Plutus Payroll Australia Pty Ltd (in liquidation) v Saikali

[2024] NSWSC 1093

Supreme Court

New South Wales

Medium Neutral Citation:

Plutus Payroll Australia Pty Ltd (in liquidation) v Saikali [2024] NSWSC 1093

Hearing dates:

24-28 June 2024

Date of orders:

28 August 2024

Decision date:

28 August 2024

Jurisdiction:

Equity - Commercial List

Before:

Nixon J

Decision:

See [651]

Catchwords:

CORPORATIONS – directors and officers – where officers of First Plaintiff breached their statutory duties by transferring funds of the First Plaintiff to a lawyer’s trust account in response to blackmail threats – whether Second to Fourth Defendants were involved in any such contravention

EQUITY – fiduciary duties – whether Second to Fourth Defendants knowingly assisted in a breach of fiduciary duty by the officers or by an employee of the First Plaintiff – whether Second to Fourth Defendants knowingly received property of the First Plaintiff as a result of such breach

CORPORATIONS – voidable transactions – whether transactions made using the company funds which had been paid into the lawyer’s trust account in response to the blackmail threats were transactions of the company – whether the transactions were uncommercial transactions and insolvent transactions

RELIEF – whether funds transferred into the lawyer’s trust account were funds which the First Plaintiff held on trust – whether the Commonwealth has recovered such funds by the forfeiture of property in proceedings under the Proceeds of Crime Act 2002 (Cth) – whether the Plaintiffs ought to have sought an exclusion order in respect of the forfeiture of such property – whether any order for relief would offend the principle against double recovery or double proof – whether the Court should exercise discretion to deny or reduce relief

EVIDENCE – where Plaintiffs tendered recordings and transcripts of conversations which had been obtained by the Australian Federal Police – where this material had been given in evidence in criminal proceedings and where recordings had been played in the course of those proceedings – whether this material was admissible under the Telecommunications (Interception and Access) Act 1979 (Cth) and the Surveillance Devices Act 2004 (Cth) – whether this material fell within section 69(3) of the Evidence Act 1995 (NSW)

Legislation Cited:

Corporations Act 2001 (Cth), ss 9, 79, 95A, 181, 182, 251A, 556, 588FA, 588FB, 588FC, 588FE, 588FF, 588FG, 1317H

Court Suppression and Non-publication Orders Act 2010 (NSW), s 3

Evidence Act 1995 (NSW), ss 69, 135, 136, 140

Proceeds of Crime Act 2002 (Cth), ss 70, 73, 74, 92A

Public Governance, Performance and Accountability Act 2013 (Cth)

Surveillance Devices Act 2004 (Cth), ss 6, 44, 45

Taxation Administration Act 1953 (Cth), Sch 1, s 255-5

Telecommunications (Interception and Access) Act 1979 (Cth) ss 5, 5B, 6E, 6EA, 7, 46, 49, 55, 60, 63, 74, 75, 75A, 77, 78

Telecommunications (Interception) Amendment Act 2000 (Cth)

Cases Cited:

A Pty Ltd v Z [2007] NSWSC 999

Addenbrooke Pty Ltd v Duncan (No 2) [2017] FCAFC 76

Addenbrooke Pty Ltd v Duncan (No 5) [2014] FCA 625

Advanced Holdings Pty Ltd atf Demian Trust v Commissioner of Taxation [2021] FCAFC 135

Anchorage Capital Master Offshore Ltd v Sparkes (2023) 111 NSWLR 304; [2023] NSWCA 88

Anderson v Canaccord Genuity Financial Ltd [2023] NSWCA 294

Anderson v Canaccord Genuity Financial Ltd (No 2) [2024] NSWCA 161

Australian Securities and Investments Commission (ASIC) v ActiveSuper Pty Ltd (in liq) (2015) 235 FCR 181; [2015] FCA 342

Australian Securities and Investments Commission (ASIC) v Hellicar (2012) 247 CLR 345; [2012] HCA 17

Australian Securities and Investments Commission (ASIC) v Macdonald (No 11) [2009] NSWSC 287

Australian Broadcasting Corporation v Chau Chak Wing (2019) 271 FCR 632; [2019] FCAFC 125

Australian Competition and Consumer Commission v Advanced Medical Institute Pty Ltd (No 2) (2005) 147 FCR 235; [2005] FCA 1357

Australian Competition and Consumer Commission v Amcor Printing Papers Group Pty Ltd (2000) 169 ALR 344; [2000] FCA 17

Averkin v Insurance Australia (2016) 92 NSWLR 68; [2016] NSWCA 122

Barnes v Addy (1874) LR 9 Ch App 244

Bellevarde Constructions Pty Ltd v L’Officina by Vincenzo Australia Pty Ltd [2022] NSWCA 246

Bosanac v Commissioner of Taxation (2022) 275 CLR 37; [2022] HCA 34

Black v S Freedman & Co (1910) 12 CLR 105; [1910] HCA 58

BP Australia Ltd v Brown (2003) 58 NSWLR 322; [2003] NSWCA 216

Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1

Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34

Crowe-Maxwell v Frost (2016) 91 NSWLR 414; [2016] NSWCA 46

David William Pallas & Julie Ann Pallas as trustees for the Pallas Family Superannuation Fund v Lendlease Corporation Ltd [2024] NSWCA 83

Doyle’s Farm Produce Pty Ltd v Murray Darling Basin Authority (No 2) (2021) 106 NSWLR 41; [2021] NSWCA 246

Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456

Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22

Fortress Credit Corp (Australia) II Pty Ltd v Fletcher (2015) 254 CLR 489; [2015] HCA 10

Giorgianni v The Queen (1985) 156 CLR 473; [1985] HCA 29

Great Investments Ltd v Warner (2016) 243 FCR 516; [2016] FCAFC 85

Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143

Grimaldi v Chameleon Mining (No 2); Chameleon Mining NL v Murchison Metals Ltd (2012) 200 FCR 296; [2012] FCAFC 6

Hasler v Singtel Optus Pty Ltd; Curtis v Singtel Optus Pty Ltd; Singtel Optus Pty Ltd v Almad Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266

In the matter of Sunnya Pty Ltd [2024] NSWSC 403

Insurance Commissioner v Joyce (1948) 77 CLR 39; [1948] HCA 17

John Fairfax Publications Pty Ltd v Doe (1995) 37 NSWLR 81

Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8

Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191

Kizon v Palmer (1997) 72 FCR 409; [1997] FCA 21

Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; [1995] HCA 68

Lifeplan Australia Friendly Society Ltd v Woff [2016] FCA 248

Ling v Pang [2023] NSWCA 112

Macks v Blacklaw & Shadforth Pty Ltd (1997) 147 ALR 281 at 306; [1997] FCA 667

Maguire v Makaronis (1997) 188 CLR 449; [1997] HCA 23

Morley v Australian Securities and Investments Commission (ASIC) [2010] NSWCA 331

Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449; [1992] HCA 66
Nicholson v Morgan (No 3) [2013] WASC 110

O’Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262

Pereira v Director of Public Prosecutions (DPP) (1988) 82 ALR 217; [1988] HCA 57

Pittmore Pty Ltd v Chan; Chan v Tan (2020) 104 NSWLR 62; [2020] NSWCA 344

Potts v Miller (1940) 40 SR (NSW) 35

Productivity Partners Pty Ltd v Australian Competition and Consumer Commission [2024] HCA 27

Qantas Airways Ltd v Gama (2008) 167 FCR 537; [2008] FCAFC 69

Quince v Varga [2009] 1 Qd R 359; [2008] QCA 376

R v Chalabian (No 2) [2022] NSWSC 63

R v Cranston (No 6) [2020] NSWSC 1777

R v Hausman [2021] NSWDC 846

Re Emanuel (No 14) Pty Ltd (in liq); Macks v Blacklaw & Shadforth Pty Ltd (1997) 147 ALR 28; [1997] FCA 667

Saaed v Minister for Immigration and Citizenship (2010) 241 CLR 252; [2010] HCA 23
Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262; [2000] NSWCA 29

Sydney Recycling Park Pty Ltd v Cardinal Group Pty Ltd (in liq) (2016) 93 NSWLR 251; [2016] NSWCA 329

Sydney Seaplanes Pty Ltd v Page (2021) 106 NSWLR 1; [2021] NSWCA 204

Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462

The Commissioner of Australian Federal Police v Cranston (No 15) [2021] NSWSC 1332

Thomas v State of New South Wales (2008) 74 NSWLR 34; [2008] NSWCA 316

Tozer Kemsley & Millbourn (Australasia) Pty Ltd v Collier’s Interstate Transport Service Ltd (1956) 94 CLR 384; [1956] HCA 6

Wood v Beves (1997) 92 A Crim R 209; (1997) 137 FLR 436

Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65 Zirilli v The King [2023] VSCA 64

Category:

Principal judgment

Parties:

Plutus Payroll Australia Pty Ltd (in liq) (First Plaintiff)
Timothy Bryce Norman in his capacity as joint and several liquidator of Plutus Payroll Australia Pty Ltd (Second Plaintiff)
Salvatore Algeri in his capacity as joint and several liquidator of Plutus Payroll Australia Pty Ltd (Third Plaintiff)
Glen Saikali (First Defendant)
Michael Teplitsky (Second Defendant)
Tepcorp Holdings Pty Ltd (Third Defendant)
Tepcorp Investments Pty Ltd (Fourth Defendant)

Representation:

Counsel:
J Stoljar SC w B Ng (Plaintiffs)
FM Douglas KC w JK Carter (Second to Fourth Defendants)

Solicitors:
Minter Ellison (Plaintiffs)
Swan Lawyers (Second to Fourth Defendants)

File Number(s):

2021/160252

Publication restriction:

Nil

JUDGMENT

A.    Introduction

The parties

1. The First Plaintiff, Plutus Payroll Australia Pty Ltd (in liquidation), operated a payroll services business.

2. The Second and Third Plaintiffs were appointed as provisional liquidators to Plutus Payroll on 9 June 2017 and as liquidators on 9 October 2017 (the Liquidators).

3. On 3 June 2021, the Plaintiffs commenced these proceedings by way of a Summons and Commercial List Statement.

4. On 5 August 2022, the Plaintiffs obtained default judgment against the First Defendant, Mr Glen Saikali.

5. The remaining defendants are the Second Defendant, Mr Michael Teplitsky, and two corporations of which Mr Teplitsky was, at all material times, the sole director and shareholder: namely, the Third Defendant, Tepcorp Holdings Pty Ltd, and the Fourth Defendant, Tepcorp Investments Pty Ltd (together, the Teplitsky Parties).

The Plutus Officers and Mr Rostankovski

6. The Plaintiffs pleaded, and the Teplitsky Parties admitted, that at all material times:

1. Mr Daniel Rostankovski was an employee of Plutus Payroll and/or of one of its related entities; and

2. each of Mr Adam Cranston, Mr Jay Onley, Mr Dev Menon and Mr Simon Anquetil was an officer of Plutus Payroll (the Plutus Officers) within the meaning of the definition appearing in s 9 of the Corporations Act 2001 (Cth) (the Act).

7. In addition, the Plaintiffs pleaded, and the Teplitsky Parties admitted, that:

1. Mr Rostankovski, as an employee of Plutus Payroll:

1. owed duties to Plutus Payroll pursuant to s 182(1) of the Act to not improperly use his position to:

1. gain advantage for himself or someone else; or

2. cause detriment to Plutus Payroll;

2. owed a fiduciary duty to Plutus Payroll not to be in a position where his personal interests conflicted with his duties to Plutus Payroll as an employee of the company; and

2. each of the Plutus Officers:

1. owed duties to Plutus Payroll pursuant to s 181(1) of the Act to exercise his powers and discharge his duties in good faith and for a proper purpose;

2. owed duties to Plutus Payroll pursuant to s 182(1) of the Act to not improperly use his position to:

1. gain advantage for himself or someone else; or

2. cause detriment to Plutus Payroll;

3. owed a fiduciary duty to Plutus Payroll not to be in a position where his personal interests conflicted with his duties to Plutus Payroll as an officer of the company.

The blackmail scheme

8. The Second Plaintiff, Mr Timothy Norman, prepared a report into the affairs of Plutus Payroll which was dated 18 February 2022. Mr Norman concluded, based on a review of the records of Plutus Payroll, that:

1. Plutus Payroll was the main entity in the Plutus group of companies and the trading business, which offered payroll services;

2. when Plutus Payroll received payroll funds from an employer, it paid those funds to a second-tier entity in the Plutus Group (called a “BOT”) for processing;

3. the BOT entity then paid out the employees’ wages net of PAYG tax;

4. there is no evidence in the PAYGW clearing account in Xero that the withheld tax amounts were paid out to the Australian Taxation Office (ATO); and

5. instead of remitting the PAYG to the ATO, the Plutus Officers directed those funds to other individuals and entities for personal gain.

9. Each of the Plutus Officers has been convicted of, and imprisoned for, offences relating to this conduct.

10. It is not necessary, for the purposes of this judgment, to make findings regarding this conduct or its illegality. That is because the focus of these proceedings was not on the conduct of the Plutus Officers, but instead on the blackmail scheme which extorted money from the Plutus Officers by threatening to expose their conduct and, in particular, on various transactions which were entered in respect of the funds which the Plutus Officers caused to be paid from Plutus Payroll as a result of the blackmail scheme.

11. Mr Rostankovski has been convicted of, and imprisoned for, offences arising from his participation in this blackmail scheme.

12. The Plaintiffs alleged and, in closing submissions the Teplitsky Parties conceded, that:

1. between 1 February 2017 and 26 April 2017, the Plutus Officers caused moneys totalling $24,244,740.64 to be transferred from a bank account held by Plutus Payroll with the Commonwealth Bank of Australia (the Plutus Funds) to the trust account of a law firm, Lands Legal Pty Ltd (Lands Legal Trust Account);

2. the Plutus Funds were paid to the Lands Legal Trust Account in response to threats made by Mr Rostankovski to the Plutus Officers, to the effect that unless substantial funds were paid, the Plutus Officers’ tax fraud would be exposed to the media and the authorities; and

3. as a result, each of the Plutus Officers:

1. contravened s 181(1) of the Act by failing to exercise his powers and discharge his duties as an officer of Plutus Payroll in good faith and for a proper purpose;

2. contravened s 182(1) of the Act by improperly using his position to gain an advantage for himself or Mr Rostankovski, and by causing detriment to Plutus Payroll; and

3. breached his fiduciary obligation to Plutus Payroll not to be in a position where his personal interests conflicted with his duties to Plutus Payroll.

13. The Plaintiffs also alleged that Mr Rostankovski breached his statutory and fiduciary duties to Plutus Payroll by implementing the “Blackmail Plan”, which involved demanding payment by the Plutus Officers in return for not revealing their tax fraud to the media and authorities, and laundering the funds of Plutus Payroll which were received as a result of the blackmail, by transferring them to other persons and entities.

Claims against the Teplitsky Parties

14. The Plaintiffs pleaded that Mr Teplitsky agreed with Mr Rostankovski and his associate, Mr Daniel Hausman, to “launder” the Plutus Funds which were paid into the Lands Legal Trust Account following the implementation of the Blackmail Plan. (Although the term “launder” was adopted in the pleading, it is important to stress at the outset of this judgment that the Plaintiffs did not allege that Mr Teplitsky engaged in any offence of money laundering, and therefore this judgment does not consider or address any such issue.)

15. The Plaintiffs alleged that, in furtherance of this agreement, the Teplitsky Parties entered into two transactions involving a company named Luminous Investment Holdings Pty Limited, of which Mr Rostankovski was the sole director and shareholder. Those two transactions were alleged to involve the payment of moneys from the Plutus Funds held in the Lands Legal Trust Account, either to the Teplitsky Parties or to third parties (for the benefit of the Teplitsky Parties), with a commensurate amount then being paid back to Luminous.

16. First, the Plaintiffs alleged that in around April 2017, Mr Teplitsky and entities related to him, entered into a “purported loan agreement” with Luminous to “borrow” $4.6m (the $4.6m Transaction). This transaction was said to involve some $4.6m of the Plutus Funds in the Lands Legal Trust Account being paid to third parties in order to buy out their rights in respect of a property development in Surry Hills, New South Wales, in which Mr Teplitsky had an interest, with the sum of $4.6m being paid back to Luminous as a fee for alleged services in relation to a different property development in Camperdown, New South Wales.

17. Secondly, the Plaintiffs alleged that in around May 2017, Tepcorp Holdings entered into a “purported loan agreement” with Luminous to borrow $7m (the $7m Transaction). This transaction was said to involve some $7m of Plutus Funds being paid from the Lands Legal Trust Account, with $6m being used for the repayment of a debt owed by Tepcorp Investments to a third party and $1m being advanced to Mr Teplitsky himself.

18. The Teplitsky Parties denied the $4.6m Transaction, and denied that the sum of $4.6m was paid from the Lands Legal Trust Account to them or for their benefit.

19. The Teplitsky Parties admitted the $7m Transaction, but pleaded that they were not aware of the source of the “loan” funds and denied that the arrangements were part of a money laundering scheme. They also pleaded that in around December 2017, Tepcorp Holdings had repaid its outstanding debt to Luminous in the amount of $8.575m, representing the $7m principal together with $1.575m in early repayment interest.

20. The Plaintiffs alleged that the Teplitsky Parties, when engaging in these transactions, had knowledge that the funds were obtained through improper means, or, alternatively, wilfully shut their eyes to the obvious, or wilfully and recklessly failed to make such inquiries that an honest and reasonable person would make in respect of the source of the funds.

21. The Plaintiffs brought three sets of claims in relation to the $4.6m Transaction and the $7m Transaction (the Transactions).

22. First, the Plaintiffs alleged that, by engaging in the pleaded conduct in respect of these Transactions, the Teplitsky Parties:

1. were involved in the Plutus Officers’ contraventions of s 181(1) of the Act, and thereby contravened s 181(2) of the Act;

2. were involved in the Plutus Officers’ contraventions of s 182(1) of the Act, and thereby contravened s 182(2) of the Act; and

3. are liable to pay Plutus Payroll compensation under s 1317H for loss suffered by reason of their contravention of either s 181(2) or s 182(2) of the Act

(the Statutory Claims).

23. Secondly, the Plaintiffs alleged that, by engaging in the pleaded conduct in respect of these Transactions in circumstances where they had the knowledge described above, the Teplitsky Parties:

1. knowingly assisted in the breach by each of the Plutus Officers and Mr Rostankovski of their fiduciary obligations to Plutus Payroll;

2. knowingly received or knowingly caused to be received the Plutus Funds in circumstances of the breach of those fiduciary obligations; and

3. are liable to pay equitable compensation to Plutus Payroll

(the Barnes v Addy Claims).

24. Thirdly, the Plaintiffs alleged that:

1. each of the $4.6m Transaction and the $7m Transaction:

1. occurred at a time when Plutus Payroll was insolvent within the meaning of s 95A(2) of the Act;

2. was an uncommercial transaction within the meaning of s 588FB of the Act, and an insolvent transaction within the meaning of s 588FC of the Act;

3. was entered into, or an act was done for the purpose of giving effect to such transaction, during the two years ending on the relation-back day;

4. was voidable under s 588FE(3) of the Act; and

2. the Teplitsky Parties were liable, pursuant to s 588FF(1)(a) or (c) to pay to Plutus Payroll an amount equal to some or all of the money that they were paid or the financial benefit that they received under these Transactions

(the Uncommercial Transaction Claims).

25. The Teplitsky Parties admitted that Plutus Payroll was insolvent within the meaning of s 95A(2) of the Act at the relevant times, and admitted that for the purposes of s 9 of the Act, the relation-back day is taken to be 6 June 2017.

Structure of Judgment

26. These reasons for judgment are structured as follows:

1. Part B provides my reasons for rulings that were given on the second day of the hearing in relation to several global objections taken by the Teplitsky Parties to the Plaintiffs’ tender of material that was produced on subpoena by the Australian Federal Police (AFP);

2. Part C addresses submissions made by the parties regarding the applicable principles concerning fact-finding and Jones v Dunkel (in the context where none of the persons involved in the relevant events or transactions was called to give evidence, and the Plaintiffs’ case was essentially documentary and circumstantial);

1. Part D sets out a chronological narrative of the relevant factual background;

2. Part E sets out my findings regarding the two transactions in issue, namely, the $4.6m Transaction and the $7m Transaction;

3. Part F deals with the claims against Mr Teplitsky for accessorial liability, including both the Statutory Claims and the Barnes v Addy Claims;

4. Part G addresses the Uncommercial Transaction Claims; and

5. Part H deals with the question of relief and addresses, in particular, the Teplitsky Parties’ submission that any relief must take account of the repayment of funds by the Teplitsky Parties to Luminous in respect of the $7m Transaction, and the subsequent forfeiture of those moneys to the Commonwealth.

B.    Evidentiary rulings

27. At the commencement of the hearing, the Teplitsky Parties took a global objection to the tender by the Plaintiffs of records of communications which had been obtained by the AFP under various warrants.

28. There were, by way of overview, three main categories of such material.

29. First, there were recordings and transcripts of telephone communications which had been intercepted by the AFP. Secondly, there were recordings and transcripts of conversations which had been obtained by the AFP using surveillance devices. Thirdly, there was material obtained by the AFP under search warrants, including information stored on the mobile phones of various persons (such as, for example, WhatsApp messages).

30. The Teplitsky Parties contended that:

1. the intercepted telephone recordings and transcripts were inadmissible under the Telecommunications (Interception and Access) Act 1979 (Cth) (TIA Act);

2. the recordings and transcripts obtained using surveillance devices were inadmissible under the Surveillance Devices Act 2004 (Cth) (SD Act); and

3. all of the material, including the material obtained by search warrant, was inadmissible by reason of s 69(3) of the Evidence Act 1995 (NSW).

31. Much of the first and second days of the hearing was taken up with argument regarding these objections. On the second day of the hearing, I ruled against these global objections. I set out below the reasons for my ruling.

The Material in Issue

32. On the voir dire hearing in relation to the admissibility of this material, the Plaintiffs read two affidavits of Constable Isabella Todoroski, who is a Federal Agent employed by the AFP.

33. Constable Todoroski is the case officer of Operation Elbrus, which is the codename for an AFP investigation relating to the business of Plutus Payroll. She was responsible for responding to a subpoena issued to the AFP in May 2023, which is referred to below.

34. Constable Todoroski deposed that during the Operation Elbrus investigation, a number of telecommunications services were intercepted by the AFP pursuant to warrants issued under the TIA Act. Those warrants were not in evidence.

35. Similarly, Constable Todoroski deposed that a number of surveillance device warrants were issued for the installation of surveillance devices with audio recording in an office in the MLC Building in Sydney, and that recordings were made by the AFP using such devices. Those warrants were also not in evidence.

36. Constable Todoroski also deposed that a number of mobile phones were seized by the AFP pursuant to various search warrants. She provided copies of extraction reports or forensic notes relating to the material downloaded from each of these phones, and attached copies of material extracted from those mobile phones, including a number of WhatsApp messages.

37. On 18 May 2022, a subpoena was issued by the Plaintiffs to the AFP in these proceedings for production of, among other things, intercepted audio recordings and transcripts of those recordings which had been tendered by the Crown in the prosecution of Mr Sevag Chalabian. Mr Chalabian was a solicitor, and was a director and the secretary of Lands Legal. Mr Chalabian was prosecuted in this Court in proceeding 2018/216206 (the Chalabian Proceeding). Mr Chalabian was convicted on one count, and sentenced to a term of imprisonment of 12 years from 23 June 2022, with a non-parole period of 7 years and 6 months.

38. Under cover of a series of letters from the Australian Government Solicitor to the Registrar of this Court in June and July 2022, the AFP produced various recordings and transcripts of intercepted telephone calls in response to the subpoena. The letters recorded that each of the recordings or transcripts had “previously been given in evidence in ‘exempt proceedings’ under s 74 of the [TIA Act]”. Similarly, the AGS stated that the audio recording of a meeting held at Clamenz lawyers on 1 February 2017 which was produced by the AFP in response to the subpoena was adduced in evidence in the Chalabian proceeding and had been “disclosed in open court” within the meaning of s 45(4)(a) of the SD Act.

39. In respect of one recording which was produced by the AFP, the AGS subsequently informed the Registrar by a letter of 5 July 2022 that it had been identified that this recording had not, in fact, been adduced in evidence in the Chalabian Proceeding, such that it may be subject to the restrictions on use in s 63 of the TIA Act.

40. On 2 May 2023, a further subpoena was issued in these proceedings to the Proper Officer of the AFP. It sought, among other things, various audio recordings referred to in the Crown Case Statement in respect of, among others, Mr Cranston (paragraph 4 of the subpoena). Mr Cranston is one of the Plutus Officers. He was prosecuted in this Court in proceeding 2017/148697 (the Cranston Proceeding). Mr Cranston was convicted on two counts, and sentenced to a term of imprisonment of 9 years from 6 March 2023 on the first count, and a term of imprisonment of 12 years from 6 March 2026 on the second count, with a single non-parole period of 10 years from 6 March 2023.

41. Constable Todoroski identified, for specific recordings and transcripts, when those materials had been played in Court or admitted into evidence in either the Chalabian Proceeding or the Cranston Proceeding. The Teplitsky Parties objected to the evidence in this form. The Plaintiffs subsequently tendered extracts from the transcript of each of those Proceedings, in order to establish that the material in issue was in fact admitted and disclosed in the course of those Proceedings.

42. This evidence established that, other than in respect of two recordings, all of the recordings and transcripts in question had been played in Court or admitted into evidence in either the Chalabian Proceeding or the Cranston Proceeding. The remaining two items were tendered in a proceeding brought in this Court by the Commissioner of the AFP against Mr Cranston and others under the Proceeds of Crime Act 2002 (Cth) (the POCA Proceeding).

The intercepted telephone calls: Application of TIA Act

Relevant provisions of TIA Act

43. Subsection 7(1) of the TIA Act prohibits the interception of “a communication passing over a telecommunications system”. This general prohibition is subject to a number of exceptions in s 7(2) of the TIA Act which include, relevantly, “the interception of a communication under a warrant”.

44. Part 2-5 of the TIA Act contains provisions relating to the issue of warrants to agencies. An “agency” includes, for the purposes of Chapter 2, a “Commonwealth agency” which is, in turn, defined in s 5 of the TIA Act as including the AFP.

45. Section 63 of the TIA Act contains a general prohibition on giving intercepted information in evidence in a proceeding, whether or not such information was lawfully intercepted. It provides as follows:

63    No dealing in intercepted information or interception warrant information

(1)    Subject to this Part and section 299, a person shall not, after the commencement of this Part:

(a)   communicate to another person, make use of, or make a record of; or

(b)   give in evidence in a proceeding;

lawfully intercepted information or information obtained by intercepting a communication in contravention of subsection 7(1).

(2)   Subject to this Part and section 299, a person must not, after the commencement of this subsection:

(a)    communicate interception warrant information to another person; or

(b)   make use of interception warrant information; or

(c)    make a record of interception warrant information; or

(d)    give interception warrant information in evidence in a proceeding.

46. The term “lawfully intercepted information” is defined in s 6E(1) of the TIA Act as meaning “information obtained … by intercepting, otherwise than in contravention of s 7(1), a communication passing over a telecommunications system”. Further, s 6E(2) provides that “information obtained … by intercepting a communication under a warrant issued to the agency or authority” is “lawfully intercepted information”.

47. The term “interception warrant information” is defined in s 6EA of the TIA Act as meaning:

(a)   information about any of the following:

(i)   an application for an interception warrant;

(ii)    the issue of an interception warrant;

(iii)    the existence or non - existence of an interception warrant;

(iv)    the expiry of an interception warrant; or

(b)    any other information that is likely to enable the identification of:

(i)    the telecommunications service to which an interception warrant relates; or

(ii)    a person specified in an interception warrant as a person using or likely to use the telecommunications service to which the warrant relates.

48. The prohibition in s 63 is expressed to be subject to Part 2-6 of the TIA Act. Section 77 identifies the circumstances in which intercepted information may be given in evidence in a proceeding. It relevantly provides as follows:

77   Intercepted material and interception warrant information inadmissible except as provided

(1)   Where a communication passing over a telecommunications system has been intercepted, whether or not in contravention of subsection 7(1), then:

(a) subject to paragraph (b), neither information, nor a record, obtained by the interception is admissible in evidence in a proceeding except in so far as section 63A, 63AB, 63AC, 63AD, 63AE, 74, 75, 75A, 76 or 76A permits a person to give in evidence in that proceeding information so obtained;

…

(3)   Interception warrant information is admissible in evidence in a proceeding only to the extent that section 63AA, 74, 75A, 76 or 76A permits a person to give interception warrant information in evidence in that proceeding.

49. The Plaintiffs contended that the recordings of intercepted communications and the transcripts of those recordings were admissible pursuant to s 75A of the TIA Act, which provides as follows:

75A   Evidence that has been given in exempt proceeding

If information is given in evidence (whether before or after the commencement of this section) in an exempt proceeding under section 74 or 75, that information, or any part of that information, may later be given in evidence in any proceeding.

Note: This section was inserted as a response to the decision of the Court of Appeal of New South Wales in Wood v Beves (1997) 92 A Crim R 209.

50. The term “information” is not defined in the TIA Act. In order to be admissible under s 75A, the relevant “information” must be information that was “given in evidence … in an exempt proceeding under section 74 or 75”.

51. An “exempt proceeding” is defined, relevantly, as “a proceeding by way of a prosecution for a prescribed offence”: s 5B(1)(a). A “prescribed offence” is defined as including any offence “punishable by imprisonment … for a period, or maximum period, of at least 3 years”: s 5.

52. Each of the Chalabian Proceeding and the Cranston Proceeding was a prosecution for an offence which was punishable by imprisonment for a period of at least 3 years (since each resulted in a term of imprisonment, for each count, of more than 3 years). Each was therefore an “exempt proceeding”.

53. In addition, the POCA proceeding was an exempt proceeding within the meaning of s 5B of the TIA Act, being “a proceeding for the confiscation or forfeiture of property, or for the imposition of a pecuniary penalty, in connection with the commission of a prescribed offence”: s 5B(1)(b).

54. It follows that each of the audio recordings or transcripts of intercepted telephone conversations tendered by the Plaintiffs in this proceeding was a document which was “given in evidence … in an exempt proceeding”.

55. The critical issue for determination was, therefore, whether this material was given in evidence in the exempt proceeding “under section 74 or section 75”. If it was, then s 75A applies so as to render it admissible in these proceedings.

Parties’ competing interpretations of section 75A

56. The Plaintiffs pointed out that, pursuant to the TIA Act, lawfully intercepted information can be admitted into evidence in an exempt proceeding either under s 74 or under s 75. They submitted that the effect of s 75A is that because all of the information in question had, by either of those routes, been admitted into evidence in the Chalabian Proceeding, the Cranston Proceeding or the POCA Proceeding, it had been given in evidence in an exempt proceeding “under section 74 or section 75”, and was therefore admissible in evidence in these proceedings pursuant to s 75A.

57. The Teplitsky Parties submitted that, in order for the Plaintiffs to establish that the information in question had been given in evidence in an exempt proceeding “under section 74”, the Plaintiffs had to show not only that it was admitted into evidence in such a proceeding, but also to show that it met all of the requirements of “lawfully intercepted information” for the purposes of s 74. Accordingly, the Teplitsky Parties argued that it was necessary to establish not only that the information was, in fact, given in evidence in the exempt proceeding under s 74, but also that it was admissible in the exempt proceeding under that section.

Language of section 75A

58. Sections 74, 75 and 75A use different terms to describe the material that is, under each section, admissible in evidence.

59. Section 74 permits “lawfully intercepted information” to be admitted in an exempt proceeding. It follows that any information which is not “lawfully intercepted information” cannot be admitted under that section. As noted above, information is “lawfully intercepted information” if it is “intercepted otherwise than in contravention of subsection 7(1)”: s 6E.

60. Pursuant to s 75, “information obtained by the interception” of a “communication … in contravention of subsection 7(1) but purportedly under a warrant” is able to be admitted in evidence in certain circumstances. Those circumstances are, in broad terms, where: (a) there is a defect or irregularity with the issue or execution of a warrant (which is not a substantial defect or irregularity); (b) but for this irregularity, the interception would not have been in contravention of s 7(1); and (c) in all the circumstances, the irregularity should be disregarded.

61. Pursuant to s 75A, information may be given in evidence in any proceeding if it has already been given in evidence in an exempt proceeding under either s 74 (which applies to information obtained otherwise that in contravention of s 7(1)) or s 75 (which applies to information obtained in contravention of s 7(1)).

62. Section 75A does not (unlike s 74 or s 75) require any enquiry to be conducted in relation to whether or not the “information” in question was obtained by an interception which was in contravention of s 7(1). Instead, what matters for the purposes of s 75A is whether the “information” has already been “given in evidence” under either of those provisions.

63. There is a logical reason for this. In order to for the material to have been admitted into evidence in the exempt proceeding, it will already have been necessary to determine whether the information is “lawfully intercepted information”, in which case it is admissible under s 74; or whether it is information obtained in contravention of s 7(1), in which case it is admissible under s 75 if the requirements in that section are satisfied. Once those issues have been considered and determined in the exempt proceeding, and the information (whether obtained in contravention of s 7(1) or not) has been given in evidence in the exempt proceeding either under s 74 or under s 75, it is admissible in a subsequent proceeding under s 75A without any further enquiry into those same issues.

Legislative purpose

64. The TIA Act includes a note to s 75A, which states that: “This section was inserted as a response to the decision of the Court of Appeal of New South Wales in Wood v Beves (1997) 92 A Crim R 209.”

65. Where a statute is amended in deliberate response to a specific judicial decision, the ”mischief” which it is intended to address and thereby the purpose of the amended provision will far more readily be able to be identified than in other circumstances: Doyle’s Farm Produce Pty Ltd v Murray Darling Basin Authority (No 2) (2021) 106 NSWLR 41; [2021] NSWCA 246 at [9] per Bell P.

66. In Sydney Seaplanes Pty Ltd v Page (2021) 106 NSWLR 1; [2021] NSWCA 204 at [37]–[38], Bell P observed that:

“The purpose of a statute may also be expressed with such generality that it is not a useful or completely satisfactory guide to a court seeking to construe a particular statutory provision: Victims Compensation Fund Corporation v Brown (2003) 77 ALJR 1797; [2003] HCA 54 at [33]. On the other hand, the nature and context of a particular statute’s enactment may reveal its purpose.

One example of this will be where a statute is passed in order to reverse, negate or accommodate the effect of a particular judicial decision. Examples of cases involving the interpretation of legislation which has been passed to reverse or accommodate dicta in judicial decisions can be multiplied but they include Residual Assco Group Ltd v Spalvins (2000) 202 CLR 629; [2000] HCA 33 (Residual Assco) and Thiess v Collector of Customs (2014) 250 CLR 664; [2014] HCA 12 at [32], in which the High Court noted that amendments to s 167 of the Customs Act 1901 (Cth) under consideration in that case were an ‘immediate prophylactic response to the spectre of widespread fiscal confusion raised by Isaacs J’ in Sargood Bros v The Commonwealth (1910) 11 CLR 258 at 301–303; [1910] HCA 45.”

67. In Wood v Beves (1997) 92 A Crim R 209, Cole JA (with whom Studdert AJA agreed) held that ss 63 and 77 of the TIA Act operated to preclude lawfully obtained information, within the meaning of s 6E of the Act, being admitted into evidence and used by a court in any proceedings after such lawfully obtained information has been given in evidence in exempted proceedings open to the public.

68. Handley JA, in dissent, referred to the following observations which had been made in relation to the TIA Act by Lindgren J (with whom Jenkinson and Kiefel JJ agreed) in Kizon v Palmer (1997) 72 FCR 409 at 434; [1997] FCA 21:

“A purposive construction is necessary to avoid absurdity. It would be absurd that the prohibitions in s 63 should continue to apply to information of a kind referred to in the definition of ‘designated warrant information’ once that information is in the public domain by, for example, having been given in evidence publicly in a prosecution. There is no provision in Part VII of the TI Act which expressly permits further divulging of designated warrant information which has been publicly given in evidence in a prosecution, yet according to a non-purposive construction, the prohibition would prevent a reporting of the evidence. This result cannot have been intended.”

69. Handley JA said (at 214-215) that:

“In my judgment by authorising the use of lawfully obtained information in evidence in an exempt proceeding, s 74(1) by necessary implication authorises its further use free from restrictions imposed by the Act. The evidence having lawfully entered the public domain may be further used, communicated and recorded without contravening s 63(1), and its use in evidence is no longer restricted by s 77(1). The privacy of the speakers which the Act within limits is concerned to protect once lost by the lawful giving of evidence in public in an exempt proceeding, is totally lost and does not survive in some qualified or mutilated form.”

70. Section 75A was inserted in the TIA Act by Item 58 in Sch 3 of the Telecommunications (Interception) Legislation Amendment Act 2000 (Cth). The explanatory memorandum for the relevant bill stated (in relation to item 58) as follows:

“This item provides a clarification on the use of evidence that has been given in exempt proceedings. The amendment allows for the further use, in subsequent proceedings, of information given in evidence in exempt proceedings under sections 74 or 75 of the Interception Act. This provision was included in response to the decision in the Court of Appeal of NSW Wood v Beves (1997) 92 A Crim R 209.”

71. The Teplitsky Parties referred to the High Court’s observation in Saaed v Minister for Immigration and Citizenship (2010) 241 CLR 252; [2010] HCA 23 at [31] that: “Statements as to legislative intention made in explanatory memoranda or by Ministers, however clear or emphatic, cannot overcome the need to carefully consider the words of the statute to ascertain its meeting”. In the present case, the language of s 75A makes plain that the legislative intent of s 75A, consistently with the terms of the explanatory memorandum, was to ensure that when material has been given in evidence in exempt proceedings (whether under s 74 or s 75), it becomes, as a result, admissible in any subsequent proceeding. The language of the provision, and the terms of the explanatory memorandum, do not support the Teplitsky Parties’ submission that, in order for such material to be admissible in a subsequent proceeding pursuant to s 75 of the TIA Act, it is necessary to establish in the subsequent proceeding that the material was in fact admissible in the exempt proceeding under either s 74 or s 75.

72. The Teplitsky Parties referred to a number of authorities regarding the legislative intent of the TIA Act, as follows:

“15.    Legislation rarely pursues one purpose at all costs. In Samsonidis v Commissioner, Australian Federal Police [2006] FCA 1592, [24], Sundberg J stated:

‘[T]he purpose of the TIA Act is to strike a balance between, on the one hand, allowing law enforcement authorities to have access to important information and, on the other, protecting the privacy of members of the public. It does this by providing for a general prohibition on the interception of telecommunications and then providing narrow exceptions.’

16.   The trajectory of the legislative history has, however, been in favour of the protection of individual privacy from overzealous law enforcement: NSW Crime Commission v Vuletic (2005) 64 NSWLR 301; [2005] NSWSC 614, [25]-[30] (Johnson J).

17.    In Taciak v Commissioner, Australian Federal Police (1995) 59 FCR 285, 297-299, Sackville J stated:

‘Parliament itself has therefore recognised, in the context of telecommunications, the fundamental importance of protecting individual privacy, although also recognising that the value of privacy can be overridden where it conflicts with other significant community values, provided that safeguards are observed. …

The recognition and protection of privacy in the Interception Act, in my view, justifies a restrictive approach to the construction of the statutory exceptions to the prohibitions on the interception of telecommunications and on the use of lawfully obtained intercept information.’

18.    Such an approach to the purpose of the TIA Act, as being directed to protecting individual privacy from the intrusion of law enforcement, has been endorsed by both first instance and appellate courts: Lawrence v NSW Police Service (2004) 144 Crim R 396; [2004] NSWSC 59, [45] (Greg James J); NSW Crime Commission v Vuletic (2005) 64 NSWLR 301; [2005] NSWSC 614, [46] (Johnson J); Commissioner of Police (NSW) v Zurich Australian Insurance Ltd [2016] NSWCA 365, [45] (Meagher JA, Ward JA and Emmett AJA concurring); R v TB (2023) 376 FLR 69; [2023] SASC 45, [34] (Kimber J).”

73. These observations regarding the legislative purpose of the TIA Act do not support the interpretation of s 75A which is advanced by the Teplitsky Parties. In particular, the legislative concern for the maintenance of privacy is a concern about preventing, or controlling the means by which, such material can enter into the public domain. It is not a concern which relates to material that is already in the public domain.

74. In John Fairfax Publications Pty Ltd v Doe (1995) 37 NSWLR 81 at 87, Gleeson CJ said:

“The legislation … in certain respects permits the communication or use of information in such a way that it will enter the public domain lawfully, and that further publication will be lawful. For example, by permitting the giving of information in evidence in defined circumstances, the legislation clearly contemplates that, since court proceedings are ordinarily conducted in public, and the evidence in such proceedings may be reported (subject to any lawful restriction), the information may become public in that way.”

75. As Handley JA observed in Wood v Beves, once information has been given in evidence in an exempt proceeding (whether under s 74 or s 75), it has “lawfully entered the public domain” and the “privacy of the speakers which the [TIA] Act within limits is concerned to protect” is “totally lost and does not survive in some qualified or mutilated form”.

Decision in Addenbrooke (No 2)

76. The Teplitsky Parties submitted that the decision of the Full Court of the Federal Court in Addenbrooke Pty Ltd v Duncan (No 2) [2017] FCAFC 76 (Addenbrooke (No 2)) establishes that, in order for material to be admissible under s 75A, it is necessary to show :

“(a)    that a warrant was issued;

(b)    that the warrant was issued within authority;

(c)    that the persons who purported to execute the warrant were authorised to do so;

(d)    what the information that was obtained in consequence of the interception in execution of the warrant was;

(e)   that any record of that information is an accurate record of the information;

(f)    that proceedings have been conducted that are ‘exempt proceedings’

(g)    that the information that was obtained in consequence of the interception in execution of the warrant was given in evidence in that exempt proceeding;

(h)    that the information that was, in fact, given in evidence in that exempt proceeding is a kind of information that is authorised to be given in such a proceeding;

(i)    that the information [the Plaintiffs] seek to adduce in this proceeding is congruent with, or part of, the information of a kind that was authorised to be given in the exempt proceeding.”

77. If the Full Court has determined that s 75A is to be interpreted as requiring such steps to be taken, then I should not depart from that decision unless I am convinced that the interpretation is plainly wrong (Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [135] per curiam) or, to put the matter another way, unless there is a compelling reason to do so: David William Pallas & Julie Ann Pallas as trustees for the Pallas Family Superannuation Fund v Lendlease Corporation Ltd [2024] NSWCA 83 at [140] per Leeming JA and at [22] per Bell CJ (Gleeson and Stern JJA agreeing).

78. However, I do not consider that the Full Court in Addenbrooke (No 2) intended to, or did, specify any requirements for admissibility under s 75A along the lines for which the Teplitsky Parties contended. Instead, I consider that the Full Court interpreted s 75A, consistently with the interpretation which I have outlined above, as allowing evidence to be given in a subsequent proceeding where it has been established that it has previously been given in evidence in an exempt proceeding.

79. The relevant ground of appeal in Addenbrooke (No 2) concerned a ruling by the primary judge (Foster J) on the admissibility of a document which, on its face, was a transcript of an intercepted telephone conversation: Addenbrooke Pty Ltd v Duncan (No 5) [2014] FCA 625. Addenbrooke had contended that the document was admissible under s 75A because it had been given in evidence in a proceeding before the Independent Commission Against Corruption (ICAC), which is, pursuant to s 5B(hb), an “exempt proceeding”. Foster J determined that the requirements for admissibility under s 75A were not satisfied, stating as follows (at [72]-[73], emphasis added):

“[72] In order to render a record of intercepted information admissible in an exempt proceeding, the tendering party must prove the existence of the relevant warrant, must prove that the record is a record of lawfully intercepted information (or at least information obtained under a warrant that suffers from an irregularity of the kind covered by s 75 of the Interception Act) and must prove that the record created is an accurate record of the intercepted communication. Proof of the accuracy of the record would normally be effected by calling the person who transcribed the communication.

[73] In the present case, the plaintiff has not proved that the record sought to be tendered was given in evidence in a proceeding before ICAC. The tender of a document which appears to be a record of the intercepted communication does not, of itself, prove that the intercepted information was lawfully intercepted or that that information was given in evidence in an exempt proceeding. Nor has the plaintiff proved that the record is an accurate record of a lawfully intercepted communication. The plaintiff did not call as a witness the person who intercepted the communication, did not call as a witness the person who transcribed the communication and did not prove the warrant pursuant to which the communication was intercepted. For these reasons, the plaintiff has failed to demonstrate that the record is subject to the exceptions to the prohibition on admissibility provided for in the Interception Act.”

80. Paragraph 72 of his Honour’s reasons is, in terms, a statement about what is required to be proved in order to render “a record of intercepted information admissible in an exempt proceeding” (that is, in order for it to be admissible under s 74 or under s 75 in such a proceeding). It does not contain any statement about the requirements of section 75A.

81. So far as the requirements of s 75A are concerned, the critical finding, which is stated in the first sentence of paragraph 73 of his Honour’s reasons, is that it had not been proved that the document had been given in evidence in a proceeding before ICAC. It necessarily followed that it was inadmissible under s 75A.

82. The second sentence of paragraph 73 – namely, “The tender of a document which appears to be a record of the intercepted communication does not, of itself, prove that the intercepted information was lawfully intercepted or that that information was given in evidence in an exempt proceeding” – should be read in a context where Foster J had referred to, in the previous paragraph, the requirements for admissibility in an exempt proceeding under s 74 and s 75. I do not read this sentence as a statement that, in order for information to be admissible under s 75A of the TIA Act, it is necessary to show both that the information was “given in evidence in an exempt proceeding” and that the information “was lawfully intercepted”. That is plainly not the case because, as his Honour recognised in paragraph 72 (and as explained above), information which is not “lawfully intercepted” is capable of being admitted under s 75 and therefore under s 75A.

83. Similarly, I consider that the balance of paragraph 73 of Foster J’s judgment must be read in a context where his Honour had been referring to the requirements for the admissibility of intercepted communications under a number of different provisions of the TIA Act (namely, each of ss 74, 75 and 75A). It is plain that his Honour had those various provisions in mind given that the final sentence of paragraph 73 refers to Addenbrooke’s failure to demonstrate that the transcript was “subject to the exceptions [plural] to the prohibition on admissibility provided for in the [TIA] Act”. Consequently, I do not read his Honour as suggesting that, in order to establish that a document is admissible under s 75A of the TIA Act, it is necessary to prove that “the record is an accurate record of a lawfully intercepted communication”; or to “prove the warrant pursuant to which the communication was accepted”; or to “call as a witness the person who intercepted the communication” or “the person who transcribed the communication”.

84. In Addenbrooke (No 2) at [560]-[566], Gilmour and White JJ (with whom Dowsett J agreed on this issue: at [288]) set out the relevant provisions of the TIA Act. Their Honours described the requirements under s 74 of the TIA Act for intercepted information to be admitted in an exempt proceeding, and then said as follows (at [564]-[567]):

“Section 75A then authorises a further step. It allows evidence given in an ‘exempt’ proceeding to be adduced later as evidence in any proceeding. Section 75A provides:

If information is given in evidence (whether before or after the commencement of this section) in an exempt proceeding under section 74 or 75, that information, or any part of that information, may later be given in evidence in any proceeding.

A note to s 75A indicates that it was inserted as a response to the decision in Wood v Beves (1997) 92 A Crim R 209. In that case, the majority of the Court of Appeal in New South Wales had held that ss 63, 74 and 77 of the Interception Act operated to preclude lawfully obtained information, within the meaning of s 6E of the Act, being admitted into evidence and used by a court in any proceedings after such lawfully obtained information had been given in evidence in exempt proceedings open to the public.

Section 77(3) provides that interception warrant information is admissible in evidence in a proceeding only to the extent that (relevantly) sections 74 or 75A permit a person to give that evidence.

Thus, the steps in relation to lawfully intercepted information and interception warrant information are: such information may be given in evidence in an exempt proceeding; and once so given, it may later be given in evidence in any proceeding.”

85. Those statements are consistent with the interpretation of the TIA Act which I have set out above, namely, that:

1. it must be shown that information is “lawfully intercepted information” in order for it to be admitted into evidence in an exempt proceeding pursuant to s 74; and

2. once information is admitted under that provision in an exempt proceeding, s 75A allows such material “to be adduced later as evidence in any proceeding”.

86. Those statements are also consistent with the following description by the Victorian Court of Appeal in Zirilli v The King [2023] VSCA 64 at [77] (Emerton P, Beach and McLeish JJA) of the effect of s 75A of the TIA Act:

“Under s 75A, where [information] has been given in evidence in an ‘exempt proceeding’, it may be later given in evidence in any proceeding.”

87. Having set out and described the effect of the relevant provisions, Gilmour and White JJ summarised (at [570]-[572]) Foster J’s reasoning in the passage which I have quoted above. Their Honours then made (at [574]-[577]) a number of comments regarding Addenbrooke’s failure to specify, in the ground of appeal or in written submissions in chief on the appeal, any error of law. Ultimately, at the hearing of the appeal, Addenbrooke submitted that “the transcript of the intercept proved, on its face, the existence of the warrant and was admissible by way of ss 6EA(a)(iii) and 77(3)” (at [577]) and that “it had been common ground at trial that the transcript had been ‘in evidence at ICAC’” (at [578]).

88. Gilmour and White JJ (at [579]) rejected the latter submission, setting out a passage of transcript which showed this was not common ground. Their Honours held as follows (at [581]):

“Given the submissions of Mr Newlinds, it is understandable that the Judge did not regard it as common ground that the intercepted communication had been obtained pursuant to a warrant or that it had been ‘given in evidence’ in a proceeding before ICAC. Although the information about this at trial was scant, it seems that ICAC may have adopted a procedure of loading documents onto its computer and thereby having been available without those documents being formally tendered or otherwise adduced into evidence in the proceeding. Although counsel for Addenbrooke at trial was directly challenged on these questions, he did not adduce evidence about them. The Judge was entitled to take the view that, while the record of the intercepted conversation may in some way have been before ICAC, Addenbrooke had not shown that it had been ‘given in evidence’ in a proceeding before it.”

89. This was sufficient to dispose of this issue. It followed that the material could not be admissible under s 75A of the TIA Act, because it had not been shown that the intercepted communications had been given in evidence in an exempt proceeding.

90. Their Honours continued as follows (at [582]):

“In these circumstances, we do not consider that this Court should conclude that the Judge erred in holding that Addenbrooke had not proved that the transcript contained ‘lawfully intercepted information’ for the purposes of s 74 of the Interception Act. Nor had Addenbrooke proved that the record was an accurate record of the intercepted communication. These matters by themselves meant that Addenbrooke could not avail itself of s 75A of the Interception Act. Given this conclusion, we do not consider it necessary to consider Addenbrooke’s submission as to the admissibility of the intercept under s 69 of the Evidence Act 1995 (Cth). No error has been shown in the Judge’s evidence ruling. This ground of appeal fails.”

91. I do not read the first two sentences of this paragraph as stating that, whenever material is tendered under s 75A of the TIA Act, it is necessary to show that it “contained ‘lawfully intercepted information’ for the purposes of s 74 of the [TIA] Act” and that “the record was an accurate record of the intercepted communication”.

92. Instead, I read their Honours as stating that “in these circumstances” (that is, in circumstances where, as held in [581], it had not been shown that the transcript had been given in evidence in an exempt proceeding), it was not necessary to consider Addenbrooke’s further submission that the transcript itself established the existence of the warrant and that this was lawfully intercepted information, because Addenbrooke could not rely on s 75A of the TIA Act.

93. Further, as noted above, it cannot be a condition for the application of s 75A that the information is shown to be “lawfully intercepted information” (being information that is “intercepted otherwise than in contravention of subsection 7(1)”), since information can be admitted under s 75A where it has been “given in evidence … under section … 75” and s 75 only applies to information which has been intercepted “in contravention of subsection 7(1)”.

94. Further, the statement in paragraph 582 that “Addenbrooke had not proved that the record was an accurate record of the intercepted communication” is not phrased as, or intended to be, a statement regarding matters which must be proved in order to establish admissibility under s 75A. Instead, this statement must be read in the context of the specific facts of that case. In particular, Addenbrooke had tendered a transcript of a conversation, where the original recording was not available, and where Addenbrooke had not shown that the transcript had been given in evidence in the ICAC proceeding under s 74 or s 75 of the TIA Act (and therefore there was no basis to conclude that any of the issues arising under those sections had been considered in the ICAC proceeding).

95. In contrast, in the present case, a recording is available in respect of all but 3 of the 142 recorded conversations, and all of that material has been shown to have been tendered in exempt proceedings. It follows that, in all but 3 cases, the Teplitsky Parties are able to make any submissions about the accuracy of any transcript, which can then be determined by reference to the recordings; and, in all cases, there has already been a process of the material being tendered in a criminal prosecution, in the course of which any issues about the authenticity and admissibility of this material were able to be considered and determined prior to the evidence being admitted.

Practical difficulties with the Teplitsky Parties’ interpretation

96. The interpretation advanced by the Teplitsky Parties would require a party in a subsequent civil proceeding to prove matters which may not have been addressed in a criminal prosecution, in circumstances where the party in a civil proceeding may be prevented, as a matter of law, from leading evidence to establish those matters.

97. For example, the Teplitsky Parties submitted that any person seeking to have evidence admitted under s 75A of the TIA Act must establish:

1. that a warrant was issued;

2. that the warrant was issued within authority; and

3. that the persons who purported to execute the warrant were authorised to do so.

98. The Teplitsky Parties identified, in a supplementary written submission, a number of specific questions which, they argued, must be addressed in dealing with these matters, including:

1. Is the warrant in accordance with the prescribed form (TIA Act, s 49(1))?

2. Is the warrant signed by the Judge or nominated AAT member who issued it (TIA Act, s 49(1))?

3. Does the warrant specify a period for which it is to be in force in accordance with s 49(3) of the TIA Act?

4. Does the warrant set out short particulars of each serious offence in relation to which the nominated AAT member was satisfied (as mentioned in s 46(1)(d) or s 46A(1)(d) (TIA Act, s 49(7)(b)))?

5. Did a certifying officer of the agency to whom the warrant was issued cause an authorised representative of the carrier to be informed immediately of the issue of the warrant (TIA Act, s 60(1)(c))?

6. Was a copy of the warrant, certified in writing by a certifying officer of the agency to be a true copy of the warrant, given as soon as practicable to that authorised representative (TIA Act, s 60(1)(d))?

7. Did the chief officer of the AFP (which is an “agency” and, relevantly, an “interception agency” as defined in s 5(1) of the TIA Act) approve the persons who have purported to exercise the authority, as conferred by the warrants (or classes of warrants) in the present case, issued to that agency?

8. Have the Plaintiffs proved that the approval of the relevant chief officer for the purposes of s 55(3) of the TIA Act was in force in relation to the warrants in the present case with respect to the persons who purported to exercise authority pursuant to them?

99. Many of these questions could only be answered by tendering “interception warrant information” within the meaning of s 6EA of the TIA Act. If that information was not given in evidence in an exempt proceeding under s 74(3), then it cannot be given in evidence in these proceedings under s 75A. Further, s 63(2)(d) would apply to prevent such information being given in evidence in these proceedings.

100. That would mean that, for example, if the warrants themselves were not given in evidence in the Chalabian Proceeding or the Cranston Proceeding (because, for example, the defence counsel examined the warrants and considered that there was no issue about their validity), then those warrants cannot be tendered in these proceedings. In that regard, some warrants were produced by the AFP pursuant to a subpoena on the first day of the hearing, and at the time of production, the representative of the Australian Government Solicitor who appeared on behalf of the AFP noted that the Commissioner was of the view that those warrants had not been tendered in evidence in an exempt proceeding, and that therefore there may be an issue about the admissibility of those warrants in these proceedings.

101. The Teplitsky Parties suggested that, where the warrants had not been tendered in the exempt proceeding, but intercepted information had been given in evidence, the intercepted information could not be admitted in a subsequent proceeding, because the party adducing the evidence in that proceeding would not be able to prove the warrant. It is difficult to see any reason, consistently with the legislative purposes which I have identified above, as to why that should be the outcome in such a situation.

102. Instead, it is consistent with the language and legislative purpose of s 75A that this provision operates to allow information from intercepted telephone calls which has been given in evidence in an exempt proceeding under s 74 or s 75 to be admitted in evidence in a subsequent proceeding, irrespective of whether the warrants were given in evidence in the exempt proceeding.

103. The Teplitsky Parties’ submission that it is necessary for the party tendering information under s 75A to prove that the warrant complies with all requirements of the TIA Act in order for it to be a valid warrant highlights a further problem with their interpretation of that provision and, in particular, their contention that it is necessary to prove that the relevant information both was admitted, and was admissible, under either s 74 or s 75. Let it be assumed that information was admitted under s 74 in an exempt proceeding and that it emerged, when the information was sought to be tendered under s 75A, that there was some minor irregularity or defect in the relevant warrant which meant that that the information was not “lawfully intercepted information” within the meaning of s 74, but nonetheless would have been admissible under s 75. On the Teplitsky Parties’ interpretation, this information could not be admitted in evidence under s 75A, because it was admitted (but not admissible) under s 74, and was admissible (but not admitted) under s 75. It is difficult to see any justification for such an outcome, particularly in light of the express legislative purpose of s 75A, namely, to ensure, in response to Wood v Beves, that when material had already been admitted in an exempt proceeding, it was admissible in any subsequent proceeding.

Potential injustice as a result of Plaintiffs’ interpretation?

104. The Teplitsky Parties argued that the Plaintiffs’ interpretation of s 75A would give rise to potential injustice if there were some substantial defect or irregularity in the relevant warrant, or some other matter, which meant that information which was in fact admitted in the exempt proceeding under s 74 was not admissible under the TIA Act. The Teplitsky Parties submitted as follows:

“The illogicity of the Plaintiffs’ contention can be tested in the following way. Let it be assumed that, in an exempt proceeding, lawfully intercepted information was given in evidence, such that the factual element is satisfied, but it transpired that certain of that information fell within the meaning of ‘foreign intelligence information’. Section 74(1) expressly excludes ‘foreign intelligence information’ from the kind of lawfully intercepted information that is authorised to be given in an exempt proceeding. On the Plaintiffs’ approach (cf Plaintiffs’ Objection Submissions, [31]), the mere historical fact that the foreign intelligence information was given in the exempt proceeding is sufficient for them to establish that such information could thereafter be given in evidence in any proceeding. That is, once the foreign intelligence information had spilled out (even if by accident) in an exempt proceeding, s 75A authorised that information being given in any later proceeding, because it was sufficient to fall within the exception that the information had been given as a historical fact, and the court in any later proceeding could not examine for itself whether the information given in the exempt proceeding was properly so given under ss 74 or 75.”

105. It would be expected that, when evidence is tendered in a prosecution for a serious offence which is punishable by (as here) a lengthy term of imprisonment, those appearing in that proceeding would be astute to any potential issue regarding the admissibility of intercepted conversations, and that any such issue would be raised, and determined in that exempt proceeding. Given that is so, it is difficult to see, where information has in fact been admitted under s 74 of the TIA Act, any justification consistent with the language or purpose of s 75A for requiring a party who tenders such information in a subsequent proceeding positively to establish that the material in fact met the requirements for admissibility under s 74.

106. Further, if it did turn out that the example posited by the Teplitsky Parties were to eventuate, there would be a means for the Court to address any potential injustice to the defendant in the subsequent proceeding. As explained below, s 78 of the TIA Act operates to preserve any other objection that may be taken to the tender of information which satisfies the requirements of s 75A. So, it would, for example, be open to a defendant, in the situation described above, to take an objection under s 135 of the Evidence Act on the basis that there would be unfair prejudice to the defendant in allowing the plaintiff to adduce and rely on material which, although admitted in an exempt proceeding, was not in fact admissible in that proceeding, and would have been excluded if an available objection had been taken. The Court would then have a discretion to exclude this evidence, if it formed the view that its probative value was substantially outweighed by the danger that it might be unfairly prejudicial to the defendant.

107. In this scenario, it would not be for the plaintiff who tenders information that has previously been admitted in an exempt proceeding positively to establish that this material was in fact admissible in that prior proceeding, but instead it would be for the defendant to raise and establish any issue regarding the admissibility of such material in the prior proceeding. This approach to the issue raised by the Teplitsky Parties gives rise to no unfairness to the defendant, since the defendant and the plaintiff are equally able to issue subpoenas to the relevant agency (here, the AFP) to explore any issue about the admissibility of the material in the exempt proceeding. Further, this approach to the issue is consistent with the language and legislative purpose of ss 75A and 78, in that it recognises that material which has been given in evidence in an exempt proceeding is thereby able to be given in evidence in a subsequent proceeding, but at the same time recognises that the defendant is able to take, at the time of its tender, any other available objection to the material, including by reason of any unfair prejudice occasioned by the tender of such material in the subsequent proceeding.

TIA Act: Ruling on objection

108. For those reasons, I ruled that any information which was given in evidence in an exempt proceeding (whether under s 74 or s 75) is thereby able to be given in evidence in these proceedings pursuant to s 75A of the TIA Act.

109. At the time of giving that ruling, I noted three matters.

110. First, it followed that it was necessary for the Plaintiffs to prove that each of the recordings and transcripts of intercepted telephone conversations which they tendered in these proceedings had, in fact, previously been admitted in an exempt proceeding. As already noted, the Plaintiffs established that this was the case by tendering extracts of the transcripts of the Chalabian Proceeding, the Cranston Proceeding and the POCA Proceeding.

111. In those proceedings, each of the recordings and transcripts in question was identified, at the time of the tender, as an intercepted telephone conversation. Each was admitted into evidence. The only means by which such material could be admitted into evidence in an exempt proceeding is under s 74 (where lawfully obtained) or s 75 (where obtained in contravention of s 7(1) of the TIA Act). It follows that all of this material was given in evidence in an exempt proceeding under s 74 or s 75 of the TIA Act.

112. Secondly, a transcript (or recording) of an intercepted telephone conversation could only be tendered in these proceedings if the transcript (or the recording) was itself previously tendered in an exempt proceeding. In this regard, I indicated that I would follow the decision of Brereton J in A Pty Ltd v Z [2007] NSWSC 999 at [9]-[10], where his Honour held that a transcript of a call was “not the same information” as a recording of the call, with the result that if a transcript (but not the recording) was given in evidence in an exempt proceeding, then only the transcript (and not the recording) was admissible in the subsequent proceeding. In the present case, the extracts of the transcripts from the exempt proceedings which have been tendered by the Plaintiffs establish that each of the transcripts or recordings that they have tendered was in fact a document which was in evidence in an exempt proceeding.

113. Thirdly, I did not, by rejecting the Teplitsky Parties’ global objection to all of the intercepted call recordings and transcripts thereby determine that all of that material should be admitted. At the time of rejecting this ruling, I stated as follows:

“I have framed my determination so as not to be in the form of a ruling on any individual document. Section 78 of the Telecommunications Interception and Access Act preserves the ability of the defendants to take any other available objection in relation to any particular document. To be clear, I am not ruling that the documents are admitted into evidence, but I am only determining, at this stage, that subject to the comments I have made, the requirements of s 75A are satisfied.”

114. Section 78 of the TIA Act provides as follows:

Where evidence otherwise inadmissible

Nothing in this Part renders information, or a restricted record, admissible in evidence in a proceeding to a greater extent than it would have been admissible in evidence in that proceeding if this Part had not been enacted.

115. The Teplitsky Parties took a further global objection to all of the intercepted calls (and to the conversations obtained by surveillance devices and to the contents of the mobile phones seized by search warrants), namely, that all of this material was inadmissible by reason of s 69(3) of the Evidence Act.

116. For reasons outlined below (at paragraphs [134]-[140]), I also ruled against this objection on the second day of the hearing, but emphasised when doing so that “any objections to specific documents … may still be taken” on any other basis.

117. When making submissions regarding whether the recordings and transcripts of the intercepted telephone calls were admissible under the TIA Act, the Teplitsky Parties had indicated that, if this issue were decided against them, they would also make objections regarding the admissibility of the recordings and transcripts on the basis that the speakers were not identified (and therefore, presumably, the intercepted calls could not rationally affect any the assessment of the probability of any fact in issue). The submission was foreshadowed by Senior Counsel for the Teplitsky Parties in the following terms:

“Then can we just deal with the hearsay rule. The defendants reserve their position with respect to the plaintiffs’ contention that what are asserted to be admissions against interest are admissible as such. That is because the contention assumes that the plaintiffs have otherwise established the admissibility of the [evidence] they seek to adduce under the TIA Act, the SDA Act and, with respect to the Crimes Act, search warrants.

The defendants will make submissions on this contention, if it is ruled that the plaintiffs otherwise have established admissibility. The defendants note, however, that the plaintiffs cannot properly assert that the information they seek to adduce in evidence are admissions against the interests of the defendants, because they do not purport to adduce any evidence that, relevantly, the information they assert to be admissions were made by Teplitsky. That is, to the extent the plaintiffs assert audio recordings proved Teplitsky said something, there is no evidence tending to prove that the person saying those things was Teplitsky. Could I expand that submission by saying that, really, that applies to virtually all of the recorded material in this case.”

118. The Plaintiffs responded to this submission by tendering a paragraph from Mr Teplitsky’s affidavit, in which Mr Teplitsky referred to one of these telephone recordings, and deposed as follows:

“Telephone intercepts

27.    I have listened to a telephone intercept where it is recorded that I used the phrase ‘cleaned it up through for you here’. I do not remember or now know the context in which I used that phrase. I use words like ‘clean’ or ‘clear’ sometimes in different ways. At no time was I talking about laundering money.”

119. The Plaintiffs submitted, and I accept, that this amounted to an admission by Mr Teplitsky that he is the person speaking on the relevant recorded telephone call (since he referred in this passage, twice, to words which “I used” in this recording). Further, this is the sum total of the affidavit evidence that Mr Teplitsky gave in response to the “Telephone intercepts”. In circumstances where Mr Teplitsky referred to, and queried, only one of the statements attributed to him, I accept the Plaintiffs’ submission that Mr Teplitsky impliedly admitted that he engaged in, and said the words recorded in, each of the other intercepted conversations in which he is identified as having participated.

120. Further, as the Plaintiffs pointed out, there was documentary evidence of the telephone numbers from which and to which intercepted calls were made, and documentary evidence of the names of the subscribers in respect of those telephone numbers; and, in numerous instances, there is evidence in the telephone calls themselves (such as the use of first names) which assist in identifying the speakers.

121. In any event, the Teplitsky Parties did not ultimately object to any individual recording or transcript on the basis that the speakers involved in that particular conversation could not be identified, and the Teplitsky Parties’ closing submissions proceeded on the basis that Mr Teplitsky did in fact participate in the intercepted telephone calls in which he is recorded as having been a participant. In particular, the Teplitsky Parties relied on the evidence of the intercepted calls in which Mr Teplitsky is recorded as having participated as showing the extent what Mr Teplitsky knew (and did not know) regarding the conduct of Mr Rostankovski and Mr Hausman.

Conversations recorded by Surveillance Devices: Application of SD Act

122. Section 45(3) of the SD Act provides as follows:

Subject to subsections (4) and (5) and section 65B, protected information may not be admitted in evidence in any proceedings.

123. “Protected information” is defined as including “any information obtained from the use of a surveillance device under a warrant ”: s 44. A “warrant” is defined as including a “surveillance device warrant”, being “a warrant issued under Division 2 of Part 2 or under subsection 35(4) or (5)”: s 6.

124. As set out above, the prohibition in s 45(3) on the admissibility of protected information is subject to the exceptions specified in ss 45(4) and (5). The Plaintiffs relied on the exception in s 45(4)(a), which provides, relevantly, that s 45(3) does not apply to:

the use, recording, communication or publication of any information that has been disclosed in proceedings in open court lawfully …

125. The Teplitsky Parties advanced three main reasons why the Plaintiffs had failed to satisfy the requirements of s 45(4)(a).

126. First, the Teplitsky Parties contended that the Plaintiffs could not establish that the recordings in question were “disclosed in proceedings” by relying on Constable Todoroski’s hearsay evidence of the contents of the transcripts of prior proceedings. The Plaintiffs met this objection by tendering extracts from the transcript of the Cranston Proceeding which established that each of the surveillance device recordings in question was played in Court in that proceeding.

127. Secondly, the Teplitsky Parties submitted that these recordings were not disclosed “in open court” because there appeared to have been orders made under the Court Suppression and Non-publication Orders Act 2010 (NSW) (CSNPO Act) and the Plaintiffs had not adduced evidence of what those orders were.

605. There are three problems with the starting premise of this submission, namely, that the Plutus Funds which were paid into the Lands Legal Trust Account (and, so far as the $7m Transaction is concerned, were paid out from there to the Teplitsky Parties) represented moneys which had been paid by employers and were held by Plutus Payroll on a bare trust for the taxation authority.

606. First, the Plutus Funds were paid from the bank account of Plutus Payroll into the Lands Legal Trust Account. There has been no financial analysis undertaken as to the source of those funds held in the Plutus Payroll bank account and, in particular, the extent to which the funds paid into the Lands Legal Trust Account comprised moneys which had been paid by employers to Plutus Payroll and which were referable to PAYG.

607. Secondly, this trust argument was raised by the Teplitsky Parties by way of an amendment made on the second day of the hearing. The Plaintiffs opposed the amendment on the basis that such an argument depended “on the intentions of the payer”, and there had been no investigation of “who the actual payer is”, “what the circumstances of the payment are”, or “how they paid the money, or why”, adding: “We don’t know if the arrangements were contractual, that is to say, confined to remedies in contract, or whether the parties intended that some trust arrangement be entered into”.

608. The only evidence regarding such matters to which the Teplitsky Parties referred, when advancing their proposed amendment, was the following statement in a report by one of the Liquidators:

“I identified that:

•   The Company was the main entity and the trading business.

•   The Company would offer its payroll services to workers either directly or through a number of recruitment agencies. These services were advertised as a ‘zero fee’ service.

•   Under one scenario, a worker would submit their timesheet to the Company, which calculated all employment related entitlements, the total value of which would be invoiced from the Company to an intermediary (i.e. a recruitment agency who on-hired the Worker’s services to another business) or the entity where the Worker performed services.

•   Once the Company received payment, the Company would then transfer the funds to one of the BOTS.

•   When the BOTS received the funds, their role was to arrange payment to workers and other respective regulatory bodies.

•   Initially there were only two BOTS, however a number of additional BOTS were set-up at later dates with the existing Workers split among these entities.”

609. In this passage of his report, the Liquidator addressed only “one scenario” by which Plutus Payroll operated, and outlined this scenario in very general terms. There was no identification of any other scenario by which Plutus Payroll operated, let alone any identification of the terms of any such arrangements, including any terms on which money was paid to Plutus Payroll or any terms regarding the role of any “intermediary”. Those are matters about which the evidence is silent, because there has not previously been any issue about the intention of the persons paying Plutus Payroll or the terms on which payment was made.

610. When this objection to the proposed amendment was raised, the Teplitsky Parties responded that their trust argument did not “raise any question about the intention of the parties providing the funds”. This led to the following exchange:

“HIS HONOUR: You’re proposing this amendment on the basis that your position is that the question of whether there’s a trust or not does not depend on any question of intention of the payer of the money to Plutus?

[SENIOR COUNSEL FOR THE TEPLITSKY PARTIES]: I think I have to propose it that way…

HIS HONOUR: Whether this stands up to scrutiny, or not, is a matter that can be addressed in submissions. On the basis that it’s said that this allegation is advanced on the basis that it doesn’t require any investigation of intention, I’ll allow the amendment.”

611. However, in closing address, the trust argument was advanced on the basis that an inference should be drawn as to the intentions of the persons who paid moneys to Plutus Payroll. The Teplitsky Parties submitted as follows:

“The proper inference to be drawn from all of the objective evidence (Bosanac v Commissioner of Taxation (2022) 275 CLR 37; [2022] HCA 34, [105] (Gordon and Edelman JJ)) is that the payers intended Plutus Payroll as their trustee to transfer from the payments received in the proper amounts to the taxation authority for the purpose of discharging their respective tax liabilities. That is, that it was not intended that Plutus Payroll (or any intermediate corporate vehicle) were to themselves have the beneficial interest in the moneys paid, but only that it held the moneys paid as a bare trustee waiting to pay them over to the taxation authority.”

612. Given the basis on which the amendment was advanced, and was allowed, it is not open to the Teplitsky Parties to advance a submission in support of the amendment in these terms.

613. Thirdly, even if it had been open to run an argument on this basis, I would not have been not satisfied that the intention to create a trust had been established.

614. While, as recognised by Gordon and Edelman JJ in Bosanac v Commissioner of Taxation (2022) 275 CLR 37; [2022] HCA 34 at [105], a presumption of a resulting trust may arise “if there be a paucity of evidence as to an intention to declare a trust”, their Honours noted that such an inference “cannot arise where a plaintiff has led evidence that tends to establish an objective intention or the lack of an objective intention to create a trust”. In the circumstances of the present case, I do not consider that it is open to me to make any inference from an absence of evidence on the issue of the intention of the employers who paid moneys to Plutus Payroll in the course of its payroll services business. The trust amendment was allowed on the basis that it did not raise any such question of intention, precisely because the Plaintiffs had not had any opportunity to investigate, or put on evidence, on that issue of intention. It would be fundamentally unfair to the Plaintiffs to allow an amendment raising an issue concerning the intention of multiple third parties, which the Plaintiffs did not have any opportunity to investigate, and then to draw an inference adverse to the Plaintiffs’ case on the basis of their failure to lead evidence on that issue.

Should the Plaintiffs have sought an exclusion order?

615. Pursuant to the orders made by this Court in the POCA Proceeding, the $8.575m Payment has now been forfeited to the Commonwealth.

616. Section 73(1) of the Proceeds of Crime Act permits an application for an exclusion order to be made to the court that made the forfeiture orders. The consequence of an exclusion order being made is that the interest in question is excluded from the operation of the forfeiture orders: s 73(2)(a)-(b). If the interest has already vested in the Commonwealth and is yet to be disposed of, such an order must direct the Commonwealth to transfer the interest to the applicant: s 73(2)(c). If the interest has vested in the Commonwealth and has been disposed of, the order must direct the Commonwealth to pay the applicant an amount equal to the value of the interest concerned: s 73(2)(d).

617. Because the Plaintiffs were notified of the application for the forfeiture order and did not appear at the hearing of that application, it would be necessary for the Plaintiffs, in order now to bring an application for an exclusion order in respect of the $8.575m Payment, to obtain the leave of the Court: s 74(3)(a). The Court may grant such leave if the Plaintiffs have a good reason for having not appeared in the POCA Proceeding, or if there is some evidence now available which was not available at the time of the hearing, or if there are other special grounds for granting the leave: s 74(4)(a)-(c).

618. Having referred to those provisions of the Proceeds of Crime Act, the Teplitsky Parties submitted as follows:

“The interest in the moneys forfeited to the Commonwealth is either properly beneficially owned by the body politic (as the Teplitsky Parties contend [this being the ‘trust’ argument]…), or it is money in which Plutus Payroll can (and should) properly assert an interest. If it is the former, then there is no prospect of Plutus Payroll obtaining an exclusion order, because Plutus Payroll’s interest (as trustee of the moneys pending their remittance to the ATO) has been conveyed to the Commonwealth and paid into the Consolidated Revenue. If it is the latter, then it remains open to Plutus Payroll to make an application for an exclusion order.”

619. I have addressed the trust argument above.

620. The contention that Plutus Payroll should make an application for an exclusion order depends on the submission that Plutus Payroll “can (and should) properly assert an interest” in the $8.575m Payment.

621. Certain conditions must be satisfied before an exclusion order is made: s 73(1)(a)-(d). These conditions include, relevantly, the following (s 73(1)(c)):

if the forfeiture order was (or the forfeiture order applied for would be) made under section 47 or 49--the court is satisfied that the applicant’s interest in the property is neither of the following:

(i)    proceeds of unlawful activity;

(ii)    if an offence on which the order was (or would be) based is a serious offence--an instrument of any serious offence; …

622. As the Plaintiffs submitted, in order for Plutus Payroll to make an application for an exclusion order, it would need to persuade the Court that Plutus Payroll’s interest in the $8.575m Payment was not the proceeds of unlawful activity. It is difficult to see how it could do so, having regard to the tax fraud for which the Plutus Officers have been imprisoned. The Teplitsky Parties advanced no submissions as to how this requirement could be met.

623. As the Plaintiffs submitted, if any issue of mitigation does arise in this context (which is disputed, and which I need not determine), there is nothing unreasonable in a liquidator refraining from “embarking on costly and probably unsuccessful litigation”.

624. The Teplitsky Parties submitted that:

1. the Court has a discretion whether or not to make an order under s 588FF(1) of the Act; and

2. having regard to the Plaintiffs’ failure to seek an exclusion order in respect of the $8.575m Payment, the Court should exercise its discretion not to make any order against the Teplitsky Parties in respect of the $7m Transaction.

625. As the Teplitsky Parties acknowledged, there are conflicting authorities on the question whether or not the Court has a discretion under s 588FF(1) of the Act to refuse relief to a liquidator in respect of a voidable transaction. I do not consider it necessary or desirable to reach a concluded view on this issue. For present purposes, I am prepared to proceed on the basis that there is such a discretion to deny or reduce relief: see BP Australia Ltd v Brown (2003) 58 NSWLR 322; [2003] NSWCA 216 at [157] and [171] per Spigelman CJ (with whom Mason P and Handley JA agreed); Great Investments Ltd v Warner (2016) 243 FCR 516; [2016] FCAFC 85 at [141] (Jagot, Edelman and Moshinsky JJ).

626. Assuming there is such a discretion, I would not exercise it so as to refuse or reduce the relief awarded to the Liquidators in respect of the $7m Transaction having regard to the circumstances of this case.

627. That is because, for the reasons outlined above, the Plaintiffs did not act unreasonably in failing to seek an exclusion order. Further, and in any case, I have found that the Teplitsky Parties engaged in serious improper conduct by knowingly assisting in a dishonest and fraudulent design that led to millions of dollars of Plutus Funds being paid away to third parties. Those are matters that weigh strongly against any exercise of discretion in the Teplitsky Parties’ favour.

Double recovery?

628. The Teplitsky Parties also relied on the principle against “double recovery” or “double proof” to argue that the Court should, having regard to the forfeiture of the $8.575m Payment, exercise its discretion to refuse any relief to the Plaintiffs in respect of the $7m Transaction.

629. I do not consider that the making of an order for the Teplitsky Parties to pay to the Liquidators an amount equivalent to the payments or benefits which they received pursuant to the $7m Transaction would offend the principle against double recovery or the principle against double proof in insolvency.

630. As a starting point, it must be kept in mind that the principle against “double recovery” is a principle against actual double recovery: Anderson v Canaccord Genuity Financial Ltd (No 2) [2024] NSWCA 161 at [70] (Gleeson, Leeming and White JJA).

631. The Teplitsky Parties’ submissions on double recovery conflate Plutus Payroll with one of its creditors (the Commonwealth). Plutus Payroll has not received any compensation in respect of the payment of its funds out of the Lands Legal Trust Account pursuant to the $7m Transaction.

632. Further, any funds obtained by the Liquidators in these proceedings will need to be dealt with in accordance with the law, including in accordance with s 556 of the Act.

633. As the Plaintiffs submitted, it is, at this stage, uncertain how that process will play out. For example, any amount able to be recovered from the Teplitsky Parties in respect of a judgment in these proceedings may be less than the amount of the Liquidators’ fees and remuneration. Alternatively, the amount recovered may be equal to or less than the amount of any award made in respect of the $4.6m Transaction, such that it could fairly be said that no amount had been recovered in respect of the $7m Transaction.

634. If the amount recovered in respect of a judgment in these proceedings substantially exceeds any amounts payable under s 556 of the Act, and any amount (including interest) awarded in respect of the $4.6m Transaction, then the situation may arise where there is an amount available for distribution to creditors (including the Commonwealth), which can be regarded as an amount recovered in respect of the $7m Transaction.

635. The Commonwealth is entitled to approximately 98% of any amount available for distribution to creditors. However, it does not follow that, if there is a distribution to creditors of moneys recovered in respect of the $7m Transaction, there will be a double recovery by the Commonwealth. The $8.575m Payment which was forfeited to the Commonwealth did not represent a payment made to the Commonwealth in respect of its claim against Plutus Payroll. Instead, that amount, which was paid in substitution for the property interest of Luminous under its second mortgage over the Short Street Property, was forfeited to the Commonwealth because it represented the proceeds of criminal activity engaged in by the sole shareholder of Luminous, Mr Rostankovski. There does not appear to me to be any sound basis to regard this forfeiture of property, pursuant to the Proceeds of Crime Act, as reducing any liability of Plutus Payroll to the Commonwealth.

636. If such an approach were appropriate, then it would presumably also be necessary to take in account any amounts recovered by the Commonwealth from, say, the Plutus Officers in the POCA Proceedings which might be able to be characterised as referrable to the PAYG amounts that were diverted by the Plutus Officers for their own benefit. There is no evidence before the Court in relation to that issue, including as to whether any such recovery has been taken into account by the Commonwealth in its proof of debt, and there have not been any submissions, including from the Commonwealth (which is not a party to the proceedings), as to those matters.

637. As the Plaintiffs submitted, the appropriate time to consider any question of “double recovery” by the Commonwealth, insofar as it arises, is following any recovery from the Teplitsky Parties in these proceedings, when it is known whether any amount, and if so how much, is available, after the making of the payments specified in s 556 of the Act, for distribution to creditors:

“But, if for example, a large sum was recovered, then the liquidators might need to think, well, I’ve recovered this large sum, they can then work through [s] 556. If at the end of the day there’s a net amount outstanding, the liquidators might say, well in the exercise of their judgment they’re going to suborn one creditor over another and ensure that some get some back and take into account the fact that some moneys are being forfeited, if they feel they can do that legitimately. They may need to go and get advice about that under s 90-15. Our friends can make an application under [s] 90-15. If the liquidator said, well, we’re going to disregard that, in the exercise of our judgment we’ve got back eight million but we think we’ll just declare a dividend to all creditors of seven cents in the dollar or whatever it might be, our friends might at that point say, well, that’s not fair, that doesn’t take into account our position. But these aren’t things to be worked out in a vacuum and these are things that can be worked out when we know what’s been recovered, if anything, and when the liquidators have made a decision about what to do.

…

So, there’s not going to be double recovery, but, anyway, if there were to be double recovery, those matters will be worked out by the liquidator who is an officer of the Court and, thereafter, one side or the other can apply under s 90-15 and get advice or get directions for the liquidator as to how to take the matter further.  In other words, the matter the proceed under the Court supervisory jurisdiction, in any event.  As for these proceedings, in our respectful submission, the appropriate orders are simply those that we have sought because Plutus has established that it has suffered that loss.”

638. Any such issue in respect of the administration of Plutus Payroll can, when it arises, be determined by the Court in its supervisory jurisdiction.

639. For those reasons, I am not satisfied that the issues raised regarding “double recovery” provide a sufficient basis for exercising any discretion to refuse or reduce any relief awarded to the Plaintiffs in respect of the $7m Transaction.

Relief in respect of $7m Transaction

640. Plutus Payroll suffered a loss of $6.852m as a result of the $7m Transaction, comprising the amount of $6m advanced to Tepcorp Holdings and used to repay Tepcorp Investments’ debt to Moshav (which was guaranteed by Mr Teplitsky) and the amount of $852,000 paid in cash to Mr Teplitsky. Those payments were made from the Plutus Funds held in the Lands Legal Trust Account, and Plutus Payroll received nothing in return for those payments. This transaction was entered in furtherance of Mr Rostankovski’s dishonest and fraudulent design, and each of the Teplitsky Parties knowingly assisted Mr Rostankovski in giving effect to that design.

641. Accordingly, in respect of the $7m Transaction, Plutus Payroll is entitled to an order for equitable compensation against the Teplitsky Parties in the amount of $6.852m, together with interest.

642. Further, by reason of those matters, Plutus Payroll is entitled to an order under s 588FF(1)(a) and/or (c) that the Teplitsky Parties pay to Plutus Payroll the amount of the payments made to each of the Teplitsky Parties from the Plutus Funds, or the amount of the benefits received by each of them, pursuant to the $7m Transaction.

CONCLUSION AND ORDERS

643. I have found that Mr Rostankovski breached his fiduciary duties to Plutus Payroll in further of a dishonest and fraudulent design.

644. I have found that the Teplitsky Parties assisted Mr Rostankovski in the breach of his fiduciary obligations and did so in circumstances where they had knowledge in the requisite sense of his dishonest and fraudulent design.

645. I have also found that each of the $7m Transaction and the $4.6m Transaction was an insolvent transaction and an uncommercial transaction of Plutus Payroll, which is voidable under s 588FF(3) of the Act.

643. Plutus Payroll is entitled to an order against Mr Teplitsky for equitable compensation in the amount of $11.152m, being the total amount of the Plutus Funds paid out of the Lands Legal Trust Account pursuant to these Transactions ($4.3m having been paid in respect of the $4.6m Transaction, and $6.852m having been paid in respect of the $7m Transaction). The Plaintiffs are also entitled to pre-judgment interest from the date that those payments were made.

644. Plutus Payroll is entitled to an order against Tepcorp Investments and Tepcorp Holdings for equitable compensation in the amount of $6.852m, being the amount of the Plutus Funds paid out of the Lands Legal Trust Account pursuant to the $7m Transaction, together with pre-judgment interest from the date that those payments were made.

645. In addition, the Plaintiffs are entitled to orders under s 588FF(1)(a) and/or (c) of the Act that the Teplitsky Parties pay the amount of the payments made to them, or benefits received by each of them, pursuant to the $7m Transaction and the $4.6m Transaction.

646. The Plaintiffs have succeeded in their claims against the Teplitsky Parties and are entitled to their costs.

647. I will direct the parties to bring in short minutes of order to give effect to these reasons, including dealing with interest and costs. If there is any dispute about the form of those orders, including the quantification of interest, or if any party seeks a different costs order, or a costs order other than on the ordinary basis, the parties will have an opportunity to be heard on these matters.

648. Accordingly, I make the following orders. The Court:

1. Directs the parties to bring in short minutes of order, by 5pm on 11 September 2024, to give effect to these reasons for judgment, including orders that deal with interest and costs, insofar as those matters can be agreed; and

2. Directs that, insofar as any aspect of the orders to give effect to the reasons for judgment cannot be agreed, the parties exchange, by 5pm on 11 September 2024, the orders which each party proposes and submissions (limited to 5 pages) on those orders, indicating whether, and if so why, an oral hearing is requested to deal with the matters in dispute.

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Decision last updated: 28 August 2024