CDirector of Public Prosecutions v Hart; Yak 3 Investments P/L as t/tee for Yak 3 Discretionary Trust v Commonwealth of Australia

[2013] QDC 60

DISTRICT COURT OF QUEENSLAND

CITATION:

CDPP v Hart & Ors; Yak 3 Investments P/L as t/tee for Yak 3 Discretionary Trust & Ors v Commonwealth of Australia [2013] QDC 60

FILE NO:

PARTIES:  

FILE NO:

PARTIES:

BD 1416 of 2003

COMMONWEALTH DIRECTOR OF PUBLIC PROSECUTIONS
Applicant
and
STEVEN IRVINE HART
First respondent
and
FLYING FIGHTERS PTY LTD as trustee for FLYING FIGHTERS DISCETIONARY TRUST
Second respondent
and
MERRELL ASSOCIATES LIMITED HK
Third respondent
and
NEMESIS AUSTRALIA PTY LTD
Fourth respondent
and
MERRELL ASSOCIATES (AUSTRALIA) PTY LTD
Fifth respondent
and
YAK 3 INVESTMENTS PTY LTD as trustee for YAK 3 DISCRETIONARY TRUST
Sixth respondent
and
BUBBLING SPRINGS OLIVE GROVE PTY LTD as trustee for BUBBLING SPRINGS DISCRETIONARY TRUST
Seventh respondent
BD 3068 of 2006

YAK 3 INVESTMENTS PTY LTD as trustee for YAK 3 DISCRETIONARY TRUST
First applicant
and
BUBBLING SPRINGS PTY LTD as trustee for BUBBLING SPRINGS DISCRETIONARY TRUST
Second applicant
and
NEMESIS AUSTRALIA PTY LTD
Third applicant
and
FLYING FIGHTERS PTY LTD as trustee for FLYING FIGHTERS DISCRETIONARY TRUST
Fourth applicant
and
ALFREDTON PTY LTD as trustee for NEMESIS GROUP SUPERANNUATION FUND
Fifth applicant
and
COMMONWEALTH OF AUSTRALIA
Respondent

DIVISION:

Civil Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

District Court, Brisbane

DELIVERED ON:

02/04/13           

DELIVERED AT:

Brisbane

HEARING DATE:

23, 24, 25, 26, 29, 30 November, 1 and 2 December 2010 and 8 and 9 March 2011, further written submissions to 21 March 2011

JUDGE:

Andrews SC DCJ

ORDER:

In BD 1416 of 2003 the application of the Commonwealth Director of Public Prosecutions is dismissed
In BD 3008 of 2006 The orders sought by the Applicant Companies are refused. The Applicant Companies have liberty within 7 Days to apply for orders in accordance with these Reasons at paragraphs [854]-[856]
Costs Reserved

CATCHWORDS:

CRIMINAL LAW – JURISDICTION, PRACTICE AND PROCEDURE – FORFEITURE – Interpretation of Proceeds of Crime Act s 102(3)(a) – where property forfeited to Commonwealth – where application under Proceeds of Crime Act 2002 (Cth) s 102(1)(c) by former owners for a declaration of their interests in the property and for transfer of the property to them – where applicants rely only on Proceeds of Crime Act s 102(3)(a) – where property when restrained was under effective control of a person later convicted of a serious offence – whether that effective control is decisive or relevant
CRIMINAL LAW – JURISDICTION, PRACTICE AND PROCEDURE – FORFEITURE – Onus of proof  –  Interpretation of Proceeds of Crime Act s 102(3)(a) – where property forfeited to Commonwealth – where application under Proceeds of Crime Act 2002 (Cth) s 102(1)(c) by former owners for a declaration of their interests in the property and for transfer of the property to them – where difficult for applicants to satisfy onus of proof of matters under s 102(3)(a) – whether evidential burden reduced – evidential burden of proof that property was not used in connection with unlawful activity – evidential burden of proof that property was not derived directly or indirectly from unlawful activity – evidential burden of disproof of fraud
CRIMINAL LAW – JURISDICTION, PRACTICE AND PROCEDURE – FORFEITURE – Interpretation of Proceeds of Crime Act s 102(3)(a) – whether it should be interpreted to mean “not substantially used…” and “not substantially derived or realised” – whether property is derived directly or indirectly from unlawful activity if unlawful activity was the source of funds used to pay rates, insurance, repairs or maintenance for property or interest on loans for purchase of  property
CRIMINAL LAW – JURISDICTION, PRACTICE AND PROCEDURE – FORFEITURE – whether property was not derived directly or indirectly from unlawful activity – whether property was not used in connection with unlawful activity – whether false representations to lender – whether fraud offence against Criminal Code (Qld) s 408C(1)(f) – where applicants failed to establish that loan not induced by fraud – whether property mortgaged to secure loan was thereby used directly or indirectly in connection with unlawful activity – whether mortgage of property not sufficient connection with unlawful activity – whether property derived from money lent pursuant to loan induced by fraud was derived from unlawful activity
CRIMINAL LAW – JURISDICTION, PRACTICE AND PROCEDURE – FORFEITURE – whether denial of natural justice for Commonwealth to plead events from 1993 to 1996 as possible offences against s 8N of the Taxation Administration Act 1953 (Cth) arising from tax minimisation schemes – whether offences committed against s 8N of the Taxation Administration Act 1953 (Cth) – where mental element of offence is recklessness but not dishonesty – whether dishonesty required for “unlawful activity” under Proceeds of Crime Act 2002 (Cth) – whether commission fees earned by tax minimisation scheme promoters were not derived from “unlawful activity” – whether rent earned from real property investment used in tax minimisation scheme was indirectly derived from unlawful activity – whether a subsequent tax minimisation scheme involved recklessness or only lack of reasonable care – where established that no recklessness – whether commission fees earned by subsequent tax minimisation scheme promoters were not derived from unlawful activity
CRIMINAL LAW – JURISDICTION, PRACTICE AND PROCEDURE – FORFEITURE – whether money laundering offences committed – whether property derived from money laundering  – whether property used in connection with money laundering
CRIMINAL LAW – JURISDICTION, PRACTICE AND PROCEDURE – FORFEITURE – Interpretation of Proceeds of Crime Act 2002 (Cth) s 102(1)(c) and (d) – where applicant’s property forfeited to Commonwealth – where charges over applicant’s property at forfeiture – whether value of applicant’s interest in property at forfeiture reduced by amount of debt secured by charges over the property – where applicant’s creditor’s charges over applicant’s property were also forfeited to the Commonwealth – whether the Commonwealth became a chargee – whether court may order transfer of property to applicant subject to a charge to the Commonwealth – whether the applicants proved the value of the creditor’s charges – whether the applicants proved the value of their interests in the forfeited property
CRIMINAL LAW – JURISDICTION, PRACTICE AND PROCEDURE – FORFEITURE – where application under Proceeds of Crime Act 2002 (Cth) s 141 – where property in effective control of accountant subject to pecuniary penalty order – where property was owned by others – where owners received some funds derived from unlawful activity – where owners’ receipt of some funds from unlawful activity was the basis for the Commonwealth’s successfully resisting application under Proceeds of Crime Act 2002 (Cth) s102(1)(c) by owners for a transfer of property to them– whether the accountant effectively controls the owners – where the Commonwealth agreed with the accountant to reduce its claim for a pecuniary penalty order by the property’s value – where the owners not party to the agreement – whether unjust to order property recovered by its owners from forfeiture to the Commonwealth to be available to satisfy a pecuniary penalty order against the accountant in favour of the Commonwealth Director of Public Prosecutions

Acts Interpretation Act 1901 (Cth) s 33 (2A)
Proceeds of Crime Act 1987 (Cth) (repealed) s 82,
Proceeds of Crime Act 2002 (Cth) s 102(1)(c), s 102(3)(a), s 141
Criminal CodeAct 1995 (Cth) Section 400.9
Briginshaw v Briginshaw[1938] HCA 34; (1938) 60 CLR 336
Capershaw and Federal Commissioner of Taxation(2004) 57 ATR 1263; [2004] AATA 1179; BC200410773
Cth DPP v Hart & Ors [2004] QDC 121
Commonwealth Director of Public Prosecutions v Hart [2010] QDC 457
Director of Public Prosecutions v Diez [2003] NSWSC 238
Director of Public Prosecutions v Brauer [1991] 2 Qd R 261
Director of Public Prosecutions v Ferguson [2006] VSC 484
Director of Public Prosecutions (DPP) v George(2008) 251 ALR 658
Director of Public Prosecutions v Jeffrey(1992) 58 A Crim R 310, BC9202106
Hart v Commissioner of Taxation [2003] FCAFC 105
Jeffrey v Director of Public Prosecutions (1995) 121 FLR 16; (1995) 79 A Crim R 514; BC 9505150
Maurice Hannan Nominees Pty Ltd as Trustee for Maurice Hannan Family Trust and Ors and Commissioner of Taxation [2004] AATA 1180
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24, distinguished
Murdoch v Simmonds [1971] VR 887
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 cited
R v Hadad (1989) 16 NSWLR 476
R v Ward, Marles and Graham (1987) 33 A Crim R 60
Re Drugs Misuse Act 1986 [1988] 2 Qd R 506
Re George [1992] 2 Qd R 351; (1991) 57 A Crim R 356; BC9102462
State of Queensland v Brooks [2005] QSC 390

COUNSEL:

Flanagan SC with del Villar for the Commonwealth and the Commonwealth Director of Public Prosecutions

The companies Yak 3 Investments Pty Ltd as trustee for Yak 3 Discretionary Trust, Nemesis Australia Pty Ltd, Bubbling Springs Pty Ltd as trustee for Bubbling Springs Discretionary Trust, Flying Fighters as trustee for the Flying Fighters Discretionary Trust and Alfredton as trustee for Nemesis Group Superannuation Fund appeared by their directors Ms S Petersen and Ms L Hart in both proceedings

Mr SI Hart appeared for himself in BD 1416 of 2003 and as spokesperson for the directors of the companies appearing in both proceedings

SOLICITORS:

Commonwealth Director of Public Prosecutions for the Applicant/Respondent

IndexPage number  

Introduction
An overview of the issues
Appearances for the Companies
Section 102 (1) (c) application
Onus and standard of proof of matters in s 102(3)
The statutory context for a POCA s 102(3) application
Is the Companies’ evidential burden reduced in the circumstances of this case?
Were funds from UOCL lawfully derived?
Were funds from Merrell lawfully derived?
Is an asset derived or realised by payments for rates, insurance, repairs, maintenance or interest on loans borrowed for their purchase?
Should POCA s 102(3)(a) be interpreted to mean “not substantially used…” and “not substantially derived or realised…”?
Is there an estoppel against the Commonwealth for the s 102(3) application
Was Mr Hart’s Effective Control on 8 May 2003 relevant and decisive for POCA s 102(3)?
Credit of Mrs Hart
Credit of Mrs Petersen
Jones v Dunkel inferences
The Alleged Unlawful Conduct
UOCL offences
The Perpetual Offences
Money Laundering Offences
Offences against the Taxation Administration Act
The Hendon Arrangement
The Northbourne Arrangement
Reliability of the Commonwealth’s Chronology
Limitations on relief under POCA s102 (1)
88 Brandon Road
3 Woff Street
Finance Facilities and the role of Nemesis
Consequences of Charges granted to Merrell and forfeited to the Commonwealth
North American T-28 VH-SHT
de Havilland Tiger Moth
50 VH-YAX, Yak 3 Fighter, American Champion Decathlon

Sources of income of the companies

North American T-6

Sea Fury VH-SHF

Yak 50 VH-YAY

Aerovod L-39C

Akrotech CAP 232

North American Trojan T-28 VH-AVC

Hangar 101

Hangar 607

Hangar 400
6 Merriwa Street, Sunnybank Hills
27 Samara Street, Sunnybank

Doonan’s Road, Grandchester
1983 Mercedes Benz 380SL

Conclusions on the companies’ application
S 141 Application

Annexure 1

Annexure 2

Introduction

[1]      An accountant, Steven Irvine Hart (“Mr Hart”), promoted tax minimisation schemes for many years. His schemes became popular, saving taxpayers large amounts of tax. Mr Hart used various companies over the years to operate the schemes. Taxpayers paid fees to some of those companies to participate. In 2003, the Commonwealth Director of Public Prosecutions (“CDPP”), suspecting Mr Hart of crimes in the way he operated some schemes, obtained orders restraining numerous assets controlled by Mr Hart. On 8 May and 19 December 2003 the CDPP obtained restraining orders. Mr Hart was later convicted of criminal offences relating to some schemes. In 2006, eighteen of the restrained assets: aeroplanes, aeroplane hangar leases, land and a car were forfeited to the Commonwealth by operation of Proceeds of Crime Act 2002 (Cth) (“POCA”) s 92.

[2]      Five companies had collectively paid about $5.5M between 1991 and 2003 to buy, maintain or improve the eighteen assets. The assets were not owned by Mr Hart. Each of the five companies claims to have been the owner, at the time of forfeiture, of one or more assets. Each of the five companies applies to get its asset or assets back, or their value.

[3]      This dispute involves an originating application[1] by the five companies (“the Companies”) pursuant to POCA s102(1)(c) to transfer to them their interests in the property or the value of their interests.[2] The Companies can enliven the court’s discretion (to order the property to be restored to them or to order that the Commonwealth pay them the value of their interests) by proving[3] that the property was not used in connection with unlawful activity and was not derived from the proceeds of unlawful activity. The Commonwealth opposes that originating application.

[1]Filed 17 October 2006 in BD3068/06

[2]The terms of orders sought are set out at [5] herein

[3]Among other things set out in POCA s102(3)

[4]      In the event that the Companies successfully enliven the court’s discretion to restore property to them or the value of their interest, and satisfy the court that the Companies have established a right to their remedy, the dispute continues into a second phase. If the court determines that any of the property should be recovered by the Companies, the CDPP claims,[4]pursuant to POCA s141, that the property be made available to satisfy a pecuniary penalty order made in its favour against Mr Hart, because Mr Hart was in effective control of the property when it was restrained.

[4]BD 1416 of 2003

[5]      By a pecuniary penalty order, Mr Hart was ordered to pay to the CDPP $14,757,287.35.[5] Mr Hart’s appeals against the order were exhausted in June 2012, unsuccessfully.

[5]Commonwealth Director of Public Prosecutions v Hart [2010] QDC 457

[6]      The seven respondents to the CDPP’s POCA s141 application include three of the five companies. Yak 3 Investments Pty Ltd (“Yak”) as trustee for Yak 3 Discretionary Trust and Nemesis Australia Pty Ltd (“Nemesis”) are two. The seventh respondent to the CDPP’s application, Bubbling Springs Olive Grove Pty Ltd as trustee for Bubbling Springs Discretionary Trust is one and the same as the second applicant among the Companies, Bubbling Springs Pty Ltd as trustee for Bubbling Springs Discretionary Trust (“Bubbling”). Its name was shortened on 23 July 2003.

[7]      The contested orders which the Companies seek[6] against the Commonwealth are:-

[6]By originating application filed 17 October 2006 in BD3068/06

(1)Pursuant to s 102 (1)(c) of the Proceeds of Crime Act 2002, an order declaring the nature, extent and value of the applicants’ interest in the property described in the affidavit of Laura Elizabeth Hart sworn 17 October 2006.

(2)Further to (1), either:

(a)An order directing the Commonwealth to transfer the applicants’ interests in the property described in the affidavit of Laura Elizabeth Hart sworn 17 October 2006 to the applicants; or

(b)An order declaring that there is payable by the Commonwealth to the applicants an amount equal to the value declared pursuant to paragraph (1) hereof.

[8] There is, theoretically, no need to consider the application by the CDPP for a declaration under POCA s 141 unless the Companies succeed in their originating application pursuant to POCA s 102(1)(c). The CDPP requests that I determine it anyway.

An overview of the issues

[9]      An overview of the issues in the two proceedings must simplify them and arguably past the point of inaccuracy. Essentially, assets ostensibly owned by the Companies were seized by the Commonwealth, forfeited to the Commonwealth and are liable to remain forfeited to the Commonwealth. For the Companies to recover them or the value of their interest in them, the Companies must win their application and then resist the CDPP’s application.

[10]      The Companies’ application requires the Companies to firstly prove that the numerous assets seized were the property of any one of the Companies. There is an issue about whether some of the aeroplanes were owned by a third party, Merrell Associates Limited (“Merrell”). I found against the Companies in respect of several assets.  

[11]      For most of the assets, the second issue is whether the Companies can prove that the asset was not derived from unlawful activity: essentially whether the money that was used in the 1980s, 1990s, or 2000s to pay for it or to pay the interest on a loan used to buy it, or to repay the loan which had originally been used to buy it, or to pay the rates, insurance, maintenance, repair, transport or storage costs of the asset, or to repay a loan secured by a mortgage over the asset was money unconnected with unlawful activity – so that the asset was not derived or realised directly or indirectly from unlawful activity.

[12]      The Commonwealth raised the question of the lawfulness of certain activities over the years. The first issue in relation to the activities is whether the Companies can establish that the activities were not unlawful. Some of the suspect activity has been found to be unlawful in two earlier civil proceedings.[7] Some other activity identified by the Commonwealth has not been the subject of any finding about lawfulness and no person has been convicted in respect of it.

[7]Maurice Hannan Nominees Pty Ltd as Trustee for Maurice Hannan Family Trust and Ors and Commissioner of Taxation [2004] AATA 1180; Commonwealth Director of Public Prosecutions v Hart [2010] QDC 457

[13] Two activities in the 1990s, the “Hendon arrangement” and the “Northbourne arrangement”, were alleged to involve recklessly causing statements to be made to a taxation officer that were false or misleading in a material particular contrary to s 8N of the Taxation Administration Act. A third activity, “the Perpetual offence”, was alleged to involve fraud in about December 2001. I have found, for reasons which follow, that the Companies have failed to satisfy me that there was no unlawful activity involved with the “Hendon arrangement” and the “Perpetual offence” but that I am satisfied there was no unlawful activity involved in the “Northbourne arrangement”.

[14]      The “Hendon arrangement” was a scheme promoted by advisers to taxpayers for its potential for investment and income tax minimisation. Part of the investment scheme involved a scheme trustee as lessor letting commercial real estate for rental returns. It was an issue whether the rent was derived from unlawful activity. I found against the Companies on this issue. 

[15]      For each activity whose lawfulness is suspect, there is an issue as to the amount of money that was derived from it, and whether the Companies could prove that an asset was not derived directly or indirectly from money derived from the unlawful activity.

[16]      The Companies raise an issue of law that they are denied natural justice by the Commonwealth’s conduct in raising such old episodes and putting the Companies to proof that there was no unlawful activity, when the delay in raising an issue about the episodes makes more difficult the rebuttal of unlawful activity. I have found against the Companies that they are not denied natural justice. Reasons follow.

[17] The degree of connection required between an unlawful activity and the use of an asset is in issue as a matter of law and requires a finding about the interpretation of POCA. I have found against the Commonwealth by finding that a substantial connection is required between an unlawful activity and the use of an asset.

[18]      Among the assets in contention is land. For some land there is an issue about whether there was a fraud (the alleged Perpetual offence) and whether the land was used in connection with it: it involves considering whether the Companies can prove there was no fraudulent misrepresentation made to induce a loan by Perpetual Nominees Limited (“Perpetual”) and, if the Companies cannot prove there was no fraud, whether the land mortgaged to Perpetual as security for the loan was used in connection with the fraud. The degree of connection between the fraud and the use of the land, as a matter of fact, is also in issue. For reasons which follow I found that the Companies have failed to satisfy me that there was no unlawful activity involved with the alleged Perpetual offence but that I am satisfied the land mortgaged to Perpetual as security for repayment of the loan induced by the alleged fraud was not substantially used in connection with the alleged fraud.

[19] The degree of connection required between unlawful activity and an asset allegedly derived from the activity is in issue as a matter of law and requires a finding about the interpretation of POCA. I have found against the Commonwealth’s submitted interpretation by finding that a substantial connection is required.

[20]      The Companies argue that money used to pay interest, rates, insurance, transport, repairs and maintenance should be ignored because the assets are not derived or realised by those payments. I found against the Companies.

[21]      As the Companies have many practical obstacles to proof of the source of monies up to twenty years before trial and where there is a reasonable explanation for the Companies’ inability to find evidence, for instance because records are lost, the Companies argue that the court should be lenient about finding whether the standard of proof was reached. I found that the standard of proof remains proof on the balance of probabilities.

[22]      Where any one of the Companies has used money from two particular companies based in Hong Kong[8] there is an issue as to how much of the money was derived by the two companies from unlawful activity. I found that the Companies failed to establish that any of the two companies’ funds were not derived or realised, directly or indirectly from unlawful activity. The next three related issues are whether Mr Hart knew that the moneys paid by those two Hong Kong based companies to or for the Companies were proceeds of unlawful activity, whether Mr Hart was in effective control of the Companies when the Companies received or transferred the money and whether the Companies themselves committed money laundering offences when receiving or transferring such money. It is thus an issue whether Mr Hart was in effective control of the Companies at all material times from 1997 to April 2003. I found against the Companies on these issues for reasons that follow.

[8]United Overseas Credit Limited and Merrell Associates Limited

[23]      If the Companies can prove that any asset was owned by one of the Companies, that it was not used in connection with unlawful activity, that it was not derived directly or indirectly from unlawful activity, there is an issue about whether the companies can prove the value of the relevant company’s interest in the asset. The issue was complicated because that value is arguably diminished by the value of charges over the assets to secure payment by the Companies of amounts due to Merrell. The quantum of the amounts secured against the assets is in issue with the Commonwealth arguing that the Companies cannot prove how much was charged against the assets. I found against the Commonwealth by finding the value of the debt secured by charges to be $1.6M. There remains an issue as to whether the Companies can prove the value of the former owner’s interest in a charged asset where there is no evidence of the value of any individual asset.  I found against the Companies on this issue. Reasons follow.

[24] The charges which were granted over the assets to secure payment to Merrell have been forfeited to the Commonwealth. The Companies argue that the Commonwealth became a chargee when the charges were forfeited to the Commonwealth. I found against the Companies by finding that the Commonwealth is not a chargee. The Companies argued that an asset that was charged with payment of an obligation by the Companies can be ordered to be returned to the Companies with an order that the Commonwealth be at liberty to enforce its chargee’s rights against the Companies. That raises an interpretation issue as to whether POCA permits it. I found against the Companies.

[25]      Ultimately, for each asset it becomes necessary to consider what money was used over the fourteen years or so that the assets were collectively acquired, to buy the asset, or maintain it, or pay off the loan which was used to buy it or to pay off a later loan secured by a mortgage over the asset and then to consider whether that money was not derived directly or indirectly from unlawful activity. For each asset those issues are relevant to the factual issue of whether the asset was derived from unlawful activity.

[26]      For several assets there was an issue whether an asset, not derived from unlawful activity, was used in connection with unlawful activity. I found against the Commonwealth where this issue arose.

[27] The Commonwealth argued as a matter of statutory interpretation, the significance of Mr Hart’s effective control of the assets when the assets were made the subject of restraining orders. Because Mr Hart was convicted of serious offences, the Commonwealth submits his effective control of assets in 2003 is relevant to and decisive on the issue of whether a court may grant the companies relief where the Companies raise the grounds under POCA s 102(3). The Commonwealth submits relief cannot be granted even though effective control is not expressly set out in POCA s 102(3) as a relevant matter. I found against the Commonwealth on this issue.

[28] If an asset is liable to be ordered to be returned to a relevant company, the Companies have a further obstacle which is the cross application of the CDPP. If a forfeited asset was lawfully acquired by a company, not used in unlawful activity, not realised or derived from unlawful activity and the company has a prima facie argument for it to be transferred to the company, the CDPP claims pursuant to POCA s 141 that the asset should be available to satisfy the $14,757,287.35 pecuniary penalty order against Mr Hart unless there would be injustice caused to the relevant respondents and if there would be injustice that the court would exempt some or all of the assets from satisfying that order, depending on the circumstances. On the hypothesis that an asset is liable to be ordered to be returned, I found against the CDPP.

Appearances for the Companies

[29]      The Companies were not legally represented in these two proceedings. In theory, they appeared by their directors, Ms S Petersen and Mrs L Hart. However, the directors used as their spokesperson in court, Mr Hart who acted as a McKenzie friend. It was Mr Hart who, for the directors, made oral submissions, examined and cross-examined witnesses, made and responded to objections to evidence.  Mr Hart as a respondent to the application of the CDPP appeared for himself and acted as McKenzie friend for the other six respondents. Mr Hart has no legal qualification. 

Section 102 (1) (c) application

[30] At material times POCA s 102 provided: (emphasis added)

102Court may make orders relating to transfer of forfeited property etc.

(1)If property is forfeited to the Commonwealth under section 92, the court that made the restraining order referred to in paragraph 92(1) (b) may, if:

(a)a person who claims an interest in the property applies under section 104 for an order under this section; and

(b)the court is satisfied that the grounds set out in subsection (2) or (3) exist;

make an order:

(c)declaring the nature, extent and value of the applicant’s interest in the property; and

(d)either:

(i)if the interest is still vested in the Commonwealth—directing the Commonwealth to transfer the interest to the applicant; or

(ii)declaring that there is payable by the Commonwealth to the applicant an amount equal to the value declared under paragraph (c).

(2)An order under this section may be made if:

(a)the applicant was not, in any way, involved in the commission of the offence to which the forfeiture relates; and

(b)the applicant’s interest in the property is not subject to the effective control of the person whose conviction caused the forfeiture; and

(c)the applicant’s interest in the property is not proceeds of the offence or an instrument of the offence.

(3)An order under this section may also be made if:

(a)the property was not used in, or in connection with, any unlawful activity and was not derived or realised, directly or indirectly, by any person from any unlawful activity; and

(b)the applicant acquired the property lawfully; and

(c)the applicant is not the person convicted of the offence to which the forfeiture relates.

Onus and standard of proof of matters in s 102(3)

[31] POCA s 102 provides two alternative bases which allow for a court to make an order under s 102. The Companies rely on only the alternative in s 102 (3). The Companies bear the onus of proving the matters necessary to establish the basis for making an order under POCA s 102.[9] Thus the Companies bear the onus of proving the matters in s102 (3).

[9]POCA s 317 (1)

[32] An order under POCA s 102(1) cannot be made unless the court is satisfied of four matters found in POCA s102(3), namely that:

(a)        that the property was not “used in” any unlawful activity;

(b)        that the property was not used “in connection with” any unlawful activity;

(c)        that the property was not “derived, directly or indirectly”, by any person from any unlawful activity; and

(d)        that the property was not “realised, directly or indirectly”, by any person from any unlawful activity.

[33]      The burden of proof is deceptively simple. Any question of fact to be decided on this application is to be decided on the balance of probabilities.[10]

[10]POCA s 317 (2)

The statutory context for a POCA s 102(3) application

[34] I bear in mind the context in which POCA s 102(3) operates. If there are reasonable grounds to suspect that property owned by A is under the effective control of H and H has committed a serious offence within six years before, the court must order that the property must not be disposed of or otherwise dealt with.[11] If H is convicted of a serious offence, the property which is the subject of the restraining order is forfeited to the Commonwealth unless A proves the four matters found in POCA s 102(3).[12]  But, if A proves those four matters then on an application by the CDPP[13] if the court is satisfied that A’s property was subject to H’s effective control at the date of the restraining order, the court may declare the whole or part of A’s property available to satisfy the pecuniary penalty order made against H. 

[11]POCA s 18

[12]POCA s 92

[13]Under POCA s 141

[35] Two notable features of that context are that in POCA:

·     no section expressly provides that the court may take account hardship or unfairness to a person whose property is liable to be forfeited;

·     an owner’s liability to forfeiture of property may arise from allowing property to be under the effective control of a person who has committed a serious offence within six years before.

Is the Companies’ evidential burden reduced in the circumstances of this case?

[36]      The Companies submit, in effect, that their evidential burden is reduced as:

·     the Commonwealth is in a better position to know and prove the essential facts relating to the sources of income that the Companies received over the past 25 years. For the reasons which follow I reject this submission.

·     the Commonwealth is better placed to trace the ultimate sources of funds used to acquire, directly or indirectly, any of their assets. For the reasons which follow I reject this submission.

·     because of those features, the amount and quality of evidence required from the Companies to discharge their burden of proof should be lessened so that slender evidence will suffice. For the reasons which follow, I do not make general findings about how much evidence is required as suspicions move further from remote possibilities and closer to probabilities.

[37]      The first two components of that submission are matters of fact. To establish those facts, the Companies rely on some particular matters. The Companies submit, in effect, that I should find the following facts:

(a)        The Australian Taxation Office (“ATO”) initially conducted an audit on the third applicant, Nemesis Australia Pty Ltd (“Nemesis”) for the period 1981 to 1987.  For this proposition they refer to Hart v Commissioner of Taxation [2003] FCAFC 105. My reading of that case reveals that the ATO in late 1987 or early 1988 conducted an audit in respect of the affairs of Nemesis for the period from 1981 to 1987.[14]I accept this proposition of fact.

[14]Par [9]

(b)        The ATO conducted further audits from 1990 to 2001 perusing and copying all financial records of each of the applicants, Harts Consulting P/L (“Consulting”) and all companies in the Harts Australasia Limited (“HAL”) Group (“HAL group”) including Bomilsco Pty Ltd (“Bomilsco”) and investigated financial transactions undertaken by them during that period.  Evidence shows that on 3 April 1997 the ATO requested Mr Hart to provide copious documents for the period 1990 to 3 April 1997. Those documents were copies of annual reports, a full set of group accounts, including reconciliations, general ledger, trial balance and general journals in respect of each member of the HAL Group and each of the five applicants. Additionally, Consulting has been subject to yearly audits by the ATO from about 1986 to 2001.[15] I find it is likely that the ATO received significant quantities of documents as a result. I find it is likely that the ATO asked Mr Hart and the companies associated with him for copies of contracts for the purchase and sale of properties.[16] It is likely that the ATO received many documents as a result.

[15]Affidavit L Hart Q00064341, par 2(d)(i)

[16]T8-5, L19

(c)        In or around September 1996 the ATO and the Australian Federal Police (“AFP”) executed search warrants on the premises of the five applicants, the companies in the Harts Group of Companies, the residential premises of Mr and Mrs Hart and the residential premises of Ms Peterson.  I find financial records including banking records, contracts and correspondence for the period 1990 to 1996 were seized.

(d)        In about February 2001 the AFP and officers of the Australian Securities and Investment Commission (“ASIC”) executed search warrants on the Companies, companies in the Harts Group and other companies and trusts in the family group seizing records from office premises and the residential address of Mr and Mrs Hart.  I so find.  The records included banking records, contracts and correspondence for the period 2000 to 2001.

(e)        On 9 May 2003 the AFP took financial records including banking records, contracts and correspondence for the period 1997 to 2003 from the various work premises of the Companies and other companies in the family group. I so find.

(f)        The CDPP examined persons pursuant to the Proceeds of Crime Act 2002 including Ms Peterson, Mrs Hart, and Mr Arnot. The CDPP also examined Mr James Sutherland who at some material time owned the issued capital of United Overseas Credit Limited (“UOCL”) and at some material time was intimately involved with the operation of Merrell Associates Limited (“Merrell”). I so find.

(g)        The AFP assisted in the execution of search warrants which led to obtaining over 100,000 documents from UOCL, Merrell, European Grand Assurance Ltd (“EGA”), the banks of UOCL, Merrell and EGA, the auditors of UOCL and Merrell and a trustee in New Zealand. I so find.

(h)        The AFP issued production notices to every bank with which the applicants had financial arrangements. I so find.

(i)         The Commonwealth appointed a forensic accountant, Mr Vincent and offered to assist him to find and access such records as he required including but not limited to the records of the applicants, UOCL, Merrell, Consulting and all companies in the HAL group.  Mr Vincent was at liberty to request the AFP to obtain documents. I so find.

(j)         Because of the execution of search warrants many records were removed from the control of the applicants.  Aside from that, the passage of time from 1983, means that many records are no longer in the custody, possession or control of the applicants according to their submission.  I accept that this would be so. 

[38]      The Companies submit that the Commonwealth was in a strong position through their expert witness, the forensic accountant Mr Vincent, the officers of the AFP, the ATO and ASIC to enable a full tracing of the ultimate source of income for each applicant company that was used directly or indirectly to acquire any asset, to pay costs associated with an asset, to pay interest on funds borrowed to acquire an asset, or to repay funds borrowed to acquire an asset.  It is the case that the Commonwealth had records seized from relevant entities by the AFP, the ATO or by ASIC. I make no finding about whether the Commonwealth had sufficient records to “enable a full tracing”. The Commonwealth engaged a forensic accountant, Mr Vincent in 2006. One of his tasks was to “Where possible, by reference to the affidavit of Laura Hart and Lisa Bundesen and the additional records supplied, identify the source of funds used to purchase the assets, repay the loans, meet interest repayments and other costs associated with borrowings and to release securities.”

[39] While I accept that the Commonwealth had power to search for documents not in its possession and the opportunity to search through documents in its possession, I make no finding about whether the Commonwealth could have achieved “a full tracing of the ultimate source of income for each applicant to see whether it was used directly or indirectly to purchase or acquire any asset”. Its forensic accountant did not try to do a full tracing of the ultimate source of funds. I bear in mind that the Commonwealth does not bear an onus of disproof under POCA s 102(3). I accept the opinion of the Commonwealth’s forensic accountant that the operations that Mr Hart conducted through the Hart group and the Companies together with the assistance of UOCL and Merrell were interwoven in such a way as to make it extremely difficult to follow thoroughly even the simplest of transactions.[17] I am not persuaded that the Commonwealth is in a better position to know and prove the essential facts relating to the sources of income that the Companies received over the past 25 years.

[17]Report Mr Vincent21/10/10 Q00064393 at 2.1

[40] There are no relevant decisions on the evidential burden upon a party seeking to establish the basis in POCA s 102(3). There are decisions considering s 48(4)(e) of the Proceeds of Crime Act 1987 (Cth) (repealed) (“POCA 1987 (repealed)”). The wording of that repealed clause is very similar to the wording of POCA s 102(3).

[41] POCA 1987 (repealed) s 48(4) provided:

(4) Where:

(a) a person (in this subsection called the ‘defendant’) has been convicted of, or has been charged or is about to be charged with, a serious offence;

(b) a court, in reliance on the conviction, charging or proposed charging, makes a restraining order against property;

(c)       the defendant has an interest in the property;

(d) the defendant applies to the court for a declaration under this subsection in relation to the interest; and

(e)       the court is satisfied that:

(i) the property was not used in, or in connection with, any unlawful activity and was not derived, directly or indirectly, by any person from any unlawful activity; and

(ii) the defendant’s interest in the property was lawfully acquired; the court may, by order, declare that the restraining order, to the extent to which it relates to the property, shall be disregarded for the purposes of section 30.(emphasis added)

[42]      In Director of Public Prosecutions v Brauer[18] the Full Court of the Supreme Court of Queensland considered s 48(4) of POCA 1987 (repealed). The facts were that Mr Brauer had pleaded guilty to an offence under the Customs Act of importing cannabis in a yacht named the “Lady V”. His property had been made subject to a restraining order. He applied under s 48(4) of the repealed Act to have the restraining order disregarded to the extent that it related to another yacht of his called “Blue Jacket”. The primary judge was not prepared to infer that this yacht was used in connection with the unlawful importation of drugs. He therefore made the order under s 48 (4) of the repealed Act.

[18] [1991] 2 Qd R 261

[43]      In Brauer, in the Full Court, Thomas J observed:[19]

[19][1991] 2 QdR 261 at 268 from L 11

“All evidence is to be weighed according to the proof which it was in the power of one side to produce, and in the power of the other to have contradicted.  That is a maxim expressed by Mansfield C.J. in Blatch v Archer (1774) 1 Cowp. 63, 65; 98E.R. 969, 970. but it applies to the weighing process, not to a determination of the burden of proof.
The starting point here depends upon which party has the evidential burden.  The amount and quality of evidence required to discharge it may be lessened when it may reasonably be supposed that the adversary is in a better position to know and prove the essential facts…[20]  However, as the learned authors of Cross on Evidence (3^rd Aust. ed) para 4.33, N.126 have observed, this does not mean that the peculiar means of knowledge of one party spares the other the burden of adducing evidence on the issue, although very slight evidence will often suffice.  This particularly true when a party has the burden of proof of a negative…[21] 

[20]Citations omitted

[21]Citations and examples omitted

These are perhaps mere robust examples of the proposition that slender evidence may suffice to satisfy an evidential burden in relation to a negative state of affairs.
The suggestion has been made that where one party bears the burden of proving a negative proposition, and where the other party has the greater means to produce evidence contradicting it, it is enough for the plaintiff to establish ‘sufficient evidence’ (which must be more than a mere scintilla) upon which there is cast upon the other party an evidential burden to advance evidence as to the particular matters that could defeat the discharge of that proof.[22]  Such a proposition is hardly novel and is an application of Purkess v Crittenden (1965) 115 CLR 164. However it should not be assumed that the Commonwealth is in a superior position to the defendant to lead proof of some connection between the property and illegal activity. The inherent difficulty under s 48(4)(e)(i) lies in the absence of any joinder of issue upon the use of the property at a specified time or times.
In the end it is plain that there is no evidentiary principle which can convert the initial evidential burden which lies on the defendant into one which lies on the Commonwealth.  I am however fortified, by reference to the above cases, in concluding that there is no requirement that a defendant account for every minute of the use of the property from the moment he acquired it, and that where a defendant is able to satisfy a court that he personally is unaware of any unlawful use of that property, and is able to demonstrate its lawful use from time to time in circumstances where it may reasonably be inferred that lawful use continued, a court may be generous in applying the presumption of continuance and in drawing appropriate inferences in favour of the absence of unlawful use.”(emphasis added)

[22]Citations omitted…

[44]      Though Brauer concerns the repealed statute, these general propositions seem to be similarly applicable to POCA s102(3) applications. Because the Companies relied heavily on many of those passages I highlighted some parts to demonstrate two things. Firstly, the slenderness of evidence required from an applicant varies with the issue. Secondly, the large volume of documentary material in the Commonwealth’s possession and the capacity of the Commonwealth to search for more documents does not inevitably mean the Commonwealth was in a better position than the Companies to lead proof of an issue in this factually complex matter.

[45]      On the first issue in Brauer, namely whether the property was used in connection with unlawful activity, Thomas J was attracted to the proposition that slender evidence may suffice to satisfy an evidential burden where the evidential burden was to prove that property was not used in connection with unlawful activity. Thomas J wrote of a court being “generous”, but the hypothesis his Honour was considering required no generosity: under his Honour’s hypothesis there were “circumstances where it may reasonably be inferred that lawful use continued”. His Honour’s hypothesis implied that it was reasonable to infer that lawful use continued because the hypothetical director could persuade a court that the director was unaware of any unlawful use for the periods of time when the director was aware of its use and could persuade a court that the periods when the director was unaware of its use were so short and infrequent and unsuspicious that it was reasonable to infer no unlawful activity occurred. I contrast a case where the issue is whether an asset was derived directly or indirectly from unlawful activity. A director’s evidence about that issue might require much more complex evidence than for an issue about unlawful use of property: for example it might require evidence of all sources of a company’s income for years to determine what sources were used to maintain an asset or to repay interest or capital on a loan for its purchase price. A director’s ability to know and reliably say whether assets have been unlawfully used is quite different from a director’s ability to know and reliably say whether a company’s assets have been derived directly or indirectly by any person from any unlawful activity. 

[46]      On the second issue which the Companies must persuade this court of, namely that any asset in question was not derived or realised, directly or indirectly, from any unlawful activity, one cannot assume the Commonwealth was in a better position to know and trace the ultimate source of funds for each of the Companies during the long relevant periods. Even if, for a particular asset, the Commonwealth was better placed to know and trace the ultimate source of funds, it is clear from the judgment of Thomas J that the onus remains on the Companies. In the same case Derrington J observed:[23]

[23][1991] 2 Qd R 261 at 271 L 51

“…the court will take into account any difficulty which may exist in some cases in the proof of a negative and in other appropriate cases any difficulty in the person’s capacity to lead suitable evidence to discharge his onus of proof.  In the absence of any evidence or any suggestion that the property is so tainted, that court may well find that the onus is discharged by even slight evidence.”

[47]      The Commonwealth submitted that the implication from those remarks of Derrington J is that if there is any evidence or any suggestion that the property is tainted, slight evidence will not be sufficient to discharge the onus.  The Commonwealth submitted that Brauer itself illustrates this.  In Brauer the fact that Mr Brauer had left his yacht for several weeks in the hands of a man who was more deeply involved in illegal drug activity than Mr Brauer, meant that there was a possibility that the yacht was used in connection with unlawful activity.  That resulted in the court holding that the court could not infer innocent use or presume continuity of innocent use and that Mr Brauer had not discharged his onus. The court did not go so far as to find that the vessel Blue Jacket was involved in unlawful activity, but the possibility of that involvement meant that Mr Brauer’s evidence of unawareness of unlawful use, was not enough to satisfy his onus that the vessel was not used in unlawful activity.

[48] It is unhelpful to make general findings about how much evidence is required as suspicions move further from remote possibilities and closer to probabilities. I accept that in an application brought by a convicted person under s 48(4) of POCA 1987 (repealed) some possibilities required more evidence from the convicted person to satisfy the convicted person’s onus than other possibilities.

[49] It is also unhelpful to make general findings about how much evidence is required from the Companies where the Commonwealth has much relevant evidence in its possession. In this case, tracing funds was a critical issue. Tracing depends very much on documentary evidence. In theory, disclosure meant that the access to relevant documents was similar for all parties. The Commonwealth had a duty to disclose documents in its possession or control which were directly relevant to a matter in issue. The Companies were at liberty to apply pursuant to UCPR rule 223, for orders for disclosure of a document or class of documents, for instance if the Companies could establish an objective likelihood that the Commonwealth’s duty to disclose had not been complied with.

[50]      The task facing the Companies to satisfy their onus was formidable. They have been attempting to trace funds over about 25 years from about 1983 and from records mostly in the possession or control of the Commonwealth. Fortunately, electronic copies were made and provided of directly relevant documents. Some relevant records may have been lost or destroyed before documents were taken under the Commonwealth’s possession or control and some may have been lost since. Most of the Companies’ efforts to prepare for trial appear to have been put into tracing sources of funds. The Commonwealth’s control of seized documents and the enormous volume of documents held by the Commonwealth have made tracing difficult and potentially more difficult for the Companies than if they and related Companies had retained continuous control of their own documents.  The limits upon the Commonwealth’s duty of disclosure to, generally, the documents which were perceived by the Commonwealth to be directly relevant may have made the problem of tracing more difficult for the Companies. The numerous sources of funds received by Companies in the Harts group and the long period during which assets were acquired, maintained or paid off made tracing very complex. The unlawful activities which have been identified by the Commonwealth to the Companies as possible sources of some funds from which assets were indirectly derived have grown in number since these proceedings commenced. The last was identified in October 2010. An unlawful activity might have generated income many times and over a long period coinciding with a period when an asset was being derived. The evidential burden the Companies have attempted has been to try to trace funds used to indirectly derive an asset and to try to exclude the possibility that unlawfully derived funds were used to derive an asset.

[51]      Mr Hart assisted with the settling of some affidavits, explaining the significance of some documents when affidavits were prepared, acted as Mackenzie friend, energetically took an advocate’s role in the trial and in interlocutory skirmishes in these proceedings. I infer that he identified to the Companies funds he would have argued came from lawful activities. Such help would have been useful in identifying supporting documents. He would have reduced any disadvantage the Companies had in their tracing tasks.

[52]      If the Commonwealth had sought to trace the source of all funds from which assets were derived, the task for the Commonwealth would have been formidable. It did not have an onus of proof of such matters. It has not been an issue in the trial whether the Commonwealth could have done a full tracing if it had so chosen or whether the Commonwealth could have determined the source of all funds from which any relevant asset was derived. I am not satisfied that the Commonwealth could have done a full tracing with a reasonable allocation of resources to the task. The enormity of the tracing task facing the Companies may or may not have been greater than the task facing the Commonwealth if it had chosen to trace. The Companies had the advantage of the knowledge of Mrs Hart, Ms Petersen and Mr Hart. I am not satisfied that the Commonwealth had an advantage over the Companies for proving essential facts. However, the Commonwealth’s instructions to its forensic accountant did limit the accountant’s duties to an extent which was sometimes unhelpful for the court. For example, Mr Vincent’s task 4 report[24]set out that his instructions were, in effect to determine if funds from unlawful activity were used, but his instructions were not to determine the proportion of unlawful funds. The onus of proof being upon the Companies to establish that an asset was not derived from unlawful activity, the Commonwealth’s instructions to its expert were justifiable. In effect, the Commonwealth’s expert looked only deep enough to opine whether some unlawfully derived money was directly or indirectly used to derive an asset and the Commonwealth left it to the Companies to show that the amount of unlawfully derived money was so little as to mean the asset was not derived from unlawful activity.

[24]Q00060117 eg at 2.14

[53]      With respect to the evidence required of the Companies to satisfy their onus, there is a matter in their favour relating to alleged unlawful behaviour involving fraud or moral delinquency which was not the subject of any submission.

[54]      In Briginshaw v Briginshaw[25]it was observed by Dixon J:

Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect inferences. Everyone must feel that, when, for instance, the issue is on which of two dates an admitted occurrence took place, a satisfactory conclusion may be reached on materials of a kind that would not satisfy any sound and prudent judgment if the question was whether some act had been done involving grave moral delinquency. Thus, Mellish L.J. says: "No doubt the court is bound to see that a case of fraud is clearly proved, but on the question at what time the persons who have been guilty of that fraud commenced it, the court is to draw reasonable inferences from their conduct" (Panama and South Pacific Telegraph Co. v. India Rubber, Gutta Percha, and Telegraph Works Co.[39]). In the same way, in dealing with the question in what county the publication of a criminal libel had taken place, Best J. said: "I admit, where presumption is attempted to be raised, as to the corpus delicti, that it ought to be strong and cogent; but in a part of the case relating merely to the question of venue, leaving the body of the offence untouched, I would act on as slight grounds of presumption as would satisfy me in the most trifling cause that can be tried in Westminster Hall" (R. v. Burdett[40]). It is often said that such an issue as fraud must be proved "clearly", "unequivocally", "strictly" or "with certainty" (Cf. Mowatt v. Blake[41]; Kisch v. Central Railway Co. of Venezuela Ltd.[42]; Lumley v. Desborough[43]). This does not mean that some standard of persuasion is fixed intermediate between the satisfaction beyond reasonable doubt required upon a criminal inquest and the reasonable satisfaction which in a civil issue may, not must, be based on a preponderance of probability. It means that the nature of the issue necessarily affects the process by which reasonable satisfaction is attained. When, in a civil proceeding, a question arises whether a crime has been committed, the standard of persuasion is, according to the better opinion, the same as upon other civil issues (Doe d. Devine v. Wilson[44]; Boyce v. Chapman[45]; Vaughton v. London and North Western Railway Co.[46]; Hurst v. Evans[47]; Brown v. McGrath[48]; Motchall v. Massoud[49]; Nelson v. Mutton[50]; Gerder v. Evans[51]; sed quœre as to the statement of Swift J. in Herbert v. Poland[52]; see, further, Wigmore on Evidence, 2nd ed. (1923), vol. v., p. 472, par. 2498 (2) (1)). But, consistently with this opinion, weight is given to the presumption of innocence and exactness of proof is expected. 

[25][1938] HCA 34; (1938) 60 CLR 336 at 361.10

[55]      Where the Companies bear the onus of disproof of fraud or recklessness, it may be that a court can conclude that the onus is satisfied by less exact proofs than would be required to establish fraud or recklessness on the balance of probabilities. Generally, “people are less likely to be fraudulent than to be negligent”.[26] That is the approach I will take when considering the particular issue of whether the Companies have established that there was no dishonest conduct, for example, in the case of the alleged “Perpetual offences” with which I must deal or no reckless conduct in the case of the Hendon and Northbourne arrangements.

[26]Cross on Evidence Australian Edition [9010]

Were funds from UOCL lawfully derived?

[56]      United Overseas Credit Limited (“UOCL”) transferred some funds directly to some of the Companies or their bank accounts. UOCL transferred some funds to creditors of some of the Companies. UOCL transferred some funds to Merrell or to other companies which subsequently provided funds to some of the Companies or for the benefit of some of the Companies. An issue is whether the funds UOCL transferred were derived from unlawful activity. The Companies contend that a portion of funds transferred by UOCL were not derived from unlawful activity. The Companies accept that UOCL did not supply funds as a gift. The Companies’ implied argument is that any funds sourced directly or indirectly from UOCL were earned or borrowed by the recipients.

[57]      The Companies argue that, in accordance with Brauer, they can discharge their onus with slight evidence because, among other things, the Commonwealth did not instruct Mr Vincent to and did not provide him with the necessary information to properly trace all the funds received by UOCL. They claim that the exhibit to Mr Vincent’s report made it clear that UOCL had made payments of $24,292,523.31, whereas UOCL received only $19,168,097.77 from participants in the UOCL offences. They submit that the court should infer that the difference of $5,124,425 was a sum of money which was not derived from unlawful activity. The submission was:

The Commonwealth in the PPO trial did not lead any evidence and therefore failed to prove that the $5,124,425 of the UOCL income Mr Vincent did not/could not trace[27] was from unlawful activity and therefore, the Applicants should be able to rely upon that fact in these proceedings and it should be accepted that the money was from lawful activity.

[27] XXN Mr Vincent T D10 P5 L20-21

[58]      There is, however, no evidence that $5,124,425 was derived from lawful activity.

[59]      The financial statements and documentation of UOCL demonstrate that it had no significant sources of income apart from the schemes that were considered in the pecuniary penalty order proceedings Commonwealth Director of Public Prosecutions v Hart.[28] UOCL’s Directors’ Report and Financial Statements from 26 June 1997 to 30 June 2000 describe the company’s principal activity as lending money to overseas borrowers.[29] The same document listed:

[28][2010] QDC 457

[29]Q00011639 at p 2.

1.          “turnover” between 26 June 1997 and 30 June 2000 as $12,579,645. This comprised $5,771,586 in “loan interest income” and “application fees” of $6,808,059;[30]

[30]Q00011639 at p 8.

2.          “other revenue” as $40,205;

3.          the value of the issued promissory notes on 30 June 2000 as $98,684,000; and

4.          long-term loans receivables as $98,684,000.[31]

[31]Q00011639 at p 4.

[60]      UOCL’s Directors’ Reports and Financial Statements for the years ending 30 June 2001, 30 June 2002 and 30 June 2003 also describe the principal activity of the company as money lending to overseas borrowers[32] and listed the turnover for those years as consisting of “loan interest income” and “application fees”.[33] Although the detailed profit and loss accounts for these years identify some other revenue, this also appears to have been connected with the schemes: the report for 30 June 2001, for example, shows that the bulk of “other revenue” consisted of “marketing and promotion”, “bank interest income”, and “cancellation charges”.[34] All of these documents are consistent with UOCL’s business revolving around the unlawful schemes considered in the pecuniary penalty order proceedings.

[32]Q00011474 at pp 2, 7 (report for year ending 30 June 2001); Q00011556 at p 2 (report for year ending 30 June 2002); Q00011671 at p 2 (report for year ending 30 June 2003).

[33]Q00011474 at p 10; Q00011556 at p 10; Q00011671 at p 10.

[34]See also Q00011556 at p 10 (showing the ‘other revenue’ for the year ending 30 June 2002 consisted of ‘bank interest’ and ‘early loan cancellation charges’ of $39,295); Q00011671 at p 10 (showing the ‘other revenue’ for the year ending 30 June 2003 consisted of ‘bank interest’ and ‘early loan cancellation charges’ of $36,351).

[61]      The letter of 24 June 2002 approved by UOCL for sending to the Internal Revenue Department in Hong Kong[35] reinforces this conclusion. It described the nature of UOCL’s business and identified no other source of income apart from the schemes. Indeed, under “Loan interest income”, the letter stated:[36]

All of the Company’s borrowers are Australian residents and their Loan Agreements entered into with the Company, together with their companies’ employee welfare or superannuation fund arrangements funded by their loans, as described hereafter, are, to the knowledge of the Company’s directors, structured solely to take advantage of Australian taxation benefits available to them under existing Australian legislation.

[35]Q00011739.

[36]Q00011739 at p 2 (D(iii)).

[62] Accordingly, this is not a case where “slight evidence” by the Companies may suffice to discharge the onus of proving the matters in s 102(3) of the Act. The documentary evidence suggests that UOCL’s income came from the schemes that were considered in the pecuniary penalty order proceedings. A reasonable inference is that all UOCL income was derived or realised from unlawful activity. Bank interest earned by UOCL on funds derived from unlawful activity would itself be indirectly derived or realised from unlawful activity. The Companies have produced no evidence to rebut the inference that all UOCL income was derived or realised from unlawful activity.

[63]      There is no basis for considering that $5,124,425 of UOCL’s income was attributable to lawful activity. That figure is the difference between $24,292,523.31 that Mr Vincent found that UOCL had paid and the $19,168,097.77 that he recorded UOCL as having received from participants. Yet, as Mr Vincent made plain, the $19,168,097.77 represented only the “minimum amount” that UOCL received into its bank account from participants in the schemes.[37] It did not represent a maximum.

[37]Q00060293 at p 5, pars 2.1 and 2.4.

[64]      So much has been accepted in an earlier proceeding. In Commonwealth Director of Public Prosecutions v Hart,[38] the court rejected a challenge to the use of the figure of $19,168,097.77 as a starting point for quantifying the benefits derived from the UOCL offences. The court did so on the following terms:[39]

Mr Hart raises a challenge to a further $1,974,165.75 which he submits should be deducted from the amount of the $19,168,097.77 which was recorded by UOCL in the client files of the participants as having been paid to UOCL. In Mr. Vincent's report at paragraph 2.4 (ii) he stated:
I have identified additional deposits totalling $1,974,165.75 were recorded in the banking records of UOCL from participants who had an alleged loan from UOCL, but were not recorded in the database. Based on my review, I was unable to identify any record of these amounts in the client files of those participants. For this reason, I am unable to positively ascertain whether such payments were made to UOCL in relation to the schemes, or for another reason.

[38][2010] QDC 457.

[39][2010] QDC 457 at [549]-[550] (emphasis added).

The flaw in the challenge is that Mr Vincent’s figure of the $19,168,097.77 which was recorded by UOCL in the client files of the participants does not include the “additional deposits totalling $1,974,165.75 were recorded in the banking records of UOCL from participants who had an alleged loan from UOCL, but were not recorded in the database”. It is clear to me that Mr Vincent declined to include the $1,974,165.75. This figure may represent further amounts received by UOCL from participants. They are amounts which were not recorded in client files or the AFP database but were nonetheless recorded in the banking records of UOCL. They should perhaps have been included as further benefits derived.

[65]      As these remarks acknowledge, there are substantial grounds for suspecting that the extra $1,974,165.75 that was recorded in the banking records of UOCL was derived from scheme participants and thus from unlawful activity. The Companies have presented no evidence that such amounts were derived from lawful activity.

[66]      The Companies submitted:[40]

[40]APPLICANTS’ S102 ADDENDUM SUBMISSION  p5

23 The Commonwealth concede that there is a difference of $5,124,425 not accounted for from the participants that UOCL had banked through its accounts.  However, what the Commonwealth now want to do is state that the Applicants should prove that was from lawful means irrespective of the fact they failed to prove it was from unlawful means in the PPO trial.
24 As there is an estoppel against the Applicants re-litigating the PPO trial the Commonwealth must also be estopped from making allegations that they could not prove in the PPO trial now against the Applicants.
25 [Para 7.8 (ii)] Mr Vincent also stated that there are a number of deposits of significant value that were not consistent with regular payments made by participants to the scheme.  He stated:
"a number of deposits of significant value (i.e. in excess of $100,000) were not consistent with regular payments made by participants in the scheme." 
26 Para 7.12 (ii) (c )]  FURTHER Mr Vincent states that there was
“significant deposits from entities whom I was able to identify were clearly not participants of the scheme”. 
27 As the only allegation of wrongdoing by UOCL raised by the Commonwealth and found by His Honour as a "serious offence" related to the participants in the scheme paying fees and interest to UOCL, then the balance of these funds should be deemed to be from lawful activity of UOCL. 

[67]      The submission seems to be, essentially, that in Commonwealth Director of Public Prosecutions v Hart, [41] there was some income received by UOCL which the CDPP failed to prove was derived unlawfully and that the court should infer in this proceeding that it was derived lawfully. The submission ignores the features relating to these funds that there are reasonable grounds to suspect that UOCL’s income was earned from unlawful activity, that the Companies bear an onus of proof that the income was not derived or realised, directly or indirectly from unlawful activity, that there is no evidence to remove that reasonable suspicion, that the Commonwealth bears no onus and I am not satisfied that the Commonwealth was in a better position than the Companies to prove the source of those further funds.

[41][2010] QDC 457.

[68]      I am not satisfied that those funds of $5,124,425 from UOCL were probably derived from lawful activity.

Were funds from Merrell lawfully derived?

[69]      With respect to the issue of funds from Merrell, the Companies argue that in accordance with Brauer that they can discharge their onus with only slight evidence because, among other things, the Commonwealth did not fully instruct Mr Vincent and provide him with the necessary information to properly trace all the funds received by Merrell. The Commonwealth did not instruct Mr Vincent for these proceedings to trace the source of all funds received by Merrell and I make no finding as to whether Mr Vincent could have achieved the exercise if he had those instructions. I do not find that the Commonwealth was in a better position than the Companies to trace the source of these funds.

[70]      The Companies submit that, according to Mr Vincent, Merrell only received $5,264,170 from UOCL but paid out a total of $7,826,287.02. They submit that the court should infer that the difference of $2,562,108, to 24 February 2004, was not derived from unlawful activity.[42]

[42]Applicants’ closing submissions, par 21(j).

[71]      Mr Vincent’s reports do not reveal any significant difference between the amount that Merrell received from UOCL and the amount that Merrell paid out. His report of 21 October 2010 makes it clear that the $7,826,287.02 represented the amount paid out by Merrell between July 1998 and February 2004.[43] The $5,264,170, however, only represented the amount paid by UOCL to Merrell between July 1998 and 15 May 2001.[44] Mr Vincent found $7,564,670.18 was paid by UOCL to Merrell between 7 July 1998 and 27 February 2004.[45] Furthermore, Mr Vincent found that during this period Merrell received some funds from European Grande Assurance SA ("EGA"), which in turn received $797,859.61 from UOCL[46] and there were some repayments from Sea Fury Investments Pty Ltd. These sources would more than cover the difference between $7,564,670.18 and $7,826,287.02. It follows that the difference upon which the Companies rely to claim that Merrell must have had other, lawful sources of funds diminishes to insignificance.

[43]Q00064393 at par 7.9, p 20.

[44]Q00064393 at par 7.8, p 19.

[45]Q00015677 at p 5.

[46]Q00015677 at p 5.

[72]      The documentary evidence suggests that Merrell’s income and assets were almost entirely derived or realised from UOCL. The list of debts owing to UOCL as at 30 June 2000 shows that Merrell owed UOCL $4,061,334, while EGA owed UOCL $537,850.[47] The balance sheet for Merrell as at 7 September 2000 showed Merrell’s total assets at $4,766,000.[48] Loans from UOCL, however, were listed as $4,316,000, and loans from EGA were listed as $330,000. The amounts owed to UOCL and EGA, recorded in Merrell’s own balance sheet, were thus almost equivalent to all of Merrell’s assets. While the balance sheet listed other investments of Merrell, including a $507,000 investment in Federal Financial Group USA, some of these investments also appear to have been derived from UOCL funds, as the list of outstanding loans as at June 2003 indicated.

[47]Q00045463.

[48]Q00040065.

[73]      Merrell’s list of outstanding loans as at June 2003 identified UOCL as the source of nearly all loans. It also identified many investments in Federal Financial Group Incorporated, totalling $733,106.29 and dating back to 18 December 1998, as sourced from UOCL funds.[49] This list suggests that Merrell did not have a significant source of income or assets derived from lawful activity, even from its investments in Federal Financial Group.

[49]Q00045408 at p 1.

[74]      The balance sheet and the profit and loss statement for the year ending 30 June 2003[50] confirm that UOCL provided the great bulk of Merrell’s funds and assets either directly or indirectly. The profit and loss statement showed income of only $28,333.05 and expenses of $110,272.04. The balance sheet disclosed debts of $3,222,071.39 to UOCL and $725,000.00 to EGA. It also disclosed a debt of $1,755,000 to Grade Investments.[51] However, this debt was annotated in Merrell’s list of outstanding loans as “Allan Stewart Trust amount taken over by Grade then sold to and guaranteed by Merrell.”[52] It therefore appears to have been a debt assigned to Merrell rather than a source of funds used by Merrell for lending or acquiring assets. In that respect, it differed from Merrell’s debts to UOCL.

[50]Q00011730.

[51]Q00011730 at p 1.

[52]Q00045408 at p 2.

[75]      The balance sheet of Merrell as at 12 August 2004 leads to similar inferences.[53] It disclosed an increased debt to UOCL of $4,116,000 and the debt of $1,755,000 to Grade Investments.

[53]Q00049128.

[76]      As this survey of the documentary material shows, there is nothing to support the Companies[54]submission that 33% of Merrell’s income was derived or realised from lawful activity. On the contrary, the inference is that practically all of Merrell’s funds were derived or realised, directly or indirectly, from UOCL. The Companies have presented no evidence to rebut that inference. The Companies point to entries in the accounts which satisfy me that Merrell received $60,000 from Mr Coad in September 1999, that in 2003 it owed $67,500 to Dreambay, that it may have invested $207,000 in about 2000 in Elsway and K2000. The Companies did not call evidence to explain these amounts. The fact that Merrell made investments does not assist me to determine that the investments were not made with funds derived or realised directly or indirectly from UOCL. The fact that Merrell may have received some unexplained amounts not directly from UOCL raises the possibility that a small proportion of funds held by Merrell at one time were not funds derived directly or indirectly from unlawful activity. However the probability is that any of Merrell’s earnings were directly or indirectly derived from investment of money Merrell received from UOCL.

[54]Applicants’ closing submissions, par 21(k).

[77] A related but different issue arises in respect of Merrell’s loans to the Companies. Merrell paid significant amounts of money used for deriving assets the Companies apply to recover. Money has been treated in accounts as a loan by Merrell and its repayment has been secured by charges. The Companies have not proved that the loans by Merrell were on usual terms offered by lenders. Inadmissible opinion evidence that the loans were on usual commercial terms was objected to and was excluded. As POCA s102(3) requires findings expressed in double negatives, I am not satisfied that money advanced by Merrell to the Companies was not advanced on conditions more favourable to the Companies than usual commercial terms. I am suspicious that, and the Companies have not satisfied me that Mr Hart was not in effective control of the Companies when the UOCL offences were committed. I give reasons for this below. Mr Hart also exercised a high degree of control over the day to day operations of UOCL and Merrell.[55]It was not an issue in the earlier proceeding whether Mr Hart had effective control of Merrell and it was not necessary to decide that fact. I am suspicious that Mr Hart’s influence over Merrell was such that he could determine whether Merrell made loans to the Companies or demanded repayment and could determine the conditions of the loans. The Companies have not satisfied me that this suspicion is improbable.

[55]Commonwealth Director of Public Prosecutions v Hart [2010] QDC 457 at [443].

[78]      Merrell’s balance sheet revealed that as at 30 June 2003[56] its assets included:

[56]Q00011730

Investments

Bubbling  $330,010

Fighters  $733,106.29

Harts Consulting (FFMR)   $177,600

Yak  $21,100

[79]      Merrell’s balance sheet revealed that as at 12 August 2004[57] the investments included:

[57]Q00049128

Loans:

Bubbling  $330,000

Fighters  $1,059,000

Flying Fighters Maintenance & Restoration $178,000

Yak  $21,000

[80]      Notably, the amount of the loans did not increase except in the case of the loan to Fighters. It is possible that the Companies which received Merrell’s money or assets or services paid for with Merrell’s money have repaid Merrell interest on the money in that period to August 2004. If Merrell received interest income it would be a source of funds which did not come directly from UOCL. If Merrell received interest income, I am not satisfied that it was not indirectly derived from unlawful activity.

[81]      I am not satisfied that any funds Merrell has provided in relation to the assets the subject of these proceedings were not derived from unlawful activity. Further, on a related issue, I am satisfied that any funds Merrell or UOCL has provided in relation to the assets the subject of these proceedings “may reasonably be suspected of being proceeds of crime” within the meaning of those words in section 82(1) of POCA 1987 (repealed).

[82]      Where the evidence was that funds from Merrell were used in respect of a payment related to individual assets, for any such asset the Commonwealth would typically make a general submission that “Because funds from Merrell...were used to acquire the property, (the relevant former owner has) not satisfied the court that the property was not derived or realised, directly or indirectly from unlawful activity…” Typically, the submission would not say what proportion of the funds which derived the asset came from Merrell. The Commonwealth supplemented written submissions with a flow chart, exhibit 10; a mixture of words, colours and arrows. Each picture was left for the court to infer a thousand words. For any asset, the chart was intended to reflect conclusions that Mr Vincent drew from reading documents in evidence and within the electronic records. The flow chart would, for example in the case of the Cap 232 aeroplane, reveal that on 22.08.03 Merrell paid $350,000 to Sea Fury; that on 27.08.03 Sea Fury paid $349,460 to Spider Tracks Pty Ltd (“Spider”); that on 28.08.03 Spider paid $200,000 to Fighters; that on 28.08.03 Fighters paid $200,000 to Ultimate Aerobatics; that seven months earlier, on 30.01.03 Unlimited Aerobatics paid $144,000 to Fighters; that on 03.02.03 Fighters paid $46,665 to FFMR for repairs done on an aircraft whose acquisition cost Mr Vincent set out in the chart as $244,133.58  (as repayment of a loan used for repairs and maintenance of various aircraft). One could then infer that the Commonwealth submitted that $46,665 was the quantum of one fund which was used to derive the Cap 232 and that the $46,665 was derived from unlawful activity and accordingly the Commonwealth submitted in “Annexure 2 Summary of Assets”: “Because funds from Merrell...were used to acquire the property, Fighters have not satisfied the court that the property was not derived or realised, directly or indirectly from unlawful activity…”.

575.On 1 August 2003 Merrell transferred $37,500 to Geoff Klooger ([Q00043033] p. 60).

576.On 8 August 2003 Merrell transferred $620,000 to European Grand Assurance ([Q00043033] p. 60).

577.On 15 August 2003 UOCL transfers $29,992 to UBC (QLD) Pty Ltd ([Q00064068] p. 2 and 3).

578.On 15 August 2003 UBC (QLD) Pty Ltd transferred $29,000 to Spider Tracks ([Q00064068] p. 2, 3, 4, 5 and 6). 

579.On 18 August 2003 Spider Tracks transferred $20,000 to Nemesis (Q00064068 p. 2, 5, 6, 10 and 12).

580.On 18 August 2003 Spider Tracks paid Countrywide $2,661.56 ([Q00064068] p. 475).

581.On 18 August 2003 Spider Tracks paid Sunshine $1,091.22 ([Q00064068] p. 2 and 5). 

582.On 19 August 2003 Nemesis made loan repayments to Equititrust $3,333.33 and $15,109.97 ([Q00064068] p. 2, 10 and 12); T5-34 L10-21).

583.On 20 August 2003 Merrell transferred $350,000 to Bernard Ponting ([Q00043033] p. 60).

584.On 22 August 2003 $349,994 was deposited to Seafury Investments. Laura Hart states this was a deposit of made by Merrell (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 53(b), Appendix 27 [Q00064121] p. 278). 

585.On 27 August 2003 Seafury Investments transferred $349,460 to Spider Tracks ([Q00064121] p. 278; and Laura Hart’s affidavit 23/7/2010 [Q00064089] para 55(a)(VI)-(VII), Appendix 32 [Q00064126] p. 311).

586.On 28 August 2003 Spider Tracks transferred $200,000 to Flying Fighters P/L (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 55(a)(III)-(V), Appendix 32 [Q00064126] pp. 308 and 310).

587.On 28 August 2003 Flying Fighters P/L transferred $200,000 to Ultimate Aerobatics (Arnot $300,000 loan) (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 55(a)(I)-(II), Appendix 32 [Q00064126] pp. 307-308).

588.On 2 September 2003 Merrell transferred $11,365.00 to Bernard Ponting ([Q00043033] p. 61).

589.On 29 September 2003 $103,857.19 was deposited to Nemesis’s Equititrust mezzanine loan facility from the sale of lot 31 (Laura Hart’s affidavit 21/9/2010 [Q00064089] para 52(g)iii, Appendix 26(a) [Q00064116] p. 214).

590.On 30 September 2003 Merrell transferred $75,000 to Geoff Klooger ([Q00043033] p. 61).

591.On 2 October 2003 $96,142.91 was deposited to Nemesis’s Equititrust mezzanine loan facility from the sale of lot 11 (Laura Hart’s affidavit 21/9/2010 [Q00064089] para 52(g)iii, Appendix 26(a) [Q00064116] p. 214). 

592.On 17 November 2003 Equititrust (via Nemesis) loaned Seafury Investments $600,000 (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 52(g)(vi), Appendix 26(c) [Q00064118] pp. 227-229 and 233).

593.On 18 November 2003 Seafury Investments transferred $250,000 to Spider Tracks (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 52(g)(VI)(dd), Appendix 26(c) [Q00064118] p. 231).

594.On 18 November 2003 Spider Tracks transferred $100,000 to Flying Fighters P/L (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 52(g)(VI)(dd), Appendix 26(c) [Q00064118] p. 232).

595.On 18 November 2003 Flying Fighters transferred $10,000 and $90,000 to Ultimate Aerobatics (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 55(b), Appendix 33 [Q00064127] p. 316). 

596.On 8 December 2003 Nigel Arnot resigned as director of Bubbling Springs P/L ([Q00060018] p. 4 of 9).

597.On 16 December 2003 Merrell transferred $29,730.10 to Bernard Ponting ([Q00043033] p. 65).

598.On 8 January 2004 Merrell transferred $4519.92 to Bernard Ponting ([Q00043033] p. 66).

599.On 21 January 2004 $69,992 was deposited to Seafury Investments P/L by Merrell (Laura Hart’s affidavit 21/9/2010 [Q00064089] para 53(c), Appendix 28 [Q00064122] p . 280).

600.On 22 January 2004 $29,992 was deposited to Seafury Investments by Merrell (Laura Hart’s affidavit 21/9/2010 [Q00064089] para 53(c), Appendix 28 [Q00064122] p. 280).

601.On 24 January 2004 $99,992 was deposited to Seafury Investments P/L by Merrell (Laura Hart’s affidavit 21/9/2010 [Q00064089] para 53(d), Appendix 29 [Q00064123]).

602.On 21 May 2004 $200,000 was deposited to Seafury Investments P/L. These funds were transferred by Nemesis Australia P/L, via its Equititrust Ltd loan account (Laura Hart’s affidavit 21/9/2010 [Q00064089] para 52(g)viii, Appendix 26(d) [Q00064119] p. 237).

603.On 17 June 2004 $240,000 was deposited to Seafury Investments P/L. These funds were deposited by Nemesis via its Equititrust Ltd loan account (Laura Hart’s affidavit 21/9/2010 [Q00064089] para 52(g)viii, Appendix 26(d) [Q00064119] p. 238).    

604.On 26 July 2004 the property located at 88 Brandon Rd, Runcorn was sold with consent of the Official Trustee with sale proceeds being as follows: $244,936.42 paid out Equititrust mortgage (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 56(h), Appendix 36 [Q00064130]; $300,000 paid in reduction of mortgage over Hangar 400; $500,000 paid to Dr Fleming as payout of the loan and release of security over the Sea Fury; $260,000 paid to Dr Ambler in payment of the loan for the aircraft VH-AVC.

605.In September 2004 $100,000 was paid to reduce the mortgage with Perpetual Nominees.  This amount was funded by a second mortgage over Pinecone Street, Sunnybank and funds borrowed through Spider Tracks P/L (Vincents’ Report 2 September 2009 23.1.8 [Q00060117]; and Laura Hart’s affidavit 17/10/2006 [Q00060221] para 138).

606.On 14 September 2004 Daniel Fleming resigned as director of Bubbling Springs P/L ([Q00060018]).

607.On 20 September 2004 UOCL paid $75,000 to Bowsprit Mortgage and Finance Ltd (Vincent’s Report 16 November 2010 para 3.1 [Q00064718] Appendix 11 [Q00064729].

608.On 21 September 2004 Equititrust loaned Yak 3 Investments P/L $550,000 and Bubbling Springs P/L $550,000.  Laura Hart states that these loans were secured by the properties at Doonan Road and Hangar 400 (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 68(c)III, Appendix 58 [Q00064152] pp. 515-517). . 

609.Laura Hart states that on 21 September 2004 $1,079,905.11 of the $1.1m loaned by Equititrust on 21 September 2004 was paid to Perpetual Nominees (MFS) (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 68(c)II and III, Appendix 58 [Q00064152] p. 510). 

610.Laura Hart states that on 21 September 2004 Bowsprit Mortgage and Finance Ltd paid Perpetual Nominees (MFS) $143,385.55. This amount was loaned to Laura Hart and secured by 52 Pinecone Street (Laura Hart’s affidavit 23/7/2010 [Q0064089] para 68(c)II and IV, Appendix 58 [Q00064152] p. 511). .

611.On 21 September 2004 Spider Tracks paid Perpetual Nominees (MFS) $234,406.32 (3 cheques) (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 68(c)II and VIII, Appendix 58 [Q00064152] pp. 506-509).

612.On 21 September 2004 Beryl Hart paid $13,000 to Perpetual Nominees (MFS) (2 cheques). Laura Hart states this was as a personal loan to her (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 68(c)II and VI, Appendix 58 [Q00064152] pp. 512-513). .

613.On 21 September 2004 Reg Hart paid $5,000 to Perpetual Nominees (MFS). Laura Hart states that this was a personal loan to her (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 68(c)II and V, Appendix 58 [Q00064152] p.514).    

614.On 22 September 2004 authorisation was given to cancel monthly standing instruction to debit account 447-1-110253-0 an amount of $2,500 paid to Merrell Associates Ltd [Q00053046].

615.In October 2004 the mortgage over Pinecone Street, Sunnybank and the funds borrowed through Spider Tracks P/L was repaid from the sale of Brandon Rd Runcorn (Vincent’s Report 2 September 2009 23.1.9 [Q00060117]; and Laura Hart’s affidavit 17/10/2006 para 138).

616.In December 2004 funds borrowed from Dr Fleming in respect of the Mercedes were repaid by Fighters by authority to ITSA from the sale of the Brandon Rd property which was owned by Nemesis (Vincent’s Report 2 September 2009 21.1.3 [Q00060117]; and Laura Hart’s affidavit 17/10/2006 [Q00060221] para 114(f)).

617.On or about 4 January 2005 ITSA paid Bowsprit Mortgage and Finance Ltd $150,000 from the sale of the property at Brandon Road (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 68(c)II and IV, Appendix 56 [Q00064150] p. 497).

618.On or about 4 January 2005 ITSA paid Dr Ambler $260,000 from the sale of the property at Brandon Road (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 59(c), Appendix 45 [Q00064139] p. 398).  

619.On or about 4 January 2005 ITSA paid Spider Tracks P/L $285,000 from the sale of the property at Brandon Road (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 65(e), Appendix 56 [Q00064150] p. 497). 

620.On 18 April 2006 the assets subject to this application were forfeited to the Commonwealth pursuant to the Proceeds of Crime Act 2002 (Cth) (Ty Maher’s affidavit 24/11/2010 [Q00064186] para 4.

621.On 18 August 2006 the property located at Doonans Rd, Granchester was sold  (settlement date 18 September 2006) for $1,490,013.25. The proceeds were paid to Equititrust ($947,167.98); Australian Taxation Office (GST) ($149,000); Fees and Rates ($5,550.75).  The remaining net proceeds of $388,294.52 were paid to ITSA (Vincent’s Report 2 September 2009 23.1.7 [Q00060117]; and Laura Hart’s affidavit 17/10/2006 [Q00060221] paras 140; and Laura Hart’s affidavit 23/7/2010 [Q00064089] para 68(c)III, Appendix 58 [Q00064152] p. 517).

622.On 25 September 2006 Shirley Petersen resigned as director and secretary of Bubbling Springs P/L ([Q00060018] p. 3-4 of 9).

623.On 25 September 2006 Laura Hart was appointed secretary of Bubbling Springs P/L ([Q00060018] p. 4 of 9).

624.On 2 October 2006 Shirley Petersen was appointed director and secretary of Bubbling Springs P/L ([Q00060018] p. 4 of 9).

625.On 8 January 2007 6 Merriwa Street was sold by the Commonwealth of Australia (i.e. ITSA) for $293,000. The proceeds were used to pay Countrywide Co-Operative Housing Society $243,221.74 and Brisbane City Council $1,645.50. The remaining net proceeds of $34,154.57 were paid to the Official Trustee in Bankruptcy (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 63(e), Appendix 50 [Q00064144] p. 458).

626.On 23 April 2007 27 Samara Street was sold for $339,300. Part of the proceeds were used to pay Sunshine Co-Operative Housing Society $146,975.22 (Laura Hart’s affidavit 23/7/2010 [Q00064089] para 64(p), Appendix 55 [Q00064149].  

ANNEXURE 2

EVIDENCE OF MR HART’S EFFECTIVE CONTROL

Flying Fighters Pty. Ltd.

(a)The property, the subject of this application is eight planes and a motor vehicle, all of which are registered in the name of the First Applicant.

(b)Mr. Arnot, the Managing Director:

(i)was not aware of significant financial transactions which have occurred in respect of the company (such as charges and loans)[764];

[764]Transcripts P411 L20-30 (Q00003945 at p.26); P333 L20-30 (Q00003944 at p.61); P207 L21-24 (Q00003943 at p.39); P315 L 4-20 (Q00003944 at p.42); Transcript P207 L34-50 (Q00003943 at p.39).

(ii)referred to two of the subject aircraft in correspondence with the Archerfield Airport Corporation as “Mr. Hart’s aircraft”[765].

[765]Affdt Kent of 11^th December 2003 Ex RCK 14 (Q00060177).

(iii)confirmed major decisions with Mr. Hart[766].

[766]Affdt Harris of 12^th August 2003 Ex ACH 2 p.22 (Q00010054); Part of Ex 18 (Q00010054); Affdt Saultry of 12^th August 2003 Ex PBS2 p.27 (Q00010429); Affdt Saultry of 12^th August 2003 Ex PBS2 p.58 & 60 (Q00010465 & Q00010467); Exhibit 13 (Q00064189).

(iv)reported to Mr. Hart in relation to the assets of the company and acted at Hart’s direction in relation to such assets[767].

[767]See Footnote 3.

(v)requested Hart to organise the final payment for an aircraft being purchased by the First Applicant[768] and sought funds for spare parts.[769]

[768]Affdt Saultry of 12^th August 2003 Ex PBS2 pg 27 (Q00010429); Exhibit 13 (Q00064189); Transcript pg 164-168 (Q00003942 at p.79)

[769]Affdt Saultry of 12^th August 2003 Ex PBS2 pg 27 (Q00010429); Exhibit 13 (Q00064189); Transcript pg 164-168 (Q00003942 at p.79)

(c)In January 2003 Mr. Arnot lent $300,000.00 to the First Applicant.  This financial arrangement was discussed between the three directors and Mr. Hart.  Mr. Hart subsequently wrote to Mr. Arnot thanking him for the loan.  He said “Your offer to lend the money for a period means an enormous amount to me” and “The YAK engine, the CAP repairs and the T-28 engine have really set me back” and later “Thank you for the help and I will be in your debt”.[770]

[770]Affdt Saultry of 12^th August 2003 Ex PBS2 pg 61 (Q00010468)

(d)In an email in January, 2003 to Mr. Arnot, Hart referred to the potential of standing people down and the cost impact to him of aircraft parts and repairs[771].

[771]Affdt Saultry of 12^th August 2003 Ex PBS2 pg 61 (Q00010468)

(e)In meetings with the Ipswich City Council, Hart referred to having “seventeen planes”[772].

[772]Affdt Bell sw 13^th October 2003 Ex TAB 1 (Q00060104); Transcript p. 682 & p.686 (Q00011388 at p.80 & p.84)

(f)Hart has signed documents in an official capacity (on occasions as Director) such as a loan agreement, charge, contract and trust account authorities[773].

[773]Trust account authorities Ex 27 (Q00064200); Charge and Contract Ex 19 (Q00064194 at pp.21-52 & Q00010149); Affdt Fleming of 4^th July 2003 Ex DVF-6 (Loan Agreement), (Q00064495 at p.2)

(g)In correspondence with the Archerfield Airport Corporation (“AAC”), Hart has referred to six planes as being owned by him[774].

[774]Ex 30 (Q00064203)

(h)Many of the planes have registration numbers which include Hart’s initials[775]:

[775]Ex 18 – Fax Arnot to Hart 25/5/01 (Q00010054), and Transcript pg 339-341 (Q00003944 at p.67-69)

(i)Hart was involved in leasing arrangements, he flew planes and negotiated for the purchase of aircraft on behalf of the company[776].

[776]Affdt Fleming of 4^th July 2003 Exhibits DVF 4 (Q00064493 at p.2); DVF 6 (Q00064495 at p.2); DVF 7 (Q00064496 at p.2); Affdt Harris of 12^th August 2003 Ex ACH2 pp.130, 133, 135 and 136 (Q00010146, Q00010149, Q00010150 & Q00010151); Part of Ex 19 (Q00010149 & Q00010146).

(j)The Mercedes motor vehicle was driven by Hart.  When receivers were appointed to Nemesis Australia Pty. Ltd, Hart arranged for Dr. Fleming to enter into a contract with the receivers as nominee for Flying Fighters Pty., Ltd so that the vehicle was taken out of the control of the receiver and remained available for Hart’s personal use[777].

[777]Affdt Fleming of 4^th July 2003 Ex DVF 4 (Q00064493).

(k)The planes and motor vehicle were listed as assets in the document entitled “Statement of Position Steven Irvine Hart as at 4/12/2000 which was provided to McLaughlins Financial Services on 7/9/2001”[778].

[778]Affdt Stride of 24^th February 2004 Ex B (Q00060035); Ex 24 (Q00010400)

(l)Flying Fighters agreed to buy an aircraft called a T-28.  When financial difficulties were encountered Mr. Hart approached his friend Dr. Ambler for a loan of $228,000.00.  (This is later referred to in paragraph 30 of the Outline).

(m)The registered office for the company is 400 Wirraway Avenue, Archerfield.  (Hart’s office had been located at this address until it moved to 404 Wirraway Avenue).

(n)The company was previously called Hart’s Flying Fighters Pty. Ltd.

(o)A fixed and floating charge over the assets of this Applicant in favour of Merrell Associates Ltd. was registered on 12 December, 2002.  Mr. Hart is thus in a position to ensure that the property the subject to this application cannot be sold without his consent.

Nemesis Australia Pty. Ltd.

(a)The property, the subject of this application is land at 88 Brandon Road, Runcorn and at 6 Merriwa Street, Sunnybank Hills and the Archerfield Airport Lease 700706560 being the lease of Hanger 607[779].  All property is registered in the name of this Applicant.

[779]Affdt Kent of 11^th December 2003 pargraph 31 (Q00059234 at p.5).

(b)The registered office of this Applicant is also 400 Wirraway Avenue.

(c)The Applicant was previously named Steve Hart Family Holdings Pty. Ltd.  The name changed to Nemesis on 1^st October, 2001.

(d)In December, 2001 Mr. Hart requested a Kevin Smith to do a fee estimate for the design of units in a proposed development at 88 Brandon Road, Runcorn.  After the fee estimate was provided, Mr. Hart then instructed Mr. Smith to proceed with the project.  Following further meetings and revisions of the scope of the work and fees, a revised estimate was issued and on 5^th September, 2002 Mrs. Hart phoned Mr. Smith and left a message for him saying: “...... Steve says to go ahead”[780].

[780]Affdt Smith of 15^th October 2003 pargraphs 8 - 14 (Q00010839 at p.3-4) & Ex KRS 13 (Q00010854)).

(e)A contract between Nemesis Pty. Ltd and Brandon Road Developments Pty. Ltd relating to 88 Brandon Road had a covering letter marked to Mr. Hart’s attention.  That contract is undated and unstamped and was subject to finance within fourteen days.  There is however no evidence that finance was obtained on the date that the contract was completed.

(f)In a later joint venture agreement, that same land is referred to as owned by Sea Fury Enterprises Pty. Ltd, although there is no evidence of an agreement or transfer of the property to that company.  (NOTE: Mrs. Shirley Peterson is a Director of Sea Fury Enterprises Pty. Ltd - “Sea Fury” is a type of aircraft and is one of the aircraft being restrained).

(g)That joint venture agreement (which makes no mention of Nemesis Pty. Ltd) is not stamped and is different to the unstamped and unsigned joint venture agreement referred to by a Lisa Bundesen (forensic accountant) and produced as an Exhibit to her report[781].

[781]Affdt Bundesen of 23^rd June 2003 p.86 (Q00010833 at p.91) and Exhibit 148 to that Affidavit p.905-915. (B00040497)

(h)In November, 2002 Mr. Hart sent an email to Mark McIvor at Equitrust saying:

“I will have the Brandon Road property refinanced prior to the 15^th”.

(i)In that same email, Mr. Hart goes on to say:

“I hope to have four of the houses also refinanced prior to the 15^th.”

(j)The property at 6 Merriwa Street is one of those properties[782].

[782]Exhibit 24 (Q00064197).

(k)Mr. Hart’s son, Troy, lives in 6 Merriwa Street.

(l)Hanger 607 is leased from Archerfield Airport Corporation (AAC) and Mr. Hart represented Nemesis Pty. Ltd in dealings with that corporation.

(m)The property, the subject of this application, is included on a list of assets headed:

“Statement of Position Steven Irvine Hart and Related Entities as at 4/12/00”. (Ex 24, p.5061 Appeal Record Book)

(n)Mr. Hart made financial arrangements with a Dr. Ambler and a Dr. Fleming such that they were each offered a one-third share in the Brandon Road property in lieu of the repayment of outstanding loans to Flying Fighters Pty Ltd.

(o)In February 2003 Hart attempted to raise $500,000.00 finance on behalf of  Nemesis.[783]

[783]Transcript p 508 L34-60 (Q00003946 at p.17)

(p)There is a charge over the property the subject of this application to Merrell Associates Pty. Ltd.  Mr. Hart is again thus in a position to ensure that the subject property cannot be sold without his consent.

(q)Mr. Arnot, although a director, was not involved with any discussions to do with the land at Brandon Road.

YAK 3 Investment Pty. Ltd.

(a)The property, the subject of this application is two hangers at Archerfield Airport.

(b)The first is Lease No. 700515084 - this is workshop building 101.  The building is occupied by Aviation Welding Australia Pty. Ltd, a company operated by Mr. Hart’s brother and his wife[784].

[784]Affdt Kent of 11^th December 2003 pars 32–35 (Q00059234 at p.5-6).

(c)The second is Lease No. 703146442 Sub-lease 70447517 which relates to 404 Wirraway Avenue.

(d)The registered office address for this company is 400 Wirraway Avenue.

(e)This company was previously called Steve Hart Family Holdings No. 3 Pty. Ltd.  The change of name occurred on 1^st October, 2001.

(f)Despite Mr. Hart having resigned as director in 1993, he:

(i)negotiated the lease of 400 Wirraway Avenue;

(ii)advised the architect in relation to plans for the hanger; and

(iii)settled the contract price with the builder and organised finance.

(g)Back on 24^th March, 1999 Mr. Hart wrote to Mr. Kent, the Managing Director of the AAC under the letterhead of this Applicant asking for a reduction in the rent for the land.  He said, “You are aware that I wish to have a privately owned museum for aircraft.”[785]

[785]Exhibit 30 (Q00064203).

(h)In meetings with Mr. Leach (the builder who constructed the hanger at 400 Wirraway Avenue), Mr. Arnot referred to needing to talk to Mr. Hart before approving major issues[786] and a fax to that effect is in evidence[787].

[786]Affdt Leach of 15^th October 2003 pargraph 5, (Q00010856 at p.2).

[787]Fax of 5^th July, 2000 which is part of Ex 18 (Q00010059 & Q00010061).

(i)Mr. Leach says that he met with Mr. Hart who told him the price that he wanted the hanger built for.  He submitted a revised quote by fax and was then advised that it had been accepted[788].

[788]Transcript p.714 L10-30 (Q00011388 at p.111).

(j)Mr. Hart reviewed the plans for the construction at 400 Wirraway Avenue[789].

[789]Affdt Smith of 15^th October 2003 pargraph 5, (Q00010839 at p.2).

(k)Ms. Petersen wrote to solicitors, Geoff Klooger & Associates and said:

“Mr. Hart has asked me to forward to you a copy of a letter that we received today from Lowes & Co., Solicitors in regard to the above”[790] and later, “As per your telephone conversation with Steve Hart would you transfer the following as requested”[791].

[790]Exhibit 28 (Q00064201).

[791]Affdt Hawthorn of 12^th August 2003 Ex MJH2 p.161 (Q00010249).

(l)In a letter from Geoff Klooger & Associates to the solicitors for the AAC they say:

“We advise that Mr. Hart is currently reorganizing his affairs and wishes to assign the lease from Steve Hart Family Holdings No. 3 Pty. Ltd to Harts Flying Fighters Pty. Ltd”[792].

[792]Affdt Kent of 11^th December 2003 Ex RCK 10 (Q00059234).

(m)Mr. Arnot refers to the hanger as Mr. Hart’s hanger in a fax to AAC[793]. 

[793]Fax of 23^rd February, 2001 Part of Ex 18 (Q00010431) and Affdt Kent of 23^rd February, 2004 Ex A (Q00060141 at p.6) and pargraph 4 (Q00060141 at p.2).

(NOTE:  Arnot said that this was a reference to Hanger 405 but Mr. Kent states that it is a reference to Hanger 400).

(n)Mr. Hart thanked Phil Adams in writing for refinancing the loan[794].

[794]Ex 42 (Q00064212).

(o)Dr. Ambler was approached by and then received advice from Hart in relation to providing a guarantee and in fact did so in favour of Perpetual Nominees Limited in support of a $650,000.00 loan.  In return, he received an option to purchase the hanger at 400 Wirraway Avenue[795].

[795]Transcript p.258 L2-11 (Q00003943 at p.91); Ambler Affdt 8^th July 2003 par. 7 (Q00010830 at p.3).

(p)Dr. Ambler did not know that a charge was registered over the Applicant’s assets by Merrell Associates Limited on 8^th January, 2002[796], though he was a director at the time.

[796]Transcript P258 L 44 - P259 L13 (Q00003943 at p.91).

(q)On 1^st November, 2001 Hanger 101 was allegedly transferred to Bubbling Springs Pty. Ltd as trustee of the Nemesis Group Superannuation Fund.  It is further alleged that the trustee of this fund has been changed to Alfredton Pty. Ltd.  This transfer has not however been approved by the AAC, was not registered and the documents are unstamped[797].  The beneficiaries of the Nemesis Group Superannuation Fund are Hart, Mrs. Hart and Ms. Petersen[798].

[797]Affdt Bundesen of 23^rd June 2003 Ex 52 pp.659-660. (B00040402)

[798]Transcript P563 L21-22 (Q00003946 at p.72).

(r)The charge mentioned in (n) above ensures that the subject property cannot be sold without Hart’s consent.

Bubbling Springs Pty. Ltd.

(a)The property the subject of this application is a house at 27 Samara Street, Sunnybank and several lots at Doonan Road, Grandchester.

(b)This Applicant was previously called Steve Hart Family Holdings No. 2 Pty. Ltd.  The name changed to Bubbling Springs Olive Grove Pty. Ltd. on 15 December, 2000 and then to Bubbling Springs Pty. Ltd.

(c)In correspondence to Mr. Klooger on 13 December, 2000 Ms. Petersen says -

“As per your telephone conversation with Steve Hart would you transfer the following as requested”

enclosing documents and requesting that the property at 27 Samara Street be transferred from this Applicant to YAK 3 Investments Pty. Ltd.[799]

[799]Affdt Hawthorn of 12^th August 2003 Ex MJH 2 p.164 (This document is not available on the        etrial system)

(d)Mr. Hart wrote to the National Australia Bank on 29 May, 2001 and offered security over the property at 27 Samara Street, Sunnybank.[800]

[800]Affdt Hawthorn of 12^th August 2003 Ex MJH 2 pp.161-162 (Q00010249)

(e)On 27 November, 2002 Hart wrote to Equitiloan saying - “I hope to have 4 of the houses refinanced prior to the 15^th.”  The property at 27 Samara Street is one of those four houses.[801]

[801]Exhibit 24 (Q00064197).

(f)The Samara Street property also appears on the “Statement of Position Steven Irvine Hart and Related Entities as at 4 December, 2000”.

(g)Mr. Hart wrote to Phil Adams thanking him for refinancing the loan.[802]

[802]Ex 42 (Q00064212)

(h)Mr. Hart attended and participated in meetings with the Ipswich City Council and Powerlink in relation to the Doonan Road, Grandchester property.[803]

[803]Affdt Bell of 13^th October 2003 (Q00060103).  Affdt Ellery of 12^th August 2003 pargraph 14 (Q00010812 at p.3), and Ex MTE2 (Q00060111), Affdt Venn of 2^nd April 2004     pargraph 8 (Q00010859 at p.3),  and Exhibits JNV1, JNV2, JNV3 (Q00010860, Q00010861 &      Q00010862).

(i)An Application for “airsports” to be conducted at the Grandchester site was refused.  A subsequent meeting between Bubbling Springs, the Ipswich City Council and the objector, Powerlink, was held on 4 April, 2002.[804].  Despite the fact that Hart was no longer a director, he did most of the talking and negotiating. 

[804]Exhibit 21 (Q00064195 at p. 3-5)

(j)Mr. Arnot is asked by Hart to report to Hart in relation to debt collectors being appointed by a Nigel Venn to collect fees incurred by this Applicant in relation to the Doonan Road property.

(k)Hart approves the drawings which are attached to a letter of 17 March, 2003.[805]  Mrs. Hart has written on the letter “Ring and make sure it is lodged.  Steve has said it is okay”.

[805]Exhibit 21 (Q00064195 at p. 6-7)

(l)Both Dr. Fleming and Mr. Arnot were directors at the relevant time, but neither was advised of a sale of real property from this Applicant to Dr. Ambler.[806]

[806]        Transcript P371 L2-15 (Q00003944 at p.99) Transcript P410 L19-33 (Q00003945 at p.25)

(m)Sometime after Dr. Fleming makes a $650,000.00 loan he was offered an option to purchase land at Doonan Road, Grandchester by Hart.

(n)Dr. Fleming, although a director at the time, was not aware of the proposal for an airstrip on the land at Doonan Road, Grandchester or of the negotiations with the Ipswich City Council.[807]

[807]Transcript P371  L18-36 (Q00003944 at p.99)

(o)Mr. Arnot, although a director at the time, was not aware of the option given to Dr. Fleming over the land at Grandchester.[808]

[808]Transcript P410 L34-60 (Q00003945 at p.25)

(p)A fixed and floating charge over the assets of the Applicants in favour of Merrell Associates Limited was registered on 12 February, 2002.  Mr. Hart is in a position to ensure that such assets cannot be sold without his consent.

General Evidence

(a)Although available to give evidence, Mr. Hart did not do so[809] - thus allowing the Court to draw an adverse inference to the Applicants’ cases (Jones -v- Dunkel (1959) 101 CLR 298);

[809]Transcript P185 L54 - p.186 L8 (Q00003943 at p.18 & 19)

(b)Mr. Hart’s office is a large, well furnished, private office at 404 Wirraway Avenue.  Mrs. Hart and Ms. Petersen however have small work stations positioned outside his office.[810]

[810]Video of search Ex32 (available from Registry); Transcript P589, 597, 599 & 602 (Q00003946 p. 99, 107, 109 & 112)

(c)Comments made and the demeanour of Mr. Hart, Mrs. Hart and Ms. Petersen during the search are suggestive of Mr. Hart being “in charge”.[811]

[811]See footnote 42

(d)The directors of the Applicants at no time make any attempt to stop Hart from referring to the assets as his.

(e)During the execution of the search warrant, Hart says he “wants his guys climbing in and out of the planes, not the police.”[812]

[812]Video of search Ex32 (available from Registry); Transcript P589, 597, 599 & 602 (Q00003946 p. 99, 107, 109 & 112)

(f)Mr. Arnot stated under cross-examination “Mr. Hart seems to have influence with Shirley and with Laura and by applying pressure they - we can hopefully get the bills paid.” [813]

[813]Transcript P169, L37-41 (Q00003942 at p.84)

(g)Ms. Petersen agreed in cross-examination that there is nothing independent to show that there was discussion amongst the directors about a particular issue.[814]

[814]Transcript P464  L59 - P466 L3 (Q00003945 at p. 79 & 81)

(h)Mr. Hart assisted in the preparation of some of the Applicants’ Affidavits.[815]

[815]Transcript P124 L30-31 (Q00003942 at p.37)

(i)Each of the four Applicants is the trustee of a discretionary trust.  The beneficiaries are set out in Exhibit 25 (the flow chart) and include relatives of Ms. Petersen, Mr. Hart’s parents and his children.  All beneficiaries are linked to him by personal or family relationships.

(j)Mr Hart deals with the assets of the different companies without regard to the different corporate entities or trusts. 

(k)Mrs Laura Hart and Ms Petersen describe themselves as follows in their income tax returns :

(i)“personal assistant” in respect of Mrs Hart[816]

[816]Exhibit 40 (Q00010366)

(ii)“secretary” in respect of Ms Petersen [817]

[817]Exhibit 23 (Q00010368)

(l)In a fax addressed to Mr Ivan Sandrici (NAB), Mr Arnot refers to Ms Petersen as ”Shirley from Mr Hart’s office” [818].

[818]Fax dated 16/10/00 from Nigel Arnot – part of Exhibit 19 (Q00010449)