Commissioner of State Revenue v Aidlaw Pty Ltd
[2010] VSC 555
•8 December 2010
25
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST F
No. 8583 of 2005
| THE COMMISSIONER OF STATE REVENUE (IN HIS CAPACITY AS THE COMPTROLLER OF STAMPS) | Plaintiff |
| v | |
| AIDLAW PTY LTD (ACN 055 407 899) (FORMERLY KNOWN AS AID & ABET PTY LTD) & ORS (according to the schedule attached) | Defendants |
---
JUDGE: | Davies J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25 October 2010 | |
DATE OF JUDGMENT: | 8 December 2010 | |
CASE MAY BE CITED AS: | Commissioner of State Revenue v Aidlaw Pty Ltd (No. 4) | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 555 | |
---
TAXATION – Moneys received as and for stamp duty – Where monies not remitted to Commissioner – Whether defendants have to show cause – Whether Defendants managed and controlled activities of company – Whether stamp monies used for the benefit of the Defendants – Where Companies associated with Defendants failed to pay stamp duty – Stamps Act 1958 s 40
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N. Lucarelli QC with Mr J. Paterson | The Solicitor for the Commissioner of State Revenue |
| For the Second and Third Defendants | Mr F. O’Loughlin | Michael Sandor & Associates |
HER HONOUR:
The plaintiff (“the SRO”) has sought an order under s 40(2) of the Stamps Act 1958 (Vic) (“the Act”) against each of the defendants, other than the fourth defendant (“Mr Bulzomi”) against whom the SRO already has an order under s 40(2). An order under s 40(2) of the Act would require the defendants to show cause why they should not deliver to the SRO an account upon oath of all duties and sums of money received by them and why the same should not be forthwith paid to the SRO. The order, if made, will be in aid of the SRO seeking to recover the duty from the defendants under s 40(1) of the Act. Section 40(1) of the Act provides that where a person who has received “any sum of money as or for duty” and “neglects or omits” to pay it to the SRO or “improperly withholds or detains” the money, that person “shall be accountable for the amount of such duty, and the same shall be a debt due from him to Her Majesty and recoverable as such”. Section 40(3) provides that the Court may “make absolute” any order made under s 40(2) and “enforce” that order by “attachment or otherwise”. In The Commissioner of State Revenue v Bulzomi[1] Dodds-Streeton JA (with whom Redlich JA and Hargave AJA agreed) stated that:
… as the language of s 40(3) of the Stamps Act expressly indicates, an application under s 40(2) institutes a proceeding in respect of a substantive right (to recover the debt under s 40(1)) and, with s 40(3), provides for the remedies, enforcement and costs of the proceedings. An application under s 40(2) is a vehicle by which the court’s jurisdiction is invoked, and the application is directed at, connected with and therefore, in ‘respect of, the substantive right to recover the debt under s 40(1).[2] (references omitted)
Her Honour also observed that an applicant under s 40(2) is not assured of obtaining the orders provided for in ss 40(2) and (3).[3] The Court, in the language of s 40(2), “may … grant an order” for the “purpose” of s 40(1) “upon such affidavit as appears sufficient”. To obtain a show cause order there must be sufficient evidence before the Court to support the contention that the person against whom the order is sought has failed to remit to the SRO moneys that the person received as duty thereby giving rise to the substantive right of the SRO to recover those moneys as a debt due by the person, as prescribed by s 40(1) of the Act.
[1][2009] VSCA 99 (Unreported, Redlich, Dodds-Streeton JJA, Hargrave AJA, 18 May 2009).
[2]Ibid [94].
[3]Ibid.
These proceedings were instituted in 2005 but the application for a s 40(2) show cause order against the remaining defendants was made only now because of a challenge by Mr Bulzomi to the ability of the SRO to rely on the procedure provided for under s 40(2) of the Act. In short compass, Mr Bulzomi argued that the process was not available because the Act was repealed when the action commenced, although the repeal occurred after the relevant events relied on by the SRO. In October 2007 Mandie J (as his Honour then was) heard the application for a s 40(2) show cause order against Mr Bulzomi who, at the time, was the only defendant who had entered an appearance. The SRO informed the Court that it sought to have the matters raised by Mr Bulzomi in opposition to the show cause order determined first, before proceeding against the other defendants.[4] In November 2007 Mandie J concluded that the SRO had made out a prima facie case for a show cause order against Mr Bulzomi.[5] Nonetheless, his Honour did not make the order because his Honour accepted the submission on behalf of Mr Bulzomi that the show cause procedure ceased to be available to the SRO on the repeal of the Act. The SRO appealed that decision. In May 2009 the Court of Appeal allowed the appeal[6] holding that the show cause procedure was available to the SRO despite the repeal of the Stamps Act. The matter was remitted back to the trial division for a show cause order to be made against Mr Bulzomi and orders were made accordingly.
[4]Commissioner of State Revenue v Aidlaw Pty Ltd [2007] VSC 475 (Unreported, Mandie J, 23 November 2007) [4].
[5]Ibid 115.
[6]Commissioner of State Revenue v Bulzomi [2009] VSCA 99 (Unreported, Redlich, Dodds-Streeton JJA, Hargrave AJA, 18 May 2009).
In this application against the remaining defendants, the SRO has relied in support on the same affidavits that were before Mandie J, supplemented by one further affidavit. The matters deposed to in those affidavits have not presently been contradicted, although the second and third defendants sought leave at the commencement of the hearing of the application to file and rely on responding affidavits and to cross-examine the SRO’s deponents. Leave was refused for reasons delivered in a ruling given that day.[7]
[7]Commissioner of State Revenue v Aidlaw Pty Ltd (No. 3) (Unreported, Davies J, 25 October 2010).
It is convenient to start with the facts that Mandie J derived from the affidavits to conclude that a prima facie case[8] had been shown on the affidavits for a show cause order against Mr Bulzomi, in so far as those facts are relevant to the remaining defendants:
[8]A show cause order is interlocutory in nature and the criterion for an order is that there must be a real case to be investigated. The standard of proof is a “prima facie” case. See: Australia and New Zealand Banking Group Ltd v David (1991) 105 FLR 403 and the cases referred to in that decision
[7] The first defendant ("Aid & Abet") was incorporated on 29 April 1992. On 25 September 2002, Aid & Abet changed its name to Aidlaw Pty Ltd.
[8] The activities of Aid & Abet of relevance are those from 1999 to the end of 2001. During that period the activities of Aid & Abet were controlled by Mr Bulzomi, Spiros Kalotihos (the second defendant) and Anne Maree Kalotihos (the third defendant) ("the non-corporate defendants").
[9] The following persons were directors and/or secretaries of Aid & Abet.
[10] Anne Maree Kalotihos and Wendi Crupi were the directors of Aid & Abet and Anne Maree Kalotihos was its secretary during 1999 and until 15 March 2000. Anne Maree Kalotihos was the sole director and secretary of Aid & Abet from 15 March 2000 after Wendi Crupi ceased to be a director. Anne Maree Kalotihos ceased to be the sole director and secretary of Aid & Abet on 8 June 2001. Mr Bulzomi was the sole director and secretary of Aid & Abet from 8 June 2001 until 5 September 2002.
[11] On 5 September 2002, Mr Bulzomi ceased to be a director and secretary and from that date until 18 October 2002, Spiros Kalotihos was the sole director and secretary of Aid & Abet. From 18 October 2002 until 28 February 2005, the sole director and secretary was one "Mika". Mika ceased to be a director and secretary on 5 September 2002 and, from that date, the sole director and secretary of Aid & Abet was "Xing". There is real doubt as to the existence of Xing. If he does exist, there is a real doubt as to his whereabouts and to the existence of his stated principal residence.
[12] Wendi Crupi and Anne Maree Kalotihos were shareholders of Aid & Abet from 1999 until 2000. In 2000 Wendi Crupi ceased to be a shareholder and Dominic Crupi became a shareholder in her place. In 2002, Anne Maree Kalotihos and Dominic Crupi ceased to be shareholders and Mika became the sole shareholder in their place. Mika ceased to be the sole shareholder on 28 February 2005 when Xing became the sole shareholder.
Aid & Abet as an authorised person
[13] Section 40A(1) of the Act empowered the Commissioner, by gazettal, to declare a person to be an "authorised person" in relation to any class of instruments chargeable with duty.
[14] Pursuant to s 40A(3)(a) of the Act, an authorised person was permitted to endorse relevant instruments for stamp duty. If an instrument was so endorsed by an authorised person in the prescribed manner, the instrument was deemed to be stamped under the Act (as the case may be): to the amount of stamp duty shown on the endorsement; (or as exempt from duty).
[15] On 12 December 1996 Aid & Abet was declared to be an authorised person. The main classes of instruments that Aid & Abet was permitted to endorse were transfers of land, mortgages, declarations of trust and leases.
[16] As an authorised person Aid & Abet was allotted the authorised person number "AP 318". That number was to be used on all endorsements made by Aid & Abet which, along with its trading name, needed to be incorporated into the approved rubber stamp to be used by it to endorse instruments.
[17] As an authorised person, Aid & Abet was required to ensure that the endorsement of each instrument for stamp duty contained the following: the expression "Vic stamp duty"; the AP number (i.e. AP 318); the amount of stamp duty (if any) in respect of which the instrument was endorsed; a Transaction Number; the date of endorsement; and the signature of a person approved by the Commissioner to endorse instruments (i.e. an authorised signatory) on behalf of Aid & Abet. The first two items of information were customarily endorsed by way of a rubber stamp and the rest of the information above was customarily endorsed by hand.
[18] As an authorised person Aid & Abet was required to report the instruments and the amounts of stamp duty which it had endorsed during the specified period. At the outset Aid & Abet was required to report weekly to the Commissioner. Later, as a result of a request made by Aid & Abet, it was to report monthly.
[19] As an authorised person Aid & Abet was required to show in each weekly statement or monthly statement certain "prescribed particulars", namely: the total number of each class of instrument endorsed by Aid & Abet for the relevant week or month; the total amount of stamp duty that Aid & Abet had endorsed in that week or month in respect of each class of instrument; and if no stamp duty was endorsed during a relevant week or month, then Aid & Abet was required to forward a relevant weekly statement or monthly statement to the Commissioner having entered the word "nil" in the total stamp duty amount column of that statement.
[20] At the time that Aid & Abet lodged a weekly statement or monthly statement it was required to pay to the Commissioner the total amount endorsed for stamp duty during the relevant week or month. The payment of that amount could be made by cheque(s) made payable to the State Revenue Office ("SRO") including cheques drawn by Aid & Abet, by clients of Aid & Abet or in cash.
[21] As an authorised person Aid & Abet was required to maintain various records for three years. The records to be maintained had to be sufficient to demonstrate that the correct stamp duty had been accounted for on the weekly statements or monthly statements forwarded to the SRO. For example, in relation to a transfer of land that had been endorsed for stamp duty, Aid & Abet was required to maintain: the contract of sale or copy thereof; and the vendor's statutory declaration under s 63A of the Act. Aid & Abet was told that the maintenance of audit trail information was mandatory.
[22] The Commissioner supplied to authorised persons (such as Aid & Abet) the Paradox Runtime Software Package (more commonly referred to as "the DRS computer software program") to enable the electronic recording of all of the details of endorsements of instruments for stamp duty sufficient to: enable Aid & Abet to complete or produce the weekly statements or the monthly statements; satisfy the Commissioner's requirements for the making and keeping of proper electronic records of endorsements for stamp duty made by Aid & Abet as an authorised person.
Aid & Abet's activities as an authorised person prior to October 1999
[23] Prior to October 1999 Aid & Abet generally complied with its reporting and payment obligations as an authorised person.
[24] In the period prior to October 1999, Aid & Abet's authorised person's activities operated on the following basis: it received from each client (including a firm of solicitors, Goldstein Partners) a separate cheque made payable to the SRO for the amount of stamp duty payable on each instrument or set of related or group of instruments of that client to be remitted to the Commissioner; upon entering details of the instruments for which it had received such cheques in the computer containing the DRS software program, Aid & Abet was able to print out the relevant transaction reports for each week as required which included various details of those instruments and a corresponding A&A weekly statement containing the prescribed particulars of those instruments in respect of the period covered by the statement.
[25] On the lodgement of the weekly statement, Aid & Abet deposited with the Commissioner each of the cheques it had received from its clients (including Goldstein Partners) in respect of the instruments the prescribed particulars of which it had included in that statement.
[26] As a result, prior to October 1999, Aid & Abet appears to have paid to the Commissioner the stamp duty payable on each instrument or related group of instruments it had endorsed by providing corresponding cheques made payable to the SRO which it had received from its clients (including Goldstein Partners).
Aid & Abet's activities as an authorised person during the October 1999 to June 2001 period
[27] However, in the period from October 1999 to June 2001, Aid & Abet did not report many of the endorsements it had made. Aid & Abet and the non-corporate defendants paid to the Commissioner only a fraction of the stamp duty moneys that were to be remitted to the Commissioner and that were deposited into Aid & Abet's bank accounts by Goldstein Partners. The system employed to achieve that end was described by the plaintiff as "the Goldstein System" and I will adopt that terminology.
[28] During the same period, Aid & Abet processed instruments received for endorsement from "non-Goldstein" clients in the same way that it had done prior to October 1999.
The Goldstein System
[29] The operation of the Goldstein System may be summarised as follows:
• Goldstein instruments which were to be endorsed for stamp duty by Aid & Abet were so endorsed;
•Goldstein transaction sheets were prepared and were forwarded to Goldstein Partners on a weekly basis recording, among other things, the details of the Aid & Abet endorsed Goldstein instruments and the amounts of stamp duty endorsed by Aid & Abet;
•Aid & Abet requested Goldstein Partners to deposit the stamp duty money payable on Goldstein instruments into Aid & Abet's bank accounts;
•the total stamp duty due on the Goldstein instruments listed on the Goldstein transaction sheet which was to be remitted to the Commissioner was deposited by Goldstein Partners into Aid & Abet's bank accounts.
[30] In communications with investigators of the SRO, Mr Bulzomi ultimately confirmed that the Goldstein System operated in the foregoing manner. He also confirmed that Goldstein Partners was Aid & Abet's major client.
[31] While Aid & Abet and the non-corporate defendants operated the Goldstein System (during the October 1999 to June 2001 period), Aid & Abet:
• failed to disclose prescribed particulars of a number of the non-Goldstein client instruments which the Commissioner's investigators found that it had endorsed during that period in the weekly statements and monthly statements which it lodged at the SRO;
•utilised the cheques made payable to the SRO received in respect of the undisclosed non-Goldstein client instruments to make payments to the Commissioner for stamp duty payable on instruments which predominantly were Goldstein instruments which it had endorsed;
•appropriated or otherwise improperly withheld the corresponding amount of the stamp duty moneys it had directly received from Goldstein Partners to be remitted to the Commissioner;
•had stamp duty moneys deposited into Aid & Abet's bank accounts; and
•did not pay at least $3.784 million of stamp duty money received as or for duty to the Commissioner. This represented approximately one-third of the stamp duty money deposited into Aid & Abet's bank accounts by Goldstein Partners for Goldstein instruments endorsed by Aid & Abet during the October 1999 to June 2001 period.
Position of the non-corporate defendants
[32] The non-corporate defendants controlled the activities of Aid & Abet including:
• directing that stamp duty money be deposited into Aid & Abet's bank accounts or paid by cheque in favour of Aid & Abet;
•under-reporting to the SRO for most of the relevant periods the amount of stamp duty due;
•determining the amount of stamp duty to be paid out of Aid & Abet's bank accounts to the SRO for each relevant period (which generally was less than the stamp duty actually due); and
•operating Aid & Abet's bank accounts including the withdrawals or transfers of stamp duty moneys from these accounts.[9]
[9]Commissioner of State Revenue v Aidlaw Pty Ltd [2007] VSC 475 (Unreported, Mandie J, 23 November 2007) [7] – [31].
I adopt those facts in the present application, derived as they are from the same evidence before the Court.
I now turn to the specific circumstances of the defendants in this application. The evidence relevant to them is extensive and has been referenced and summarised in the outline of submissions of the SRO. I have separately reviewed that evidence but it is convenient to repeat parts of those submissions because they contain a useful analysis of the evidence.
A. Spiros Kalotihos
(a) Control of the activities of Aid & Abet
The second defendant (“Mr Kalotihos”) was a director of Aid & Abet for a short time only in 2002. Nonetheless the evidence showed that Mr Kalotihos not only had substantial involvement in the day to day business of Aid & Abet, but that the affairs of the company were conducted at his direction and under his control. There is evidence that he:
(a) acted as manager, and gave instructions on the day to day running of the business and described himself as the “managing director” or “manager” of Aid & Abet;
(b) attended meetings of Aid & Abet and was involved in its management meetings;
(c) oversaw the work carried out by the managers and employees of Aid & Abet, including Mr Bulzomi and the third defendant (“Mrs Kalotihos”), who is his wife and also a director of the company for a period of time;
(d) oversaw Aid & Abet’s endorsement activities including the establishment and operation of the Goldstein System and gave directions to Aid & Abet’s employees in that regard;
(e) dealt with the financial affairs of Aid & Abet;
(f) hired employees and was involved in the determination of the remuneration of employees; and
(g) spent six to ten hours a day on average at the offices of Aid & Abet.
The management by Mr Kalotihos of Aid & Abet also included extensive involvement in its banking activities. The evidence showed, in particular, that he:
(a) opened bank accounts for Aid & Abet and nominated signatories to those accounts;
(b) had authority to, and operated, those trading accounts;
(c) signed cheques drawn on those accounts totalling $11,748,600, which included cheques made payable to the SRO for duty;
(e) monitored those accounts (including bank balances) and the cash flow of Aid & Abet; and
(g) gave instructions to Aid & Abet’s employees as to banking.
(b)Involvement in the management and control of the endorsement activities of Aid & Abet
The evidence showed that during October 1999 to June 2001 Mr Kalotihos was involved in and, with Mr Bulzomi, jointly controlled the endorsement activities of Aid & Abet in that:
(a) they oversaw and directed the Goldstein System;
(b) they directed the payment of duty to the SRO and signed cheques for the payment of duty;
(c) they approved the statements for filing with the SRO; and
(d) they directed and supervised the employees of Aid & Abet with respect to endorsing instruments and paying stamp duty.
Mandie J concluded that the evidence showed the following about the procedure followed for endorsement:
Allocation and Supervision of Mr Bulzomi of endorsement work by Aid & Abet employees
[47] During the October 1999 to June 2001 period (when the Goldstein System operated) the following procedure was followed for endorsements:
·when instruments for endorsement were received at Aid & Abet they were placed into yellow folders and an instruction sheet from the client was stapled to the front of each yellow folder;
·unless exempt from stamp duty, the non-Goldstein clients’ instruments were accompanied by cheques made payable to the SRO (and not Aid & Abet) for stamp duty and cheques for the lodgement fees (if any). These cheques were stapled to the inside of the yellow folders. The yellow folders with Goldstein instruments did not usually have cheques stapled to the inside as Goldstein Partners paid for the stamp duty and lodgement fees in a lump sum to Aid & Abet for the Goldstein instruments endorsed;
·once the yellow folders were prepared, a reference number was allocated to each folder (and written on the instruction sheet). The reference number was used to keep track of the instrument(s) in each folder and to enable the client to be billed. After the reference number was allocated, the yellow folders were provided to Mr Bulzomi. He strictly controlled the allocation of the instruments to be endorsed by himself or by employees of Aid & Abet;
[48] Once Mr Bulzomi had allocated instruments to be endorsed by Aid & Abet employees they took the following steps:
·the amount of stamp duty payable on an instrument was calculated and checked against that recorded on the instruction sheet provided by the client and the relevant cheque made payable to the SRO (if any);
·the details of the proposed endorsement were keyed in on the computer that ran the DRS software program. Once the details of the proposed endorsement were entered into the computer, it re-confirmed the amount of stamp duty that was payable for that instrument and recorded the fact that the instrument was endorsed;
·the rubber stamp was impressed on the instrument and the details required by the rubber stamp were completed;
·the cheques made payable to the SRO were detached from the yellow folders containing the instruments. The reference number on the instruction sheet was written on the reverse side of each of the cheques. Those cheques were placed in a drawer of the endorsing table. (The yellow folders for the Goldstein instruments did not usually have cheques for stamp duty or lodgement fees attached to them);
·the details of the amount of stamp duty endorsed on non-Goldstein clients’ instruments were recorded on a document known as a Various Transaction Sheet which was maintained on a weekly basis;
·the details of the amounts of stamp duty endorsed on Goldstein instruments were recorded on a Goldstein transaction sheet which was also maintained on a weekly basis; and
·the yellow folders with the endorsed instrument(s), which needed to be lodged at the Land Registry, were placed on the lodging table.
…
Mr Bulzomi dealing with enquiries by clients in connection with the endorsement of instruments
[50] If an enquiry as to the amount of stamp duty to be endorsed on an instrument arose (generally as a result of a difference between the amount calculated by an Aid & Abet employee compared with the amount listed on the instruction sheet or the attached cheque made payable to the SRO), it was necessary to seek clarification of the discrepancy from the client (including Goldstein Partners). Aid & Abet employees were under direction from Mr Bulzomi that they were to prepare a draft fax about the mismatch for approval by himself or, in his absence, Spiros Kalotihos. Mr Bulzomi approved most of those faxes. The rest were approved by Spiros Kalotihos. After the faxes were approved, they were sent to the client (including Goldstein Partners). Any mismatch in relation to Goldstein instruments was first discussed with Mr Bulzomi, or in his absence, Spiros Kalotihos, before a fax was prepared and approved by him for sending to the client. The client, including Goldstein Partners, would respond to the enquiry by speaking with the Aid & Abet employee responsible or with Mr Bulzomi when the Aid & Abet employee could not resolve the mismatch with the client.
Printing transaction reports
[51] At Aid & Abet, transaction reports were produced at around the same time the corresponding weekly statements or monthly statements were produced using the DRS software program on the Aid & Abet computer in the endorsing area. The transaction reports were generally printed by Mr Bulzomi. When a Transaction Report was required by an Aid & Abet employee, it was necessary to request Mr Bulzomi to print it out. Once transaction reports were printed out and the entries therein checked as stated below they were kept in a file on a table in the endorsing area.
Directing and supervising Aid & Abet employees to check the information in the transaction reports against that in corresponding Goldstein transaction sheets and other transaction sheets
[52] Following the printing out of each Transaction Report, as directed by Mr Bulzomi, Aid & Abet employees checked the information in the Transaction Report against that in the corresponding Goldstein transaction sheet(s) and other transaction sheet(s). The purpose of that task was to reconcile the stamp duty entries on the Goldstein transaction sheet(s) and the other transaction sheet(s) with the stamp duty entries in the corresponding Transaction Report. Once the Aid & Abet employees were satisfied that the information on the Transaction Report matched the details in the other sheets, the employees gave to Mr Bulzomi: the Transaction Report; the corresponding other transaction sheet(s); the corresponding cheques made payable to the SRO that had been placed in the drawer in the endorsing area; and the corresponding Goldstein transaction sheet(s).
[53] Having been provided with the Transaction Report, the other transaction sheet(s) and the Goldstein transaction sheet(s), Mr Bulzomi would later return them to Aid & Abet employees and they would be filed in a file or files kept in the endorsing area.
Mr Bulzomi directing and approving Goldstein transaction sheets and requesting payment of stamp duty money from Goldstein Partners
[54] At the end of each week during the October 1999 to June 2001 period, the Goldstein transaction sheet was forwarded by facsimile to Goldstein Partners with a request for payment of stamp duty money and lodgement fees. This was done after each of the Goldstein instruments listed in the Goldstein transaction sheet had been endorsed for stamp duty. The facsimile seeking the deposit of the stamp duty moneys and lodgement fees into Aid & Abet’s bank accounts or payment cheques drawn in favour of Aid & Abet were ordinarily approved and signed by Mr Bulzomi or in his absence Spiros Kalotihos. The facsimile and the Goldstein transaction sheet were not sent unless the total stamp duty sought was approved by Mr Bulzomi or, in his absence, Spiros Kalotihos.
[55] The stamp duty moneys requested from Goldstein Partners in the facsimile coversheet accompanied by the Goldstein transaction sheet, usually requested that the amount of stamp duty due be deposited into Aid & Abet’s bank accounts. Mr Bulzomi sometimes spoke to persons at Goldstein Partners about the deposit or payment of the stamp duty money referred to in the Goldstein transaction sheets. If the stamp duty money was not deposited into Aid & Abet’s bank accounts by Goldstein Partners, or paid to Aid & Abet by cheque as requested, then Spiros Kalotihos would telephone Goldstein Partners at Mr Bulzomi’s request and ask for the stamp duty money.
[56] The bank statements of Aid & Abet’s bank accounts confirm that, during the October 1999 to June 2001 period, the stamp duty money requested in the facsimile cover sheets accompanying the Goldstein transaction sheets was deposited by Goldstein Partners into Aid & Abet’s bank accounts.
…
Mr Bulzomi approving and signing weekly statements or monthly statements
[65] Aid & Abet was required by the SRO to lodge weekly statements (later monthly statements). Aid & Abet filed the weekly statements (and later) the monthly statements with the SRO. The weekly statements (and later) the monthly statements were printed out by Mr Bulzomi and they were filed by Aid & Abet employees at the request of Mr Bulzomi.
[66] Mr Bulzomi was the person at Aid & Abet responsible for the completion of the weekly statements and the monthly statements. Many of the weekly statements and some of the monthly statements filed by Aid & Abet with the SRO in respect of the October 1999 to June 2001 period were signed or approved by Mr Bulzomi. At least one of the weekly statements was signed by Spiros Kalotihos. Any of the weekly statements or monthly statements signed by Aid & Abet employees were so signed at the direction of or with the approval of Mr Bulzomi.
[67] On some occasions the SRO did not accept the weekly statements for filing because the total amount of stamp duty stated in it did not balance with the total amount of the cheques that the Aid & Abet employees had been given to pay with that document. On those occasions the Aid & Abet employees returned the weekly statements and the cheques that had been given to Mr Bulzomi. He took them away and he gave the weekly statements and cheques back to the Aid & Abet employees for them to re-file with the SRO.
Mr Bulzomi collecting and making use of cheques made payable to the SRO
[68] During the period starting from the end of June 2000, on some occasions both Mr Bulzomi and Spiros Kalotihos directed an Aid & Abet employee to remove from the yellow folders containing the non-Goldstein instruments (and being instruments that were yet to be endorsed) cheques made payable to the SRO and to provide those cheques to them. On those occasions either Mr Bulzomi or Spiros Kalotihos explained to the Aid & Abet employee that the cheques were needed to make up stamp duty payments due to the SRO because the stamp duty money from Goldstein Partners had not been deposited into Aid & Abet’s bank accounts. Mr Bulzomi and Spiros Kalotihos also said to the Aid & Abet employee that when Aid & Abet received from Goldstein Partners, stamp duty due on the relevant instruments would be replaced. On those occasions Mr Bulzomi and Spiros Kalotihos would generally ask an Aid & Abet employee to give them cheques made payable to the SRO for a general sum (approximately $80,000 to $100,000).
[69] As a result of those instructions the Aid & Abet employee removed cheques made payable to the SRO from the yellow folders containing unprocessed non-Goldstein instruments totalling an amount close to the amount that had been requested. Those cheques were then given to Mr Bulzomi or Spiros Kalotihos as directed. The Aid & Abet employee was told by Mr Bulzomi and Spiros Kalotihos that they would make a record of the cheques made payable to the SRO that were given to them so that they would know which cheques would be missing when Mr Bulzomi was given the other transaction sheet and the remaining cheques made payable to the SRO.
Selection and provision to Aid & Abet employees of cheques to be filed with the weekly statements and the monthly statements
[70] All the cheques made payable to the SRO (in respect of instruments endorsed during that week that had been placed in the drawer in the endorsement area) were collected together and attached to the relevant transaction sheet and provided to Mr Bulzomi or collected by him.
Drawing and/or signing Aid & Abet cheques payable to the SRO
[71] When a weekly statement (or monthly statement) was filed at the SRO by an authorised person, it was necessary for it to be accompanied by stamp duty money recorded as payable in that statement. During the October 1999 to June 2001 period it was usual for Aid & Abet to pay the stamp duty disclosed in the weekly statement (or monthly statement) by cheques made payable to the SRO along with an Aid & Abet cheque made payable to the SRO. The Aid & Abet cheque made payable to the SRO was for an amount equal to the difference (“cheque for the difference”) between the cheques made payable to the SRO and the amount stated in the weekly statement (or monthly statement) filed with the SRO.
[72] During the October 1999 to June 2001 period Mr Bulzomi drew and/or signed various cheques for the difference. These cheques were deposited with the SRO at the time that the weekly statements or monthly statements were filed along with cheques made payable to the SRO which Aid & Abet had received from its clients.
[73] The various cheques for the difference were drawn and/or signed by Mr Bulzomi.[10]
[10]Ibid [47] – [73].
The evidence in this application supports the involvement of Mr Kalotihos in the collection and application of stamp duty as set out by Mandie J.
Additionally, the evidence showed that:
(a) Mr Kalotihos also drew and/or signed cheques for the difference between the cheques made payable to the SRO and the amount stated in the weekly statement filed with the SRO. Mr Kalotihos confirmed in an examination conducted by the SRO that from October 1999 to 8 May 2000, he signed all of the 32 Aid & Abet cheques made payable to the SRO drawn on the company’s ANZ trading account, apart from two cheques for insignificant amounts. From November 1999 until October 2001, during the operation of the Goldstein System, Mr Kalotihos signed 43 Aid & Abet cheques made payable to the SRO; and
(b) that Mr Kalotihos actively participated in those activities.
(c) Stamp duty money present in Aid & Abet accounts
The bank statements of Aid & Abet bank accounts disclosed that during October 1999 to June 2001, Aid & Abet received money for duty from Goldstein Partners by way of deposit into Aid & Abet’s bank accounts. The SRO’s investigations have revealed that at least $3,784,590.30 in duty has not been remitted to the SRO. Significantly, as at 31 December 2001, the balance of the Aid & Abet bank accounts was $24,523.98. The evidence showed that during that period, Mr Kalotihos was drawing and signing cheques for his personal benefit and for the benefit of companies associated with him. The reasonable inference, based on the presently available material before the Court, is that Mr Kalotihos applied moneys directly and indirectly that Aid & Abet received as and for duty for his own benefit.
(d)Payments for the benefit of Spiros Kalotihos
During the operation of the Goldstein System, 8 payments totalling $306,245.01 were drawn from the account for Mr Kalotihos’ direct benefit. These included payments for the purchase by him of 2 Porsche motor vehicles and payment of credit card expenses. It is reasonable to infer from the presently available evidence that these payments were sourced from stamp duty monies paid into the Aid & Abet accounts.
Mr Kalotihos was the major shareholder of 89 Pty Ltd. The evidence showed that Mr Kalotihos oversaw or directed the payment by Aid & Abet to 89 Pty Ltd of $986,095.30. It is reasonable to infer from the presently available evidence that these payments were sourced from stamp duty monies paid into the Aid & Abet accounts.
The evidence showed that Mr Kalotihos oversaw or directed the payment by Aid & Abet to the fifth defendant, Monocote Pty Ltd, of $738,948.60. Monocote was a company owned and controlled by Mr and Mrs Kalotihos. Again, it is reasonable to infer from the presently available evidence that these payments were sourced from stamp duty monies paid into the Aid & Abet accounts.
The evidence indicated that KC Management is a company associated with Mr Kalotihos. The evidence also showed that Mr Kalotihos oversaw or directed the payment by Aid & Abet to KC Management, of $429,285.64.30. Part of those funds were used by KC Management to discharge a facility secured by a mortgage over property owned by Mrs Kalotihos. Again, it is reasonable to infer from the presently available evidence that these payments were sourced from stamp duty monies paid into the Aid & Abet accounts.
The evidence indicated that Clubhouse Restaurant is a company associated with Mr Kalotihos. The evidence also showed that Mr Kalotihos oversaw or directed the payment by Aid & Abet to the seventh defendant, Clubhouse Restaurant, of $205,000. Again, it is reasonable to infer from the presently available evidence that these payments were sourced from stamp duty monies paid into the Aid & Abet accounts.
B. Anne Maree Kalotihos
(a) Control of the activities of Aid & Abet
Anne Maree Kalotihos was a founding director and the managing director of Aid & Abet. Mrs Kalotihos continued to be a director until a few months before the termination of Aid & Abet as an Authorised Person by the SRO. ASIC’s records show that Anne Maree Kalotihos was a director of Aid & Abet from 1 May 1992 until 8 June 2001.
From the incorporation of Aid & Abet until 2002, she was also was one of two shareholders of Aid & Abet. From 1993 – 1999 the second shareholder was Leon Kalotihos; from 1999 – 2001 Wendie Crupi was the second shareholder; and from 2001 – 2002 the second shareholder was Dominic Crupi.
The evidence showed that Mrs Kalotihos was substantially involved in the activities of Aid & Abet:
(a) she attended meetings about the business of Aid & Abet (including management meetings) and made decisions about the running of Aid & Abet;
(b) she was involved in the financial affairs of Aid & Abet;
(c) she was involved in the endorsement activities of Aid & Abet;
(d) she played a large role in the engagement and dismissal of staff and determined employee remuneration levels;
(e) she controlled the payroll, took care of the quality control of the work completed by Aid & Abet and checked the invoicing of clients; and
(f) she signed documents on behalf of Aid & Abet which required the signature of a director, including its Annual Returns.
Mr Bulzomi told the SRO investigators that:
(a) in the running of the Aid & Abet business he ran all his decisions past Mr and Mrs Kalotihos as they had the ultimate say;
(b) he did not do anything on behalf of Aid & Abet unless they were aware of it and had agreed to it;
(c) even after he became a director of Aid & Abet, they continued to give instructions to him on the day to day running of the business of Aid & Abet and that he did not make decisions on his own.
The evidence showed that Mrs Kalotihos also had extensive involvement in the banking activities of the company, including drawing and signing cheques.
Mrs Kalohitos signed the application on behalf of Aid & Abet on 19 November 1996 to become an Authorised Person and was one of the persons nominated on behalf of Aid & Abet to endorse and calculate stamp duty. She endorsed instruments and also supervised Aid & Abet’s stamp duty endorsement activities carried out by other Aid & Abet employees.
The evidence showed that during that period, Mrs Kalotihos was drawing and signing cheques for her personal benefit and for the benefit of companies associated with her.
(b) Payments of stamp duty money to or for the benefit of Anne Maree Kalotihos
During the period 1 October 1999 to 31 December 2001, payments were made out of the company’s bank accounts to or for her benefit in the sum of $282,189.19 by way of:
(a) a payment by way of a cheque in her favour in the sum of $7,150;
(b) payments to American Express in respect of her Amex card in the sum $159,539.23; and
(c) payments to “City Legal Services” on her behalf of in the sum of $155,499.96.
It is reasonable to infer from the presently available evidence that the payments were sourced from stamp duty payments made to Aid & Abet.
Furthermore the evidence disclosed that deposits totalling $550,000 were paid into a St George bank account in her name. It is reasonable to infer that those deposits were also sourced from stamp duty received by Aid & Abet that was not remitted to the SRO.
C.The failure of 89 P/L and Monocote to Pay stamp duty on instruments endorsed for them
(a) The failure of 89 P/L to pay stamp duty on the instrument of transfer for 89 City Road
In early 2001 Aid & Abet moved to the premises at City Road, South Melbourne that was purchased by 89 Pty Ltd. 89 Pty Ltd did not use its own money to pay the stamp duty of $93,500.00 due on the purchase. Aid & Abet’s records show that the stamp duty of $93,500.00 due on an instrument endorsed by it on 30 June 2000 was paid to the SRO by cheques provided to Aid & Abet by non Goldstein clients.
(b)The failure of Monocote to pay stamp duty on the instrument of transfer for the Kavanagh Street Unit
The Court was also asked to infer that Aid & Abet paid the stamp duty of $31,060 due on the purchase by Monocote of a unit. That inference is open on the evidence but the evidence did not link the payment of that stamp duty out of stamp duty received by Aid & Abet that was not remitted to the SRO.
D.The involvement of Spiros Kalotihos and Anne Maree Kalotihos in Aid & Abet avoiding detection
Mandie J concluded that the evidence showed the involvement of Mr Bulzomi in Aid & Abet avoiding detection:
Mr Bulzomi’s involvement in the avoidance of detection
[74] In the course of Aid & Abet completing its endorsement activities under the control of Mr Bulzomi, various actions were taken that hindered the subsequent SRO investigation of those activities. In summary, the actions were:
·using an unapproved stamp;
·endorsing instruments using unauthorised signatures or without a signature;
·deleting entries as to endorsements made in the DRS software program used by Aid & Abet;
·using non-sequential transaction numbers;
·failing to provide to the SRO copies of all transaction reports;
·failing to provide to the SRO back up copies of data as to the endorsement of instruments for stamp duty; and
·providing to the SRO investigators a manual reconciliation of the endorsements purportedly made by Aid & Abet during May 2001 which failed to state all the endorsements which Aid & Abet made and the stamp duty due on those endorsements.
[75] Mr Bulzomi either directed or was involved in each of the above activities which may be detailed further as follows.
Use of Unapproved Stamp
[76] Aid & Abet received approval from the SRO to use an approved stamp to endorse instruments for stamp duty. The approved stamp included the name of the authorised person (namely Aid & Abet) and the AP Number attributed to that authorised person (namely AP 318 for Aid & Abet). The information on the approved stamp enabled any person inspecting an endorsed instrument to ascertain the identity of the authorised person. During the period commencing on 13 April 2000 and ending on 6 December 2000, Aid & Abet also used an unapproved stamp to endorse instruments for stamp duty. The unapproved stamp did not include Aid & Abet’s name and included an incorrect AP Number (namely AP 818). Mr Bulzomi has identified the unapproved stamp as having been used by Aid & Abet to endorse instruments. The effect of using the unapproved stamp was that the endorsement did not indicate that it had been completed by Aid & Abet.
[77] The SRO’s investigations of Aid & Abet’s endorsement activities included obtaining instruments apparently endorsed by Aid & Abet from the Land Registry. To identify those instruments reference was made to the information included on the endorsement. The SRO investigators were only able to identify instruments endorsed by Aid & Abet using the unapproved stamp because the SRO had become aware that Aid & Abet had used that stamp. Accordingly, the SRO investigators were able to ascertain the total value of the stamp duty endorsed by Aid & Abet during the October 1999 to June 2001 period. That total value of the stamp duty endorsed was then compared with the total amount of stamp duty received from Aid & Abet to establish that not all of the stamp duty endorsed by Aid & Abet during that period had been paid to the Commissioner.
[78] Mr Bulzomi provided the unapproved stamp to Aid & Abet employees for them to use in place of the approved stamp. The Aid & Abet employee used the unapproved stamp to endorse documents for stamp duty. The unapproved stamp was used from 13 April 2000 until 6 December 2000. During that period there were 1,817 endorsements out of a total of 2,031 endorsements which the Commissioner found were completed by Aid & Abet’s use of the unapproved stamp.
[79] On 30 November 2001 Mr Bulzomi was asked by SRO investigators about the use of the unapproved stamp. Mr Bulzomi said that the original stamp had been mislaid and that Aid & Abet had a replacement stamp made. He said the replacement stamp had the number “AP 818”. He said that the original stamp was found after a couple of weeks. Mr Bulzomi said that an officer of the SRO had pointed out to him that the replacement stamp had the wrong AP Number. Mr Bulzomi said that as a result the stamp with “AP 818” was destroyed and Aid & Abet reverted to using only the original “AP 318” stamp.
Endorsing instruments using unauthorised signatures or without a signature
[80] Aid & Abet was required to include on every instrument endorsed for stamp duty the signature of a person approved by the Commissioner for that purpose. The Commissioner had approved various persons as authorised signatories to complete endorsements by Aid & Abet as an authorised person. Numerous endorsements completed by Aid & Abet were not signed by persons who were authorised signatories. Further, there were various endorsements completed by Aid & Abet during the October 1999 to June 2001 period with indecipherable signatures or marks or no signature at all. Mr Bulzomi himself was unable to recognise various signatures on a sample of nine endorsements on instruments. Mr Bulzomi directed an Aid & Abet employee to complete endorsements on some instruments by copying his (Mr Bulzomi’s) signature on the imprint of the rubber stamp. The Aid & Abet employee did copy Mr Bulzomi’s signature on the imprint of the rubber stamp to complete endorsements on some instruments. Mr Bulzomi told the employee that if anyone at the Land Registry asked any questions regarding signatures on endorsements, as not being signatures of authorised signatories, the employee was to inform that person that he (the employee) did not know anything about it.
Deleting entries as to endorsements made in the DRS computer software program used by Aid & Abet
[81] Aid & Abet’s endorsement activities could be verified by the documents produced (i.e. transaction reports and weekly statements or monthly statements) and the data maintained by the DRS software program. Mr Bulzomi made deletions of stamp duty entries that had been made in the DRS computer software program. In addition, Mr Bulzomi directed an Aid & Abet employee to delete stamp duty entries that had been recorded on the DRS computer software program and the Aid & Abet employee carried out those instructions. When asked why the employee was required to delete stamp duty entries in the DRS computer software program, Mr Bulzomi told the Aid & Abet employee that the deletions were necessary because the stamp duty recorded on the Goldstein transaction sheet(s) or the other transaction sheet(s) did not balance with the amount of stamp duty available for payment and that the employee had made an incorrect entry.
Using non-sequential transaction numbers
[82] As an authorised person, Aid & Abet was required to use sequential transaction numbers on each instrument that it endorsed for stamp duty. Generally speaking, up until 16 June 1999, Aid & Abet had allotted consecutive transaction numbers in respect of instruments that it endorsed for stamp duty. After 16 June 1999, Aid & Abet used non-consecutive or non-unique purported transaction numbers for the endorsement of instruments for stamp duty. Specifically, after 16 June 1999, Aid & Abet allotted transaction numbers that it had previously used and allotted non-sequential numbers for endorsements recorded on the same day. bers
[83] Mr Bulzomi has admitted that the transaction numbers used at Aid & Abet were not consecutive. On 16 August 2001 Mr Bulzomi provided to the SRO two transaction reports. They showed that the numbers appearing in the clients’ reference column were not a series of sequential transaction numbers. In other words, the numbers ascribed by Aid & Abet to the instrument referred to therein were non-sequential. The use of non-sequential transaction numbers made an investigation or an audit of the endorsement activities of Aid & Abet very difficult.[11]
[11]Ibid [74] – [83].
The evidence also sufficiently established for present purposes the involvement of Mr and Mrs Kalotihos in each of those activities, as the persons with the ultimate control of Aid & Abet who, according to Mr Bulzomi, were instructing and directing him in relation to those activities.
E. Conclusion
Mandie J concluded on the basis of the affidavits before him that:
Mr Bulzomi’s control of the payment out of stamp duty
[85] During the period when Aid & Abet was using the Goldstein System it failed to remit to the Commissioner substantial sums of stamp duty money it had received for that purpose. Aid & Abet received $3,784,590.30 from Goldstein Partners on account of stamp duty to be paid to the Commissioner, which it failed to pay. By 31 December 2001 the balance of Aid & Abet’s bank account was only $24,523.98. The stamp duty moneys withdrawn from Aid & Abet’s bank account (which led to the reduction of the balances of these bank account to $24,523.98) were paid to certain persons and entities and to the beneficiary of the Bunnett Trust account.[12]
[12]Ibid [85].
I similarly conclude that the SRO has made out a prima facie case for a show cause order as against Aid & Abet.
Mandie J also concluded on the basis of the affidavits before him that:
[86] The said persons and entities that received these payments included the second to seventh defendants.[13]
[13]Ibid [86].
The evidence equally bears out that an order under s 40(2) should be made against the non corporate defendants.
Furthermore I am satisfied that the SRO has established, on a prima facie basis that the fifth, sixth and seventh defendants are also persons within the meaning of s 40(1) that:
• received sums of money as or for duty upon or in respect of numerous instruments;
• neglected or omitted to appropriate such money to the due payment of such duty or otherwise improperly withheld or detained the same; and
• thereby became accountable to the Commissioner for the amount of such duty.
Accordingly an order for show cause will be made against each of those defendants.
The SRO contended that the Court should direct that the show cause by the corporate defendants should be directed to be made by Mr and Mrs Kalohitos as the persons in actual or effective control of those companies, particularly as the director of Aid & Abet on the ASIC records appears to be a non-existent person. I do not consider it necessary or appropriate to make that direction. It is up to the defendants themselves whether and if so how they propose to show cause.
---
SCHEDULE OF PARTIES
| No. 8583 of 2005 | |
| BETWEEN: | |
| THE COMMISSIONER OF STATE REVENUE (IN HIS CAPACITY AS THE COMPTROLLER OF STAMPS) | Plaintiff |
| - and - | |
| AIDLAW PTY LTD (ACN 055 407 899) (RECEIVERS AND MANAGERS APPOINTED) (FORMERLY KNOWN AS AID & ABET PTY LTD) | Firstnamed Defendant |
| SPIROS KALOTIHOS | Secondnamed Defendant |
| ANNE MAREE KALOTIHOS | Thirdnamed Defendant |
| ANTONIO BULZOMI (ALSO KNOWN AS TONY BULZOMI) | Fourthnamed Defendant |
| MONOCOTE PTY LTD (ACN 094 166 024) | Fifthnamed Defendant |
| KC MANAGEMENT SERVICES PTY LTD (ACN 006 185 888) | Sixthnamed Defendant |
| AID & ABET CLUBHOUSE RESTAURANT PTY LTD (094 945 945) (FORMERLY MI’MUM’S BAR & GRILL PTY LTD) | Seventhnamed Defendant |
---
2
0