Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation B61/1999
[2000] HCATrans 660
•31 October 2000
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Brisbane No B61 of 1999
B e t w e e n -
ARUNDEL CHIROPRACTIC CENTRE PTY LTD
Applicant
and
THE DEPUTY COMMISSIONER OF TAXATION
Respondent
Notice of motion
CALLINAN J
(In Chambers)
TRANSCRIPT OF PROCEEDINGS
AT BRISBANE ON MONDAY, 31 OCTOBER 2000, AT 10.43 AM
(Continued from 28/9/00)
Copyright in the High Court of Australia
MR A.J.H. MORRIS, QC: Your Honour, I appear with my learned friend, MS A. JULIAN‑ARMITAGE, for the applicant in this matter. (instructed by Rea & Sockhill)
MR P.V. SLATTERY: Your Honour, I appear with MS G.L. EBBECK, for the respondent in this matter. (instructed by Australian Government Solicitor)
HIS HONOUR: What stage are we at here? I am a little bit concerned about the amount of time this matter is taking. You have subpoenaed people, Mr Slattery, is that right?
MR SLATTERY: Yes, your Honour, that is correct. There will be evidence only from one of those people and that will be Mr Henke.
HIS HONOUR: And we are still in your case?
MR SLATTERY: That is correct, your Honour, yes.
HIS HONOUR: All right. Mr Morris, what is your estimate of how long the evidence might take?
MR MORRIS: Your Honour, we are not anticipating adducing any evidence, so it is really very much a matter of how much evidence‑in‑chief our learned friends wish to call from Mr Henke. Subject to that, your Honour did mention on the previous occasion that your Honour would appreciate fairly comprehensive reconciliation. We have not found that we are able to do that with the evidence incomplete, so it occurred to us to suggest, if it suits your Honour’s convenience that, at the conclusion of evidence the matter then be adjourned to put in written submissions. We would be, of course, entirely happy to appear before your Honour and speak to them, if your Honour thinks that that would be helpful, but that is really entirely a matter for your Honour.
HIS HONOUR: Thank you, Mr Morris. What do you say about that, Mr Slattery?
MR SLATTERY: Your Honour, we have taken the opportunity to prepare some written submissions now, which we have handed to your Honour’s associate. I will hand a copy to my friend. We would need to obviously embellish those in respect of anything that comes out today.
HIS HONOUR: Well, it seems what Mr Morris has suggested is a good idea, do you not think? What I would be minded to do then, on the assumption that the evidence finishes ‑ and I am anxious for the matter to proceed expeditiously ‑ is to adjourn it and to give you both an opportunity to complete your written submissions within, say, 10 days; is that acceptable?
MR MORRIS: Well, if my learned friend’s submissions are in draft ‑ and I understand he would not be held to what has been drafted ‑ we could prepare a response to that easily within 10 days.
HIS HONOUR: All right, and we will do it on the basis then that, if it is acceptable to you two, I will re‑list it for further argument if I need assistance, otherwise I will proceed on the written submissions. Now, does anybody have any problem with that?
MR MORRIS: None at all, so far as we are concerned.
HIS HONOUR: All right, thank you.
MR SLATTERY: The only perhaps problem I might have is I would want the opportunity to complete our written submissions ‑ ‑ ‑
HIS HONOUR: Of course.
MR SLATTERY: ‑ ‑ ‑ and it is just a matter of timing from my friend, that is all.
HIS HONOUR: Well, look, I will not hold either of you to that. I would expect that you do the best you can within 10 days and then if I need you I will reconvene.
MR SLATTERY: Thank you, your Honour.
HIS HONOUR: That is acceptable. Neither of you particularly wants to speak to the written submissions; is that correct?
MR MORRIS: No.
MR SLATTERY: No.
HIS HONOUR: Right, well you proceed with your case, Mr Slattery.
MR SLATTERY: Thank you, your Honour. Can I first perhaps do an audit of the material. What we have done, your Honour, is to produce some bundles of material, which I can hand to your Honour and to my friend, just to try and make things a bit easier for handling sake.
HIS HONOUR: Yes, it will be helpful.
MR SLATTERY: Your Honour, can I hand first a bundle of material called a pleadings folder and within that folder your Honour will find – and it is printed on both sides – all of the affidavit material tabbed.
HIS HONOUR: Thank you.
MR SLATTERY: That contains all of the relevant affidavits which have been filed and which have been read in the application thus far.
HIS HONOUR: Thank you.
MR SLATTERY: The second bundle of material is the large bundle of material which contains documents which have been produced on subpoena.
HIS HONOUR: Have these documents all been admitted into evidence?
MR SLATTERY: Not yet, your Honour. What I will be seeking to do ultimately is to admit that bundle as one exhibit, rather than each as a separate exhibit.
HIS HONOUR: All right. Well, Mr Morris might want some time to consider that but, subject to that, that seems to be very convenient.
MR SLATTERY: Yes. The documents which are in the bundle are either documents which are produced by the ITR or Dr Brown or are produced from the affidavits themselves and there is only one small bundle of material, which comes from another case, in which the ITR were joined and costs orders were made against the court, Moneytree, but I will come to that in a moment.
HIS HONOUR: Is that the case before Chief Justice Doyle?
MR SLATTERY: Yes, it was, yes.
HIS HONOUR: But against whom was the order made there?
MR SLATTERY: ITR, and his Honour the Chief Justice made the order for joinder of ITR in that matter and for indemnity costs to be paid by ITR. The appeal against that order was dismissed a week or so ago by the Full Court.
HIS HONOUR: Was it. Well, I forget ‑ are the reasons of the Full Court here?
MR SLATTERY: We have provided copies.
HIS HONOUR: Thank you. Yes, all right.
MR SLATTERY: I will come to those, your Honour. We have a book of authorities also to hand your Honour. We have got all the authorities together so your Honour does not have to go to various places to find them.
HIS HONOUR: Thank you, Mr Slattery.
MR SLATTERY: We also have a book of the existing exhibits, AA to AH, and the final bundle is a bundle of documents, which have been attained on the subpoena delivered to Messrs Rea & Sockhill, Solicitors, and they are the documents ‑ and I am grateful to my friend’s instructing solicitors ‑ which we inspected yesterday and which we would seek to tender before your Honour, as business records from the files of Rea & Sockhill.
HIS HONOUR: Mr Morris.
MR MORRIS: Your Honour, I have no difficulty with that. There is one complication though, in fact, it was my junior who tagged the copies of the documents from that firm’s file, of which copies were taken by the solicitor from the Australian Government Solicitor’s office. What has been provided to us is a bundle of nine documents. There were many more that were copied. If these are the only ones intended to be tendered then the rest of the photocopies should, of course, be returned, as they are not in evidence, they were produced pursuant to a subpoena.
HIS HONOUR: That is quite correct.
MR SLATTERY: I am happy to accommodate that, your Honour. Perhaps at lunchtime or the end of the day we can accommodate that.
MR MORRIS: There is no urgency. I should say there is an element of, not self‑interest, but an element of personal interest in the matter in the sense that one of the documents tagged, for reasons which entirely escape me, was my memorandum of fees from the last appearance before your Honour. I cannot quite understand how anyone thought that that was relevant in these proceedings but ‑ ‑ ‑
HIS HONOUR: I am not going to be allowed to see that, I suppose.
MR MORRIS: No, your Honour is not, so it seems, but it was, as your Honour would expect, very modest.
HIS HONOUR: Morbid curiosity of judges about what counsel are currently charging. You proceed, Mr Slattery.
MR SLATTERY: Thank you, your Honour. First of all, can I give your Honour some mechanical information. This bundle is, in fact, constructed so that your Honour can easily turn documents.
HIS HONOUR: Thank you.
MR SLATTERY: Can I ask your Honour to go to that bundle, first of all, and go to the tab 56D, right at the back, the green pages.
HIS HONOUR: Yes, I have that.
MR SLATTERY: Can I tell your Honour, first of all, just as a matter of course, that in so far as the documents are white pages, they have come from the ITR files, in respect of other colours they come from other places, and there is a reckoner at the front of the document, which is the fifth page in, sources of documents.
HIS HONOUR: Thank you.
MR SLATTERY: Your Honour, these are the documents which I have asked your Honour to go to at tab 56D, which are produced by Jean Sayer. Ms Sayer is a chartered accountant. She was appointed a receiver of the practice of Peter Brooke, Solicitor, by the Law Society of New South Wales, and on subpoena she has produced the material which is there disclosed.
We have not insisted upon Ms Sayer attending today. In fact, the subpoena to Ms Sayer lapsed after the last occasion was cancelled by your Honour, that is, the last occasion of the hearing, and that is explained in an affidavit of Morris James Clifford Henry sworn 31 October, which is, I think, the last document on your Honour’s file. I do not ask your Honour to go to it. We have not insisted Ms Sayer attend. She has given us the documents that she possessed in relation to Mr Brooke’s practice.
HIS HONOUR: And their business records.
MR SLATTERY: Correct, your Honour, yes. I will be taking your Honour to those, in particular the second last document, which is the combined matter ledger disclosing funds received from Mr Brooke from the Institute of Taxation Research and the name of the client for the relevant purposes.
HIS HONOUR: Thank you.
MR SLATTERY: There is then a subpoena issued to Mr Sockhill. Mr Sockhill is apparently in Vanuatu today and is not attending. We have had access to his file. Thirdly, a Mr Huston is present. Mr Huston was the accountant for Arundel Chiropractic Centre Pty Limited. I think Mr Huston is here today to answer the subpoena.
HIS HONOUR: Is he, by any chance, Mr Robin Huston?
MR SLATTERY: He is, your Honour.
HIS HONOUR: I should mention that I think I acted once against Mr Huston for your client, Mr Slattery; is that right?
MR SLATTERY: That is right, your Honour, yes.
HIS HONOUR: It was a long time ago. The matter came to the High Court, I think.
MR MORRIS: Your Honour, I do not understand that Mr Huston’s credit is going to be an issue.
HIS HONOUR: Right, very well. Well, neither of you ‑ ‑ ‑
MR MORRIS: But then perhaps that is a matter my learned friend would know more about.
MR SLATTERY: I was about to say to your Honour that it will not be an issue, your Honour.
HIS HONOUR: So neither of you is troubled by that?
MR SLATTERY: No, your Honour.
HIS HONOUR: Yes.
MR SLATTERY: Then mapping out what we are doing today, Mr Henke is here to answer the two subpoenas and we would seek leave to examine Mr Henke in relation to the documents that he produces and the documents thus far produced by the ITR.
HIS HONOUR: Yes. Now, I may have to interrupt this matter at midday because I have another application, but we will see how we go.
MR SLATTERY: Thank you, your Honour. Could we call the subpoena issued to Mr Robin Huston, please. If your Honour goes to tab 39 of the
pleadings book, there is a copy of that subpoena. I ask that Mr Huston be sworn, your Honour.
HIS HONOUR: Yes.
ROBIN HUSTON, sworn:
MR SLATTERY: Mr Huston, you are here in answer to a subpoena issued by this Honourable Court dated 6 October 2000?‑‑‑Yes I am.
Do you have a copy of the subpoena in front of you?‑‑‑Yes, I do.
And you have read the subpoena and each of the paragraphs?‑‑‑Yes, I have.
And have you made a search of your documents ‑ ‑ ‑?‑‑‑I have.
‑ ‑ ‑ to provide documents in answer to the subpoena which has been issued to you?‑‑‑I have.
And you produce those documents to the Court?‑‑‑Yes, I will.
And are they in a manilla folder?‑‑‑They are in a manilla folder.
Thank you. And have you had any other documents which meet the description of the documents described in the schedule set out in the subpoena?‑‑‑No, I do not have.
Have you had previously?‑‑‑I have in the past, yes.
And what documents did you have?‑‑‑They would be some financial accounts and some company records.
And where are they now?‑‑‑When the company was sold, I think in January 2000, they’d be passed across to the new owners.
And by the company, we mean Arundel Chiropractic Centre Pty Limited?‑‑‑Arundel Chiropractic Centre Pty Limited, yes.
Did you have any involvement in the sale of that company?‑‑‑No, I didn’t.
HIS HONOUR: It was the sale of the shares in the company, I take it?‑‑‑Sale of the shares in the company, your Honour.
MR SLATTERY: And they are the documents you produce to the Court?‑‑‑Yes, I am.
Thank you. No further questions, thank you, your Honour. I seek access to those documents, your Honour.
HIS HONOUR: Yes. Mr Morris.
MR MORRIS: I have no further questions. I would seek access to the documents.
HIS HONOUR: Yes. Well may Mr Huston be excused when he has produced the documents?
MR MORRIS: Certainly, so far as we are concerned.
HIS HONOUR: Would you take those documents from Mr Huston? I order that both parties have access to them and nobody requires Mr Huston any more?
MR SLATTERY: No, thank you, your Honour.
HIS HONOUR: You are excused, Mr Huston.
THE WITNESS WITHDREW
MR SLATTERY: Your Honour, I call the subpoenas which have been issued to Mr Ian Henke.
HIS HONOUR: Call Mr Henke outside the door.
MR SLATTERY: And they are tab 37 and tab 38 of the pleadings book, your Honour.
IAN SIDNEY HENKE, sworn:
MR SLATTERY: Mr Henke, you attend in answer to two subpoenas issued by this honourable Court, both dated 6 October 2000?---Yes, Mr Slattery.
Can I please go to the first subpoena entitled “Subpoena duces tecum”?‑‑‑Yes.
Do you have them in front of you?---No, I don’t.
Did you understand that one document, that is one subpoena, required the production of documents?---Yes, I did, yes.
Did you read the subpoena?---Yes, I did.
What particular role do you have with the Institute of Taxation Research Pty Ltd?---I am the executive director of the institute.
How many directors are there of the Institute of Taxation Research?‑‑‑Three.
Who are they?---Mrs Robyn Conningham, Mr Lance Miller.
And yourself?---And myself.
Are you aware of the records which are kept by the Institute of Taxation Research?---I am aware of the records, yes.
I will call it ITR. Is that all right?---Yes, that is fine.
Where are those records kept?---They’re kept in the office in Melbourne.
Do you have access to those records?---I have access to them, yes.
After you read the subpoena, did you take access to those records to provide an answer to the subpoena?---In relation to this subpoena, sir, or the previous one?
Yes?---In fact, the only thing I had in the office at that stage were financial records. Every other document that we had in the office in relation to it had been brought to this Court two weeks prior by a member of the staff who was responsible for maintaining the records.
That was Mrs Broadley?---Mrs Broadley.
You have brought as well today some further records?---Well, I have brought two documents specifically at the request of the subpoena, which relate to the only financial dealings, and the file that I have here, in fact, was one Mrs Broadley had, in fact, brought to the Court previously and which had been retained here by counsel in the intervening period.
Can you describe for his Honour, please, the documents that you have brought today, apart from the documents that were produced on the last occasion?---Yes, there are two. One is the statement of account, which shows that Arundel Chiropractic in fact paid us $4,000 in a particular period, and has some identification detail on that, being the receipt. The second one is a document which shows amounts of money paid by ITR to an agency called the B & B Agency, which included Mr Brown. I assume that in the subpoena that you served, that you required us to declare all of the financial dealings with Mr Brown, and so this document, in fact, declares that.
Thank you. Were there other documents that the ITR formerly possessed but no longer have in its possession that were described on the face of the subpoena?---No, the entire – on the day on which we got the subpoena that Mrs Broadley brought up, I just had the staff go into all of the files, collect all of the documents, all of the actual files that were there, and those documents that were on those files were just simply transported hereto.
Which staff did that work for you?---That went between Mr Ian Murphy, who is a solicitor on the staff down there, and Mrs Broadley. I was not directly involved in handling those documents at that time.
Did they report to you as to the work that they had done to find the documents to answer the subpoena?---Yes, they did. They said they had collected all of the files that were in the office and moved all of the files that were in the office.
Your Honour, I would seek access to the two further documents which have been produced by Mr Henke.
HIS HONOUR: There is no problem about that?
MR MORRIS: There is no objection, your Honour.
HIS HONOUR: I order that both parties have access to those documents.
MR SLATTERY: Your Honour, I would like now to question Mr Henke, and he will need to have before him a copy of the documents which are the larger bundle of material. We have copied into that, as I have said, the documents obtained on the subpoena at first instance.
HIS HONOUR: Yes, well, do you have a bundle that can be handed ‑ ‑ ‑
MR SLATTERY: We have a spare bundle for Mr Henke.
Mr Henke, can I just tell you as well, the way this is organised is if you just pull on the documents slightly, they become slightly freer to turn, all right, so you will not have any difficulty turning them?---Fine, thank you.
You can unhook, if you can, the – this makes it a lot easier to deal with and a lot freer?---Fine.
Can I tell you that these documents contain predominantly documents that were obtained on the last occasion, and where they are different, I will tell you. There are tabs. You will see down the side the tabs are numbered. Do you see that?---Yes.
Thank you. If you go, please, to document numbered 1, is that the cover sheet of the file that is kept within the ITR in relation to Arundel?---Yes, it would seem to be, yes.
Do you recognise the writing on it?---Yes, well, I think it’s the staff member who normally looks after that part of the file.
Can I ask you please to go to the middle of the page, and you will see the referral agent, B B Agency?---Yes.
What is B B Agency?---Brown Brooke.
You will see then two payments on the right-hand side under the heading “payments”?---Yes.
There is an ITR account of $2,000 and a trust account for $2,000?---Yes.
Those amounts having been received from?---Yes, and they are the document that I have just handed to you.
HIS HONOUR: Why would you hold money in trust, Mr Henke?---Part of the agreement, your Honour, was that we would only utilise money that was held on the client’s behalf under certain conditions and in relation to the things that they actually required. And if not, it was to be returned to them.
You say that was the arrangement, that you - - -?---Yes, sir.
Is that arrangement in writing anywhere?---Yes, your Honour.
Whereabouts is that?---It is a contract, actually, which is in the files and should be in the original files.
MR SLATTERY: While on that, your Honour, your Honour and Mr Henke, could you please go to document number 7. Is this the document you are referring to, to his Honour?---Yes, it is.
Could you just please go to paragraph - under the definition – before we do that, who drew this document?---One of the legal officers on our staff, sir.
Thank you. The agreement appears to be set out in paragraph numbered 1?‑‑‑Yes.
And following. Paragraph 2 – and I am going to ask you questions now specifically to follow his Honour’s lead in relation to the trust account?‑‑‑Yes, of course.
Paragraph 2, second sentence, do you see that? Do you read that?‑‑‑Yes, I do, yes.
If you then go to schedule D, which is on the bottom of the second page, it shows the trust sum. If you then go to schedule E, which is referred to in paragraph 2, it discloses how moneys are to be disbursed from the trust fund?---Yes, that’s correct.
HIS HONOUR: Schedule E, I just cannot pick it up ‑ ‑ ‑
MR SLATTERY: The top of the third page, your Honour.
HIS HONOUR: Yes.
MR SLATTERY: It relates to specific events, do you see that?---Yes.
In particular, those events are set out in (a), (b), (c) and (d)?---Yes, that’s true.
They relate, do they not, to questions of either reduced taxation amounts payable by a taxpayer or references by the use of constitutional references of future liabilities?‑‑‑Yes.
HIS HONOUR: Mr Henke, how many clients do you have?---Probably in the order of 700, your Honour.
How many of those have gone to court?---A significant number of them.
What does that mean - 10, 20, 30?---Probably half.
So 350?---Yes.
How many have had a hearing in the court?---Most of those, sir.
Have you ever had a win? Have any of your clients ever had a win?‑‑‑In the direct court hearing, I would say no, sir. But we don’t expect them to.
You do not expect to?---No, sir.
You realise then that your clients are undertaking a futility?---Your Honour, our clients inevitably have been put in a position where they have no hope whatever in their circumstances other than doing that. They feel that their lives have been destroyed, or will be destroyed, by the actions of the ATO otherwise. They feel it’s a last resort for them.
But some 300 or so people have tried their luck in the courts and not one of them has ever succeeded, is that right?---Directly, sir, that’s true.
And notwithstanding those invariable losses, are you continuing to promote - I will use this expression - the constitutional arguments that are contained in the material that you disseminate?---Sir, at this stage, the arguments that we are disseminating to people to use are not constitutional arguments. There are other arguments which have arisen and we are advising them that in the light of the failure of the constitutional arguments to sway the benches, that there are other arguments that depend upon standard faults, we might say, in the drawing and drafting and execution of legislation that they should use.
How many of your clients, using these other arguments, have actually had a hearing of their cases?---Probably 100 of those, sir.
Has one of them ever brought the flags up, as it were?---Let me put it the other way round.
No, you deal with my question first?---Well, in the sense of having got a positive result, no. But, equally, they haven’t had negative results either, sir.
What do you mean by that? They have not won; it sounds like a loss to me?‑‑‑Well, that many of the matters, your Honour, are still being heard, are still under way, the issues are still being explored.
I am interested in the cases that have been completed?---There are very few of those matters have been completed.
Yes, Mr Slattery?
MR SLATTERY: Can I just finish on schedule E? Can you tell his Honour your understanding, please, of the use of the trust funds which are described in schedule E? When are they to be used by the Institute of Taxation Research?---Well, there are - one of the things that happens, they are normally held for use of the clients. And, of course, if the clients find themselves in – we can’t use them for ourselves, and we do not use them for ourselves; they can only ever be used on behalf of the clients. In the case of Arundel, as you can see, the item that is in item D, in fact, has been fulfilled in this particular matter. And those funds were therefore released, but they were not released by us, or to us; we haven’t had any reason to use them.
HIS HONOUR: But I thought the scheme was – and you correct me if I am wrong – that the company would receive that sum that was otherwise held in trust if you had a win, or if the client had a win?---Yes, that’s correct.
That is the scheme, is it?---But if not, it has to be used by and for the clients.
Well, it’s like a contingency fund, is it, a contingency fee?---If there was a win, sir, yes. But if not, it is used by and for the clients.
How is it used on the clients’ behalf?---Well, if clients require counsel to appear for them in various matters over a long period of time – as you can see, sir, many of these people don’t have a great deal in the way of funds.
But you say “counsel”; you are not carrying on a practice as a solicitor, are you?‑‑‑No, of course not, sir.
Well, you do not brief counsel, do you?---No, but quite often these clients have reason - they have somebody who they have briefed, where their own funds are such as that if there was no money made available to them, they would then find themselves without representation in the courts.
But these are their funds; they are held in trust?---Of course.
So, are you telling me that one application of these funds would be for payment, in whole or in part, of legal fees incurred by your clients?---By the clients themselves directly, yes, sir.
Do you pay the fee of the clients’ direction or request? What happens?---Well, we pay it to the solicitor or whoever it is directed to, and from time to time they in turn will ask us if there are any funds available, and in many cases there are no funds available for the clients.
Let me understand this. There are occasions upon which you either reimburse or pay the solicitor fees being incurred by the client with that solicitor?---Yes, that’s correct.
All right, yes.
MR SLATTERY: Can I just ask you to go to document 2 just to identify that that is again a document from your files. It appears to be in a second file cover sheet?---Yes.
Can I ask you, please, to go to document 6. You will see that is a letter, I think sent by facsimile, to you by Mark Brown?---Yes.
And can I ask you just to read the – do you recognise that letter and are you familiar with it?---Not particularly, but ‑ ‑ ‑
It came from your files?---Yes, but what should be said, sir, is that, as a matter of practice, everything coming into the place is addressed to me. It’s not necessarily something for my attention.
HIS HONOUR: Was this document put to Dr Brown?
MR SLATTERY: It did not come from Dr Brown’s files.
HIS HONOUR: Yes, I know that, but was it put to him?
MR SLATTERY: No, your Honour, because we did not have it.
HIS HONOUR: Yes.
MR SLATTERY: Could you please look at the second paragraph ‑ ‑ ‑
MR MORRIS: Your Honour, I should correct that. My learned friend is right in the sense of saying that because he chose to call Dr Brown before calling on the subpoena addressed to ITR, he did not have it at the time he was examining Dr Brown, but that was one of the documents produced to your Honour on the previous occasion.
HIS HONOUR: Yes.
MR SLATTERY: Could you go to the second paragraph of that letter. Are you able to tell his Honour what directions you were giving to Dr Brown that are referred to there?---We weren’t giving any directions as to his actions. The only directions we gave to him was when he sought information and we supplied the information that he sought.
HIS HONOUR: It is not this witness’s document and your question involves an assumption that what the author wrote is necessarily correct. I mean, it may well be, Mr Slattery, but ‑ ‑ ‑
MR SLATTERY: Yes, I should rephrase the question.
Did you give directions to Dr Brown from March/April of 1998 to challenge the authority of the ATO?---Definitely not.
Did you know that he had discontinued forwarding PAYE payments to the Deputy Commissioner of Taxation after March of 1998?---Not in memory but, in looking at this document, I would agree he has done so. But it wasn’t something that I was conscious of.
Did you ever discuss the fact with him that he would discontinue forwarding PAYE payments for himself after March of 1998?---No.
Could you look at the third paragraph. Did you discuss with Dr Brown the fact that he would change his company to a single director company?---No, I did not.
You will see there he uses the expression at the end of the second sentence, “getting out of the firing line”?---Yes.
Did you have any understanding what he meant by that?---Exactly what he meant there is something I’d be supposing about but it could well refer to the fact that the ATO regularly targets directors of companies.
The next paragraph, there is the reference to an investment of the superannuation fund. Did you have any discussions with Dr Brown?---None at all.
Do you have any understanding what is referred to there in that fourth paragraph of that letter?---Exactly what’s there, that he doesn’t wish to be taxed in relation to his superannuation fund. But I have – as you will see, there are no documents throughout our documents which have anything to do with his superannuation fund.
Could you go up to the top of the page. You will see there a reference, OOL219?---Yes.
Do you know whose handwriting that is?---Probably the same member of the staff who did the cover sheets.
What is that reference?---OOL is simply Coolangatta. In fact, it is the standard airline designation for an area, and 219 is simply the file number.
That is your ITR file number?---That’s right.
Thank you. And if you go back then, please, to document 2, that is a letter to Dr Brown of 15 July 1998 – I beg your pardon, 2C, I am sorry?---Yes.
Have you seen that letter before?---I’ve seen many examples of that particular letter, yes.
How have you seen those examples?---Generally forwarded to us by fax.
Are they letters sent to clients of the ITR?---Yes.
When you say you are familiar generally with the letter, do I take it that you have seen the number of copies of a similar style of letter sent?---It appears to be a standard letter that was being circulated by the ATO at that time, yes.
And were you aware from at least the copies of the letters that you saw of the attitude of the Deputy Commissioner of Taxation in relation to the arguments questioning the validity of the taxation laws in Australia?---Yes, and I think he is wrong.
HIS HONOUR: But, Mr Henke, you say you think he is wrong, but more than 300 cases on this point have failed. Are you a qualified lawyer?
---No, sir, I am not.
Do you have any qualifications at all?---Yes, but not in law, sir.
What are your qualifications?---In science and social science.
Mr Henke, the law is what the courts declare it to be. Can you understand that?---Yes, I can.
And what the courts decide results in the imposition of sanctions which have a real effect upon people. They have to pay money and their property can be sequestered. In some circumstances, people can even go to prison. So, not only do the courts declare the law, but also there are enforcement authorities that give effect to it, and that effect has significant impacts upon people’s lives. They lose money, they lose property, and in some circumstances they go to prison. Do you understand all of that?---Yes, of course, sir.
And do you understand that persistence in a line that the courts have consistently held to be an erroneous line will cause those consequences to people?---I am aware of that, sir, but I am also aware that where there has been a resistance, such as the area of terra nullius, eventually the courts have changed their mind.
You are not seriously suggesting that that is an analogy, are you? Do you know how many cases there were in Australia on terra nullius before the Mabo decision? Do you have any idea how many there were?---Well, I’ve seen references to about 15 or 20, sir.
Yes. All right, Mr Slattery.
MR SLATTERY: If you go then to document 3, Mr Henke. These are documents from your file which appear to have been faxed to you by Arundel?---Yes.
And disclosing notices issued by the Deputy Commissioner of Taxation?---Yes.
In particular, in relation to the assessment issued to the company – that is document No 3?---Yes.
And document No 4 is a similar style of document, the later document. The first is dated 3 November 1998, that is document 3, and the second is dated 7 January 1999?---Yes.
Were you aware of these documents having been received by the ITR from Dr Brown?---Not specifically, but again I’ve seen many documents of this type.
And if you look to document No 7, you will see that that is a document dated 19 January 1999?---Yes.
Is it that under that style of agreement that you enter into with your clients, that they are to send to you the types of material that we see at documents 3 and 4 of this book?---Yes.
Would you then please go to document No 5, and that is a letter from the firm of chartered accountants, Hanrick Curran, addressed to you?---Yes.
And that provides some details in relation to the tax position of Arundel?---Yes.
And was that document sent to you in accordance with the usual arrangements that you make with your clients under the agreement which is document 7?---I think from a previous document, sir, this, in fact, was sent as a bundle with the contract and other documents.
Would you then please go to document 7A. There is a pro forma questionnaire?---Yes.
HIS HONOUR: I am sorry, where should I – I see, it has the same file number at the top.
MR SLATTERY: Yes, your Honour. Your Honour will see a consistent file number of these documents.
HIS HONOUR: Yes, thank you.
MR SLATTERY: That is the same style of document which is at the back of document No 7. So 7A and the document at the back of No 7 are a similar document, appear to have been completed by Dr Brown?---Yes, I assume so.
You are looking at the blue – would you just go back?---The blue ones, yes.
Just go back one, and the last couple of pages of 7 you will see is a questionnaire.
HIS HONOUR: And that is a form of document ‑ ‑ ‑
MR HENKE: It is just a photocopy of the same document.
HIS HONOUR: It is your document, a form of document prepared by ITR, is that right, Mr Henke?---The basic form, sir.
Yes.
MR SLATTERY: I just want to ask you some questions about document 7A?---Yes.
And that is a document I think you asked the clients to complete at the time they signed the contracts, which is document 7?---That is correct.
Is this completed, in the ordinary course, at about the same time as the contract is executed?---Yes, it would be.
If you go, please, to the second-last page of the blue copy, document 7A, you will see some handwriting on the top of the page, second-last page?---Yes.
It says, “Brisbane Chartered Accountant, Robin Huston, is handling my tax matters. He will be able to provide specific details”.
HIS HONOUR: Mr Slattery, I am sorry, I have lost you.
MR SLATTERY: I am sorry, your Honour. You are in the blue copy, second-last page of the blue copy.
HIS HONOUR: That is 7A?
MR SLATTERY: 7A, your Honour, yes, top of the page.
HIS HONOUR: All I have on the top of my page is OOL219. Would you show this to Mr Slattery, to make sure I am looking at the right document. What was I doing wrong? I thought I was looking ‑ ‑ ‑
MR SLATTERY: It was the second rather than the second-last, your Honour.
HIS HONOUR: Could I just ask Mr Henke a question?
Would you look at the second page of that questionnaire, Mr Henke?---Yes, sir.
Question 10?---Yes.
Look at question 9 – “Have lawyers or accountants been handling these matters on your behalf?” It seems to have been answered “No” by Dr Brown. Is that right?‑‑‑Yes.
“Do you wish to have these representatives continue to act in these matters?” He said “No”. Then Mr Slattery has drawn your attention to two pages on where apparently Dr Brown has written “Robin Huston is handling my tax matters. He will be able to provide specific details.” Do you see that?‑‑‑Mm.
What normally would you have done if the answer to question 10 had been no and there had not been a notation of the kind that Dr Brown made?---Well, normally we just accept that they were handling their own matters.
But if they say no, that they do not want the representatives to continue to act, what do you do?‑‑‑Well, then, that’s their choice.
What do you do for them?‑‑‑We don’t substitute anybody for them.
No, no, but if they say no, they do not want them to continue to act, what do you do?‑‑‑Well, then, we don’t take any direct action about their accounting and those sorts of issues.
But what do you do?‑‑‑In relation ‑ ‑ ‑
What is the point of the question?---The point of the question, sir, is that if somebody already has a solicitor and accountant acting for them and they wish to continue having that solicitor and accountant acting for them, then we have no problem or objection as to that continuing to occur. It then simply means that what we supplied to the client is then supplied on to their expert people to then be dealt with in the appropriate manner.
Yes, that is what happens if they answer the question yes, but if they answer the question no, that they do not wish their representatives to continue to act, what do you do?‑‑‑Well, normally we don’t take any action at that point except supply whatever material we have then direct to the client.
I see.
MR SLATTERY: The reference is made to Robin Huston on the page that I have referred you to?‑‑‑Yes.
And I have drawn your attention to the document being a letter from Hanrick Curran, which is document 5. Did you have any input, that is the ITR have any input, into the change of accountants from Hanrick Curran to Robin Huston?‑‑‑None at all.
Is Robin Huston a person who is recommended by the ITR?‑‑‑From time to time, yes, if we think something is a problem.
Did you generally recommend him?‑‑‑We’ve recommended they go to a number of accountants. He’s just one of a number, depending upon where people are.
And did you publish recommendations to people about which accountants they should go to?‑‑‑We have done so in the past.
Why did you recommend Robin Huston?‑‑‑Because he’s a man who we understood has had a great deal of experience in dealing with these sorts of matters.
What sorts of matters?‑‑‑Where people have taxation difficulty.
How did you obtain that understanding?‑‑‑Probably by reference from third parties. I couldn’t be certain at this stage who it was. I had never met the man at that stage, so I had no reason to know from personal experience.
Did the ITR make an examination or an investigation of Mr Huston as to his appropriateness to be recommended by the ITR?‑‑‑No, we simply send people to them and let people make their own judgments. We don’t – we made no direct linking at all.
Would you please go to document 8. It is a letter in your file, again from Dr Brown to Mr Lance Miller, and Mr Lance Miller, I think, is a resident in Queensland?‑‑‑Correct.
You will see there in the middle of the page he says, “I am in receipt of a final notice for payment of instalment of company tax for Arundel due on 15 December 1998, and I think that is the documents I took you to previously?‑‑‑Yes.
What do you do when you receive such information from a client such as Dr Brown?‑‑‑In Dr Brown’s case, since he was a solicitor, I felt there was no particular need to advise him to any legal aspect of it at all.
Did you understand him to be a practising solicitor?‑‑‑I knew he was not a practising solicitor but I knew he was a qualified solicitor.
Are you saying that you did nothing in respect of that statement?‑‑‑None at all - there was no reason to.
I beg your pardon?‑‑‑I had no reason to.
So I take it that ITR did nothing in respect of that statement?‑‑‑No.
Could you go to the bottom of the page. He says, “I trust ITR’s action on my behalf won’t jeopardise the refund that his wife hopes to obtain”?‑‑‑Yes, I see that.
What action is he referring to there, do you understand?‑‑‑I’ve got no idea.
You do not know?‑‑‑I don’t know because, after all, it was not a letter to me.
It is to a co‑director of the ITR?‑‑‑But resident in another State.
And it was on your file in Melbourne?‑‑‑Well, yes, he probably – in fact, it’s been faxed down to be put on the file. The fax number at the top shows that’s what happened.
Can you go then, please, to the next document, document 9, and you will see that it is a debt collection notice addressed to Arundel?‑‑‑Yes.
And were you aware that the ITR received a copy of a debt collection notice issued by the Commissioner of Taxation addressed to Arundel?‑‑‑Yes.
Did you give any advice in relation to what should be done in respect of that request for payment?‑‑‑I think we wrote a letter probably to the – on their behalf.
If you look at the next document, document 9C(1), is that the letter you are referring to?‑‑‑It looks like the standard letter that was sent in those circumstances, yes.
And you see there the first line you say – is that signed by you, first of all?‑‑‑Yes, that is my ‑ ‑ ‑
Thank you, and it is dated 9 March and you say in the first line that “The Institute has been retained as a consultant by Arundel”?‑‑‑That’s correct.
Is that a different arrangement than was disclosed under the agreement which is in document 7?‑‑‑No, not at all. It actually describes the arrangement.
You then go on to discuss an attached notice of objection and that is the second and following pages of 9C(1)?‑‑‑Yes.
HIS HONOUR: Just before you leave the first page, who undertook the 25 years research program?‑‑‑It actually started with a very eminent scientist, Dr Frank Conningham, sir, and he then continued to explore that with a number of eminent legal academics principally in the United States and UK, where he was based for many years as a scientist with NASA.
So you have a scientist co‑ordinator to lead your research program?‑‑‑Well, he encountered some anomalies in the early 1970s, which generated interest for him.
I see. Yes.
MR SLATTERY: And you refer in the second paragraph to a decision in, I think, a hearing before Justice Hayne of the High Court?‑‑‑Yes.
And what matter was that?‑‑‑That was in the matter of Joosse and another matter. There were five matters involved in that.
And, I think, in that application Justice Hayne dismissed the application?‑‑‑He dismissed an application to remove the matter to the Court, yes.
And if you look then to the third paragraph of your letter, was that the position of the company at that time in respect of its clients?‑‑‑No, the company we’re referring to, of course, is Arundel, not ourselves.
Can you go to the notice of objection and you will see there are set out grounds of objection?‑‑‑Yes.
And you will see at the end that it is signed. Is that your signature?‑‑‑Yes, that’s correct.
And is that a document that you forwarded to the Deputy Commissioner of Taxation with the letter of 9 ‑ ‑ ‑?‑‑‑I assume so, sir, yes.
You say you assume so. There is nothing to doubt about that, is there?‑‑‑No, look, let me just say this, that as a matter of practice I am the only person in the office, with the exception of one of the solicitors, who signs anything, so whilst a number of documents are put in front of me each day to sign, what happens to them beforehand and what happens to them afterwards, I can only assume that they follow the process that has been set down and that is all I can say about it.
Thank you. Now, you set out grounds for objection that you have signed?‑‑‑Yes.
Who decided on the grounds which are 31 in number?‑‑‑All of our material was done by the solicitors that we had working for it, and we have had five working for us over a period of time. I couldn’t tell you which one it was at that time but we have had five.
That is, working for the ITR?‑‑‑That’s right.
Did you review that document before it was put in?‑‑‑Not at all.
Please go to document 9C(2). It is a letter of 24 March 1999 sent to you by the Commissioner of Taxation and it refers to the lodgment of an objection?‑‑‑Yes.
Are you familiar with that letter?‑‑‑Again, I’ve seen it a number of – in exactly the same terms.
And you see it challenges the question of agency on the second page?‑‑‑Yes, it does, yes.
And did you take some steps to address that issue?‑‑‑I think we did. I think we actually asked in writing from Dr Brown for an authority to do just that.
Right. And if you go to document 9C(3), is that the authority that you are referring to?‑‑‑Yes.
Now, if you go then to document 9C(4), that is the response to the notice of objection from the Deputy Commissioner of Taxation. It sets out reasons commencing at the third page. Did you read this document when it came to the ITR?‑‑‑Probably.
Were you aware of the attitude taken by the Commissioner which he sets out in the reasons for decision, after you read it?‑‑‑Of course.
Was that something new for you at the time?‑‑‑I’ve never seen an objection that the Commissioner allowed.
HIS HONOUR: Well, that is not really an answer to Mr Slattery’s question. I think it was intended to be a specific question, was it, about some aspect?
MR SLATTERY: Yes.
HIS HONOUR: You ask the question again and perhaps a little more explicitly.
MR SLATTERY: Yes, I will, your Honour, thank you.
If you look at the reasons for decision and the discussion contained within it and the references in particular to the various cases, were any of the matters that are contained there matters that you had not seen previously?‑‑‑There are a couple of items towards the end which had not been produced until that stage.
Which items are they, Mr Henke?‑‑‑The reference in 11 to Bradley v The Commonwealth.
I think it is at the top of page 6 of 7 pages?‑‑‑Yes, and the Walsh v Professional Nominees I was aware of, but I hadn’t seen the material. I believe that involved a real estate agent.
How were you aware of that decision, Walsh?‑‑‑There was quite a lot of publicity about it at the time that the actual matter occurred.
If you go to page 7 of 7 pages you will see that after the legislative references there are references to court decisions and Joosse is mentioned?‑‑‑Yes.
And Walsh as well?‑‑‑Yes.
Did you get a copy of the Walsh decision and read it after seeing that document?‑‑‑Yes, I did get a copy of the Walsh decision.
Can I then go, please, to document 10, and is that your response to the refusal of the notice of objection to the assessment?‑‑‑I think it is, yes.
Can you look at the last paragraph, please?‑‑‑Yes.
I beg your pardon, look at the second paragraph. You mention there the LJ Investments matter?‑‑‑Yes.
Were you aware of the decisions by this time in the LJ Investments matter?‑‑‑Which, High Court decisions or other decisions?
Yes, High Court decisions?‑‑‑I don’t know that at that stage whether there had been any decisions made. I am not conscious – that would not have been in there if had been ‑ LJ had already to our knowledge been decided.
But you knew the matter was before the Court?‑‑‑I knew the matter had been before courts in the ACT for quite a long time.
And that, I think, was another application for removal to the High Court?‑‑‑Yes, that’s correct.
And then document 11. There is a further letter from the ATO to yourself and it mentions a right of appeal?‑‑‑Yes.
And did you advise the taxpayer to appeal?‑‑‑Well, what happened was, I think we gave them a copy of this document and left it to them to decide what it was that they should do at that stage.
And did they give you any instructions?‑‑‑Not that I am conscious of. Night be.
And then document 14 – I beg your pardon, document 12, I am sorry, is a letter from the Commissioner of Taxation of 22 May 1999, which is a notice of intended legal action?‑‑‑Yes.
And it is addressed to the ITR ‑ Arundel care of the ITR?‑‑‑Correct.
And in the second paragraph it announces the intention to issue legal proceedings for recovery?‑‑‑Yes.
Did you give any advice to the taxpayer at that time about what it should do, having received that letter?‑‑‑No. We immediately forwarded it to the taxpayer – to the taxpayer to make his decision about it.
I am sorry, I missed the ‑ ‑ ‑?‑‑‑To the taxpayer to make his decision.
HIS HONOUR: You having first told the taxpayer that everything the Taxation Commissioner was saying was nonsense, in effect. Is that not right?‑‑‑No. By this stage, your Honour, Dr Brown had ‑ ‑ ‑
No, no, please. No, no, Mr Henke, if I ask you a question, I want you to answer it responsibly, please?‑‑‑Yes.
Is it not the fact that the substance of what you had told Arundel, before this point, that what the Taxation Commissioner was asserting about the company’s obligation to pay tax was legal nonsense?‑‑‑Yes.
Thank you.
MR SLATTERY: If you then go to the next tab, tab 13, your letter to the Commissioner of Taxation of 28 May relating to the disallowance of objection?‑‑‑Yes.
It said that “the disallowance will be placed before the AAT or the Federal Court as decided by legal counsel”?‑‑‑Yes.
Was that legal counsel Mr Fitzgibbon?‑‑‑No. It was ‑ ‑ ‑
Who was it?‑‑‑I have no idea. It would have been ‑ the matter was referred back, as I started to say in the previous matter – the previous document, is being aware that Mr Brown was a qualified solicitor and that he was very close friends with Mr Peter Brooke, that he was taking his legal advice direct from that point there, and they were seeking further legal advice as to what they should do.
If you look at your letter, you claim that what is being done is a deliberate deception of the public, in the end of the second paragraph?‑‑‑Yes.
You then say that action will be taken against the issuing officers?‑‑‑Yes.
Was any action taken?‑‑‑There is still outstanding action against people under those particular circumstances, sir.
Just look at this matter. Are you saying that action has been taken under the Public Service Act to prevent person without lawful authority overturning recorded decisions of the United Kingdom and Commonwealth Governments?‑‑‑I think we – I think there were probably letters written to the particular public servants at the time. In fact, this one is addressed to a particular public servant.
Mr Wilkie, I think, was the person who was handling the file at that stage?‑‑‑I think probably, judging by the reference, yes, I would think so.
Did you take the action that you were talking about there in the last paragraph, last four ‑ ‑ ‑?‑‑‑Not without ‑ not without the authority of the – of Mr Brown. We had no authority to do that on our own – on our own ‑ ‑ ‑
Is there any mention in that letter of you obtaining authority from Arundel?‑‑‑Not at all. Not at all.
Or that you would seek authority from Arundel to do that?‑‑‑No.
Then your next letter is the letter ‑ document No 14, which is a letter of 2 June, that you have sent to the Deputy Commissioner of Taxation. It is referring to the notice of intended legal action?‑‑‑Well, that basically is a duplicate of the previous letter, Mr Slattery.
It is not the same though. If you look at the previous letter, it is 28 May, that is document 13, and this letter is dated 2 June. So you appear to have sent two letters within four days. All right?‑‑‑Yes.
There are certainly some similar expressions in the letters, and I accept that, but leaving aside the similar expressions. When was the decision made to have the matter ‑ looking at the first paragraph now, when was the decision made for the matter to be reviewed by the Federal Court or the AAT?‑‑‑I don’t know when there was. I don’t even know if there was a decision made. Can I point out to you that right from the beginning this matter was Dr Brown in conjunction with Mr Brooke, that is who the BB Agency is, and so it was always in legal hands from day one.
But you continued to write these letters?‑‑‑Of course. That is what we were being requested to do and that is what we did.
Are you saying that in respect of each of these letters you received a specific request to write the letter?‑‑‑We were – we were being asked to answer each of the documents on behalf of the client.
Who requested you to do that?‑‑‑Dr Brown.
How did he do that?‑‑‑He would fax a document down and say, “Will you answer?”.
If you look at the letters that you were receiving, you were receiving them directly, for example, document 11, document 12, document 9C(4)?‑‑‑Yes. You will note there is a gap between each document and its reply, to allow time for it to be referred to the client and get him tell us what he wanted done.
You say that you sent them to the client and then the client sent them back to you?‑‑‑Automatically. No, well, in these particular cases we just ‑ we would fax them off to the client. We didn’t get documents which we didn’t fax back to them and just sort of leave them in the dark about what was happening.
Did you record anywhere the instructions that you received from the client?‑‑‑Well, I ‑ since I wasn’t necessarily handling the file ‑ I mean, with 330 files I did not handle the files personally.
But you signed the letters that went out?‑‑‑Yes, I signed the letters, very specifically.
Did you make sure that you had instructions when the letters ‑ this type of correspondence went out to the Commissioner of Taxation?‑‑‑Dr Brown had constant, and I really mean constant, telephone contact with the office. His telephone contact would sometimes be hours long.
Who was he speaking to?‑‑‑Everybody in the office.
About his matter?‑‑‑Of course.
How long did that go on for?‑‑‑Probably until 12 months ago.
HIS HONOUR: What is the situation in Queensland now about giving legal advice, unqualified people or corporations giving legal advice? Is that regulated by the Law Society Act?
MR MORRIS: Yes, it is still in the Law Society Act. There is also a provision in the Supreme Court Act 1863, I think, that was re‑enacted as part of the recent codification that also prohibits acting or practising as a solicitor.
HIS HONOUR: I was looking at document 21, for example ‑ you are going to tender all of these documents, Mr Slattery?
MR SLATTERY: I will, your Honour, yes.
MR MORRIS: It may be that document 21 was sent from Victoria.
HIS HONOUR: Yes, it may well have been. I was just wondering about ‑ this is a company, is it not, ITR?
MR SLATTERY: Yes, your Honour.
HIS HONOUR: The Trade Practices Act provisions about representation, do they have any bearing on any of this?
MR SLATTERY: The answer is yes, but that is not at our suit so ‑ ‑ ‑
HIS HONOUR: No, I know that.
MR MORRIS: My learned friend is perfectly right that any claims of leading on deceptive conduct would have to be by a person whose loss or damage was suffered as a result of that conduct.
HIS HONOUR: Yes.
MR MORRIS: I do not think in these proceedings the Deputy Commissioner can claim that he was misled or deceived by anything that occurred.
HIS HONOUR: What about the ACCC’s general regulatory powers?
MR MORRIS: That is a different issue, your Honour, yes.
HIS HONOUR: Yes. There may be sections of the Trade Practices Act that might ‑ ‑ ‑
MR MORRIS: Yes. Specifically, I think it is section 81, that ‑ your Honour will recall the injunction provisions, do not require any locus standi, so any person who is aware of a corporation committing misleading or deceptive conduct in the course of trade or commerce can sue for an injunction to restrain that conduct.
HIS HONOUR: Yes. Thank you for that assistance, Mr Morris.
MR SLATTERY: The only provision I can think of, your Honour, that I am sure is going to come before your Honours at some stage, is section 51AC(2), which is acting unconscionably in the course of providing advice in relation to financial matters, and there are two interchangeable ‑ is a person and a corporation. So a person may not in respect of the provision by a corporation of financial services, which is very broadly defined, may not act unconscionably. That is the only provision I can think of that may fit this, but that again is too long a bow to draw I think for my client.
HIS HONOUR: Well, I am not making any suggestions. I am just interested in the question whether conceivably, and only conceivably, there might be other regulatory regimes, which somebody might seek to invoke, that is all.
MR SLATTERY: Yes, your Honour.
HIS HONOUR: Now, I see the next matter that I have listed, the people are here in relation to that. How much longer do you think you will be, Mr Slattery?
MR SLATTERY: I have to go through these documents, your Honour; I will be a little while.
HIS HONOUR: Well, Mr Slattery, you know in this Court we do not hear trials very often and the Court is heavily pressed with Full Court matters.
MR SLATTERY: Yes, your Honour.
HIS HONOUR: I would like you to see if you can think of some way of expediting the matter, that is all. I appreciate what you are doing.
MR MORRIS: May I suggest a course of action, your Honour? So far the cross‑examination seems to have been directed to proving the documents, that they are what they purport to be, and so on. If your Honour were to stand down to hear the other matter and Mr Henke were to take the bundle, read through it all and then he can be asked as a general question, does he accept that they are true copies of the correspondence written by ‑ ‑ ‑
HIS HONOUR: And then Mr Slattery could ask any questions physically in relation to any – that seems to be a reasonable course, do you think, Mr Slattery?
MR SLATTERY: Yes, I am happy with that, but there are certain links that have got to be made.
HIS HONOUR: I understand that, and I am not suggesting that you should not do that, but if you do what Mr Morris suggests, the documents will all be identified and the witness may have some familiarity with them.
MR SLATTERY: Yes.
HIS HONOUR: I do not think Mr Morris is going to object, even assuming he could, to the reception of any of these documents.
MR MORRIS: No.
HIS HONOUR: Anyway, they do not need any identification. That means that the apparent author will be taken to be the author of them and the addressee, the addressee of them.
MR SLATTERY: Thank you, your Honour.
HIS HONOUR: All right. I will stand this matter down. I do not know how long it will take. I would think perhaps about half an hour, so I will say resume not before 12.30 pm.
MR SLATTERY: Thank you, your Honour. Does your Honour wish us to clear or ‑ ‑ ‑
HIS HONOUR: I think these people will need some space. I adjourn the matter that is now before me for half an hour.
AT 12.02 PM SHORT ADJOURNMENT
UPON RESUMING AT 12.49 PM:
HIS HONOUR: Now, Mr Slattery, the Court does not have days to hear this matter, so I would appreciate anything that you can do to expedite it.
MR SLATTERY: Your Honour, if I might comment on that? If Mr Henke came back into the witness box? I understand that he has been through an entire bundle of documents provided by my learned friend and is able to confirm, with one exception, that they are all what they purport to be, that is, letters sent or received on about the dates they bear, written by the people that they purport to be written by, signed by the people that they purport to be written by and so on.
HIS HONOUR: And which document is the exception?
MR MORRIS: The only exception is the very last one, document 56D which our learned friend took your Honour to this morning. That is the report from the chartered accountant, Jean Sayer, receiver of the practice of Mr Brooke and Mr Henke - and I doubt that this is in dispute – he says he knows nothing about that or the transactions referred to in them. There appear to be some offshore transfers of funds and so on.
HIS HONOUR: To the extent that it is relevant it is certainly admissible as a business record.
MR SLATTERY: Yes, there is no issue on admissibility.
HIS HONOUR: All right. There you are, Mr Slattery.
MR SLATTERY: Thank you, Mr Slattery.
HIS HONOUR: So, really all you need to cover is any point you need to make on any particular document, I think.
MR SLATTERY: Yes, your Honour. Your Honour, as I said, there are still the links that have to be made.
HIS HONOUR: Well, let us get on with it.
MR SLATTERY: Yes, your Honour.
Mr Henke, could you open, please, the bundle?
Could I tell your Honour that in so far as I do not address a…..document it is from the ITR file and I will not ask questions unless it is absolutely necessary.
HIS HONOUR: Good.
MR SLATTERY: I think at the time we broke, Mr Henke, we were looking at documents 14, 15 and 16 and, in particular, document 15 was a document sent to the ITR by Arundel in relation to an income tax return. I want to take you, please, to document 16 which is the Form 509H ‑ ‑ ‑
HIS HONOUR: We can see what it is, Mr Slattery. Just ask your question on it, please.
MR SLATTERY: Yes.
Do you recall the receipt of this document?---Yes, I do.
Did you give advice to Arundel after the receipt of the document?---Only that he should get legal defence for it.
Did you provide to Arundel a legal defence?---No, we did not.
Did you have anything to do with the legal defence which was filed by Arundel in relation to that demand?---I think there was consultation between Mr Brooke and to Mr Murphy of our staff in relation to it, but that is as much as I could tell you.
Are you putting to his Honour that you have never acted – I am sorry, I beg your pardon. I withdraw that. Are you putting to his Honour that Mr Brooke never acted on your instructions?---No, I’m putting – I’m saying – yes, I’m saying Mr Brooke does not act on our instructions in relation to the holding or the running of the case.
Thank you. Would you go to document 19, please?—Yes.
Do you see in the first paragraph a mention of David Fitzgibbon?---Yes.
Is he counsel that was involved with the ITR and has acted in ITR
matters?---He has indeed, yes.
And was he counsel normally briefed on behalf of taxpayers in matters in which the ITR was involved?---He is one of about eight that have been briefed.
You will see there the third paragraph. Did you confirm with Mr Fitzgibbon that he was to appear on 3 August?---I did not but I understand that Mr Brooke did talk directly to him.
How do you understand that?---Because of conversations that were held with Mr Brooke - Mr Brooke’s office, actually, at the time, not with Mr Brooke per se.
Do you see there in the next paragraph – did you advise the client?---No, we did not.
Are you certain of that?---Yes.
How can you be certain?---Because at the time concerned Mr Brooke was not around and there were conversations going backwards and forwards between his PA and our office and we asked him to talk direct – we asked her, I should say, to talk direct to them.
Could I just ask you to concentrate, please, on the second paragraph?---Yes.
Where it talks about documents that were forwarded for filing? Did you forward documents to Mr Brooke for filing?---I think you will find, Mr Slattery, that those documents were forwarded to Mr Galton of Galtons, Lawyers, for filing, not from us. That is, the forwarding refers to that as a town agent for Mr Brooke.
Would you look at this bundle of material, please, taken from Mr Galton’s file – I beg your pardon, the file of Rea & Stockhill, and tab 1? There is a document dated 15 July from Peter Brooke to Dr Brown?---Yes.
Do you know who filed the documents on 30 June?---I understand somebody from Mr Galton’s office.
Galton?---Galton.
Do you see then the next paragraph this invitation to Dr Brown to take the documents to his solicitor? Do you know who Dr Brown’s solicitor
was?---As far as I knew, Mr Brooke, unless there was some other change that he had done at that stage, but, again, this is not signed by Peter Brooke. I think that’s his secretary’s signature underneath.
Are you sure of that?---I think so.
Is that a guess?---To a degree, yes.
MR MORRIS: Your Honour, I object to this cross‑examination. It has been going on for a while. This is my learned friend’s witness. He has asked a question. He has got an answer. That is the end of it.
HIS HONOUR: Well, you are objecting to his cross‑examining his own witness.
MR MORRIS: His own witness, yes.
HIS HONOUR: Yes, well, that was cross-examination, Mr Slattery.
MR SLATTERY: No, I think the witness, your Honour, said, “ I think that’s his signature”.
HIS HONOUR: Yes.
MR SLATTERY: And I asked the question, “Is that a guess?”
HIS HONOUR: It sounded to me like cross-examination. I have heard a fair bit of cross-examination in my time, Mr Slattery. I disallow the question.
MR SLATTERY: All right. Would you go, please, to document 21 of the large bundle? That is a letter to the Australian Taxation Office, and you mention contracts on the bottom of the first page – the last paragraph of the first page?---Yes.
And this is your letter?---Yes.
And then you go – on the second page you discuss – I am sorry, before I go on to that. Is the contracts you are referring the document numbered 7 that you refer to?---I assume so, yes.
Then on the second page you discuss the ‑ ‑ ‑
HIS HONOUR: Mr Slattery, what is the position about tax agents? Have they got to be registered under the Act?
MR SLATTERY: They do, your Honour.
HIS HONOUR: Can you give me a reference to that anywhere?
MR SLATTERY: I do not but I can get it for you.
HIS HONOUR: But you will in due course?
MR SLATTERY: Yes.
HIS HONOUR: All right, you can go ahead.
MR SLATTERY: There is some correspondence which I can take you back to which asks for registration - - -
HIS HONOUR: Yes, I think I remember that, now. You go ahead.
MR SLATTERY: Yes.
Can I say to you on the second last paragraph on page 2 and then the last paragraph on page 2 after your discussion concerning the cases and the decisions of Justice Hayne?---Yes.
And you say, “We have already placed the non-existence of the ATO before the Federal Court in Quin” and that is the matter that ultimately became Levey I think?---Yes.
Arundel was not involved in the Quin matter, was it?---No, not at all.
Who is the “we” that is referred to?---Actually, Mr Levey which we were referring to. It was his call that that was done in that particular manner.
Is that what you mean by the expression “we”?---Yes.
Can I take you, please, to document 26? And that is a letter received after the decision you had made in the Arundel matter and that, I can tell you was made – that decision was made on 4 August 1999?---Yes.
And that is an account to you from Brooke for solicitors fees and counsel fees?---Yes.
Did you pay that account?---I think what we did was we released money that Mr Brooke was holding.
Was he holding money from – delivered from you?---He was holding a considerable amount of money delivered from us.
How much?---I think about $5000 or something of that order.
Could you go to document 27?---Yes.
Is that your signature on the document?---Yes.
Did you read the document before you signed it?---Yes.
Thank you. And the next document, I think, is a reconciliation - that is document 28 – is a reconciliation, internally, of the ITR in relation to the funds which have been delivered by Arundel?---Correct.
Now, I want to just clarify because his Honour did ask some questions. You will see there that the ITR account is $2000 and the trust account is $2000?---Yes.
But you will see the expenditure is $2,036.50?---Yes.
Is it the case that the $36.50 was paid out of the trust account?---No, sir.
Where was that paid from?---It was paid from the – the actual amounts were paid from other moneys that were due from us to the B & B Agency which was Mr Brown and Mr Brooke. There is some $16,000 involved in that, sir.
And did you have authority to offset those amounts?---Well, the money was paid to Mr Brooke on behalf of both of them and the authority to offset them is purely between Mr Brooke and Mr Brown.
Can I take you back, please, to document 27 and ask you to read the first line of document 27?---Yes.
Did you write anything back to Mr Brooke in relation to what he said there?---No.
Did you sign the document?---Yes, I did.
Thank you. And can I ask you, please, to go on to document 30 which is a similar request in relation to payment of professional fees by
Mr Brooke?---Yes.
And he seeks your authorisation?---Yes.
And a further authority to act is the last document in that bundle?---Yes.
And did you sign it?---Yes.
And you read that again before you signed it?---Yes. Yes.
Thank you. Did you see the arguments that were put forward by Arundel in answer to the demand made by the Deputy Commission of Taxation for payment of tax?---After they were filed, yes.
And before the decision of Justice Muir?---Yes, I think I saw them at that stage but I wouldn’t be certain.
At the time that you saw them did you consider them to have any prospect of success?---I thought if somebody was looking at them with a fresh eye, yes.
And you know that they failed?---Yes.
Can I ask you, please, to go to document 55B right at the back of the bundle?---Yes.
And can you go to the third page, please?---Yes.
And that is a memo that was published by the ITO dated 5 August 99 and is signed by the directors?---Yes, I assume – yes, that’s right.
Are you aware of the contents?---In general, yes.
And did you authorise the issue of this document?---Probably, yes.
You say in the second paragraph that, “Intelligence reports have been received of an abuse of the Queensland court system to prevent companies being able to walk away from any tax”?---Yes.
Was that the intention of the ITR?---Not specifically, no.
Why did you say that there?---Because we were aware that the ATO never sues directly for the recovery of tax from companies but only ever attempts to wind them up.
You then go to the next sentence, “This behaviour of the ATO includes putting all taxation matters before a single named judge of the Queensland Supreme Court”. Which judge was that?---Justice Muir.
And Justice Muir heard the Arundel matter, did he not?---I think so, yes.
And he brought down the decision in the Arundel matter the day before this document?---But that was one of about five that he had done.
Yes, I accept that?---Yes.
And you say that “Justice Muir is prepared to ignore the law as it is written in order to assist the ATO”?---That is what was said in this, yes.
HIS HONOUR: You could not have believed that to be true, Mr Henke. You could not have believed that possibly to be true?---Your Honour, some people have great confidence in the courts, we do not, and I do not. It may be offensive to your Honour but it happens to be so.
Yes.
MR SLATTERY: And you have described the behaviour as corrupt and that the ATO is behind the moves. And, then the next paragraph, please, “We are taking legal steps to refer every matter to the High Court and remove them from the jurisdiction of the Queensland courts until the illegality comes to an end?---Yes.
And that was your intention?---Yes, it certainly was.
And that was the intention of the ITR from that time onwards, was it
not?---Well, it was an attempt to do so, yes. I mean, provided the clients concerned were prepared to do so.
And Arundel was one of the matters that had just been decided by Justice Muir?---Yes.
If you go then back, please, to document 34?---Yes.
Do you recall receiving that document?---Yes, I do.
Do you recall, now, that an application to wind-up Arundel was taken in the Supreme Court of Queensland?---Yes.
Did you give advice to Mr Brooke as to what he should do about that?---Well, I think at that stage – I think ‑ ‑ ‑
I am sorry, Dr Brown, I beg your pardon?---To Dr Brown. Well, again it was suggested to Dr Brown that he goes and consults his solicitor, at that stage, to work out what they should do at that point.
MR SLATTERY: Did you know that a notice of motion was issued in the High Court?---Yes, I am aware of that, yes.
When did you become aware of that?---Well, it was discussed by Mr Brooke.
With you?---Well, with members of the staff in my office, which includes the solicitors in the office.
And you?---Yes, he did discuss it with me.
What was the extent of that discussion?---The extent of that discussion is whether or not it should, in fact, be done in order to have the matters heard that, in fact, had been put aside by Judge Muir.
Was a decision made?---As far as I know, yes, but not by us.
Who made the decision?---Mr Brooke and Mr Browne.
HIS HONOUR: Mr Slattery, I am just thinking about the adjournment. How much longer do you think you will be in cross-examination?
MR SLATTERY: About 45 minutes, your Honour.
HIS HONOUR: All right, well, look, I will adjourn now, but would you try to pay some attention to trying to abbreviate it in some way if you can? I do not want to inhibit you too much, but see what you can do, will you?
MR SLATTERY: Yes, your Honour.
HIS HONOUR: All right. Did you want to say something?
MR SLATTERY: No, your Honour. I am actually abbreviating it as I am going.
HIS HONOUR: Yes, well, certainly you are moving much more quickly now, but it would be helpful if you could.
MR SLATTERY: Yes, your Honour.
HIS HONOUR: All right, well, I will adjourn now until 10 past two.
AT 1.09 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.10 PM:
HIS HONOUR: Is Mr Henke here? Please sit down.
MR SLATTERY: Mr Henke, when we broke I was asking you questions in relation to the preparation of the notice of motion to the High Court?‑‑‑Yes.
You said that that was done in consultation between the ITR and Mr Brooke?---Yes.
Is it the case that the notice of motion was drawn in the offices of the ITR?‑‑‑No, definitely not.
Could you go to document 1, please, in the book. It is right in front of you. That is a record, is it not, of the front sheet of the file in relation to Arundel – document No 1?---Yes, it is.
That sets out a history, does it not, of what was done on the file, on the bottom?---Yes, okay, yes, that’s fine.
Are you looking at document No 1?---Yes. This one?
Yes?---I am sorry.
There is hand-written entries on the bottom of the page, and the last entry you will see says “notices of motion sent to Peter Brooke to issue?---Quite possible, yes.
Do you want to read that?---Yes, I can see that.
That is what occurred, is it not?---We’re not saying that Mr Brooke was not talking to the solicitors in my office.
No, I did not ask that question?---No, but if there’s consultation going backwards and forwards, I can’t, and I don’t, dictate to the people working there what they will do when working with a solicitor who’s acting on behalf of the client.
So it is the case, is it, that it is possible that the notices of motion were prepared in your office and sent to Peter Brooke to issue?---No, I don’t think so at all. I think you’ll find that what have happened at that stage is certainly that Mr Brooke had things and Mr Murphy had things, that they sent stuff backwards and forwards between them, and that perhaps this was one in which, having looked at the final copy of what was there, that was then sent back.
That is not what the entry says though, is it?---But the entry is just a note on the bottom of something of what’s been done. It doesn’t describe what the process is.
But Mr Brooke was your solicitor, was he not?---No. Mr Brooke had made a particular point very early in the arrangements between ITR and Mr Brooke. And he made a requirement that, for the purposes of the Law Society in Queensland, that ITR had to be a client of his rather than acting in some legal advisory capacity to him in that context. We agreed that if that was what was required for the Queensland law purposes, then we were agreeable to it. Hence, the remarks throughout the system of ITR being a client of Peter Brooke and Company. That’s in many of the documents.
So there was no other relationship than that, is that what you are saying?‑‑‑No, and I’m saying, but we had, on our staff, we had, from time to time, five solicitors. I’m not quite certain which one did this, but nevertheless, they did consult with Mr Brooke. I mean, that was the purpose of what we were doing.
You know that after the notice of motion was filed, some submissions were filed in support of the notice of motion?---Yes, at some future stage, yes.
And they were filed on 17 December?---I’ve seen those in the file, yes.
You knew at that time, did you – I will withdraw the question. Who drew the contents of the submissions?---Well, I certainly didn’t, and I couldn’t say for certain who did.
Did the ITR draw them?---I don’t think so, but I certainly think we supplied a lot of material that went into them.
Who did you supply it to?---Mr Brooke, or Mr Brooke’s office, anyway. Because Mr Brooke, at that stage, had been missing for some time and unable to be contacted.
Who was working in his office?---From what I understand, Mr Bernie Kelly, QC and Mr Geoff Brooke, his brother. But most of our contact was with Mr Brooke’s secretary, Debbie.
Did you ask those two persons, that is Mr Kelly and Mr Geoff Brooke, to prepare the submissions?---I personally did not, no.
Did the ITR do that?---I don’t think so. I think the requirement for preparation of the submissions came from the High Court to Mr Brooke. It was not a communication to us.
As I understand what you are saying, you supplied the contents of the notice of motion – the contents of the submissions?---A substantial part of it, but not all of it, yes.
Which part did you not supply?---There is no way I could tell you what we did or didn’t supply, because Mr Brooke and Dr Brown had been communicating with us for six or seven months, 12 months, by this stage.
But you knew Mr Brooke was out of the country at that time, did you not? You knew that?---Yes, we were aware of it. We were having trouble contacting him.
And you know that he had been away since 20 November and he did not return until 21 December 1999?---Yes, we are aware of that, in fact, it caused considerable difficulties for Mr Brown.
It was your expectation that what you provided to his office would find its way into the submissions in support of the notice of motion?---Well, we hoped it would be used, but we couldn’t be certain of that.
Was it the case that you also had the same expectation about the notice of motion as you had about the Supreme Court proceedings, that is, that they had no…..?---No, I didn’t believe so, because I actually believed that there were a number of issues that were raised in that which had not been before the Court previously. And I think there were a whole lot of issues there which I thought that the High Court, looking at, would possibly view quite favourably. They were quite different to the issues that had been raised previously.
You know as well, do you not, of the application taken in January of the year 2000 to join Mr Brooke as a party to these proceedings and for costs orders to be made against him?---I’ve seen that, yes.
You were aware of that?---Yes, I’ve seen that.
And you were aware, were you not, of the conduct of the High Court proceedings after the Supreme Court proceedings had been finalised?‑‑‑I was aware that a settlement had been arrived at in the Supreme Court. But the continuing arrangements between the High Court and Mr Brooke, I wasn’t directly privy to, we got it second-hand at any stage.
When you say you got it second-hand, what do you mean?---Well, we’d either get a copy of the notice or Mr Brooke would advise us that something had been done or he’d been approached. For instance, I think there is a note in relation to that matter that he was seeking to see if we would indemnify him if he proceeded on that matter in the early part of January, which we, in fact, declined to do. As far as we were concerned, the matter was at an end.
And that is documents 42?---Yes, and we in fact declined to do. As far as we were concerned, the matter was at an end.
I beg your pardon?---As far as we were concerned, the matter was at an end, it had finished.
But you look at document 42A – have you seen that document before?‑‑‑Yes, I’ve seen it, yes.
That is a letter from Mr Brooke to his client, is it not?---That’s right, yes.
As you would have it?---Yes, that’s right.
And he does not seek an indemnity there, does he?---No, he doesn’t.
Did you have a discussion with Mr Brooke about the possibility of indemnifying him in respect of the Commissioner’s application?---We quite explicitly said that we would not indemnify him relation to that. We did not have any control. There was no way in which we would do that.
In the period of November 1999 you had direct contact, did you not, from time to time from the office of Mr Brooke?---Yes, indeed.
And he sought your instructions – and I am referring now to document 39?‑‑‑Yes.
And we know now that the date, “the prospective return of Mr Brooke of Tuesday or Wednesday next week” was wrong and in fact he was away for a good month?---That’s right.
You see that they seek your instructions?---Yes, it was his secretary, the fax is from his secretary.
Did you give instructions?---No, we did not give instructions.
You simply sent the submissions, is that right?---No, what we did is we rang – because this was in addition to whatever telephone conversations were going on at the time; this was not the only communication that was happening, because we were endeavouring to find Peter Brooke to find out what was going on.
Why was that, Mr Henke?---Why were we trying to find out what was going on?
Yes?---Well, obviously we are getting documents about the case, we are getting this sort of document about a case, of course we wanted to know what was going on. As you can see about his non-return, his secretary was responding to our questions as to why he wasn’t answering what our questions were.
HIS HONOUR: Mr Henke, would you mind looking at document 47, please?---Yes.
You see that handwriting on that document, paid cheque No 183?---Yes.
Do you know whose handwriting that is?---I think it is Mrs Broadley’s, I think, sir.
Does that mean that ITR paid that memorandum of fees to - - -?---It does, indeed, your Honour. Just a brief explanation to that, your Honour: there were a number of – Mr Ford took over the late Mr Ian Galton’s practice when he collapsed and died in court at, I think it was Maryborough.
Not a good way to go, but yes?---And we received - these matters looked as if they would have to go into the estate of the late Mr Galton, and we actually received a specific request whether or not to clear those matters and to prevent them going into that, whether we would be prepared to pay the matters. There was no strict reason for us to do so, but we in fact agreed to do so, just so that it did not become part of an estate matter, and a distressing part of an estate matter at the time. But it was not part of our conventional thing. In fact, I think you’ll find elsewhere that Mr Ford states quite explicitly that he did not have any instructions in relation to this matter at all.
MR SLATTERY: If you go to document 44, Mr Henke, it is in fact Mr Brooke, is it not, that is sending the file on to Ford?---Yes, but he sent his file, but the other file had already gone to Mr Ford. There were two files, Mr Slattery, one of which was Mr Galton’s ‑ ‑ ‑
But was not Mr Galton merely the town agent for Mr Brooke?---Yes, but Mr Gaulton, in fact, to my knowledge, did most of the work in relation to the matter.
MR SLATTERY: Well, how did you know that?---Because from time to time, particularly in the absence of Mr Brooke, Mr Galton spoke to us.
Did you with that letter, Mr Brooke encloses a note to the charges, his first paragraph?---Yes, yes.
Where is that bill?---I don’t know.
You see in the top left-hand corner of that page, there is a photocopy mark of a staple?---Yes, yes.
So, when this document was photocopied to bring to court, it had something stapled to it. Where is that document, Mr Henke?---I’ll have a look in the original file.
HIS HONOUR: Mr Slattery, while that is being done, are you able to enlighten me as to what section 19 of the United Nations Lawyers Code says? I am looking at the document that is document 49.
MR SLATTERY: No, your Honour, I am not, and I am fairly sure it does not say that you can join solicitors to proceedings, your Honour.
HIS HONOUR: Can you assist me on the United Nations Lawyers Code as to ‑ ‑ ‑
MR MORRIS: Your Honour, only to the extent to say that I will not be troubling your Honour with any submissions based on that provision.
HIS HONOUR: Thank you, Mr Morris.
THE WITNESS: I can’t find a copy of it in this, but it may well be in one of the other two files that was, in fact, supplied with us at the same time. So, I’ve only got one of the three files here.
MR SLATTERY: So there is not an account in existence that shows that Mr Brooke rendered an account to you for all the work done?---I should assume so, yes.
And that is all the work done in the Arundel matter in the High Court?---And I would think it probably also incorporates a whole lot of other matters which he was clearing up at the same time.
So, it is headed “Arundel”, Mr Henke. Just have a look at the letter, it is headed “Arundel”?---Yes, I am aware of what is here, but I think also it will find that it was part of a large group of matters because Mr Brooke turned, I think, about 30 files over to Mr Ford.
So it was Mr Brooke who turned the files over to Mr Ford?---Well, he turned his files over to Mr Ford, but Mr Galton’s files also went to Mr Ford.
But you knew, did you not, at that stage, that the Arundel High Court application was still on foot as at 30 May 2000?---Only from your actions, not from the client’s actions.
But you had know, had you not, since January in the correspondence that you had received in relation to the joinder of Mr Brooke and his application for an indemnity of that fact?---But I was aware also, Mr Slattery, that a section 40 notice to remove a matter cannot remove a matter if the matter no longer exists.
But you knew the application was still on foot?---But the application could not be on foot if the original matter was no longer there and I was aware that the original matter was no longer there. After all, it is only a notice of motion to remove a matter to this Court. Unless there is a matter to remove, the application no longer has a reason to exist.
If that is the case, Mr Henke, can you explain why written submissions were filed on 20 December 1999 after ‑ ‑ ‑
MR MORRIS: Your Honour, I object to this, this is plainly cross‑examination.
HIS HONOUR: That is right, Mr Slattery.
MR SLATTERY: As at 17 December 1999, the date upon which the Supreme Court proceedings were finalised, you knew that the High Court proceedings were still on foot?---I was aware that the documents were in place for them before that date on which the matter was finalised.
And you knew in January of 2000 that the High Court proceedings were still on foot?---I knew in January 2000 that the ATO was attempting to keep the matter still on foot before the High Court.
And you did not give any instructions to anyone to discontinue those proceedings?---I did not have the authority to give anybody to discontinue the proceedings.
You knew of the change of shareholders and directors of Arundel as at the end of January 2000?---I am aware of the fact that it happened, but I was not involved in that at all.
And you were aware of the contents of the file going to Ford Lawyers in June 2000?---I was aware that an entire batch of files had been transferred to Mr Ford in June 2000, but I did not see the contents of any of those files.
And you paid the account of Mr Brooke of 30 May in relation to these High Court proceedings?---I haven’t got evidence that we didn’t, but I also haven’t got evidence that we did. I assume we did.
And you also paid an account – his Honour has referred to document 47 – there is also an account behind document 46 and if you go to the account - could you have a look at that?---Yes. As I have just explained, there are a number of matters in relation to this which related to Mr Galton and related to Mr Galton’s things and, in fact, I think the amount was something like $1,300 all up, was the total amount concerned. That is only part of what it was that we agreed to deal with under those circumstances.
But if you have a look at the detail on the memorandum of account, you will see that it relates to all work done for the High Court and you paid that account?---Yes, but, again, the detail that is in the thing. For instance, the call to the Institute of Taxation Research requesting contact details. They were asking for contact details if we had them for the directors of the company. They asked - elsewhere in this documentation there is a letter from Mr Ford specifically advising your client or your office that he had no instructions to act in the matter at all.
You see, if you look at document 56D which is the green document at the very back, you will see there that an amount was paid into trust, the trust account of Mr Brooke on 1 July 1999.---Yes.
And dibursed from that trust account payments in respect of all solicitors’ fees payable up to August of 1999?---But you’ll notice there they relate to a whole number of matters, not merely this one.
Yes, but if we go through each of the entries, you see the entry “You”. that is Deputy Commissioner of Taxation or Deputy Commissioner “Arundel”?‑‑‑If that is the way they run their accounting system, that is fine, that is their problem, not mine.
Did you receive trust account statements from Mr Brooke from time to time, having regard to the amounts that he was taking out of his trust account?---I think he asked us to release things from time to time. I think that was about the extent of what we got.
Are the documents we have already looked at?---Yes, I think so. But the object of that was very simple, is that Mr Brooke was looking after a number of matters and was talking to people on a daily basis getting $170 or $150 or whatever dollars it was a time, and it just became impossible to do.
Mr Henke, I have asked you some questions about the notice of motion and you have given me some answers in relation to it. I just want to just confirm again. If you could look please at the bundle of material I have shown you, called the “pleadings file”. Now I ask you to go to document numbered 1.---Yes.
That is the notice of motion we were discussing a moment ago and your answer to me was that as far as you were concerned, there was nothing to remove.---No, I would ‑ ‑ ‑
After - - -?---After December 12th or 7th to 15th or whatever date that was.
I will just ask you please to look at the notice of motion first page under the entry, “blank day of blank or as soon thereafter as the applicant or counsel for the applicant may be heard for an order that prior to proceedings in S6693 of 1999 be removed into this Honourable Court pursuant to section 40 of the Judiciary Act”. Do you read that? ---Yes, yes, I do.
That was the application, was it not, that you understood was attempting to be removed?---You mean that is the case that was attempting to be removed?
Yes, that was the issue.---Well, without knowing the numbers, and I am not conscious of the numbers, but without knowing the numbers, if that was the matter before it, yes, that I agree.
If you then go to tab 8 please, and could you look to the bottom right-hand and you see some page numbers, could you go to page 73. You will see there that on the top right-hand corner, you will see that is action No 6693 of 1999 and that is the application which was sought to be removed. You will see on that page that that is an application filed on behalf of Arundel.
---Yes
You will see that is an application for the setting aside of a creditor’s statutory demand, not an application to wind up.---Yes.
Do you want to reconsider the answer you gave in relation to that matter?---Not at all. All it shows is that in relation to the document that you produced there is that there is a wrong case number on it.
Are you saying that the document page 73, which is part of tab 8, of the pleadings volume is wrong?---No, I’m saying if the document has got a wrong number on it, the document’s got a wrong number on it. I mean ‑ ‑ ‑
Which document has got the wrong number on it, Mr Henke?---Well, if the matter relating to the creditor’s statutory demand had been completed, which it was back earlier in the year, then that was the – look, I am not even certain which matter was seeking to be removed, whether it was the creditor’s statutory demand matter, or whether it was the matter relating to the winding up. I am sorry, from these two, I cannot tell.
Mr Henke, this is the notice of motion that was sent from your office. That is obvious from tab 1. That seeks the removal of that particular action, that is, 6693 of 1999, and that is the application by Arundel to set aside the statutory demand.---No, I’m sorry, if you’re taking that document as one, if you have a look, it is a stamped copy of the application.
No, what page are you ‑ ‑ ‑?---No, I am looking at the document, the notice of motion that you have referred me to. If you look at the top of the document, you will see it has originated at Galton Solicitors. It is a document which has the High Court stamp on and is, therefore the document that has been lodged and it has been received at our office. Now, it hasn’t been received, and in fact it wasn’t received at our office. I can’t read whatever the date is on the High Court stamp here, but that notice of motion would seem to me to be after the event, not before, because we couldn’t have sent Mr Galton a copy of a notice of motion with a High Court stamp already upon it.
MR SLATTERY: I did not say that. I said that the action that you sought to have removed into the High Court was the action commenced by Arundel in relation to the statutory - - -
MR MORRIS: I object to that, your Honour. It assumes that this witness, or his company, was the one that sought to have something removed and the witness – being my learned friend’s own witness has already said that that was not his application. It was done by Dr Brown instructing his own solicitors.
HIS HONOUR: That is right, Mr Slattery. There used to be a section in the State Evidence Act that you could not contradict your own witness, apart from those exceptions about recent invention and the like. Is there a similar provision in the Commonwealth Evidence Act?
MR SLATTERY: Section 38 is the section I was about to take your Honour to.
HIS HONOUR: What does it say, Mr Slattery?
MR SLATTERY: It is the unfavourable witness provision, your Honour.
HIS HONOUR: I do not have a copy of the Evidence Act. This is the Commonwealth ‑ ‑ ‑
MR SLATTERY: Yes, your Honour.
HIS HONOUR: We have had more appeals in the short period of time on this Act than any other statute, certainly in my time. Queensland has not adopted it; a few States have. I think they might be very wise. No, I am not going to let you cross-examine under that section. I have a discretion and you chose to call this witness. You do not have a statement to any prior inconsistent statement, what basis do you say I should give you leave to cross-examine him on?
MR SLATTERY: That is correct, your Honour. We concede that we have no prior ‑ ‑ ‑
HIS HONOUR: Well, there really needs to be something to trigger my discretion.
MR SLATTERY: Yes, your Honour.
HIS HONOUR: Why should I exercise my discretion to ‑ ‑ ‑
MR SLATTERY: We would say - our submission, your Honour, is that there are a number of plain facts which are evident from the documents ‑ ‑ ‑
HIS HONOUR: Well, what are you asking him about them for, if they are plain from the documents? You have proved them. Frankly, I have not understood some of the questions because the documents speak for themselves. Mr Morris does not object to them. They are all put before the witness. I do not think the rule in Browne v Dunn applies. If Mr Morris wants to cross-examine about the documents to disprove anything that they appear to show on their face, then he can. He can cross-examine this witness. It is not his witness. He can cross-examine him as much as he likes.
MR SLATTERY: Yes, your Honour.
HIS HONOUR: But you have put before the Court documents which, on their face, appear to show whatever they do show. Frankly, I do not know why we are taking up so much time adducing that they show what they appear to show. They are before the witness. If Mr Morris wants to, he can ask any question he likes to, any proper question he likes, in cross‑examination, with respect to them. That is what I was trying to imply before lunch, Mr Slattery. We seem to be taking up a great deal of time reproving what the documents appear to prove.
MR SLATTERY: Your Honour is against me on the application?
HIS HONOUR: Well, is there anything further you want to say in relation to that?
MR SLATTERY: We would not want it to be – our position is this, your Honour, that we would not want your Honour to hear for the first time, in our written submissions, the suggestion that some of the evidence that has been given is plainly inconsistent with the documents and that oral evidence should not be, which was volunteered and not asked, accepted.
HIS HONOUR: The only oral evidence that has been given is evidence that has been given as a result of your questions. I know what you are saying, you are saying that some of the answers have been non-responsive.
MR SLATTERY: Yes.
HIS HONOUR: But, on the whole, most of them have been responsive. Whether they are credible or not will be a question for me.
MR SLATTERY: Yes, your Honour, I would not want to put against ‑ ‑ ‑
HIS HONOUR: But you put the documents to the witness. If he wants to say anything – if Mr Morris wants to bring out anything contrary to the documents, he can. You do not have to do any more so far as proof of the contents of them is concerned.
MR SLATTERY: No, your Honour.
HIS HONOUR: Now, is there anything further you want to submit to me in relation to why I should permit you to cross-examine this witness?
MR SLATTERY: No, your Honour.
HIS HONOUR: And it is your case, Mr Slattery, but what I am saying to you about the documents has to be right. They either prove something on their face or they do not. I am not disposed to allow you to create – it creates a false issue. You cross-examine the witness to try to show that the documents do not say something or that he wants to say something that is contrary to the documents, you are creating the issue.
MR SLATTERY: Yes, your Honour. Can I tender, your Honour, as a bundle, the large volume of material?
HIS HONOUR: Yes, what exhibit number does that become?
MR SLATTERY: It might be AI, your Honour.
HIS HONOUR: AI, yes. Well, that bundle is admitted and will be marked AI.
EXHIBIT: Exhibit AI…..Large volume of material.
MR SLATTERY: I tender as a bundle the documents obtained from the Rea and Sockhill files?
HIS HONOUR: There is no objection to those?
MR MORRIS: No, your Honour.
HIS HONOUR: No. Those documents are admitted.
EXHIBIT:Exhibit AJ…..Documents obtained from Rea and Sockhill
MR SLATTERY: I read further affidavit material, in particular, Lisa Dawn Jackson. Her affidavit is sworn on 27 October 2000, which is the very back of that bundle, your Honour.
HIS HONOUR: When was this document sworn, Mr Slattery?
MR SLATTERY: On 27 October 2000, your Honour.
HIS HONOUR: Let me just read that. That is to prove something I think you already have in your chronology about travel overseas by Mr Brooke.
MR SLATTERY: Yes, your Honour.
HIS HONOUR: Mr Slattery, I mean, if Mr Morris were to cross-examine and bring out certain matters, you could renew your application then, perhaps, re-examination. But we have not reached that point.
MR SLATTERY: No.
HIS HONOUR: I am sorry, I interrupted you. Is there any other material you want ‑ ‑ ‑
MR SLATTERY: There are some affidavits of service which I do not think are in contest between the parties in relation to ‑ ‑ ‑
HIS HONOUR: They were filed a day or so ago?
MR SLATTERY: Yes.
HIS HONOUR: I have read them, yes.
MR SLATTERY: The affidavits of service, so they are not in issue, your Honour.
MR MORRIS: Your Honour, if it will make things quicker, can we proceed on the basis that my learned friend has read everything in the pleadings bundle so that we all know exactly what documents are before your Honour and what are not?
HIS HONOUR: That sounds convenient, Mr ‑ ‑ ‑
MR SLATTERY: I am happy with that and, thank you, I am grateful for my friend’s indication.
HIS HONOUR: All right, thank you, Mr Slattery.
MR SLATTERY: Thank you, your Honour, I have finished my questions.
CROSS-EXAMINED BY MR MORRIS:
MR MORRIS: Your Honour, I do have a few questions.
Mr Henke, I want to start off on this matter. His Honour asked you some questions this morning about the constitutional arguments that ITR has been propounding ‑ ‑ ‑
HIS HONOUR: He said they were not constitutional, did he not? No, he said the later ones were not constitutional, sorry.
MR MORRIS: The later ones were not. Mr Henke, apart from arguments involving what I will call, broadly, constitutional issues, matters of parliamentary sovereignty and Australia’s existence as an independent sovereign state, matters of that nature, are there other issues of law which ITR is investigating in respect of the administration of the Australian tax system?---Significant ones, Mr Morris.
And do those include issues which – I hope you will not find this an offensive term – but issues which would be regarded as orthodox legal issues?---Yes, indeed, they do.
I think we can be frank about matters, Mr Henke. It is the case, is it not, that both I and my learned junior may complain to you that there are certain arguments and kinds of arguments that we will not accept instructions to advance in this Court?---Absolutely clearly, and it has been – your representation here is on that basis.
Yes. But, in addition to that, there are other issues of law that ITR is investigating which competent and reputable counsel have given advice on and which ITR is pursuing?---Indeed.
So when one looks at the agreement - we have here an example in evidence of the agreement between ITR and Arundel Chiropractic Centre. but there are similar agreements, are there not, with other taxpayers?---Yes, there are, indeed, yes.
And the consultancy and advice provided, pursuant to those agreements, is not limited to the constitutional-type issues that I mention?---Well, of course not, of course not.
Just as one example of that, because it is a matter of public record, are there proceedings that you are aware of at the moment involving a client of ITR questioning the scope of the Commissioner’s power, or the Deputy Commissioner’s power, in respect of the – “to sue for and recover debts”?‑‑‑Yes, absolutely. Without question, there is a provision in the legislation to allow the Deputy Commissioner to sue and recover. There is no provision in the legislation to allow the Commissioner to liquidate companies.
HIS HONOUR: Well, that has been the subject of a decision, has it not?
MR MORRIS: There has been a decision recently and that is the subject of a current appeal, as I understand it.
HIS HONOUR: I thought it was an issue in the case…..in which I expressly held that the Commissioner was like any other litigant who wind up companies if the Commissioner had a debt.
MR MORRIS: I am not sure whether your Honour is thinking of the situation where the Commissioner already has a judgment debt.
HIS HONOUR: No, no, I was not.
MR MORRIS: And it is certainly plain that the Commissioner has power to enforce a judgment debt in that way.
MR SLATTERY: I think the matter came up in Henry, your Honour. I think your Honour did decide that there was no…..at all on the Commissioner using the Corporations Law to pursue the recovery of debts.
HIS HONOUR: I thought I had done that, Mr Slattery. I may be wrong but ‑ ‑ ‑
MR MORRIS: I am not ‑ ‑ ‑
HIS HONOUR: No, I understand what you are saying, you are not traversing it. It just may not be an accurate statement of the state of legal authority on that point, that is all.
MR MORRIS: Yes, in fact, it is advantageous that your Honour is aware of that point because that would, I suggest, indicate to your Honour that it is a point argued on orthodox bases rather than a point involving obtuse constitutional provisions.
HIS HONOUR: Yes. I was just looking for information ‑ ‑ ‑
MR MORRIS: Mr Henke – I am sorry, may I continue, your Honour?
HIS HONOUR: I was just looking – Mr Slattery, was it within Henry I decided that, was it?
MR SLATTERY: My memory is that it was, your Honour, yes. …. because that matter arose in the ITR matter in Adelaide called Monetary Management and I think it was in the….aspect of it that your Honour decided that.
HIS HONOUR: All right, you go ahead, Mr Morris.
MR MORRIS: Yes, thank you. How did you come to be acquainted with Mr Brooke?---Mr Brown introduced us, a long-time friend of his.
We have been favoured with a copy of our learned friend’s proposed submissions. I wish to raise with you a number of specific matters arising out of that. Did you instruct or retain Mr Brooke to act on behalf of Arundel?---No, we did not.
Did you instruct or retain counsel to act on behalf of Arundel?---No, we did not.
I think Mr Myers of counsel was retained on behalf of Arundel at one stage?---Yes, but when Mr Myers of counsel or any other counsel were retained, they were sought by the solicitor at the time, whoever the solicitor was acting, and engaged directly by the solicitor concerned.
Dealing specifically with the motion to this Court to remove proceedings – it does not matter for the moment which proceedings, but to remove some proceedings from the Supreme Court – did you give any instructions to any legal practitioner to file that notice of motion?---No, I did not.
Did you encourage Mr Brown to file that notion of motion of Arundel?---No, I didn’t encourage him to do so. I did discuss with him what his options were at that sort of stage. He had got information about it and he spoke to me about it, bearing in mind that by that time Mr Brown was the author of a book called The Constitutional Con and he was, in fact, probably more gung ho about the various issues that were involved than anybody else I knew.
HIS HONOUR: Mr Henke, you say you did not encourage Mr Brown, was it, to file the notice of motion, is that right?---Yes, sir, that is correct.
Well, if you have a look at document Noi 55B – do you still have that bundle in front of you?---Yes, I do.
That is a circular that went around to all of your clients. Do you see that?---Yes, I do, yes.
Was it Mr Brown or Arundel a client at that stage?---Yes, but at that stage Mr Brown did not have a matter that fell within that context.
Well, he was a client though, is that right?---He was a client at the time but he certainly didn’t have – he had no matter before the court at that stage.
But you say in the third paragraph there, and I am drawing your attention to it because it might be read as an encouragement, “Additionally, we are taking legal steps to refer every matter to the High Court until the illegality comes to an end”, and I just want to draw your attention to the word “we” and “every matter”. Some people might read that as an encouragement, you see?---Well, you note, sir, firstly, that the – whilst it certainly is one of our company’s documents, it is certainly not one put out by myself.
You say it is not put out by you?---No, it is a company document ‑ ‑ ‑
It is signed the Directors. You are a Director, are you not?---Yes, it was ‑ ‑ ‑
I thought you said that there were only two people, I think, who were allowed to sign documents, is that right?---Well, this was somebody who, in fact, was with us and then resigned over another matter, sir.
Well, in any event, I am just drawing your attention so you can - - -?---I accept that it is a company document, your Honour, and I don’t have a problem about that at all.
And, indeed, that some might, perhaps, read it as encouragement?---I can only point out to your Honour that, at the time that that document went out, there was, in fact, no court case to my knowledge involving Mr Brown.
No, but you were saying that – he had a matter with you though, did he not? He was a client?---He certainly was a client, sir, yes.
Yes, all right.
MR MORRIS: Thank you, your Honour. Mr Henke, putting this into context, the document his Honour just drew to your attention is dated 5 August 1999. The notice of motion which commenced proceedings in this Court is dated 14 October 1999. Did you have discussions with Dr Brown between 5 August and 19 October in respect of, if I can use the expression again, the constitutional issues?---Yes, of course.
Did Dr Brown need any encouragement to litigate the constitutional issues?---None at all.
HIS HONOUR: I do not know whether I can – we do not know. He is really speaking for Mr Brown if he answers that question.
MR MORRIS: Well, I will put it this way. In your discussions with Dr Brown, what attitude did he express in respect of the constitutional issues?---Dr Brown expressed the view that the matter should be considered at the highest level and he wanted to be involved in having it pursued at the highest level.
Now, that notice of motion that I spoke of was filed in October 1999, 14 October. To your knowledge, did anyone from ITR give instructions to file that notice of motion?---No, definitely not.
I want to ask you next about payment of the lawyers involved, and we have seen evidence that your company received accounts from Mr Brooke. That is the case, is it not?---Yes, absolutely.
And, I think, accounts from Mr Galton?---Yes.
Accounts from counsel, Mr Myers, at least Mr Myers?---Yes, indeed.
I cannot recall any others and, ultimately, accounts from Mr Ford?---Yes.
Now, I want to leave to one side, for the moment, the Ford accounts because you have already given some explanation for them. But leaving the Ford accounts to one side, for the moment, dealing with the other Arundel matters, what funds were used to pay solicitor’s and counsel’s fees?---Funds that were either owned by or due to Arundel. They were not – we are not and never have been a source of funds or had sufficient funds to support all of the various matters that arise around the country. We’re a quite small organisation in that sense.
Did one cent of ITR’s own money go into the conduct of proceedings in this‑‑‑?---No, definitely not.
HIS HONOUR: Well, is that right? I am not saying it is not, but what about the trust fund that you held?---It only became ours, your Honour, in the event that there was a successful outcome but until that stage it remained the property of the client and if the client wanted it to used to pursue a matter such as this, we had no right to say to them that they could not use it in that manner. It was theirs.
Let me just understand about that. In this case, the amount was $4,000 that was paid to you, is that right?---The initial amount, sir, yes.
There was a $2,000 flag fall, as it were, you would say, for the information, is that right?---Yes, that’s right.
And then the other $2,000?---To pay for clerical work that was done in that earlier part of it, sir.
That is the first two thousand?---That is right, yes.
The second two thousand is the fund that you had a contingent interest in, in the event that the subscriber had a win, is that right?---Yes.
Was any of that $2,000 ever used for any legal fees?---Your Honour, one of the things that I should draw attention to in this particular matter is that there is an additional relationship which is not covered by that particular situation and that is that for other work that was being done, we were, in fact, paying Dr Brown and Mr Brooke as a joint entity a considerable amount of money. In fact, it was ‑ ‑ ‑
He was your agent, is that right?---That is right, and we paid them some $16,000 for that and, so ‑ ‑ ‑
What was your agency arrangement with Mr Brown?---Well, they were conducting - both of them conducted a number of meetings, I believe both in Australia and outside Australia, for that matter.
To promote ITR?---Yes, they did, and to promote other issues that they were, in fact, involved with.
ITR for what purpose?---Well, they were seeking to broaden the awareness of what we were doing and as to whether people who had problems should, in fact, come and talk to us, sir.
Was it not inevitable that those people would, if they accepted what you were promulgating, become involved in litigation?---In many cases, yes, and where we knew that that was so, the specific arrangements were made for them to have to deal with directly their legal costs that were involved.
And you had a direct interest in that litigation in the sense that if it succeeded, you would get an additional fee – you would get the contingency fee?---Yes, that is true, sir, that is true.
MR MORRIS: Thank you, your Honour. The next point I want to deal with from my learned friend’s submissions is the assertion that the taxpayer – the taxpayer being Arundel, of course, in this case – embarked upon a course of conduct to challenge the Deputy Commissioner of Taxation during 1998 at the direction of ITR. Did you give any direction to Arundel?---Definitely not.
The next assertion I want to deal with is in these terms. ITR advised and encouraged the taxpayer to refuse to pay the tax assessed against it. Did you give such advice?---We advised the taxpayer to challenge the assessments of what was against it. In fact, what we did during the various parts of filing objections, et cetera, was, in fact, to utilise the legal mechanics that are there for the taxpayer to challenge.
It is said then that after the disallowance of the notice of objection, the ITR, and not the taxpayer, instructed solicitors, Peter Brooke, to file the application and supporting affidavit. Did you give any such instructions?---No, definitely not.
All right. It is then said that, “Brooke received from the ITR the contents of the notice of motion”, that is the motion to remove proceedings into the High Court, “and arranged for its filing by Galton Solicitors”. What is your knowledge of the drafting of the notice of motion?---Well, the notice of motion, as I’ve seen, is, in fact, not consistent with what would come off the computers that we have in the office. It is – certainly I know there was input in terms of information and questions from members of our staff, but the actual preparation, typing, delivery of it to Galton’s, and the instructions to Galton’s to file the matter, were directly from Mr Brooke. We had no relationship with Galton’s other than him acting as the town agent for Mr Brooke.
Now, you became aware at some stage, in about November 1999, thereabouts, that proceedings had been settled between the taxpayer, Arundel, on the one hand, and the Commissioner of Taxation on the other hand?
MR SLATTERY: I object to the question. I think my friend’s date is wrong, it was December.
MR MORRIS: It was in December that you became aware of that?---We were informed that it was so. We didn’t actually see any documentation about it until much later. But, in fact, we were informed that, in fact, the matter was concluded, yes.
Now, at that stage, can we identify the state of your knowledge? You knew that the Commissioner had issued a winding-up notice against Arundel?---Yes.
You knew that Brooke had instituted proceedings in the Supreme Court to have that winding-up notice set aside?---Yes.
Did you have any knowledge, one way or the other, as to whether the Commissioner had actually brought proceedings to wind up Arundel?---Whether the ‑ ‑ ‑
Whether an actual winding-up petition had been filed?---To my knowledge, yes, it had been.
All right. Now, I want to know what your understanding was at the time rather than what you have gleaned here today from reading documents?---Yes.
Which proceedings was it that you thought the motion was to have removed into the High Court?---The only motion that I could imagine at the time that could have been removed into the High Court was the action to wind up the company.
So, whatever the documents say, at the time, that is what you thought had been done?---I don’t normally see the case numbers, the document numbers. I would have no idea even of what the – apart from seeing it in front of me today, or even what the case number is today, and so, consequently, a case number on a bit of paper would mean absolutely nothing to me.
Now, once you became aware that some resolution had been achieved between the taxpayer and the Deputy Commissioner, did you do anything with a view to continuing the proceedings in this Court?---Nothing at all.
What was your state of mind at that point in time regarding the proceedings in this Court?---Well, my understanding of it was, is that the wording of the section of the Judiciary Act allows a removal under section 40 at any time up until the point at which the matter is finally determined and that once the matter had been determined, which it had been in the Supreme Court, then there was no longer any capacity to remove under section 40. The entire capacity had disappeared. So that, as far as I was concerned, anything that had been initiated prior to that no longer had any legal point or legislative basis.
Now, I also want to ask you about the filing of a notice of discontinuance of the proceedings in this Court. Did you, or your organisation, give any instructions to file the notice of discontinuance?---No, we did not.
Do you have any personal knowledge as to the source of those instructions?---Not at all.
You are aware, of course, that the shares in the company previously known as Arundel, now known as Nuradel, have been sold?---Yes, I am aware of it.
Apparently the purchaser’s name is Clarence Marae, did you know that?
---Yes.
MR SLATTERY: I object to that. That is, in fact, utterly wrong.
HIS HONOUR: If it is wrong, the question will not have any probative value.
MR SLATTERY: But it is misleading the witness as well.
HIS HONOUR: No, it is not misleading the witness. I will not pay any attention to the answer, if that is wrong. It is cross‑examination, Mr Slattery. People often put things in cross‑examination that are not right and then if they have not got it right, then the evidence has no value. Yes, Mr Morris.
MR MORRIS: Thank you, your Honour.
Who do you understand to be the purchaser of the shares in the company?---As far as I know, it was bought by another company and that is as much as I know about it. I don’t know any of the people involved in that company, I don’t know Mr Marae who you mentioned, and I wasn’t in any way involved in the purchase or sale of the company. That was purely a matter arranged by Dr Brown through his own interests.
Do you know a person called Mr Clarence Marae?---No, I do not.
You see, so that I am not accused of misleading you, I will read precisely what is in my learned friend’s outline: “The action was discontinued. The action was not discontinued on instructions of the only officer of the taxpayer now known as Nuradel, Mr Clarence Marae”. Do you have any knowledge one way or the other regarding that?---None at all.
It is said that Mr Marae lives in Vanuatu. Do you know anything about that?---I have been told that that’s where he lives, basically, yes.
But you have no personal knowledge of that?---No, I’ve never been to Vanuatu, so I’ve no direct connection whatever.
Then it said “The instructions”, which I presume means the instructions to discontinue the proceedings, “were given by the ITR”. Did you give such instructions?---Definitely not and, in fact, very much the reverse. Mr Ford
rang me to ask whether we were in a position to give any instructions about the continuance of the matter before the High Court and I told him quite specifically that we weren’t, that we had no capacity to give any instructions, and if he had some from somewhere else, fine, but he would get no instructions from us. To my knowledge, he communicated that to the Australian Government Solicitor’s office.
I have nothing further, thank you, your Honour.
HIS HONOUR: Mr Slattery?
RE-EXAMINED BY MR SLATTERY:
MR SLATTERY: One point, in relation to Mr Brown and his work for the ITR, you said a payment of $16,000 was made to you?---Approximately. I mean, the figures are there, sir.
Is that based upon some commission basis?---Yes, it was.
Is that based upon a figure of 18 per cent of moneys earned by ITR as a result of people introduced by Brown to ITR?---Yes, it is; but, again, it was split on a contingency and result basis, so that there was a small initial payment and then there was - if certain results were achieved, including negotiated settlements, then the balance was payable.
Therefore, if there was a successful defence under schedule E of the agreement, an amount would be paid to Brown?---Yes, that’s correct.
Then the second point: his Honour asked you some questions about the trust fund and you had already pointed out that – and I am looking now at document 7, fourth page, schedule E, a negotiated settlement. There was a negotiated settlement here?---Yes.
Is it the case that under schedule E, once the negotiated settlement takes place, the funds become the funds of the ITR?---In the other cases in which that happens, yes, that’s true.
Was this case different?---Well, the relationship between Mr Brown and ourselves was quite different. We, in fact, had no arrangements with most of the other clients and which we’re not paying them anything at all. So, consequently, the mere fact that ‑ ‑ ‑
HIS HONOUR: No, that is not what Mr Slattery is asking you. He is not asking you about money that you might pay to Mr Brown on some other account. I think this is right, Mr Slattery, is it not?
MR SLATTERY: Yes, your Honour.
HIS HONOUR: Mr Slattery is asking you whether there was a payment – well, you asked the question, but it is not in respect of some other account.
THE WITNESS: Technically, under the terms of section E, we could have claimed the $2,000 under the provisions of the final section of section E.
HIS HONOUR: Because there is a negotiated ‑ ‑ ‑?---Because there was a negotiated settlement, your Honour. We could have claimed that, yes.
Have you finished, Mr Slattery?
MR SLATTERY: Yes, thank you, your Honour.
HIS HONOUR: I did not interrupt you?
MR SLATTERY: No, your Honour.
HIS HONOUR: Mr Henke, ITR is not a non-profit company, is it?---Essentially it is, sir.
It supports you, I take it?---No, in fact, I’ve taken no money out of the company for many months.
Had you taken money out of it in the past?---I have on odd occasions, expenses and we have taken director’s fees from time to time, but none of us take regular fees out of the company.
What about salary?---No, I take no salary, sir.
At any event, it would not be wrong to describe it as an entrepreneurial company, would it?---It was formed as a commercial company because that seemed to be the format in which it was done. If there had been another suitable format in which it could have been done, your Honour, we probably would have chosen that. It wasn’t sought to be set up in the form of a taxation promotion thing to provide profits in large amounts for ourselves. That wasn’t what it was set up to do. It was set up to explore the issues and to deal with the issues.
Why do you have agents who go around like Dr Brown did, as it were – and I do not mean this offensively – but drumming up business for you?---If your Honour will permit me.
Yes, certainly?---For instance, one of the things we’ve encountered is a series of matters which in general terms are called the sentinel cases. Some 1,000 people were robbed by somebody who had put together a tax promotion scheme which promised people deductions and then at a later point the ATO chose to deny the deductions and to seek large amounts of tax from these people. The promoters of that scheme, two of them have been gaoled for five years or more and a number of the people involved are still involved in litigation with the ATO. There is at least one matter, a particular airline captain, where the ATO was currently seizing 86 per cent of his income by way of section 218. He has not yet been able to get his matter in front of a court to be dealt with and as a result he is getting out of his – he has a very substantial normal salary, about $11,900 a month, but he is getting something like $1,700-odd out of his substantial salary to support himself, his wife, his family and all his obligations. The number of those matters that exist out in the community are quite immense. There is probably 100,000.
I do not want to interrupt you but you are really not answering my question which is: why is it then that these people actively promote people to act as your agents to find more customers for you?---This is what I was getting to, your Honour. The issue in relation to this is that most of these people found themselves absolutely alone without assistance. They were either being asked for very large fees for assistance directly by counsel, most of whom could offer them nothing, and they were - if you like, we were the last resort. Now, quite often these people do not have a widespread knowledge, they don’t have a widespread linkage and, in fact, this agency issue that you’re talking about, in fact, has spread. The fact that going before the court against the ATO, which most people are informed is an absolute futile legal procedure, many of these people feel they’ve got no choice but to either go bankrupt or do something of that nature rather than try to defend themselves. Now, to a great degree, we are the place of last resort, if you like. Now, we may not be a very successful resort. I accept your Honour’s comments about that. But the fact of it is, that for these people, they literally have nowhere else to turn. There isn’t another avenue available to them.
Some people might suggest that perhaps they ought to pay their income tax?---Well, your Honour, in this particular case, there have been a number of these matters in which the bills presented to these people – who are PAYE taxpayers, incidentally – have been in the order of $700,000 and $750,000, $780,000. So, the potential for somebody in that kind of situation as a PAYE taxpayer to pay that amount of money is just beyond their commercial capacity, it just does not exist. So simply paying the tax and dealing with it is not even an option for most of them because of the way in which the things have – I mean, there is a view and it is being pursued elsewhere that the ATO in pursuing a number of these people is, in fact, breaching provisions of the Crimes Act by compounding the results of the felony in which these people have been robbed in the first place. So, there are a considerable number of people who have quite legitimate problems, but where - their source of support to sustain them while they are doing that is virtually non-existent. Now, we may not be the most successful people in the world in doing it, but we are amongst the few who are prepared to stand up and confront even something like today whilst we are doing it.
Do you have any questions arising out of what I just asked, Mr Slattery?
MR SLATTERY: Yes.
Mr Henke, the tax debt of Arundel was $8,000?---Yes.
How much did Arundel pay in legal fees and fees to the ITR in respect of their tax debt?---I would have to think probably $10,000, maybe $12,000 all up. I don’t have a total figure, I can only glean it from the various accounts that we got, but whatever the results were between Mr Brown and Mr Brooke I’m not privy to. I don’t know how they divided what they got.
The tax in respect of the 1997 year for Arundel was paid on 17 December 1999?---Well, if that’s the settlement date that we are talking about in relation to the matter, yes.
Thank you. No further questions.
HIS HONOUR: Did you have anything arising out of that, Mr Morris.
MR MORRIS: No thank you, your Honour.
HIS HONOUR: All right, thank you. May Mr Henke be excused?
MR SLATTERY: Mr Henke may be excused, your Honour.
HIS HONOUR: Is there no documents or anything that he ‑ ‑ ‑
MR SLATTERY: There are only two documents which I have not yet seen which Mr Henke brought, and the extra documents Mr Henke brought along. We have not seen yet the Brooke account with the letter of 30 May 2000.
HIS HONOUR: They are the two additional ones he brought this morning, are they?
MR SLATTERY: There are the two additional this morning which I have not yet seen, your Honour. There is also - you might not remember, I was referring to a letter from Brooke of 30 May 2000 ‑ ‑ ‑
HIS HONOUR: I am getting my associate to give you the two documents you have not so far seen.
MR SLATTERY: Thank you.
HIS HONOUR: Take your time, Mr Slattery. I just want to make sure that everything is covered before we let Mr Henke go, that is all.
MR SLATTERY: Yes, I have no further use for those, thank you, your Honour. They can be returned to Mr Henke.
HIS HONOUR: All right. The documents you brought this morning are being returned to you, Mr Henke. May I excuse Mr Henke now?
MR SLATTERY: There is only one other matter, your Honour, which was the document 44 in exhibit AI, which was the attachment to the letter of 30 May 2000, which was the fee account rendered by Brooke to ITR for work done to date in respect of the High Court matter. That is a document which properly should have been brought forward in answer to the subpoena.
HIS HONOUR: If it is still there. Do you mind if I ask Mr Henke?
Have you got document 44?---I have had a look through this file, sir. I haven’t been able to find the particular documents Mr Slattery is looking for.
You have had a search in your file?‑‑‑Yes, I have searched in the file I brought with me. The only suggestion I might make is that it was Mr Brooke’s habit from time to time to give us accounts which related to more than one matter.
So it could be on another file?‑‑‑Yes, sir, it could be on another file and, you know, it is not easy to search those other files to see, in fact, if it is on one of those other files.
Yes, right. Well, I do not know if there is anything we can do about it, Mr Slattery.
MR SLATTERY: Your Honour, I think it should be produced. It was clearly attached to this letter.
HIS HONOUR: Yes, and you are right, of course. It should be produced, but sometimes documents do get lost or cannot be found. What do you want me to do about it? I mean, I am not prepared to say on the whole that Mr Henke has not so far made some kind of a genuine search and a genuine effort to comply with the subpoena. It seems to me he clearly has done that. If you want to, and I suppose the alternative is to allow him to go back to Melbourne and conduct another search and bring him back here which might prove to be futile.
MR SLATTERY: No. I wonder whether this could be, perhaps, addressed between solicitors because I think it is important that – that that account is the final instalment from Brooke in relation to his involvement in the matter and I think it is important to see that document. At least an attempt should be made. If it cannot be found – but it appears to have been stapled to this document at the time of the filing.
HIS HONOUR: I do not think Mr Henke disputes that. He just says that it might have got on to a different file. That is all.
MR SLATTERY: Yes.
HIS HONOUR: How many files have you got, Mr Henke?‑‑‑About a thousand, sir, but there could be ‑ ‑ ‑
How many would have been current?‑‑‑I think there’s probably only three or four which were contemporaneous with this.
Well, there you are?‑‑‑So it is ‑ I am perfectly happy to try and find it. I mean, there’s nothing – there’s nothing in it that I would have any problem being before the Court.
You cannot remember the contents of it, of course?‑‑‑No, sir, no idea.
MR MORRIS: Might I suggest the compromise of Mr Henke being excused on his personal undertaking to the Court to diligently search for the document and to report back through – probably most conveniently through my learned junior and she can liaise with the other side as to the results of his search.
HIS HONOUR: What do you say, Mr Slattery?
MR SLATTERY: Yes, I would not want to bring Mr Henke back or have another appearance before your Honour. I do not think that is necessary. I think if it could be done between ‑ ‑ ‑
HIS HONOUR: Well, Mr Morris is really taking it a bit further than that. He says that he is prepared to recommend to Mr Henke that he give an undertaking to make a diligent search.
Are you prepared to give that undertaking?‑‑‑Of course, your Honour, and there is nothing in it that can’t be seen.
Well, Mr Slattery, that certainly meets your requirement and probably goes a bit beyond it, I think.
MR SLATTERY: Thank you.
HIS HONOUR: Well, subject to your undertaking, Mr Henke, which, as I understand it, is that you will make a diligent search for this document, a diligent and immediate search for this document, and will provide it to your solicitors, you are excused?‑‑‑Thank you, your Honour.
You give that undertaking?‑‑‑Thank you, your Honour.
THE WITNESS WITHDREW
HIS HONOUR: Now, Mr Slattery, have you any further evidence?
MR SLATTERY: I will just check with my learned junior, your Honour. Your Honour, thank you, no. That is the case for me.
HIS HONOUR: What about you, Mr Morris?
MR MORRIS: Your Honour, we elect to call no evidence so that, I think, is the end of the evidence.
HIS HONOUR: Yes. Well, let me tell you, you are both – you have made a big advance on your submissions, Mr Slattery, but I will have to be brought up to date. I should know this, but you probably know it better than I do at the moment. How long does it take for a transcript to become available?
MR SLATTERY: It has taken some time for some reason and I do not know why. We had some difficulty last time. It took about ten days, I think, for it to become available last time.
HIS HONOUR: It seems that the last time might have taken a bit longer than what is normally the case. Perhaps I should say this. Mr Morris has called no evidence. You did not put in any documents, Mr Morris, did you?
MR MORRIS: No, your Honour.
HIS HONOUR: I believe in the old‑fashioned idea. I know in some courts now they get applicants to address first and respondents to address second, no matter who has called evidence or not, but the last word probably does not count with the judge anyway.
MR MORRIS: It does not count to any great extent, although there is also a view in some places that Chamber applications are dealt with differently from trials. I suppose this is ‑ ‑ ‑
HIS HONOUR: Quite. Anyway there is no problem about this. I would give either of you any opportunity to reply to anything else. Well, perhaps I should suggest, Mr Slattery – it is better to have formal orders about this, I think. People tend to act on deadlines perhaps more than they might otherwise. By the way, I will try to expedite the transcript for you. I will get some inquiries made about that.
MR MORRIS: Thank you, your Honour.
HIS HONOUR: If you could provide your submission say by Friday week ‑ Monday week to give you a little more time.
MR SLATTERY: Yes, your Honour. Thank you.
HIS HONOUR: Mr Morris, how long do you want, bearing in mind you have a draft and you can see the direction in which Mr Slattery is heading?
MR MORRIS: Yes, exactly, your Honour. Within seven days after receiving our learned friend ‑ ‑ ‑
HIS HONOUR: All right.
MR MORRIS: The only possible problem being the transcript and its availability.
HIS HONOUR: Well, subject to that, but I think you will probably have less difficulty about that than Mr Slattery.
MR MORRIS: Obviously, yes.
HIS HONOUR: So I would order that Mr Slattery provide to the Court his written submission by Monday week.
MR MORRIS: Yes.
HIS HONOUR: And you by the following Monday.
MR MORRIS: Thank you, your Honour.
HIS HONOUR: Could I ask both of you to do this? Would you have regard in your submissions to two possible positions, one being that ITR or its controlling mind honestly believes that the Commissioner and the taxing apparatus in Australia are ineffective legally and then the other position that that is not believed to be true and this is an entrepreneurial activity, and perhaps you might have regard to some possibility in between.
MR MORRIS: Yes, I understand that.
HIS HONOUR: Chief Justice Doyle in the case – is it Moneytree or Moneypenny?
MR SLATTERY: Moneytree, your Honour.
HIS HONOUR: Moneytree ‑ pointed out that, in his opinion, it was not at all decisive that there was no financial interest in the outcome on the part of the non‑party there against whom the order was made. It does not mean that the converse is not true, that a financial interest might be, in a sense, inculpatory to it. There does not seem to be any doubt that the company here, that ITR, had a financial interest in the outcome even though it is contingent.
MR MORRIS: That seems to be.
HIS HONOUR: It seemed to be common ground, Mr Morris. What turns on that if, in addition to the financial interest, the company had a conscientious belief in the views that were being propounded ‑ ‑ ‑
MR MORRIS: There are certainly suggestions in some of the cases that the bona fides of the third party, of the non‑party, who is supporting the litigation, are not decisive but, again, they are negative suggestions a bit like not having a financial interest. It may well be arguable that an absence of bona fides is an inculpatory factor even though bona fides itself is not an exculpatory factor, if that makes sense.
HIS HONOUR: Yes. That is the sort of territory that I would be interested in your exploring. It is an enormous problem. I mean, the jurisdiction is obviously not punitive and it never should be punitive, but it is an enormous problem that views are being propounded which you, as counsel, would not and cannot support and it is an irresistible inference – indeed, I think, Mr Henke said that he has been advised, not only by you but also by others, that the views are not going to prevail.
MR MORRIS: Yes.
HIS HONOUR: So that is another factor which is obviously very important in your submissions.
MR MORRIS: Yes, although that is perhaps a subtly different question from the one of bona fides.
HIS HONOUR: Yes, it is. It is, but they are obviously the sorts of things that I am concerned about. It is quite a different case, it seems to me, from the Moneytree Case. Various different factors have to be considered. Do you follow what I am ‑ ‑ ‑
MR SLATTERY: No, your Honour. Your Honour did ask me earlier for the copy of the Moneytree decision in the Full Court.
HIS HONOUR: Yes, thank you, Mr Slattery. I will just have a quick look at that before you go. It is an extemporary decision. The appellant attempted to file a notice of discontinuance on the morning.
MR SLATTERY: Yes, your Honour.
HIS HONOUR: But there had been written argument submitted.
MR SLATTERY: They delivered the day before, your Honour, a 30‑page written argument, and I should say, your Honour, that the written argument raised entirely new matters outside the notice of appeal or the matter at first instance.
HIS HONOUR: It is hardly a Full Court authority on the point that Chief Justice Doyle dealt with. Really, it does not have anything to do with it.
MR SLATTERY: It does not add anything to the Chief Justice’s decision.
HIS HONOUR: It does not even really deal with it.
MR SLATTERY: No, no.
HIS HONOUR: All right. Well, there is nothing further today.
MR SLATTERY: Nothing further today, your Honour.
HIS HONOUR: I will adjourn the matter to a date to be fixed but upon the basis, as I understand it, that if either of you wants to make oral submissions you will let my associate know and I can reconvene, otherwise I will decide the matter on the basis of the written submissions.
MR MORRIS: I might say, your Honour, I saw it the other way round, that if your Honour thought it would be of assistance to have oral submissions.
HIS HONOUR: There is that as well, but if the parties want to be heard orally I am prepared to do it, but as I understand it, neither of you wants to. Is that right, Mr Slattery?
MR SLATTERY: Yes, thank you, your Honour.
MR MORRIS: My confidence in my powers of persuasion is not such as to think I could make any difference in your Honour’s view once your Honour has seen our written argument.
HIS HONOUR: Yes. It will only be if I need some assistance then in all probability. All right, thank you. The matter is adjourned.
AT 3.40 PM THE MATTER WAS ADJOURNED
Key Legal Topics
Areas of Law
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Tax Law
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Administrative Law
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Civil Procedure
Legal Concepts
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Appeal
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Judicial Review
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Procedural Fairness
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Standing
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Jurisdiction
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