The Trustee for Oenoviva (Australia & New Zealand) Plant and Equipment Trust and Commissioner of Taxation
[2014] AATA 614
•28 August 2014
[2014] AATA 614
Division TAXATION APPEALS DIVISION File Numbers
2012/5901
2014/1300
Re
The Trustee for Oenoviva (Australia & New Zealand) Plant and Equipment Trust
APPLICANT
And
Commissioner of Taxation
RESPONDENT
INTERLOCUTORY DECISION
Tribunal Egon Fice, Senior Member
Date 28 August 2014 Place Melbourne The Tribunal finds that Mr Garrett does not have standing to pursue the two applications before this Tribunal on behalf of the Oenoviva (Australia & New Zealand) Plant and Equipment Trust, nor can he be joined as a party pursuant to s. 14ZZD of the Taxation Administration Act 1953. Furthermore, the Tribunal finds that this is a case where it is appropriate to dismiss these applications pursuant to s. 42A(5)(b) of the Administrative Appeals Tribunal Act 1975.
........[sgd Egon Fice]................................................................
Egon Fice, Senior Member
PRACTICE & PROCEDURE – Standing – Joinder – Dismissal pursuant to s 42A of the AAT Act – Private hearing pursuant to s 14ZZE of the Taxation Administration Act – Taxation – Goods and Services Tax – Input Tax Credit – Creditable acquisition – Administrative penalties – Disqualification from managing a corporation – Trust Deeds
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) ss 30, 42A
A New Tax System (Goods and Services Tax) Act 1999 (Cth) ss 9-5, 9-15, 11-5, 11-20, 23-5,
184-1Corporations Act 2001 (Cth) ss 127, 128, 129, 206A, 206B, 482
Criminal Law Consolidation Act 1935 (SA) s 140
Instruments Act 1958 (Vic) ss 105, 106, 107
Taxation Administration Act 1953 (Cth) ss 14ZZD, 14ZZE, 284-75, 298-10
Cases
Guse v Comcare (1997) 49 ALD 288
Northside Developments Pty Ltd v Registrar-General and Others (1990) 170 CLR 146
Secondary Materials
Miscellaneous Taxation Ruling MT 2006/1 – The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number
REASONS FOR DECISION
Egon Fice, Senior Member
28 August 2014
Application number 2012/5901 (the First Application) lodged with the Tribunal on 31 December 2012 was lodged by Mr Andrew Garrett and Oenoviva (Australia and New Zealand) Pty Ltd (OANZPL) (formerly known as Two Tribes Wine Company (Australia & New Zealand) Pty Ltd) as joint trustees of the Oenoviva (Australia & New Zealand) Plant and Equipment Trust (the Plant and Equipment Trust). This application was lodged in respect of an Objection Decision made by the Commissioner of Taxation (the Commissioner) on 13 November 2012. The Commissioner disallowed a claim for input tax credits for creditable acquisitions in the amount of $3,150,000 for the tax period 1 March 2012 – 31 March 2012.
The second application, number 2014/1300 (the Second Application), was lodged with the Tribunal on 19 March 2014. This application was lodged in respect of an Objection Decision made by the Commissioner on 7 May 2013 regarding an administrative penalty assessment made on 9 January 2013 which arose out of the First Application. The Commissioner assessed the trustee (OANZPL) to be liable to pay an administrative penalty in the amount of $1,575,000.
On 22 January 2014 Registrar Burns of the Federal Court of Australia ordered that OANZPL be wound up in insolvency under the provisions of the Corporations Act 2001 (the Corporations Act). Mr Timothy James Clifton was appointed as liquidator. On 12 February 2014 Deputy President S A Forgie directed that a preliminary hearing should take place on 14 April 2014 to determine whether:
(a)the First Application should be dismissed under s. 42A(5)(b) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) because the applicant failed, within a reasonable time, to comply with a Tribunal direction made on 8 November 2013;
(b)if the application is not dismissed pursuant to s. 42A(5)(b), Mr Garrett was a joint trustee of the Plant and Equipment Trust and by reason of that appointment has a right to bring both applications on behalf of the Plant and Equipment Trust; and
(c)his appointment as a controller of OANZPL conferred on Mr Garrett any rights in relation to this proceeding.
On 11 March 2014 in the course of a Directions Hearing, Mr Garrett also claimed that he was entitled to be joined as a party to these proceedings pursuant to s. 14ZZD of the Taxation Administration Act 1953 (Administration Act). It provides:
14ZZD Section 30 of the AAT Act applies in relation to reviewable objection decision or an extension of time refusal decision as if subsection (1A) of that section were omitted and the following subsection were substituted:
“(1A) If an application has been made by a person to the Tribunal for review of a review reviewable objection decision or an extension of time refusal decision:
(a)any other person whose interests are affected by the decision may apply, in writing, to the Tribunal to be made a party to the proceedings; and
(b)the Tribunal may, in its discretion, by order, if it is satisfied that the person making the application consents to the order, make that person a party to the proceeding.”.
Mr Garrett claimed he was a person whose interests were affected by the decisions made by the Commissioner. This issue was then added to the list of matters set out above for preliminary hearing.
Although the Commissioner at first appeared reluctant to agree to a preliminary hearing of the matters to which I have referred above, in my opinion, those issues warranted resolution because there was a real possibility that it would dispose of both of these applications. That would result in substantial cost savings to both parties.
In fact, in the course of the preliminary hearing in respect of both of these claims, the Commissioner provided the Tribunal with an email sent to the Commissioner from the office of the liquidator, CliftonHall. The liquidator advised the Commissioner that the liquidation was impecunious and that he did not intend to participate in or prosecute the applications lodged by Mr Garrett.
There are three principal issues which need to be determined. They are whether Mr Garrett has standing and authority to act in these proceedings on behalf of the Plant and Equipment Trust; whether Mr Garrett was entitled to be joined as a party to these proceedings pursuant to s. 14ZZD of the Administration Act; and whether these applications should be dismissed on the grounds that the applicant failed, within a reasonable time, to comply with directions made by the Tribunal.
I should also mention that Mr Garrett wrote to the Tribunal by email on 10 March 2014 requesting a private hearing. In his email he stated:
Pursuant to the provisions of section 14ZZE (a) of the Taxation Administration Act (1953), in my capacity as the applicant, I request that all hearings before the aforementioned proceeding be held in private.
Section 14ZZE of the Administration Act provides:
14ZZE Hearings before Tribunal other than Small Taxation Claims Tribunal to be held in private if applicant so requests
Despite section 35 of the AAT Act, the hearing of a proceeding before the Tribunal, other than the Small Taxation Claims Tribunal, for:
(a) a review of a reviewable objection decision; or
(b) a review of an extension of time refusal decision; or
(c) an AAT extension application;
is to be in private if the party who made the application requests that it be in private.
I considered Mr Garrett’s request at a Telephone Directions Hearing held on 11 March 2014 and explained to him that his request would not be granted at that stage due to the other outstanding issues which needed to be resolved, namely standing and dismissal.
Section 14ZZE of the Administration Act applies only in the specified circumstances. The applicant in these matters is The Trustee for Oenoviva (Australia & New Zealand) Plant and Equipment Trust. Mr Garrett purports to act on behalf of the applicant. His right to do so was the purpose of the Interlocutory hearing held on 12 and 13 May 2014. As s. 14ZZE only applies to the Tribunal where it is conducting a review of a reviewable objection decision; a review of an extension of time refusal decision; or an AAT extension application, I find that s.14ZZE does not apply in these circumstances.
STANDING AND AUTHORITY TO ACT ON BEHALF OF THE PLANT AND EQUIPMENT TRUST
At the time the Commissioner made the objection decision in respect of the claimed creditable acquisitions, OANZPL was (at least on its face) the sole trustee of the Plant and Equipment Trust and it was the entity registered under Part 2-5 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act). For the purposes of the GST Act, an entity includes a trust (s. 184-1(1)(g)). Regardless, as Ms M Baker of counsel, who appeared on behalf the Commissioner, submitted, a right or obligation cannot be conferred or imposed on an entity that is not a legal person (s. 184-1(2) Note 1). Furthermore, as s. 23-5 provides, it is the entity carrying on an enterprise which must be registered under the GST Act rather than the enterprise. In this case, the registered entity carrying on the enterprise for the purposes of the GST Act was OANZPL.
As far as creditable acquisitions are concerned, a person makes a creditable acquisition if, amongst other things, they are registered under the GST Act (s. 11-5). Section 11-20 provides that an entity is entitled to an input tax credit for any creditable acquisition that it makes. Hence, in this case, the claim for an input tax credit was made by the registered entity, OANZPL. In addition, as Ms Baker submitted, the entity liable for the administrative penalty is responsible for objecting to such an assessment.
The basis upon which the Commissioner assessed that an administrative penalty should issue was that the trustee of the Plant and Equipment Trust, when claiming for the input tax credit, made a false or misleading statement in a material particular. That is in accordance with s. 284-75(1) of Schedule 1 of the Administration Act. Again, the entity which made the claimed false and misleading statement is OANZPL, in its capacity as trustee of the Plant and Equipment Trust. Written notice of liability to pay the penalty was issued, pursuant to s. 298-10 of Schedule 1 of the Administration Act, to OANZPL in its capacity as trustee of the Plant and Equipment Trust.
For the purposes of the GST Act, it is correct to say that a trust, although not itself a legal person, has statutory status as an entity pursuant to s. 184-1(1). As is explained in Miscellaneous Taxation Ruling MT 2006/1:
71.… The trust itself cannot be a party to legal proceedings nor have other obligations placed upon it. The trustee is the appropriate party. This is recognised in subsection 184-1(2) which provides that the trustee in that capacity is taken to be the trust entity. Consequently a trust entity is identified both by the trust relationship itself (the trust) and by reference to one of the necessary legal persons to that relationship (the trustee).
72. The Act does not create two separate entities – the trust and trustee – but the relevant entity is the trust, with the trustee standing as that entity if legal personality is required.
It must also be borne in mind that trustees of a trust change from time to time. In those circumstances, the trustee in its capacity as trustee for the trust at any given time is taken to be the entity that is a trust. Although the legal person acting as trustee may change, the trust remains and its ABN (Australian Business Number) does not alter. It is only its legal representative that has changed.
It follows that in this matter, it is the Plant and Equipment Trust which is the entity for the purposes of the GST Act. Its legal representatives are OANZPL and, if Mr Garrett’s appointment as joint trustee is valid, Mr Garrett. As far as OANZPL is concerned, its liquidator, Mr Clifton, has made it clear that the company is impecunious and he will not participate in these proceedings. The remaining question is whether Mr Garrett has standing to pursue these proceedings on behalf of the Plant and Equipment Trust.
The first issue with which I need to deal is the fact that Mr Garrett was convicted in the District Court of South Australia on 22 October 2010 for contravention of s. 140 of the Criminal Law Consolidation Act 1935 (SA) (Criminal Consolidation Act) for which he received a Good Behaviour Bond to be served for a period of 2 years. Section 140 of the Criminal Consolidation Act in essence makes it an offence for a person to have dishonest dealings with documents, the maximum penalty for that offence being 10 years or, for an aggravated offence, 15 years.
In a letter dated 23 October 2012 ASIC referred to that conviction and pointed out that s. 206B(1)(b)(ii) of the Corporations Act 2001 (the Corporations Act) provided for automatic disqualification from managing a corporation where a person is convicted of an offence that involves dishonesty and which is punishable by imprisonment for at least 3 months. Section 206B(1) relevantly provides:
206B
Convictions
(1)A person becomes disqualified from managing corporations if the person:
(a)is convicted on indictment of an offence that:
(i) concerns the making, or participation in making, of decisions that affect the whole or a substantial part of the business of the corporation; or
(ii) concerns an act that has the capacity to affect significantly the corporation’s financial standing; or
(b)is convicted of an offence that:
(i) is a contravention of this Act and is punishable by imprisonment for a period greater than 12 months; or
(ii) involves dishonesty and is punishable by imprisonment for at least 3 months; or…
Section 206B(2) provides that the period of disqualification starts on the day the person is convicted and, if the person does not serve a term of imprisonment, the disqualification lasts for five years after the day on which the person was convicted. The consequences of disqualification are briefly stated in s. 206A(2) of the Corporations Act which provides:
(2) a person ceases to be a director, alternate director or a secretary of a company if:
(a)the person becomes disqualified from managing corporations under this Part; and
(b)they are not given permission to manage the corporation under section 206F or 206G.
Mr Garrett has not been given permission to manage a corporation under s. 206F or 206G of the Corporations Act. It follows that Mr Garrett was disqualified from managing a corporation between 22 October 2010 and 22 October 2015. He also ceased to be a director of a company as from 22 October 2010. Accordingly, from that date, Mr Garrett could not lawfully exercise any of the powers of a director of a corporation granted under the Corporations Act.
A person disqualified under Part 2D. 6 of the Corporations Act commits an offence if he or she takes any action to manage a corporation while under disqualification. Section 206A(1) provides:
(1) A person who is disqualified from managing corporations under this Part commits an offence if:
(a)they make, or participate in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or
(b)they exercise the capacity to affect significantly the corporation’s financial standing; or
(c)they communicate instructions or wishes (other than advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation) to the directors of the corporation:
(i) knowing that the directors are accustomed to act in accordance with the person’s instructions or wishes; or
(ii) intending that the directors will act in accordance with those instructions or wishes.
Acting under power of attorney
By way of a preliminary matter, Ms Baker pointed out that Mr Garrett executed the application for review in the First Application indicating he did so “By Power of Attorney”.
I had in evidence a document described as a Limited General Power of Attorney made under s. 105 of the Instruments Act 1958 (Vic) (Instruments Act) dated 23 November 2012 said to be granted by a Mr Robert Nowak. A historical company extract from ASIC in respect of OANZPL discloses that Mr Nowak was appointed the sole director and secretary of that company on 23 October 2012. Mr Garrett ceased to be a director on 22 October 2010. There appears to have been no secretary appointed between 20 May 2010 and 23 October 2012. The General Power of Attorney is said to be limited to Mr Garrett applying his signature on Mr Nowak’s instructions as a director of a number of companies comprising The Andrew Garrett Group, including OANZPL. The document is signed by Mr Nowak and Mr Garrett as well as one witness, Ms Kate Rosewall.
The first problem identified by the Commissioner is that at the time the power of attorney was purportedly executed, Mr Garrett had already been disqualified from managing the corporation pursuant to s. 206B(1)(b)(ii) of the Corporations Act. Therefore, as Ms Baker correctly submitted, by representing OANZPL at this Tribunal, Mr Garrett would be committing an offence under s. 206A of the Corporations Act.
The second problem is that s. 106 of the Instruments Act provides:
Execution of powers of attorney
(1)An instrument creating a power of attorney may be executed by, or by direction and in the presence of, the donor of the power.
(2)Where such an instrument is executed by a person by direction and in the presence of the donor of the power, two other persons shall be present as witnesses and shall attest the instrument.
Clearly, the General Power of Attorney relied on by Mr Garrett is defective due to the fact that only one witness purportedly attested to that instrument.
There may also be a third problem regarding the power Mr Garrett purported to exercise as attorney for Mr Nowak in his capacity as a director of OANZPL in its capacity as trustee of the Plant and Equipment Trust. That is because s. 107 of the Instruments Act provides:
Form of power of attorney
(1) a general power of attorney in or to the effect of the form set out in Schedule 12 shall operate to confer –
(a)on the attorney under the power; or
(b)if there is more than one attorney, on the attorneys acting jointly or acting jointly or severally, as the case may be –
authority to do on behalf of the donor anything (other than delegate his powers under the power of attorney) which he can lawfully do by an attorney.
(2)A general power of attorney given by a person shall not operate to delegate to the attorney under the power the execution or exercise of all or any trusts, powers and discretions vested in him as trustee, either alone or jointly with any other person or persons.
As I have indicated above, for the purposes of the GST Act, a trustee of a trust stands as the legal entity for the purposes of the entity, being the trust. Arguably, the General Power of Attorney granted by Mr Nowak could not operate to delegate to Mr Garrett any powers Mr Nowak had under the GST Act effectively acting as trustee of the Plant and Equipment Trust.
In my opinion, the General Power of Attorney granted by Mr Nowak is ineffective. Mr Nowak failed to ensure that two witnesses were present and attested that instrument as is required by s. 106(2) of the Instruments Act. Furthermore, even if the instrument was effective, contrary to law he would be making or participating in decisions that affected the whole or a substantial part of the business of OANZPL; he would be exercising the capacity to significantly affect OANZPL’s financial standing; or he would be communicating instructions or wishes to Mr Nowak intending that he would act in accordance with those instructions or wishes.
The plant and equipment trust deed
The Plant and Equipment Trust was established by a Deed dated 30 March 2012. The settlor of that Deed is said to be Mr Garrett and the First Trustee is said to be Two Tribes Wine Company (Australia & New Zealand) Pty Ltd ACN 133 861 579 which was subsequently renamed as OANZPL. I had in evidence before me three copies of the Trust Deed, each containing significant differences.
The first Trust Deed (see: volume 7(A) of the applicant’s documents, document 5) is signed by Mr Garrett in his capacity as settlor and also as the Sole Director & Secretary of OANZPL. Although there is a signature line for a witness to Mr Garrett’s signature, no signature appears on that document. The second Trust Deed (see: Supplementary Tribunal document 1) is signed by Mr Garrett in his capacity as settlor and as the Sole Director/Secretary of OANZPL. Mr Garrett’s signature appears to have been witnessed by a person signing as K Rosewall. The third Trust Deed (see: Supplementary Tribunal document 2) is again signed by Mr Garrett as settlor and the signature is witnessed by an unknown person but the signature is clearly not that of K Rosewall as in the second Trust Deed. Mr Garrett suggested that the signature was that of Mr Nicholas Garrett, his son. Mr Garrett has also signed as Sole Director/Secretary.
The fact that there are three significantly different documents all purporting to be the Trust Deed executed on 30 March 2012 in respect of the Plant and Equipment Trust is cause for concern. Mr Garrett did not offer an explanation for the three different documents all purporting to be the same Trust Deed although, when this was pointed out to him in the course of the hearing, he said he took exception to the suggestion that there were alternative versions of the Trust Deed. In addition to that, at the time Mr Garrett purported to sign as the Sole Director & Secretary or the Sole Director/Secretary, he had ceased to be a director or Secretary of OANZPL by the operation of s. 206A(2) of the Corporations Act. As Ms Baker submitted, despite Mr Garrett contending that he had signed the Unit Trust Deed pursuant to section 127 of the Corporations Act, which allows a company to execute a Deed where the document is signed by two directors of the company; a director and a secretary of the company; or for a proprietary company which has a sole director who is also the sole company secretary, Mr Garrett held neither position. In fact, on 30 March 2012 OANZPL did not have a secretary at all.
I agree with Ms Baker’s submission that the Trust Deed is likely to be held to be an invalid document.
While it is true to say that a document duly executed in accordance with s. 127(1) may be relied upon by persons dealing with the company, that does not, in my opinion, validate the document other than to outsiders who have relied upon the document, in good faith, presumably to their detriment. This is frequently referred to as the indoor management rule. The operation of the rule was described in some detail by the High Court of Australia (Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ) in Northside Developments Pty Ltd v Registrar-General and Others (1990) 170 CLR 146. Mason CJ said, at 154 – 155:
According to the rule in Turquand’s Case, persons dealing with a company in good faith may assume that acts within its constitution and powers have been duly performed and are not bound to inquire whether acts of internal management have been regular: Morris v. Kanssen (33). There Lord Simons observed (34):
“It is a rule designed for the protection of those who are entitled to assume, just because they cannot know, that the person with whom they deal has the authority which he claims. This is clearly shown by the fact that the rule cannot be invoked if the condition is no longer satisfied, that is, if he who would invoke it is put upon his inquiry. He cannot presume in his own favour that things are rightly done if inquiry had he ought to make would tell him that they were wrongly done.”
In the circumstances of these applications, where it is only an insider, in this case Mr Garrett, who was aware or should have been aware at the time that he had ceased to be a director of all companies of which he was a director prior to his disqualification, and who seeks to rely on the Trust Deed, it cannot be held to be valid. Furthermore, there is a serious question regarding which of those documents is in fact the Trust Deed, two of them having been witnessed by different persons and one not witnessed at all. The invalidity of the Trust Deed, as far as Mr Garrett is concerned, has a knock-on effect regarding other documents he purportedly executed when not authorised to do so.
The most significant knock-on effect is the Deed made on 23 November 2012 or 15 March 2013, depending on which document is relied upon, purporting to make Mr Garrett a joint trustee of the Plant and Equipment Trust.
Deed purporting to appoint Mr Garrett as joint trustee
The document dated 23 November 2012 is said to be a Deed made by OANZPL; Sanctuary Australasia Pty Ltd (ACN 148 150 716) (Sanctuary Australasia) in its capacity as joint trustee of the Andrew Garrett Family Trust No 4 and as the sole unit holder of the Plant and Equipment Trust; and Mr Garrett as the New Trustee. For the purposes of this analysis, I assume that the Plant and Equipment Trust was validly established.
Clause 21 of the Plant and Equipment Trust Deed (see: Supplementary Tribunal document 1) provides for the removal and appointment of trustees. That clause provides that the trustee (at that time OANZPL) will be removed as trustee if it is liquidated or a provisional liquidator, receiver or receiver and manager, official manager or administrator is appointed or if it enters into any arrangement, compromise or composition with its creditors or is otherwise subject of any order, arrangement or administration made or entered into under any law of Australia or any of its States or Territories relating to insolvency. Clause 21 (b) provides that unit holders have the power to remove any trustee and to appoint a new trustee or new trustees in place of a trustee or in addition to the trustee. Subclause (c) provides the unit holders must exercise the powers vested in them under clause 21 (b) in the same manner as their consent is to be obtained under clause 24.
Clause 24 provides that the unit holders or a particular group or class of them will have consented to any particular matter if they execute a formal consent in writing; or pass a resolution that they consent at a meeting of unit holders by majority of at least 75% of those present at that meeting. The problem, according to Ms Baker, is that the appointment of Mr Garrett as a new trustee of the Plant and Equipment Trust did not occur in accordance with those clauses I have referred to above.
The first Schedule to the Plant and Equipment Trust states that Sanctuary Australasia in its capacity as joint trustee of the Andrew Garrett Family Trust No 4 is the holder of 100 units in that trust. The second Schedule is a unit certificate purporting to certify that Sanctuary Australasia is a registered holder of units numbered 1 – 100. That position remained for the tax period in question, which ended on 31 March 2012.
Ms Baker pointed out that Mr Garrett resigned as a joint trustee of the Plant and Equipment Trust on 14 March 2013. An email from Mr Garrett dated 12 February 2014 to the Australian Government Solicitor, acting on behalf of the Respondent, refers to his resignation in an attached document. Mr Garrett also stated that he was reappointed a day later, on 15 March 2013, which was after concerns raised by the Australian Taxation Office (ATO). In fact the recital to the 15 March 2013 Deed states Mr Garrett previously resigned on 14 March 2013 as a consequence of the actions of the ATO. Ms Baker pointed out that the ACN number for OANZPL was incorrect in both the 23 November 2012 and 15 March 2013 Deeds. In fact, as Mr Garrett pointed out, he inadvertently entered the ACN of Sanctuary Australasia against OANZPL. In addition, Ms Baker submitted that there was no evidence before the Tribunal as to whether formal consent in writing was obtained from the unit holder (Sanctuary Australasia) or whether there was a resolution passed at a meeting of unit holders. In my opinion, that is plainly correct and it raises serious questions about the validity of Mr Garrett’s appointment as a joint trustee of the Plant and Equipment Trust.
In any event, Ms Baker submitted that there was a more significant issue and that was whether Sanctuary Australasia was ever the joint trustee of the Andrew Garrett Family Trust No 4. The Andrew Garrett Family Trust No 4 is a discretionary trust. It appears to have been settled by Deed made on 1 August 2008. Mr Garrett is said to be both the Appointor and the Trustee and Mr Christopher McCarthy the settlor. The General Beneficiaries are defined as the primary beneficiaries (Mr Garrett’s two sons) and their issue living from time to time and includes any parent of the primary beneficiaries, presumably including Mr Garrett. Clause 11 of the discretionary trust Deed deals with the appointment of a new trustee.
Effectively, the trustee at any time may resign and by instrument in writing appoint a new trustee or trustees. Clause 11.2 provides that the office of the trustee will be vacated if the trustee becomes incapable of discharging his or her duties and, if the trustee is a Corporation, an order is made or a resolution passed which will have the effect of winding up the Corporation. Furthermore, clause 11.3 provides that the Appointor has the power from time to time by Deed or Will to remove a trustee from office and appoint any person other than an Appointor to act alone or jointly with any other person as trustee.
The document upon which Mr Garrett relies to support the appointment of Sanctuary Australasia as trustee of the Andrew Garrett Family Trust No 4 is a document described as Memorandum of Appointment of New Trustees which is dated 15 September 2009. This was attached to Mr Garrett’s outline of submissions dated 28 February 2014 in the First Application. The problem with the Memorandum of Appointment is that while it refers to the appointment of Sanctuary Australasia as a new trustee, that document has not been executed by any party. In his outline of submissions, Mr Garrett expressly stated that he was not able to locate a copy of the executed Deed of Appointment of Sanctuary Australasia as trustee of the Andrew Garrett Family Trust No 4. In addition, Ms Baker submitted there were no minutes from Sanctuary Australasia evidencing that the company agreed at any point in time to become the trustee of the Andrew Garrett Family Trust No 4. I accept that submission given that I have not seen any such document amongst the voluminous documents before me in this matter.
Ms Baker also directed my attention to the historical company extract obtained from ASIC on 26 March 2014 in respect of Sanctuary Australasia. The company was placed into external administration on 22 January 2014. Mr Michael Basedow of Pitcher Partners was appointed liquidator. Mr Robert Nowak is listed as a director of Sanctuary Australasia between 23 October 2012 and 29 November 2013. Mr Garrett was a director between 12 August 2009 and 22 October 2010, following which he was disqualified. There was also a third director, Mr Wayne McCarthy, who was appointed a director on 12 August 2009 and he ceased to act on 2 September 2009. He was reappointed on 11 September 2009, remaining until 20 May 2010. Therefore, as Ms Baker submitted, Mr McCarthy was a director of Sanctuary Australasia at the time the memorandum of appointment of new Trustees was said to have been made (15 September 2009). However, I had no evidence from Mr McCarthy regarding the purported appointment of Sanctuary Australasia as a trustee of the Andrew Garrett Family Trust No 4.
Ms Baker then directed my attention to an annexure to Mr Garrett’s outline of submissions dated 28 February 2014 which is in fact a Deed made on 30 September 2009 (annexure 4). That Deed is said to have been made between Mr Garrett as the retiring trustee, OANZPL (then known as Two Tribes Wine Company) as the new trustee and Mr Garrett as the Appointor. The first recital in that document states:
WHEREAS the Retiring Trustee is the present Trustee of the Andrew Garrett Family Trust No 4 (the Trust) constituted by a Deed of Settlement made on the 1st August 20108 (sic) between Christopher McCarthy as settlor and the Retiring Trustee as trustee.
Had Sanctuary Australasia in fact been appointed as trustee of the Andrew Garrett Family Trust No 4 on 15 September 2009 as claimed by Mr Garrett, logically, one would have expected its name to appear on that Deed. It does not. The document purports to replace Mr Garrett as trustee with OANZPL. Mr Garrett executed that document as Sole Director/Sole company secretary of OANZPL, as the retiring trustee in his own right and as the Appointor in his own right.
On 5 July 2011 Mr Garrett, Sanctuary Australasia and OANZPL executed a Deed purporting to appoint Holy Grail Hospitality Pty Ltd (ACN 151 929 681) (Holy Grail) as an additional trustee to the Andrew Garrett Family Trust No 4. The first obvious anomaly is that Mr Garrett purportedly retired as trustee under the Deed made on 30 September 2009. Without explanation, he now again reappears as trustee of the Andrew Garrett Family Trust No 4. Also, the Deed refers to Sanctuary Australasia as trustee despite the fact that its name did not appear as trustee on the 30 September 2009 Deed. In his outline of submissions dated 28 February 2014 Mr Garrett said, at paragraph 16, that he could not locate a copy of his reappointment as a joint trustee of the Andrew Garrett Family Trust No 4 but that nevertheless, since 5 July 2011 he has held himself out to be a joint trustee of that trust on a continuous basis. With respect to Mr Garrett, holding oneself out to be a trustee of a trust may have consequences where the trust is dealing with outsiders, however, that does not convert ostensible authority to act as trustee into actual authority. Actual authority in this case remains absent. It follows I must agree with Ms Baker’s submission that the 5 July 2011 Deed purporting to appoint Holy Grail as a further joint trustee of the Andrew Garrett Family Trust No 4 cannot be valid.
According to Ms Baker, because it cannot be established on the documents that Sanctuary Australasia ever held the position of a trustee of the Andrew Garrett Family Trust No 4, although it purported to be the holder of 100 units in the Plant and Equipment Trust in that capacity, because it never held that position, there is a serious question about whether it was in fact entitled to hold itself out as the legal owner of the units on behalf of the Andrew Garrett Family Trust No 4.
With respect to Mr Garrett, on the evidence before me on this application, that must be correct. It follows, as Ms Baker submitted, that because Sanctuary Australasia was never validly appointed as trustee of the Andrew Garrett Family trust No 4, and Holy Grail was never validly appointed as a new trustee because Mr Garrett had resigned, considerable doubt is cast over who in fact holds the units in the Plant and Equipment trust at present. The authority of Sanctuary Australasia to validly execute the Deeds made on 23 November 2012 and 15 March 2013 purportedly appointing Mr Garrett as a joint trustee of the Plant and Equipment Trust is equally questionable. It could not have been the entity which held the power to appoint trustees to the Plant and Equipment Trust absent the legal right to hold units in that trust. I find that those purported appointments of Mr Garrett as trustee are invalid.
APPOINTMENT AS MANAGING CONTROLLER
Mr Garrett contended that his appointment as controller of OANZPL as a consequence of the crystallisation of a Deed of Charge made on 28 July 2012 resulted in the property, the subject of the charge, being vested in him and that he had a right to be indemnified (presumably for any liabilities incurred by OANZPL in any capacity) by the charged property. The first thing I should say about this is that it simply makes no sense. In fact, when one examines in detail the documents purporting to give rise to Mr Garrett’s appointment as a controller of OANZPL, Mr Garrett’s confusion is amplified.
The Deed of Charge which is said to have been made on 28 July 2012 stated that OANZPL, in its capacity as trustee for the Oenoviva (Australia & New Zealand) Trust (ABN 59 486 167 468) as chargor, charged secured property to The Light Pty Ltd in its capacity as trustee for the Andrew Garrett Family Trust No 3 (ABN 21 675 178 730). Clearly, this document purports to be a charge granted by OANZPL its capacity as a trustee for another trust and not the Plant and Equipment trust whose ABN is 42 462 692 177. Furthermore, the chargee is the named corporate entity as trustee for the Andrew Garrett Family Trust No 3, and not the No 4 trust previously referred to.
The property said to be secured by the charge is all property, rights and undertaking of the chargor which of course is OANZPL in its capacity as trustee of the Oenoviva (Australia & New Zealand) Trust. The secured money is defined in the Deed and it means all monies (including damages) which the chargor is or may at any time be liable to pay the chargee on account of any reason. However, under clause 7.2 which deals with warranties and representations, the Deed states:
7.2 No trust
The chargor warrants and represents that the chargor has not entered into this document and does not hold any of the secured property as trustee of any trust and the chargor enters into this document as beneficial owner of the secured property.
Plainly, the Deed is a document cobbled together from a document or documents used for other purposes without a careful reading of its contents. On this basis alone, it is not possible to give any effect to the Deed. In fact, there are further problems. The purported Deed has not been executed by The Light Pty Ltd in its capacity as trustee of the Andrew Garrett Family Trust No 3. The document is purportedly executed by the chargor where Mr Garrett has signed as the sole director/secretary of OANZPL. Plainly, on 28 July 2012 Mr Garrett was not a director or a secretary of any company as a consequence of his disqualification and the effect of s. 206A(2) of the Corporations Act.
In his outline of submissions dated 24 March 2014, Mr Garrett referred to a supplementary Deed dated 20 September 2012. That document purports to be a Deed of Variation of Charge. The Deed is said to have been made by Mr Garrett as the Joint Trustee, The Light Pty Ltd as the Chargee and Oenoviva (Australia & New Zealand) Pty Ltd as the Chargee. Putting aside the fact that Oenoviva (Australia & New Zealand) Pty Ltd is not the Chargee under the Deed dated 28 July 2012 (referred to in the Deed of Variation as 27 July 2012), in this document it appears to be a party in its own right and not as trustee. Despite that, in the recitals OANZPL is referred to in its capacity as trustee for the Oenoviva (Australia & New Zealand) Trust. A further recital then refers to the Chargee having become the trustee of the Plant and Equipment trust by way of Deed of settlement dated 30 March 2012. That of course cannot be a reference to The Light Pty Ltd which is not referred to in the Deed of Settlement of 30 March 2012.
Ms Baker also referred to the operative amendments in the Deed of Variation of Charge which are just as confusing, if not more so, than the remainder of this document. The first Amendment purports to vary clause 7.2 to which I have referred above. The first Amendment provides that the Chargee has entered into the charge personally and in its capacity as trustee of the trusts (previously referred to as the Andrew Garrett Family Trust, the Andrew Garrett Family Trust No 3 and the Andrew Garrett Family Trust No 4) and that the Chargor entered into the Charge as Beneficial Owner of the secured property subject to the Charge. That is of course contrary to the purported Deed of Charge dated 28 July 2012. The Second Amendment then refers to the charge being security for all monies owed by the Chargee. Again, it is obvious that under a charge, it is the chargor which owes money to the chargee, not the other way around. It is plain to me that this document cannot have any effect whatsoever, let alone the effect intended by Mr Garrett, whatever that may have been. It simply makes no sense at all and, as Ms Baker submitted, it does not alter the fact that the security purportedly granted on 28 July 2012 was a security over the property of OANZPL in its capacity as trustee of the Oenoviva (Australia and New Zealand) trust and not the Plant and Equipment Trust. Furthermore, the document is purportedly executed by OANZPL by Mr Garrett acting as sole Director/Sole company secretary at a time when he was disqualified from acting as a company director or secretary.
Given the state of these security documents, it is unnecessary for me to further explore the appointment of Mr Garrett as a controller of OANZPL. I find that the Deed of Charge made 28 July 2012 and the Deed of Variation of Charge dated 20 September 2012 do not establish Mr Garrett’s standing to appear on behalf of the applicant in these proceedings.
JOINDER PURSUANT TO S. 14ZZD OF THE ADMINISTRATION ACT
Section 14ZZD of the Administration Act varies s. 30(1A) of the AAT Act. The difference between the two sections is the addition of the following words in s. 14ZZD(1A)(b):
…, if it is satisfied that the person making the application consents to the order,…
In this case, the Tribunal needs to be satisfied that OANZPL, in its capacity as trustee of the Plant and Equipment Trust, consents to Mr Garrett being joined to these proceedings. Therefore, as Ms Baker submitted, because Mr Garrett is not a trustee of the Plant and Equipment Trust for the reasons I have outlined above, and the liquidator of OANZPL has stated he does not intend to proceed with these applications, there is no person who is able to consent to Mr Garrett’s joinder to these proceedings. Therefore s. 14ZZD is of no assistance to Mr Garrett establishing he should be joined as a party to these proceedings.
DISMISSAL FOR FAILURE TO COMPLY WITH TRIBUNAL DIRECTIONS
Although not strictly necessary given the findings I have made above, the second general matter which was heard in this interlocutory application was whether the applications the subject of these proceedings should be dismissed pursuant to s. 42A(5)(b) the AAT Act. For this purpose, I have taken into account that Mr Garrett purported to act on behalf of OANZPL until it went into liquidation on 22 January 2014 and that the liquidator has informed the Tribunal that he does not intend to proceed with these applications. Section 42A(5)(b) of the AAT Act provides:
(5)If an applicant for a review of a decision fails within a reasonable time:
(a)to proceed with the application; or
(b)to comply with the direction by the Tribunal in relation to the application;
the Tribunal may dismiss the application without proceeding to review the decision.
Ms Baker submitted that notwithstanding repeated extensions of time granted to the applicant, the applicant has been consistently dilatory in complying with directions of the Tribunal.
In considering this application, I have borne in mind the fact that it is only on very rare occasions that the Tribunal should exercise its discretion under s. 42A(5)(b). As Burchett J said in Guse v Comcare (1997) 49 ALD 288:
This is plainly a valuable discretionary power. But para (b) does involve denying an applicant a hearing of the merits of his application. That should be done very sparingly, and only, I think, as a decision of last resort. Particularly is this so in a case where the genuineness of the claim is not in dispute.…
…, I should add that the principle of natural justice does not place on him any onus to show that an opportunity to be heard would in fact have proved fruitful. Natural justice stands on a higher plane than that.
However, this matter is significantly different to that of Guse. Not only was Mr Garrett given ample opportunity to rectify matters of concern since these applications were lodged in the Tribunal, there have also been a number of directions hearings at which his failure to do so was discussed in some detail. In addition to that, on the hearing of these interlocutory matters, Mr Garrett has had ample opportunity to explain his failure to comply with directions and why this matter should be allowed to proceed to a full merits hearing. I have set out the significant events below.
·31 December 2012 – First Application lodged with Tribunal.
·14 February 2013 – Commissioner informs Mr Garrett that the only issues for determination before the Tribunal whether the applicant was entitled to an input tax credit of $3,150,000 for the period ended 31 March 2012; and whether the assessment of the GST net amount of $0 for the period 31 March 2012 was excessive.
·8 April 2013 – Tribunal made directions requiring the applicant to lodge with the Tribunal and serve on the respondent on or before 13 May 2013 a summary of evidence of witnesses proposed to be called at the hearing; any other documents upon which the applicant intended to rely at the hearing; and a Statement of Facts, Issues and Contentions.
·28 April 2013 – Mr Garrett requested an extension of time until 17 May 2012 (sic – 2013) to file his Statement and supporting materials. The respondent did not object to this extension.
·6 May 2013 – the Tribunal directed that the time to comply with the original Direction was extended to 20 May 2013.
·21 May 2013 – Mr Garrett advised the Tribunal there was a delay, expecting to lodge the Statement of Facts, Issues and Contentions by the following day and witness statements by 24 May 2013. Later that day a Statement of Facts, Issues and Contentions was lodged by Mr Garrett. One witness statement was lodged and Mr Garrett informed the Tribunal that a further 23 witness statements were to come.
·22 May 2013 – Mr Garrett writes to the ATO requesting 11 witness statements be provided by offices of the Commissioner.
·23 May 2013 – Mr Garrett writes to the ATO and the Tribunal and attached what is described as a list of evidence which appears to simply be an index of documents.
·24 May 2013 – Mr Garrett lodged five witness statements indicating more will be available shortly.
·27 May 2013 – Mr Garrett lodged what he described as a final evidence list indicating all available witness statements and documents would be available 29 May 2013.
·28 May 2013 – Commissioner requests an urgent telephone directions hearing in order to clarify the issues which need to be determined by the Tribunal. The Commissioner’s representative said she had spoken with Mr Garrett explaining what evidence was relevant to the transaction in question. As Mr Garrett had previously explained he was about to lodge some 20 folders of documents. The Commissioner expressed concern about the relevance of those documents. Mr Nicholas Garrett’s witness statement lodged and served.
·2 June 2013 – 10 books of materials lodged with Tribunal and served on respondent. Updated chronology and evidence list served on respondent. Mr Garrett said he was still waiting on nine further witness statements.
·7 June 2013 – Deputy President Forgie made amended directions extending the applicant’s time for compliance to 7 June 2013.
·27 June 2013 – Commissioner writes to Mr Garrett and copies the Tribunal indicating the documents which have been received and those which have not. The Commissioner requests that any further documents be provided on or before 19 July 2013.
·5 July 2013 – the Commissioner lodges with the Tribunal his Statement of Facts, Issues and Contentions and a copy of Supplementary T-documents.
·19 July 2013 – Commissioner requests that the Tribunal convene another telephone conference in order to establish whether any additional steps needed to be taken prior to setting the matter down for hearing.
·8 August 2013 – further Directions Hearing by Deputy President Forgie where directions were made directing the applicant to lodge with the Tribunal and serve on the respondent on or before 1 November 2013 a further amended Statement of Facts, Issues and Contentions and any witness statements and any other material on which it intends to rely.
·1 November 2013 – no further material lodged with the Tribunal.
·6 November 2013 – applicant’s lawyers informed Tribunal that they cease to act.
·8 November 2013 – Deputy President Forgie makes amended directions so that applicant is required to comply with previous direction on or before 31 January 2014.
·31 January 2014 – no further materials lodged with Tribunal.
·3 February 2014 – Mr Garrett advises registry and ATO that he intended to lodge a further witness statement by 5 February 2014 and that a liquidator had been appointed to the applicant company. Mr Garrett also informed the Tribunal that he had been appointed as Managing Controller of the applicant company.
·12 February 2014 – Deputy President Forgie makes directions regarding whether this application should be dismissed s. 42A(5)(b) of the AAT Act and, if not, whether Mr Garrett was a joint trustee of the Plant and Equipment Trust; if he is not a joint trustee, whether the liquidator intended to continue this application; and whether Mr Garrett’s claimed appointment as controller of the applicant company gave him any rights in relation to this proceeding.
Prior to the hearing in these interlocutory matters commencing, Mr Garrett lodged with the Tribunal submissions made on 28 February 2014, 24 March 2014 and 12 May 2014. In addition, he had lodged with the Tribunal 15 arch lever folders of documents. However, rather than addressing the issues which arise on the applications in question, and despite having been expressly directed to those issues on a number of occasions, Mr Garrett started off by describing the issues he sought to ventilate in the High Court. None of those issues go to the matters in these applications. He also set out in detail a transcript of a telephone conversation with Mr Barlow of the ATO. There is nothing in the content of that discussion which is relevant to the matters in these applications. Mr Garrett made serious derogatory comments about the behaviour of a number of ATO officers, none of which bear any relevance to the matters in this proceeding. Mr Garrett referred to a proceeding he commenced in the Federal Court of Australia in respect of ACN 133 861 579 Pty Ltd (in liquidation) (formerly known as Oenoviva (Australia and New Zealand) Pty Ltd). That proceeding is entirely irrelevant to the matters in issue on these applications. Nevertheless, I should point out that on 5 June 2014, Davies J handed down her decision in that matter concluding:
As Mr Garrett has no standing to bring the application to terminate the winding up of the company the application will be dismissed.
Davies J was required to determine whether Mr Garrett had standing to bring an application to terminate the winding up of OANZPL. That application was made by Mr Garrett as managing controller and he also claimed to have standing to make the application as a creditor and contributory of the company. Mr Garrett subsequently conceded that his status as managing controller did not give him standing to terminate the winding up by reason of s. 482(1A) of the Corporations Act. Her Honour found that the evidence did not support his claim that he was a creditor of the company nor did it support his claim as a contributory. In that case, as well as the matters before this Tribunal, Mr Garrett relied on tax invoices and financial statements which he prepared himself. Her Honour pointed out that those documents did not constitute independent corroborative evidence of the existence of any debt because Mr Garrett prepared them himself and in any event, the financial statements did not disclose any amount owed by the company to Mr Garrett. Davies J also pointed out that Mr Garrett’s claim to be a creditor was inconsistent with other evidence then before the Court. There are many similarities between the documents presented to the Court and those which Mr Garrett has lodged with the Tribunal. They suffer from the same problems. Her Honour was also aware of the fact that Mr Garrett appeared to be in contravention of s. 206A of the Corporations Act although, given her findings, she found it unnecessary to form a concluded view about that.
In addition to the above, as I have already indicated, two full days of Tribunal hearing time were allotted to these applications. Although Mr Garrett was given ample opportunity to address the dismissal for failure to comply with directions issue, he did not do so in any coherent way. That was despite the fact that his attention was expressly directed to that issue on more than one occasion.
In fact, the entire dispute Mr Garrett has with the Commissioner regarding the application of the GST Act is whether, having granted an equitable right of set-off to the entity providing goods and services to OANZPL in its capacity as trustee of the Plant and Equipment Trust, the trustee has provided consideration for a creditable acquisition. There may be some peripheral issues regarding acquisition for a creditable purpose, however, that does not justify the 15 arch lever folders of documents Mr Garrett deemed necessary to prove that there was a creditable acquisition in the March 2012 quarter. That involved a single transaction.
The claim made by OANZPL as trustee of the Plant and Equipment Trust for an input tax credit in the amount of $3,150,000 was in respect of the purchase of 300 sets of Oenotecas (wine dispensing units) from Asbroek Engineering Services Pty Ltd (Asbroek). Asbroek issued an invoice to OANZPL in its capacity as trustee of the Plant and Equipment Trust in the amount of $34,650,000 ostensibly for the acquisition of the Oenotecas. However, there was no evidence in any of the documents before me of consideration having moved from the purchaser to the seller in the March 2012 quarter.
Although Mr Garrett put into evidence the Profit & Loss Statements and Balance Sheets for various income years, he disclosed that he was the author of those documents. They make no sense whatsoever. For example, Profit & Loss statement for the year ended 30 June 2012 discloses gross profit of $3,163,520. This is recorded as a distribution, presumably from the trustee of the Oenoviva (Australia & New Zealand) Trust and the trustee of The Holy Grail Property Trust No 4. There is no bank statement or any other source documents supporting any of those entries. Likewise, the Balance Sheet as at 30 June 2012 discloses current assets in the form of prepaid plant & equipment being Oenotecas in the sum of $35,486,053. Mr Garrett’s evidence was that only one set of Oenotecas was ever produced by Asbroek, the cost of which was said to be $105,000.
As best I could understand Mr Garrett’s explanation for the way in which the manufacture of Oenotecas would be paid for by the Plant and Equipment Trust, there was a Heads of Agreement between Sanctuary Australasia as trustee of the Holy Grail Property Trust No 4 and Asbroek Engineering Services as trustee of the Asbroek Business Trust 2 which was apparently executed on 27 September 2011. According to that document, Asbroek was to acquire the right to manufacture the Oenotecas and to supply and install that equipment in venues acquired and established by Sanctuary Australasia for what is described as the Purchase Price. Asbroek Engineering Services was also required to maintain and service the equipment installed by the licensees who had agreed to establish what Mr Garrett described as Urban Wineries. The Purchase Price was stated to be $32,390,000.
However, the Purchase Price was said to be financed under a vendor’s financing arrangement. While there is no such document amongst all of the materials which were provided by Mr Garrett, as best I am able to understand, that means that the Purchase Price for the rights acquired by Asbroek was funded by Sanctuary Australasia and was only repayable in a number of instalments or tranches from what is described as distributable EBIT (earnings before interest and tax). In fact, the agreement expressly states that Asbroek would have no liability to repay the Purchase Price other than from distributable EBIT. In other words, if there were no sales of plant and equipment by Asbroek, nothing need be paid.
Despite that arrangement, in accordance with the Heads of Agreement, Sanctuary Australasia issued a tax invoice on 27 September 2011 in the amount of $6,766,667. At that stage, of course, no Oenotecas had been manufactured and therefore Asbroek was under no obligation to pay anything. Furthermore, on 30 December 2011, Two Tribes Wine Company (ANZ) Pty Ltd as trustee for the Holy Grail Property Trust No 4 issued an invoice in the amount of $25,623,333 to Asbroek for manufacturing and installation rights. For unexplained reasons, that does not appear to be in accordance with the Heads of Agreement. Nevertheless, there is another tax invoice issued by Holy Grail Hospitality Pty Ltd as trustee for the Holy Grail Property Trust No 4 to Asbroek for the same amount. Finally, Asbroek issued a tax invoice to OANZPL as trustee for the Plant and Equipment Trust in the amount of $31,500,000 on 30 March 2012. That was said to be for the supply of 300 sets of Oenotecas. It is this invoice which gives rise to the claim for an input tax credit in the amount of $3,150,000, made on the same date. To complete the picture, Two Tribes Wine Company (although not stated on the invoice, apparently in its capacity as trustee for the Oenoviva (Australia & New Zealand) Trust as it bears that trust’s ABN number) invoiced Asbroek on 31 March 2012 in the sum of $32,390,000 for the rights it is said to have acquired in accordance with the Heads of Agreement document dated 31 March 2012.
In order for an entitlement to arise to an input tax credit, OANZPL must necessarily have made what is described as a creditable acquisition. That term is defined in the GST Act as follows:
11-5 What is a creditable acquisition?
You make a creditable acquisition if:
(a)you acquire anything solely or partly for a*creditable purpose; and
(b)the supply of the thing to you is a*taxable supply; and
(c)you provide, or are liable to provide,*consideration for the supply; and
(d)you are*registered, or*required to be registered.
The expression taxable supplies is relevantly defined in s. 9-5 the GST Act as:
9-5 Taxable supplies
You make a taxable supply if:
(a)you make the supply for*consideration; and…
Relevantly, consideration is defined in s. 9-15 as:
9-15 Consideration
(1)Consideration includes:
(a)any payment, or any act of forbearance, in connection with a supply of anything; and
(b)any payment, or any act of forbearance, in response to or for the inducement of a supply of anything.
The first point to note is that for OANZPL in its capacity as trustee for the Plant and Equipment Trust to be entitled to an input tax credit as claimed, it must have been provided with the taxable supply which means that which was supplied to it must have been for consideration. In other words, OANZPL must have made a payment for that supply or an act of forbearance. In fact, the documents do not indicate that the supply of Oenotecas by Asbroek Engineering Services was made for consideration. It was made on an understanding or agreement between the parties that Asbroek Engineering Services could set off what it owed to Sanctuary Australasia in its capacity as trustee of the Holy Grail Property Trust No 4. It is not apparent to me how this translates into a supply to OANZPL for consideration. It does not result in OANZPL being liable to provide consideration for the supply of Oenotecas.
It is clear that the substantive transaction underlying the intention expressed in the documents to which I have referred above had not eventuated at the time the invoices were issued. That is undoubtedly why the Commissioner referred to the transaction as a sham. However this alleged transaction is described, what is clearly apparent is that no consideration moved from OANZPL to Asbroek Engineering Services for the supply of 300 sets of Oenotecas. The 300 sets were never manufactured or supplied by Asbroek Engineering Services. At best, one set was manufactured and provided to Mr Garrett. If consideration was provided for that set, there is certainly no evidence of that consideration moving in the March 2012 quarter.
Mr Garrett’s reference to an equitable right off set off is unsustainable. There is no evidence of any monies in fact moving from one party to another in this entire transaction. It is constituted solely by documents prepared by Mr Garrett for parties on both sides this transaction. In fact, if there are any obligations to pay monies, they are contingent upon events set out in the Heads of Agreement taking place. There was no evidence of any such contingency coming to fruition. In any event, there is also no evidence that any of the parties, absent earnings being produced by the so-called Urban Wineries, had the capacity to make the payments described in the documents.
The explanation offered by Mr Garrett as to how this equipment was to be paid for in the future is unconvincing to say the least. He seems to have relied on what is described as a Bank Comfort Letter/Proof of Funds Letter provided by an organisation which describes itself as the Unitrust Development Bank, based in the Philippines. That letter is dated 8 September 2012. It confirms that its client, Genesis Global Trading Co Ltd, apparently based in Thailand, had on deposit at the Unitrust Development Bank at least US$250,000,000. However, following an enquiry made by the ATO to the Financial Consumer Affairs Group in the Philippines, that organisation reported that the Monetary Board (Central Bank) in the Philippines prohibited the Unitrust Development Bank from doing business in the Philippines 4 January 2002. Its assets were then placed into receivership.
In addition, amongst the bundle of documents Mr Garrett produced on the interlocutory hearing was a document purporting to be an International Bill of Exchange. On its face, it appears to provide a US$1,000,000,000 facility to Genesis Global Trading Co Ltd. There was a further so-called Confidential Memo – UCC – 3 which described the International Bill of Exchange as a: Sovereign Guarantee in form of a Sight Draft, bankable but not a bank guarantee as it is guaranteed as a direct obligation of the United States as a sovereign and to be considered as cash money payable for discharge of any private or public contractual claim. However, that document is plainly a fake. The United States Department of the Treasury, Office of the Inspector General website explains that there has been a proliferation of bogus Sight Drafts and Bills of Exchange drawn on the US Treasury Department. After explaining the origins of these kinds of bogus documents, it said:
Drawing such drafts on the U.S. Treasury is fraudulent and a violation of federal law. The theory behind their use is bogus and incomprehensible. The Justice Department is vigorously prosecuting these crimes.
With early and vigorous prosecution by the Justice Department on bogus Sight Draft cases, we have begun to see Bills of Exchange taking their place. This change occurred on or around January 2001. All these Bills of Exchange drawn on the U.S. Treasury are worthless. All the same issues and background materials applicable to Sight Drafts also apply to Bills of Exchange. This is the same fraud under another name.
The purpose of setting out the nature of the transaction is to disclose whether the claim made by OANZPL has any prospect of succeeding against the Commissioner. While I have not examined the merits in detail, it should be obvious from the matters I have considered that the claim cannot succeed. If that were not sufficient, then if one looks at all of the documents prepared in relation to the input tax credit claim made by OANZPL, they have been signed by Mr Garrett as sole director/secretary of corporate entities at time when he was disqualified and hence was not a director or secretary of any corporation. The agreements purportedly executed by Mr Garrett are, accordingly, invalid.
While I accept that it is possible that an outsider dealing with Mr Garrett may be able to rely on the assumptions provided for in s. 129(5) of the Corporations Act, no such argument is raised by any of the documents before me in this proceeding. In any event, any such assumption only goes to the rights of the parties who have relied on documents improperly executed on behalf of a company. It cannot create valid documents from those which are invalid. In my opinion, as far as the Commissioner is concerned, who is plainly not a party to any of the transactions involved, those documents remain invalid. While holding those documents to be invalid may have consequences inter partes, that cannot be of any concern for the Commissioner.
CONCLUSION
I have found that Mr Garrett could not lawfully act on behalf of OANZPL under a Power of Attorney purportedly granted by Mr Nowak, who was appointed sole director and secretary of that company on 23 October 2012. The instrument purportedly conferring the power on Mr Garrett does not comply with the statutory requirement set out in the Instruments Act. Furthermore, a general power of attorney cannot operate to delegate to the attorney powers and discretions vested in that person in a trustee capacity. Effectively, that is what Mr Nowak sought to do in this case.
I have also found that the Trust Deed establishing the Plant and Equipment Trust is, on the balance of probability, invalid. There were three different documents in evidence before me, each purporting to be the Trust Deed. In my opinion, none of those documents was properly executed and, in any event, there is no indication as to which document is in fact the Trust Deed.
Furthermore, the purported appointment of Mr Garrett as a joint trustee under the Deed made on 23 November 2012 presents with significant problems. The power of appointment purports to have been exercised by Sanctuary Australasia in its capacity as joint trustee of the Andrew Garrett Family Trust No 4, being the sole unit holder of the Plant and Equipment Trust. There was no evidence of formal consent in writing obtained from Sanctuary Australasia nor evidence of a resolution passed at a meeting of unit holders as was required. In fact, the documents in evidence before me disclose that it is more probable than not that Sanctuary Australasia never was a joint trustee of the Andrew Garrett Family Trust No 4. The document said to evidence that appointment was not executed by the parties.
Mr Garrett purported to resign as trustee of the Andrew Garrett Family Trust No 4 by a Deed made on 30 September 2009. OANZPL (under its former name Two Tribes Wine Company Pty Ltd) was said to have consented to be appointed as the new trustee of the Andrew Garrett Family Trust No 4. However, Sanctuary Australasia does not appear on that Deed. Had it in fact been a joint trustee of the Andrew Garrett Family Trust No 4 as claimed by Mr Garrett, it would have appeared on that document.
In addition, although Mr Garrett purported to retire as trustee under the Deed made on 30 September 2009, in a Deed made on 5 July 2011, Mr Garrett, Sanctuary Australasia and OANZPL purported to appoint Holy Grail as an additional trustee of the Andrew Garrett Family Trust No 4. There was no evidence that Mr Garrett was reappointed as trustee of the Andrew Garrett Family Trust No 4. While Mr Garrett maintained that he held himself out to be a joint trustee, I have found that any such holding out cannot convert ostensible authority to act as trustee into actual authority.
Given the poor state of the documents upon which Mr Garrett relies in order to establish his standing as a joint trustee of the Plant and Equipment Trust, I have found, on the balance of probabilities, his purported appointment pursuant to the 23 November 2012 and 15 March 2013 Deeds was invalid.
Mr Garrett’s claim to have been appointed a controller of OANZPL suffers from similar problems. The Deed of Charge made on 28 July 2012 is made by OANZPL in its capacity as trustee for the Oenoviva (Australia & New Zealand) Trust. It does not purport to charge the property of the Plant and Equipment Trust. Furthermore, I have found there are other problems with the document including the fact that the chargor warranted that it did not hold any secured property as trustee of any trust. That Deed has not been executed by the chargee. Although Mr Garrett referred to a Deed of Variation of Charge, that document also suffers from confusion problems regarding parties and the capacity in which they act. I have found that document to be ineffective.
For those reasons, I find that Mr Garrett does not have standing to pursue the two applications before this Tribunal.
I have also found that Mr Garrett’s application to be made a party to these proceedings by reason of s. 14ZZD of the Administration Act cannot succeed because there is no person who is able to consent to his joinder.
In any event, I have also determined that both applications before the Tribunal should be dismissed pursuant to s. 42A(5)(b) of the AAT Act. There can be no question that the applicant in these proceedings failed, within a reasonable time, to comply with directions made by the Tribunal. While I am mindful that this power should be used sparingly and only perhaps as a last resort, I have come to this conclusion because the applicant has no prospect of succeeding in either application.
Despite lodging in excess of 15 arch lever folders of documents for the purpose of establishing the right to claim an input tax credit involving a single transaction for the March 2012 quarter, nothing in the materials lodged with the Tribunal establishes that there was a taxable supply made to the applicant and that it was required to provide or was liable to provide consideration for that supply.
To further compound Mr Garrett’s problems, all of the Deeds to which I have referred above were executed by Mr Garrett purporting to be the sole director/sole secretary of the corporate entities involved. Although Mr Garrett relied on ss. 127 and 128 of the Corporations Act, those sections do not assist Mr Garrett in these proceedings involving the Commissioner. This is not a claim made by a party to the transactions evidenced by documents signed by Mr Garrett at a time when he was disqualified from acting as a director or Secretary of the company. The indoor management rule does not have any application. In my opinion, all of those documents were executed by Mr Garrett at a time when he was not lawfully in a position to do so. They are simply invalid as against the Commissioner.
Concluding, I find that Mr Garrett does not have standing to act on behalf of OANZPL as trustee of the Plant and Equipment Trust for the purpose of pursuing the two applications before this Tribunal. He cannot be joined as a party to these applications because s.14ZZD of the Administration Act does not apply to him. Furthermore, I find that this is a case where it is appropriate to dismiss these applications pursuant to s. 42A(5)(b) of the AAT Act. Despite Mr Garrett providing numerous volumes of documents in respect of the single transaction in question, there is nothing amongst those documents which allows me to find that these applications have any prospects of success.
I certify that the preceding 97 (ninety-seven) paragraphs are a true copy of the reasons for the decision herein of Senior Member Egon Fice ...[sgd].....................................................................
Associate
Dated 28 August 2014
Dates of interlocutory hearing 12-13 May 2014 Date of telephone directions hearing
26 July 2014 Advocate for the Applicant Mr A Garrett Counsel for the Respondent Ms M Baker Solicitors for the Respondent Mr V Tavalaro, Australian Government Solicitor
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