Commissioner of Taxation v Rawson Finances Pty Ltd
[2023] FCA 617
•9 June 2023
FEDERAL COURT OF AUSTRALIA
Commissioner of Taxation v Rawson Finances Pty Ltd [2023] FCA 617
File number(s): NSD 1329 of 2014 Judgment of: PERRY J Date of judgment: 9 June 2023 Catchwords: TAXATION – application by Commissioner of Taxation to set aside judgment of the Full Court of the Federal Court on the basis it was procured by fraud – where Commissioner of Taxation issued assessments on basis that alleged loans by the taxpayer from Mercantile Discount Bank (MDB), Israel, should be characterised as income – where assessments challenged in Administrative Appeals Tribunal under Part IVC, Taxation Administration Act 1953 – where Tribunal accepted taxpayer’s case that limited loan documentation only was available and an inference should be drawn that the taxpayer’s loans were obtained in line with a “business practice” whereby related family companies obtained loans from Israeli banks on the basis of personal guarantees only – where Tribunal decision overturned on appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) to the Federal Court – where Tribunal decision overturned in the Federal Court on basis that its finding was not open on the evidence – where Tribunal decision upheld by Full Court on basis that the findings were open on the evidence before the Tribunal despite inherent implausibility of the Tribunal’s finding that the loans were genuine – where new evidence, including from liquidators of other family entities and from Israeli banks and bank officers pursuant to letters of request to Israeli authorities, unequivocally established existence of back-to-back deposit accounts held in code names securing the “loans” to the taxpayer and related family entities – where evidence disclosed extraordinary lengths by taxpayer to conceal fraud – where evidence led by, and submissions made on behalf of, the taxpayer before the Tribunal was known to be false and misleading – where knowledge of director attributed to taxpayer in the circumstances – where no legitimate reason as to why a genuine loan might be sought, when monies borrowed by taxpayer were already available to it by way of security – where loan terms were uncommercial – fraud established – whether fraud was material – decision of the Full Court of the Federal Court set aside
BANKING AND FINANCIAL INSTITUTIONS – where taxpayer’s “business practice” case contended that all related entities took out loans on the basis of personal guarantees – where evidence established that related entities acquired loans on the basis of linked deposit accounts – where related entities discontinued proceedings in light of new evidence – where business practice engaged in by related entities was directly contrary to the case advanced by the taxpayer in Tribunal proceedings – new evidence establishes that taxpayer’s “business practice” case before the Tribunal was false and misleading
BANKING AND FINANCIAL INSTITUTIONS – where the taxpayer utilised back-to-back loan arrangement whereby loans were secured by a corresponding cash deposit held in code name – where funds from MDB would not have been advanced to the taxpayer without security of cash deposit – where interest was regularly paid by deposit account – where the taxpayer’s director was principally involved in facilitating back-to-back arrangement – where evidence establishes that funds were not genuine loans
EVIDENCE – principles of fact-finding – application of Briginshaw principle – Jones v Dunkel adverse inferences drawn from failure to call key witnesses
PRACTICE AND PROCEDURE – principles of impeaching a judgment on the ground of fraud in independent proceedings – where unnecessary to establish that reasonable diligence must have been exercised to discover the fraud in the course of the proceedings – whether false evidence was an operative cause of the Tribunal’s (and the Full Court’s) decision and whether fresh evidence have changed the Tribunal’s approach or decision – whether the new evidence is so material that it is reasonably probable that it would lead to a different result if the matter were reheard by the Tribunal – where only operative decision to be set aside is Full Court’s decision
Legislation: Administrative Appeals Tribunal Act 1975 (Cth) Pt IV; s 44
Evidence Act 1995 (Cth) ss 55, 122(3), 128, 140(2)
Federal Court of Australia Act 1976 (Cth) s 43
Foreign Evidence Act 1994 (Cth)
Income Tax Assessment Act 1936 (Cth) pt IVA; ss 8-1, 166, 167, 167(b), 175A, 264, 264A
Taxation Administration Act 1953 (Cth) pt IVC; ss 14ZZK, 14ZZK(a),14ZZK(b); Sch 1 ss 353-10, 353-25
Federal Court Rules 2011 (Cth) r 39.05(b)
Legitimacy Declaration Act 1858 (UK) s 8
Cases cited: Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd [1986] FCA 248; (1986) 12 FCR 14
Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751; (2018) 266 FCR 247
B.C.I Finances Pty Ltd (in liq) v Commissioner of Taxation [2015] FCA 679
BCI Finances Pty Ltd (in liq) v Binetter (No 4) [2016] FCA 1351; (2016) 104 ATR 248
BCI Finances Pty Ltd (in liq) v Binetter [2018] FCAFC 189; (2018) 362 ALR 592
BCI Finances Pty Ltd (in liq) v Commissioner of Taxation (No 3) [2014] FCA 958; (2014) 320 ALR 747
BCI Finances Pty Ltd v Commissioner of Taxation [2012] FCA 855; (2012) 89 ATR 861
Beach Petroleum NL & Anor v Johnson, MK & Ors [1993] FCA 392; (1993) 43 FCR 1
Binetter v BCI Finances Pty Ltd (in liq) [2015] FCAFC 122; (2015) 235 FCR 410
Binetter v BCI Finances Pty Ltd [2016] HCATrans 33
Binqld Finances Pty Ltd (in liq) (ACN 119 243 220) v Israel Discount Bank (No 2) [2020] FCA 1208; (2020) 384 ALR 148
Blatch v Archer [1774] EngR 2; (1774) 1 Cowp 63
Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336
Clone Pty Ltd v Players Pty Ltd (In Liquidation) (Receivers & Managers Appointed) [2018] HCA 12; (2018) 264 CLR 165
Commissionerof Taxation v Rawson Finances Pty Ltd (No 4) [2016] FCA 1436
Commissioner of Taxation v Rawson Finances Pty Ltd [2012] FCA 753; (2012) 89 ATR 357
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132; (2007) 162 FCR 466
Craig v South Australia [1995] HCA 58; (1995) 184 CLR 163
Danmark Pty Ltd v Federal Commissioner of Taxation (1944) 7 ATD 333
Dickson v Commissioner of Australian Federal Police [2019] NSWSC 1293
Dickson v The Queen [2020] NSWCA 125
Federal Commissioner of Taxation v Dalco [1990] HCA 3; (1990) 168 CLR 614
Gashi v Federal Commissioner of Taxation [2013] FCAFC 30; (2013) 209 FCR 301
Gauci v Federal Commissioner of Taxation [1975] HCA 54; (1975) 135 CLR 81
Gould v Vaggelas [1984] HCA 75; (1984) 157 CLR 215
Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121
Haritos v Federal Commissioner of Taxation [2015] FCAFC 92; (2015) 233 FCR 315
Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572
IMM v The Queen [2016] HCA 14; (2016) 257 CLR 300
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Krakowski v Eurolynx Properties Ltd [1995] HCA 68; (1995) 183 CLR 563
McCormack v Federal Commissioner of Taxation [1979] HCA 18; (1979) 143 CLR 284
McDonald v McDonald [1965] HCA 45; (1965) 113 CLR 529
Mercantile Discount Bank Ltd v Federal Court of Australia and Ors CAA 798/20
Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; (2018) 264 CLR 541
Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (No 2) [1992] FCA 548; (1992) 37 FCR 234
O’Donnell v Reichard [1975] VR 916
Owens Bank Limited v Bracco [1992] 2 AC 443
Patch v Ward (1867) LR 3 Ch App 203
Paul’s Retail Pty Ltd v Sporte Leisure Pty Ltd [2012] FCAFC 51; (2012) 202 FCR 286
Payne v Parker [1976] 1 NSWLR 191
Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26; (2013) 93 ATR 775
Rawson Finances Pty Ltd v Commissioner of Taxation [2016] FCAFC 95; (2016) 103 ATR 630
Re Areffco and Commissioner of Taxation [2011] AATA 628; (2011) 84 ATR 924
Rejfek v McElroy [1965] HCA 46; (1965) 112 CLR 517
RHG Mortgage Limited v Rosario Ianni [2015] NSWCA 56
Royal Bank of Scotland PLC v Highland Financial Partners LP [2013] EWCA Civ 328; [2013] 1 CLC 596
Schellenberg v Tunnel Holdings Pty Ltd [2000] HCA 18; (2000) 200 CLR 121
Spalla v St George Motor Finance Limited (No 5) [2004] FCA 1262
Sullivan v Civil Aviation Safety Authority [2014] FCAFC 93; (2014) 226 FCR 555
SZFDEv Minister for Immigration and Citizenship [2007] HCA 35; (2007) 232 CLR 189
SZSXT v Minister for Immigration and Border Protection [2014] FCAFC 40; (2014) 222 FCR 73
Takhar v Gracefield Developments Ltd [2019] UKSC 13; [2020] AC 450
Tesco Supermarkets Ltd v Nattrass [1972] AC 153
The Alfred Nobel [1918] P 293
The Ampthill Peerage [1977] AC 547
The Louisiana and Other Ships [1918] AC 461
Tjiong v Tjiong [2021] NSWSC 1389
TNT Skypak International (Aust) Pty Ltd v Commissioner of Taxation (Cth) [1988] FCA 198; (1988) 82 ALR 175
Toubia v Schwenke [2002] NSWCA 34; (2002) 54 NSWLR 46
Trautwein v Federal Commissioner of Taxation [1936] HCA 77; (1936) 56 CLR 63
Vu v Commissioner of Taxation (Cth) [2006] FCA 889; (2006) ATR 4387
Wentworth v Rogers (No 5) (1986) 6 NSWLR 534
Wishart v Fraser [1941] HCA 8; (1941) 64 CLR 470
Zappia v Commissioner of Taxation [2017] FCA 390
Zappia v Federal Commissioner of Taxation [2017] FCAFC 185; (2017) 106 ATR 875
Division: General Division Registry: New South Wales National Practice Area: Taxation Number of paragraphs: 655 Date of last submission/s: 3 September 2020 Dates of hearing: 14 – 22 September 2020 Counsel for the Applicant Ms K Morgan SC and Mr K Josifoski Solicitor for the Applicant MinterEllison Counsel for the Respondent Mr N Hutley SC and Mr B Jones Solicitor for the Respondent Pitcher Partners Legal NSW Pty Ltd ORDERS
NSD 1329 of 2014 BETWEEN: COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
Applicant
AND: RAWSON FINANCES PTY LTD
Respondent
ORDER MADE BY:
PERRY J
DATE OF ORDER:
9 JUNE 2023
THE COURT ORDERS THAT:
1.The orders made by the Full Court of the Federal Court in Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26 are set aside.
2.On or before 4pm on 23 June 2023, the parties are to advise if any further orders are required to give effect to these reasons.
3.In the event that agreement between the parties as to the appropriate order for costs is not reached:
a.the parties are to agree a timetable by 4pm on 23 June 2023 in which short submissions on, and any evidence with respect to, the applicant’s application for indemnity costs are to be filed and served; and
b.subject to further order of the Court, the application for indemnity costs is to be determined on the papers.
4.Liberty to apply.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
PERRY J:
1 INTRODUCTION
[1]
2 DRAMATIS PERSONAE
[16]
2.1 Rawson
[17]
2.2 Other entities controlled by members of the Binetter family (BCI, Binqld, EGL, Ligon 268, Advance, Civic, and the GERM entities)
[22]
2.3 Binetter family code names
[29]
3 EVIDENCE
[31]
3.1 Rawson
[31]
3.2 The Commissioner’s evidence
[32]
3.3 Grant of leave to use certain documents obtained in Part IVC proceedings instituted by BCI in the Federal Court in these proceedings
[36]
3.4 Manner of citing documents and glossary
[47]
4 OVERVIEW OF THE ISSUES
[50]
5 RELEVANT PRINCIPLES
[57]
5.1 Principles applying where it is sought to impeach a judgment on the ground of fraud
[57]
5.2 Principles concerning fact-finding: Briginshaw
[79]
5.3 Failure to call witnesses and lead evidence
[82]
5.3.1 Relevant principles
[82]
5.3.2 Should adverse inferences be drawn from the failure by Rawson to call Andrew, Margaret, Michael and/or Gary?
[93]
5.4 Attributing knowledge to Rawson
[105]
6 THE COMMISSIONER’S PLEADED CASE OF FRAUD
[109]
7 THE RAWSON AUDIT AND SUBSEQUENT AAT AND FEDERAL COURT PROCEEDINGS
[123]
7.1 The audit, objection and taxation disputes
[123]
7.1.1 Rawson
[123]
7.1.2 Information provided in relation to the audits of Rawson, BCI, Binqld, Ligon 268, EGL, Advance and Civic (2006-2007)
[138]
7.1.3 Review and appeal proceedings by Rawson, Binqld, Ligon 268, EGL, Advance and Civic and onus under s 14ZZK of TAA 53
[144]
7.2 Rawson’s case before the Tribunal
[152]
7.2.1 Rawson’s SFIC
[152]
7.2.2 Rawson’s inferential case in the AAT
[156]
7.2.3 The business practice evidence
[161]
7.2.3.1 Evidence of Emil Binetter
[162]
7.2.3.2 Documents said to establish similar loans from Israeli banks, including the mud map and summary of assets
[169]
7.2.3.3 Expert evidence of Mr Etzion and Mr Orly Brown
[174]
7.2.3.4 Evidence of Andrew and Margaret as to Emil’s business practice
[181]
7.2.4 The secondary documentary evidence establishing the loans to Rawson from MDB and the evidence of Israel Zamir, formerly Foreign Exchange Department Manager, MDB
[189]
7.2.5 Evidence of witnesses for Rawson in relation to the Rawson MDB loans
[197]
7.3 The Commissioner’s case before the Tribunal
[203]
7.4 The Tribunal’s decision in Rawson (AAT)
[212]
7.4.1 The critical issue
[213]
7.4.2 The Tribunal’s findings with respect to the unusual terms of the loans and their lack of security, and acceptance of Mr Etzion and Mr Brown’s evidence
[214]
7.4.3 The Tribunal’s finding that the incomplete state of the loan documentation did not contradict the reality of the loans
[215]
7.4.4 The Tribunal’s finding that the interest payment irregularities were not material
[218]
7.4.5 The comfort derived by the Tribunal from Mr Zamir’s statutory declaration in accepting Andrew’s evidence as to the absence of any security deposit
[221]
7.4.6 The Tribunal’s acceptance of Rawson’s case disavowing any overseas security assets, including its acceptance of the evidence of Andrew and Margaret
[222]
7.4.7 The Tribunal’s rejection of the Commissioner’s “hypothesis” as to the existence of back-to-back arrangements and weight given to the evidence of Andrew and Margaret in so finding
[226]
7.4.8 Summary of the Tribunal’s conclusions
[228]
7.5 The s 44 appeal to the Federal Court
[230]
7.6 The decision of the Full Court of the Federal Court
[233]
8 NEW EVIDENCE ESTABLISHING THE FALSITY OF RAWSON’S INFERENTIAL CASE BASED ON THE BUSINESS PRACTICE OF RELATED BINETTER FAMILY ENTITIES
[242]
8.1 Introduction
[242]
8.2 Advance
[245]
8.2.1 The new evidence in relation to Advance’s “loan” from MDB
[245]
8.2.2 The Advance audit and preparation of draft correspondence to be sent by the Israeli banks to misrepresent the so-called loan arrangements
[263]
8.2.3 The impact of the new evidence in relation to Advance on Rawson’s business practice case
[277]
8.3 Civic
[286]
8.3.1 The new evidence in relation to Civic’s “loan” from IDB
[286]
8.3.2 The Civic audit and preparation of draft correspondence to be sent by the Israeli banks to misrepresent the so-called loan arrangements
[297]
8.3.3 The impact of the new evidence in relation to Civic on Rawson’s business practice case
[307]
8.4 BCI
[313]
8.4.1 The new evidence in relation to BCI’s “loans” from Bank Hapoalim
[313]
8.4.1.1 Preliminary
[313]
8.4.1.2 Establishment of the BCI loan
[317]
8.4.1.3 Extensions to the loans by Bank Hapoalim, Tel Aviv and corresponding rollover of the fiduciary deposits with Bank Hapoalim, Switzerland (2003‑2004)
[326]
8.4.1.4 Repayment of the fiduciary deposit on 2 June 2004 following repayment of Emil’s half of the BCI loans at the end of May 2004
[333]
8.4.1.5 The BCI application for credit and deed of pledge signed by Andrew in 2006
[336]
8.4.1.6 The BTB Letter dated 15 October 2009
[344]
8.4.2 The BCI audit commencing 24 May 2007 and preparation of draft correspondence to be sent by the Israeli banks to misrepresent the so-called loan arrangements
[349]
8.4.3 The BCI Part IVC proceeding in the Federal Court commenced on 12 May 2011
[356]
8.4.3.1 The false and misleading evidence given by Andrew and Mr Etzion that the BCI loans were secured only against personal guarantees and a charge
[356]
8.4.3.2 The expert evidence of Mr Ben Zeev that the BCI loans were back-to-back loans based on the BTB letter
[365]
8.4.3.3 Examinations of Bank Hapoalim officers pursuant to the BCI letter of request confirming the back-to-back arrangement for the BCI loans
[370]
8.4.4 BCI is placed into voluntary administration and the BCI proceedings are discontinued on 10 March 2014
[375]
8.4.5 The impact of the new evidence in relation to BCI on Rawson’s business practice case
[378]
8.5 EGL
[383]
8.5.1 The new evidence in relation to EGL’s “loan” from IDB
[383]
8.5.2 The EGL audit and preparation of draft correspondence to be sent by the Israeli banks to misrepresent the so-called loan arrangements
[392]
8.5.3 The impact of the new evidence in relation to EGL on Rawson’s business practice case
[403]
8.6 Binqld
[409]
8.7 GERM entities
[413]
8.8 The materiality of the new evidence from the perspective of the BCI, Advance, Civic and EGL Part IVC proceedings
[417]
8.9 Conclusion
[433]
9 FRAUDULENT EVIDENCE IN THE RAWSON (AAT) PROCEEDINGS IN LIGHT OF MATERIAL DISCOVERED AFTER CONCLUSION OF THE PROCEEDINGS – RAWSON
[435]
9.1 The letters of request issued in these proceedings
[436]
9.2 Overview of the documents produced by MDB and examinations undertaken pursuant to the letters of request
[444]
9.3 The Rawson loans were secured by a linked cash deposit in an account in the code name of “Arthur Belan”
[449]
9.3.1 17 March 1997: establishment of the “Arthur Belan” deposit account with MDB
[450]
9.3.2 17 March 1997: application by Michael on behalf of Rawson for the foreign currency loan
[453]
9.3.3 April 1997: Grant of the approved credit line of AUD$4,705,900 to Michael and the Binetter family entities by MDB secured by the back-to-back deposit
[460]
9.3.4 The relationship between the transfer of unexplained funds into the Arthur Belan deposit account and drawings on the Rawson loan accounts
[479]
9.3.5 MDB internal records confirming that the Rawson loans were secured against the Arthur Belan deposit account at all times
[488]
9.3.6 Conclusion as to the link between the Arthur Belan deposit account and the Rawson loan account from the outset
[493]
9.4 Rawson never defaulted in paying “interest” on the Rawson loans
[494]
9.5 Andrew Binetter knew the Rawson loans were secured by a cash deposit, agreed to MDB’s margin of 0.6% on the Rawson loans, and gave instructions with respect to transactions involving the Arthur Belan deposit account
[514]
9.5.1 Andrew knew of the Rawson loans and Arthur Belan deposit account from 1997
[514]
9.5.2 Evidence of transactions involving Andrew with respect to the Rawson loan accounts and deposit account
[518]
9.5.2.1 Evidence of transactions involving Andrew from 1999
[518]
9.5.2.2 Evidence of transactions involving Andrew from 2002
[522]
9.5.2.3 Evidence of transactions involving Andrew from 2006
[532]
9.5.2.4 Evidence of transactions involving Andrew from 2009
[539]
9.6 Rawson did not ask MBD to provide all of its files in respect of Rawson’s arrangements with MDB
[543]
9.7 Were Andrew and Michael involved in drafting or finalising Mr Etzion’s statutory declaration?
[568]
10 CONSIDERATION AND DISPOSITION OF THE APPLICATION
[571]
10.1 Extent to which the fraud was sought to be concealed
[572]
10.2 Scope of the false or materially misleading evidence before the Tribunal
[577]
10.3 Rawson’s contention that the alleged fraud could not affect the issues before, or decision of, the Full Court by reason of the limited nature of a s 44 appeal
[585]
10.4 Materiality of the fraud
[594]
10.4.1 Introduction
[594]
10.4.2 Was the fraud an operative cause of the Tribunal’s decision?
[600]
10.4.3 Is the new evidence so material that it could reasonably be expected to lead to a different result at a rehearing?
[612]
10.4.4 Rawson’s genuine loans submission
[637]
10.4.4.1 Rawson’s contention that the new evidence confirms the funds from MDB were genuine loans at interest
[637]
10.4.4.2 Rawson’s genuine loans submission must be rejected
[637]
11 CONCLUSION
[654]
APPENDIX A: GLOSSARY
[]
APPENDIX B: PAYMENTS OF INTEREST ON RAWSON’S LOANS FROM JULY 2001 TO DECEMBER 2004
1. INTRODUCTION
According to the Greek myth, Theseus was able to escape from the labyrinth by the use of Ariadne’s string, which helped guide him to the end of the twists and turns of that famous maze. No amount of string, however, would have saved Theseus from the labyrinth of lies and deceit which lie at the core of this case.
The applicant, the Commissioner of Taxation, seeks to set aside the decision of the Full Federal Court in Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26; (2013) 133 ALD 39 (Rawson (FCAFC)) on the ground that it was procured by fraud. Further, or in the alternative, the Commissioner seeks to set aside on the same ground both the decisions in Rawson (FCAFC) and of the Administrative Appeals Tribunal (Tribunal or AAT) in ReAreffco and Commissioner of Taxation [2011] AATA 628; (2011) 84 ATR 924 (Rawson (AAT)). Areffco was the pseudonym used by the AAT for the respondent, Rawson Finances Pty Ltd, which was one of a number of entities owned and controlled by members of the Binetter family.
By way of overview, the decisions in Rawson (AAT) and Rawson (FCAFC) arose in context of Project Wickenby, a project by the Australian Taxation Office (ATO) which investigated whether Australian taxpayers were returning profits earned abroad to Australia disguised as “loans” from overseas banks. Following an audit commenced in July 2006, the Commissioner issued under s 167 of the Income Tax Assessment Act 1936 (Cth) (ITAA 36) notices of assessment and amended assessment of the amount of taxable income of Rawson for the financial years ending 30 June 1997 to 30 June 2008 (the relevant period) and penalty assessments for the years ended 30 June 2001 to 30 June 2008 inclusive (the taxation assessments and the penalty assessments respectively). First, the Commissioner disallowed amounts which Rawson claimed for the relevant period were allowable deductions representing interest incurred by it on alleged loans from the Mercantile Discount Bank (MDB) in Israel to Rawson. Secondly, by assessments for the years of income ended 30 June 1997 and 1998, the Commissioner included in Rawson’s assessable income, amounts received by Rawson in Australia from MDB by way of purported loans. This resulted in the Commissioner assessing Rawson’s taxable income in the sum of $3,007,550.00 for the year ending 30 June 1998 and in the sum of $1,971,088 for the year ending 30 June 1999.
Rawson, however, contended that the amounts that the Commissioner had assessed as taxable income for the years ending 30 June 1998 and 1999 were loans made to it from MDB and claimed deductions over the relevant period for interest allegedly paid by Rawson on those loans. It lodged taxation objections to the taxation assessments (the taxation objections), and objections to the penalty assessments (the penalty objections) in September 2009.
Rawson’s taxation and penalty objections were disallowed by the Commissioner on 27 May 2010.
On 11 June 2010, Rawson commenced merits review proceedings against the Commissioner’s decision in the AAT under Part IVC of the Taxation Administration Act 1953 (Cth) (TAA 53). The proceedings were heard from 9 to 13 May 2011, 8 to 10 June 2011, and on 17 June 2011. Section 14ZZK of the TAA 53 imposed the onus of proving that the Commissioner’s assessments were excessive upon Rawson.
In the course of the Rawson (AAT) proceedings, Rawson adduced evidence from several witnesses. Shortly stated, the effect of that evidence and Rawson’s submissions was as follows:
(1)the Binetter family had a business practice of setting up special purpose vehicles to take out loans from Israeli banks, being MDB, Israel Discount Bank (IDB) and Bank Hapoalim;
(2)Israeli banks operated differently from Australian banks because Israeli banks were willing to lend to foreign entities on the basis only of personal guarantees and relationships;
(3)members of the Binetter family, including the directors of Rawson, had direct involvement with Israeli banks through various entities including:
(a)BCI Finances Pty Ltd;
(b)ACN 078 272 867 Pty Limited, formerly Advance Finances Pty Ltd;
(c)ACN 087 623 541 Pty Limited, formerly Civic Finances Pty Ltd; and
(d)EGL Development (Canberra) Pty Ltd;
(4)BCI, Advance, Civic, and EGL, each received significant loans from Israeli banks which were not supported by any form of security, whether a back-to-back (abbreviated in some documents as BTB) cash deposit or any other form of security, but only by personal guarantees; and
(5)by inference, the Rawson loans were also not supported by any deposit or back-to-back arrangement, and MDB was willing to loan monies to Rawson on the strength of a personal guarantee from a former director of Rawson.
In Rawson (AAT), the Tribunal accepted that Rawson had established that the taxation assessments were excessive. Accordingly, on 6 September 2011, the Tribunal set aside the Commissioner’s decisions insofar as the Commissioner had: (a) included in Rawson’s assessable income any part of the funds transferred from MDB; and (b) disallowed deductions for interest. As the Commissioner submitted, in so finding, the Tribunal accepted that:
Rawson, a recently incorporated Australian company with no net assets and issued share capital of $2 was able to obtain a loan for AUD4.75 million from a reputable Israeli bank whilst providing no security and was able to seemingly default on its interest payment obligations for lengthy periods of time without any recovery steps being taken, or without any apparent response from MDB.
(Applicant’s Outline of Submissions (AS) at [10].)
The Commissioner instituted an appeal against the AAT decision in the Federal Court under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act). This was an appeal on a question of law only and not as to the merits of the AAT decision. In other words, as Jessup J held in Rawson (FCAFC) at [60], disagreement, or even strong disagreement, with the findings by the AAT would not suffice to establish a basis on which the Court could interfere with the AAT’s decision.
On 17 July 2012, Edmonds J allowed the Commissioner’s appeal on the ground that the AAT’s conclusion, that the Tribunal’s characterisation of Rawson’s funds received from MDB in 1997 as “loans”, was not open on the evidence, and Rawson had not therefore discharged its onus of proof under s 14ZZK(b)(i) of the TAA: Commissioner of Taxation v Rawson Finances Pty Ltd [2012] FCA 753; (2012) 89 ATR 357 (Rawson (FCA) at [18]). Rawson then appealed from that decision to the Full Court, alleging that the primary judge had erred in failing to consider evidence which supported the inference that the 1997 transfers were by way of loans. On 5 March 2013, the Full Court in Rawson (FCAFC) allowed Rawson’s appeal, set aside the orders of the primary judge, and in lieu thereof, ordered that the application by way of appeal from the AAT be dismissed.
Nonetheless, in so holding, Jagot J (with whose reasons Nicholas J agreed) accepted the inherent implausibility of the Tribunal’s decision, observing that (at [78]-[80]):
This is a difficult case.
One reason it is difficult is that, after a hearing over 9 days and through a meticulous analysis of some 77 pages of the whole of the material before it, the Administrative Appeals Tribunal (the Tribunal) reached a conclusion which seems inherently implausible – that the appellant, Rawson Finances Pty Ltd (Rawson) had proved on the balance of probabilities that in 1997 an Israeli bank lent $4.75 million to an Australian company with an issued share capital of $2 without having any form of security or guarantee and thereafter took no step to require the payment of interest on the outstanding loan amounts of about $1.75 million over two periods of more than 3 years each between 2001 and 2009, the loans ultimately having been fully repaid by December 2009. This conclusion was reached despite: (i) the lack of any loan agreements, (ii) the lack of any witness who had any involvement in the establishment of the loans being called to give evidence, (iii) the evidence that Israeli banking practices usually would require security for such loans, (iv) Rawson’s lack of financial capacity at the time of the loans to repay the money, and (v) the lack of any action taken by the bank despite Rawson having failed to pay interest for some 7.5 years in total out of the 12 years over which the loans existed.
By contrast, after a hearing confined to a question of law on an appeal under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act), the primary judge concluded that it was not open on the evidence for the Tribunal to conclude that the funds transferred by the Israeli bank to Rawson in 1997 were by way of a loan because, in the circumstances of this case, the transfer of funds “may be equally explicable” as a transfer through the Israeli bank of Rawson’s own money and, indeed, an analysis of the evidence made it far more likely that this was so than the conclusion reached by the Tribunal. The primary judge’s conclusion that it was far more likely on the evidence that the funds transferred were not a loan to Rawson, given the circumstances to which brief reference has been made above and which the Tribunal itself considered warranted the characterisation of the funds transfer as at least “unusual”, has the advantages of immediate plausibility and apparent common sense. The primary judge’s conclusion, in contrast to that of the Tribunal:
•explains the otherwise apparently inexplicable (that any bank was willing to lend a company with no assets and no apparent means of repayment $4.75 million without any security and was content to take no action whatsoever when the asserted borrower failed to pay interest for more than 7 years in total);
•recognises that the respondent in this appeal, the Commissioner of Taxation (the commissioner) has no means of compelling the Israeli bank to produce the whole of its records to the commissioner;
•recognises that the commissioner has no means of testing the assertions of the fund transfers relating to a “loan” in documents in circumstances where no officer of the Israeli bank was willing to give evidence and no person associated with Rawson who had any involvement in the establishment of the loans was available to give evidence; and
•recognises that the kind of documents of the bank and Rawson which were located and put before the Tribunal were not only an incomplete record which may well not disclose the whole of the dealings between Rawson and the bank relevant to the question whether the funds were transferred by way of a loan or otherwise but also were, as the commissioner put it, precisely the type of documents that would be brought into existence if a company such as Rawson wished it to appear that it was obtaining loan funds when in reality it was moving into Australia its own funds or funds it already controlled overseas for the purpose of avoiding incurring a tax liability on those funds as part of its assessable income.
(Emphasis added.)
The Commissioner contends that he subsequently obtained a substantial body of new evidence since judgment in Rawson (FCAFC). The new evidence (which, together with the evidence and other documents pertaining to the Rawson (AAT) proceedings, comprised 56 volumes) includes the following:
(1)documents and translated transcripts of examinations of officers of Bank Hapoalim obtained pursuant to the letter of request in the BCI proceedings (BCI Finances Pty Ltd v Commissioner of Taxation [2012] FCA 855; (2012) 89 ATR 861) (BCI letter of request)[1] (noting that leave was granted to use these documents in the present proceeding);
(2)documents produced by the liquidators of Advance and Civic in March and July 2015;
(3)documents produced on 2 February 2020 and 21 April 2020 in answer to the subpoena issued in these proceedings;
(4)translated transcripts of examinations of Messrs Zamir, Septon and Antebi conducted pursuant to the Rawson letters of request; and
(5)documents produced by MDB pursuant to the Rawson letters of request.
[1] KDB Vol 7 Tab 233; TCA1-1 9/407/5424.
The Commissioner contends that the new evidence establishes first that the loans to BCI, Advance, Civic and EGL were in fact secured by secret cash deposits and described as back-to-back loans, and that these matters were known to witnesses who gave false or misleading evidence to the contrary on behalf of, and to the knowledge of, Rawson in the Rawson (AAT) proceedings. Secondly, the Commissioner alleges that the new evidence establishes that the Rawson loans were supported by a secret linked deposit account in a code name and that Rawson’s case that they were secured only by personal guarantees was knowingly false. Thirdly, and also based upon the new evidence, the Commissioner alleges that the decisions in Rawson (AAT) and Rawson (FCAFC) were obtained by fraud and that the fraud was material to the outcome of the Rawson (AAT) proceedings.
For the reasons given below, the new evidence overwhelmingly establishes that the decisions of the AAT and the FCAFC were obtained by fraud on the part of Rawson (but not on the part of the legal practitioners making submissions in the Rawson (AAT) and Federal Court proceedings). First, this is now established by direct evidence of Rawson’s loan arrangements with MDB and Rawson’s knowledge of the fraud through its director and company secretary, Andrew Binetter. Secondly, the Commissioner also adduced new evidence in relation to other Binetter family entities (including BCI, Advance, Civic and EGL) because Rawson ran an inferential case before the AAT that it followed the same “business practice” as its related entities. Accordingly, the new evidence of the actual business practices of those entities was relied upon by the Commissioner in support of the alleged fraud perpetrated by Rawson. While, given direct evidence of the fraud, it might not be strictly necessary for me to make findings in relation to Rawson’s case in the AAT to the extent that it was based upon the alleged business practices of those related entities, I have nonetheless addressed that evidence. In particular, as trial judge, it is incumbent upon me to make findings with respect to all material issues. Furthermore, that evidence further strengthens the finding of fraud that I have made and exposes the extent of the fraud perpetrated by Rawson on the AAT and the Full Court. It also exposes the lengths to which Rawson went to conceal the back-to-back nature of its arrangement with MDB, seeking at every stage to conceal the fraud. Thirdly, I have no doubt that the fraud was material to the outcome of the AAT and in turn to the decision of the Full Court.
In short, this is a case of extraordinary deceit and subterfuge involving a multitude of overseas accounts and highly suspicious and unexplained transactions of labyrithal complexity. The evidence plainly establishes that Andrew Binetter, who was the company secretary and a director of Rawson since 1998, and was responsible for conducting the Part IVC proceedings and Federal Court appeals on Rawson’s behalf, knew the true nature of the arrangements between Rawson and MDB. Yet Rawson, through Andrew, ran a case known to be false and misleading in the Tribunal and pressed that case on appeal to the Federal Court and the Full Court. Indeed Andrew himself gave patently false evidence to the Tribunal. It is therefore no overstatement to say that the evidence establishes highly egregious and fraudulent conduct by Rawson, through Andrew, in the case run in the AAT and in the Federal Court. In the words of Lord Sumption in Takhar v Gracefield Developments Ltd [2019] UKSC 13; [2020] AC 450 at [61], this is a case where the Commissioner has established that he is “absolutely entitled” to have the Full Court’s decision set aside by reason of the fraud.
2. DRAMATIS PERSONAE
The dramatis personae is largely taken from the Commissioner’s opening submissions which was non-contentious, save where I otherwise identify.
2.1 Rawson
Rawson was incorporated in the Australian Capital Territory on 21 April 1997[2]. At all material times Rawson was the wholly owned subsidiary of Ligon 158 Pty Ltd as trustee of the Caringbah Investment Trust (applicant’s second further amended statement of claim (2FASOC) and defence (Def) at [2]). Margaret Binetter and her husband, Erwin Binetter, beneficially held the majority of the shares in Ligon 158[3]. The directors of Rawson were Erwin from the date of incorporation until his death on 25 August 2009, Margaret also from the date of incorporation, and their son, Andrew, from 9 March 1998, who was also appointed as company secretary on the same date (2FASOC and Def at [3]).
[2] KDB Vol 1 Tab 15; TCA1-1 1/21/353.
[3] KDB Vol 8 Tab 259; TCA1-2 9/3961.
Rawson’s sole business was ostensibly the borrowing and lending of money[4]. As the Commissioner submits, its balance sheets for the relevant tax years reveal that it had no net assets and that the so-called “loans” from MDB were its only significant liability[5].
[4] KDB Vol 4 Tab 150; TCA1-1 5/284/2563 [88].
[5] KDB Vol 6 Tab 201; TCA6-1 9/51.0/51.2/51.5/51.8/51.11/51.13 – .20.
In June, July and December 1997, a total of AUD$4.75 million was transferred in three tranches from MDB to Rawson, which was said to constitute the principal of a loan from MDB to Rawson (the Rawson loans)[6]. Between February 1998 and 2009, Rawson purportedly made a series of transfers to MDB in respect of the “loans”[7].
[6] KDB Vol 1 Tab 17; TCA1-1 1/26/394 (AUSTRAC records); KDB Vol 4 Tab 144; TCA1-1 4/278/1991 [6], [9], [12] (Rawson’s statement of facts, issues and contentions).
[7] See, Areffco [25]; KDB Vol 4 Tab 160; KDB Vol 7 Tab 211; TCA1-1 5/298/2742 [34] – [35] (affidavit of Andrew Binetter 17 November 2010).
There was no direct evidence before the Tribunal of any security or guarantee in support of the Rawson loans. As earlier explained, the case led by Rawson was one based on circumstantial evidence in which the AAT was asked to draw inferences from the alleged business practices engaged in by Erwin with banks in Israel. In so saying, I do not disagree with Jagot J in Rawson (FCAFC) at [88] that “permissible inference may be based on direct evidence or circumstantial evidence. The mere fact that evidence is circumstantial rather than direct does not convert permissible inference based on that evidence into impermissible conjecture”. However, the present is a case in which direct evidence is now available which establishes the false and misleading nature of the circumstantial case which Rawson fraudulently ran in the AAT and to which it adhered in defending the AAT decision in the Rawson (FCA) and Rawson (FCAFC) proceedings.
Furthermore, at all relevant times, Rawson and the other Binetter family entities were represented by Mark Douglass, initially of MDA Lawyers and subsequently of Signet Lawyers.
2.2 Other entities controlled by members of the Binetter family (BCI, Binqld, EGL, Ligon 268, Advance, Civic, and the GERM entities)
In addition to Rawson, various members of the Binetter family controlled several entities (the Binetter family entities). These relevantly included:
(1)BCI[8];
(2)Binqld Finances Pty Ltd;[9]
(3)EGL;[10]
(4)Ligon 268 Pty Ltd;[11]
(5)Advance;[12]
(6)Civic;[13]
(7)Gerobin Finances Pty Ltd;[14]
(8)Erbin Finances Pty Ltd;[15]
(9)Rawbin Finances Pty Ltd;[16] and
(10)Marbin Finances Pty Ltd.[17]
[8] KDB Vol 8 Tab 268; TCA1-1 11/494/6368 (company search).
[9] KDB Vol 8 Tab 269; TCA1-1 11/495/6378 (company search).
[10] KDB Vol 8 Tab 270; TCA1-1 11/496/6383 (company search).
[11] KDB Vol 8 Tab 271; TCA1-1 11/497/6392 (company search).
[12] KDB Vol 8 Tab 272; TCA1-1 11/498/6401 (company search).
[13] CB Vol 8 Tab 499; TCA1-1 11/499/6408 (company search).
[14] KDB Vol 8 Tab 281; McGregor NEM1-2 Tab 156 (company search).
[15] KDB Vol 8 Tab 282; McGregor NEM1-2 Tab 157 (company search).
[16] KDB Vol 8 Tab 283; McGregor NEM1-2 Tab 158 (company search).
[17] KDB Vol 8 Tab 284; McGregor NEM1-2 Tab 159 (company search).
The last four entities, Gerobin, Erbin, Rawbin and Marbin, are collectively referred to as the GERM entities.
Aside from Rawson, each of the entities listed above is now subject to external administration[18].
[18] KDB Vol 8 Tab 268, 269, 270, 271, 272 and CB Vol 8 Tab 499; TCA1-1 11/494 – 499/6368 – 6413 (BCI, Binqld, Ligon 268, EGL, Advance and Civic); KDB Vol 8 Tab 281, 282, 283, 284; McGregor NEM1-2 Tabs 156 – 159 (GERM).
BCI,[19] Binqld,[20] EGL,[21] Ligon 268,[22] Advance[23] and Civic[24] each separately commenced proceedings pursuant to Part IVC of the TAA 53 in the Federal Court or the AAT and contended that they borrowed funds from banks in Israel as follows:
(1)from MDB in the case of Advance;
(2)from Bank Hapoalim in the case of BCI; and
(3)from IDB in the cases of Binqld, Ligon 268, EGL and Civic[25].
[19] KDB Vol 7 Tab 216; TCA1-1 8/373/4715 [10]ff, [29]ff (amended appeal statement).
[20] KDB Vol 7 Tab 221; TCA1-1 8/388/5026 [6]ff (further amended statement of facts, issues and contentions).
[21] KDB Vol 7 Tab 222; TCA1-1 8/389/5040 [15]ff (statement of facts, issues and contentions).
[22] KDB Vol 7 Tab 223; TCA1-1 8/390/5056 [14]ff (statement of facts, issues and contentions).
[23] KDB Vol 7 Tab 234; TCA1-1 9/413/5486 [17]ff, [24]ff (statement of facts, issues and contentions).
[24] KDB Vol 7 Tab 235; TCA1-1 9/414/5500 [16]ff, [22]ff (statement of facts, issues and contentions).
[25] KDB Vol 7 Tab 216; TCA1-1 8/373/4715 (BCI); KDB Vol 7 Tab 221; TCA1-1 8/388/5026 (Binqld); KDB Vol 7 Tab 222; TCA1-1 8/389/5040 (EGL), KDB Vol 7 Tab 223; TCA1-1 8/390/5056 (Ligon 268), KDB Vol 7 Tab 234; TCA1-1 9/413/5486 (Advance), KDB Vol 7 Tab 235; TCA1-1 9/414/5500 (Civic).
However, Advance and Civic withdrew their Part IVC proceedings on 4 March 2013 prior to the Tribunal hearing and shortly after going into administration. BCI discontinued its Part IVC proceedings in the Federal Court on 10 March 2014 after the Commissioner obtained documents demonstrating that its loans were in fact supported by cash deposits. Binqld, Ligon 268 and EGL also withdrew their respective Part IVC proceedings in the Tribunal shortly thereafter on 22 May 2014.
Taking each of these entities in turn:
(1)BCI was incorporated in the Australian Capital Territory on 1 May 1992[26]. The following individuals, who were all members of the Binetter family, were appointed directors of BCI, among others[27]:
[26] KDB Vol 8 Tab 268; TCA1-1 11/494/6386 (company search).
[27] KDB Vol 8 Tab 268; TCA1-1 11/494/6386 (company search).
(a)Margaret, appointed on 25 January 1994;
(b)Gary Binetter (son of Emil Binetter), appointed on 25 January 1994;
(c)Andrew, appointed on 25 January 1994;
(d)Erwin, appointed on 4 May 1992 and ceasing on 25 August 2009; and
(e)Emil (deceased) (Erwin’s brother), appointed on 4 May 1992 and ceasing on 20 June 2013.
(2)Binqld was incorporated in the Victoria on 12 April 2006[28]. Andrew was its sole director from incorporation[29].
[28] KDB Vol 8 Tab 269; TCA1-1 11/495/6378 (company search).
[29] KDB Vol 8 Tab 269; TCA1-1 11/495/6378 (company search).
(3)EGL was incorporated in the Australian Capital Territory on 20 June 1975[30]. The following individuals, who were all members of the Binetter family, were appointed directors of EGL:
[30] KDB Vol 8 Tab 270; TCA1-1 11/496/6383 (company search).
(a)Erwin, appointed on 18 July 1975 and ceasing on 25 August 2009;
(b)Emil, appointed on 31 January 1990 and ceasing on 28 September 2001;
(c)Gary, appointed on 16 October 1996 and ceasing on 28 September 2001; and
(d)Michael Binetter (older brother of Andrew), appointed on 16 October 1996 and ceasing on 28 September 2001; and
(e)Andrew, appointed on 28 September 2001.
(4)Ligon 268 was incorporated in New South Wales on 22 April 1991[31]. The directors of Ligon 268 were, among others:
[31] KDB Vol 8 Tab 271; TCA1-111/497/6392 (company search).
(a)Erwin, appointed on 6 September 1991 and ceasing on 25 August 2009;
(b)Michael, appointed on 5 July 1991 and ceasing on 30 June 1992;
(c)Ronald Binetter (brother of Michael and Andrew), appointed on 5 July 1991 and ceasing on 27 March 1992; and
(d)Andrew, appointed on 30 June 1992[32].
[32] KDB Vol 8 Tab 271; TCA1-111/497/6392 (company search).
(5)Advance was incorporated in the Australian Capital Territory on 21 April 1997[33]. The directors of Advance were:
[33] KDB Vol 8 Tab 272; TCA1-1 11/498/6401 (company search).
(a)Gary, appointed on 21 April 1997;
(b)Emil, appointed on 21 April 1997 and ceasing on 11 April 2011;
(c)Debbie Binetter (sister of Gary), appointed on 21 April and ceasing on 11 April 2011; and
(d)Lisa Binetter (sister of Gary), appointed on 21 April 1997 and ceasing on 11 April 2011[34].
(6)Civic was incorporated in the Australian Capital Territory on 17 May 1999[35]. The directors of Civic were:
(a)Gary, appointed on 17 May 1999;
(b)Emil, appointed on 17 May 1999 and ceasing on 11 April 2011;
(c)Debbie, appointed on 17 May 1999 and ceasing on 11 April 2011; and
(d)Lisa, appointed on 17 May 1999 and ceasing on 11 April 2011[36].
(7)At all relevant times, Andrew Binetter was the sole director and shareholder of the GERM entities[37]. Erbin was incorporated in Victoria on 13 July 2009, and Gerobin, Marbin and Rawbin were incorporated in New South Wales on 16 November 2009[38].
[34] KDB Vol 8 Tab 272; TCA1-1 11/498/6401 (company search).
[35] CB Vol 8 Tab 499; TCA1-1 11/499/6408 (company search).
[36] CB Vol 8 Tab 499; TCA1-1 11/499/6408 (company search).
[37] KDB Vol 8 Tabs 281, 282, 283, 284; McGregor NEM1-2 Tabs 156 – 159.
[38] KDB Vol 8 Tabs 281-284; McGregor NEM1-2 Tabs 156 – 159.
I later discuss the evidence before the Tribunal in detail. I note at this stage, however, that Andrew, Margaret, Gary, and Baruch Etzion gave evidence[39] and were cross-examined[40] in the Rawson (AAT) proceedings. Mr Etzion had approved loans to BCI when he was employed by Bank Hapoalim and was said to be an expert with respect to the likelihood of a loan being granted on the strength of a bare personal guarantee. Their evidence was relied upon as indirect evidence of aspects of the purported loans from MDB. Their affidavits were also filed and served in Part IVC proceedings commenced by BCI in the Federal Court[41].
[39] KDB Vol 4 Tab 150; Andrew Binetter: KDB Vol 4 Tab 160; TCA1-1 5/284/2563 (21 October 2010); TCA1-1 5/298/2742 (17 November 2010); KDB Vol 5 Tab 177; TCA1-1 6/326/3008 (15 April 2011); KDB Vol 5 Tab 182; TCA1-1 6/330/3053 (4 May 2011); KDB Vol 5 Tab 185; TCA1-1 6/333/3074 (6 May 2011). Baruch Etzion: KDB Vol 3 Tab 129; TCA1-1 3/211/1238; (16 December 2009); KDB Vol 5 Tab 167; TCA1-1 5/303/2804 (15 February 2011); KDB Vol 5 Tab 175; TCA1-1 6/324/2988 (1 April 2011).
[40] Andrew Binetter: KDB Vol 5 Tab 191; TCA1-1 6/337/3231; KDB Vol 6 Tab 197; TCA1-1 7/345/3577; KDB Vol 6 Tab 198; TCA1-1 7/346/3659; KDB Vol 6 Tab 199; TCA1-1 7/347/3745; KDB Vol 6 Tab 202; TCA1-1 7/350/3872. Baruch Etzion: KDB Vol 5 Tab 191; TCA1-1 6/337/3231.
[41] Andrew Binetter: KDB Vol 7 Tab 215; TCA1-1 8/370/4658 (31 October 2011); KDB Vol 7 Tab 220; TCA1-1 8/387/5022 (13 April 2012); KDB Vol 7 Tab 236; TCA1-1 9/415/513 (28 September 2012). Baruch Etzion: KDB Vol 7 Tab 212; TCA1-1 8/365/4619 (4 October 2011); KDB Vol 7 Tab 218; TCA1-1 8/379/4789 (15 March 2012); KDB Vol 7 Tab 219; TCA1-1 8/380/4800 (15 March 2012).
2.3 Binetter family code names
As I later explain, the Binetter family members operated the “loan” accounts with the Israeli banks using various code names. These are conveniently set out in the table below.
Binetter family member Belan code name Erwin Binetter family Erwin George Belan Michael Arthur Belan Andrew Frank Belan Margaret Ida Belan Ronald Benjamin Belan Peter Belan Henry Belan Emil Binetter family Emil David Belan Gary John Belan Debbie Rose Belan Lisa Rita Belan
In addition, as the Commissioner submitted (applicant’s submissions (AS) at [248]), the Belan code names may not be the only pseudonyms used by the Binetter family. The MDB documents reveal large payments being made to names such as “Peter Babis”[42], “David Israel”[43] and “M&D Lobelson”[44]. The identity of these persons has never been explained by Rawson and may also be code names.
3. EVIDENCE
[42] SCB Vol 9 Tab 897; MDB Documents pp 43 (AUD$1,060,000 converted to Swiss Francs to Peter Babis at the instruction of Frank Belan (Andrew Binetter) on 21 July 2009);, SCB Vol 9 Tab 908; MDB Documents p 44 (CHF917,000 to Peter Babis by order of Michael Binetter on 22 July 2009), and SCB Vol 9 Tab 942 MDB Documents p 76; (AUD$648,049.84 to Peter Babis in Swiss Francs at the instruction of Andrew Binetter on 13 October 2009); SCB Vol 9 Tab 943; MDB Documents p 77 (CHF595,000 to Peter Babis by order of Michael Binetter on 13 October 2009).
[43] SCB Vol 7 Tab 722; MDB Documents p 486.
[44] SCB Vol 7 Tab 721; MDB Documents p 485.
3.1 Rawson
Rawson filed its defence to the 2FASOC on 8 July 2020[45]. However, by orders made on 29 April 2015, Rawson was excused from pleading to paragraphs 14, 16, 18, 20, 22, 24, 26, 29(c), 31, and 33 of the Commissioner’s 2FASOC on the basis that its directors, Andrew and Margaret, asserted the privilege against self-incrimination. Rawson did not tender any evidence and no witnesses gave evidence for Rawson.
[45] CB Vol 1 Tab 3.
3.2 The Commissioner’s evidence
The Commissioner relied upon a number of affidavits (including exhibits and annexures) of Thomas Charles Arnold, solicitor, namely:
(1)save for those paragraphs not read, his affidavit affirmed 11 September 2015 (TCA1) setting out a chronology of events and exhibiting material provided by the liquidators, being:
(a)exhibit TCA1-1 comprised of 11 volumes; and
(b)exhibit TCA1-2 comprised of 13 volumes.
(2)his affidavit affirmed 11 February 2016 (TCA3) which annexed various s 264 and s 264A notices issued to Rawson and the Binetter family entities;
(3)his affidavit also affirmed 11 February 2016 (TCA4) identifying gaps in the evidence from the affidavit affirmed on 15 September 2015;
(4)his affidavit affirmed 12 February 2016 TCA5) and exhibit thereto marked “TCA5-1” containing copies of Andrew Binnetter’s credit card statements to establish his location in Israel at various times; and
(5)his affidavit affirmed 12 February 2016 (TCA6) and exhibit thereto marked “TCA6-1”, being a USB containing all of the material before the AAT and before Federal Court on appeal from the AAT.
In addition, the Commissioner relied upon the affidavits of the following additional witnesses:
(6)the affidavit of Ester Copley, a National Accreditation Authority for Translators and Interpreters accredited Hebrew to English translator, affirmed 16 September 2015 annexing copies of documents translated by her from Hebrew to English;
(7)the affidavit of Chris Kinsella, solicitor, affirmed 17 September 2015, save for those parts not read and documents not tendered (T25.42-46) (as specified in the objections schedule);
(8)the affidavit of Rochelle Layoun, public servant employed by the Australian Tax Office (ATO), affirmed 11 February 2016, including annexed summaries of incoming passenger cards from the Passenger Movement Reconstruction Database maintained by the Department of Immigration and Border Protection about the movement of various Binetter family members, including Andrew, Erwin, Michael and Gary, to and from Australia at various times;
(9)the affidavit of Max Christopher Donnelly, chartered accountant and consultant at Ferrier Hodgson and registered liquidator of Civic and Advance, sworn 12 February 2016, including exhibits being documents obtained from MDB in the course of the liquidation relevant to the asserted loans from MDB to Civic and Advance;
(10)the affidavit of Naomi Elizabeth McGregor, solicitor, affirmed 19 June 2020 exhibiting a USB containing documents obtained from the Commissioner’s records relating to Rawson and associated entities.
The documentary material was voluminous and comprised:
(1)the key documents bundle (KDB) (8 volumes);
(2)the Court Book (CB) (38 volumes) containing the documentary evidence in chronological order save for the MDB Documents; and
(3)the Supplementary Court Book (SCB) (10 volumes) comprising the MDB Documents.
The parties also filed:
(1)their respective lists of legal and factual issues to be determined at the hearing;
(2)extensive written submissions in advance of the hearing; and
(3)a lengthy agreed chronology hyperlinked to the relevant documents.
3.3 Grant of leave to use certain documents obtained in Part IVC proceedings instituted by BCI in the Federal Court in these proceedings
As I have earlier mentioned, BCI instituted proceedings in the Federal Court of Australia challenging assessments by the Commissioner which treated as taxable income, monies transferred to it from Bank Hapoalim in Israel pursuant to alleged loans. On 9 August 2012, orders were made by Jagot J in the BCI proceedings: BCI Finances Pty Ltd v Commissioner of Taxation [2012] FCA 855; (2012) 89 ATR 861. Among other orders, Jagot J made orders for the BCI letter of request to be sent to judicial authorities in Israel for the taking of evidence from Mr Ilan Mazur, an officer of Bank Hapoalim[46]. Jagot J also made orders for there to “be discovery by [BCI] of documents in Schedule E to these orders”. In broad terms, the documents in Schedule E primarily pertained to:
(1)documents related to borrowings by BCI from Bank Hapoalim, including bank statements which record of evidence payment of interest or repayment of principal by BCI to Bank Hapoalim;
(2)documents related to lending by BCI to any entity; and
(3)various other financial records, accounts and recordings concerning BCI.
[46] KDB Vol 7 Tab 233; TCA1-1 9/407/5424.
On 26 January 2014 (and after the Full Court’s decision in Rawson (FCAFC)), BCI filed a motion in the Israeli proceedings which concerned the letters of request. That motion requested a short delay in proceedings, on the basis that BCI had not yet received all of the documents relevant to that letter of request held by Bank Hapoalim[47]. Implicitly, that document therefore indicated that BCI had obtained at least some documents from Bank Hapoalim.
[47] KDB Vol 8 Tab 247; TCA1-1 10/463/6020.
Following the filing of that motion in the Israeli proceedings, on 29 January 2014, the Commissioner filed and served a notice to produce document in this Court, requiring the applicant to produce “all documents provided by Bank Hapoalim [to BCI] … following the directions hearing before … the Magistrate’s Court Tel-Aviv Jaffa … as referred to in the Applicant’s motion filed in those proceedings on or about 26 January 2014”.[48]
[48] CB Vol 8 Tab 467; TCA1-1 10/464/6020.
Finally, on 9 April 2014, the Commissioner issued a subpoena (returnable on 30 April 2014) in the BCI proceeding to Signet Lawyers (formerly MDA Lawyers).[49] By that subpoena, the Commissioner sought production of “all documents provided by Bank Hapoalim to you [Signet Lawyers] or to the applicant [BCI] following the directions hearing before … the Magistrate’s Court Tel-Aviv Jaffa … as referred to in the Applicant’s motion filed in those proceedings on or about 26 January 2014”.[50]
[49] KDB Vol 8 Tab 252; TCA1-1 10/479/6199.
[50] KDB Vol 8 Tab 251; TCA1-1 10/477/6138.
On 10 June 2014, the Commissioner filed an interlocutory application and supporting affidavit in the BCI proceedings[51] seeking leave to use certain documents obtained in those proceedings:
(1)in order to determine whether he would apply to the Court to set aside the decision of the Full Court in Rawson (FCAFC) (or alternatively, the Rawson (AAT) decision) on the basis the orders were procured by fraud; and
(2)in any such proceeding instituted by the Commissioner.
[51] CB Vol 38 Tab 1953 – 1954.
That application identified various documents sought to be released, including the following:
Affidavit and documentary evidence
1. Affidavit of Baruch Etzion filed on 12 October 2011 [TCA1-1 8/365/4619].
2.Exhibit “BE18” to the affidavit of Baruch Etzion filed on 12 October 2011, being a letter from Bank Hapoalim to BCI Finances Pty Ltd dated 10 November 2009 in relation to the balance of account for account no. 343415 as at 30 September 2009 [TCA1-1 3/187/1211].
…
5. Affidavit of Margaret Binetter filed on 14 October 2011 [TCA1-1 8/367/4636].
…
7.Affidavit of Andrew Binetter filed on 1 November 2011 [TCA1-1 8/370/4658].
8.Affidavit of Baruch Etzion filed on 13 April 2012 [TCA1-1 8/379/4789 and 8/380/4800]
…
Documents produced by Andrew Binetter under subpoena and discovered
…
12.Letter from Bank Hapoalim to BCI Finances Pty Ltd dated 15 October 2009 in relation to account balance for account number 343415 as at 30 September 2009 [TCA1-1 3/184/1162].
…
Documents produced by Signet Lawyers under subpoena
…
15.All documents produced by Signet Lawyers Pty Ltd on 22 May 2014 in an envelope pursuant to the subpoena to produce documents issued on 9 April 2014, being:
a.a letter from Bank Hapoalim (Switzerland) Ltd to Bank Hapoalim, Tel Aviv dated 25 May 2004 [TCA1-1 1/93/541]; and
b.a letter from Bank Hapoalim (Switzerland) Ltd to Bank Hapoalim, Tel Aviv dated 1 June 2004 [TCA1-1 1/94/543].
On 19 August 2014, Edmonds J heard that application. On 10 September 2014, in BCI Finances Pty Ltd (in liq) v Commissioner of Taxation (No 3) [2014] FCA 958; (2014) 320 ALR 747, his Honour made orders that:
1.The respondent (the Commissioner) have leave to use those documents described in paras 1, 2, 5, 7, 8, 12 and 15 of the schedule to the interlocutory application filed 10 June 2014 –
a.In order to determine whether he will apply to the Court to set aside the decision in [Rawson (FCAFC)] and the earlier decisions in relation to the same on the basis that judgment was procedure by fraud;
b.in any proceeding instituted by the respondent seeking to set aside the decision given in [Rawson (FCAFC)] and the earlier decisions in relation to the same.
Between February and April 2015, the Commissioner obtained further documents from Bank Hapoalim pursuant to the BCI letter of request, necessitating a further application for leave to use those documents in the present proceeding.
On 4 June 2015, the Commissioner filed an interlocutory application and supporting affidavit in the BCI proceedings. That application sought, amongst other orders, for the Commissioner to be released from the implied obligation not to make use of documents filed in those proceedings for purposes other than those of the proceedings, so far as necessary to enable the Commissioner to use the documents identified in Schedule A in the present proceeding[52].
[52] CB Vol 38 Tabs 1957-1958.
On 7 July 2015, Jagot J made orders, amongst others, that the Commissioner be released from the implied obligation not to make use of documents filed in the BCI proceedings for purposes other than those of the proceedings, so far as is necessary to enable the Commissioner to use, in the present proceeding, the documents identified in Schedule A and B as attached to the Commisioner’s interlocutory application dated 3 June 2015: B.C.I Finances Pty Limited (in liq) v Commissioner of Taxation [2015] FCA 679.
The orders made on 7 July 2015 were opposed by Andrew. An appeal by Andrew from that decision was dismissed unanimously by the Full Court on 27 August 2015: Binetter v BCI Finances Pty Ltd (in liq) [2015] FCAFC 122; (2015) 235 FCR 410. Andrew further sought special leave to the High Court. On 12 February 2016, Keane and Gageler JJ refused special leave with costs, on the basis that the appeal “would have insufficient prospects of success to warrant the grant of special leave to appeal”: Binetter v BCI Finances Pty Ltd [2016] HCATrans 33.
3.4 Manner of citing documents and glossary
For reasons of consistency, I have adopted the manner of referring to documents in the footnotes which was used by the Commissioner in his written submissions, namely:
a reference to a document that is part of an exhibit is a reference to, first, the mark identifying the exhibit, second, the volume number describing where the document is located, third, the tab number the document is behind and fourth, the page number of the document contained in the exhibit. For example, TCA1-1 1/13/296 refers to the document at page 296 behind tab 13 in volume 1 of exhibit TCA1-1.
In addition, the Commissioner provided a glossary of terms used in the applicant’s submissions in chief. As I have adopted the same terminology as the Commissioner, I have reproduced the glossary in Appendix A (with appropriate amendments) to these reasons to assist the reader.
Finally, footnote references to the evidence have been included for the convenience of the parties only and are not intended to comprehensively identify the location of all documents or every location in the evidence where a particular document is found. Nor, while there are some cross-references included to the agreed chronology, does the judgment contain comprehensive cross-references to the agreed chronology.
4. OVERVIEW OF THE ISSUES
The Commissioner submitted that the decision of the Full Court should be set aside on the ground that it was procured by fraud. The way in which the Commissioner put the case of fraud in oral and written submissions can be summarised as follows.
(1)The onus lay upon Rawson under s 14ZZK of the TAA 53 in the Part IVC proceeding to prove that the Commissioner’s assessment was excessive.
(2)In order to discharge that onus, Rawson, through its directors, presented a case in the AAT that the taxation assessments were excessive based upon the repeated assertion (in its pleadings, evidence, statements of facts, issues and contentions (SFICs) and submissions) that the loans by MDB to Rawson were secured by personal guarantees only, and that there was no back-to-back deposit against which the loans were secured. Rawson also alleged that although interest on the loan account had not been paid for a period, it had been capitalised and was eventually fully paid. In other words, as Jagot J held in Rawson (FCAFC) at [91]:
The only basis upon which Rawson sought to discharge its burden of proof [before the Tribunal on the Part IVC proceeding] was that the funds transferred to Rawson by the Israeli bank in 1997, the Mercantile Discount Bank (MDB), were not assessable income because they were loans which Rawson was obliged to and did repay and on which Rawson had paid interest. Accordingly, the ultimate issue between Rawson and the commissioner in the proceedings before the tribunal was whether, on the whole of the material, Rawson had discharged its burden of proving that the funds transferred were loans. If they were loans, it followed that the assessments were excessive. If they were not loans, it followed that Rawson had not discharged its onus of proof.
(Emphasis added.)
(3)That case was pressed again in the Federal Court and on appeal to the Full Court when Rawson alleged that there was no error of law in the AAT’s decision because the AAT’s findings accepting Rawson’s case were open on the evidence before it. While Edmonds J on the s 44 appeal in Rawson (FCA) held against Rawson and quashed the AAT’s decision, Rawson’s case was upheld on the appeal to the Full Court, despite the inherent implausibility of Rawson’s case to which Jagot J referred in Rawson (FCAFC).
(4)However, the case presented by Rawson was, to the knowledge of Rawson at least through its director, Andrew, entirely false. Andrew had been involved from the outset as a signatory to the secret code-named Arthur Belan deposit account against which the loans were secured and from which so-called interest was repaid, and was involved in transactions concerning the Arthur Belan deposit account since at least 2002. Margaret also had an account in a code name, Ida Belan.
(5)While pleaded in the 2FASOC, the Commissioner submitted that it was not necessary on the case as articulated in his submissions for the Commissioner to establish that Mr Zamir, Mr Etzion and other witnesses had knowledge of the fraud or knowingly misled the AAT. Nor was it necessary to show that these witnesses committed perjury or had been suborned to give false evidence. It sufficed that Rawson knew that it was presenting a completely false case to the Tribunal as to why the assessments were excessive.
(6)The Commissioner contended that the fraud was material in that:
(a) the deliberately false evidence and intentional concealment of evidence were an operative cause of the Tribunal’s decision (and the Full Court decision); and
(b)it is likely that a different outcome would be reached if the Tribunal were to rehear the matter appraised of the new evidence.
In the face of overwhelming evidence of the existence of the back-to-back loans in the case of Rawson and the Binetter family entities, Rawson admitted the existence of the back-to-back loans for the first time in its written submissions in this proceeding, but contends that the Commissioner still cannot succeed for essentially the following reasons.
First, Rawson contends that in order to succeed on his pleaded case, the Commissioner must establish that the Andrew and Margaret, as well as the the other witnesses on which Rawson’s case depended (who are referred to in the 2FASOC) including Mr Zamir, perjured themselves or were suborned into giving false evidence. In Rawson’s submission, this is the case which has been pleaded by the Commissioner. (I note that this submission also explains why Rawson says that the decision which must be set aside is the AAT’s decision because the perjury occurred at the level of the AAT, and why it contends that there would be no inconsistency between the decision of this Court setting that decision aside and the decision in Rawson (FCAFC), because the Full Court simply determined whether the AAT’s decision was open to it on the basis of the evidence before the AAT). Rawson therefore denies that the Commissioner has pleaded that Rawson ran an entire case before the AAT, the Federal Court and the Full Court which was knowingly fraudulent. Given that fraud must be strictly pleaded and proved, Rawson says that the Commissioner must be held to his pleaded case which he cannot establish. Rawson also alleges that the 2FASOC is largely based upon a wrong assumption, because it does not suffice to establish fraud that the evidence give was “misleading” or “materially misleading” as pleaded. Instead, Rawson contends that perjury must be proved to the standard articulated in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 and the elements are those applicable to a criminal prosecution.
However, for reasons which I later develop, the Commissioner’s submissions as to the adequacy of its pleaded case to establish fraud is, in my view, unquestionably correct. Rawson’s submissions impermissibly conflate the question of whether Rawson had the requisite fraudulent intent with the means by which the fraud was allegedly perpetrated, namely, by the leading of false or misleading evidence, including by material non-disclosures.
Secondly, Rawson also submits that when regard is had to the new evidence (including produced by MDB and the witnesses examined in Israel pursuant to the letters of request), the result would be the same: the evidence of the witnesses in the AAT was truthful as Rawson itself had no overseas assets, and the new evidence confirms that the Rawson loans were genuine and enforceable loans in respect of which interest was payable. To the contrary, Rawson submits that the new evidence makes it clear that these were genuine loans. As Rawson submitted in its written submissions (RS) at [3]:
The evidence obtained pursuant to the Letters of Request to Israel unequivocally confirms that the funds received from the bank were genuine loans at interest. Had the ‘undisclosed evidence’ been before the Tribunal, namely that there were cash deposits (in an account owned by a person other than Rawson), which secured the loans from the bank, the Tribunal and the Full Court would have reached the same conclusion, a fortiori.
The Commissioner however alleges that Rawson is effectively seeking to impose the onus upon the Commissioner to establish that these were not genuine loans, rather than Rawson being required to establish that the assessments were excessive in accordance with the statutory onus on the basis of the case which it chose to run in the AAT. As the Commissioner submitted orally in reply:
… we disagree, on a matter of [principle], with Mr Hutley’s [Rawson’s counsel’s] submissions. That your Honour’s job is to look at the decision of the Tribunal, and impose, on the Senior Members decision, the existence of the deposit. And determine whether, in the context of some of his – of the Tribunal’s – findings, Rawson would still have satisfied the onus. Now we say that that’s not the right approach and that’s inconsistent with authority; that the approach your Honour has to undertake is your Honour has to undertake an assessment of the evidence that was led and the submissions put and assess the new evidence in light of that. And whether the new evidence would have had an impact.
(See also the Commissioner’s written submission in reply (AR).)
As the Commissioner also submitted:
… the significant issue that was put by Mr Hutley today was an argument he has run on various occasions, which is the idea of this being a genuine loan. Well, the three loans being genuine. As your Honour now knows, it was every year it had to be redone. We now know that. It wasn’t just one loans or three loans in 1997. It was in fact extended every single year, including by Andrew Binetter prior to the hearing and that was never revealed. But everything that Mr Hutley submitted this morning, your Honour, would not have been an argument that could have been [r]un in the tribunal.
Mr Hutley’s client would have been constrained by the terms of its objection, and the objection that it had articulated and ran was – these were loans, and the interest was as paid, by Mr Andrew Binetter, and in the 90s by his father. So what your Honour’s task actually is, is not whether MDB as an enforceable right under a loan contract, but whether or not your Honour is satisfied that the commissioner has proved the fraud that is pleaded, whether if that material had been available, whether for each year of income, Rawson would have been able to satisfy the commissioner, that the assessments were not excessive.
(T 22/09/20 at pp. 517.38-518.8 (Ms Morgan); emphasis added.)
5. RELEVANT PRINCIPLES
5.1 Principles applying where it is sought to impeach a judgment on the ground of fraud
First, the Federal Court has implied jurisdiction to set aside orders procured by fraud: Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd [1986] FCA 248; (1986) 12 FCR 14 at 15 (Morling J) and the authorities cited therein. This is reflected in r 39.05(b) of the Federal Court Rules 2011 (Cth) (FCR) which provides that the Federal Court may set aside or vary any judgment or order after it has been entered if it was “obtained by fraud”.
Secondly, as the Commissioner submitted, while the fraud alleged by the Commissioner commenced with the case presented by Rawson to the Tribunal, unlike a court, the Tribunal lacks any equitable jurisdiction to set aside its decision on the basis that it was procured by fraud. Nor does a decision of the Tribunal authoritatively determine the rights of the parties, in contrast to an exercise of judicial power.
However, as the Commissioner also submitted, the effect of the orders of the Full Court was to restore the operation of the Tribunal’s decision which itself merged into the judgment of the Full Court. Thus, by analogy in Thiess Pty Ltd and Hochtief Ag v Industrial Court of NSW [2010] NSWCA 252; (2010) 78 NSWLR 74, Spigelman CJ held (at [74]) that:
In a case such as the present, it is not sufficient to make orders directed only at the outcome of the proceedings in the Local Court. An order dismissing the appeal, as made by the Full Bench of the Industrial Court in this case, has the consequence that the orders of the Local Court become merged in the judgment of the Full Bench: see Wishart v Fraser (1941) 64 CLR 470 especially at 482–483 … It is, accordingly, necessary to make orders directed to the order of an appellate court dismissing an appeal.
The case to which Spigelman CJ referred to in Thiess was Wishart v Fraser [1941] HCA 8; (1941) 64 CLR 470 which concerned an appellant who sought special leave from a decision of the then Court of Quarter Sessions, and at the same time sought to overturn, by order nisi, a conviction from the then Court of Petty Sessions. Although Wishart involved a special leave application to the High Court, the Commissioner placed particular reliance on Dixon J’s proposition (at 482‑3) that:
It is not denied that the order of the Court of Quarter Sessions was within its jurisdiction and was validly made. While it stands it is a judicial declaration by a competent court exercising Federal jurisdiction establishing the order of the magistrate and preventing its being called in question. If this court made an order setting aside the conviction, there would be two inconsistent judicial orders in operation at the same time, that of the Court of Quarter Sessions confirming the conviction and that of this court discharging it.
Equally, if this Court were to set aside the Tribunal’s decision on the ground of fraud, there would be two inconsistent judicial orders in operation at the same time, namely, the Full Court’s decision upholding the Tribunal’s decision and the decision of this Court setting the Tribunal’s decision aside. It follows as the Commissioner submitted (AS at [130]), that, consistently with authorities concerning the effect of an appellate court’s order, the only operative decision, and the one which should be set aside if it was indeed procured by fraud, is that of the Full Court in Rawson (FCAFC). Nonetheless, as the fraud was perpetrated on the Full Court by reason of Rawson pressing, on appeal, the fraudulent case that it ran before the Tribunal, it is necessary in the first place to establish that the decision of the Tribunal was induced by fraud.
Thirdly, as the Commissioner has done in these proceedings, it is generally appropriate for a party wishing to impeach a judgment on the ground of fraud to institute independent proceedings for that purpose: Australasian Meat at 15; Clone Pty Ltd v Players Pty Ltd (In Liquidation) (Receivers & Managers Appointed) [2018] HCA 12; (2018) 264 CLR 165 at [32] (the Court); see also e.g. Tjiong v Tjiong [2021] NSWSC 1389 at [74] (Parker J). In this regard, Lord Sumption (with whom Lord Hodge, Lord Lloyd-Jones and Lord Kitchin JJSC agreed) in Takhar v Gracefield Developments Ltd [2019] UKSC 13; [2020] AC 450 at [60]-[61] explained that:
An action to set aside an earlier judgement for fraud is not a procedural application but a cause of action. As applied to judgments obtained by fraud, the historical background was explained by Sir George Jessel MR in Flower v Lloyd (1877) 6 Ch D 297, 299–300. Equity has always exercised a special jurisdiction to reverse transactions procured by fraud. A party to earlier litigation was entitled to bring an original bill in equity to set aside the judgment given in that litigation on the ground that it was obtained by fraud. Such a bill could be brought without leave, because it was brought in support of a substantive right. If the fact and materiality of the fraud were established, the party bringing the bill was absolutely entitled to have the earlier judgment set aside. In this respect, an original bill differed from a bill of review on the basis of further evidence, which was essentially procedural and did require leave. After the fusion of law and equity in the 1870s, the procedure by way of original bill was superseded by a procedure by action on the same juridical basis.
The cause of action to set aside a judgment in earlier proceedings for fraud is independent of the cause of action asserted in the earlier proceedings. It relates to the conduct of the earlier proceedings, and not to the underlying dispute. There can be no question of cause of action estoppel. Nor can there be any question of issue estoppel, because the basis of the action is that the decision of the issue in the earlier proceedings is vitiated by the fraud and cannot bind the parties: R v Humphrys [1977] AC 1, 21 (Viscount Dilhorne). If the claimant establishes his right to have the earlier judgement set aside, it will be of no further legal relevance qua judgment. It follows that res judicata cannot therefore arise in either of its classic forms.
(Emphasis added.)
Fourthly, the High Court in Clone held (at [55] and [69]) that the power to set aside a judgment on the ground of fraud requires actual fraud, reflecting the public interest in the finality of litigation. In so holding, their Honours at [55] approved inter alia the statement by Sir John Rolt LJ in Patch v Ward (1867) LR 3 Ch App 203 at 212-213 that:
… the fraud must be actual positive fraud, a meditated and intentional contrivance to keep the parties and the Court in ignorance of the real facts of the case, and obtaining that decree by that contrivance. Mere constructive fraud not originating in actual contrivance, but consisting of acts tending possibly to deceive or mislead without any such intention or contrivance, would probably not be sufficient … What, therefore, the Appellant has to do is to satisfy the Court that the decree was obtained by the positive and actual fraud and contrivance of the party obtaining it.
Thus, the High Court held that serious malpractice by the respondent’s lawyers did not suffice; nor would accident, surprise, mistake or a lack of frankness alone: Clone at [55] and [57] (quoting The Ampthill Peerage [1977] AC 547 at 571 (Lord Wilberforce) and 591 (Lord Simon of Glaisdale)); see also e.g. Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 538 (Kirby P). As, for example, Lord Simon of Glaisdale said in Ampthill Peerage at 591 (on which Rawson relied):
To impeach a judgment on the ground of fraud it must be proved that the court was deceived into giving the impugned judgment by means of a false case known to be false or not believed to be true or made recklessly without any knowledge on the subject. No doubt, suppression of the truth may sometimes amount to suggestion of the false: The Alfred Nobel [1918] P. 293. But, short of this, lack of frankness or an ulterior or oblique or indirect motive is insufficient.
Rawson submitted that the decision in Ampthill Peerage is authority for the proposition that merely failing to disclose evidence without a positive duty to do so is not fraud (T403.15-17), relying upon the following passage from the judgment of Lord Kilbrandon at 595-596:
It is fraudulent conduct to represent to another what is not true with the intention of inducing that other to act contrary to his own interest or, sometimes, his duty. If the conduct has succeeded, fraud has been committed. Fraud is a civil wrong when it breaches a duty not to deceive; the deception may consist of the imparting of false information or the non-disclosure of true information. In either case the duty binds the representer not in the abstract, whatever his moral obligation may do, but because he stands in a relationship with the recipient which calls in law for truthful communication.
In support of this proposition, Rawson also placed reliance on The Alfred Nobel [1918] P 293 at 296 where the President of the Prize Court, Sir Samuel Evans, held that:
Every Court has the inherent right to set aside an order which it has made if it has been procured by fraud; and that rule applies to the Prize Court certainly as strongly as it does to any other Court. It cannot be too well known that claimants who desire to establish their claims [for a decree for release of the proceeds of consignments to them in Admiralty] must put their cases honestly, fairly, candidly, and fully before the Court. That has been said in the course of the last three years or so over and over again. So far from having done that, the deponent in this particular case unfortunately stated what was untrue, and impliedly what was false, by suppressing material facts which ought to have been laid before the Court.
Rawson further argued that, consistently with this, its case before the Tribunal was that (RS at [9]):
The amounts received were not assessable income because they were loans it was obliged to repay, and did repay with interest. The interest was deductible because the funds borrowed from the MDB were on-lent at rates of interest equal to the rate of interest payable on the MDB loans.
In addition, whilst the Commissioner had found the loans to be a sham when disallowing Rawson’s taxation objection, by the time of the Rawson (AAT) hearing, Rawson contended that the Commissioner “had expressly eschewed the sham contention [but] incongruously contended that Rawson had nevertheless engaged in fraud or evasion because there was no loan and there were no payments of interest giving rise to the deduction claimed” (RS at [13]). Rawson further contended that the Commissioner’s position had narrowed further during the Tribunal hearing so as to contend that (at [14]-[15]):
in the absence of an adequate explanation as to the nature of receipts (i.e. proof they were genuine loans), [the Commissioner] was entitled to assess the amounts received from MDB as income and that the taxpayer had failed to discharge its burden of proof that the amounts received were loans. No positive case as to the income nature of the receipts was put; only that the amounts had been received and that it was incumbent on Rawson to show that they were not receipts of income. Importantly, the Commissioner did not dispute the evidence of the facts that Rawson had on-lent the funds received from MDB to other group entities at rates of interest equal to the rates on the MDB loans and did not contend the interest was otherwise not deductible if the loans were genuine.
The Commissioner accepted that the contentious receipts were from MDB and that the contentious payments by Rawson were to MDB. It was only the character of the amounts that was in issue. The Commissioner’s principal position was that Rawson had not satisfied its burden of proving the amounts were a loan (and thus that the interest thereon was a deductible expense), which he supported by pointing to the irregularities in Rawson’s evidence.
10.4.4.2Rawson’s genuine loans submission must be rejected
Rawson’s genuine loans submissions must be rejected for the following reasons.
First, broadly speaking, it is correct to say that the Commissioner’s case before the Tribunal was that Rawson had failed to discharge its onus under s 14ZZK(b) of the TAA 53 of establishing that its taxable income in each year was less than the amounts assessed by the Commissioner. It is also correct to say that the Commissioner accepted that the so-called loan monies were transferred by MDB to Rawson in Australia. However, Rawson’s submissions characterise the case put by Rawson before the Tribunal at a superficially high level of generality. In fact Rawson’s position before the Tribunal was that, save for a personal guarantee which it characterised as “security”, no security was given over any assets or property either by Rawson or by any other entity or person, whether by way of a back-to-back deposit account or otherwise, in line with the business practice said to be evidenced by Binetter loan arrangements with other Israeli banks. That being so, the Commissioner submitted to the Tribunal that it was incumbent upon Rawson to prove that:
(1)the loans were unsecured;
(2)the only additional rights given to MDB were Erwin’s personal guarantee; and
(3)the provision of funds by MDB did not occur in connection with any other transaction which affected MDB’s preparedness to advance the funds, such as other funds deposited with MDB.
This, in the Commissioner’s submission, could be done only if Rawson gave full disclosure of the dealing between Rawson and MDB. If there were some security or an associated transaction such as an associated deposit with MDB to which the bank had access by way of a set off, the Commissioner submitted to the Tribunal that it would cast a completely different light on the nature of the dealing with MDB and the basis upon which Rawson received moneys from the bank (at [21] of the Commissioner’s written submissions before the Tribunal).
Secondly, as the Commissioner submitted in this proceeding:
by characterising the relevant conduct as the security alone and asserting the “genuineness” of the loans, Rawson’s submission do not confront the calculated deceit of its own conduct in presenting the evidence relied upon by Rawson before the Tribunal to establish the opposite of the true position; including the evidence of its apparent sole directors: Andrew Binetter and his mother, Margaret Binetter.
(AR at [5]; emphasis in original.)
It is no answer to this to point to the fact that the plurality in the Full Court accepted at [122] that Andrew’s evidence, as accepted by the Tribunal, was not necessarily decisive of the ultimate issue, for the reasons I have already given at [604] above. The entire case put by Rawson was patently false and, had the new documents been provided, would have been determined in an entirely different manner. Nor is it an answer to rely upon the Full Court’s finding at [108] that the Tribunal was correct to reject the Commissioner’s submission that it was incumbent on Rawson to prove “as independent matters additional to the reality of the loan transaction and liabilities, that there was no security for the loans, or no security other than a personal guarantee” and that there was no back-to-back arrangement. The point is that the new evidence incontrovertibly established the existence of the back-to-back loans which, if it had been available before the Tribunal, would have contradicted the positive case put by Rawson and cast an entirely different complexion on the alleged loans.
Thirdly, it is common ground that the Tribunal did not make an order permitting Rawson to raise additional grounds to those stated in the taxation objection decision. As such, Rawson was limited to the grounds stated in its taxation objections by force of s 14ZZK of the TAA 53. As a result, I accept Ms Morgan’s submission in closing address that:
the significant issue that was put by [counsel for Rawson] today was an argument he has run on various occasions, which is the idea of this being a genuine loan. Well, the three loans being genuine. As your Honour now knows, it was every year it had to be redone. We now know that. It wasn’t just one loans or three loans in 1997. It was in fact extended every single year, including by Andrew Binetter prior to the hearing and that was never revealed. But everything that Mr Hutley submitted this morning, your Honour, would not have been an argument that could have been [r]un in the tribunal.
Mr Hutley’s client [Rawson] would have been constrained by the terms of its objection, and the objection that it had articulated and ran was – these were loans, and the interest was as paid, by Mr Andrew Binetter, and in the 90s by his father. So what your Honour’s task actually is, is not whether MDB [has] an enforceable right under a loan contract, but whether or not your Honour is satisfied that the [C]ommissioner has proved the fraud that is pleaded, whether if that material had been available, whether for each year of income, Rawson would have been able to satisfy the [C]ommissioner, that the assessments were not excessive.
(T518.38-519.8; emphasis added.)
It follows that the materiality of the new evidence, for the purposes of determining its impact on the evidence supporting the original decision of the AAT and Full Court, cannot be assessed by reference to the question of whether this evidence may have satisfied the Tribunal that MDB had enforceable rights under the loan contracts. That proceeds on a false counterfactual as to the live issues raised by Rawson’s objection and, therefore, before the Tribunal.
Fourthly, the question of whether Rawson was contractually bound to repay the loans and they were therefore enforceable by MDB also misses the point. Rather, among other things, as the Full Court held in BCI Finances (FCAFC) at [575], “[w]hile the existence of the offshore deposits and their provision as security for the advances, support the proposition that the advances were repayable, this does not address the questions whether the ‘interest’ payments were truly interest and whether the interest deductions were honestly claimed.” In this regard, it will be recalled that the interest rates for the Rawson loans and the linked Arthur Belan deposit account were set by Rawson, as the customer, and not by MDB whose profit was not in those rates but in the margin charged by MDB as the fee for facilitating the back-to-back arrangement negotiated by the Binetter family.
Furthermore, the submission ignores the fact that, from whatever perspective one considers the true arrangements between Rawson and MDB (and indeed the other Binetter family entities and the Israeli banks), the monies transferred from MDB to Rawson were not obtained pursuant to an ordinary commercial loan agreement, as:
(1)the loans were supported at all times by a secret cash deposit held under a code name;
(2)MDB would not transfer any funds pursuant to the so-called loans unless and until the monies were deposited;
(3)the deposit was required to be maintained for the life of all loans to Rawson and in an amount at least equal in value to the loans;
(4)the customer, Rawson, determined the interest rates for the loans and deposit accounts;
(5)the true price for the transfers of funds from MDB was an undisclosed margin;
(6)the customer, Rawson, prepared correspondence for MDB to engross on MDB’s letterhead which would support its case that the funds were transferred to it pursuant to an ordinary commercial loan agreement with MDB and omitted any reference to the deposits; and
(7)it is difficult to conceive of a legitimate reason as to why a genuine loan might be sought, when the monies borrowed by Rawson were already available to it by way of the security in the back-to-back deposit account (as I have earlier explained).
In the fifth place, Rawson’s submission is premised upon a misapprehension of the test of materiality. Rather, as the Commissioner submits:
this Court does not evaluate the findings of the Tribunal and determine in light of those findings, whether the fact of security would have altered the outcome. Rather, what this Court must do is consider whether, had the Tribunal had all the material now available to this Court, the Commissioner’s submissions and contentions would have been different and that the evidence obtained after the trial would probably have affected the outcome of the proceedings, and to the extent the fraud consists of perjury, that evidence remains unanswered and is so strong that it would reasonably be expected to have been decisive at a rehearing.
(AR at [6]; emphasis added.)
Applying the correct test, it is incontrovertible that if the new evidence now available to the Court of the linked Arthur Belan deposit account with MDB by Michael had been available to the Tribunal: the Commissioner’s submissions and contentions before the Tribunal would have been different; the issues between the parties would have been fundamentally different; the secretive transactions now revealed would have formed specific issues in the proceeding; and the fresh evidence would have entirely changed the way in which the Tribunal approached its decision. As the Commissioner submitted (at AR at [11]):
The existence of a cash deposit securing the Rawson loans (indeed all the loans relied upon by Rawson in the Binetter family companies) means that the issues in which the dispute before the Tribunal proceeded would have been altered, as the secretive transactions, now brought to light, would have formed specific issues in the proceeding (though they were generally stated in the Commissioner’s case, including in his Statement of Facts, Issues and Contentions).
(Emphasis in original.)
Sixthly, Rawson did not lead any evidence in support of its submission in this proceeding that the funds in the Arthur Belan deposit account belonged to Michael. The fact that Michael opened the loan account in his code name, was a signatory to the account, and could operate it does not establish that he was the legal or beneficial owner of the funds deposited in the account. Indeed, on the same day that the Arthur Belan deposit account was opened (17 March 1997), Michael signed an authority authorising his parents and siblings, including Andrew, to make deposits and withdrawals from the account, two of whom were the original directors of Rawson (i.e. Margaret and Erwin), together with a power of attorney applying to all accounts and transactions with MDB also in their favour. Furthermore:
(1)even though Rawson was not incorporated until 21 April 1997, Michael applied on the same day for a foreign resident loan on behalf of the (proposed) company at the time that the deposit account was opened;
(2)on 2 May 1997, Michael signed the certification of officers of Rawson in the capacity of Rawson’s lawyer;
(3)on 30 May 1997, Michael in his own name and in the name of Arthur Belan signed an agreement with MDB the effect of which was to ensure that all loans by MDB to Rawson, including in the future, were and would continue to be secured via a cash deposit dollar for dollar in the Arthur Belan deposit account with MDB; and
(4)internal bank documentation describes Michael as Rawson’s lawyer.
These matters, and in particular the fact that Michael was holding himself out to MDB as Rawson’s lawyer, strongly suggest that Michael was in fact holding those monies on behalf of his client, Rawson, or at the very least that he did not have beneficial ownership of the monies in that account. Added to this, Michael has not given evidence in support of Rawson’s case for which no explanation has been given. This enables me more confidently to conclude that Michael would not have been able to give evidence which supported the inference for which Rawson contends, namely, that he had full beneficial ownership of the funds in the Arthur Belan deposit account.
Furthermore, as the Commissioner submits (AR at [14]), Rawson has neither addressed nor explained the dealings by Erwin (George Belan) and Andrew (Frank Belan) with the Arthur Belan deposit account and the fact that, as I have earlier found, monies withdrawn from the Arthur Belan deposit account went to “M&D Lobelson”, “Peter Babis” and “David Israel” at various times.
All of these circumstances make it plain that there would have been real questions raised as to the legal and beneficial ownership of, and control over, the monies in the Arthur Belan deposit account if the fresh evidence of the account had been before the Tribunal. These questions would have included whether Rawson had legal or equitable ownership of the funds in the account, contrary to the Tribunal’s finding that Rawson had discharged its onus of establishing that Rawson itself did not provide any security (at [202]), and that Rawson itself had no means of providing such security (at [231]). This highlights, among other difficulties, the fundamental difficulty with Rawson’s submission that the deposit could not be assessed as income because Rawson had assets of only $2. As the Commissioner submitted (AR at [51]), that submission:
is inconsistent with the onus imposed on a taxpayer under s 14AAK of the TAA 1953 in review proceedings. To reason from that proposition that it had to be Michael Binetter’s income should be rejected; such a suggestion was never put to the Tribunal, or the Commissioner prior to the receipt [of Rawson’s written submissions in this proceeding], and is not supported by any evidence from Michael Binetter.
Nor could the Tribunal have found, as it did, that it was satisfied that Rawson never assumed any liability consistent with any kind of back-to-back arrangement (at [231]). Yet this finding was pivotal to the Tribunal’s conclusion that Rawson had discharged its onus “of proving that the contentious loans were real and that its asserted liabilities for repayment and interest reflect the intended and enforceable reality of the transactions with MDB” (at [231]).
Furthermore, even if Michael had legal and beneficial ownership of the monies in that account as Rawson contends, that would not mean that the existence of the deposit account confirmed that the funds received from MDB were genuine loans at interest. There would remain a number of unusual circumstances and apparent irregularities on which the Commissioner relied to oppose Rawson’s review application before the Tribunal, including: the fact that the Arthur Belan deposit account secured the monies loaned to Rawson; that transactions were made using code names which concealed the true identities of the Binetter family members; and the apparent commercial unreality of the asserted loans with MDB. There can also be no real doubt that Rawson’s determination to oppose in Australia and in Israel the letters of request process to obtain the documents and evidence from Israel arose from its motivation to conceal this evidence, given MDB’s position that, if asked, it would disclose the existence of the Arthur Belan deposit account. That determination, as the Commissioner submits (AR at [2]), is in itself demonstrative of the materiality of the underlying evidence that would inevitably have been revealed (and which Andrew and Michael knew would be revealed) if the MDB account files were provided to this Court and the witnesses in Israel were examined.
Nor did Rawson lead any evidence in support of its submission that any witnesses for Rawson who gave false evidence or were permitted to mislead the Tribunal (and the Commissioner) did so in order to protect Michael. It is, with respect, untenable to suggest that “[t]he only logical inference to be drawn … is that the non-disclosure of that fact was to protect the owner of the deposit (Michael Binetter) from being assessed by the Commissioner on what he describes as the “unexplained” cash deposit.” Furthermore, it cannot be said, as Rawson submitted, that any concealment of the evidence of the Arthur Belan deposit account could only have undermined Rawson’s case in the Tribunal (RS at [77]). To the contrary, the fresh evidence directly contradicts the case put by Rawson before the Tribunal that the loans were made solely on the basis of a personal guarantee, and vindicates the Commissioner’s “hypothesis” (as it was described by the Tribunal at [202]) as to the existence of a linked deposit account with MDB that belonged either to Rawson or to some other related entity associated with Erwin (at [6]).
In the seventh place, in support of Rawson’s genuine loan submission, Rawson relied on the fact that that MDB described the transaction as a loan and that the loan was an enforceable one. Rawson’s written submissions state (at [75]):
Despite the Commissioner’s use of inverted commas when describing the amount received by Rawson from MDB as a loan, he does not dispute that both the voluminous documentary evidence produced by MDB in response to the subpoena issued by the Magistrate’s Court in Tel Aviv and the evidence of Elie Septon and Israel Zamir, former bank officers of MDB familiar with the Rawson loans, unequivocally supports the Tribunal’s finding that the amounts received by Rawson from MDB were genuine loans of the banks own funds that were repayable with interest.
This submission must be rejected. It simply repeats an argument put before Tribunal without factoring in the new evidence of the deposit account which reveals that Rawson already had the monies available to it, whether they were strictly speaking its own funds or not. The existence of that deposit account denies the reality of the loans for present purposes and would have opened up entirely different lines of inquiry. MDB’s description of the “loans” as such is part of the ruse that Rawson was manufacturing, and cannot now be relied upon as evidence that the loan was genuine. Such an argument is ultimately circular: as Rawson initially called the arrangement a “loan” as part of the ruse, it cannot now rely on the fact that it was called a “loan” to deny the ruse.
In short, as counsel for the Commissioner submitted before this Court:
Importantly, your Honour has never been provided with any explanation of the .6 per cent price or the source of the Arthur [Belan] funds. Your Honour has received no explanation why Andrew Binetter, a director of Rawson and authorised representative on the Arthur [Belan] account as Frank [Belan], did not tell the AAT about the Arthur [Belan] account, nor about its relationship with the Rawson so-called loans. Nor did Andrew Binetter, when asked by Mr Sullivan [in the Rawson (AAT) proceedings], reveal the BCI deposits in the Swiss account in Bank Hapoalim.
Your Honour has not been provided with an explanation as to why Margaret Binetter, also a director of Rawson and authorised representative on the Arthur [Belan] account as Ida [Belan], did not tell the AAT about the Arthur [Belan] account, nor about its relationship with the funds transferred to Rawson in Australia. There has been no explanation as to why Andrew’s brother and Margaret’s son, Michael Binetter, who set-up both the Arthur [Belan] account and the Rawson account, did not give evidence about this material – about these events to the AAT, nor why the Arthur [Belan] account was opened with a code name – where the money came from into the Arthur [Belan] account and who paid, if any, tax on it.
Your Honour has been given no explanation why Emil Binetter said he had no overseas assets and said that only personal guarantees existed for all his related companies where we now know the opposite was true. Your Honour hasn’t been given any explanation as to why [Gary] Binetter did not tell the tribunal about his own code-name account as John [Belan] ..... that account. Your Honour hasn’t been given any explanation as to why Rawson had ..... lied about the existence of a cash deposit in the name of BCI Finance in Switzerland and why he lied to say that the same conduct would be explicable for Rawson and its relationship to the Arthur [Belan] account.
Your Honour has not been given any explanation as to why the directors of Rawson, Andrew and Margaret Binetter, permitted all of this evidence to be relied upon and the submissions to be made to the AAT that Rawson had obtained a loan on the basis of a personal guarantee and there was not any more to the transaction such as a back-to-back loan when that is exactly what the true facts were.
There is no explanation offered for any of this because there is no explanation except that if the tribunal had discovered the transfer of funds to Australia was supported by one-for-one deposits – that the margin between the two bank accounts was the price at .6 per cent, there was no interest rates not paid because they were paid by Arthur [Belan] account, the tribunal would not have found that Rawson had established the assessments were excessive.
And that’s why, your Honour, for each of the corporations that were used for matching conduct the Binetters upon the revelations of the cash deposits overseas for BCI, EGL, … Civic and Advance withdrew their tax review hearing. Andrew Binetter – I will take you to an email, your Honour, where Andrew Binetter was advised to withdraw all appeal proceedings because of cash deposits – because the cash deposits prevented establishing the onus of proof, and, indeed, in that email the solicitors advise they could no longer act if the matters proceeded.
And that’s why, your Honour, in BCI and in Rawson, Andrew and Margaret Binetter, as directors of both BCI and of Rawson, resisted the Commissioner’s attempts to examine relevant bank officers in relation to the deposits held by the bank to facilitate the transfer of funds back to Australia.
(T41.37–42.42.)
In light of the evidence above, I accept those submissions as entirely compelling.
11. CONCLUSION
For the reasons set out above, the orders of the Full Court of the Federal Court in Rawson (FCAFC) should be set aside on the ground that it was procured by fraud. I note in this regard, that while Rawson sought to defend the Tribunal’s decision in the Federal Court at first instance on the same fraudulent basis as it prosecuted the appeal against that judgment in the Full Court, the judgment in Rawson (FCA) was not affected by the fraud. In other words, as the primary judge rejected Rawson’s fraudulent case, the fraud was not material. As such, there is no basis to set aside the orders in Rawson (FCA).
The Commissioner seeks an order for indemnity costs. However, as this has not yet been the subject of argument, I make no order as to costs at present and will allow the parties an opportunity to address me on this issue if agreement on the issue of costs is not reached.
I certify that the preceding six hundred and fifty five (655) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Perry. Associate:
Dated: 9 June 2023
APPENDIX A: GLOSSARY
Term
Description
2006 deed of pledge
deed of pledge dated 8 March 2006 signed by Andrew as pledger of the security for BCI’s loan from Bank Hapoalim
AAT or Tribunal
Administrative Appeals Tribunal
Advance
ACN 078 272 867 Pty Limited, formerly Advance Finances Pty Limited (in liq)
Advance loans
the purported loans between Advance and MDB entered into in 1997 in the amount of AUD$4million and in 2004 in the amount of AUD$2.5million
Advance proceedings
proceedings initiated in the Tribunal (AAT Ref 2010/2936-2642) by Advance under Part IVC of the Taxation Administration Act 1953 on 10 July 2012
Areffco
pseudonym for Rawson Finances Pty Ltd adopted in Areffco
Arthur Belan deposit account
MDB term deposit account number 98018-350982 in the name of Arthur Belan (Michael Binetter) with George Belan (Erwin Binetter), Ida Belan (Margaret Binetter), Benjamin Belan (Ronald Binetter), Henry Belan (Peter Binetter) and Frank Belan (Andrew Binetter) having powers of attorney
Arthur Belan pledge
an MDB form in Hebrew (and translated into English) dated 30 May 1997, which described Arthur Belan as a “guarantor” and Rawson as the “borrower” of money owed to MDB
BCI
BCI Finances Pty Ltd (in liq)
BCI letter of request
letter of request sent to judicial authorities in Israel for the taking of evidence from Mr Ilan Mazur, an officer of Bank Hapoalim, issued in the BCI proceedings: BCI Finances Pty Ltd v Commissioner of Taxation [2012] FCA 855; (2012) 89 ATR 861
BCI loans
BCI loans 1 – 12 and BCI loans 13 – 24
BCI loans 1 – 12
the purported loan between BCI Finances Pty Ltd and Bank Hapoalim entered into on or about 25 April 1993 by way of twelve documents bearing the date 13 May 1993 and signed by Erwin Binetter
BCI loans 13 – 24
the purported loan between BCI Finances Pty Ltd and Bank Hapoalim entered into by way of twelve documents bearing the date 27 May 1993 and signed by Emil Binetter
BCI proceedings
proceedings initiated in the Federal Court (NSD626/2011) by BCI under Part IVC of the Taxation Administration Act 1953 on 12 May 2011
BCI v Binetter (No 4)
BCI Finances Pty Ltd (in liq) v Binetter (No 4) [2016] FCA 1351; (2016) 348 ALR 227, being a judgment by Gleeson J dated 18 November 2016 in the BCI proceedings
BH
Bank Hapoalim
Binqld
Binqld Finances Pty Limited (in liq)
Binqld proceedings
proceedings initiated in the Tribunal (AAT Ref 2011/0275-0277) by Binqld under Part IVC of the Taxation Administration Act 1953 on 24 January 2011
Binqld v IDB
Binqld Finances Pty Ltd (in liq) (ACN 119 243 220) v Israel Discount Bank (No 2) [2020] FCA 1208; (2020) 384 ALR 148, being a judgment by Foster J dated 20 August 2020 in the Binqld proceedings
BTB
a back-to-back loan arrangement
CB
Court Book
Civic
ACN 087 623 541 Pty Limited, formerly Civic Finance Pty Limited (in liq)
Civic loans
the purported loans between Civic and IDB entered into on 25 May 1999 in the amount of AUD$5million and on or about 27 May 2004 in the amount of AUD$3.69million
Civic proceedings
proceedings initiated in the Tribunal (AAT Ref 2012/2921-2926) by Civic under Part IVC of the Taxation Administration Act 1953 on 10 July 2012
Commissioner
Commissioner of Taxation
EGL
EGL Development (Canberra) Pty Limited (in liq)
EGL loans
the purported loans between EGL and IDB entered into in about 21 December 1988 in the amount of up to 19.5 million Swiss Francs and in about August 1993 in the amount of up to 4 million Swiss Francs
EGL proceedings
proceedings commenced in the Tribunal (AAT Ref 2011/1704-1719) by EGL under Part IVC of the Taxation Administration Act 1953 on 31 May 2011
GERM entities
collective reference to Gerobin, Erbin, Rawbin and Marbin
Gerobin
Gerobin Finances Pty Ltd (in liq)
IDB
Israel Discount Bank
KDB
Key Documents Bundle
Letters of request
three letters of request sent to Israel to take evidence from Elie Septon, Israel Zamir and Shaul Antebi in these proceedings: Commissionerof Taxation v Rawson Finances Pty Ltd (No 4) [2016] FCA 1436
Ligon 268 proceedings
proceedings commenced in the Tribunal (AAT Ref 2011/1721-1730) by Ligon 268 under Part IVC of the Taxation Administration Act 1953 on 5 May 2011
Ligon 158
Ligon 158 Pty Limited (in liq), the parent company of Rawson
Ligon 268
Ligon 268 Pty Limited (in liq)
Marbin
Marbin Finances Pty Ltd (in liq)
MDA Lawyers
First law firm of Mr Douglass
MDB
Mercantile Discount Bank
MDB Documents
the documents produced by MDB on 2 February 2020 and 21 April 2020 pursuant to the letters of request issued in these proceedings on or about 30 November 2016
Rawbin
Rawbin Finances Pty Limited (in liq)
Rawson
Rawson Finances Pty Limited
Rawson current
account
MDB current account number 98018-351083 in the name of Rawson
Rawson loan account 1
MDB loan account number 971118-650013 in the name of Rawson for the purported loan of AUD$3,000,000
Rawson loan account 2
MDB loan account number 971118-650021 in the name of Rawson for the purported loan of AUD$800,000
Rawson loan account 3
MDB loan account number 971-118-650048 in the name of Rawson for the purported loan of AUD$750,000
Rawson loans
a collective reference to Rawson loan account 1, Rawson loan account 2 and Rawson loan account 3
Rawson (AAT)
ReAreffco and Commissioner of Taxation [2011] AATA 628; (2011) 84 ATR 924, being the Tribunal's decision dated 6 September 2011
These proceedings were initiated by Rawson under Part IVC of the Taxation Administration Act 1953 on 11 June 2010 in the AAT Ref 2010/2360 seeking review of the Commissioner’s objection decision in respect of notices of assessment, notices of amended assessment and notice of penalty issued to Rawson for the income years ended 30 June 1997 to 30 June 2008
Rawson (FCA)
Commissioner of Taxation v Rawson Finances Pty Ltd [2012] FCA 753; (2012) 89 ATR 357, being Edmond J’s decision dated 17 July 2012 allowing the Commissioner’s appeal from Rawson (AAT)
Rawson (FCAFC)
Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26; (2013) 133 ALD 39, being the decision of the Full Federal Court dated 5 March 2013 allowing Rawson’s appeal from Rawson (FCA)
Rawson (No 4)
Commissionerof Taxation v Rawson Finances Pty Ltd (No 4) [2016] FCA 1436, being the decision of Justice Perry dated 30 November 2016 allowing a letter of request to be sent to Israel to take evidence from Elie Septon, Israel Zamir and Shaul Antebi
SCB
Supplementary Court Book
Signet Lawyers
Second law firm of Mr Douglass
APPENDIX B: PAYMENTS OF INTEREST ON RAWSON’S LOANS FROM JULY 2001 TO DECEMBER 2004
Rawson current account: 98018-351083
Arthur Belan deposit account: 98018-350982
Rawson loan account 2: ending 650021
Rawson loan account 3: ending 650048
Agreed chronology item Date Description Document reference 163
31 December 2001
Rawson instructs MDB to debit Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083) in the amount AUD$66,000
SCB Vol 4 Tab 341; MDB Folder 2 p 813; SCB Vol 4 Tab 341; MDB Folder 5 p 240; SCB Vol 4 Tab 342; MDB Folder 2 p 812
164
165
1 January 2002
MDB debits interest amount AUD$34,114 in Rawson loan account 2 (654-971-18-650021) for the period 29 June 2001 to 31 December 2001
MDB debits interest amount AUD$31,981.88 in Rawson loan account 3 654-971-18-650048 for the period 29 June 2001 to 31 December 2001
SCB Vol 4 Tab 345; MDB Folder 5 p 86
SCB Vol 4 Tab 347; MDB Folder 5 p 88
168
3 June 2002
MDB debits interest amount of AUD$28,382 in Rawson loan account 2 (654-971-18-650021) for the period 31 December 2001 to 4 June 2002
SCB Vol 4 Tab 362; MDB Folder 2 p 830
171
6 June 2002
“Arthur Belan” instructs MDB to transfer the amount AUD$53,757.90 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083)
SCB Vol 4 Tab 373; MDB Folder 2 p 834-835
173
1742 July 2002
“Arthur Belan” instructs MDB to withdraw amount AUD$59,959.26 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98218-350982)
“Arthur Belan” instructs MDB to withdraw amount AUD$1,618.72 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083)SCB Vol 4 Tab 382; MDB Folder 2 p 848; SCB Vol 4 Tab 382; MDB Folder 5 p 231;
SCB Vol 4 Tab 383; MDB Folder 2 p 849SCB Vol 4 Tab 383; MDB Folder 5 p 232;
SCB Vol 4 Tab 385; MDB Folder 2 p 850-851
184
25 December 2002
“Arthur Belan” instructs MDB to deposit payment in the amount AUD$20,000 into Arthur Belan deposit account (98018-350982)
SCB Vol 5 Tab 426; MDB Folder 3 p 894-895
190
1 January 2003
MDB debits interest amount of AUD$38,724 in Rawson loan account 2 (654-971-18-650021) for the period 4 June 2002 to 31 December 2002
SCB Vol 5 Tab 437; MDB Folder 3 p 906
191
2 January 2003
“Arthur Belan” instructs MDB to withdraw the amount AUD$75,027.75 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083)
SCB Vol 5 Tab 439; MDB Folder 3 p 909;
SCB Vol 5 Tab 440; MDB Folder 3 p 910
193
1 July 2003
“Arthur Belan” instructs MDB to withdraw the amount AUD$59,394.35 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083)
SCB Vol 5 Tab 451; MDB Folder 3 p 920
199
1 January 2004
“Arthur Belan” instructs MDB to withdraw AUD$52,489.28 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083)
SCB Vol 5 Tab 486; MDB Folder 1 p 159
200
201
1 January 2004
MDB advises Rawson that it executed the payment of interest of AUD$31,809 for loan account 3 (650048) and that Rawson current account (654-098018-351083) was debited of this amount
MDB advises Rawson that it executed the payment of interest of AUD$33,929 for loan account 2 (650021) and that Rawson current account (654-098018-351083) was debited of this amount
SCB Vol 5 Tab 487; MDB Folder 1 p 160
SCB Vol 5 Tab 488; MDB Folder 1 p 161202
3 January 2004
Rawson instructs MDB to debit Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083) for the amount of AUD$9,961.29
SCB Vol 5 Tab 491; MDB Folder 1 p 247-248
228
1 July 2004
“Arthur Belan” instructs MDB to withdraw AUD$65,024.05 from Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083)
SCB Vol 5 Tab 535; MDB Folder 1 p 207-208
236
2 January 2005
Rawson instructs MDB to debit Arthur Belan deposit account (98018-350982) and credit Rawson current account (98018-351083) for the amount of AUD$54,850.18
SCB Vol 6 Tab 552;
MDB Folder 1 p 242;
SCB Vol 6 Tab 553;
MDB Folder 1 p 238;
SCB Vol 6 Tab 553;
MDB Folder 1 p 240;
SCB Vol 6 Tab 553;
MDB Folder 5 p 373-374;
SCB Vol 6 Tab 544;
MDB Folder 5 p 376244
7 January 2005
Rawson orders the transfer of AUD$63,428.55 to MDB with the description “Att Mr Elie Septon Int 6 months to 300601 Amt 1550000 behalf Rawson Fi…”
SCB Vol 6 Tab 570;
MDB Folder 1 p 271;
SCB Vol 6 Tab 570; MDB Folder 5 p 367
10
17
8