5 Tab 184; TCA1-2 3/1800.
[85] KDB Vol 7 Tab 229; TCA1-1 9/402/5390.
[86] KDB Vol 7 Tab 230; TCA1-1 9/403/5392.
[87] KDB Vol 4 Tab 140; TCA1-1 4/220/1558 (Rawson application for review).
[88] KDB Vol 7 Tab 221 ; TCA1-1 8/388/5026 ( Binqld’s Further Amended SFIC); KDB Vol 7 Tab 222 ; TCA1-1 8/389/5040 ( EGL’s SFIC); KDB Vol 7 Tab 223; TCA1-1 8/390/5056 ( Ligon 268’s SFIC); KDB Vol 7 Tab 234 ; TCA1-1 9/413/5486 ( Advance’s SFIC); KDB Vol 7 Tab 235 ; TCA1-1 9/414/5500 ( Civic’s SFIC); KDB Vol 7 Tab 216 ; TCA1-1 8/373/4715 ( BCI’s amended appeal statement).
[89] KDB Vol 7 Tab 226 ; TCA1-1 9/396/5233 (Commissioner’s SFIC in Binqld ); KDB Vol 7 Tab 227; TCA1-1 9/397/5242 (Commissioner’s SFIC in EGL ); KDB Vol 7 Tab 228; TCA1-1 9/398/5254 (Commissioner’s SFIC in Ligon 268 ); KDB Vol 8 Tab 237; TCA1-1 9/416/5526 (Commissioner’s SFIC in Advance ); KDB Vol 8 Tab 238; TCA1-1 9/417/5535 (Commissioner’s SFIC in Civic ).
[90] KDB Vol 6 Tab 204 ; TCA1-1 7/351/2845 (Commissioner’s appeal statement in BCI ).
[91] KDB Vol 4 Tab 144 ; TCA1-1 4/278/1991 ( Rawson’s SFIC);
[92] AAT 9 May 2011 T57.43-58.4; CB Vol 5 Tab 338; TCA1-1 6/335/3088.
[93] KDB Vol 4 Tab 168; TCA1-1 5/304/2807; KDB Vol 5 Tab 176; TCA1-1 6/325/2995.
[94] KDB Vol 4 Tab 167; TCA1-1 5/303/2804; KDB Vol 5 Tab 175; TCA1-1 6/324/2988.
[95] KDB Vol 3 Tab 132; TCA1-1 3/216/1398 (15 February 2010) (first statutory declaration); KDB Vol 4 Tab 166; TCA1-1 5/302/2803 (14 February 2011) (second statutory declaration).
[96] KDB Vol 4 Tab 150; TCA1-1 5/284/2563; KBD Vol 4 Tab 160; TCA1-1 5/298/2742; KDB Vol 5 Tab 177; TCA1-1 6/326/3008; KDB Vol 5 Tab 182; TCA1-1 6/330/3053; KDB Vol 5 Tab 192; TCA1-1 6/338/3334.
[97] KDB Vol 4 Tab 147; TCA1-1 5/282/2391.
[98] KDB Vol 6 Tab 195 ; TCA1-1 6/342/2356.
[99] KDB Vol 4 Tab 148; TCA1-1 5/283/2396; KDB Vol 4 Tab 162; TCA1-1 5/300/2799.
[100] KDB Vol 3 Tab 132; TCA1-1 3/216/1398.
[101] KDB Vol 4 Tab 166; TCA1-1 5/302/2803.
[102] KDB Vol 5 Tab 178 ; TCA1-1 6/327/301.
[103] KDB Vol 5 Tab 187; TCA1-1 6/334/3081.
[104] T54.18-.26; CB Vol 5 Tab 338; TCA1-1 6/335/3088.
[105] T581.52ff, KDB Vol 6 Tab 199; TCA1-1 7/347/3745.
[106] KDB Vol 5 Tab 187; TCA1-1 6/334/3081.
[107] KDB Vol 6 Tab 196 ; TCA1-1 6/343/3560; CB Vol 26-27 Tab 1227 ; TCA6-1 8/47/4257; KDB Vol 6 Tab 196 ; TCA6-1 10/22A/5832.
[108] AAT 8 June 2011 T402-403 ( KDB Vol 6 Tab 197 ; TCA1-1 7/345/3577).
[109] AAT 8 June 2011 T402 ( KDB Vol 6 Tab 197 ; TCA1-1 7/345/3577).
[110] AAT 8 June 2011 T418 ( KDB Vol 6 Tab 197 ; TCA1-1 7/345/3577).
[111] KDB Vol 6 Tab 199; TCA1-1 7/347/3745.
[112] KDB Vol 4 Tab 167; TCA1-1 5/303/2804; KDB Vol 5 Tab 175 ; TCA1-1 6/324/2988.
[113] KDB Vol 5 Tab 187; TCA1-1 6/334/3081.
[114] AAT 10 May 2011 T137-138: KDB Vol 5 Tab 190 ; TCA1-1 6/336/3163.
[115] AAT 9 May 2011 T57 ( CB Vol 5 Tab 338 ; TCA1-1 6/335/3088).
[116] Rawson’s AAT reply submissions dated 15 August 2011 at [79] ( KDB Vol 6 Tab 209; TCA1-1 7/359/4158).
[117] Expert Opinion of Orly Brown affirmed 15 February 2011 ( KDB Vol 4 Tab 168; TCA1-1 5/304/2807); Further Expert Opinion of Orly Brown affirmed on 8 April 2011 ( KDB Vol 5 Tab 176; TCA1-1 6/325/2295).
[118] CB Vol 22 Tab 1208; TCA6-1 3/29/1377.
[119] KDB Vol 4 Tab 147; TCA1-1 5/282/2391
[120] Rawson’s AAT Opening Submissions dated 9 May 2011 at [17] ( KDB Vol 5 Tab 187; TCA1-1 6/334/3076); see also Rawson’s Outline of Submissions dated 15 April 2011 at [38]–[39] ( KDB Vol 5 Tab 178; TCA1-1 6/327/301).
[121] SCB Vol 1 Tab 2 , T22.5-12. See also T27.18-20.
[122] KDB Vol 3 Tab 132; TCA1-1 3/216/1398 (15 February 2010) and KDB Vol 4 Tab 166; TCA1-1 5/302/2803 (14 February 2011) respectively.
[123] Affidavit of Andrew Binnetter affirmed on 21 October 2010 at [5] ( KDB Vol 4 Tab 150; TCA1-1 5/284/2563); Affidavit of Mark Craig Douglass sworn 25 October 2019 at [22] ( CB Vol 21 Tab 1195; TCA6-1 2/17/483.
[124] Examination of Israel Zamir, 12 August 2020, 329.2-5 (Supp CB at tab 3).
[125] SCB Vol 1 Tab 3, T238.11-28, T239.1.
[126] SCB Vol 1 Tab 3 , T308.12-14.
[127] KDB Vol 4 Tab 147; TCA1-1 5/282/2391.
[128] KDB Vol 4 Tab 150; TCA1-1 5/284/2563.
[129] KDB Vol 4 Tab 160 ; TCA1-1 6/298/2742.
[130] KDB Vol 5 Tab 177; TCA1-1 6/326/3008.
[131] KDB Vol 5 Tab 182; TCA1-1 6/330/3053.
[132] KDB Vol 6 Tab 195; TCA1-1 6/342/3465.
[133] KDB Vol 4 Tab 167; TCA1-1 5/303/2804.
[134] KDB Vol 5 Tab 175; TCA1-1 6/324/2988.
[135] See, Andrew Binetter AAT (4 May 2011) [118] – [121] ( KDB Vol 5 Tab 182; TCA1-1 6/330/3053); Andrew Binetter AAT (6 May 2011) [4] – [5] ( KDB Vol 5 Tab 185; TCA1-1 6/333/3074).
[136] See, Andrew Binetter AAT (4 May 2011) [118] – [121] ( KDB Vol 5 Tab 182; TCA1-1 6/330/3053); Andrew Binetter AAT (6 May 2011) [4] – [5] ( KDB Vol 5 Tab 185; TCA1-1 6/333/3074).
[137] Andrew Binetter AAT (6 May 2011) [5] ( KDB Vol 5 Tab 185; TCA1-1 6/333/3074).
[138] KDB Vol 6 Tab 198; TCA1-1 7/346/3659 T528.
[139] KDB Vol 1 Tab 16; TCA1-1 1/23/367; Donnelly Annexure “MCD-1” pp 289 and 346.
[140] Affidavit of Andrew Binetter affirmed 1 June 2011 at [31] and Annexure F ( KDB Vol 6 Tab 195; TCA1-1 6/342/3465).
[141] Respondent’s AAT submissions dated 10 June 2011 at [21] (KDB Vol 6 Tab 200; TCA1-1 7/348/3833).
[142] KDB Vol 6 Tab 206; TCA1-1 7/353/3955.
[143] KDB Vol 1 Tab 3.1 ; Examination of Israel Zamir, 12 August 2020, T339.24-27.
[144] KDB Vol 1 Tab 16 at pg 260.
[145] SCB Vol 2 Tab 76 .
[146] SCB Vol 2 Tab 78; MDB Documents p 1069 .
[147] SCB Vol 2 Tab 83; MDB Documents p 1385.
[148] SCB Vol 1 Tab 10.1; MDB Documents p 1365.
[149] SCB Vol 2 Tab 84 ; MDB documents p 1391.
[150] SCB Vol 2 Tab 88 ; MDB documents p 1397.
[151] SCB Vol 1 Tab 4; MDB Documents p 957.
[152] KDB Vol 1 Tab 18.
[153] KDB Vol 1 Tab 19.
[154] SCB Vol 1 Tab 61 ; MDB Documents p 1040 .
[155] SCB Vol 2 Tab 86 ; MDB Documents p 1393.
[156] SCB Vol 2 Tab 87 ; MDB Documents p 1395.
[157] SCB Vol 1 Tab 38; MDB Documents p 992; SCB Vol 1 Tab 42; MDB Documents p 991.
[158] SCB Vol 2 Tab 89 ; MDB documents p 1389.
[159] SCB Vol 2 Tab 90 ; MDB Documents p 1063.
[160] SCB Vol 7 Tab 721 ; MDB Documents p 485.
[161] KDB Vol 1 Tab 20 ; TCA1-1 1/33/417.
[162] KDB Vol 4 Tab 162 ; TCA1-1 5/300/2799.
[163] T65.19-20.
[164] KDB Vol 2 Tab 70 ; TCA1-1 1/35/419.
[165] KDB Vol 1 Tab 21 ; TCA1-1 1/34/418.
[166] KDB Vol 1 Tab 24; TCA1-1 1/68/490.
[167] SCB Vol 3 Tab 300 ; MDB Folder 2 p 747.
[168] SCB Vol 5 Tab 513 ; MDB Folder 1 p 185.
[169] KDB Vol 1 Tab 32; TCA1-1 1/89/535.
[170] T140.4-11 (Hearing Day 2 on 15 September 2020).
[171] SCB Vol 5 Tab 530 ; MDB Folder 3 p 908.
[172] SCB Vol 5 Tab 532 ; MDB Folder 1 p 205-206.
[173] SCB Vol 6 Tab 615 ; MDB Folder 1 p 346-347.
[174] SCB Vol 6 Tab 622 ; MDB Folder 1 p 364.
[175] SCB Vol 6 Tab 623 ; MDB Folder 1 p 348.
[176] SCB Vol 6 Tab 624 ; MDB Folder 1 p 349.
[177] KDB Vol 1 Tab 46 ; TCA1-1 2/112/595 .
[178] SCB Vol 1 Tab 67; SCB Vol 2 Tab 93; SCB Vol 2 Tab 120 .
[179] SCB Vol 6 Tab 629 ; MDB Folder 1 p 367; SCB Vol 6 Tab 632; MDB Folder 1 p 370.
[180] SCB Vol 6 Tab 630 ; MDB Folder 1 p 368.
[181] SCB Vol 6 Tab 641 ; MDB Folder 1 p 389.
[182] KDB Vol 2 Tab 58 .
[183] KDB Vol 2 Tab 59.
[184] KDB Vol 2 Tab 60.
[185] KDB Vol 2 Tab 80
[186] KDB Vol 2 Tab 85 .
[187] KDB Vol 2 Tab 87.
[188] KDB Vol 2 Tab 90.
[189] KDB Vol 2 Tab 91 ; TCA1-2 Volume 5 Page 2567.
[190] KDB Vol 2 Tab 93 ; TCA1-2 Volume 5 Page 2569.
[191] KDB Vol 2 Tab 93; TCA1-2 Volume 5 Page 2569.
[192] KDB Vol 4 Tab 148; TCA1-1 5/283/2396.
[193] Transcript of examination of Elie Septon on 26 July 2020 at T32.3-19.
[194] KDB Vol 4 Tab 162; TCA1-1 5/300/2799.
[195] KDB Vol 5 Tab 187 ; TCA1-1 6/334/3076.
[196] KDB Vol 1 Tab 2 ; Examination of Elie Septon, 26 July 2020, T40.3-6.
[197] KDB Vol 7 Tab 235; TCA1-1 9/414/5500.
[198] CB Vol 1 Tab 68; Donnelly Annexure “MCD1-7” p 245.
[199] CB Vol 1 Tab 68; Donnelly Annexure “MCD1-7” p 245.
[200] CB Vol 1 Tab 68 ; Donnelly Annexure “MCD1-7” p 245.
[201] KDB Vol 1 Tab 28 ; TCA1-1 1/85/524.
[202] KDB Vol 1 Tab 29 ; TCA1-1 1/86/528.
[203] KDB Vol 1 Tab 30; TCA1-1 1/87/530.
[204] KDB Vol 1 Tab 31; TCA1-1 1/88/534.
[205] KDB Vol 1 Tab 32.
[206] KDB Vol 1 Tab 33 ; TCA1-2 5/2305.
[207] KDB Vol 7 Tab 235; TCA1-1 9/414/5500 [22]; see also, KDB Vol 4 Tab 148; TCA1-1 5/283/2396 [368] (affidavit of Emil Binetter 6 October 2011).
[208] CB Vol 30 Tab 1398 ; TCA6-2 12/24A/6823.
[209] KDB Vol 2 Tab 79 .
[210] KDB Vol 2 Tab 86 .
[211] KDB Vol 2 Tab 88 .
[212] KDB Vol 2 Tab 90.
[213] KDB Vol 2 Tab 93.
[214] KDB Vol 2 Tab 92.
[215] KDB Vol 2 Tab 95.
[216] KDB Vol 2 Tab 97 .
[217] CB Vol 15 Tabs 894 and 895.
[218] KDB Vol 4 Tab 148 ; TCA1-1 5/283/2396 [304].
[219] KDB Vol 4 Tab 162; TCA1-1 5/300/2799 [2] and [3].
[220] KDB Vol 1 Tab 3 ; TCA1-1 1/5/209.
[221] KDB Vol 1 Tab 7 ; TCA1-1 1/9/253.
[222] KDB Vol 1 Tab 6 ; TCA1-1 1/8/230.
[223] KDB Vol 1 Tab 6 ; TCA1-1 1/8/230.
[224] KDB Vol 1 Tab 8 ; TCA1-1 1/10/255.
[225] KDB Vol 1 Tab 10 ; TCA1-1 1/12/260.
[226] KDB Vol 1 Tab 12 ; TCA1-1 1/17/311.
[227] KDB Vol 1 Tabs 10 and 12 .
[228] KDB Vol 1 Tab 22 ; TCA1-1 1/37/421.
[229] KDB Vol 1 Tab 23 ; TCA1-1 1/38/423.
[230] KDB Vol 1 Tab 25 ; TCA1-1 1/81/519.
[231] KDB Vol 7 Tab 215; TCA1-1 8/370/4658 [49] and [66] – [67]; CB Vol 2 Tab 113; TCA1-1 2/110/591; CB Vol 2 Tab 117; TCA1-1 2/114/607.
[232] KDB Vol 1 Tab 27 ; TCA1-1 1/82/520.
[233] KDB Vol 1 Tab 26 ; TCA1-2 5/2297.
[234] KDB Vol 1 Tab 36 ; TCA1-1 1/93/541.
[235] KDB Vol 7 Tab 215 ; TCA1-1 8/370/4658 [49].
[236] See, KDB Vol 7 Tab 216 ; TCA1-1 8/373/4715 [22]; KDB Vol 7 Tab 214 ; TCA1-1 8/368/4642 [34], [48] – [53]; KDB Vol 7 Tab 215 ; TCA1-1 8/370/4658 [58]; KDB Vol 4 Tab 148 ; TCA1-1 5/283/2396 [355] – [357].
[237] KDB Vol 7 Tab 215 ; TCA1-1 8/370/4658 [49] and [66] – [67]; CB Vol 2 Tab 113 ; TCA1-1 2/110/591; CB Vol 2 Tab 117 ; TCA1-1 2/114/607.
[238] See, KDB Vol 7 Tab 216 ; TCA1-1 8/373/4715 [23]; KDB Vol 7 Tab 215 ; TCA1-1 8/370/4658 [62] – [65].
[239] KDB Vol 1 Tab 38 ; TCA1-1 1/94/543.
[240] KDB Vol 1 Tab 40 ; TCA1-1 1/101/563.
[241] KDB Vol 1 Tab 43 ; TCA1-1 2/105/584.
[242] KDB Vol 2 Tab 49 ; agreed chronology item 282.
[243] KDB Vol 8 Tab 260 ; TCA1-1 10/488/6229; TCA1-1 10/488/6232.
[244] CB Vol 1 Tab 4 ; TCA1 [425]; KDB Vol 2 Tab 50 ; TCA1-1 2/118/613; CB Vol 38 Tab 1961, 1962 .
[245] KDB Vol 2 Tab 50 ; TCA1-1 2/118/613.
[246] KDB Vol 2 Tab 55 ; TCA1-1 2/125/636; agreed chronology item 311.
[247] KDB Vol 2 Tab 51 ; agreed chronology item 286.
[248] KDB Vol 2 Tab 51; TCA1-1 2/119/618 and KDB Vol 2 Tab 52; TCA1-1 2/120/620.
[249] KDB Vol 2 Tab 50; TCA1-1 2/118/613.
[250] KDB Vol 7 Tab 218; TCA1-1 8/379/4789 [9]; see also, KDB Vol 1 Tab 14; TCA1-2 9/4339 – 4422.
[251] KDB Vol 3 Tab 121 ; TCA1-1 3/184/1109.
[252] KDB Vol 7 Tab 236; TCA1-1 9/415/5513; see also KDB Vol 3 Tab 121 ; TCA1-1 3/184/1109.
[253] KDB Vol 7 Tab 236; TCA1-1 9/415/5513.
[254] KDB Vol 3 Tab 126; TCA1-1 3/187/1211.
[255] KDB Vol 2 Tab 61 ; TCA1-1 2/127/645.
[256] KDB Vol 2 Tab 67; TCA1-1 2/133/706.
[257] KDB Vol 2 Tab 64; TCA1-1 2/130/657 T6.7.
[258] KDB Vol 2 Tab 50; TCA1-1 2/118/613.
[259] KDB Vol 2 Tab 64; TCA1-1 2/130/652.
[260] KDB Vol 2 Tab 89 ; TCA1-1 2/148/702.
[261] KDB Vol 2 Tab 67; TCA1-1 2/133/706.
[262] KDB Vol 5 Tab 193; TCA1-1 6/339/3426.
[263] KDB Vol 7 Tab 215; TCA1-1 8/370/4658.
[264] KDB Vol 7 Tab 212; TCA1-1 8/365/4619.
[265] KDB Vol 7 Tab 218; TCA1-1 8/379/4789 and KDB Vol 7 Tab 219; 8/380/4800.
[266] KDB Vol 7 Tab 212; TCA1-1 8/365/4619.
[267] KDB Vol 7 Tab 212; TCA1-1 8/365/4619.
[268] KDB Vol 8 Tab 248; TCA1-1 10/467/6031.
[269] KDB Vol 8 Tab 248 ; TCA1-1 10/467/6035.
[270] KDB Vol 8 Tab 248 ; TCA1-1 10/467/6035.
[271] KDB Vol 8 Tab 248 ; TCA1-1 10/467/6052 Annexure “BBZ2-3” [10].
[272] KDB Vol 8 Tab 248; TCA1-1 10/467/6052 Annexure “BBZ2-3” [8].
[273] KDB Vol 8 Tab 261 ; TCA1-1 10/489/6254.
[274] KDB Vol 8 Tab 261 ; TCA1-1 10/489/6259-60.
[275] KDB Vol 8 Tab 262 ; TCA1-1 10/490/6320.
[276] KDB Vol 8 Tab 249; TCA1-1 10/470/6106.
[277] KDB Vol 8 Tab 250; TCA1-1 10/471/6110.
[278] KDB Vol 8 Tab 251; TCA1-1 10/477/6138.
[279] KDB Vol 8 Tab 253; TCA1-2 6/3578.
[280] KDB Vol 8 Tab 256; TCA1-1 10/485/6226; KDB Vol 8 Tab 255; TCA1-1 10/484/6220.
[281] See, KDB Vol 8 Tab 248 ; TCA1-1 10/467/6052 [10] (Barry Ben Zeev 6 February 2014).
[282] KDB Vol 7 Tab 215 ; TCA1-1 8/370/4658.
[283] KDB Vol 6 Tab 198; TCA1-1 7/346/2659 T515.12ff; T516.37-40ff and T517.16-18ff; T528.7-12; T529.31-33.
[284] KDB Vol 6 Tab 198 ; TCA1-1 7/346/2659 T516.44-517.02 and T517.16-18.
[285] KDB Vol 4 Tab 167 ; TCA1-1 5/303/2801; KDB Vol 5 Tab 175 ; TCA1-1 6/324/2988.
[286] KDB Vol 5 Tab 191; TCA1-1 6/337/3231 T244.12.
[287] KDB Vol 7 Tab 222; TCA1-1 8/389/5040.
[288] CB Vol 13 Tab 710; TCA1-2 5/2285.
[289] CB Vol 13 Tab 711 ; TCA1-2 5/2286.
[290] KDB Vol 2 Tab 61 ; TCA1-1 2/127/644.
[291] KDB Vol 2 Tab 84 .
[292] KDB Vol 2 Tab 89 ; TCA1-1 2/148/764.
[293] KDB Vol 2 Tab 91 ; TCA1-2 5/2567; agreed chronology at item 362.
[294] KDB Vol 2 Tab 93 ; TCA1-2 5/2569.
[295] KDB Vol 2 Tab 94 ; TCA1-2 5/2593 .
[296] KDB Vol 2 Tab 96 ; TCA1-2 5/2626; TCA1-1 2/157/874 .
[297] KDB Vol 2 Tab 96; TCA1-2 5/2626; TCA1-1/2/157/874; KDB Vol 7 Tab 232; TCA1-2 6/3020.001.
[298] KDB Vol 5 Tab 187 ; TCA1-1 Vol 6 Tab 334.
[299] KDB Vol 4 Tab 148 ; TCA 1-1 5/283/2396.
[300] KDB Vol 8 Tab 269; TCA1-1 11/495/6378 (company search).
[301] KDB Vol 7 Tab 221; TCA1-1 8/388/5026.
[302] KDB Vol 8 Tab 254; TCA1-1 10/483/6218 (Ligon 268); KDB Vol 8 Tab 257; TCA1-1 10/486/6227 (Binqld); KDB Vol 8 Tab 258; TCA1-1 10/487/6229 (EGL).
[303] KDB Vol 2 Tab 57; TCA1-1 2/126/640.
[304] KDB Vol 2 Tab 93; TCA1-2 5/2575 and 5/2578.
[305] KDB Vol 8 Tabs 281, 282, 283, 284; McGregor NEM1-2 Tabs 156 – 159.
[306] KDB Vol 8 Tabs 281-284; McGregor NEM1-2 Tabs 156 – 159.
[307] KDB Vol 8 Tab 275; McGregor NEM1-2 Tab 176.
[308] KDB Vol 3 Tab 109; McGregor NEM1-2 Tab 95 (Erbin); KDB Vol 5 Tab 179; McGregor NEM1-2 Tab 123 (Rawbin); KDB Vol 6 Tab 205; McGregor NEM1-2 Tab 125 (Gerobin); KDB Vol 6 Tab 208; McGregor NEM1-2 Tab 126 (Marbin).
[309] KDB Vol 6 Tab 208; NEM1-2 Tab 126 (Marbin)
[310] KDB Vol 8 Tab 275; NEM1-2 Tab 176.
[311] T354.5-7.
[312] CB Vol 15 Tab 892 ; TCA1-2 Vol 6 Page 3304-3304.011
[313] CB Vol 15 Tab 894 ; TCA1-2 Vol 6 Page 3319.
[314] CB Vol 15 Tab 895 ; TCA1-2 Vol 6 Page 3330.
[315] KDB Vol 8 Tab 239; TCA1-1 9/424/5748 (Advance) and KDB Vol 8 Tab 240; TCA1-1 9/425/5749 (Civic).
[316] KDB Vol 8 Tab 248 ; TCA1-1 10/467/6052 Annexure “BBZ2-3” [10].
[317] CB Vol 8 Tab 472 ; TCA1-1 Vol 10 Tab 469.
[318] CB Vol 38 Tab 1952 (6 May 2014 orders).
[319] CB Vol 38 Tabs 1949, 1950, 1951 (Tribunal listing for Binqld, Ligon 268 and EGL).
[320] CB Vol 15 Tab 944 ; TCA1-2 Vol 6 Page 3597.
[321] KDB Vol 8 Tab 255.
[322] On 12 May 2015, BCI was ordered to pay the Commissioner’s costs in the BCI proceedings up to and including 23 April 2014 on the indemnity basis: TCA1 [434]; CB Vol 38 Tab 1955 (9 September 2014 orders); KDB Vol 8 Tab 255; TCA1-1 10/484/6220; KDB Vol 8 Tab 256; TCA1-1 10/485/6226.
[323] KDB Vol 8 Tab 252 .
[324] KDB Vol 8 Tab 254; TCA1-1 10/483/6218 (Ligon 268); KDB Vol 8 Tab 257; TCA1-1 10/486/6227 (Binqld); KDB Vol 8 Tab 258; TCA1-1 10/487/6229 (EGL).
[325] Examination of Elie Septon, 26 July 2020, 12.4-10 and 110.27-111.2 respectively.
[326] SCB Vol 1 Tab 5 (MDB Folder 3 p 962). See also the reference to the code name in the “Know Your Customer” form completed for Rawson (referred by Israel Discount Bank Ltd) dated 24 January 2007: SCB Vol 1 Tab 24 ; MDB Folder 2 p 563.
[327] SCB Vol 1 Tab 4 ; MDB Folder 3 p 957-958; 965-966; SCB Vol 1 Tab 8 ; MDB Folder 4 p 1348.
[328] SCB Vol 1 Tab 6 ; MDB Folder 4 p 1346-1347; SCB Vol 1 Tab 7.1 ; MDB Folder 5 p 403
[329] SCB Vol 1 Tab 9 ; MDB Folder 4 p 1359-1360; SCB Vol 1 Tab 42 ; MDB Documents p 991.
[330] SCB Vol 1 Tab 11 ; MDB Folder 4 p 1367-1370; SCB Vol 7 Tab 721 ; MDB Documents p 485; SCB Vol 3 Tab 273 ; MDB Documents p 695.
[331] SCB Vol 1 Tab 10.1 .
[332] SCB Vol 1 Tab 10.2 .
[333] SCB Vol 1 Tab 12 ; MDB Folder 4 p 1357-1358; SCB Vol 1 Tab 12 ; MDB Folder 3 p 961.
[334] Examination of Israel Zamir, 27 August 2020, 241.
[335] Examination of Israel Zamir, 27 August 2020, 238.19-21.
[336] Examination of Elie Septon, 26 July 2020, 65.25 - 66.3-4.
[337] KDB Vol 1 Tab 15 .
[338] SCB Vol 1 Tab 17 ; MDB Folder 3 p 994.
[339] SCB Vol 2 Tab 95 .
[340] SCB Vol 1 Tab 67 .
[341] Examination of Elie Septon, 26 July 2020, 28.2-9.
[342] SCB Vol 1 Tab 23 ; MDB Folder 3 p 553-554, SCB Vol 1 Tab 19 ; MDB Folder 3 pp 637-638; SCB Vol 1 Tab 18 ; MDB Folder 5 p 134; SCB Vol 1 Tab 20 ; MDB Folder 5 pp 247-248.
[343] SCB Vol 1 Tab 21 .
[344] Examination of Elie Septon, 26 July 2020, 64.13-65.22.
[345] SCB Vol 1 Tab 64 ; MDB Documents p 1043.
[346] E.g. SCB Vol 7 Tab 663 ; MDB Documents p 413.
[347] SCB Vol 1 Tab 25 ; MDB Folder 3 p 977, SCB Vol 1 Tab 26 ; MDB Folder 3 p1005.
[348] SCB Vol 1 Tab 27 ; MDB Folder 3 p 978.
[349] KDB Vol 1 Tab 15; KDB Vol 6 Tab 201 ; TCA6-1 9/51.0/51.2/51.5/51.8/51.11/51.13 – .20.
[350] SCB Vol 1 Tab 37 ; MDB Folder 3 p 989.
[351] SCB Vol 1 Tab 56 ; MDB Folder 3 p. 1014, 1022; see also SCB Vol 1 Tab 60 ; MDB Folder 3 pp. 1030; 1034; 1377, 1429 and 1430.
[352] SCB Vol 1 Tab 60 .
[353] SCB Vol 1 Tab 28 ;MDB Folder 3 p 979; Agreed chronology item 21.
[354] SCB Vol 1 Tab 42 ; MDB Folder 2 p 633; SCB Vol 1 Tab 43 ; MDB Folder 3 p 1017; agreed chronology at item 26.
[355] SCB Vol 1 Tab 46 ; MDB Folder 3 p 1001; agreed chronology at item 29.
[356] SCB Vol 1 Tab 48 .
[357] SCB Vol 1 Tab 64 ; MDB Documents p 1043.
[358] KDB Vol 3 Tab 132; TCA1-1 3/216/1398.
[359] Examination of Israel Zamir, 6 August 2020, 323.26-324.11 (Supp CB at tab 3).
[360] KDB Vol 4 Tab 166; TCA1-1 5/302/2803.
[361] SCB Vol 1 Tab 54 ; MDB Folder 3 p 1011; agreed chronology at item 32.
[362] SCB Vol 1 Tab 55 ; MDB Folder 3 p 1012-1013.
[363] MDB Summary report dated 12 June 1997 ( SCB Vol 2 Tab 85 ; MDB Documents p 1066).
[364] SCB Vol 1 Tab 61 ; MDB Folder 3 p 1006-1007; agreed chronology item 34.
[365] SCB Vol 1 Tab 67; MDB Documents p 1045.
[366] SCB Vol 1 Tab 62 .
[367] SCB Vol 1 Tab 66 .
[368] KDB Vol 1 Tab 17 ; TCA1-1 Vol 1 Tab 26; SCB Vol 2 Tab 69; SCB Vol 2 Tab 70 .
[369] SCB Vol 1 Tab 68.
[370] SCB Vol 2 Tab 71.
[371] SCB Vol 2 Tab 93; MDB Documents p 1074; SCB Vol 2 Tab 92; MDB Documents p 1078.
[372] SCB Vol 2 Tab 92; MDB Documents p 1078.
[373] SCB Vol 2 Tab 93; MDB Documents p 1074
[374] SCB Vol 2 Tab 98 .
[375] KDB Vol 1 Tab 17 ; TCA1-1 Vol 1 Tab 26.
[376] SCB Vol 2 Tab 95.
[377] SCB Vol 2 Tab 99.
[378] SCB Vol 2 Tab 120; MDB Documents p 1110; SCB Vol 2 Tab 117; MDB Documents p 1113; See also, SCB Vol 2 Tab 167; MDB Documents p 1658.
[379] SCB Vol 2 Tab 120 .
[380] SCB Vol 2 Tab 98.
[381] SCB Vol 2 Tab 11.
[382] SCB Vol 2 Tab 109 .
[383] KDB Vol 1 Tab 17 ; TCA1-1 Vol 1 Tab 26.
[384] SCB Vol 2 Tab 123 .
[385] SCB Vol 2 Tab 122.
[386] On 13 April 1997 ( SCB Vol 1 Tab 25; MDB Documents p 977), 21 April 1997 ( SCB Vol 1 Tab 27; MDB Documents p 978), 5 June 1997 ( SCB Vol 2 Tab 71; MDB Documents p 1048), 8 June 1997 ( SCB Vol 2 Tab 73; MDB Documents p 1064), 12 June 1997 ( SCB Vol 2 Tab 85; MDB Documents p 1066), 8 July 1997 ( SCB Vol 2 Tab 100; MDB Documents p 1088), 4 February 2000 ( SCB Vol 3 Tab 276; MDB Documents p 701), 14 February 2000 ( SCB Vol 3 Tab 278; MDB Documents p 711), 21 September 2000 ( SCB Vol 3 Tab 279; MDB Documents p 713), 5 March 2000 ( SCB Vol 3 Tab 280; MDB Documents p 718), 2 October 2000 ( SCB Vol 3 Tab 304; MDB Documents p 748), 4 October 2000 ( SCB Vol 3 Tab 305; MDB Documents p 753), 20 May 2001 (SCB Vol 4 Tab 324 ; MDB Documents p 770), 18 December 2001 (SCB Vol 4 Tab 337 ; MDB Documents p 793), 20 December 2001 ( SCB Vol 4 Tab 338; MDB Documents p 798), 27 December 2001 ( SCB Vol 4 Tab 340; MDB Documents p 806), 23 December 2002 ( SCB Vol 5 Tab 418; MDB Documents p 801), 29 December 2002 ( SCB Vol 5 Tab 431; MDB Documents p 808), 2 January 2003 ( SCB Vol 5 Tab 438; MDB Documents p 811), 2 February 2004 ( SCB Vol 5 Tab 493; MDB Documents p 168), 11 February 2004 ( SCB Vol 5 Tab 500; MDB Documents p 174), 25 May 2004 ( SCB Vol 5 Tab 520; MDB Documents p 192), 1 June 2004 ( SCB Vol 5 Tab 526; MDB Documents p 201), 14 June 2004 ( SCB Vol 5 Tab 528; MDB Documents p 204), 28 July 2005 ( SCB Vol 7 Tab 658; MDB Documents p 407), 2 August 2005 ( SCB Vol 7 Tab 663; MDB Documents p 413); 3 August 2005 ( SCB Vol 7 Tab 666; MDB Documents p 420), 8 November 2006 ( SCB Vol 7 Tab 753; MDB Documents p 527), 20 November 2006 ( SCB Vol 7 Tab 756; MDB Documents p 532), 28 November 2007 ( SCB Vol 8 Tab 803; MDB Documents p 589).
[387] SCB Vol 5 Tab 500; MDB Documents p 174.
[388] SCB Vol 5 Tab 500; MDB Documents p 174; SCB Vol 5 Tab 520; MDB Documents p 192.
[389] SCB Vol 7 Tab 663; MDB Documents p 413.
[390] SCB Vol 8 Tab 803; MDB Documents p 589.
[391] SCB Vol 5 Tab 500; MDB Documents p 174; SCB Vol 7 Tab 658; MDB Documents p 407.
[392] MDB summary report dated 14 February 2000 ( SCB Vol 3 Tab 278; MDB Documents p 711).
[393] SCB Vol 7 Tab 662; MDB Documents p 416.
[394] MDB summary report dated 14 February 2000 ( SCB Vol 3 Tab 278; MDB Documents p 711).
[395] SCB Vol 3 Tab 212 ; MDB Folder 3 p 1168-1169.
[396] SCB Vol 1 Tab 46; MDB Documents p 1001; SCB Vol 1 Tab 47 ; MDB Documents p 1002; SCB Vol 1 Tab 48; MDB Documents p 1004; SCB Vol 1 Tab 56; MDB Documents p 1014; SCB Vol 1 Tab 51; MDB Documents p 1019; SCB Vol 1 Tab 59; MDB Documents p 1020; SCB Vol 1 Tab 60; MDB Documents p 1030.
[397] SCB Vol 1 Tab 46; MDB Documents p 1001.
[398] SCB Vol 7 Tab 695; MDB Documents p 452.
[399] SCB Vol 9 Tab 930; MDB Documents p 70.
[400] SCB Vol 2 Tab 140 ; MDB Folder 5 p 127.
[401] SCB Vol 2 Tab 144.
[402] SCB Vol 2 Tab 144.
[403] SCB Vol 2 Tab 145.
[404] SCB Vol 2 Tab 152.
[405] SCB Vol 2 Tab 154 and Tab 161.
[406] SCB Vol 2 Tab 153.
[407] SCB Vol 2 Tab 155; Tab 157 and Tab 175.
[408] KDB Tab 23.5; SCB Tab 168, 169 and 174.
[409] SCB Vol 2 Tab 168; MDB Folder 5 p 194.
[410] SCB Vol 2 Tab 169; MDB Folder 5 p 193; SCB Vol 2 Tab 169 ; MDB Folder 5 p 195; SCB Vol 2 Tab 169 ; MDB Folder 3 p 1174-1175.
[411] SCB Vol 2 Tab 177.
[412] SCB Vol 2 Tabs 179 and 181.
[413] KDB Vol 1 Tab 23.6
[414] KDB Vol 3 Tab 132 ; TCA1-1 Vol 3 Tab 216 Page 1398.
[415] SCB Vol 2 Tab 184 and Tab 185 ; MDB Folder 3 p 1198; MDB Folder 3 p 1200.
[416] SCB Vol 2 Tab 186 ; MDB Folder 2 p 643; SCB Vol 2 Tab 186 ; MDB Folder 3 p 1201; KDB Vol 1 Tab 23.7 .
[417] SCB Vol 3 Tab 192.
[418] SCB Vol 2 Tab 188.
[419] SCB Vol 2 Tab 187.
[420] SCB Vol 3 Tab 202.
[421] KDB Vol 1 Tab 23.8 .
[422] SCB Vol 3 Tab 223.
[423] SCB Vol 3 Tab 224.
[424] SCB Vol 3 Tab 225.
[425] SCB Vol 3 Tab 226.
[426] T239-240 (6 August 2020), SCB Vol 1 Tab 3 .
[427] SCB Vol 1 Tab 2 ; Transcript 26 July 2020, T81-T82.
[428] See SCB Vol 4 Tab 389 ; SCB Vol 4 Tab 389; SCB Vol 4 Tab 389; SCB Vol 5 Tab 420.
[429] SCB Vol 1 Tab 6 ; agreed chronology item 9.
[430] SCB Vol 1 Tab 10.1 ; MDB Documents p 1365.
[431] Agreed chronology at Item 11; SCB vol 1 Tab 12 .
[432] KDB Tab 23.5; SCB Tab 168, 169 and 174.
[433] SCB Vol 3 Tab 232 ; MDB Folder 4 p 1242.
[434] SCB Vol 3 Tab 233.
[435] SCB Vol 3 Tab 255.
[436] SCB Vol 4 Tab 360; MDB Documents p 828.
[437] SCB Vol 4 Tab 389.
[438] SCB Vol 4 Tab 389; MDB Documents p 860.
[439] SCB Vol 4 Tab 388.
[440] SCB Vol 4 Tab 390; MDB Documents p 862.
[441] SCB Vol 4 Tab 397.
[442] SCB Vol 5 Tab 420; MDB Documents p 876
[443] SCB Vol 5 Tab 426.
[444] SCB Vol 7 Tab 718; MDB Documents pp 463, 464.
[445] SCB Vol 7 Tab 699; MDB Documents p 458;
[446] SCB Vol 7 Tab 702.
[447] SCB Vol 7 Tab 727; MDB Documents p 497.
[448] SCB Vol 6 Tab 575.
[449] SCB Vol 7 Tab 722; MDB Documents p 486.
[450] SCB Vol 7 Tab 721; MDB Documents p 485.
[451] SCB Vol 7 Tab 726.
[452] SCB Vol 7 Tab 725.
[453] SCB Vol 9 Tab 897; MDB Documents p 43; SCB Vol 9 Tab 919 .
[454] SCB Vol 9 Tab 919; MDB Documents p 58.
[455] SCB Vol 9 Tab 893; MDB Documents p 52; SCB Vol 8 Tab 832; MDB Documents p 52.
[456] SCB Vol 9 Tab 908 ; MDB Documents p 44.
[457] SCB Vol 9 Tab 918; MDB Documents p 55-56.
[458] SCB Vol 9 Tab 936; MDB Documents p 78.
[459] KDB Vol 3 Tab 120; TCA1-1 3/183/1161; KDB Vol 3 Tab 122; TCA1-1 3/185/1166; KDB Vol 3 Tab 121; TCA1-1 5/284/2563 [4]; see also, KDB Vol 8 Tab 273 ; Layoun Annexure “RL1” page 10; agreed chronology items 428 and 438 (albeit that the reference at item 438 should have stated incoming passenger card for Andrew Binetter).
[460] SCB Vol 9 Tab 936; MDB Documents p 78.
[461] SCB Vol 1 Tab 3.2; Transcript 13 August 2020, T467.2-T469.6.
[462] SCB Vol 9 Tab 942; MDB Documents p 76; SCB Vol 9 Tab 943 ; MDB Documents p 77.
[463] SCB Vol 9 Tab 942; MDB Documents p 76.
[464] SCB Vol 9 Tab 943; MDB Documents p 77
[465] KDB Vol 3 Tab 116.
[466] KDB Vol 4 Tab 151; TCA1-1 Vol 5 Tab 289.
[467] KDB Vol 5 Tab 182; T CA6-1 Tab 36.0 – 36.96 pp 1578-2387.
[468] KDB Vol 5 Tab 185; TCA6-1 8/41/4120-4123.
[469] Examination of Elie Septon, 26 July 2020, 65.17-22 ( SCB Vol 1 Tab 2 ).
[470] Examination of Elie Septon, 26 July 2020, 64.26-65.1 ( SCB Vol 1 Tab 2 ).
[471] Examination of Israel Zamir, 6 August 2020, 283.3-17 ( SCB Vol 1 Tab 2 ).
[472] Examination of Israel Zamir, 6 August 2020, 326.21-327.1 ( SCB Vol 1 Tab 3 ).
[473] Examination of Israel Zamir, 6 August 2020, 286.13-26 ( SCB Vol 1 Tab 3 ).
[474] Examination of Israel Zamir, 6 August 2020, 286.11-289.4 ( SCB Vol 1 Tab 3 ). See also id at 308.15-20.
[475] KDB Vol 2 Tab 93.1 ; TCA1-1 Vol 2 Tab 151; TCA6-2 Tab 24A Page 6917-6959; TCA6-2 Tab 25A Page 7084-7127; see items 371-377 of the agreed chronology.
[476] SCB Vol 8 Tab 822 ; MDB Folder 5 p 395; SCB Vol 8 Tab 823 ; MDB Folder 5 p 397; SCB Vol 8 Tab 824 ; MDB Folder 5 p 399.
[477] SCB Vol 9 Tab 909; MDB Documents p 34; SCB Vol 8 Tab 783; MDB Documents pp 1333 and 1478. See also SCB Vol 8 Tab 781; MDB Documents p 28;
[478] KDB Vol 3 Tab 132; TCA1-1 3/216/1398.
[479] KDB Vol 4 Tab 166; TCA1-1 5/302/2803.
[480] Examination of Israel Zamir, 6 August 2020, 340-3-11 ( SCB Vol 1 Tab 3 ).
[481] Examination of Israel Zamir, 6 August 2020, 323.26-324.11 ( SCB Vol 1 Tab 3 ).
[482] Examination of Israel Zamir, 12 August 2020, 329.2-5 ( SCB Vol 1 Tab 3 ).
[483] Examination of Israel Zamir, 12 August 2020, 329.2-5 ( SCB Vol 1 Tab 3 ).
[484] Examination of Israel Zamir, 12 August 2020, 329.13-15 ( SCB Vol 1 Tab 3 ).
[485] Examination of Israel Zamir, 12 August 2020, 329.9-11 ( SCB Vol 1 Tab 3 ).
[486] Examination of Israel Zamir, 12 August 2020, 329.22-330.11, 334.17-21 and 335.8-12 ( SCB Vol 1 Tab 3.1 ).
[487] Examination of Israel Zamir, 12 August 2020, 329.22-330.11, 334.17-21 and 335.8-12 ( SCB Vol 1 Tab 3.1 ).
[488] Examination of Israel Zamir, 12 August 2020, 3.31.16-17 ( SCB Vol 1 Tab 3.1 ).
[489] KDB Vol 4 Tab 172.
[490] KDB Vol 3 Tab 123; TCA1-2 5/2631 – 2632.
[491] SCB Vol 1 Tab 27 ; MDB Folder 3 p 978; SCB Vol 1 Tab 28 ; MDB Folder 3 p 979; agreed chronology item 21.
[492] KDB Vol 5 Tab 177; TCA1-1 6/326/3008 at [27] and [30].
[493] KDB Vol 5 Tab 177; TCA1-1 6/326/3008 at [27] and [30].
[494] KDB Vol 5 Tab 177; TCA1-1 6/326/3008 at [27].
[495] KDB Vol 6 Tab 198; TCA1-1 7/346/2659.
[496] KDB Vol 5 Tab 182; TCA1-1 6/330/3053 at [118]-[122].
[497] KDB Vol 5 Tab 191; TCA1-1 6/337/3231.
[498] KDB Vol 6 Tab 198; TCA1-1 7/346/2659.
[499] KDB Vol 6 Tab 198 ; TCA1-1 7/346/2618.
[500] KDB Vol 2 Tab 96; TCA1-2 5/2626; KDB Vol 7 Tab 232; TCA1-2 6/3020.001 at [45]-[47].
[501] KDB Vol 4 Tab 147; TCA1-1 5/282/2391.
[502] CB Vol 5 Tab 347; TCA1-1 Vol 7 Tab 344.
[503] CB Vol 5 Tab 347; TCA1-1 Vol 7 Tab 344.
[504] CB Vol 5 Tab 347; TCA1-1 Vol 7 Tab 344.
[505] Examination of Israel Zamir, 6 August 2020, 283.3-17 ( SCB Vol 1 Tab 3 ).
[506] KDB Vol 3 Tab 129; TCA1-1 3/211/1238 at [5] and [16].
[507] KDB Vol 3 Tab 129; TCA1-1 3/211/1238 at [7].
[508] KDB Vol 3 Tab 129; TCA1-1 3/211/1238 at [6].
[509] KDB Vol 4 Tab 167; TCA1-1 5/303/2801.
[510] KDB Vol 5 Tab 175; TCA1-1 6/324/2988 at [7].
[511] KDB Vol 5 Tab 175; TCA1-1 6/324/2988 at [17].
[512] KDB Vol 5 Tab 191; TCA1-1 6/337/3231.
[513] KDB Vol 4 Tab 167 at 1692 and 1694.004.
[514] KDB Vol 6 Tab 195; TCA1-1 6/342/3465 at [16].
[515] KDB Vol 6 Tab 195; TCA1-1 6/342/3465 at [31].
[516] KDB Vol 4 Tab 162; TCA1-1 5/300/2799 at [2].
[517] KDB Vol 4 Tab 162; TCA1-1 5/300/2799 at [3].
[518] KDB Vol 4 Tab 148; TCA1-1 5/283/2396 at [204].
[519] KDB Vol 4 Tab 148; TCA1-1 5/283/2396 at [265], [358]-[364].
[520] KDB Vol 4 Tab 148; TCA1-1 5/283/2396 at [304], [365]-[369].
[521] KDB Vol 4 Tab 148; TCA1-1 5/283/2396 at [23].
[522] Examination of Elie Septon, 26 July 2020, 64.26-65.1 ( SCB Vol 1 Tab 2 ).
[523] Examination of Israel Zamir, 6 August 2020, 283.3-17 ( SCB Vol 1 Tab 3 ).
[524] Respondent’s AAT submissions dated 10 June 2011 at [21] (KDB Vol 6 Tab 200; TCA1-1 7/348/3833).
[525] AAT 9 May 2011 T57.43; CB Vol 5 Tab 338; TCA1-1 6/335/3088.
[526] KDB Vol 2 Tab 77.
[527] KDB Vol 2 Tab 89.

 

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