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[2024] FCA 1312
Federal Court of Australia
2024-11-14
Halley J
Original judgment source is linked above.
Corporations Act 2001 (Cth) ss 180, 181, 182, 1317H Competition and Consumer Act 2010 (Cth) Sch 2 Legislation: Fair Work Act 2009 (Cth) Evidence Act 1995 (Cth) s 140 Insurance Contracts Act 1984 (Cth) ss 21, 26, 28 Crimes Act 1900 (NSW) s 193B, 249B, 249F
ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65 AL Underwood Ltd v Bank of Liverpool [1924] 1 KB 775 All Class Insurance Brokers Pty Ltd (in liq) v Chubb Insurance Australia Limited (No 2) (2021) 154 ACSR 78; [2021] FCA 782 Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 5) (1996) 64 FCR 73 Bale v Mills (2011) 81 NSWLR 498; [2011] NSWCA 226 BCI Finances Pty Ltd (in liq) v Binetter (No 4) (2016) 348 ALR 227; [2016] FCA 1351 Briginshaw v Briginshaw (1938) 60 CLR 336 CGU Insurance Ltd v Porthouse (2008) 235 CLR 103; [2008] HCA 30 CIC Insurance Ltd v Midaz Pty Ltd [1999] 1 Qd R 279; (1998) 10 ANZ Ins Cas 61-394 Combulk Pty Ltd v TNT Management Pty Ltd (1993) 41 FCR 59 Commercial Union Assurance Co of Australia Ltd v Beard (1999) 47 NSWLR 735 Daraydan Holdings Ltd v Solland International Ltd [2005] Ch 119 Deloitte Touche Tohmatsu v Cridlands Pty Ltd (2003) 134 FCR 474; [2003] FCA 1413 Derry v Peek (1889) 14 App Cas 337 Eden v Risdale's Railway Lamp & Lighting Co (1889) 23 QBD 368 FAI Insurance Co Ltd v McSweeney (1999) 10 ANZ Ins Cas 61-443 Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 Funk Coffee and Food Pty Ltd v Hype Investments Pty Ltd [2021] SASCFC 28 Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 Cases cited: Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 Holloway v McFeeters (1956) 94 CLR 470 Hovendon & Sons v Milhoff (1900) 83 L.T. 41 Hung v Warner, in the matter of Bellpac Pty Ltd (Receivers and Managers Appointed) (in liq) [2013] FCAFC 48 Industries & General Mortgage Company Ltd v Lewis [1949] 2 All ER 573 Lysaght Bros & Co Ltd v Falk (1905) 2 CLR 421 Manchester Unity Total Care Building Society v MGICA Ltd (1991) 6 ANZ Ins Cas 61-062 Masters Home Improvement Australia Pty Ltd v North East Solution Pty Ltd (2017) 372 ALR 440; [2017] VSCA 88 Mehajer v R [2014] NSWCCA 167 Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 P&S Kauter Investments Pty Ltd v Arch Underwriting at Lloyd's Ltd (2021) 105 NSWLR 110; [2021] NSWCA 136 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 Payne v Parker [1976] 1 NSWLR 191 Permanent Trustee Australia Limited v FAI General Insurance Company Limited (in liquidation) (2003) 214 CLR 514; [2003] HCA 25 Prepaid Services Pty Ltd v Atradius Credit Insurance NV (2013) 302 ALR 732; [2013] NSWCA 252 Re HIH Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler (2002) 41 ACSR 72; [2002] NSWSC 171 Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd; Carelli v FS Architects Pty Ltd [2008] NSWCA 39 Rosenberg v Percival (2001) 205 CLR 434; [2001] HCA 18 Secured Lending 1 Pty Ltd v Mahmassani [2021] NSWSC 811 Simply Irresistible Pty Ltd v Couper [2012] VSCA 128 Smith v New South Wales Bar Association (No 2) (1992) 176 CLR 256; [1992] HCA 36
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Date of hearing: 13-14, 18-19, 21, 26-28 April, 1-2, 4-5, 16-17, 25 May 2023
Counsel for the Plaintiff: Mr M Ashhurst SC with Mr D Mackay and Ms S Scott
Solicitor for the Plaintiff: Diamond Conway Lawyers
Counsel for the Second Defendant: Mr M Jones SC with Ms A Zheng
Solicitor for the Second Defendant: Gilchrist Connell
BETWEEN: JOHN JOSEPH CARTER Plaintiff AND: CHUBB INSURANCE AUSTRALIA LTD Second Defendant
order made by: HALLEY J DATE OF ORDER: 14 November 2024
THE COURT ORDERS THAT:
BETWEEN: JOHN JOSEPH CARTER Cross-Claimant AND: CHUBB INSURANCE AUSTRALIA LTD Second Cross-Defendant
order made by: HALLEY j DATE OF ORDER: 14 NOVEMBER 2024
THE COURT ORDERS THAT:
A.1. Overview 1 These proceedings are concerned with claims for indemnity by John Carter under a directors and officers liability policy that Orix Australia Corporation Limited (Orix) had obtained from Chubb Insurance Australia Limited (Chubb). 2 Mr Carter was at all relevant times the Managing Director and Chief Executive Officer of Orix. 3 Chubb was previously called ACE Insurance Limited but changed its name to Chubb Insurance Australia Limited with effect from 1 November 2016. In order to avoid unnecessary confusion, in these reasons for judgment the single defined term Chubb has been used to refer to the company without distinguishing between periods when it was called ACE Insurance Limited and periods when it was called Chubb Insurance Australia Limited. 4 The claims made by Mr Carter under the directors and officers liability policy issued by Chubb are with respect to defence costs incurred by him in defending (a) criminal charges that were brought against him by the Director of Public Prosecutions, and (b) civil proceedings brought against him by Orix. 5 Chubb has denied liability on the basis that Mr Carter was engaged in, and aware of alleged fraudulent misrepresentations and fraudulent non-disclosures at the time that he signed a renewal proposal for Orix's directors and officers liability policy with Chubb (Proposal) on 30 October 2014. In addition, Chubb cross claims against Mr Carter seeking recovery of money that it had paid for defence costs in defending the criminal charges prior to advising Mr Carter that his claims for indemnity had been denied.
A.2. Claims made under the Policy 6 Following the submission of the Proposal, Chubb issued Orix with a Directors & Officers Liability Insurance Policy No. 01CH534086 (Policy) for the period 31 December 2014 to 31 December 2015. Mr Carter is an "Insured" within the meaning of the Policy. 7 On 25 March 2015, the New South Wales Police executed a search warrant at Orix's offices in Macquarie Park. 8 On 2 April 2015, Mr Carter was arrested. 9 On 2 April 2015, Mr Carter was charged by the New South Wales Police with four counts of corruptly receiving or soliciting a benefit pursuant to s 249B(1) of the Crimes Act 1900 (NSW) (Crimes Act) and one count of knowingly dealing with proceeds of crime pursuant to s 193B(1) of the Crimes Act (together, Criminal Charges). 10 On 4 June 2015, Mr Carter notified Chubb of the Criminal Charges. 11 Mr Carter claimed an indemnity under cl 1.1 of the Policy and sought payment of "Emergency Defence Costs" under cl 2.3 of the Policy. 12 Chubb initially accepted that Defence Costs, as defined in cl 3.5 of the Policy, were payable, but reserved its rights under the Policy and at law as further information came to light. Pursuant to that acceptance and reservation, Chubb advanced an amount of $657,277.38 (excluding GST) to Mr Carter (Sums Advanced). 13 Following its review, however, of the material served by the New South Wales Police in the Local Court criminal proceedings no. 2015/00098199 brought against Mr Carter (Criminal proceedings), Chubb notified Mr Carter on 13 April 2017 that: (a) it believed that Mr Carter was engaged in, and aware of, fraudulent non-disclosure by Orix to Chubb at the time the Policy was entered into; (b) the advancement of Defence Costs under the Policy was suspended; and (c) it sought repayment of the Sums Advanced. 14 Mr Carter has not repaid the Sums Advanced. 15 In September 2019, the Criminal proceedings were discontinued.
A.3. Overview of the two proceedings 16 These reasons for judgment concern two proceedings, NSD 437 of 2022 and NSD 448 of 2022, which were case managed and heard together.
A.3.1. Carter proceedings (NSD 437 of 2022) 17 On 7 October 2020, Mr Carter commenced proceedings against Orix and Chubb, initially in the New South Wales Supreme Court (proceeding no. 2020/00283307), later transferred to the Federal Court of Australia on 7 June 2022 (proceeding NSD 437 of 2022) (Carter proceedings). Mr Carter claims pursuant to the Policy an amount of $3,230,369.95 which he contends to have expended in defending the Criminal Charges. 18 On 16 November 2022, Mr Carter's claim against Orix in the Carter proceedings was dismissed. 19 In its further amended defence filed on 30 March 2023, Chubb contends: (a) during Mr Carter's tenure as Chief Executive Officer and Managing Director of Orix, he was aware of a course of conduct that involved, in broad terms: (i) the payment of bribes and provision of illegal inducements to Bryan Pereira, the procurement manager of Coca-Cola Amatil Ltd (CCA), a fleet customer of Orix; and (ii) two transactions (GrainCorp Transactions) which amounted to the payment of bribes and provision of illegal inducements to Tony Chidiac, the procurement manager for GrainCorp Ltd (GrainCorp), also a fleet customer of Orix; and (b) Mr Carter did not disclose this knowledge and thereby gave a false declaration, and thereby caused Orix to make fraudulent misrepresentations and fraudulent non-disclosures when he signed the Proposal on behalf of Orix. 20 In its further amended cross claim filed on 4 April 2023, Chubb repeats the matters pleaded in its further amended defence and contends that Mr Carter was and is not entitled to his defence costs advanced by Chubb and Mr Carter was in breach of the recoupment term by not repaying the Sums Advanced to Chubb after Chubb sought repayment of them on 13 April 2017. 21 By way of a defence to the further amended cross claim filed on 11 April 2023, Mr Carter contends, in broad terms, that (a) he was and is entitled to indemnification, (b) he is not liable to repay the Sums Advanced, (c) Chubb has no entitlement to recover the Sums Advanced until final adjudication, and (d) Chubb waived any rights it has under s 28(3) of the Insurance Contracts Act 1984 (Cth) (Insurance Contracts Act) by renewing the Policy on 29 January 2016.
A.3.2. Orix proceedings (NSD 448 of 2022) 22 On 12 June 2020, Orix commenced proceedings, initially in the Supreme Court of New South Wales (proceeding no. 2020/00174863), that were subsequently transferred to the Federal Court of Australia on 7 June 2022 (proceeding NSD 448 of 2022) (Orix proceedings). In those proceedings, Orix sought compensation pursuant to s 1317H of the Corporations Act 2001 (Cth) (Corporations Act) from Mr Carter for contraventions of s 180, s 181 and s 182(1), certain declarations, equitable compensation for breach of fiduciary duties, damages for breach of contractual duties, damages in tort, and damages and/or compensation pursuant to s 236 or s 237 of the Australian Consumer Law in Sch 2 to the Competition and Consumer Act 2010 (Cth) with respect to Mr Carter's conduct in relation to the transactions with CCA and GrainCorp. Orix also brought claims against George Georgiou, an Orix employee, for breaches of s 181 and s 182(1) of the Corporations Act, declarations, equitable compensation, and damages for breach of contractual duties. 23 By an amended cross claim filed on 22 July 2021 pursuant to leave granted by Black J, Mr Carter sought damages for breach of an executive services agreement and deed of Indemnity, Insurance and Access (first cross claim). 24 By a second cross claim filed on 28 September 2020, Mr Carter seeks a declaration that Chubb must indemnify him under the Policy and indemnify him for the costs incurred in defending the Orix proceedings (second cross claim). 25 On 16 November 2022, Orix's claim against Mr Carter, and the first cross claim, were dismissed. 26 On 18 January 2023, the claims brought by Orix against Mr Georgiou, and Mr Georgiou's cross claim filed on 4 November 2020, were also dismissed. 27 By a further amended defence in response to the second cross claim, filed on 4 April 2023, Chubb claims that at the time Mr Carter signed the Proposal, he (a) knew the relevant facts regarding the CCA and GrainCorp transactions, (b) did not disclose the information he knew, (c) declared that the information in the Proposal was true and correct in every detail, and (d) caused Orix to make fraudulent representations and engage in fraudulent non-disclosure. Chubb contends that Mr Carter is therefore not entitled to indemnification under the Policy. Chubb's further amended defence to the second-cross claim in the Orix proceedings was largely pleaded in identical terms (including as to paragraph numbers) to Chubb's further amended defence in the Carter proceedings. 28 On 15 June 2021, Mr Carter also commenced proceedings against Orix (proceeding NSD 559 of 2021) regarding claims under the Fair Work Act 2009 (Cth). This proceeding was dismissed on 16 November 2022. 29 Pursuant to an order made on 30 September 2022, proceedings NSD 437 of 2022, NSD 448 of 2022 and NSD 559 of 2021 (prior to its dismissal), were case managed together and evidence in one case was to be evidence in the other.
A.4. Issues for determination 30 In order to facilitate the efficient resolution of these proceedings, the parties have agreed a list of 55 issues to be determined. By way of summary, these issues are: (a) the nature of the arrangements that Orix entered into with Systems Reporting Services Pty Ltd (SRS) under which SRS invoiced Orix for "management inspection fees" (SRS arrangements) (Issues 1 to 7); (b) the extent of Mr Carter's knowledge of the SRS arrangements (Issues 8 to 13); (c) whether it is open on the pleadings for Chubb to contend that CCA (other than Mr Pereira) was not aware of the alleged use by Orix of a ledger account and subsequently an income account to act as a "slush fund" for the benefit of Mr Pereira (Slush Fund arrangements) and Mr Pereira was directing Orix to implement the Slush Fund arrangements without any authorisation from CCA (Issues 14 to 15); (d) the sources of the funds that were the subject of the Slush Fund arrangements and the extent of the knowledge of, and authorisation by, CCA of the Slush Fund arrangements (Issues 16 to 25); (e) the extent of any payments to, or on behalf of Mr Pereira, pursuant to the Slush Fund arrangements (Issues 26 to 29); (f) the extent of Mr Carter's knowledge of the Slush Fund arrangements (Issues 30 to 37); (g) whether it was open on the pleadings for Chubb to contend that GrainCorp was not aware of the funds advanced to Mr Chidiac to facilitate his daughter's purchase of a motor vehicle (Issue 38); (h) the circumstances in which the funds were advanced by Orix to Mr Chidiac to facilitate his daughter's purchase of a Mazda 3 motor vehicle and a purchase by Mr Chidiac of a Subaru Liberty motor vehicle (together, GrainCorp Transactions) (Issues 39 to 42); (i) Mr Carter's knowledge of the circumstances in which the funds were advanced by Orix to Mr Chidiac to facilitate the purchase of the Mazda 3 and Subaru Liberty motor vehicles (Issues 43 to 44); (j) whether Mr Carter made fraudulent representations to Chubb in connection with the renewal of the Policy (Issues 45 to 48); (k) whether Mr Carter fraudulently failed to disclose to Chubb the SRS arrangements, the Slush Fund arrangements and the GrainCorp Transactions (Issue 49); (l) whether Chubb was entitled to deny indemnity to Mr Carter under cl 7 of the Policy by reason of findings made that Mr Carter had made fraudulent representations and fraudulently failed to disclose matters to Chubb (Issue 50); (m) whether Chubb would have offered any policy to Orix if Mr Carter had disclosed to Chubb the SRS arrangements, the Slush Fund arrangements and the GrainCorp Transactions (Issue 51); (n) whether the claims made by Mr Carter for defence costs with respect to the Orix proceedings and the Criminal proceedings would be excluded by reason of cl 4.1 of the Policy (Issue 52); (o) whether the legal costs claimed by Mr Carter in these proceedings referrable for work done are claims that are covered by the Policy (if he was otherwise entitled to be indemnified under the Policy) and in what amount (Issues 53 to 54); and (p) whether any requirement to repay the Sums Advanced only arises if the exclusion under cl 4.1 of the Policy applies or whether the exclusion also operates where the insured is not entitled to indemnity for any other reason (Issue 55). 31 Chronologically, the events addressed in Issues 1 to 13 occurred after the events addressed in Issues 14 to 37 with respect to CCA and have therefore been addressed after those issues in these reasons. 32 Although the issues are discrete, the matters relevant to each issue at times substantially overlap. Many matters are equally relevant to establishing (a) the nature of the impugned conduct, (b) whether the impugned conduct could constitute the payment of a bribe or provision of an illegal inducement, and (c) Mr Carter's knowledge of the impugned conduct and whether it could constitute the payment of a bribe or the provision of an illegal inducement. Where necessary, matters might be repeated for particular emphasis but to the extent possible I have sought to limit any repetition of matters, in particular matters that are plainly relevant to questions of whether the impugned arrangements could constitute bribes or illegal inducements and Mr Carter's knowledge of whether they could. 33 The issues agreed between the parties used the description "slush fund" to refer to the alleged scheme or course of conduct in which payments of bribes and provision of illegal inducements were alleged to have been made to Mr Pereira from a fund maintained by Orix, that was referred to in contemporaneous documents by various names, including "slush fund", but more generally by the more neutral term "CCA Marketing Account". For the sake of clarity, the term "CCA Marketing Account" rather than "slush fund", is used to refer to the fund, except to the extent that different names are used in extracts from documents included in the reasons. Further, the parties interchangeably referred in their pleadings and submissions to "secret commissions", "secret benefits" as well as "illegal inducements". Again, for the sake of clarity except to the extent the reference is context specific, the term "illegal inducements" is used in the reasons.
A.5. Overview of Mr Carter's case 34 As submitted by Mr Carter, the fundamental issue for determination in the proceedings is whether Mr Carter had actual knowledge of illegal or dishonest activity that he failed to inform Orix's insurer of at the time that he completed the Proposal for the renewal of the Policy. 35 Mr Carter's closing written submissions included a 9 page submission entitled "Mr Carter's statement of critical facts and concepts". It provided a useful summary of the case that Mr Carter seeks to advance. Mr Carter's case is founded on the following critical propositions. 36 First, the manner in which the funds for the CCA Marketing Account were provided to Orix by Mr Pereira meant that Mr Pereira had apparent authority to give instructions for the distribution of the funds, even if those directions seemed to a third party observer to be for the personal benefit of Mr Pereira. 37 Second, given Mr Pereira had apparent authority to give such directions, Orix had no discretion to refuse them and therefore the question of alleged bribes or illegal inducements cannot arise. 38 Third, the evidence of Mr Carter's involvement in the impugned transactions is distorted by the emails he received from Mr Georgiou. Mr Georgiou would appear to have been deliberately seeking to implicate Mr Carter in those transactions. 39 Fourth, Chubb cannot contend that Mr Carter had actual knowledge that Mr Pereira was not authorised by CCA to direct payments from the CCA Marketing Account because Chubb has not adduced any direct evidence or pleaded such a claim. 40 Fifth, properly understood, Chubb's complaint is a criticism of Mr Carter's failure to take effective action in response to a "possible misuse" by Mr Pereira of his apparent authority to deal with the CCA Marketing Account. Such a complaint might give rise to a claim in negligence but no such claim has been pleaded by Chubb. 41 Sixth, there was simply no reason for Mr Carter to have risked his entire career and even liberty by participating in any fraud involving Mr Pereira in circumstances where he gained no direct or indirect personal benefit from the alleged dishonesty or illegal acts. 42 Seventh, the proposition that Mr Carter in approving the SRS invoices was deliberately approving fraudulent and fictitious invoices as some form of inducement to Mr Pereira is entirely illogical because at the time that the SRS invoices were paid Mr Carter understood that Mr Pereira was about to be removed from CCA and agreement on the terms of a fourth fleet flip had been finalised more than six months prior to the SRS payments being made. 43 Eighth, there is no evidence that Mr Carter had any actual knowledge of the extent of Mr Chidiac's authority to deal with the GrainCorp profit share account and Chubb has not adduced any evidence that Mr Chidiac did not have such authority. 44 For the reasons that follow, I have concluded that none of the critical propositions advanced by Mr Carter have substance or otherwise preclude Chubb from denying indemnity to Mr Carter and recovering the Sums Advanced. As I explain below, Mr Carter's various denials of his knowledge of the payment of bribes and provision of illegal inducements are implausible given the extent of his involvement in the impugned transactions as demonstrated by the contemporaneous documents and the inherent logic of events. There is little, if any, ambiguity in the emails passing between Mr Georgiou and Mr Carter concerning the impugned transactions both as to their content and their purpose in promoting the commercial interests of Orix in its commercial dealings with CCA. The contention that Mr Georgiou was seeking to deliberately implicate Mr Carter in the emails he sent to Mr Carter is fanciful. On no plausible view was Mr Carter a peripheral observer who did not have any real or substantive appreciation of the payment of bribes and provision of illegal inducements to Mr Pereira and Mr Chidiac. Further, it can readily be inferred from the nature of the payments made in response to the requests made by Mr Pereira that Mr Carter knew that the payments had not been authorised by CCA.
B.1. Orix 45 At all relevant times, Orix carried on a business specialising in the acquisition, financing and management of motor vehicles. On the "fleet" side of its business, its services included fleet management and leasing of passenger, light commercial and heavy commercial vehicles to small and large businesses, as well as vehicle rentals.
John Carter 46 Mr Carter was an employee of Orix from October 1986 until June 2015. Mr Carter was a director of Orix from March 2001 to June 2015, and was the Chief Executive Officer and Managing Director of Orix from 1 April 2005 until the termination of his employment in June 2015.
George Georgiou 47 Mr Georgiou was the General Manager for Fleet Services for Orix in the period from August 2005 until the termination of his employment in June 2015. From about 2002, Mr Georgiou oversaw Orix's commercial relationship with CCA. In the period 2003 to August 2005, Mr Georgiou had been the Corporate & Public Relations Director of Orix.
William McCulloch 48 Mr McCulloch was employed by Orix from February 1999 to June 2015. He was the National Operations Manager at Orix between April 2007 and March 2015. 49 Mr McCulloch was responsible for overseeing all departments of an operational nature, including the purchasing of vehicles, repairs and maintenance, disposing of vehicles (end of lease), revising lease pricing, and managing Orix's short term rental fleet.
Gary Dundas 50 Mr Dundas was the Group Financial Controller of Orix between 27 November 2006 and 20 July 2015. Mr Dundas was responsible for overseeing Orix's balance sheet, profit and loss reporting, setting budgets, forecasting profits and taxation compliance. Mr Dundas was also involved in reporting Orix's results to its parent company and its auditors.
Other Orix personnel 51 Narelle Manley worked on the CCA account exclusively, and had the day to day management of the account from 2002 or 2003 to March 2009 (except for a period of maternity leave between December 2006 and May 2007). 52 Kim Scott was a Relationship Manager of Orix who worked on the CCA account between March 2009 and December 2012. 53 Hayley Tunnicliff was a Relationship Executive of Orix who worked on the CCA account from approximately 2009. In July 2012 she was promoted to Senior Relationship Executive. In the period up to December 2012 she reported to Ms Scott. In December 2012, she took over all of Ms Scott's existing responsibilities on the CCA account, other than meetings with Ray Ward, a former procurement manager at CCA. 54 Christopher Briggs held various roles with Orix from 2000 to 2019. From 2005 to 2014, Mr Briggs held the title "General Manager Fleet Operations and New Zealand", and during this time, reported to Mr Carter. 55 Peter Forster is the company secretary of Orix. Mr Forster commenced employment with Orix in 1996, and reported directly to Mr Carter from 2007 until Mr Carter was suspended in April 2015. 56 David Lyons was the National Credit Accounts Manager at Orix from 2008. He did not have specific responsibilities relating to the CCA account, but oversaw the issuing of invoices, allocation of receipts and credit, and collection of invoices, including from the CCA account. 57 Phillip Davie was the National Legal and Compliance Manager at Orix from February 2009 to November 2011, before becoming the National Manager Credit and Legal in November 2011, and then the National Credit Manager in July 2015. 58 Kerri Ryan was Mr Carter's Executive Assistant. Ms Ryan was the only Executive Assistant at Orix and also performed work for other senior managers including Mr Georgiou. 59 Mark Goldstein is the Vehicle Remarketing Manager at Orix. He commenced employment with Orix in 1996. 60 Una Hughes commenced employment with Orix in November 1998, initially as an Accounts Payable Clerk. Ms Hughes then became the Accounts Payable Supervisor from 2005 or 2006, initially reporting to Mark Levy and Leanne Aitken before reporting to Mr Dundas until May 2015. 61 Greg Roberts commenced employment with Orix in 1997 and has worked in several different roles. Mr Roberts is responsible for managing various corporate business applications, including Orix's fleet management and leasing system known as "Willow". Prior to Mr Carter's suspension, Mr Roberts reported to Mr Briggs, who in turn reported to Mr Carter. 62 Raymond Beddie is the General Manager of Finance at Orix. Mr Beddie has held various positions with Orix since October 2000, including Group Management Accountant, Project Manager, Resources Manager, Infrastructure Manager, Fleet Accounting Manager and Group Financial Controller.
B.2. CCA 63 CCA was one of Orix's customers. In the period between March 1998 and June 2003, Orix supplied some vehicles to CCA but Orix was not its principal fleet provider. 64 Between 2011 and 2016, the CCA account was the second largest account for Orix in terms of exposure (amortised value of funded leases) and vehicle numbers on a Trans-Tasman basis.
Bryan Pereira 65 Mr Pereira was the Procurement Manager for CCA from 2003 until March 2015. Mr Pereira dealt with whoever of Ms Manley, Ms Scott or Ms Tunnicliff had the day-to-day management of the CCA account in that period on a daily basis. Mr Pereira also dealt with Mr Georgiou.
Bill Mossati 66 Mr Mossati was the National Manager, Capital Projects and Procurement of CCA. Mr Pereira reported to Mr Mossati.
Raymond (Ray) Ward 67 Prior to early 2002, Mr Ward was the Senior Purchasing Manager and responsible for the ongoing management of CCA's fleet contract with Orix. In early 2003, Mr Ward departed CCA and provided consulting services to Clintons Motor Group (Clintons). 68 Mr Ward was the relevant "introducer" for vehicles which Orix procured from Clintons to lease to CCA.
B.3. GrainCorp 69 GrainCorp was a fleet client of Orix since at least 2008. 70 Anthony (Tony) Chidiac was the Procurement Manager Procurement and Shared Services for GrainCorp.
B.4. Other 71 Gary Chua was an associate of Mr Pereira. Mr Chua was not employed by Orix, CCA or GrainCorp. 72 Cyril Rodrigo Jr was an associate of Mr Pereira based in Singapore. Mr Rodrigo was not employed by Orix, CCA or GrainCorp.
C.1. Overview 73 Each party relied upon evidence of lay and expert witnesses. 74 In addition to his own evidence, Mr Carter relied upon the lay evidence of Mr Briggs and Mr Lyons. 75 Chubb relied upon the lay evidence of two of its former employees, Christopher Madell and Christopher Brown. 76 Chubb also subpoenaed the following current and former employees of Orix to give evidence: Mr Dundas, Mr McCulloch, Ms Manley, Ms Ryan, Ms Hughes, Ms Scott, Ms Tunnicliff, Mr Davie, Mr Forster, Mr Roberts, Mr Beddie, Mr Goldstein and Timothy Clarke.
C.2. The evidence of Mr Carter 77 The critical issue in these proceedings is the extent of Mr Carter's actual knowledge, at the time he signed the Proposal, of the alleged bribes or provision of illegal inducements, the likelihood of claims being made against him with respect to those matters and whether those matters might give rise to a claim under the Policy. 78 Mr Carter swore three affidavits in the proceedings and was extensively cross examined over four and a half hearing days. He found the exercise confronting and all too often adopted an adversarial approach to his cross examiner. I accept that the elapse of time since the events he was being cross examined on may well have made it difficult for him to distinguish between recollection and reconstruction, particularly when confronted with allegations of actual knowledge of alleged bribery or illegal inducements of procurement managers of customers of Orix. Nevertheless, it was clear that much of his evidence was informed by a keen appreciation of the case that had been advanced against him rather than genuine recollection. This appreciation was particularly evident at the conclusion of his cross examination when he was being challenged on his understanding of whether matters might give rise to a claim against him and whether claims in respect of such matters might give rise to a claim under the Policy. 79 The adversarial and at times evasive approach adopted by Mr Carter in the course of his cross examination was exemplified in the following exchange about his understanding of the use of the word "penguin", informed no doubt by his knowledge that his cross examiner would at some stage take him to an email that he received from Mr Georgiou in February 2013 with the heading "Another penguin caught in our nets !!": MR JONES: Thank you. Now, Mr Carter, at the time that you worked at ORIX, did you ever hear the word "penguin" used to describe a person?---Yes. And did you ever read the word "penguin" being used to describe a person?---Sorry, what was that? Did you ever read the word "penguin" being used to describe a person?---I can't recall that. No. Have you ever used the word "penguin" to describe someone yourself?---Yes. All right. Are you able to tell his Honour what you understood, if anything, the word "penguin" may have meant if used to describe a person?---My - I described a penguin is that, if anyone was - got any - was invited to a lunch or anything, I would regard them - I would say that everyone is a penguin. Would you agree that that is someone - - - HIS HONOUR: So, sorry, could you - I don't follow that. So, if someone was invited to a lunch, they were a penguin?---Yes. I would say anyone who was taken a benefit of anything, if you invite someone to a lunch or you - or anything there, a function - - - You mean in a business context?---Yes. You don't ask penguins to lunch at home?---No. All right. MR JONES: And what you're saying there, is it, that that is - that a person that accepts a benefit that they have no entitlement to?---No. You agree with that?---No, I don't. So when someone comes to a business lunch, you say that they have an entitlement to go to that business lunch?---Yes. I see. And do you say you had that understanding in 2013/2014?---Yes. 80 Much of Mr Carter's affidavit evidence and evidence in cross examination was directed at seeking to refute or otherwise put in context email communications that, at least on their face, were starkly inconsistent with his professed denials of any knowledge of bribery or illegal inducements. 81 Mr Carter sought to address these emails by claiming that he had no recollection of reading them, denied reading them, denied or did not recall reading particular parts of them, read but did not believe their contents or did not understand the potential significance of them. He claimed that as a busy chief executive officer of a large company he was "time poor" and had a practice of not opening all emails and for emails that he opened he would glance at them and only read the important parts closely. He also stated that he expected senior executives to speak to him directly about significant matters that required his attention rather than sending him emails. 82 Mr Carter also submits that admissions he made against interest and concessions that he made in cross examination demonstrated that his denials of knowledge could be accepted. I do not accept that the alleged admissions against interest or concessions rose above concessions that almost incontrovertibly arose from contemporaneous documents, the objective logic of events or otherwise supported the case that Mr Carter was seeking to advance in the proceedings. 83 I accept that it was likely that Mr Carter was not able to read all emails in detail that were sent to him and that senior executives would seek to speak to him directly, rather than sending an email, about significant matters requiring his attention. I do not accept, however, given the extent of the emails that he exchanged with Mr Georgiou about Mr Pereira's requests for the disbursement of funds out of accounts held by Orix and the implementation of the SRS arrangements that it is plausible that he did not read and understand the significance of emails that he received from Mr Georgiou on these issues. 84 Ultimately, however, the question of whether it was more probable than not, that Mr Carter opened an email and read and understood its significance, rather than simply glancing at the email, falls to be determined by the identity of the sender, the email's objective content, the context in which it was sent and any subsequent response by Mr Carter. It is those matters, not generalised claims made by Mr Carter many years after emails were received that he did not read them, did not understand their potential implications or did not believe them, that I found to be more probative. 85 In giving limited weight or rejecting Mr Carter's denials of knowledge I do not make any finding that Mr Carter has deliberately given false evidence. Such a finding should only be made, as Deane J observed in Smith v New South Wales Bar Association (No 2) (1992) 176 CLR 256; [1992] HCA 36 at 271, when it is "truly necessary for the purpose of disposing of the particular case". Here the contemporaneous emails sent and received by Mr Carter provide a compelling, almost inescapable, basis from which Mr Carter's actual knowledge of alleged bribery or illegal inducements of procurement managers of customers of Orix can readily be inferred, notwithstanding his testimonial denials. Mr Carter's denials have to be carefully scrutinised against the inherent logic of events given the risk that they were self-serving and unreliable because they were advanced with the benefit of hindsight and under significant personal pressure given the seriousness of the case advanced by Chubb and the adverse financial consequences for Mr Carter if the denials were not accepted.
C.3. Mr Carter's lay witnesses 86 Mr Carter relied on evidence from Mr Briggs and Mr Lyons, neither of whom was cross examined.
Christopher Briggs 87 Mr Briggs gave evidence on the relationship between CCA and Orix, the introducer fees payable to Mr Ward, and the accounts maintained by Orix with respect to CCA variously referred to as the slush fund, the CCA profit share account and the accrual account. 88 Mr Briggs also responded to the evidence of (a) Mr McCulloch, with respect to the purchase of the Mercedes for Mr Pereira, the 2013 fleet flip (known as the "Fourth Fleet Flip"), and the introducer fees, and (b) Mr Roberts, with respect to the CCA inspection fees.
David Lyons 89 Mr Lyons gave evidence on (a) the CCA account, (b) dealings with Mr Pereira, (c) meetings of the "Collections Committee", (d) the various CCA accounts maintained by Orix, and (e) a company search for Systems Management Services Pty Ltd, and later for SRS, that Mr Carter requested.
C.4.1. The evidence of Mr Dundas 90 Mr Dundas was subpoenaed to give evidence and gave evidence on (a) Orix's processes for paying and verifying payments made to external parties, (b) Orix's processes for reimbursing expenses incurred personally by employees, (c) the CCA account and accounts related to Mr Ward, (d) the introducer fees paid to an entity related to Mr Ward and other payments made to SRS, (e) the various payments including with respect to the purchase of the Mercedes for Mr Pereira, (f) the Fourth Fleet Flip, and (g) internal Orix communications regarding GrainCorp. 91 Mr Dundas was cross examined. He answered questions directly, without hesitation and did not act as an advocate. He made appropriate concessions, particularly when confronted with contemporaneous documents that were inconsistent with his evidence. In resolving factual issues where the evidence of Mr Dundas and Mr Carter conflicted, I accepted the evidence of Mr Dundas except to the extent that it was not consistent with the apparent logic of events.
Kim Scott 92 Ms Scott was subpoenaed to give evidence. In her affidavit she gave evidence as to (a) her role and specific responsibilities in managing the CCA Marketing Account including payment of the introducer fee, managing the "Ray Ward R1107766 Account", (b) changes to the "Ray Ward R1107766 Account" and (c) her involvement with the accounts after 2012. 93 Ms Scott was excused from attending to give evidence on the ground that she had pressing personal family matters and Chubb had therefore indicated it was not going to call on her subpoena to give evidence. By consent, various paragraphs of her affidavit were admitted into evidence notwithstanding that she was not available for cross examination.
William McCulloch 94 Mr McCulloch was subpoenaed to give evidence. 95 Mr McCulloch affirmed two affidavits in the proceedings. He gave evidence of (a) vehicle inspection services conducted by Pickles Auctions (Pickles), (b) communications regarding pre-end of lease inspections, (c) Orix's leasing arrangements, including disposal of vehicles and residual values, (d) fleet flips conducted by CCA and Orix between 2003 and 2015 and early termination fees, (e) the closure of the "Ray Ward AR Account" in 2012, (f) monitoring of the accrual account, and (g) the "GrainCorp Profit Share Account" between 2012 and 2015. 96 Mr McCulloch was excused from attending to give evidence on the ground that he was the subject of a tragic family event in the days preceding the hearing, and in light of those events, Chubb indicated it was not going to call on his subpoena to give evidence. By consent, various paragraphs of his affidavits were admitted into evidence notwithstanding that he was not available for cross examination.
Christopher Brown 97 From October 2010, Mr Brown was employed by Chubb as a Senior Finance Lines Underwriter. Mr Brown was responsible for new financial lines business and had a book of renewals for existing insureds. In March 2016, Mr Brown was promoted to New South Wales Financial Lines Distribution Manager, Independent Broker Unit. 98 Mr Brown was subpoenaed to give evidence, and gave evidence on (a) his role and responsibilities as a Senior Financial Lines Underwriter, (b) his underwriting process for directors and officers financial institutions business, (c) notification of claims and circumstances, and (d) the policy provided to Orix and the notification of a possible claim on 10 April 2015. 99 Mr Brown was cross examined. Mr Brown answered questions put to him directly and without hesitation. Although much of his evidence was directed at what he would have done had certain disclosures been made to him and therefore by its nature was hypothetical and subject to hindsight bias, I generally accepted it because it was consistent with the apparent logic of events.
Christopher Madell 100 Mr Madell commenced employment with Chubb in March 2013, as the New South Wales Financial Lines Manager and Australia and New Zealand Head of Financial Institutions. From March 2016 to October 2017, Mr Madell was the Global Broking Unit Manager. 101 Mr Madell gave evidence on (a) his responsibilities as Australia and New Zealand Head of Financial Institutions, (b) his underwriting process for directors and officers financial institutions business, (c) his process for claims and circumstances notified, (d) Orix's policy and the notification of a possible claim on 10 April 2015, and (e) his awareness of the allegations and alleged lack of disclosure. 102 Mr Madell was cross examined. Mr Madell also answered questions put to him directly and without hesitation. Again, although much of his evidence was directed at what he would have done had certain disclosures been made to him and therefore by its nature was hypothetical and subject to hindsight bias, I generally accepted it because it was consistent with the apparent logic of events.
C.4.4. Other lay witnesses 103 As noted above, Chubb subpoenaed several current and former employees of Orix to give evidence. Some were cross examined but their evidence was largely uncontroversial. I accept that to the extent they were cross examined each gave evidence to the best of their recollection and answered questions put to them directly and without prevarication. It is not necessary to make any further comments about their evidence at this stage.
C.5. The absence of Mr Georgiou and Mr Pereira 104 Neither Mr Georgiou nor Mr Pereira gave evidence. Both were central characters in the alleged bribery and provision of fraudulent inducements. The absence of Mr Pereira was not the subject of any Jones v Dunkel submissions by either Mr Carter or Chubb. 105 As noted above, Mr Georgiou had been the second defendant in the Orix proceedings but the proceedings against him were dismissed, by consent, on 18 January 2023. 106 The candour, familiarity and language in the contemporaneous emails passing between Mr Carter and Mr Georgiou demonstrate the extent of the close relationship between them. Notwithstanding the closeness of that relationship, Chubb did not invite the Court to draw any Jones v Dunkel inference against Mr Carter for his decision not to seek to rely on any evidence of Mr Georgiou. 107 Mr Carter submits that Jones v Dunkel inferences should be drawn against Chubb because of its failure to provide any explanation for why it chose not to call on the subpoena it had issued to Mr Georgiou to give evidence. 108 I do not accept that any Jones v Dunkel inferences should be drawn against Chubb with respect to Mr Georgiou. Mr Georgiou had filed affidavit evidence in the proceedings as a defendant sued by Orix but he ceased to be a party after the proceedings against him were dismissed. The mere issue of a subpoena to Mr Georgiou, a former defendant, cannot give rise to findings that it would have been natural for Chubb to have called Mr Georgiou, he was in Chubb's camp, or he could be expected to be available to give evidence for Chubb: Payne v Parker [1976] 1 NSWLR 191 at 201-202 (Glass JA); Hung v Warner, in the matter of Bellpac Pty Ltd (Receivers and Managers Appointed) (in liq) [2013] FCAFC 48 at [55]-[56] (Jacobson, Gordon and Robertson JJ); Secured Lending 1 Pty Ltd v Mahmassani [2021] NSWSC 811 at [60] (Davies J). 109 Moreover, I would in any event decline to draw any Jones v Dunkel inference with respect to the absence of Mr Georgiou given the following unequivocal statement made by senior counsel for Mr Carter in his oral opening submissions: I think it's fair to say that Mr Georgio[u] is not in anybody's camp and I'm not going to claim that he is in Chubb's camp. He's certainly not in our camp.
C.6.1. Overview 110 Mr Carter relied on the expert evidence of Stephen Dubedat, Dawna Wright and Rodney McKemmish. Chubb relied upon the expert evidence of John Temple-Cole and Owen Bourke. 111 Ultimately, with the exception of the evidence given by Mr Dubedat which is addressed at [464] to [465] below, there was no material controversy raised by the expert evidence.
C.6.2. Forensic expert evidence 112 Mr Dubedat is a forensic document examiner. Mr Dubedat gave evidence as to the authenticity of signatures on three expense reimbursement claim forms purported to have been signed by Mr Carter. Mr Dubedat concluded, based on an examination of 15 sample signatures provided by Mr Carter, that one of the signatures was probably, or very probably genuine, one of the signatures was "probably not genuine", and the third signature was "not genuine".
C.6.3. Accounting expert evidence 113 Ms Wright is a qualified chartered accountant and forensic accounting specialist. Ms Wright gave evidence on: (a) the source of credits recorded in certain accounts and ledgers of Orix from the date each ledger was opened until March 2015; (b) how those credits were recorded in Orix's fleet management system, Willow, and whether such treatment was in accordance with accepted accounting standards; (c) how debits from the specified accounts were recorded in Willow and whether such treatment was in accordance with accepted accounting standards; (d) in particular, how "introducer fees" and "inspection fees" paid or payable in relation to the CCA account were accounted for in Orix's books and records from 2003 to 2015; and (e) what the total level of income received by Orix from CCA was during the period from March 2003 to June 2016. 114 Mr Temple-Cole is an experienced forensic accounting specialist. Mr Temple-Cole gave evidence on: (a) whether records provided substantiated, from an accounting perspective: (i) payments listed as "Introducer Fees"; (ii) payments listed as "Management Service Inspection Fees"; (iii) payments listed on the "Accounts Receivable account: Ray Ward AR R1107766" and "McCulloch Spreadsheet"; (iv) a payment described as "Payment to Gary Chua"; and (v) payments described as "GrainCorp Transactions involving Tony Chidiac"; and (b) identifying, explaining and describing, based on the records provided, the accounting processes by which the fees identified above were entered and recorded in Orix's internal systems. 115 Both Ms Wright and Mr Temple-Cole were briefly cross examined.
C.6.4. Email time stamp and metadata expert evidence 116 Mr Bourke is a partner of Forensic and Technology Services at Clayton Utz. Mr Bourke gave evidence on the various steps taken to identify, categorise and resolve time stamp and metadata issues in various emails. 117 Mr McKemmish is a qualified digital and cyber forensic specialist. Mr McKemmish responds to evidence given by Mr Bourke in relation to ascertaining the correct dates and times of email communications produced in the proceeding. 118 A joint expert report was prepared by Mr McKemmish and Mr Bourke. Mr McKemmish and Mr Bourke agreed that (a) email communications examined contained a mixture of emails that had reliable date and time stamps as well as emails that had anomalous dates and times, (b) the anomalous dates and times were a result of the migration of emails from a Group Wise email server to a Microsoft Exchange server, (c) there are alternative sources with accurate date and time stamps, such as the message header, (d) emails were backed up regularly from the Group Wise server using a dedicated backup software, (e) the dedicated backup software contains a contemporaneous record of email dates and times as at the time of backup and (f) the approaches taken by both Mr Bourke and Mr McKemmish have resulted in identical date and time properties for the emails examined, or within a small variance of seconds. 119 Neither Mr Bourke nor Mr McKemmish was cross examined.
D.1. Overview 120 Chubb's core contention is that Orix failed to disclose the Slush Fund arrangements, GrainCorp Transactions and SRS arrangements at the time it submitted the Proposal, which affected the presentation of risk to Chubb. Chubb contends, as pleaded, that had those matters been disclosed it would have brought to Chubb's attention that officers of Orix were facilitating the payment of bribes or provision of illegal inducements to senior employees of two of Orix's customers, CCA and GrainCorp. 121 Mr Carter's core contention with respect to the Slush Fund arrangements is that Orix held the funds in the various iterations of the CCA Marketing Account beneficially for CCA on the condition that they be released in accordance with directions given by Mr Pereira. Mr Carter contends that Mr Pereira had the apparent authority of CCA to give such directions. Mr Carter therefore submits that Orix was not providing Mr Pereira with any benefit and therefore the disbursement of funds could not be a bribe as the funds were CCA's money and Orix had no discretion "to refuse to deliver up" to Mr Pereira the funds he had placed with Orix. 122 These core contentions raise for consideration, (a) the drawing of inferences as to Mr Carter's knowledge, (b) in what circumstances can a party rely on the doctrine of apparent authority, (c) what constitutes a bribe or provision of an illegal inducement, and (d) how might the payment of a bribe or provision of an illegal inducement give rise to a claim under a directors and officers liability insurance policy.
D.2. Drawing of inferences 123 The principles regarding the drawing of inferences are well established. For present purposes the following summary of those principles is sufficient. 124 First, any inference must be based on facts established by admissible evidence and be drawn by a process of reasoning, not speculation or guesswork: Masters Home Improvement Australia Pty Ltd v North East Solution Pty Ltd (2017) 372 ALR 440; [2017] VSCA 88 at [101] (Santamaria, Ferguson and Kaye JJA). 125 Second, where direct proof is not available to a party seeking to establish that an inference ought to be drawn it must demonstrate that that inference is the more probable one. Its task is to demonstrate that on the balance of probabilities the inference for which it contends has a greater degree of likelihood than any competing inference: Holloway v McFeeters (1956) 94 CLR 470 at 480-481 (Williams, Webb and Taylor JJ). 126 Third, in determining whether an inference is to be drawn as a matter of probability, the Court is not required to consider each primary fact, established by the evidence, in isolation. Rather, the totality of those facts are to be considered together, giving effect to their united and combined force: Masters Home Improvement at [101].
D.3. Apparent Authority 127 The principles concerning whether an agent has the "apparent" or "ostensible" authority of a principal to engage in transactions on behalf of the principal are well established. The principles can relevantly be distilled as follows. 128 First, the onus of establishing that an agent had ostensible authority to act on behalf of a principal is on the party seeking to establish the existence of the authority: Lysaght Bros & Co Ltd v Falk (1905) 2 CLR 421 at 428 (Griffiths CJ). 129 Second, apparent or ostensible authority is a legal relationship established between a principal and a contractor created by a representation that is made by the principal to the contractor that an agent has the authority to enter into a contract of a kind within the scope of the "apparent" authority that operates as an estoppel preventing the principal from asserting that they were not bound by the contract: Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503 (Diplock LJ). 130 Third, the representation must come from the principal, not the agent. The conduct of the agent is not irrelevant to the representation, but the principal's conduct must be the source of the representation: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 at [36] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ). 131 Fourth, the representation by the principal giving rise to the apparent authority may be conveyed in a variety of ways of which the most common is a representation by conduct, namely by permitting an agent to act in a particular manner in the conduct of the principal's business: Freeman & Lockyer at 503. 132 Fifth, a party dealing with a company cannot rely on any doctrine of apparent authority if they are put on inquiry as to whether the authority exists by reason of the nature of the transaction or other matters and no further inquiry is made or the principal fails to satisfy the inquiry: Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 154-155 (Mason CJ), 180-182 (Brennan J), 212 (Gaudron J). 133 Sixth, a party cannot rely on the doctrine of apparent authority if they know that the agent of the principal is acting in their own interests and not for the benefit of their principal: Lysaght Bros at 429-431; Combulk Pty Ltd v TNT Management Pty Ltd (1993) 41 FCR 59 at 66 (Neaves, Beaumont and Burchett JJ); AL Underwood Ltd v Bank of Liverpool [1924] 1 KB 775 at 791-792 (Scrutton LJ).
D.4. Bribery 134 Bribery can be the basis of a civil claim brought by a principal against the agent being bribed, or a criminal offence. 135 In Industries & General Mortgage Company Ltd v Lewis [1949] 2 All ER 573, Slade J at 575-576 defined the meaning of bribe in the context of a civil claim as the payment of a secret commission, which contains three elements: …. (i) that the person making the payment makes it to the agent of the other person with whom he is dealing; (ii) that he makes it to that person knowing that the person is acting as the agent of the other person with whom he is dealing; and (iii) that he fails to disclose to the other person with whom he is dealing that he has made that payment to the person whom he knows to be the other person's agent. Those three are the only elements necessary to constitute the payment of a secret commission or bribe for civil purposes. I emphasise "civil purposes" because the Prevention of Corruption Act, 1906, s 1(1), introduced the adverb "corruptly", and, except in the case provided for in s 2 of the amending Act of 1916, the onus is put on the prosecution of showing that the payment has been made corruptly. I hold that proof of corruptness or corrupt motive is unnecessary in a civil action and my authority is the decision of the Court of Appeal in Hovenden and Sons v Milhoff where the plaintiffs carried on business as hairdressers' sundrymen and the defendant was a member of a firm of wholesale tobacconists. 136 The Full Court of this Court cited the definition of bribe provided by Slade J in Lewis with approval, as one of "the better known descriptions of bribes and secret commissions": Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 at [190] (Finn, Stone and Perram JJ). Secret commissions need not necessarily take the form of a payment of money and could be in other forms such as a gift of shares: Grimaldi at [191] citing Eden v Risdale's Railway Lamp & Lighting Co (1889) 23 QBD 368. 137 The Full Court in Grimaldi also cited at [192] with approval the following observations of Lawrence Collins J in Daraydan Holdings Ltd v Solland International Ltd [2005] Ch 119 at [53]: In proceedings against the payer of the bribe there is no need for the principal to prove (a) that the payer of the bribe acted with a corrupt motive; (b) that the agent's mind was actually affected by the bribe; (c) that the payer knew or suspected that the agent would conceal the payment from the principal; (d) that the principal suffered any loss or that the transaction was in some way unfair; the law is intended to operate as a deterrent against the giving of bribes. 138 After citing the above passages from Lewis and Daraydan, the Full Court in Grimaldi then concluded at [193]: Finally, as both of the above quotations make plain, the payer of a secret commission to a person known to be acting in the matter on behalf of another, is taken to have assumed the risk of the payee having not obtained his or her principal's informed consent to receipt of the payment: Grant v Gold Exploration and Development Syndicate [1900] 1 QB 233 at 249. Knowing that the payee is acting on another's behalf is sufficient of itself to attract liability, unless full disclosure is made by the payer or "agent" and consent is given by the principal to the payment. Importantly, the payer's liability does not turn on his or her knowing or suspecting that the agent has not received the principal's informed consent to the payment: Daraydan Holdings at [53]; Bartram & Sons Ltd (1904) 90 LT 357 at 359-60. 139 Mr Carter submits that the characteristics of a bribe are definitively stated in Paul Finn, Fiduciary Obligations (The Federation Press, 2016) at [496] in the following terms: i. The payment of money or money's worth to a person in a fiduciary position; ii. In circumstances in which the payment could possibly induce the fiduciary, as fiduciary, to show favour towards or to exert influence on behalf of, the donor in the donor's dealings with the fiduciary or with the fiduciary's beneficiary; and iii. The payment being undisclosed to the beneficiary. 140 Mr Carter seeks to rely on the third stated characteristic to contend that Chubb must establish that the alleged bribes were not disclosed to CCA. The profound difficulty with that contention is that this description of the characteristics of a bribe must be read subject to the Full Court's statements in Grimaldi that (a) the payer of a bribe is taken to have assumed the risk that the agent (as payee) had not obtained their principal's informed consent and (b) the liability of a payer does not turn on them knowing or suspecting that the agent (as payee) had not obtained their principal's consent. A difficulty compounded by the fact that Finn J was the presiding Judge in Grimaldi and in a footnote to the paragraph that Mr Carter seeks rely upon in Fiduciary Obligations, the two best known definitions of a bribe in the context of a principal and agent relationship, are stated to be that provided by Slade J in Lewis at 575 and by Romer LJ in Hovendon & Sons v Milhoff (1900) 83 L.T. 41 at 43. 141 Moreover, it is stated in Fiduciary Obligations (at [495]), quoting from the decision of Romer LJ in Hovendon at 43: Thus, once it is established that a bribe has been given - … the court will not inquire into the donor's motive in giving the bribe, now allow evidence to be gone into as to the motive. Secondly the courts will presume in favour of the [beneficiary] and as against the briber and the [fiduciary] bribed, that the [fiduciary] was influenced by the bribe; and this presumption is irrebuttable. 142 Bribery is a criminal offence by reason of s 249B of the Crimes Act. Section 249B relevantly states: (1) If any agent corruptly receives or solicits (or corruptly agrees to receive or solicit) from another person for the agent or for anyone else any benefit - (a) as an inducement or reward for or otherwise on account of - (i) doing or not doing something, or having done or not having done something, or (ii) showing or not showing, or having shown or not having shown, favour or disfavour to any person, in relation to the affairs or business of the agent's principal, or (b) the receipt of any expectation of which would in any way tend to influence the agent to show, or not to show, favour or disfavour to any person in relation to the affairs or business of the agent's principal, the agent is liable to imprisonment for seven years. (2) If any person corruptly gives or offers to give to any agent, or to any other person with the consent or at the request of any agent, any benefit - (a) as an inducement or reward for or otherwise on account of the agent's - (i) doing or not doing something, or having done or not having done something, or (ii) showing or not showing, or having shown or not having shown, favour or disfavour to any person, in relation to the affairs or business of the agent's principal, or (b) the receipt or any expectation of which would in any way tend to influence the agent to show, or not to show, favour or disfavour to any person in relation to the affairs or business of the agent's principal, the firstmentioned person is liable to imprisonment for 7 years. (3) For the purposes of subsection (1), where a benefit is received or solicited by anyone with the consent or at the request of an agent, the agent shall be deemed to have received or solicited the benefit. 143 Section 249B(2) of the Crimes Act is the key provision relevant to this case. Section 249B(2) and s 249B(1) are symmetrical in operation. Section 249B(2) creates the offence for the provision of an illegitimate benefit by any person to the agent of a principal. In contrast, s 249B(1) creates the offence for the receipt of an illegitimate benefit by an agent from another person. 144 As explained in Mehajer v R [2014] NSWCCA 167 at [67] (Bathurst CJ, Johnson and Hulme JJ agreeing), in order to constitute a criminal offence pursuant to s 249B(2)(b) (where the accused is the payer or provider of the benefit to the agent) it would be necessary for the Crown to prove: (a) the payee was the agent of a principal; (b) the accused gave or offered to give to the agent a benefit; (c) the given or offered benefit was one which, objectively, would tend to influence the agent to show favour or disfavour to any person in relation to the affairs or business of the agent's principal; (d) the given or offered benefit was made with the payer intending, knowing or believing that it would tend to influence the agent to show favour or disfavour to any person in relation to the affairs or business of the agent's principal; and (e) the payment was corrupt according to normally received standards of conduct. 145 For the last of these elements, a payment to an agent without the knowledge or consent of the principal and having the purpose described on s 249B(2)(a) (the matter in (c) above) or the tendency to have the effect described in s 249B(2)(b) (the matter in (d) above) would generally satisfy the "corrupt" element: Mehajer at [63]. 146 In Mehajer, Bathurst CJ referred to the distinction between s 249B(1) and s 249B(2) in the following terms at [68]-[70]: The differences in the elements of each offence can be summarised as follows. For a benefit or offer of a benefit to constitute an offence under s 249B(2)(a)(i) of the Act, it is necessary to establish that the donor of the benefit intended the benefit or offer as an inducement to the agent to do or refrain from doing a particular act in relation to the principal's affairs (or as a reward for doing or refraining from doing such an act). By contrast, s 249B(2)(a)(ii) of the Act does not require the payment to be an inducement or reward for doing or not doing a particular act. Rather it requires that the payment was intended by the donor as an inducement or reward for showing or not showing favour to a particular person in relation to the affairs of the principal. The difference between the elements of s 249B(2)(a)(i) and (ii) of the Act with s 249B(2)(b) is that, for the purposes of the latter section, the donor, whilst not offering the payment or benefit as an inducement or reward, must make the payment or offer to make the payment knowing, believing or intending that the payment was one which would tend to influence the agent to show favour or disfavour in relation to the affairs or business of the principal of the agent. 147 As stated above, s 2489B(1) provides reflective provisions directed at the recipient agent of the benefit. The elements of the criminal offence (where the accused is the agent) are: (a) the accused was the agent of a principal; (b) the accused received or solicited receipt from another person a benefit for the accused or another person; (c) the received benefit or expectation would, objectively, tend to influence the accused to show favour or disfavour to any person in relation to the affairs or business of the accused's principal; and (d) the payment was corrupt according to normally received standards of conduct.
D.5. Potential directors and officers liability insurance claims
D.5.1. Overview 148 For the purposes of a directors and officers liability policy, there are principally three types of claims identified by the parties relevant to these proceedings that could fall within coverage where a person is a director or officer of a company engaged in the payment of a bribe or provision of an illegal inducement: (a) a claim by the Australian Securities and Investments Commission (ASIC) for breaches of statutory duties under the Corporations Act; (b) a claim by a corporation for breaches of statutory and equitable duties owed to it causing it harm; and (c) investigations by ASIC into the conduct. 149 The critical issue in these proceedings is the extent of Mr Carter's knowledge, at the time he signed the Proposal, of matters which may give rise to the above claims, and the failure to disclose those matters to Chubb.
D.5.2. Breaches of statutory duties 150 The statutory duties owed by a director or officer of a corporation include the duties to act with care and diligence in s 180(1) of the Corporations Act, duties to act in good faith and for a proper purpose in s 181(1) of the Corporations Act, and duties not to improperly use their position to gain an advantage for themselves or cause harm to the corporation in s 182 of the Corporations Act. 151 The statutory duties imposed on directors pursuant to s 180(1) reflect the common law and equitable duties owed by a director to their corporation: Re HIH Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler (2002) 41 ACSR 72; [2002] NSWSC 171 at [372] (Santow J). The principles relevant to each of the statutory directors' duties in s 180(1), s 181(1) and s 182 of the Corporations Act and at common law and in equity are well established and were not in dispute. For present purposes, it is not necessary to make any further reference to them. The relevant question here is whether Mr Carter knew at the time he signed the Proposal of matters that might give rise to a claim that he breached his duties to Orix, not whether he had breached those duties.
D.5.3. Related accessorial responsibility for conduct 152 There are three sources of liability as an accessory for a party who is not a principal contravener with respect to civil and criminal actions for bribery. 153 First, in respect of the criminal offence of bribery, pursuant to s 249F of the Crimes Act, a person who aids, abets, counsels, procures, solicits or incites the commission of an offence under Pt 4A of the Crimes Act, in which s 249B is located, is also guilty of an offence. Such an action would be brought by the Crown, as it enforces the Crimes Act. 154 Second, s 79 of the Corporations Act provides: A person is involved in a contravention if, and only if, the person: (a) has aided, abetted, counselled or procured the contravention; or (b) has induced, whether by threats or promises or otherwise, the contravention; or (c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect the contravention. 155 Third, equity also invites responsibility for a fiduciary breach upon a non-fiduciary where the non-fiduciary assists, that is, participates without inducing or procuring a dishonest and fraudulent design on the part of the fiduciary: Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 at [78] (Leeming JA, Barrett and Gleeson JJA agreeing).
D.5.4. Exposure to investigations 156 Prior to commencing proceedings for contraventions of the Corporations Act or prosecutions under the Crimes Act, the relevant authorities typically conduct broad ranging investigations. Investigation powers are generally engaged when a relevant authority has reason to suspect that a person or persons may have committed a contravention or offence, including the facilitation of or involvement in any payment of bribes or the provision of illegal inducements. Further, investigations are commonly not limited to enquiry with the person of interest, but are commonly fact gathering exercises that also involve interviews and the production of documents from persons that may not be the central focus of the investigation.
E.1. Introduction 157 As explained above, the description "CCA Marketing Account" was used from time to time in contemporaneous documents and by parties in their submissions to refer to the "slush fund" that Chubb contends was utilised by Mr Pereira for his own purposes including as a mechanism to make it appear to CCA that he had extracted significant concessions from Orix. The latter use was represented by Mr Pereira to Orix, and understood by Orix, as making "Orix look good" and thereby favour Orix in its commercial negotiations with CCA, in particular, in competing with Toyota Financial Services.
E.1.1. CCA Fleet Agreement and the First Fleet Flip 158 As noted above, CCA was a major client of Orix. The first fleet agreement with Orix was dated 13 March 1998 (CCA Fleet Agreement). 159 The CCA Fleet Agreement included "Standard Conditions" that: (a) incorporated into the CCA Fleet Agreement references to the types of services provided by Orix, including the Fleet Lease (described in the First Schedule) and Fleet Service and Fleet Management (described in the Second Schedule); (b) provided that CCA could lease vehicles from Orix by: (i) requesting Orix to provide a quotation for the lease; and (ii) delivering a Quotation and Order Form in relation to the vehicle, which set out the applicable rates; (c) provided that the term over which each lease was provided, the chargeable rate (which for the Fleet Lease was charged as a "Monthly Charge") and the other integers relevant to ascertaining the commercial outcomes of the lease were all defined by reference to values recorded in the relevant Quotation and Order Form; (d) included cl 12.8 which provided as follows: [CCA] acknowledges that persons may from time to time be introduced to ORIX by a broker, agent, dealer or other person and in such circumstances ORIX may pay commission, fees or other remuneration to such person. If a Lease results from any such introduction, [CCA] consents to the payment of ORIX of commission fees or other remuneration to such person and acknowledges that ORIX may have taken such payment into account in arriving at the total rent payable under the relevant Lease. (e) did not contain an equivalent to cl 12.8 where: (i) the recipient of payment was not a broker, agent, dealer or other person providing an introduction to Orix but an employee of CCA; or (ii) CCA consented upfront to the use of CCA's own money by Orix to make the payment; and (f) did not contain, as found in other fleet agreements with customers such as GrainCorp, any provision for "profit sharing" (that is, where a profit was realised upon the disposal of vehicles leased by the customer, that profit would be shared equally by Orix and the customer). 160 The quotation process was central to the contractual process and the financial returns that Orix could expect from its commercial arrangements with CCA. The Fleet Agreement and the Standard Conditions did not identify the amounts to be charged by Orix to CCA, or the basis upon which they would be charged. For the fleet leases, that was to be determined through the provision of quotations by Orix to CCA. 161 Orix had a system for authorising the payment of third-party supplier invoices for a fleet expense, which required the relevant invoice to be signed and dated by the relevant person in Fleet Leasing who approved the invoice for payment. 162 Prior to 2003, CCA procured a large proportion of its vehicles from fleet providers other than Orix, including Toyota Financial Services. 163 In March 2003, Mr Georgiou set up a lunch with Mr Pereira, to "throw… [Orix's] hat in the ring for ALL [of CCA's] business". 164 By June 2003, Mr Georgiou confirmed that Orix had "won the Toyota cars from [Toyota Financial Services] for Coke". 165 The replacement of existing vehicles leased from Toyota Financial Services, with Orix vehicles, began in June 2003, and was known as the "First Fleet Flip". Orix procured vehicles from Clintons to lease to CCA.
E.1.2. The origin of the introducer fee 166 In July 2003, Mr Georgiou instructed Ms Manley to include an "introducer fee" in the CCA quotation template that was payable to Clintons for each vehicle delivered as part of the First Fleet Flip, including on Holden vehicles that were not procured from Clintons. From this time, Ms Manley included a $30 per month introducer fee component in the quotation template. This amounted to $1,000 over the life of the lease (which was 36 months). 167 The introducer fee was recorded as a finance element in the quotation. It was included in the capital cost of the vehicle leased to CCA. Upon delivery of a vehicle to CCA, the full amount of the introducer fee was posted to the accounts payable ledger associated with the "introducer", and then Orix recovered the amount through the "introducer fee" component of the monthly rental. 168 From 2003 to 2006, Mr Ward appeared to be acting as an agent or consultant for Clintons. He was the person to whom Ms Manley provided reports recording how many cars were delivered to CCA each month. 169 Ms Manley provided a monthly delivery report to Mr Ward, which recorded the number of cars delivered by Orix to CCA each month. Based on this report, the relevant introducer issued an invoice for the introducer fee payable with respect to the number of cars delivered. Initially, Clintons was the relevant introducer. The money recognised in the accounts payable ledger account was then reduced by an equivalent amount when Clintons issued an invoice for those fees. 170 In May 2006, Ms Manley was informed by either Mr Georgiou or Mr Pereira that going forward, the introducer fee was to be paid to Mr Ward, not Clintons. Mr Ward had previously held Mr Pereira's position at CCA. 171 Changes were made to Willow, Orix's financial accounting system, to provide that the introducer fees were to be paid to "Ray Ward Consulting", an entity associated with Mr Ward, not Clintons. Thereafter, although there were a number of accounts payable accounts associated with Mr Ward, the main ledger to which introducer fees were posted was an accounts payable account with the identifier R1177066 (RW AP Account). 172 There was no evidence as to why the payee of the fee changed and no evidence regarding the contractual arrangements between Mr Ward and Clintons. 173 It was not in issue, however, that Mr Ward (a) had acted as a consultant to Clintons in 2003 when the First Fleet Flip was negotiated and (b) played an important role in negotiations regarding the First Fleet Flip. Chubb did not seek to impugn Mr Ward's entitlement to be paid fees as the relevant "introducer" on the First Fleet Flip with CCA. 174 Throughout the First Fleet Flip, other than during the period when Ms Manley took some maternity leave from December 2006 to May 2007, she met with Mr Ward on a regular basis. During these meetings, she showed him the delivery report from the previous month and in return he provided her with an invoice for introducer fees.
E.1.3. Second Fleet Flip 175 The Second Fleet Flip involved replacing Toyota Kluger vehicles in CCA's fleet with Toyota RAV4 four-wheel drive vehicles. The first orders placed by CCA as part of the Second Fleet Flip commenced in May 2007. The quotations produced for the Second Fleet Flip also included an introducer fee component. This flip occurred four years after the initial "introducer" fee agreement was entered into. 176 The Second Fleet Flip included an arrangement for the payment of "early termination fees". These were fees that were payable under the CCA Fleet Agreement when CCA returned a leased vehicle to Orix for disposal prior to expiry of the lease term. The early termination fees were calculated by staff within Mr McCulloch's disposals team. 177 On 26 April 2007, Mr Pereira sent an email to Mr Georgiou, confirming that the quantum of the Toyota Motor Corporation rebate was $1,500 and the quantum of the Toyota Dealer Network rebate was $1,700, and they were to be "allocated to Orix Australia for use in the reduction of the cost of 542 Klugers". Mr Pereira then stated in his email: Once the CCA Kluger Flip Program is completed the discounts offered by TMC and TDN will become the property of Coca-Cola Amatil and as such CCA will determine the use of the discounts / rebates. 178 This arrangement was referred to in a draft letter to Mr Pereira that was attached to an email from Mr Georgiou to Rosie Ang, an employee of Orix, on 9 May 2007: We can now confirm that the $3000 contribution per vehicle will be allocated to the 542 Klugers as Early Termination Costs (ETC). 179 Orix invoiced Toyota Motor Corporation and the Toyota Dealer Network directly for the rebates. The money, when received, was credited by Orix to an accounts receivable account with the identifier C0026472 (which was the CCA accounts receivable account) in Willow. 180 In February 2009, Mr Pereira directed Mr Manley to set aside $880,000 and draw a cheque made out to CCA in that amount to "make [him] look good" to CCA. It was common ground between the parties that Mr Pereira did make the request, and Ms Manley, after receiving authorisation from Mr Georgiou to do so, made the payment of $880,000 to CCA. 181 In March 2009, all remaining rebate moneys were transferred into an accounts receivable ledger with the same identifier R1107766 as the RW AP Account (RW AR Account). It is unclear on the evidence why the money was transferred to an accounts receivable ledger, as opposed to the RW AP Account. 182 Prior to March 2009, it was common ground that there had developed a practice by which Mr Pereira directed Ms Manley: (a) from time to time, to give Mr Ward a delivery report that misled Mr Ward into invoicing for less than the full number of cars delivered in a particular month, as a result of which, not all of the introducer fees for each month posted to the RW AP Account were invoiced by, and paid to, Mr Ward; and (b) to then incur expenses for Mr Pereira on her corporate credit card, and use funds withheld from Mr Ward in the RW AP Account to pay for those expenses. 183 The RW AR Account is the first such "slush fund", that is, iteration of the CCA Marketing Account, that is the subject of Chubb's contentions. 184 The funds made available to Mr Pereira as recognised in the RW AR Account included a sum of $137,500 transferred from the RW AP Account (that is, introducer fees that Mr Ward did not invoice for, and which were therefore not paid to him). 185 Mr Pereira gave directions to Orix personnel during this period as to how money from the RW AR Account was to be spent. 186 According to a reconciliation carried out by Ms Manley in September 2009, by the end of the Second Fleet Flip, Orix had received $1,456,000 in rebate money for new cars that were part of the flip and CCA had incurred $1,015,374.57 in early termination fees on returned cars, which left a surplus of $440,625.43. Orix had also received rebates on 288 additional cars ordered by CCA as part of the Second Fleet Flip, in addition to the cars required for changeover as part of the flip, in the amount of $921,600, against which Orix also offset disposal costs of $304,985.70 and disposal credits of $50,000 associated with the Second Fleet Flip. The reconciliation prepared by Ms Manley recorded that a net amount of $1,107,239.73 was payable to CCA.
E.1.4. Third Fleet Flip 187 In or about mid-2010, the Third Fleet Flip commenced. The flip involved replacing Toyota RAV4 four-wheel drives with new model Toyota RAV4 two-wheel drives. The "introducer" fee was still included as a component of the rental price charged to CCA. It was not in issue that throughout the Third Fleet Flip, Mr Ward continued to invoice for, and was paid, an introducer fee. It was also not in issue that Mr Ward continued to meet with a relevant contact from the Orix relationship team for the CCA account on a regular basis, being Ms Scott at this time. 188 The quantum of the "introducer" fee changed throughout this flip. Mr Pereira liaised with Mr Ward regarding the quantum of the introducer fee. 189 In May 2011, the introducer fee was reduced from $1,000 to $500 per vehicle but in July 2011 it was increased back up to $1,000 for all new Toyota vehicles delivered to CCA. 190 In July 2011, the balance of the RW AR Account was $143,525.55. 191 In or about July 2011, Mr Pereira instructed Orix that, for at least some, if not all, vehicles delivered to CCA, the introducer fee would be applied as follows: (a) $500 was to be paid to Mr Ward (if only a $500 introducer fee had been charged to CCA); and (b) if the introducer fee charged to CCA on the relevant vehicle was $1000, then the additional $500 was to be withheld and transferred to the RW AR Account. 192 From that time, the $500 portions of the $1,000 introducer fees which were not paid to Mr Ward were transferred to the RW AR Account where it accrued because it was not being paid out to Mr Ward. 193 In August 2011, Mr Pereira instructed Orix to transfer $60,000 to CCA out of the RW AR Account described as "Payment to CCA sale cars rebate Jan-Apr 2011". 194 In the period July to December 2011, Mr Pereira continued to instruct Orix personnel to pay certain expenses from the RW AR Account. 195 In December 2011, Mr Dundas recommended that the practice of expenses being charged to the RW AR Account should cease. 196 Around the same time, the balance of the RW AR Account was $115,743.95. 197 Between February 2011 and March 2012, $137,500 was transferred from the RW AP Account to the RW AR Account. 198 In April 2012, the introducer fee was reduced to $500 and consequently no further payments were made into the RW AR Account. 199 Debit transactions recorded to the RW AR Account reduced the (negative) balance on the account. Mr Temple-Cole, who was asked to substantiate payments made from the account, identified 48 records of "cash outflows", totalling $561,188. 200 By July 2012, the balance remaining in the RW AR Account had been transferred to the Orix general ledger as income. 201 In July 2012, Ms Scott instructed Orix accounts staff that "nothing goes in or out of the [RW AR Account] anymore. Just [Mr Ward's] money in and [Mr Ward's] money out every month so it always clears to zero". 202 From early 2012 to 2014, the RW AP Account otherwise continued to receive $500 per vehicle (introducer fee) and this money was paid to Mr Ward.
E.1.5. Accrual Spreadsheet 203 From about May 2012, Mr McCulloch manually maintained a spreadsheet to track income referrable to the CCA Marketing Account (Accrual Spreadsheet). Mr McCulloch, however, did not take over the role of tracking relevant expenditure until October 2012. 204 A final copy of the Accrual Spreadsheet was copied from Mr McColloch's computer in April 2015. The spreadsheet itself contains two tabs, named 2011 (2011 spreadsheet) and 2012 (2012 spreadsheet). The 2011 spreadsheet contains various entries that in aggregate amount to $117,280.41 (which was the balance of the RW AR Account ascertained by Mr McCulloch in February 2012). Mr McCulloch explains that this covered the transactions on the RW AR Account until the end of 2011. The 2012 spreadsheet recorded transactions from 2012 onward. 205 The 2012 spreadsheet records amounts under the headers "withdrawals" and "deposits". 206 The entries under "deposits" total $305,126.76, and include the following entries: (a) an entry of $117,281.41 with the description "transfer to income 30/3/2011", which the parties accepted was intended to refer to Mr Ward notionally returning to Orix the amount that reflected the balance of the RW AR Account; (b) two entries with the description "Feb 12 vehicles" and "March 12 vehicle" that was referrable to amounts received by Orix as "introducer fees" but which had been withheld from Mr Ward; (c) monthly entries starting May 2012, as to the amount of inspection fees received from CCA that month; and (d) a transfer from an account called the "CCA Profit Share Account" of $70,000 in August 2013. 207 The 152 entries under "withdrawals" appear to relate to expenditure for the period 17 February 2012 to February 2014, in an aggregate amount of $303,841.20. Mr Temple-Cole, Orix's expert accountant, reviewed documentation regarding 145 of these transactions, and in his opinion, 137 of the transactions can be substantiated, that is, there is third-party evidence that the payment reflected in the "withdrawal" entry was made. 208 The Accrual Spreadsheet was necessary because after the RW AR Account ceased to be used: (a) all "deposit" amounts went to Orix's general income account, and there was no separate record of those "inflows" available; and (b) all expenses were paid directly from Orix's income account, and as such those "outflows" also could not be easily tracked. 209 On 3 May 2012, shortly after Mr McCulloch started maintaining the Accrual Spreadsheet, Mr Carter, Mr McCulloch and Mr Georgiou exchanged a series of emails with the subject line "Visa" that included the following email from Mr Carter at 4.18 pm: I see that $336.36 has been put on Kim's visa for Drummond Golf for BP….. have we picked this up on the expense sheet....also….I thought we agreed it was you two and no body else involved 210 Mr McCulloch clarified in his response to Mr Carter and Mr Georgiou, sent later that day at 6.12 pm, that Ms Scott "no longer sees the other side being the balance held" and that "we probably need to sit down with Kim as well let her know she needs to be completely removed from this going forward".
E.1.6. Negotiations in 2013 leading up to the Fourth Fleet Flip 211 The Fourth Fleet Flip was negotiated between CCA and Orix in 2013. Unlike the previous fleet flips, the commercial terms of the Fourth Fleet Flip were the subject of extended negotiations from March to August 2013, and were documented as variations to the CCA Fleet Agreement. It involved replacing Toyota RAV4 two-wheel drive vehicles with newer model Toyota RAV4 two-wheel drive vehicles. It commenced in the second half of 2013. 212 On 24 June 2013, Mr McCulloch wrote to Mr Georgiou and Mr Carter and proposed cutting the pre-end lease inspections for CCA that were performed by Pickles. He went on to explain his calculation of savings that could be achieved if the inspections were removed. For the purposes of his calculations, Mr McCulloch used Pickles' charge for inspections, which he identified as $55 for city metro locations per vehicle.
E.2.1. Overview 213 Mr Carter raises two preliminary pleading issues: (a) is it open on the pleadings for Chubb to contend that CCA (other than Mr Pereira) was not aware (other than as to $880,000 that was returned to CCA) that Orix was holding funds on behalf of CCA that were being dispensed by Orix at the direction of Mr Pereira (Issue 14); and (b) is it open on the pleadings for Chubb to contend that Mr Pereira was directing Orix to use the "CCA Marketing funds" without the authorisation of CCA as to that use (Issue 15)? 214 The figure in Issue 14, Issue 16 and Issue 31, as framed by the parties, was $800,000 but it was common ground between the parties that the amount actually paid to CCA, as recorded in an entry posted in the CCA account receivables account on 24 February 2009, was $880,000. 215 Both preliminary issues concern the alleged lack of knowledge or authorisation by CCA as to what was happening regarding the creation of the CCA Marketing Account in March 2009 from rebate moneys retained by Orix, and then how that fund was used.
E.2.2. Submissions 216 Chubb submits that it is clearly open on its pleadings to maintain such allegations. It submits that the pleadings which concern this aspect of the operation of the CCA Marketing Account is at [5(aa)] of its further amended defences in the proceedings regarding the RW AR Account and [5(hh)] of its further amended defences regarding the Accrual Spreadsheet. 217 Mr Carter submits that the pleadings at [5(aa)] and [5(hh)] allege that Orix was paying for expenditure to Mr Pereira and was thereby providing secret profits to Mr Pereira, and that the "secret" component is that CCA was not aware of these payments. Mr Carter submits that the case Chubb now wants to advance is not that Orix was making secret payments, but rather that when Mr Pereira was directing that moneys he had provided to Orix, on the condition that Orix return it to him at his direction, and those transactions were not known to his employer, CCA. 218 Mr Carter submits that Orix had no alternative but to distribute those moneys in accordance with Mr Pereira's instructions and therefore these could not be considered secret commissions. He submits that the new argument that Chubb now wants to advance is that Mr Carter knew that Mr Pereira did not have the actual authority of CCA to have provided these funds to Orix in the manner he did, or alternatively that Mr Carter knew that Mr Pereira did not have the authority of CCA to direct the distribution of these funds in the manner he did.
E.2.3. Consideration 219 Chubb pleads in its further amended defences at [5(aa)] and [5(hh)] that the payments made from both the RW AR Account and the Accrual Spreadsheet: i. were paid from money received by OACL as part of the CCA Fleet Flips; ii. were paid for expenses incurred for the benefit of Pereira, or at his direction; iii. were secret benefits provided to Pereira or at his direction, which amounted to payment of bribes or secret benefits to an employee of OACL's customer, CCA; and iv. and in light of (iii), exposed OACL to the risk of criminal sanction, as well as civil claims from CCA 220 I do not accept the pleading point raised by Mr Carter. The allegation advanced by Chubb in these paragraphs of its further amended defences is that the payments constituted "bribes" or "secret benefits" to an employee of CCA. The allegations implicitly proceed on the premise that CCA was not aware of the payments being made for expenses incurred for "the benefit" of Mr Pereira or at his direction. Had CCA been aware of the making of the payments from money received by Orix as part of the CCA fleet flips they could not have constituted a bribe or a secret benefit paid to or for the benefit of Mr Pereira. 221 The case advanced by Chubb therefore has always necessarily proceeded on the basis that Mr Carter knew that Mr Pereira did not know and therefore could not have the authority of CCA to direct the distribution of these funds in the manner he did. 222 The questions raised in Issues 14 and 15 must both be answered in the affirmative.
E.3.1. Overview 223 The parties have identified the following issues regarding the Toyota rebates: (a) if the answer to Issue 14 is in the affirmative, was CCA (other than Mr Pereira) aware (other than as to $880,000 that was returned to CCA) that Orix was holding funds received as rebates from Toyota Motor Corporation and/or the Toyota Dealer Network during the Second Fleet Flip (Rebate Money) that were being dispensed by Orix at the direction of Mr Pereira (Issue 16); and (b) did Orix hold the Rebate Money on behalf of CCA (Issue 17).
Issue 16 224 Chubb submits that the critical issue in relation to the CCA Marketing Account is whether or not CCA knew about its existence. Chubb submits that CCA had no such knowledge and it therefore follows that CCA did not know about, and therefore did not authorise, any specific inflows and outflows from that account. 225 Chubb submits that CCA never knew, and could not have worked out, the amount of money that was left over from the set-off process that occurred during the Second Fleet Flip because it did not know the amount of early termination fees that had been charged by Orix on the fleet flip. It submits that while the rebates were a set amount per vehicle, the early termination fees varied for each vehicle upon its return. It submits that CCA never received invoices from Orix that recorded the amount of early termination fees that were incurred, and in the absence of such information, CCA could not have ascertained whether the $880,000 returned by Orix represented the whole of the left over rebate money, or only part. 226 Chubb submits that Mr Pereira's direction that the residual rebate money be transferred out of the CCA accounts receivable account supports the finding that Mr Pereira was taking steps to ensure that CCA did not know about the remaining funds. 227 Chubb submits that the subsequent usage of the CCA Marketing Account, which was created by the retained Rebate Money, also bears out the fact that CCA did not know about these funds. 228 Chubb also submits that the fact that CCA did not know about or authorise the existence of the CCA Marketing Account can be inferred from the steps taken in early 2012 to close it. It submits that the steps taken to close the account were entirely at odds with the notion that the money was CCA's money. 229 Mr Carter submits that there is no evidence from any CCA employee that they were not aware of the early termination fees. He submits that Orix's responses to a subpoena does not prove that no such invoices were ever created, but rather, only proves that there are no such invoices currently in the possession of Orix. 230 Mr Carter submits that even if the Court could be satisfied that no actual invoices were created to record the early termination fees, that does not prove that CCA was not advised of the total of those fees. He submits that the information may have been provided directly by Orix to a clerk at CCA or by Mr Pereira.
Issue 17 231 Chubb submits that Orix clearly received the initial rebates on CCA's behalf, which was the basis upon which the set-off occurred and why the $880,000 repayment was made. 232 Chubb submits that it does not matter whether the remaining money was held on behalf of CCA or not. It submits that, in a legal sense, whether it remained the money of CCA or ceased to be money of CCA either when it was moved into the RW AR Account or when it was taken to income by Orix, it was nevertheless a fund of money that Orix recognised as being available for use at the direction of Mr Pereira, for Mr Pereira and CCA related expenditure. It submits that as its case is that Orix was providing an inducement or bribe to Mr Pereira, it does not matter whether the money was in truth that of Orix or CCA or Mr Ward. It submits that the focus of the enquiry is whether the recipient was an agent of a person dealing with the giver of the gift, as known to the giver, and whether disclosure of the gift was made to the principal. It submits that the focus is not on the source of the funds from which the gift is made. 233 Mr Carter submits that Issue 17 is critical to why Chubb's illegal bribes or inducements claims fail. He submits that the issue should be answered in the affirmative. He submits that the money was held by Orix beneficially for CCA, and on the condition that Orix release those funds in accordance with the direction of CCA. Mr Carter submits that as Mr Pereira had the apparent authority of CCA to give Orix the directions for the expenditure of money, Orix was not providing Mr Pereira with any benefit, and therefore there could not be a bribe.
E.3.3. Consideration 234 I am satisfied that CCA did not know that Orix was holding funds that it received as rebates from Toyota Motor Corporation or the Toyota Dealer Network in the course of the Second Fleet Flip that were being dispensed by Orix at the direction of Mr Pereira. I accept that it was not possible for CCA to identify that funds were being held by Orix for that purpose because the amount of the early termination fees varied and CCA did not receive any invoices from Orix recording the amount of the early termination fees. Mr Carter's challenge to the absence of invoices rises no higher than speculation and is contrary to the apparent logic of events. Money was being disbursed out of the rebates for the benefit of Mr Pereira personally. There was no apparent reason why money held by Orix was being used to benefit Mr Pereira personally. 235 I am also satisfied that Mr Pereira did not have the apparent authority of CCA to give Orix directions as to the disbursement of the Rebate Money. There was no holding out by CCA beyond statements made by Mr Pereira himself, that Mr Pereira had any authority to direct Orix to retain the Rebate Money and to then direct how funds in the CCA Marketing Account were to be disbursed. That Mr Pereira was held out by CCA as its procurement manager in its dealings with Orix cannot clothe Mr Pereira with apparent authority to undertake the financial arrangements of the kind that were implemented between Orix and Mr Pereira. Moreover, given Mr Carter's knowledge that CCA was not aware of those arrangements, as explained at E.9.3 below, any contention that CCA had any authority, either implied or express, is implausible. 236 Nor does it ultimately matter whether the money remaining from the initial rebates after the $880,000 repayment continued to be money of CCA. At all times the money remaining was a fund that was held by Orix and disbursed in accordance with directions from Mr Pereira, unknown to CCA.
E.4. Transfers of Rebate Money to Ray Ward accounts (Issues 18 to 20)
E.4.1. Overview 237 The parties have identified the following issues regarding transfers of the Rebate Money to accounts styled as Ray Ward accounts: (a) in or about March 2009 was the remainder of the Rebate Money transferred (in accordance with instructions received by Ms Manley from Mr Pereira) to the RW AP Account? If the answer is no, was the Rebate Money transferred instead to the RW AR Account, with the same number as the RW AP Account except it was an accounts receivable account? (Issue 18); (b) did Orix hold the Rebate Money that was transferred to the RW AR Account on behalf of CCA? (Issue 19); and (c) from about March 2009, did the staff at Orix debit the RW AR Account with expenses as instructed by Mr Pereira? (Issue 20).
Issue 18 238 Chubb submits that the answer to Issue 18 is straightforward. It submits that Ms Manley did instruct that the money be transferred into the RW AP Account, however, it was instead transferred into the RW AR Account. 239 Mr Carter agrees with Chubb's answer to this issue, except notes that there is no evidence as to why the moneys were paid into the RW AR Account rather than the RW AP Account. It submits that the RW AP Account was the account where the introducer fees were accumulating, one of the accounts from which expenses had been paid prior to this date, and the account to which Mr Pereira directed the money be transferred.
Issue 19 240 Chubb submits that the answer to Issue 19 has little significance on its case, and submits that it is not clear what difference there is between Issue 19 and Issue 17. 241 Mr Carter submits that Issues 17 and 19 are critical to why Chubb's illegal bribes or inducements claims fail. He submits that Issue 19 should be answered in the affirmative.
Issue 20 242 Chubb submits that while the CCA Marketing Account was recognised in the RW AR Account, the expenses were recognised by increasing the balance of the RW AR Account by reducing the negative balance. 243 Mr Carter agrees that while the CCA Marketing Account was recognised in the RW AR Account, the expenses were recognised by increasing the balance of the RW AR Account by reducing the negative balance.
Issue 18 244 I am satisfied that in or about March 2009, notwithstanding the instructions received by Ms Manley from Mr Pereira to transfer it to the RW AP Account, the remainder of the Rebate Money was transferred instead to an account number with the same number as the RW AP Account, except it was an accounts receivable account. Both Ms Wright and Mr Temple-Cole agreed that this transfer was recorded in ledger entries in the Willow system of Orix, and this issue was ultimately not in dispute between the parties.
Issue 19 245 It was common ground that the rebates were originally received by Orix on behalf of CCA. As submitted by Chubb, however, after the $880,000 was transferred to CCA, it is almost impossible to conclude that the balance of the rebate moneys, referred to in the issue as the Rebate Money, was held on behalf of CCA. The Rebate Money was initially transferred to an internal Orix account in the name of Mr Ward and then Orix recognised it as income and recorded the funds that were available in the CCA Marketing Account in a spreadsheet. 246 Ultimately, however, the source of the funds for the payment of a bribe or the provision of illegal inducements is not material. The relevant enquiries are whether the person providing the bribe was aware that the recipient was an agent of a principal and whether the agent disclosed the bribe to their principal. In any event, if the Rebate Money was held by Orix on behalf of CCA, the use of those funds to provide the bribes or provision of illegal inducements was even more egregious conduct. 247 Mr Carter's contention that the disbursement of the Rebate Money at Mr Pereira's direction could not constitute a bribe because the money was held by Orix beneficially for CCA and on the condition that Orix release the funds "in accordance with the direction of CCA", is misconceived. It must fail because it depends on two premises, neither of which finds any support in the evidence. 248 First, Mr Pereira did not have the apparent authority of CCA to give Orix directions as to the disbursement of the Rebate Money. As I explain above at [235], there was no holding out by CCA beyond statements made by Mr Pereira himself, that Mr Pereira had any authority to direct Orix to retain the Rebate Money and to then direct how funds in the CCA Marketing Account were to be disbursed. 249 Second, in complying with Mr Pereira's directions Orix was providing Mr Pereira with personal benefits. For the reasons advanced in relation to the issues concerning the CCA Marketing Account below, I am satisfied that Mr Pereira was receiving substantial personal benefits in order for Orix to promote and retain his ongoing support in its dealings with CCA.
Issue 20 250 It was not in dispute and I accept that from about March 2009, the staff at Orix debited the RW AR Account with expenses as instructed by Mr Pereira.
E.5.1. Overview 251 From January 2012, an element called the "Coke Inspection Fee" of $13.90 per month per vehicle was included in each quote issued to CCA, until the end of August 2013. 252 As to the $13.90 inspection fee, the issues are: (a) why was the $13.90 inspection fee created? (Issue 21); (b) was the creation of the $13.90 "inspection fee" the creation of an additional fee without the knowledge of CCA or was it effectively the renaming (substitution) of an existing fee (being half of the existing "introducer fee") which did not result in CCA being charged any additional sum? (Issue 22); and (c) did CCA know that the $13.90 inspection fee was created and that funds received by Orix referrable to that element were recognised in the CCA Marketing Account and made available by Orix for use at the direction of Mr Pereira? (Issue 23).
Issue 21 253 Chubb submits that the simple answer, based on the evidence of Mr McCulloch who instructed Mr Roberts to create the $13.90 inspection fee, was that it was created so that, following the closure of the RW AR Account, there was a mechanism to track how much income was being received by Orix that Orix intended to make available to Mr Pereira through the CCA Marketing Account. 254 Chubb submits that it was not created because Orix started to charge CCA for inspections that it had not previously charged CCA. 255 Chubb submits that this is consistent with the position of Mr Carter, which is that the inspection fee did not in fact increase the rental charged to CCA, but rather funds collected from CCA through the monthly rentals were reallocated. 256 Mr Carter submits that his simple answer is that the inspection fee was created by Mr McCulloch to track the introducer fees that Orix was receiving on behalf of CCA so that the expenditure of the CCA Marketing Account was not greater than the moneys received by way of introducer fees that were not passed through to Mr Ward. 257 Mr Carter submits that the fees were not charges for non-existent services. He submits that the fees were a replacement for the introducer fees that were being charged by Orix and not passed on to Mr Ward, on the instructions of Mr Pereira. 258 Mr Carter submits that the accounting treatment of the fees is not the important fact. He submits that the important fact is that Orix was replacing one charge that CCA had consented to (being the introducer fee) with another charge (being the inspection fee).
Issue 22 259 Chubb submits that the $13.90 inspection fee was not the creation of an additional fee. Chubb submits that while it was new and a separate element in the quotations, the overall amount charged did not change. Chubb submits that this is consistent with its position that none of what occurred with respect to the inspection fee was known to CCA. 260 Chubb submits that it was also not the "renaming" or "substitution" of half of the existing introducer fee, because the introducer fee and the inspection fee behaved differently. 261 Mr Carter largely accepted Chubb's submissions on this point.
Issue 23 262 Chubb submits that CCA had no knowledge of the fund because it was an element created to build up the funds in the CCA Marketing Account. 263 Chubb submits that Orix used undisclosed quotations, with the elements that made up the quotations and how much was charged for each not shown on the quotations. It submits that unless the overall rental changed, CCA would not have noticed changes in the elements or their quantum, and the parties agree that the overall rental did not change. 264 Chubb submits that the proposition that CCA did know and did consent to the fee and the purpose for which it was deployed is "commercial nonsense". It submits that the arrangement makes no sense from CCA's perspective, and there can be no commercial reason why a party such as CCA would "want to do this with their money". It submits that in the absence of evidence that they did in fact want to be charged a monthly rental charge that was taken to be income by Orix, such as a written agreement to this effect, the Court should not infer that CCA did know and agree to such an arrangement. 265 Mr Carter submits that there can be no doubt that Mr Pereira was aware of the inspection fees. He submits that it would be speculation for the Court to determine whether CCA, beyond Mr Pereira, were also aware of the inspection fees. 266 Mr Carter submits that while Orix used undisclosed quotations, the evidence was that Mr Pereira had access to the elements in those quotations, including the introducer fee, if requested. 267 Mr Carter submits that Chubb has not established that it would be considered "commercial nonsense" by CCA to agree to the inspection fee. He submits that if Mr Pereira had explained to his superiors that Orix was going to introduce a fee in substitution for the introducer fee that was funding the CCA marketing fund, and that this substitution would cost CCA less money, the CCA executives may have agreed to it. 268 Mr Carter submits that Chubb's submissions simply assume, in favour of itself, that CCA had no knowledge of the CCA Marketing Account. Mr Carter submits that it is equally possible that CCA knew about this account but were not aware of the extent to which Mr Pereira was using this account to pay for what Chubb calls personal expenses, or alternatively that CCA deducted these expenses from Mr Pereira's employment package.
E.5.3. Consideration 269 It is convenient to address Issues 21 to 23 together. 270 I am satisfied that the inspection fee was created as a mechanism to enable Orix to continue to provide funds for the CCA Marketing Account and that CCA was not aware that (a) the inspection fee was included as an element in the CCA Marketing Account, and (b) Orix made it available to Mr Pereira to disburse at his direction. 271 On 2 December 2011, Mr Dundas emailed Mr Carter a copy of the Orix NAB visa card expenses for November 2011 and observed: … I notice a large expense item that it is to be charged to the Ray Ward/CoKe Cola Account this month. Can we have a discussion about this as I would recommend that we cease the current practice?… 272 Later that day, Mr Carter forwarded Mr Dundas' email to Mr Georgiou and stated: We need to do this another way. 273 Several minutes later, Mr Carter emailed Mr Dundas and informed him: I'm not happy either so let me work out a way which pushes it to Ray Ward so he can deal with it. 274 Mr Dundas gave evidence in his affidavit that at about the time of these emails he had a conversation with Mr Carter in which Mr Carter said to him words to the following effect: Gary, I've decided that we will clear expenses from the Ray Ward account and we can start recording CCA marketing expenses in the General Ledger. 275 Mr Carter denied in cross examination that he had any conversation in words to that effect. I do not accept those denials. 276 I accept the alleged conversation occurred 10 years before Mr Dundas swore his affidavit. The use of the phrase "words to the effect" by Mr Dundas in his affidavit make plain, however, that Mr Dundas is not purporting to provide a verbatim recollection of the conversation, only the "gist" or "thrust" of what he was told by Mr Carter. To that extent I accept that at about the time these emails were being exchanged Mr Carter informed Mr Dundas that he had decided to close the "Ray Ward account" and that the "CCA marketing expenses" were now to be recorded in the Orix general ledger. That such a conversation occurred is consistent with the content of the 2 December 2011 emails, what happened subsequently and with the overall oversight that Mr Carter had of the arrangements involving the CCA Marketing Account. It is significant that Mr Dundas makes the recommendation to Mr Carter that the "Ray Ward/Coke Cola account" be closed and it is Mr Carter who gives the instruction to Mr Georgiou "We need to do this another way". 277 In his cross examination Mr Carter claimed that at all times he considered the "Ray Ward accrual account" was simply a "Coca-Cola marketing account". I do not accept that evidence. The claims are inconsistent with the content of the 2 December 2011 emails, the conversation that Mr Carter had with Mr Dundas at about the time of the emails and perhaps most significantly, the content of the subsequent email that he received from Mr Georgiou on 20 February 2012, that I discuss at [285] below. 278 In January 2012, Mr McCulloch spoke to Mr Roberts, who was the Manager of the Business Applications Group at Orix at the time, about setting up a new element in Willow to track certain fees to be paid by CCA. As recorded in a subsequent email sent on 17 January 2012, referring to that conversation, Mr McCulloch wanted an element "specific to Coke" that could be tracked so as to "report on this elements [sic] income line". 279 At 7.48 am on 18 January 2012, Mr Roberts responded and said it was possible to do this, but he required a name for the element first. At 8.42 am on 20 January 2012, Mr McCulloch responded to this email with: Okay Name of new element - Coke Inspection Fee Amount - $6.95 Attached to parent AR C0026472. Idea is to create new quote template with this element in it so it pulls though for all coke entities. Quoter should not be able to change the value or remove element from the template. RM level (Kim & Pas) and above to have this access only. As mentioned before Xmas, will need a data extract created also and so JJC / GG can be advised at any given time how much we are collecting in this fee over a period and also an accumulative balance If you can put it into test, we can then get Hayley to play with it. Thanks Willy 280 Between Mr Roberts asking for a name for the element on 18 January 2012, and Mr McCulloch responding with the name "Inspection Fee" on 20 January 2012, Mr Georgiou, Ms Scott and Mr McCulloch exchanged emails about possible names for the new element. 281 Initially, Mr McCulloch told Mr Roberts that the amount of the fee was $6.95 per month (a total of $250 per vehicle over the lease term). At 3.08 pm on 24 January 2012, however, he emailed Mr Georgiou to seek confirmation about the amount: This is the right amount at the moment ($250) of which everyone agrees with (JC/BP/Ray Ward)) yes ? 282 At 5.02 pm, Mr McCulloch sent another email to Mr Roberts, and informed him that the fee was to be $13.90 ($500 over the 36-month term). Thereafter, an inspection fee of $13.90 per month per vehicle was included in each CCA quote issued after January 2012 until 30 August 2013. It ceased during the Fourth Fleet Flip, in or around August 2013, at the direction of Mr Pereira, but was resumed on 11 vehicles quoted to CCA from around December 2014. 283 The need for Orix to establish an alternative mechanism by which funds could be accumulated and placed in an account that could be used as a "slush fund" by Mr Pereira was emphasised in February 2012 when Mr Carter was advised of a further payment request from Mr Pereira. 284 On 17 February 2012, at 11.50 pm, Mr Georgiou sent an email to Mr Carter, which attached an email that Mr Pereira had sent to Mr Georgiou earlier that day. Mr Pereira stated in his email that he wanted to buy various pieces of electronic equipment from Harvey Norman, including a 55-inch Samsung TV. Mr Georgiou, in forwarding Mr Pereira's purchase request to Mr Carter, prefaces it with: More shopping ! I will tell him to get the proper tax invoice. We will put it down as a charity donation. Spoke to Gary re another 10.5k that was supposed to go to the slush fund for the Jan orders and told him to take it to income. As you know we now have the cell \line taking the money going forward but KK still running a spread sheet. … 285 On 20 February 2012, Mr Georgiou then sent an email to Mr Carter and Mr McCulloch, with the title "Ray Ward Accrual account": Guys, We need to clear and close this account ASAP.
E.6. $70,000 transfer to the CCA Marketing Account (Issue 24)
E.6.1. Overview 297 Issue 24 identified by the parties is whether CCA in August 2013 authorised the "transfer" of $70,000 from the account Orix maintained, in the belief that CCA was entitled to a profit share arrangement (CCA Profit Share Account), to the CCA Marketing Account. 298 The CCA Profit Share Account was entirely distinct from the CCA Marketing Account. Profit share accounts were ledger accounts to which a percentage of any profits realised on disposal of a returned vehicle were allocated and held for the benefit of any customers who were entitled, under their fleet agreement with Orix, to such an arrangement. Mr McCulloch's team were in charge of administering this arrangement. 299 As noted in [159(f)] above, the CCA Fleet Agreement did not contain a term providing for a profit share arrangement for CCA. 300 On 24 June 2013, Mr McCulloch, however, advised Mr Georgiou, there was $362,629.35 in what he referred to as "profit share" and $44,176.44 in what he referred to as Mr Pereira's "cunning kit". In context, I infer that the reference to the "cunning kit" was a reference to the CCA Marketing Account. 301 The Accrual Spreadsheet records a $70,000 transfer from the CCA Profit Share Account in August 2013. Those funds then formed part of the "slush fund" for Mr Pereira's use, with other "deposits" included in the Accrual Spreadsheet. 302 On 27 August 2013, Mr Carter and Mr Georgiou received an email from Mr McCulloch titled "BP" that stated $70,000 had been transferred from "accrual" to "his account". I infer, that in context, the reference to "accrual" was a reference to the misnamed CCA Profit Share Account and the reference to "his account" was a reference to the CCA Marketing Account. In response to a query from Mr Georgiou as to what was left in the "profit share account", Mr McCulloch replied on 28 August 2013 that $277,787.08 as at 31 July 2013 remained after the $70,000 had been transferred to "his account". 303 On 3 October 2013, Mr Carter received another email from Mr McCulloch titled "BP" that again referred to the $70,000 transfer. 304 On 18 November 2013, Mr Carter received an email from Mr McCulloch, which notified Mr Carter that the accrual was in fact negative without the $70,000 transfer being taken into account. The "accrual" was the account into which the transfer was being made, not the account from which it was being paid. In context, I infer that this is a reference to the CCA Marketing Account. This is consistent with the reference to the "BP accrual balance" in the email from Mr McCulloch referred to below. 305 On 6 January 2014, Mr McCulloch informed Mr Carter and others that: BP accrual balance = $76,005.84. Take out the $70,000 transfer from Profit share and he is at $6,005.83. 306 In the same email, Mr McCulloch provided the following explanation of how the CCA Marketing Account (referred to as the Ray Ward account) was established and differed from the so called "Profit Share account": George, my recollection of the Profit Share account being set up was that I was told (circa 2009 - Narelle era) CCA had it in their agreement and nobody at ORIX or CCA had picked up on it. I then set up the Profit share account and went back as far as 2004 (to get the losses) and then started accruing from 2011 when the balance turned positive. I think we need Phil Davie to double check they do not have profit share clause in their agreement. I'll do that today. The money paid to us from TMCA/Dealers for ET's with the flip to Klugers was more than we needed and I recall that surplus sat in the old Ray Ward Account. This money has not been involved in any way with the current Profit Share balance. When this money was reconciled, we took a large cut and left the rest in the Ray Ward account. I agree with you George as BP allowing us to mop up stuff ups, CCA contractors etc.. this would amount somewhere in the $100k range however, these have always been from the Ray Ward account, not profit share. Maybe we are confusing these two accounts ?
E.6.2. Submissions 307 Chubb submits that CCA did not, and could not, have authorised such a transfer because it did not know about the CCA Marketing Account. 308 Chubb submits that the only evidence is that Mr Pereira directed the transfer to the CCA Marketing Account, and that the Court should find that he was not authorised by CCA to do so. 309 Mr Carter submits that it would be speculation for the Court to decide the issue in the manner contended by Chubb.
E.6.3. Consideration 310 I am satisfied that CCA did not authorise the transfer in August 2013 of $70,000 from the CCA Profit Share Account to the CCA Marketing Account. As I have concluded above, CCA did not know about the existence of the CCA Marketing Account and there was no evidence that Mr Pereira was authorised by CCA to direct transfers from the CCA Profit Share Account to the CCA Marketing Account or any other account maintained by Orix. Moreover, it is implausible that CCA would have authorised Mr Pereira to transfer money from an account established to give effect to a profit share arrangement for CCA's benefit to an account from which funds were disbursed at the direction of Mr Pereira for his personal benefit.
E.7. Payments made at the direction of Mr Pereira (Issues 25 to 27)
E.7.1. Overview 311 The parties have agreed on the following list of issues relevant to the making of payments by Orix at the direction of Mr Pereira from funds which it held. 312 As to the use of the CCA Marketing Account: (a) if the answer to Issue 15 is in the affirmative, did Mr Pereira direct Orix to use the "CCA Marketing funds" in a way that CCA had not authorised Mr Pereira to do? (Issue 25); (b) between 2009 and 2014, what was the money that was recognised in the CCA Marketing Account used to pay for, and who benefitted from that expenditure and/or was that expenditure incurred at Mr Pereira's direction or at CCA's direction (expressed through Mr Pereira)? (Issue 26); and (c) was Mr Pereira offered the use of the CCA Marketing Funds by Orix as an illegal inducement or alternatively a bribe to Mr Pereira? (Issue 27).
Issues 25 and 26 313 Chubb submits that the funds in the CCA Marketing Account were used for various purposes, and some of them benefitted CCA executives and/or CCA. Some of them also benefitted Orix. Chubb submits, however, that some of the uses of the money in the CCA Marketing Account were distinctively for personal purposes of Mr Pereira. 314 Further, Chubbs submits that, at all times, the expenditure from the CCA Marketing Account was at the direction of Mr Pereira. 315 Chubb submits that Mr Pereira used the funds in ways that CCA did not authorise him to do so. It submits that this is clearly the case with respect to expenditure that benefitted him personally. It submits that CCA would have had no commercial reason to approve use of substantial sums of its money on purchasing an expensive car for Mr Pereira, paying for him to travel with Mr Georgiou and paying for Mr Pereira to enjoy adult entertainment. 316 Mr Carter submits that Chubb appears to be conflating concepts of actual and apparent authority with abuse of authority. Mr Carter submits that at all relevant times, Mr Pereira had the apparent authority of CCA to deal with the fund of moneys in the CCA Marketing Account, because his actions created that fund. 317 Mr Carter places particular emphasis on an email from Mr Pereira to Mr Georgiou on 26 April 2007. He submits that this is a written instruction from CCA (Mr Pereira) to Orix about the treatment of the Toyota rebates that, together with the fact that Mr Pereira negotiated the rebates: clearly establishes that Mr Pereira had apparent authority to give instructions regarding the distribution of this money and that Mr Carter was fully entitled to have that understanding. 318 Mr Carter submits that Mr Pereira's apparent authority was conveyed to Orix and Mr Carter because he was represented by CCA to be its "Procurement Manager" and more significantly, it had "clothed" Mr Pereira with the apparent authority to issue directions in respect of the CCA Marketing Account by "allowing him the authority" to create the account by negotiating rebates and reductions in the introducer fees payable to Mr Ward. 319 Mr Carter submits that (a) Mr Pereira negotiated the rebates and then allocated them to Orix on conditions, (b) Mr Pereira instructed Orix to pay the introducer fees and negotiated a reduction in those fees with Mr Ward, (c) Mr Carter was not cross examined on the "critical" 26 April 2007 email from Mr Pereira to Mr Georgiou or Mr Carter's conversation recorded in Mr Carter's affidavit at [42] and that unchallenged evidence should be accepted, (d) the evidence of Ms Scott and Ms Manley proves that there was no agreement between Orix and Mr Ward regarding introducer fees and Orix was simply advised of the agreement between CCA and Mr Ward so that introducer fees could be "passed (or pulled) through" Orix's quotation system.
Issue 27 320 Chubb submits that the Court should infer that Orix made the money in the CCA Marketing Account available for Mr Pereira's use as an illegal inducement or alternatively a bribe to Mr Pereira. 321 Chubb submits that the amount of money that Orix made available to Mr Pereira was substantial. It submits that over $1 million was made available for Mr Pereira to direct its use. Even taking into account that this money was made available over a 5 year period, in terms of a "gift" of value, that is an amount of money that would have the effect of compromising Mr Pereira's loyalty toward CCA in favour of Orix. 322 Chubb submits that if the Court finds that the existence of the fund was not known to CCA, then the conclusion that it was an illegal inducement or bribe is "inescapable". 323 Mr Carter submits that the answer to Issue 27 is in the negative. He submits that it is not possible for Orix to have made an illegal bribe or inducement to Mr Pereira with funds that Mr Pereira created and directed to Orix on the condition that Orix hold such funds until directed to distribute those funds in accordance with Mr Pereira's instructions. 324 Mr Carter submits that it would be necessary for Chubb to establish that Orix had some form of legal discretion to retain those funds against the express instructions of Mr Pereira, and Chubb has not established this.
Issues 25 and 26 325 It can readily be accepted that Mr Pereira was responsible for the establishment of the CCA Marketing Account and its use as a slush fund for his benefit. At the same time, there can be no doubt that Mr Carter and other officers and employees of Orix consented to and facilitated the establishment and use of the CCA Marketing Account as a slush fund to be disbursed at Mr Pereira's sole discretion. Orix, however, was under no legal obligation to provide such consent or to facilitate the establishment and operation of the CCA Marketing Account in that manner. Rather, Mr Carter consented to and facilitated the establishment and use of the CCA Marketing Account as a slush fund because both he and Mr Georgiou recognised, as their contemporaneous emails make plain, that it was in Orix's best interests to secure the ongoing support of Mr Pereira in Orix's commercial dealings with CCA. These emails are discussed in [438] to [446] below. 326 Mr Pereira's actions that led to the creation of the CCA Marketing Account could not establish that he had the apparent authority of CCA to deal with the moneys in the account given its use, to the knowledge of at least both Mr Carter and Mr Georgiou, as a slush fund for the benefit of Mr Pereira. 327 Consistently, with the relevant principles concerning apparent authority identified above at section D.3., these matters are sufficient to dispose of any contention that CCA had represented to Orix that Mr Pereira had its apparent authority to deal with the funds in the CCA Marketing Account. 328 Nevertheless, given the prominence that Mr Carter has given to some matters in his submissions on apparent authority, it is necessary to address them below. 329 Contrary to Mr Carter's submissions, the 26 April 2007 email from Mr Pereira to Mr Georgiou in relation to the Second Fleet Flip, sent at 10.15 am, does not establish that Mr Pereira had apparent authority to give any instructions regarding the distribution of money held in the CCA Marketing Account. Mr Pereira provided the following confirmation to Mr Georgiou in the email: … Further to our conversation regarding the Toyota Motor Corp. (TMC) and Toyota Dealer Networks (TDN) contribution in respect of the Rav 4 purchases, Coca-Cola Amatil confirm the following: A. TMC Rebate is $1,500 This amount is allocated to Orix Australia for use in the reduction of the early termination cost of the 542 Klugers B 1. TDN Rebate $1,700 The amount of $1,500 is allocated to Orix Australia for use in the reduction of the early termination cost of the 542 Klugers. B2. The balance amount of $200 is allocated to Orix Australia to be used in reducing the purchase price of the Klugers. Once the CCA Kluger Flip Program is completed the discounts offered by TMC and TDN will become the property of Coca-Cola Amatil and as such CCA will determine the use of the discounts/rebates. … 330 The emails preceding this email between Mr Georgiou and Mr Pereira, however, make clear the limited and defined scope of any "instruction" that Mr Pereira may have been providing in his 26 April 2007 email. 331 On 19 April 2007, Mr Georgiou had sent Mr Pereira an email, copied to Ms Scott, stating that Orix had agreed not to charge any early termination fees with respect to the Second Fleet Flip. 332 On 24 April 2007, Mr Georgiou was advised by Alan Court, Orix's National Manager - Legal and Compliance, that the standard conditions of the CCA Fleet Agreement provided that early termination fees were payable if there was an early termination by mutual agreement. 333 Later that day, given the advice he had received from Mr Court, Mr Georgiou sent the following email to Mr Pereira: … Also matey- we will have to get a letter from you basically assigning the $3000 over to ORIX for "fees to facilitate the flip". This is just in case we both get hit by that bus !!! If you like try this: CCA hereby assigns the rebate total of $3000 for every Rav 4 purchased during the flip program to ORIX Aust Corp and this is deemed to be facilitation fees for the services offered. Once the total flip of 542 Klugers has been reached this money then becomes the property of CCA to determine how this $3000 will be disbursed . … 334 On 26 April 2007, at 9.52 am, Mr Pereira responded to Mr Georgiou's request: … I will send you an email shortly confirming the discount offered by TMC and Toyota dealers are for your use in off setting` the ET values for the 542 Klugers. … 335 These emails make plain that the "instruction" in Mr Pereira's email sent at 10.15 am on 26 April 2007 was provided at the request of Mr Georgiou to enable the Second Fleet Flip to proceed without CCA appearing to have incurred any additional fees. The assignment of the CCA rebates to Orix and their characterisation as "facilitation fees" would have enabled Orix to obtain funds equivalent to what it was entitled under the CCA Fleet Agreement to receive as early termination fees. 336 Rather than providing evidence that Mr Pereira had apparent authority from CCA to give any instructions regarding the distribution of funds from the CCA Marketing Account, if anything, it confirmed the absence of such authority. Mr Pereira was providing the instruction at the request of Orix, not CCA. 337 The payments out of the CCA Marketing Account benefitted Mr Pereira both directly and indirectly. Some payments were made for distinctly personal purposes of Mr Pereira, most notably the provision of the Mercedes. Other payments were made to benefit CCA senior executives or to make it look like Orix was providing real and tangible benefits to CCA. These payments enabled Mr Pereira to promote Orix as a preferred supplier of leased vehicles for CCA. 338 Equally problematic is Mr Carter's submission that the evidence of Ms Scott and Ms Manley proves that there was no agreement between Orix and Mr Ward regarding introducer fees and Orix was simply advised of the agreement between CCA and Mr Ward so that introducer fees could be "passed (or pulled) through" Orix's quotation system. 339 Ms Manley may have been instructed by Mr Pereira to withhold introducer fees from Mr Ward but the manner in which the instruction took place is inconsistent with any contention that Mr Pereira was acting within any apparent authority from CCA. Ms Manley gave evidence, that I accept, that Mr Pereira directed her to withhold introducer fees from Mr Ward by amending down the number of vehicles in the reports that she provided to Mr Ward. The instructions given by Mr Pereira to Ms Manley demonstrate the withholding of introducer fees was not the result of any agreement reached between Mr Pereira and Mr Ward, but rather it was achieved through deception, the amended reports would not have alerted Mr Ward to the withholding of the introducer fees.
Purchase of Mercedes 340 The purchase by Mr Carter of a new Mercedes vehicle in April 2011 provides a good illustration of the use of the CCA Marketing Account by Mr Pereira for his personal purposes. 341 On 4 January 2011, Mr Carter received an email from Mr Georgiou regarding Mr Pereira's desire to "change over his Merc". The email relevantly stated: Also bro- [Mr Pereira] really does want to change over his Merc. He is thinking of 2 options:
Proposed Cyril Rodrigo transfer 353 A request by Mr Pereira in October 2013 for a transfer of funds for the benefit of Cyril Rodrigo provides a further illustration of how Mr Pereira gave directions to Orix for the disbursement of funds from the CCA Marketing Account and the supervision or oversight of those directions by Mr Carter and Mr Georgiou. 354 On 1 October 2013, Mr Pereira, Mr Georgiou and Mr Carter exchanged the following emails concerning a request by Mr Pereira to arrange for the amount of $20,000 to be transferred from the "CCA accrual account" to Mr Rodrigo. I infer that, in context, the "CCA accrual account" was another name used by Mr Pereira to describe the CCA Marketing Account. 355 At 1.29 pm, Mr Pereira made the initial request to Mr Georgiou for the transfer of the $20,000 in the following terms: Hi GG Can you do me a favour, please transfer the amount of $20,000.00 from the CCA accrual account to the following account listed below: Name: Don Cyril Rodrigo Jnr Bank : National Australia Bank Ltd 271 Collins St Melbourne Vic BSB No: [] Act No : [] Thanks and regards Bryan Pereira 356 At 1.30 pm, Mr Georgiou forwarded this request to Mr Carter and said that he had told Mr Pereira that "this is OK". 357 At 2.47 pm, Mr Pereira forwarded to Mr Georgiou the email Mr Pereira sent on 26 July 2013 from his CCA email address "authorising" the payment to Mr Chua, a friend of Mr Pereira's. The circumstances in which the 26 July 2013 email was first sent by Mr Pereira are addressed at [393] to [399] below. 358 At 2.52 pm, Mr Pereira then sent a further email to Mr Georgiou, in the following terms: Hi GG CCA has an arrangement with Cyril Rodrigo wherein CCA has agreed to pay for his inspection services. This email authorizes you to transfer $20,500.00 to be paid from the profit share you are holding on behalf of CCA to the following account. Name: Don Cyril Rodrigo Jnr Bank : National Australia Bank Ltd 271 Collins St Melbourne Vic BSB No: [**] Act No :[* ****] Thanks and regards Bryan Pereira 359 At 4.13 pm, Mr Georgiou forwarded Mr Pereira's 2.52 pm email to Mr Carter and asked whether it is "sufficient to effect a transfer payment into Cyrils account?". 360 At 5.09 pm, Mr Carter responded "Don't know….check with the pencil". The "pencil" was a word used by Mr Carter and Mr Georgiou to refer to Mr Dundas. 361 Ultimately, no money was transferred to Mr Rodrigo from the CCA Marketing Account or any other Orix account but as I observe at [353] above the proposed transfer provides a further illustration of the extent to which Mr Carter was kept informed of and consulted about requests made by Mr Pereira for the disbursement of funds from the CCA Marketing Account. The emails in relation to the proposed transfer also demonstrate the extent to which Mr Carter and Mr Georgiou prepared the form of the requests for Mr Pereira to provide, including their preparedness to include a reference to an alleged CCA "arrangement with Cyril Rodrigo wherein CCA has agreed to pay for his inspection services" in order to purport to provide a legitimate reason for the transfer. 362 Mr Carter submits that his statement "Don't know … check with the pencil" supports his contentions that he would not authorise illegitimate transactions. I do not accept that submission. It is telling that Mr Carter's response to Mr Georgiou's redrafted request referring to the alleged CCA inspection services arrangement with Mr Rodrigo was not to question the legitimacy of the alleged arrangement advanced by Mr Georgiou but rather to tell Mr Georgiou to check with Mr Dundas whether the explanation would be sufficient from an accounting perspective to justify the payment. Mr Carter was plainly concerned with form not substance in circumstances where there was no evidence that Mr Rodrigo ever provided any "inspection services' for CCA.
Issue 27 363 I am satisfied that Mr Pereira was offered the use of the funds in the CCA Marketing Account as an illegal inducement or bribe. The payments were made for the purpose of securing and maintaining Mr Pereira's assistance in Orix's commercial dealings with CCA. 364 As Mr Georgiou candidly explained to Mr Carter in his 8 July 2013 email: … There a few things that only the 3 of us should know ……..the profit share account is there for BP to help us out (as proven many times in the past)….CCA DO NOT KNOW about this account ! If you think about the many times BP has taken money from this account to get us out of trouble and also "subsidise" a few Senior CCA staff cars….ie. Warwick White, Bill Mossati and the Proc Boss Bruce whatever to name a few…….all the time saying ORIX has done the right thing by them !! BP ….has always protected us……that tosser Eric Joseph got close……Tomlinson is getting closer….numerous other organisations like Mckenzies also sniffed around. … (Emphasis in original.) 365 The message conveyed by Mr Georgiou in this extract from the email is unambiguous. Mr Pereira was using funds in the CCA Marketing Account, referred to in this email as the "profit share account" to represent falsely that Orix was providing discounts or other benefits to CCA. 366 Mr Georgiou also made the following comments in his 8 July 2013 email concerning the assistance that Mr Pereira had provided Orix and recommending that Orix enter into a further flip arrangement with CCA: … Further proof of his love of ORIX and good to know, [Toyota Financial Services] has about 90 cars and BP has always had them there to show his bosses he keeps us honest !! These units will also be flipped as part of the program to match the 48mths and the ET's on each of these will be added back into the new lease. Therefore these 90 units without the obvious $12k load will be much cheaper than our rentals but creating a huge smoke screen so no one can compare us again !! To quote BP "this is one way of hiding the cost differential between ORIX and [Toyota Financial Services], so no more comparisons as both deals are so different !! We have also made a shit load of money in the flip programs !! We will lock CCA up for many years by doing this deal !! … 367 Creating a mechanism by which cost differentials between pricing offered by Orix and its principal competitor, Toyota Financial Services, could be identified and acted upon was of considerable commercial value to Orix. 368 The value of Mr Pereira to Orix was reinforced by Mr Georgiou in the following concluding remarks in his 8 July 2013 email: … Yes…..I am a big fan of BP's and I like the way he works …..lets face it….my job is to get close to people and keep them here, same can be said now with Tony Chidiac !!!.......BUT I DO WORK for ORIX who pay my salary ! … 369 Mr Georgiou clearly had no hesitation or qualms about the importance of capturing people with whom he deals, by getting close to them and keeping "them here" and emphasising that unlike Mr Pereira and Mr Chidiac, he is actually formally employed by Orix. 370 The value to Orix of securing Mr Pereira's assistance in its dealings with CCA was demonstrated as early as late 2008 in relation to a default by a DSC truck driver on a lease. 371 On 24 November 2008, in an email exchange between Mr Carter and Mr Lyons, the National Credit Manager for Orix, Mr Carter was advised of a potential loss of $91,000 arising from an interest default by DSC on a leased vehicle that had previously been leased to CCA and that CCA was proposing to take on again following the DSC default. Mr Carter advised Mr Lyons: … FYI- Bryan is going to put the heat on his people to:
E.8.1. Overview 378 In July 2013, Orix made a payment of $47,200 from the account named "CCA Profit Share Account" to Mr Chua. The payment was made at the direction of Mr Pereira. 379 As to the payment to Mr Chua, the issues are: (a) what were the circumstances in which Orix transferred $47,200 from the CCA Profit Share Account to Mr Chua in July 2013, including who benefitted from that expenditure and/or was that expenditure incurred at Mr Pereira's direction or at CCA's direction (expressed through Mr Pereira) (Issue 28); and (b) was this payment to Mr Chua made as an illegal inducement or alternatively a bribe by Orix to Mr Pereira? (Issue 29).
Issue 28 380 In answer to Issue 28 Chubb submits that the person who benefitted from the transfer was not only Mr Chua, but also Mr Pereira, because it was made at his request and the Court should find that the direction was given by Mr Pereira and not CCA because (a) the request originally appears to have been made in respect of the CCA Marketing Account, (b) it may be inferred that Mr Pereira was taking some steps to conceal what was happening from CCA, because his email correspondence with Mr Georgiou principally took place using his personal email account, and (c) it was plainly made for a personal purpose as Mr Chua was a personal friend of Mr Pereira. 381 Mr Carter submits that the evidence only demonstrates that Mr Chua benefited from the transaction, and there is insufficient evidence to determine if Mr Pereira also benefitted from the transaction. 382 Mr Carter accepts that the payment was made at Mr Pereira's direction, not CCA's direction. Mr Carter submits that unlike the CCA Marketing Account, the moneys in the CCA Profit Share Account were required to be returned to CCA. In those circumstances, Mr Carter submits it was most unlikely that CCA would have authorised funds from the CCA Profit Share account to have been used for this purpose.
Issue 29 383 Chubb submits that it follows that the Court should find that the payment was an illegal inducement or bribe provided to Mr Pereira. 384 Mr Carter submits that the evidence does not indicate that the benefit for Mr Chua was an inducement for Mr Pereira so as to satisfy the requirements of "corrupt purpose".
E.8.3. Consideration 385 On 22 July 2013 Mr Pereira emailed Mr Georgiou and asked him to assist "[Mr Pereira's] friend Gary [Chua]" deal with a Kia dealership from which Mr Chua intended to purchase a vehicle. The email was not sent from Mr Pereira's CCA email account. Rather, the email was sent from what appears to be a personal account of Mr Pereira. 386 On 25 July 2013, Mr Pereira sent a further email to Mr Georgiou, again from his personal email account, and stated: Hi GG Here's quote for Gary's Kia. All done for $47,200. Please ask your guys to place the order tomorrow morning. They said delivery can be undertaken by Aug 6 Kind regards BP 387 Mr Georgiou confirmed that Mr Pereira wanted Orix to pay for the vehicle, but said that he thought Mr Pereira's account did not have enough money, and instead asked "we take this out of the accrual ?". He then sent an email to Mr McCulloch, asking him to order the car and pay for it from the accrual account. 388 Mr Georgiou was using "accrual" and Mr Pereira's "account" to refer to separate accounts. I infer that the reference to Mr Pereira's "account" is a reference to the CCA Marketing Account, during this period represented by the balance of the funds monitored by Mr McCulloch, in respect of which Mr McCulloch sent regular updates titled "BP" to Mr Georgiou and Mr Carter. 389 On 26 July 2013, following a series of various emails between Mr Pereira, Mr Georgiou, Mr Carter, Mr McCulloch and Mr Dundas, $47,200 was transferred from the CCA Profit Share Account to Mr Chua. 390 At 12.48 pm, Mr Pereira sent Mr Georgiou an email from his CCA email account, with instructions to transfer the $47,200 to an account in Mr Chua's name from "our Coke accrual account". 391 At 2.19 pm, Mr McCulloch and Mr Georgiou were told by Mr Dundas that a cheque requisition form was required to process this request. 392 At 2.46 pm, following Mr Dundas' request for a cheque requisition form, Mr Georgiou separately forwarded to Mr Carter, without any comment, Mr Pereira's email set out at [386] above, together with a quote from Kia Motors that was marked to the attention of Gary Sian Hwee Chua, at an email address that included Mr Chua's initials and surname. 393 At 2.59 pm, Mr Carter then sent a separate email to Mr Georgiou, with the following text: Hi GG, CCA has an arrangement with Mr Gary Chua wherein CCA has agreed to fund the purchase of a car for Gary Chua as per the attached invoice. This email authorises you to transfer $47,200 to be paid from the profit share you are holding on behalf of CCA to the following account: Gary Chua Westpac BSB [] Account Number [] Regards BP 394 Mr Carter denies that he drafted or sent this email. I do not accept those denials for the reasons that I provide at [493] to [500] below, in addressing Mr Carter's knowledge of the use of the CCA Profit Share Account to fund the purchase of the Kia motor vehicle for Mr Chua. 395 It is telling that the email from Mr Georgiou to Mr Carter forwarding a copy of Mr Pereira's 25 July 2013 email and a copy of the quote to Mr Chua from KIA Motors simply forwarded the documents without any comment, Mr Carter's email was sent only 13 minutes after he received Mr Georgiou's email and Mr Carter's email simply provided the text of a proposed email from Mr Pereira to Mr Georgiou. The absence of any explanation and the speed with which the emails crossed implies a degree of sensitivity to the process that was being followed to produce an email from Mr Pereira that could be used to justify the payment to Mr Chua. Equally significant to the creation of an alleged justification for the payment is the inclusion of the references to the existence of an alleged arrangement between CCA and Mr Chua for the purchase of a car for Mr Chua from the CCA Profit Share Account. 396 Then at 3.01 pm, Mr Georgiou sent an email to Mr Pereira's personal email address: I need this on your CCA email address with the Kia invoice attached. G Hi GG, CCA has an arrangement with Mr Gary Chua wherein CCA has agreed to fund the purchase of a car for Gary Chua as per the attached invoice. This email authorises you to transfer $47,200 to be paid from the profit share you are holding on behalf of CCA to the following account: Gary Chua Westpac BSB [] Account Number [] Regards BP 397 Again it is telling that Mr Georgiou sent the email to Mr Pereira at his personal email address and requested that "I need this on your CCA email address with the Kia invoice attached". Not only is the content of the email to be sent by Mr Pereira being dictated by Mr Georgiou but also the email address from which it is to be sent. 398 At 3.25 pm that day, Mr Pereira sent Mr Georgiou the following email from his CCA email address: Hi GG CCA has an arrangement with Gray Chua wherein CCA has agreed to fund the purchase of a car for Gary Chua as per the. attached invoice. This email authorizes you to transfer $47,200 to be paid from the profit share you are holding on behalf of CCA to the following account. Gary Chua Equity Access Loans Westpac BSB [] Account No [] The invoice from Stillwell Kia will follow shortly Kind regards Bryan Pereira 399 At 3.26 pm, Mr Georgiou then immediately forwarded this email to Mr Carter and asked, "Is this ok?". 400 Mr Carter did not provide any email or other written response to Mr Georgiou's 3.26 pm email. It is implausible given the request for confirmation that Mr Pereira's email was "okay" and Mr Carter's earlier involvement in the preparation of the email that Mr Carter did not respond, at least verbally, to Mr Georgiou providing the confirmation requested. 401 At or about 4.00 pm, Mr McCulloch then organised for the payment to be made to Mr Chua's account. 402 At 4.08 pm, Mr Carter sent another email to Mr Georgiou, with a link to Mr Chua's LinkedIn page, an observation that Mr Chua "Was MD of this mob Chariot Internet Limited" and then a comment "now this" and a link to a website, "http:www.learnedsolutions.com/".The email demonstrates that Mr Carter was interested in learning of Mr Chua's background and makes clear the extent of Mr Carter's interest in the payment to Mr Chua. 403 I am satisfied for the foregoing reasons that the payment made to Mr Chua was an illegal inducement or bribe provided to Mr Pereira as it was a payment made to a personal friend of Mr Pereira with no apparent association with CCA. It can readily be inferred that a payment of that magnitude to a person's friend with no apparent association with the person's employer was for the benefit of both the person requesting the benefit and the person's friend receiving the benefit. It is implausible that it was simply a payment in the nature of a charitable gift from Mr Pereira to Mr Chua. I infer that it is likely that Mr Pereira had already received some benefit in return from Mr Chua or expected to receive some benefit from Mr Chua in the future. In any event, even if no tangible benefit had been received or was expected from Mr Chua, allowing Mr Pereira to use the funds in the CCA Marketing Account to bestow gifts on friends still constituted a benefit for Mr Pereira and was thus capable of acting as a bribe or illegal inducement for Mr Pereira to act in the interests of Orix in its dealings with CCA.
E.9. Mr Carter's knowledge of the Slush Fund arrangements (Issues 30 to 35)
E.9.1. Overview 404 With respect to the CCA Marketing Account, the issues are: (a) what did Mr Carter know by 30 October 2014 about the source(s) of the money recognised in the CCA Marketing Account (either as a ledger in the Willow system or later in a spreadsheet maintained by Mr McCulloch) and what that money was used to pay for, including who benefitted from that expenditure and at whose direction that expenditure was incurred? (Issue 30); (b) if the answer to Issue 14 is affirmative, and CCA (other than Mr Pereira) did not know (other than as to $880,000 that was returned to CCA) that Orix was holding Rebate Money that was being dispensed by Orix at the direction of Mr Pereira, did Mr Carter know this as at 30 October 2014? (Issue 31); and (c) if Orix held the Rebate Money that was transferred to the RW AR Account on behalf of CCA, did Mr Carter know this as at 30 October 2014? If so, at all relevant times did Mr Carter understand that this money was held by Orix on behalf of CCA? (Issue 32). 405 With respect to the $13.90 inspection fee, the issues are: (a) if the $13.90 inspection fee was the creation of an additional fee that was charged to CCA and CCA did not know that it had been created and that funds received by Orix referrable to it were recognised in the CCA Marketing Account and made available by Orix for use at the direction of Mr Pereira, did Mr Carter know this as at 30 October 2014? (Issue 33); and (b) if the answer to Issue 15 is affirmative, and if Mr Pereira directed Orix to use the "CCA Marketing funds" in a way that CCA had not authorised Mr Pereira to do, did Mr Carter know this fact as at 30 October 2014? (Issue 34). 406 Issue 35 is whether Mr Carter knew by 30 October 2014 that either all, or at least some, of the payments made from the CCA Marketing Account were made as an illegal inducement or alternatively a bribe to Mr Pereira.
Chubb 407 Chubb submits that Mr Carter knew that Mr Pereira directed the use of the money recognised in the CCA Marketing Account throughout the period 2009 to 2015, and that he did so without the knowledge or authorisation of CCA. 408 Chubb submits that further support for finding that Mr Carter knew that this was not a fund authorised by CCA, but in effect, a secret fund of money held by Orix for Mr Pereira's use, is supported by his involvement in the steps taken to close the RW AR Account, and his knowledge about the inspection fee. 409 Chubb advances the following submissions to support its contention. 410 First, the Court should find that, Mr Carter knew that the CCA Marketing Account was, at that time, being recognised in a ledger account associated with Mr Ward, and, he was not just a passive observer of the steps taken to close the account, but the one who made the decision to do so. 411 Second, Mr Carter knew from the same set of facts that CCA were not in any way involved in closing the ledger that purportedly held its funds, and that the money was then not deposited in any ledger or account associated with CCA, but taken to Orix's income. 412 Third, at least by November 2013, and possibly before that, Mr Carter understood that the inspection fee was an element in the CCA quotations that was created to "feed the accrual" or add to the funds recognised in the CCA Marketing Account. 413 Chubb also submits that the Court should find that Mr Carter knew that CCA did not know about the CCA Marketing Account, because of the steps taken to place the funds in a ledger not associated with CCA, and the number of times that he was told by Mr Georgiou that CCA did not know about the account, without eliciting any challenge or dismissive response, or even any surprise, from Mr Carter. 414 Next Chubb submits that Mr Carter knew that the money in the CCA Marketing account was being used to (a) cover up mistakes made by Orix, (b) benefit CCA executives and impress them, and (c) fund Mr Pereira's personal expenditure, including the purchase of a Mercedes vehicle, travel expenses incurred by Mr Georgiou on a trip with Mr Pereira to China and the provision of escort services for Mr Pereira.
Mr Carter 415 Mr Carter submits that it is not open to Chubb to claim that Mr Carter had actual knowledge that CCA was not aware of the CCA Marketing Account when (a) there is no evidence from any CCA employee to support that contention, (b) Mr Pereira clearly had apparent authority to operate the account, (c) Mr Carter could not have had actual knowledge of CCA's knowledge of the account without direct communications with either CCA or Mr Pereira on the issue, and (d) it would have been a very unusual, if not a unique experience for Mr Carter to have encountered a fund of this type being set up by a person without their employer's knowledge. 416 Mr Carter submits that he had very little direct knowledge in relation to the CCA Marketing Account and the accounting treatment of that account, other than that he was advised by Mr Dundas that the treatment was incorrect. 417 Mr Carter submits that Chubb's submissions effectively amount to the proposition that Mr Carter should have realised what was occurring in relation to Mr Pereira was "out of the ordinary". Mr Carter submits that that submission is much easier to make with the benefit of hindsight, and that Mr Carter's involvement in these issues was peripheral only. 418 With respect to his knowledge of the Mercedes transaction, Mr Carter submits that the Court should accept his evidence that in the space of no more than 15 seconds he signed the 19 April 2011 email and Mercedes invoice authorising the transaction after seeing Mr Georgiou's signature. He submits that "the effect" of his evidence is that he accepted that Mr Georgiou had authorised the transaction and did not "take the time to read Mr Georgiou's handwriting carefully". 419 Mr Carter subsequently submitted that he was a facilitator not an authoriser of the Mercedes transaction and he was only carrying out an administrative task because, inconsistently with his earlier submission, the person authorising the transaction was Mr Pereira. He submits that he had no reason to "even look at this transaction because he assumed from earlier emails that it was proceeding by way of hire purchase and he was aware that the transaction involved the use of the CCA Marketing Account and the request had come from Mr Pereira who was authorised to direct how money was to be distributed from that account. 420 Mr Carter submits that Chubb's real complaint about the Mercedes transaction would seem to be an unpleaded contention that Mr Carter was negligent in carrying out an administrative function in accordance with a CCA direction without realising that Mr Pereira may have been abusing his authority to deal with those funds. 421 Next, Mr Carter submits that he had no reason to request a "revs check" if he believed the Mercedes was not being purchased by Orix and asked rhetorically "what possible reason could Mr Carter have to direct a revs check for a purchase that was being funded by CCA money". 422 Mr Carter submits, however, the critical issue was not the "revs check" but rather that he had not claimed in his evidence that he had told Mr Georgiou that Mr Pereira had to pay for the Mercedes personally or he was opposed to any use of the funds in the CCA Marketing Account to meet any obligations on the part of Mr Pereira. Mr Carter submits that this was consistent with the objective facts, namely that Mr Pereira had provided the funds to Orix on the condition that Orix distribute them in accordance with his instructions, and therefore what reason could he have to second guess any direction from Mr Pereira. 423 Mr Carter then sought to rely on the absence of such evidence to advance the following submission: It is difficult to imagine better evidence to demonstrate the credit of Mr Carter. Mr Carter did not reach for the protection of a claim that he had forbidden Mr Georgiou to allow the CCA Marketing fund to be used like this and that Mr Georgiou went against his instructions. Instead, Mr Carter told the truth, even though it seemed not to help him. Admissions against interest of this type are the clearest indicators of an honest witness.
Issues 30 to 32 424 I am comfortably satisfied, on the balance of probabilities, and having regard to the quality of evidence required to reach such a serious and adverse conclusion as required by s 140(2) of the Evidence Act 1995 (Cth) (Evidence Act), that Mr Carter had actual knowledge as at 30 October 2014 that (a) the CCA Marketing Account was an account (initially as a ledger in the Willow system and subsequently in a spreadsheet maintained by Mr McCulloch) into which rebate moneys and introducer fees were paid, (b) funds were disbursed from the account pursuant to instructions given by Mr Pereira, and (c) CCA was not aware of the existence of the CCA Marketing Account. 425 The following evidence is sufficient to establish Mr Carter's knowledge of each of these matters. 426 On 28 January 2011, Mr Carter received the following email from Mr Georgiou: Ok - just spoke to Bryan. he wants the dealer to keep $250 and send us a cheque for $500 in all these cases. The $500 then posted to his accrual account (refer Kim Scott)- this account is then used by Bryan to make us look good . CCA needs to give us over $60K in rego renewals for the inertia cars so he does not want this billed to CCA but to come from his accrual account. This way he big notes himself saying he "screwed us into picking up the tab". Does this make sense Chris ? (Emphasis added.) 427 I do not accept Mr Carter's denial that he did not read this email. The email was sent by Mr Georgiou, it was a short email addressed to both Mr Briggs and Mr Carter, it referred to a discussion with Mr Pereira in the first line, it concerned a sensitive topic being the use of Mr Pereira's "accrual account" and the absence of any email response from Mr Carter is not surprising given the last line asking Mr Briggs "Does this make sense Chris?". 428 The use of the language "his accrual account" in the context of a discussion with Mr Pereira and the direction given by him to make a payment out of the account to make "us" look good by not invoicing CCA for the registration renewals and the comment that Mr Pereira wanted to "big note" himself by saying he "screwed us into picking up the tab" conveyed to Mr Carter that funds were being disbursed from an account maintained by Orix at the direction of Mr Pereira and that CCA was not aware of that arrangement. If CCA had been aware of that arrangement, the big noting suggestion was illogical, because CCA would appreciate that they were not in reality receiving any benefit from Orix. 429 On 8 July 2013, in the context of discussions regarding a proposed Fourth Fleet Flip, as noted at [364] above, Mr Carter received an email from Mr Georgiou that endorsed certain proposed commercial terms for the proposed transaction and in which Mr Georgiou advised him: … There a few things that only the 3 of us should know …….the profit share account is there for BP to help us out (as proven many times in the past) CCA DO NOT KNOW about this account ! If you think about the many times BP has taken money from this account to get us out of trouble and also "subsidise" a few Senior CCA staff cars. ie. Warwick White, Bill Mossati and the Proc Boss Bruce whatever to name a few……all the time saying ORIX has done the right thing by them !! … (Emphasis in original.) 430 I infer that in context the reference to the "profit share account" is a reference to the CCA Marketing Account. The dual nature of Mr Pereira's use of the account is clearly expressed. It is being used by Mr Pereira both to assist Orix to get "out of trouble" and to "subsidise" cars for senior CCA staff in a manner that makes Orix look like it has done "the right thing" by CCA. Again, this comment is inconsistent with CCA having any knowledge of the CCA Marketing Account. 431 There can be no dispute that Mr Carter received and read the email because an hour after Mr Georgiou sent the email, Mr Carter responded to Mr Georgiou "When can we talk about this?" Mr Carter could not have determined that he needed to "talk about this" with Mr Georgiou if he had not read the email. 432 Mr Carter agreed in cross examination that Mr Georgiou was telling him that CCA did not know about the CCA Marketing Account but claimed he did not believe him. When pressed further about that claim, Mr Carter gave the following evidence: And that - and do you agree that what he's telling you - that comment of lack of knowledge on the part of Coke follows from his statement that the account is designed to help out ORIX; do you agree?---I don't - no, I - no, I don't. I don't know why - why he's saying - I'm not linking that, but I don't know why he's saying that. All right. Well, then he says, in terms of trying to remind people of something that he had said before, to think about the many times Pereira has taken money from this account to get ORIX out of trouble; you see that?---I see what - that's what he's saying. And he also tells you to think of the times that money from that account had been used to subsidise, in quotes, a few senior Coke staff cars?---I see that. All the time saying that ORIX has done the right thing by them?---That's what he's saying. And what he was doing was giving you two examples of how this money had been used to help out ORIX; do you agree?---What I - what I will agree with is that he's trying to - he's trying to convince - convince us to reduce our margins. Certainly, you would agree that the two examples he gave, if they were to help out ORIX, could only help if Coke did not know anything about the CCA marketing account; do you agree?---I find it very hard - the - sorry. Just ask that again, sorry. Yes. Well, I will ask you first about the logic of what he's saying?---Yes. Do you agree that the two examples that he gave are only consistent with what he's saying about Coke not knowing about the account?---The logic would be there. All right. Now, do you dispute the two examples he gave as being things that had occurred, in fact, to your knowledge?---Do I dispute that. Sorry, ask that - the two - the two things he's - yes. Yes, he has given two examples there. One is the quote subsidised, and one is to get ORIX out of trouble. Do you see that? Do you agree or disagree that events had occurred where those two things had happened?---Those two things happened, I believe. And all right. And may I suggest to you that as you read this and realised those two things had happened, there was a logic in what he was telling you, that Coke did not know about this account; do you agree?---It's his logic. It's not mine. All right. HIS HONOUR: I'm sorry, I thought you had earlier agreed that you thought there was a logic?---Yes. Yes. (Emphasis added.) 433 This evidence given by Mr Carter highlights the implausibility of his claim that he did not believe Mr Georgiou's unambiguous and clearly articulated statement that "CCA DO NOT KNOW" about the CCA Marketing Account and again demonstrates his generally combative approach to giving evidence. After accepting the logic of what was being put to him, he initially attempted to restate the logic as only that of Mr Georgiou before finally accepting the logic of it when reminded of his earlier evidence. 434 Further, and in any event, Mr Carter did not seek to contradict, by reference to any contemporaneous documents, Mr Georgiou's statement that CCA did not know of the existence of the CCA Marketing Account. Nor is there any suggestion in the evidence that any officer or employee of CCA, other than Mr Pereira, was aware of the existence of the CCA Marketing Account. These matters, combined with the nature of the payments made out of the CCA Marketing Account, including most starkly the extent to which payments were made to make Orix "look good" in the eyes of CCA in order to improve Orix's position in its commercial negotiations with CCA are sufficient evidence from which the absence of knowledge can be inferred, consistently with the observations made by Campbell JA (with whom McColl JA and Handley AJA agreed) in Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd; Carelli v FS Architects Pty Ltd [2008] NSWCA 39 at [78]. 435 The emails received by Mr Carter, that referred to Mr Pereira's use of the CCA Marketing Account to make payments to make Orix "look good" in the eyes of CCA, also included the following emails. 436 On 1 August 2013, Mr Carter received an email from Mr Georgiou in relation to the upcoming Fourth Fleet Flip, in which Mr Georgiou reported: OK- latest is TMCA can't deliver the Aug, Sept numbers…..this means CCA have to extend and WILL be paying for the re registrations. BP said.....he will sell it internally that ORIX have agreed to pay for half the rego costs….. but we take the $$ from the "profit share account". (Emphasis added.) 437 In context, it is clear that the reference to the "profit share account" is a reference to the CCA Marketing Account. CCA could not plausibly understand that Orix was "agreeing" to pay half the registration fees otherwise payable by CCA, if CCA were aware that the Orix payment was to be made from the funds to which CCA was entitled in the CCA Profit Share Account. 438 On 12 August 2013, Mr Carter received an email from Mr Georgiou in which Mr Georgiou advised: The balance of money left over ...is basically in our safe keeping to cover us for ANYTHING CCA related...just like its always been. remember BP has got us out of some real shit in the past few years and has also used some monies to make us look good at CCA Corp level. 439 On 3 January 2014 Mr Carter received an email from Mr Georgiou in which Mr Georgiou explained: OK……the Profit Share account was set up to hold monies from an "old " flip we did a few years ago! The shortfall on ET's plus some was actually paid to us by TMCA and at some point (after the flip) we were instructed by BP to send off a chq to CCA as a show of good faith, that we "actually" made some small amount of profit from the program, so we are giving some back to you. The rest, under BP's instructions was to be used at his discretion to disburse the money as he see's fit. We have had some "stuff ups" which BP has made good from this account…..a few Owner Operator Truck deals, stuff ups in payouts, money to subsidise other Snr Mgt vehicles or accessories purchased………ALL to make us look good ! This account has always remained "by name" as the CCA Profit Share account ! Fact ….. CCA do NOT have a profit share facility .. .so we can in fact close this account. BP wants to keep around $20K in this account to prop up any future stuff ups by us or purchase some accessories for other CCA Mgt when their cars are due to be replaced…..or just transfer it all into the CCA Mkgt account, again to be used by us if and when needed. The balance is to be transferred into the "CCA Mktg account" to be used for future CCA Mktg activities. He will send us an email acknowledging the fact that there is no CCA profit share account and for us to transfer the money to the "Mktg" account. Are you OK with this? 440 In context, it is clear that Mr Georgiou's references to the "CCA Mktg account" are to the CCA Marketing Account and the references to "future CCA Mktg activities" are to the continuing disbursement of money from that fund by Mr Pereira, both for his personal gain and to assist Orix in "looking good" in the eyes of CCA. 441 Later that day, Mr Carter and Mr Georgiou exchanged a series of emails that culminated in the following email at 3.01 pm from Mr Carter to Mr Georgiou, in response to being informed by Mr Georgiou that Mr Pereira had been "spooked" by Mr Georgiou and Mr Pereira did not like the name "profit share" for the account: I'll check with Wilbo when he gets back however I think we use this to convince the auditors to carry it in that name…..shouldn't worry him what we call it 442 The reference to "Wilbo" was a reference to Mr McCulloch who at that time was on leave. 443 On 6 January 2014, Mr McCulloch emailed Mr Carter in which he confirmed Mr Georgiou's account of what had happened to the rebate money and explained the difference between the "profit share account" and the slush fund: The money paid to us from TMCA/Dealers for ET's with the flip to Klugers was more than we needed and I recall that surplus sat in the old Ray Ward Account. This money has not been involved in any way with the current Profit Share balance. When this money was reconciled, we took at large cut and left the rest in the Ray Ward account. I agree with you George as to BP allowing us to mop [up] stuff ups, CCA contractors etc.. this would amount somewhere in the $100k range however, these have always been from the Ray Ward account, not profit share. Maybe we are confusing these two accounts ? Willy 444 In context, Mr McCulloch's reference to the "Ray Ward Account" was a reference to the account that Mr Carter and Mr Georgiou typically referred to as the CCA Marketing Account. 445 At 9.14 am Mr Georgiou emailed Mr Carter and Mr McCulloch in response to Mr McCulloch's email in which he advised: … If we need to keep the name of that account for "audit" purpose, then no worries, he will have to work with what we tell him to do. … 446 Moreover, I am satisfied that Mr Carter was aware that the funds in the CCA Marketing Account were being used to cover up Orix's mistakes, benefit CCA executives, make Orix look good in the eyes of CCA and to fund personal expenditure for Mr Pereira. 447 Mr Carter's knowledge as at October 2014, that the funds in the CCA Marketing Account were used, at least in part, to cover up Orix's mistakes, benefit CCA executives and make Orix look good in the eyes of CCA is established by his receipt and subsequent response to Mr Georgiou's 3 January 2014 email. It is necessary, however, to say something further about Mr Carter's knowledge of the use of the CCA Marketing Account to fund personal expenditure for Mr Pereira.
Mercedes transaction 448 On 19 April 2011, Mr Carter signed and dated an email from Mr Pereira to Mr Georgiou sent at 10.13 am on that day requesting a payment of $145,000 to Oldtimer Centre Pty Ltd and an invoice from Oldtimer Centre Pty Ltd for the purchase of a second hand 2008 Mercedes Benz CL500 Coupe Auto motor vehicle for invoicing and delivery to Mr Pereira. 449 I accept that it is more likely that Mr Carter was not shown the Mercedes invoice until 19 April 2011, contrary to the evidence of Mr Dundas. I am satisfied that Mr Carter signed and dated both the invoice and the 10.13 am email at some time on 19 April 2011 between 10.13 am and when the payment of $145,000 was made to Oldtimer Centre Pty Ltd by electronic funds transfer at 10.53 am. I also accept that Mr Carter may have had only limited time to review the documents before he authorised the transaction given there was less than 40 minutes between when Mr Georgiou received the 19 April 2011 email from Mr Pereira and Ms Hughes processing the payment for the Mercedes vehicle. 450 I do not accept, however, that it is credible that Mr Carter did not notice and recognise the significance of Mr Georgiou's handwritten note emphasising in capital letters that "FUNDS TO COME FROM CCA A/C" and "THIS IS NOT AN ORIX FUNDED VEHICLE". Mr Georgiou, in a handwritten annotation that he must have recognised was on a document to be provided to Mr Carter for authorisation, was making it very clear that the Mercedes was to be purchased from funds held in the CCA Marketing Account, not by Orix. 451 Nor do I accept that Mr Carter's authorisation of the Mercedes transaction can be characterised as him merely carrying out an administrative function for which he had no discretion or that he had to in effect accept without question any request made by Mr Pereira for the use of the funds in the CCA Marketing Account and the CCA Profit Share Account. If that was the position, it was inconceivable that Orix would have in place a process by which Mr Carter, as the Chief Executive Officer of Orix, was required to "authorise" the expenditure from the CCA Marketing Account and the CCA Profit Share Account. The more plausible and probable explanation for the requirement for Mr Carter to "authorise" the expenditure was that he could monitor the expenditure in order to satisfy himself that the funds in the account were being used in Orix's best commercial interests, both to ensure that Mr Pereira was given sufficient incentive to continue to act in Orix's interests and that a proportion of the funds were used, consistently with Mr Georgiou's explanations, to cover up Orix's mistakes and to make Orix look good in the eyes of CCA. Making Orix look good to CCA was important to increase the prospect of Orix remaining CCA's preferred supplier of leased vehicles. 452 Moreover, there is a fundamental tension between Mr Carter's claims that he was only performing an administrative function and he only glanced at the email and Mercedes invoice before he signed them and his affidavit evidence and evidence in cross examination more than 10 years after the event that he has an actual recollection of not reading Mr Georgiou's handwritten note and he only spent 15 seconds looking at the documents. It is implausible that Mr Carter could have any specific recollection of the circumstances in which he authorised the Mercedes transaction if he did no more than glance at the email and Mercedes invoice for the purpose of performing a purely administrative function. 453 The CCA Marketing Account may have been referred to as a slush fund but it was not a fund that was made available for Mr Pereira to utilise without the oversight and control of Mr Georgiou and Mr Carter. The decision to order the "revs check" on the vehicle is consistent with a desire on the part of Mr Carter to ensure that the funds to be utilised from the CCA Marketing Account were used to provide a real, and not illusory, "benefit" to Mr Pereira in order to retain his continuing support in Orix's commercial dealings with CCA. 454 Nor do I accept, contrary to Mr Carter's submission, that the absence of any evidence from Mr Carter that he did not forbid Mr Georgiou from allowing the CCA Marketing Account to be used for the Mercedes transaction in any sense demonstrates or bolsters the credit of Mr Carter. Rather the absence of such evidence only serves to highlight Mr Carter's contemporaneous acceptance and understanding that the funds in the CCA Marketing Account (and in the CCA Profit Share Account for the payment to Mr Chua), subject to Mr Carter's authorisation, were being used for purposes, that included, funding Mr Pereira's personal expenditure.
Expense Reimbursement Forms 455 In the period between September 2010 and August 2011, Mr Georgiou made a number of cash withdrawals from his personal bank account(s) and then sought reimbursement for these withdrawals from Orix. In order to be reimbursed for these withdrawals Mr Georgiou was required to complete pro forma reimbursement claim forms, and then have it approved by his line manager, Mr Carter. 456 In September 2010, for the period 19 September 2010 to 26 September 2010, Mr Georgiou sought reimbursement for expenses incurred on "RECENT TRAVEL TO CHINA WITH COCA-COLA" in the amount of $9,046.50. The description of the expenses are "GIFT VOUCHERS", "CORPORATE GIFTS" and "GIFTS FOR CHINA". Mr Carter's signature is on this form accompanied by the words "AMOUNT TO BE OBTAINED FROM FUNDS HELD FOR CCA". 457 On 21 January 2011, for the period 14 January 2011 to 20 January 2011, Mr Georgiou sought reimbursement for expenses incurred "TO BUY CORPORATE GIFTS FOR COKE" in the amount of $6,000. The form notes "TO BE REIMBURSED FROM CCA ACCOUNT - REFER KIM SCOTT". 458 On 17 February 2011, Mr Georgiou sought reimbursement for expenses incurred "FOR COKE USE AT CHARITY AUCTION" in the amount of $4,000. The form notes "TO BE REIMBURSED FROM CCA A/C - REFER KIM SCOTT". 459 On 14 March 2011, Mr Georgiou sought reimbursement for expenses incurred "FOR PURCHASE OF GOLF GOODS FOR GOLF DAY" in the amount of $8,500. The form notes "TO BE REIMBURSED BY CCA - REFER KIM SCOTT". 460 On 18 May 2011, Mr Georgiou sought reimbursement for expenses incurred "FOR CORPORATE GIFTS" in the amount of $2,000. 461 The descriptions of the expenses in each of the expense reimbursement forms purported to be signed by Mr Carter, are not sufficient on their face to establish to the requisite standard, given the seriousness of the allegation, that Mr Carter must have appreciated that the expenses were not for legitimate CCA "marketing" expenses. The descriptions "GIFT VOUCHERS", "CORPORATE GIFTS", "GIFTS FOR CHINA", "TO BUY CORPORATE GIFTS FOR COKE", "FOR COKE USE AT CHARITY AUCTION", "FOR PURCHASE OF GOLF GOODS FOR GOLF DAY" and "FOR CORPORATE GIFTS" are equivocal. The descriptions either suggest that the expenditure was for CCA's benefit or are silent as to whether the gifts are for the use of Orix or CCA or whether, by way of example, it was a "CCA golf day" or an "Orix golf day". 462 Moreover, that the "marketing expenses" may have initially been paid for by Mr Georgiou by cash is not capable, without more contextual information, of establishing to the requisite standard that the payments were not genuine marketing expenses for CCA. It is possible that the descriptions were fictitious, but there was an insufficient evidentiary basis for such a finding to be made. 463 Mr Carter's authorisation of the reimbursements to Mr Georgiou for CCA "marketing expenses" from the CCA Marketing Account without any receipts or other documents substantiating that the purchases were legitimate may have been poor practice and careless but is not sufficient to demonstrate that Mr Carter must therefore have known that the expenses were not legitimate expenses and were a bribe or illegal inducement. Mr Carter's authorisation of the reimbursements in the absence of any supporting documentation or authorisation from CCA, while consistent with the proposition that Mr Carter knew that the CCA Marketing Account was operating as a slush fund for Mr Pereira, is not, in and of itself, sufficient to establish that he had such knowledge, to the requisite standard. 464 I note that there was conflicting evidence as to whether the signatures of Mr Carter on the 14 March 2011 and 18 May 2011 expense reimbursement forms were genuine. Mr Dubedat gave expert evidence that the signatures were "probably not genuine" or "not genuine" by comparing the signatures to specimen signatures provided to him by Mr Carter. Three witnesses, however, who were very familiar with Mr Carter's signature, Ms Ryan, Ms Hughes and Mr Dundas, gave evidence that they recognised the signature as that of Mr Carter. Further Ms Ryan gave evidence that she had observed that Mr Carter's signature often varied, depending on his position at the time and whether he used an "on the fly" signature. Mr Forster also gave evidence that he had observed that Mr Carter used a more rounded signature when he was rushed or distracted. 465 On balance, I am satisfied that it is more probable than not that Mr Carter's signatures on the 14 March 2011 and 18 May 2011 expense reimbursement forms were genuine. Ms Ryan and Mr Forster have provided plausible and credible explanations for the differences in Mr Carter's signature on those forms. The evidence of Ms Ryan and Mr Forster, based on their observation of Mr Carter's practice in signing documents was that his signatures varied substantially. It is not surprising given those explanations that an expert handwriting expert might have reached the conclusions that Mr Dubedat reached when he compared the disputed signatures with copies of Mr Carter's usual signatures. 466 Further, the explanations for the expenditure were relatively benign and of the same character that Mr Carter accepts he authorised, Mr Carter's preparedness to authorise expenditure from the CCA Marketing Account was known by Mr Georgiou and other Orix employees involved in obtaining Mr Carter's authorisation for expenditure from the CCA Marketing Account and the forging of a chief executive's signature is not a matter to be lightly inferred, particularly in the absence of any coherent explanation by Mr Carter as to who might have forged his signature other than speculation, without any foundation, that Mr Georgiou might have done so.
Adult entertainment 467 The extent to which Mr Carter was aware that the CCA Marketing Account was utilised to fund personal expenditure of Mr Pereira was more clearly demonstrated with respect to funding adult entertainment for Mr Pereira. 468 In the course of an email exchange between Mr Carter and Mr Georgiou on 25 January 2012 in which Mr Georgiou advised Mr Carter, in response to a query as to what Mr Pereira had recently purchased in Sydney: … Shit loads of gifts ! Including a 2600 breitling watch for a cca mgr !! He didn't want to tell me the name but said don't make a comment about the watch when I see it on someones wrist !! 469 Mr Georgiou then added in his next email in the exchange: … Plus the 7k cash I had to get out yesterday to pay for his roots !!! But he is good value for us bro ! He said he doesn't question wilbo anymore on the profit share calcs .. just said whatever the figure is I'm sure JC is overlooking the account so I trust you guys nowadays ! Just wanted to transf to whatever account JC wants set up !! 470 Not only does the exchange make plain that Mr Carter was informed of the payment, in cash of $7,000 for Mr Pereira's adult entertainment, it also made clear to Mr Carter the extent to which Mr Pereira was content to rely on Mr Carter to "overlook" the CCA Marketing Account on his behalf.
Golf trips and personal expenditure 471 Mr Carter's knowledge of the extent to which the CCA Marketing Account was used for Mr Pereira's personal benefit was also demonstrated by an email exchange he had with Mr Georgiou in January 2011 about purchases made by Mr Pereira and an overseas golf trip that Mr Georgiou was planning with Mr Pereira. 472 On 4 January 2011, Mr Carter and Mr Georgiou had an email exchange in which the sensitivity of Mr Georgiou's overseas travel with Mr Pereira was starkly illustrated. 473 The email chain began with an email from Mr Georgiou to Mr Carter forwarding an email from Mr Pereira to Mr Georgiou in which Mr Pereira asked Mr Georgiou to purchase an item from golfbuddyglobal.com and to bring it with him "for the 14th to S'pore". A reference, I infer, to a trip that Mr Pereira and Mr Georgiou were planning to Singapore commencing on 14 January 2011. Mr Georgiou asked Mr Carter in his covering email to him: Bro- can you buy these things in Oz ? 474 Mr Carter expressed no surprise at Mr Pereira's request for the purchase of the item from golfbuddyglobal.com. Rather, he responded in relation to the proposed trip: I believe you can … you never got back to me re this trip … surely you are not going the way you feel……..also….what's happening re restructure….. 475 At this point Mr Carter's concern is with Mr Georgiou's health, not a trip to Singapore with Mr Pereira. 476 Mr Carter, however, in a subsequent email to Mr Georgiou, sent at 2.34 pm, notified him: Also, this will be the last trip with BP for a while……I'm uncomfortable with the message it sends to the troops ….. for me I'm okay with it …. but I know there are rumblings …. you won't here [sic] them but I sense they are there with Kimbo, Chuckles and Scooter … (trust me on this one). 477 As I explain at [287] above, "Kimbo" was a term that Mr Carter and Mr Georgiou used to refer to Ms Scott. 478 Mr Georgiou, relevantly responded in his next email to Mr Carter in the chain, sent at 2.39 pm: I will tell BP that as well bro- no big deal I'm sure he HAS to understand!! 479 This email exchange highlights Mr Carter's knowledge of the sensitivity of Mr Georgiou's overseas golfing trips with Mr Pereira, a matter emphasised by the language of "trust me on this one" and that Mr Pereira "HAS" to understand. He has to understand because it must have been self-evident to both Mr Carter and Mr Pereira that the golf trips were for the personal benefit of Mr Pereira.
Issues 33 and 34 480 I am satisfied given his involvement in, and knowledge of, the closure of the RW AR Account and the subsequent use of a spreadsheet to record and track the balance held for Mr Pereira's use in the Orix income account and the introduction of the fee that ultimately was characterised as an "inspection fee", as demonstrated by the emails and matters that I refer to at [270] to [277] and [283] to [294] above, that Mr Carter knew as at 30 October 2014 that (a) CCA did not know of the imposition of the $13.90 inspection fee, that it was paid into the CCA Marketing Account and then made available for Mr Pereira to disburse for his benefit and (b) CCA had not authorised Mr Pereira to make those disbursements. Given the absence of any service being provided in return for the "inspection fees" it is inconceivable that Mr Carter believed CCA had authorised or permitted Mr Pereira, either apparently or expressly, to agree to the inspection fees being added to the Orix quotations to CCA.
Issue 35 481 Given my findings that Mr Carter knew as at October 2014, that unknown to CCA, the funds in the CCA Marketing Account were used, at least in part to cover up Orix's mistakes, benefit CCA executives and make Orix look good in the eyes of CCA, I am comfortably satisfied, on the balance of probabilities, and having regard to the quality of evidence required to reach such a serious and adverse conclusion as required by s 140(2) of the Evidence Act, that Mr Carter had actual knowledge as at 30 October 2014 that, at least, significant payments were made from the CCA Marketing Account as an illegal inducement or alternatively a bribe to Mr Pereira to secure his assistance in Orix's commercial dealings with CCA.
E.10. Mr Carter's knowledge of the payment to Mr Chua (Issues 36 and 37)
E.10.1. Overview 482 The agreed issues with respect to the payment to Mr Chua are: (a) what did Mr Carter know about the transfer of $47,200 from the CCA Profit Share Account to Mr Gary Chua in July 2013 (Issue 36(a)), including who benefitted from that expenditure and/or at whose direction was that expenditure incurred (Issue 36(b))? (together, Issue 36); and (b) did Mr Carter know that this payment to Mr Chua was made as an illegal inducement or alternatively a bribe? (Issue 37).
Issue 36 483 Chubb submits that Mr Carter must have known about the transfer to Mr Chua, because he sent the email at 2.59 pm on 26 July 2013 to Mr Georgiou, which was a false payment authority for Mr Pereira to provide to Orix, in order to secure the release of funds from the CCA Profit Share Account to make the transfer. 484 Chubb submits that in light of Mr Carter's involvement, as reflected in his 26 July 2013 emails, the Court should find in answer to Issue 36(a) that he knew that Mr Pereira made the request for the transfer, and therefore it benefitted him. 485 In answer to Issue 36(b), Chubb submits that Mr Carter knew that the transfer had been made at Mr Pereira's request, without any authorisation from CCA, since Mr Carter himself drafted the payment authority for Mr Pereira to send back to Orix. Chubb submits that had Mr Carter believed that Mr Pereira was properly authorised in making the request, he would simply have asked Mr Georgiou to obtain a valid payment authority from CCA, rather than drafting it himself. 486 Mr Carter submits that it should be clear beyond argument that the disputed document sent at 2.59 pm from Mr Carter's email address was not drafted or sent by Mr Carter. 487 Mr Carter submits that there is no evidence that Mr Carter knew anything about the transaction with Mr Chua. He submits that Chubb's whole claim depends on the 2.59 pm email purported to have been sent by Mr Carter on 26 July 2013. Mr Carter submits that his denials that he had any involvement in the creation of this email should be accepted because, (a) he does not appear to have been at his desk at that time, (b) it is unlikely he would sign off an email "BP", (c) Mr McKemmish gave expert evidence that a large number of emails were sent from Mr Carter's email address prior to 2.21 pm and after 3.43 pm on 26 July 2013, but the only email sent between those times was the disputed email sent at 2.59 pm, and Mr McKemmish could find no reference in any emails to the bank details of Mr Chua included in the 2.59 pm email, (d) if Mr Carter had sent the 2.59 pm email then there would not have been any need for Mr Georgiou to email Mr Carter at 3.26 pm asking if the email he had received from Mr Pereira was okay because it was in the same form of words as the 2.59 pm email, and (e) it defies all logic that Mr Carter would have carried out a LinkedIn search on Mr Chua at 3.26 pm rather than before he purportedly created the disputed email at 2.59 pm. 488 Further, Mr Carter submits that an equally likely course of events to that suggested by Chubb is that Mr Georgiou went into Mr Carter's office and sent the 2.59 pm email as "cover", received it on his blackberry device, sent a further email from his computer at 3.01 pm to Mr Pereira and then sent the "is this Ok" email to Mr Carter at 3.25 pm. Mr Carter submits that this version of events is consistent with the expert evidence of Mr McKemmish that the 2.59 pm email either came from or to a blackberry device and given the unexplained failure of Chubb to call on its subpoena for Mr Georgiou to give evidence the Court can more comfortably draw inferences against Mr Georgiou.
Issue 37 489 Chubb submits that in circumstances where Mr Carter both knew, from his own role in the transaction, that (a) the transfer was at Mr Pereira's personal request and (b) the transfer was for Mr Pereira's benefit (in that it acceded to a request by him), there could have been no other reason to facilitate, by drafting a false payment authority, the making of the payment to Mr Chua. It submits that Mr Chua was clearly unknown to Mr Carter as Mr Carter took steps to look him up on LinkedIn. 490 Chubb submits that Mr Carter knew that the only reason for making that payment would have been to obtain the favour of Mr Pereira and that it was a substantial gift in the amount of $47,200 that posed the obvious risk of compromising Mr Pereira in Orix's favour. 491 Chubb submits further that the answer to this issue also needs to take into account the extensive relationship between Mr Pereira and Orix, in which Orix provided substantial payments and benefits to Mr Pereira that preceded July 2013. 492 Mr Carter submits that it should be clear beyond argument that the disputed document sent at 2.59 pm from Mr Carter's email address was not drafted or sent by Mr Carter, and in those circumstances Chubb has made an error in understanding the facts in issue and should withdraw its allegations regarding the payment to Mr Chua.
E.10.3. Consideration 493 I am satisfied that Mr Carter drafted and sent the 2.59 pm email on 26 July 2013 and he was thereby aware of (a) the proposed payment to Mr Chua from the CCA Profit Share Account before it was made at or about 4.00pm on 26 July 2013, (b) the proposed payment to Mr Chua was made at the request of Mr Pereira, (c) the immediate beneficiary of the payment was Mr Chua, but given the payment was made at the direction of Mr Pereira to a person with no discernible connection with CCA the beneficiary of the payment, at least in an indirect sense, was also Mr Pereira. 494 I do not accept Mr Carter's claim that he was not involved in the creation of the 2.59 pm email. None of the matters relied upon by Mr Carter to dispute that he sent the email are persuasive. 495 There was no probative evidence that Mr Carter was not at his desk. Mr Carter's attempt to rely on a meeting record to claim he was in a three hour meeting at 3.00 pm appears to have been abandoned. In any event, the meeting record cannot sensibly be construed as suggesting that Mr Carter was in a teleconference or any other meeting at 3.00 pm on 26 July 2013. The meeting record referred to a meeting with a subject line "Rory" by "phone from JJC's office to CB [Chris Briggs]" with a start time of "2013-07-26T00:00:00Z" and an end time of "2013-07-26T00:15:00Z". I readily infer, and take judicial notice, that references to date and time groups followed by the letter Z indicate that the date and time group is in Zulu time (that is UTC + 0). Zulu time is a time zone that is ten hours behind Australian Eastern Standard Time (AEST) (that is Kilo time, being UTC + 10). Further, I take judicial notice of the fact that the time that is represented in three sets of double digits separated by colons refers to hours, minutes and seconds. Hence the start and end times recorded in the meeting record are relevantly 10.00 am and 10.15 am AEST. 496 The "BP" sign off was explicable on the basis that it was an email to be sent by Mr Pereira to Mr Georgiou. The frequency with which Mr Carter sent emails on the afternoon of 26 July 2013 tells one nothing as to whether the 2.59 pm email was genuine. As explained below, the 3.26 pm email from Mr Georgiou asking if the email from Mr Pereira was "ok" is not inconsistent with Mr Carter creating the 2.59 pm email because it did not attach the invoice, as stipulated in the 2.59 pm email. The bank details may well have been provided orally or in a document that has not been retained, and there was no necessary connection between the timing of the LinkedIn search and the preparation of the 2.59 pm email. 497 Moreover, the "Georgiou implication" theory advanced by Mr Carter itself is illogical. Irrespective of whether Mr Carter created the 2.59 pm email, Mr Carter was subsequently emailed the request from Mr Pereira for the payment to Mr Chua at 3.26 pm and asked whether it was "ok". This would have been more than sufficient to implicate Mr Carter if that was Mr Georgiou's motivation and would have avoided the obvious risk that Mr Carter may have subsequently discovered that Mr Georgiou had been creating fictitious emails on Mr Carter's email account. 498 Nor, contrary to Mr Carter's submissions am I prepared, for the reasons I have given at [108] to [109] above, to draw any Jones v Dunkel inference against Chubb for not calling on Mr Georgiou's subpoena to give evidence in rejecting as implausible the "Georgiou implication" theory. 499 Further, it is significant that Mr Georgiou did not provide Mr Pereira with a copy of Mr Carter's 2.59 pm email, rather he copied the email to a new email and sent that to Mr Pereira from his own email address. There was no evidence to suggest that Mr Georgiou sought to use the 2.59 pm email to represent to Mr Pereira that the form of the request necessary to facilitate the payment to Mr Chua had come from Mr Carter. 500 For these reasons, I am comfortably satisfied, on the balance of probabilities, and having regard to the quality of evidence required to reach such a serious and adverse conclusion as required by s 140(2) of the Evidence Act, that Mr Carter knew that the payment to Mr Chua was made as an illegal inducement or alternatively a bribe. Mr Carter was not aware of any information to suggest that the advance of $47,500 to Mr Chua, at Mr Pereira's request, to purchase a car was in any way connected with or otherwise in the commercial interests of CCA. Nor was Mr Carter aware of any alleged authorisation by CCA of the advance to Mr Chua. 501 Moreover, it is implausible that Mr Georgiou did not provide Mr Carter with an explanation of why the payment was being made to Mr Chua at or about the time that he forwarded the Kia quotation to Mr Carter given the care with which Mr Carter drafted the 2.59 pm email and the opaque manner in which he forwarded it to Mr Georgiou. Whatever the precise form of the explanation provided by Mr Georgiou to Mr Carter to cause Mr Carter to draft the 2.59 pm email it must have been sufficient to persuade Mr Carter that it was a payment to be made as a personal favour to Mr Pereira given the absence of any discernible benefit to CCA or Orix. A personal favour, which I am satisfied Mr Carter was aware was intended to secure the continued assistance of Mr Pereira in Orix's commercial dealings with CCA, as emphasised by Mr Georgiou in his 12 August 2013 and 3 January 2014 emails to Mr Carter referred to at [438] and [439] above.
F.1. Overview 502 In April 2014, Mr Pereira caused a company called Systems Reporting Services Pty Ltd (SRS) to issue invoices for what were described as "management services inspection fees" (SRS invoices) in an amount of $500 per vehicle delivered by Orix to CCA since November 2013 (SRS arrangements). The SRS arrangements replaced the previous use of the CCA Marketing Account into which the net rebates and excess introducer fees (that is, introducer fees that had not been passed onto to Mr Ward) had been allocated.
F.2.1. Issues 503 The parties have identified the following specific issues relevant to the existence and operation of the SRS arrangements: (a) what was the nature of the arrangement that Orix entered into with SRS pursuant to which SRS invoiced Orix for "management inspection service fees" for which it was paid in 2014? (Issue 1); (b) were the SRS invoices "fictitious invoices" meaning that they were issued by SRS with the intention of SRS claiming the fees described in those invoices but with no intention of SRS carrying out any of the services described in those invoices? (Issue 2); (c) were the SRS invoices issued with the intention of SRS conducting the "introducer role" (and receiving the introducer payments) previously conducted by Mr Ward and/or carrying out inspection services previously carried out by Pickles? (Issue 3); (d) did SRS take on the "introducer" role previously performed by Mr Ward? (Issue 4); (e) did SRS take on the role of providing inspection services previously undertaken by Pickles? (Issue 5); (f) did Mr Pereira receive a financial benefit from the payment of the SRS invoices? (Issue 6); and (g) if the answer to Issue 6 is affirmative, were the payments made by Orix to SRS an illegal inducement or alternatively a bribe to Mr Pereira? (Issue 7).
Issues 1 to 6 504 Chubb submits that the nature of the arrangement entered into by Orix with SRS was a sham transaction, in which SRS rendered no services to Orix, but invoiced Orix for asserted services, in order for Orix to make payments of money that had accrued in a relevant accounts payable account as a result of the introducer fee element included in Fourth Fleet Flip quotes to Mr Pereira. 505 Chubb submits: (a) the SRS invoices were "fictitious" as they claimed fees for services that were not, and were not intended to be, rendered, whether for inspection services or the role previously carried out by Mr Ward (in answer to Issues 2, 3, 4 and 5); and (b) it may be inferred from the nature of the arrangement that the purpose of the payments was to provide a financial benefit to Mr Pereira, and that he received such a benefit (Issue 6). 506 Mr Carter accepts that the payment of the SRS invoices was a "brazen fraud". He accepts that the arrangement entered into by Orix with SRS would seem to be a sham transaction pursuant to which SRS invoiced Orix for services it did not render to Orix. He also accepts that the purpose of the transactions was to assist Mr Pereira or persons associated with him to access the introducer fee element included in the Fourth Fleet Flip. 507 Mr Carter submits, however, that the only reasonable explanation for Mr Pereira seeking to access the funds through the SRS invoices rather than the existing CCA Marketing Account was that he was intending to cease to be an employee of CCA.
Issue 7 508 Chubb submits that the answer to Issue 7 is unequivocally yes, although it contends that by the point in time by which the SRS payments were made, Mr Pereira was already, and had long been, compromised and "captured" by Orix. It submits that the SRS payments in 2014 were merely a continuation of what had already been happening since at least March 2009 with respect to making the so-called CCA Marketing Account available for use at Mr Pereira's unrestricted direction. Chubb submits that the entire arrangement was devised to keep the fact of Mr Pereira's involvement a secret, and that there can be no contest that CCA did not know and did not authorise Mr Pereira to be paid substantial sums by Orix while he was an employee of CCA. Chubb submits that this is why secrecy was paramount and why Mr Carter rejected Mr Pereira's initial proposal that Systems Management Services Pty Ltd (ABN 83 167 084 951) (SMS), a company of which Mr Pereira was a director, be used as an invoicing entity. 509 Mr Carter submits that the answer to Issue 7 must be in the negative. 510 Mr Carter submits that the payments made to SRS could not compromise Mr Pereira's loyalty to CCA and therefore could not have been made as a bribe or illegal inducement. He submits that the payments made pursuant to the SRS invoices were made more than six months after the terms of the Fourth Fleet Flip were agreed, there was no evidence that Mr Pereira was asked to perform any act or omission in return for the payments and the payments were made at a time when Mr Pereira was being replaced by the "NEW team". 511 Mr Carter submits that there was no reasonable basis for Mr Pereira to have been participating in the SRS arrangements, as distinct from the Slush Fund arrangements, unless Mr Pereira was intending to leave the employment of CCA.
F.2.3. Consideration 512 Given Mr Carter's concessions that the payment of the SRS invoices was a brazen fraud and the purpose of the transactions was to assist Mr Pereira or persons associated with him to access the introducer fee element included in the Fourth Fleet Flip, together with the absence of any evidence that Mr Pereira or SRS provided or intended to provide any inspection, introduction or other services, it is readily apparent, and I am comfortably satisfied, on the balance of probabilities, and having regard to the quality of evidence required to reach such a serious and adverse conclusion as required by s 140(2) of the Evidence Act, of the following matters. 513 First, the SRS arrangements involved the issue of "fictitious invoices" to Orix in which SRS claimed fees for services that it had no intention of carrying out in order to enable Mr Pereira to access the introducer fee element in the Fourth Fleet Flip. 514 Second, the SRS invoices were not issued with the intention of SRS conducting the "introducer role" previously conducted by Mr Ward or carrying out inspection services previously provided by Pickles. 515 Third, SRS did not take on the introducer role previously undertaken by Mr Ward or provide inspection services previously provided by Pickles. 516 Fourth, Mr Pereira received a financial benefit from the payment of the SRS invoices. 517 The question of whether the payments made by Orix to SRS were an illegal inducement or alternatively a bribe to Mr Pereira is inextricably linked to the question of what knowledge Mr Carter had of the SRS arrangements. That question is addressed below.
F.3. Mr Carter's knowledge of the SRS arrangements (Issues 8 to 13)
F.3.1. Issues 518 The parties have identified the following specific issues as to Mr Carter's knowledge of the SRS arrangements: (a) what did Mr Carter know by 30 October 2014 about Orix's arrangement with SRS? (Issue 8); (b) at the relevant date of the approval for payment of the SRS invoices what was Mr Carter's understanding of Mr Pereira's future employment with CCA? (Issue 9); (c) did Mr Carter understand that SRS would be taking on the role of carrying out the inspections previously carried out by Pickles? (Issue 10); (d) if the SRS invoices were issued by SRS as "fictitious invoices" in the manner described in Issue 2, was Mr Carter aware of that fact on 30 October 2014? (Issue 11); (e) did Mr Carter not want Mr Pereira to be seen to be associated with SRS because Mr Carter understood that SRS would be creating "fictitious invoices" or because Mr Carter did not want Mr Pereira to be associated with a company providing services for CCA whilst Mr Pereira was still an employee of that company? (Issue 12); and (f) if the answer to Issue 7 is affirmative, did Mr Carter know by 30 October 2014 that the payments made by Orix to SRS were an illegal inducement or alternatively a bribe to Mr Pereira? (Issue 13).
Chubb 519 Chubb submits that the Court should find that Mr Carter knew that the arrangement to pay SRS was a sham, devised to enable Mr Pereira to access funds posted to an "introducer" accounts payable account without Orix being seen to pay Mr Pereira those moneys directly. It submits that Mr Carter did not have any genuine belief that SRS was performing any actual services for Orix. 520 Chubb submits that the short answer to Issue 9 is that it should be inferred that, by 10 June 2014, when the first invoice for SRS was approved, Mr Carter had obtained sufficient assurance that Mr Pereira's employment with CCA would not be affected by the announced restructure. 521 Chubb submits, in answer to Issue 10, that Mr Carter had no understanding that SRS would be taking on the role of carrying out the inspections previously carried out by Pickles. Chubb submits that Mr Carter would have realised that it was not possible that SRS was providing such a service, because (a) it was charging for a service that was said to have been provided in the same period that he had been told Pickles was also providing the service, (b) it was also the same service that SMS had also purported to have provided to Orix, and (c) SRS could not have provided that service because it did not exist at the time that the alleged services were provided. 522 Chubb submits that it therefore follows, in answer to Issue 11, that Mr Carter knew that SRS was issuing fictitious invoices, because it could not have provided the service for which it invoiced. 523 Chubb submits, in answer to Issue 12, that Mr Carter did not want Mr Pereira to be seen to be associated with SRS because he understood that SRS would be creating "fictitious invoices" and that was his intention in allowing Orix to make those payments. 524 Chubb submits, in answer to Issue 13, that Mr Carter knew all of the relevant facts to establish that the payments were a bribe. It submits that Mr Carter knew they were being paid to Mr Pereira, who was an employee of CCA, he knew the sums were substantial, not only because he was given some of the invoices (the two invoices by SRS submitted to him on 12 May 2014 exceeded $300,000) but also because he was told in emails that the payment was worked out on the basis of $500 per vehicle delivered, and he was undoubtedly capable of working out what the mathematical conclusion to that would be.
Mr Carter 525 Mr Carter submits that the Court should find that Mr Carter understood that a company for which Mr Pereira was neither a shareholder nor director had provided, or would be providing, services for the benefit of CCA, that the company would invoice Orix for those services and that following the usual authorisation processes at Orix those invoices would be paid. 526 Mr Carter submits that his involvement in the majority of the transactions relied upon by Chubb was only peripheral, the Court was given a distorted view of the totality of the email traffic received by Mr Carter each day and the time he had to review those emails, and the titles chosen by Mr Georgiou for emails such as "Coke FYI only!!" and "Another penguin caught in our nets" did not indicate that Mr Carter shared Mr Georgiou's views or the titles might have suggested anything significant to Mr Carter. 527 Next, Mr Carter submits that an alternative and more plausible inference to that propounded by Chubb was that (a) he recognised the SRS invoices had something to do with Mr Pereira providing some form of service for the benefit of CCA "somewhat in the manner that Mr Ward had done when he left CCA", (b) he was concerned that this might give rise to a potential conflict of interest, but (c) he saw this as an issue between Mr Pereira and CCA and not a matter directly involving Orix. 528 Finally, Mr Carter submits that it would make no commercial sense for Mr Carter to have entered into a fraudulent transaction, that was of no benefit to Orix or himself that would risk "everything, including his freedom", with a person with whom he had no personal relationship and where the person was not even going to remain working for CCA. 529 In answer to Issue 9, Mr Carter submits that the evidence demonstrates that Mr Carter was of the understanding that Mr Pereira would be leaving the employment of CCA when the SRS invoices were paid. 530 Mr Carter submits that Chubb's contentions on Issues 10 and 11 are dependent on Chubb's contention that Mr Carter read and properly understood the effect of the SMS and SRS invoices. He submits that the Court should not reach that conclusion. 531 Mr Carter submits that Chubb's argument on Issue 12 is illogical. He submits that if Mr Carter had agreed to pay fictitious invoices, removing Mr Pereira as a director or shareholder would not make it any less likely that the fraud for non-existent inspections was not going to be discovered. Mr Carter submits that the most likely reason for his request is his understanding that it may create a possible conflict of interest. 532 Mr Carter submits that the answer to Issue 13 must be no. Mr Carter submits that the only motivation that Chubb can point to for Mr Carter being knowingly involved in the fraud by Mr Pereira was the "capturing" of Mr Pereira which Chubb describes as the CCA scheme. Mr Carter submits that the scheme fails because in no relevant sense was Mr Pereira captured or compromised. He submits that Mr Pereira had apparent authority to instruct Orix to make the disbursements it did, and Orix had no discretion to refuse those instructions. Mr Carter submits that it follows that "you cannot bribe someone with their own money". He submits that Chubb has no other explanation as to why Mr Carter would engage in a fraud of this type, and no reasonable explanation as to why he would do it when he understood that Mr Pereira was leaving CCA.
F.3.3. Consideration 533 The origin of the SRS arrangements can be traced back to July 2013. 534 On 10 July 2013, Mr Georgiou sent an email to Mr Carter alone, with the subject "Coke FYI only !!". It read: Ok just spoke to BP …he understands ! No more pre off lease inspection. No more car comparisons until 6 mths out from the 48 mths. Told him the 2 accounts…profit share and his slush…have to stay separate. Told him JC will give CCA 12m and they have to pay it back in equal mthly installments [sic] …..for that matter JC is happy to give CCA whatever they want as long as we charge it back over the life of the lease. No more smoke and mirrors…although he was adamant he has never tried to dud us!! He has told Ward…its over …he will get a one off payment of $100 per car for the 1000 cars totalling $100k ...paid from the profit share account before the end of this year…then he's out ! He wants the $1k to continue along...we put that into where ever we want and control it. He will a few times during the year...invoice us as a consultant totaling [sic] about 180k PA {basically replacing Ward} and we pay from the profit share\accrual account. The 1000 cars we put on will have the $1000 bkge in there...so we end up with $1m for the next 4yrs of which he will only draw his 180k PA . What I will do now is do the quotes based on 48/120kms with the 12k and the $1k….that's the rental we want over the next 48mths. I offered your plan of the credit then invoice fuel…he understands why but wants to see the numbers. 535 The email made plain to Mr Carter that Mr Pereira wanted the $1,000 payment to continue, notwithstanding that Mr Ward would no longer be involved, and Mr Pereira was content that Orix would hold and control the payments. Further, Mr Carter was informed that a "few times" each year Mr Pereira would invoice CCA as a consultant, in aggregate approximately $180,000 per annum, and CCA would pay the invoices from the CCA Marketing Account. Significantly, the payment as a "consultant" was not suggested to be necessary because Mr Pereira might be about to cease to be employed by CCA. Rather, it was suggested as a means by which funds could be made available to Mr Pereira once the arrangements with Mr Ward were concluded. At that time half of the introducer fees payable to Mr Ward were being paid into the CCA Marketing Account. 536 On 30 July 2013, Mr Carter engaged in the following email correspondence with Mr Georgiou: (a) at 10.31 am, Mr Georgiou sent Mr Carter and email that a deposit made to Mr Chua's account had shown as from "CCA Accrual Account" and that "BP [Mr Pereira] wants the account name changed to BP Fair Wear and Tear Account"; (b) at 11.33 am, Mr Carter responded that "It's not a BP Account….it's a CCA account….no way we have it titled in our accounts BP's account….when they transmit it….they don't need to show anything"; (c) at 11.35 am, Mr Georgiou enquired "Can we call it a Fair Wear and Tear account?"; (d) at 11.37 am, Mr Carter replied "yep with CCA in front of it"; and (e) at 11.47 am, Mr Carter replied again and said "Actually you need to check with Wilbo as it might be called this for the auditors ie profit share … if this is the case CCA accrual account needs to stay…as I said…with transfers you don't have to write anything so nothing appears on peoples bank statements…". 537 This email exchange between Mr Carter and Mr Georgiou demonstrates the extent of Mr Carter's continuing knowledge and involvement in the payment of money out of the CCA Marketing Account including his sensitivity as to how the account was named and that the payment from the account were not disclosed on bank statements. It was in that context that Mr Carter and Mr Georgiou subsequently required Mr Pereira to nominate a company to receive the payments, rather than to continue to use the various iterations of the CCA Marketing Account to make funds available to Mr Pereira. 538 Between 8 and 11 August 2013, Mr Georgiou and Mr McCulloch engaged in correspondence concerning the pre-end of lease inspections (which was copied to Mr Carter). The effect of this correspondence was: (a) Mr McCulloch did not believe that pre-end of lease inspections was included in the Fourth Fleet Flip because of the cost to Orix; (b) Mr Georgiou was of the view that that was agreed "going forward" but that "bp says he has paid for the current cars to have inspection so it should be done"; (c) the cost of the inspections was borne by Orix; (d) Pickles were withdrawing the service by the year's end; and (e) Mr Georgiou had told Mr Pereira that Pickles was ceasing the service in December. 539 In response to this chain of correspondence, Mr McCulloch responded "Pickles are dropping it because its been running at a loss for some time. What do you want me to do ?". 540 Mr Carter's response to Mr McCulloch was unequivocal: "Wilbo, where we have committed to do them and we can't get out of it, we need to have an alternative". Mr Carter wanted a replacement to Pickles to be found and, importantly, Mr Georgiou knew that Mr Carter wanted a replacement to be sourced. There is no evidence that Mr Carter was ever told that a replacement was not sourced and instead Pickles had continued to provide the service. 541 By 18 November 2013, it was apparent that the funds remaining in the CCA Marketing Account were very limited and that the previous arrangements under which Mr Ward invoiced Orix for introducer fees had ceased for some time. 542 On 18 November 2013, Mr Carter, Mr Georgiou and Mr McCulloch exchanged the following emails. 543 At 8.21 am, Mr McCulloch advised Mr Carter and Mr Georgiou that as at 1 November 2013, the "BP" account had a negative balance of $3,070.86, if the $70,000 transfer from the CCA Profit Share Account was not taken into account. I infer that, in context, the reference to the "BP" account was a reference to the CCA Marketing Account. 544 At 8.30 am, Mr Georgiou responded: Thanks bro … how much is in Profit share now ? As he wants to finish up Ward with a $100k in Dec. 545 At 8.45 am, Mr McCulloch advised Mr Carter and Mr Georgiou that the balance in the CCA Profit Share Account was $134,000. 546 At 8.48 am, Mr Carter responded: I thought the Ward Account disappeared last year.... 547 At 8.50 am, Mr Georgiou forwarded Mr McCulloch's 8.21 am email to Mr Pereira and advised him: Bro..this is the balance of your account and there is $134k left in the profit share. I think u need to start invoicing us for the deals settled like Ray does asap … 548 Consistently with Mr Pereira's suggestion conveyed by Mr Georgiou in his 10 July 2013 email to Mr Carter, Mr Georgiou was suggesting to Mr Pereira the introduction of a mechanism by which Orix would be able to make payments to Mr Pereira to replace the previous invoices provided by Mr Ward. It is significant that Mr Georgiou refers to the CCA Marketing Account as "your account" and distinguishes it from the "profit share" account. 549 At 8.53 am, Mr Georgiou provided the following response to Mr Carter's 8.48 am email: Its still in his name I think but I did explain how BP wanted to just pay him out at $100k in Dec as Ward hasn't invoiced us anything for months as no new cars were ordered because of the flip. BP told him once the flip happens there is NO more money as it was quoted very fine. 550 Mr Carter was not copied on Mr Georgiou's 8.50 am email to Mr Pereira, but he was advised by Mr Georgiou that the CCA Marketing Account was still in Mr Ward's name but after a payment to Mr Ward in December that arrangement would come to an end. 551 On the following day, 19 November 2013, Mr Pereira emailed Mr Georgiou requesting that $34,000 be transferred from the CCA Profit Share Account to the "CCA Marketing Expenses Accrual Account" and $18,000 be paid from the "CCA Marketing Expenses Accrual Account" to purchase a Toyota Kluger. 552 Later that day, Mr Georgiou forwarded Mr Pereira's request to Mr McCulloch and Mr Dundas, and advised them that the $18,000 was to purchase a Toyota Kluger for a family member of Mr Pereira that was currently being driven by Mr Mossati (to whom Mr Pereira reported at CCA). 553 Mr Dundas gave evidence, that I accept, notwithstanding Mr Carter's denials, that after receiving Mr Georgiou's email he had a conversation with Mr Carter to the following effect: [Mr Dundas] said: "Why are we purchasing a vehicle for a member of BP's family?" [Mr Carter] said: "Leave it with me." 554 It is significant that Mr Dundas asked why are "we" purchasing, rather than why is "CCA" purchasing a vehicle for a member of Mr Pereira's family. Mr Carter might have had many responsibilities as the Chief Executive Officer of Orix, but it is remarkable that an expenditure of $18,000 was expressly drawn to his attention by Mr Dundas and Mr Carter responded that he would deal with the request and expressed no concern when he was told that "we" are purchasing a vehicle for a member of Mr Pereira's family. 555 Some two weeks later, on 4 December 2013, Mr Georgiou advised Mr Carter by email: BP now wants to buy the Mossad Kluger to sell to a mate but wants to use his accrual money to pay for it. What would you/Gary require for this to happen ? 556 Later that day, Mr Carter responded: He needs to do what we agreed to ……set up a company…..invoice us for work done for coke…..then we pay that company…..with that money…… 557 Mr Carter's response establishes that at some point prior to 4 December 2013, Mr Carter believed that Mr Pereira had agreed to set up a company for the purpose of invoicing Orix and then Orix would then pay the company with "that money". In context, I infer that the reference to "that money" was a reference to amounts previously paid to Mr Ward as explained by Mr Georgiou in his 10 July 2013 email to Mr Carter. 558 I do not accept the following inherently implausible evidence given by Mr Carter in cross examination as to the reasons why it had been agreed that Mr Pereira "set up" a company: [Mr Jones]: Well, the, coming back to the email on 4 December 2013 at 10232 of the court book, why did you say in the email that he needed - that is, Mr Pereira needed to set up a company?---Because in my mind, he needed to have an entity to invoice properly to perform his work. I probably should have not - he needs to have an - you know ..... company. But I could have - probably should have said needs to be able to register for GST or - and have an ABN. You weren't concerned that you didn't want to be paying the money to him in his own name?---No. … MR JONES: Well, you knew by this stage for at least a decade Mr Ward had been invoicing your company in his own name, didn't you?---I don't know how he was invoicing. But I believe, looking at the documents here, he was invoicing in his individual name. Yes. There was no problem with him invoicing your company in his own name, was there?---No. And he didn't have to set up a company for GST purposes to invoice your company, did he?---I'm not - I'm not aware, but probably not. 559 At some stage on that day, 4 December 2013, presumably after being reminded by Mr Georgiou of the agreement that he would set up a company to invoice CCA, Mr Pereira caused a company with the name Systems Management Services Pty Ltd (ABN 83 167 084 951) to be incorporated. This was the first company that Mr Pereira established for the purpose of invoicing Orix for payment of fees. 560 On 3 January 2014, Mr Georgiou and Mr Carter exchanged emails, copied to Mr McCulloch, concerning what was referred to as the "Profit Share account". 561 At 2.42 pm, Mr Georgiou also advised Mr Carter and Mr McCulloch: OK ……the Profit Share account was set up to hold monies from an "old" flip we did a few years ago ! The shortfall on ET's plus some was actually paid to us by TMCA and at some point (after the flip) we were instructed by BP to send off a chq to CCA as a show of good faith, that we "actually" made some small amount of profit from the program, so we are giving some back to you. The rest, under BP's instructions was to be used at his discretion to disburse the money as he see's fit. We have had some "stuff ups" which BP has made good from this account…a few Owner Operator Truck deals, stuff ups in payouts, money to subsidise other Snr Mgt vehicles or accessories purchased………ALL to make us look good ! This account has always remained "by name" as the CCA Profit Share account ! Fact…..CCA do NOT have a profit share facility….so we can in fact close this account. BP wants to keep around $20K in this account to prop up any future stuff ups by us or purchase some accessories for other CCA Mgt when their cars are due to be replaced…..or just transfer it all into the CCA Mkgt account , again to be used by us if and when needed. The balance is to be transferred into the "CCA Mktg account" to be used for future CCA Mktg activities. He will send us an email acknowledging the fact that there is no CCA profit share account and for us to transfer the money to the "Mktg" account. Are you ok with this? All future "bkge" charged at $500 per car will be going into the "introducer account" and invoiced properly by a registered ABN company replacing the Ray Ward deal. (Emphasis added.) 562 The quotation marks around the reference to the "introducer account" implies that it was not in reality an account into which introducer fees were to be paid. Rather it is apparent from the balance of this extract from Mr Georgiou's email it was an account into which all future "bkge", a reference to some form of "brokerage", at least as understood by Mr Carter, of $500 per car would be paid. 563 Mr Carter was not able to provide any plausible explanation for the proposal to pay a fee into an "introducer account" for a "registered ABN company" to replace the previous payments made to Mr Ward as an "introducing broker". As the following evidence given by Mr Carter in cross examination, when pressed about Mr Georgiou's explanation of the proposed new arrangement in his 2.42 pm email, makes clear, there was no relevant "introducing broker" for the Fourth Fleet Flip between Orix and CCA: And do you agree that the reference to "BKGE", as you understood it, is a reference to "brokerage"?---Yes. And that would have been confirmed by the reference to the "introducer account", do you agree?---It would be. And do you agree that in terms of the accounting system at ORIX at the time, that would be a reference to the Ward introducer fee account?---If that's what it was called, yes. Right. And do you agree that you understood that the way the Ward account operated was that the amount of money recorded in it would be reduced by an invoice and payment process?---Yes. And do you agree that what is proposed, at least in this paragraph, is that brokerage was to be accessed by an invoice issued by a registered ABN company?---Yes. … And do you agree that the suggestion is that this invoicing was to replace the Ray Ward deal?---Yes. And what the email is saying is that a new deal, whatever it may be, will replace the Ray Ward deal?---Yes. And do you agree that no ABN company was identified to you at that point?---I can't recall but I believe not. Right. And do you agree that you knew that no ABN company, whoever it was, introduced the fourth fleet flip deal between Coke and Orix?---Agree. And you knew that no ABN company, whoever it was, was the introducer of - or the 30 re-introducer of Coke to Orix?---Correct. And do you agree that when you read this paragraph, you knew that this ABN company could not replace Ward as an introducing broker?---It wouldn't - it wouldn't replace Ward as an introducing broker. 564 The only plausible explanation for the request that the invoices be issued by an "ABN company" and not by Mr Pereira personally is that Mr Carter and Mr Georgiou appreciated that it was important that Mr Pereira not be seen as the person issuing the invoices to Orix. The use of an ABN company would provide a façade behind which the payments could be made to Mr Pereira without exposing what otherwise would be a flagrant conflict of interest given Mr Pereira's employment with CCA. 565 At 2.44 pm, Mr Carter asked Mr Georgiou how much was currently in the "profit share account" to which question Mr Georgiou responded at 2.48 pm with a figure of $134,000 as at 1 November 2013. 566 At 2.51 pm, Mr Carter emailed the following response to Mr Georgiou's 2.44 pm email: At this point in time I think we need the lot in the account to cover us for "unforeseen" events….ie extension of regos…..contributions to senior managers cars etc ……. especially since there is a new CEO elect …… 567 Mr Carter's response is inconsistent with any notion that he regarded the money in the "profit share account" as money of CCA. Rather, it suggests that it was a fund of money that was available to be deployed for what was euphemistically described as "unforeseen" events, which to Mr Carter's knowledge extended to "contributions to senior managers cars", that is senior managers of CCA, not Orix. 568 At 2.59 pm, Mr Georgiou quickly clarified: All rego extns are being billed to CCA ………. he just wants the money out of the P/Share account as I have spooked him about it !! No matter where it is held … we still have control and he will always do the right thing ……. he just doesn't like the name P/S. Any contributions to snr mgrs cars will also be covered by this. 569 It is significant that Mr Georgiou was emphasising to Mr Carter that irrespective of where the money was held, Orix would "still have control" of it and Mr Pereira could always be relied upon to "do the right thing". 570 Then, at 3.01 pm, Mr Carter advised Mr Georgiou: I'll check with Wilbo when he gets back however I think we use this to convince the auditors to carry it in that name ……. shouldn't worry him what we call it 571 Notwithstanding the references to "profit share account" in the emails exchanged between Mr Georgiou and Mr Carter, it is apparent that the account they are referring to is in fact the CCA Marketing Account, not the CCA Profit Share Account. This is made clear in the last two paragraphs of Mr McCulloch's response to the email chain on 6 January 2014: Sorry Guys Internet was hopeless in Forster for the past 3-4 days. Probably 40,000 more people in town with I Phone / Pads the cause. BP accrual balance = $76,005.84, Take out the $70,000 transfer from Profit share and he is at $6,005.84. Above includes the December income but if there were any Visa transactions for Dec 13, these need to be deducted from the figure Profit Share balance $134,576.05 This balance is after the $70k transfer to BP accrual. It does not include 2013 numbers. 2013 numbers to be worked up this on month and it will definitely be a positive number. Couple of things George, my recollection of the Proft Share account being set up was that I was told (circa 2009 - Narelle era) CCA had it in their agreement and nobody at ORIX or CCA had picked up on it. I then set up the Profit share account and went back as far as 2004 (to get the losses) and then started accruing from 2011 when the balance turned positive. I think we need Phil Davie to double check they do not have profit share clause in their agreement. I'll do that today. The money paid to us from TMCA/Dealers for ET's with the flip to Klugers was more than we needed and I recall that surplus sat in the old Ray Ward Account. This money has not been involved in any way with the current Profit Share balance. When this money was reconciled, we took a large cut and left the rest in the Ray Ward account. I agree with you George as BP allowing us to mop up stuff ups, CCA contractors etc.. this would amount somewhere in the $100k range however, these have always been from the Ray Ward account, not profit share. Maybe we are confusing these two accounts ? Willy 572 Later, on 23 January 2014, I infer as a result of the reference in Mr Georgiou's 2.42 pm email that Mr Pereira "will send us an email acknowledging the fact that there is no CCA profit share account and for us to transfer the money to the "Mktg" account", Mr Pereira sent the following email to Mr Georgiou: Hi GG As discussed, we confirm that the Fleet Agreement does not provide for a Profit Share facility for CCA . The remaining funds in this account of $134,576.05 is to be transferred to the CCA Marketing Expense account to accommodate the immediate and future marketing activities. … 573 The next relevant event was an exchange of emails between Mr Carter and Mr Georgiou on 16 January 2014 concerning the proposed transfer of funds to the CCA Marketing Account. 574 At 1.45 pm, Mr Georgiou forwarded to Mr Carter an email that he had received earlier that day from Hayley Williams (being Ms Tunnicliff) confirming that 297 RAV4 vehicles had been delivered to date under the latest flip programme and each included the $500 "introducer amount", and in his covering email asked Mr Carter: Bro See below....what do we need from BP to move some of this "fee" to the "mktg account" to cover some of his planned golf trips and other CCA execs options on cars in the next few months? 575 At 1.47 pm, Mr Carter responded: [D]on't know yet…..will look at when I get back ….. need to understand how it's all being reckonised [sic] 576 Mr Georgiou was asking Mr Carter what did Orix need from Mr Pereira to move the "fee" to the "mktg account". The use of quotation marks implied that in reality they were not fees and the account was not in truth a marketing account. Mr Carter did not raise any concern that the "fee" was to pay for some of "his", being a reference to Mr Pereira, golf trips or about the use of a "mktg account" fee to pay for "other CCA execs options on cars". 577 At 2.55 pm, Mr Georgiou forwarded to Mr Carter an email chain that included a confirmation from Mr Dundas that the accounting treatment of the $500 introducer fee in the "new CCA deal" was the same as for the $500 "introducer fee" that had previously been paid to Mr Ward. The "accounting treatment" by Orix might have been the same but Mr Carter was not able to provide any plausible explanation as to how any fee payable under the "new CCA deal" bore any relationship to the previous $500 "introducer fee" payable to Mr Ward. 578 On 11 March 2014, Mr Pereira emailed a draft invoice from SMS to Mr Georgiou and asked him to have a look at it and advise him whether it was "suitable". As noted at [508] above, SMS was the company that Mr Pereira initially proposed to replace the CCA Marketing Account arrangements. 579 The draft SMS invoice attached to Mr Pereira's email was numbered 14-03100 and dated 2 February 2014 in an amount of $163,350 for a total of 297 fees with a unit price of $500 that were stated to be a "Management service fee" for October, November and December 2013. The draft SMS invoice did not make any reference to "introducer fees" or provide any explanation of the alleged "Management service fee". It was addressed to Orix for the attention of Mr Georgiou. 580 On 12 March 2014, Mr Georgiou responded to Mr Pereira's 11 March 2014 email stipulating that the invoice should include "some reference to CCA cars delivered in the particular month plus a signature on somewhere". 581 On 17 March 2014, Mr Georgiou sent a series of emails to Mr Carter in relation to the draft SMS invoice provided by Mr Pereira. 582 At 1.31 pm, Mr Georgiou forwarded Mr Carter a copy of the draft SMS invoice and stated that it replaced "Wards for the $500 bkge", it was "All legit, company properly registered with ABN etc." and Mr Pereira's name did "not appear anywhere". Mr Georgiou concluded: He will start drawing down on the cars already delivered and as per the Ward deal… always accompanied by OUR report showing unit HAS the $500 etc. 583 The addition of the comment that Mr Pereira's name did "not appear anywhere" highlighted the sensitivity of both Mr Georgiou and Mr Carter that Mr Pereira not be seen as having any connection to the "ABN company" that was being proposed to invoice Orix. The concern was any appearance of Mr Pereira's name, not that it was a company that had been advanced by Mr Pereira to invoice and be paid the "Management service fees". 584 At 1.33 pm, Mr Georgiou then forwarded to Mr Carter a copy of an "old Ward invoice". The old Ward invoice relevantly recorded (as written): RE; Introduction fee for vehicles settled in Junly [sic] as per attached list. ( Refer Kim Scott) 1 Vehicles @ $500.00 585 At 3.03 pm, Mr Georgiou forwarded to Mr Carter an email that he had received from Mr Pereira which thanked him "for helping out" and in his covering email Mr Georgiou asked Mr Carter: Mgt /Inspection fee OK bro ? 586 The query that Mr Georgiou made of Mr Carter seeking his approval for the description of the "fee" highlights the extent to which Mr Carter was involved in, and necessarily thereby had knowledge, of the formulation of the SRS arrangements. 587 At 3.15 pm, Mr Carter received an email from Mr Lyons, the National Credit Manager of Orix, attaching an ASIC company search of SMS that Mr Carter had requested from Mr Lyons. The company search recorded that SMS had been registered on 4 December 2013 and that Mr Pereira was the sole director, company secretary and shareholder of SMS and his shares were held beneficially. The registered office for SMS was recorded as "P&A Accountants & Business Advisers, Level 3, 141-149 Ifould Street, Adelaide, SA, 5000". 588 The apparent sensitivity of the SRS arrangements and the significance of them to Mr Carter is again demonstrated by Mr Carter's decision, independently of Mr Georgiou, to request that a company search be undertaken of SMS. 589 Although there are no further email communications or other contemporaneous records in evidence of what took place prior to the evening of 19 March 2014, it is clear from the subsequent emails referred to below that Mr Pereira was advised, presumably by Mr Georgiou, that Mr Pereira could not be recorded as a director or shareholder of the company to which the proposed "Mgt/Inspection fee" was to be paid. 590 On 19 March 2014, Mr Pereira sent an email to Mr Georgiou advising him that his accountant, Andrew Wong, would be "looking to manage the SMS (soon to be deleted) account for me" and asking Mr Georgiou to review three names for the new company to be registered, including "Systems Reporting Services (SRS)". The request for a review of the three names again demonstrates the extent to which Mr Georgiou, and in turn Mr Carter, were intimately involved in the establishment of the SRS arrangements. Mr Pereira was conveying in his email that he acknowledged that SMS was an inappropriate vehicle to invoice Orix but that it was also necessary for him to inform and seek approval from Orix as to the name of the entity that was to invoice Orix. 591 On 30 April 2014, Mr Wong sent an email to Mr Georgiou, copied to Mr Pereira's personal email address, in which he attached two invoices that were purported to have been issued by SRS. 592 The first invoice was numbered 13-001 and dated 2 February 2014 in an amount of $103,400 for 188 "management service inspection fee[s]" each in the amount of $500 in November and December 2013. It was addressed to Orix for the attention of Mr Georgiou. 593 The second invoice was numbered 14-002 and dated 2 April 2014 in an amount of $206,800 for 376 "management service inspection fee[s]" each in the amount of $500 for January, February and March 2014. It was also addressed to Orix for the attention of Mr Georgiou. 594 On 12 May 2014, Mr Georgiou and Mr Carter exchanged emails in relation to the two SRS invoices that Mr Wong had emailed to Mr Georgiou on 30 April 2014 and an announcement that CCA had made to the Australian Securities Exchange (ASX). 595 At 8.34 am, Mr Georgiou emailed the two SRS invoices to Mr Carter for approval and confirmed that all the cars the subject of the invoices had been delivered and all included the "service fee" of $500 and noted that "BP is not on this now." 596 The comment "BP is not on this now" again reinforced the importance of Mr Pereira not being seen to be associated with the SRS arrangements. At the same time both Mr Carter and Mr Georgiou must have recognised that for all practical purposes SRS was a corporate vehicle that was being used to facilitate payments to Mr Pereira. It is implausible that Mr Carter and Mr Georgiou would have facilitated an arrangement whereby significant fees were being paid to a genuine arm's length company that was independent of any connection with Mr Pereira and in respect of which no services were provided to Orix. 597 At 9.38 am, Mr Carter responded: … haven't opened the attachments assume he did what I said and set up a new one as all old records still show….will get David to do the search when I can open it. 598 It is significant that Mr Carter referred to an assumption that Mr Pereira "did what I said" and informed Mr Georgiou that he would again personally request Mr Lyons to obtain a company search of the new company, SRS. 599 At 10.09 am, Mr Carter emailed Mr Lyons requesting that he obtain a company search of SRS because he wanted "to see directors and shareholders current and past". 600 At 10.19 am, Mr Lyons emailed Mr Carter a copy of a company search of SRS. The company search for SRS revealed that the sole director, company secretary and shareholder was Mr Wong but his share was not beneficially held by him. The current registered address was recorded as Level 3, 141-149 Ifould Street, Adelaide, the same registered address as SMS. The company search also revealed that the company had been initially registered as Crowle Pty Ltd and had only changed its name to SRS on 3 April 2014. Both SRS invoices, however, were purported to have been issued prior to that date on 2 February 2014 and 2 April 2014, respectively. 601 At some time prior to 12.50 pm on 12 May 2014, CCA announced to the ASX that it would be restructuring Australian Beverages, and John Murphy, CCA's current Managing Director - Australian Beverages had decided to leave at the end of June, due to the foreshadowed organisation changes. 602 At 12.50 pm, Mr Carter sent an email titled "CCA" to Mr Georgiou, stating: I smell a rat.......Murphy gone....reckon the rest of our contacts will be gonski soon……. need to hold onto this dough as long as possible…….. 603 The following very candid exchange subsequently took place that evening between Mr Georgiou and Mr Carter: (a) at 9.49 pm, Mr Georgiou responded "Faaaqrk" to Mr Carter's "I smell a rat" email; (b) at 10.13 pm, Mr Carter replied: BP knows he is about to be punted.....we will delay the payment……Mossad will be punted as well....don't want anything to do with this supplier programme....as you know....I never wanted to….this will be an issue for us.....I can see how this is going to play out....and it's not good for us..... (c) at 10.25 pm, Mr Georgiou responded: Ok relax...let me find out...there is no way he would leave the $1.5m behind....if he does there's our retirement (d) at 10.31 pm, Mr Carter replied: He ain't getting it.....we need it for our profit….there will be a complete clean out over there. 604 The reference to the "supplier programme" was a reference to the Supplier of the Year Programme (or SOTY). It was an annual competition run by CCA for its suppliers, including Orix. 605 Mr Carter submits that the reference to "this dough" in the 12.50 pm email from Mr Carter was necessarily a reference to the $1.5 million surplus payment associated with the "loyalty payment" and not a reference to any payment made under the SRS arrangements. He submits that otherwise Mr Carter and Mr Georgiou would be referring to two separate sums of money without either realising they were referring to different sums. He submits that would also not explain why Mr Carter was referring to the SRS fees as the "dough" and not the "SRS fees", and why he was suggesting that Orix hold onto the SRS fees and not pay them or the reference to "Mossad" (that is, Mr Mossati) in relation to the "delayed payment". Mr Carter further submits that the absence of any reference to the SRS arrangements in this email demonstrates that he had no knowledge of any fraud or fictitious invoices. 606 The fundamental difficulty with these submissions, however, is that the "loyalty payment" was a reference to an anticipated future surplus that Orix expected to recoup from the fleet flip between months 43 and 48 of the flip, that is in a period in 2017, given the Fourth Fleet Flip relevantly commenced in October 2013. In contrast, Mr Carter by reason of his earlier emails that day was considering immediate payments under the SRS arrangements at the request of Mr Pereira. In that context, the reference to the "smelling a rat" was the potential loss of the support that he had expected that Orix would continue to receive from Mr Pereira, directly or indirectly, in return for the entry into the SRS arrangements and the "dough" to be held onto as long as possible and the "payment" to be delayed were therefore most likely references to payments under the SRS arrangements. 607 Mr Georgiou had referred in his 3 January 2014 email to Mr Carter to a suggestion that Mr Pereira had made to him that if Orix agreed to an early payment of some $500,000 of the anticipated future surplus, or "anywhere between $250K to $500K" soon after the "flip has ceased" and that this would make Orix "look real good" and CCA would think that Orix would be "superstars!!". Mr Georgiou, however, noted in his email that he had told Mr Pereira that Orix would have to expense any such payment and you, that is Mr Carter, "may not want to do that!". There was no evidence that Mr Carter ever provided any response to Mr Georgiou on this proposal and on no view was Orix under any obligation to make any early payment of the anticipated surplus to CCA. 608 Further, textually bearing in mind the stream of consciousness by Mr Carter in his 10.13 pm email by reason of the ellipsis points, it is clear that the delay in the payment was linked by Mr Carter in his 10.13 pm email to his concern that Mr Pereira was "about to be punted" and the reference to Mr Mossati was made in the context of the supplier programme. 609 Mr Georgiou then introduced in his 10.25 pm email a reference to the $1.5 million loyalty payment in an effort to address Mr Carter's concern about the potential loss of the CCA relationship, observing that "he", being a reference to Mr Pereira, would not leave the $1.5 million behind. It follows that the "it" referred to by Mr Carter in his 10.31 pm email is a reference to the $1.5 million anticipated surplus associated with the loyalty payment. 610 On 18 May 2014, Mr Pereira sent an email to Mr Georgiou from his personal email account about various matters including: … Please hold off on the iPhone 5 Order, will wait till iPhone 6 is out in the next month. 3. Hope you aware the booking for Penang in June is going ahead. There will be the extra charge of Hotel and Golf bookings for Gary too, maybe total is about $6K 4. Am asking Hayley to book Cyril's car in June for 7 days, about $500.00 I think. 5. Please ask your best mate about the 2008 CL 500 (WDD216) Sat Nav upgrade disc. 6. Please process the SRS Invoice. … 611 Significantly, the email from Mr Pereira included a request for Mr Georgiou to "process the SRS Invoice". 612 On 19 May 2014, at 1.09 pm, Mr Georgiou sought confirmation from Mr Lyons, copied to Mr Carter, as to the identity of the directors of SRS. Mr Carter confirmed that Mr Lyons had already provided an ASIC search for SRS and Mr Pereira did not appear. 613 At 1.22 pm, Mr Georgiou then replied to Mr Pereira's request for him to process the SRS invoice: Bro Problem…….JC wants out of the SOTY asap….once that's done….. then wants a 30min meeting with Bill to understand what is going on in CCA….then he will approve payment to SRS. Let me know when you get us out of SOTY and I will email Bill requesting a meeting. G 614 The reference to a meeting with "Bill" was a meeting with Mr Mossati. 615 At 4.30 pm, Mr Pereira provided the following response to Mr Georgiou: Hey GG No problems with SOTY, I spoke with the Yvonne Mckay this morning, I have to go through the proper channels with Bill and Glenn so they don't misunderstand Orix. I will take care of it. I will let Bill know later today that you want the meeting as soon as possible. Regards BP 616 At 5.00 pm, Mr Georgiou forwarded Mr Carter his 1.22 pm email to Mr Pereira and Mr Pereira's 4.30 pm response, and stated in his covering email: "Bro, Read from the bottom up". 617 At 5.52 pm, Mr Pereira responded to Mr Georgiou's 1.22 pm email and confirmed: … Bill is happy to take a meeting with both you and JC. … 618 At 6.34 pm, Mr Georgiou forwarded Mr Pereira's 5.52 pm response to Mr Carter. 619 On 4 June 2014, at 7.55 pm, Mr Pereira sent the following email from his iPhone to Mr Georgiou with some advice for Mr Georgiou's forthcoming meeting with Mr Mossati: Hey GG Glad to see you have to do some work. Remember, Bill is your ally, so he is there to help, especially with SOTY. Your stance with the FF:
G.1. Overview 639 In 2012, GrainCorp entered into a new fleet leasing agreement with Orix (GrainCorp Fleet Agreement). Under the GrainCorp Fleet Agreement, GrainCorp (unlike CCA) was entitled to a profit share arrangement, pursuant to cl 4 of Section C, "Additional Provisions", of the GrainCorp Fleet Agreement (Profit Share Term). GrainCorp had been a customer of Orix since at least 2008. 640 The Profit Share Term provided: (a) at the end of each calendar year, Orix would calculate the aggregate of profits and losses resulting from the sale of certain vehicles on operating leases under the GrainCorp Fleet Agreement that have been returned by GrainCorp upon expiry of the vehicle's lease term; and (b) in any period when the aggregate of profits exceeded the aggregate of losses (including any carried forward from a previous year), Orix and GrainCorp were to share the resultant surplus on a 50/50 basis. 641 GrainCorp's profit share was allocated to a sub-ledger account of Orix (GC Profit Share Account). It was common ground that the money in the GC Profit Share Account was GrainCorp's money.
G.2. Pleading issue (Issue 38) 642 Mr Carter raises a preliminary issue as to whether it was open for Chubb to seek a finding that GrainCorp was not aware of Mr Chidiac's request for a payment of $9,627 from the funds in the GC Profit Share Account in connection with the purchase of a Mazda 3 vehicle. He submits that it was necessary for Chubb to plead this contention as a material fact and it was not encompassed by the allegation of a claim of a "secret profit" as the money in question was that of GrainCorp, not Orix. 643 Chubb pleads in its further amended defences at [5(mm)]: The transaction pleaded in paragraph (ll) above: i. involved the application of monies held in the GrainCorp Profit Share Account to subsidise the purchase of a personal vehicle for Mr Chidiac; ii. was a secret benefit provided to Chidiac which amounted to the payment of a bribe or provision of a secret benefit to an employee of OACL's customer, GrainCorp; and iii. exposed OACL to the risk of criminal sanction, as well as civil claims from GrainCorp. 644 The transaction pleaded in the further amended defences at [5(ll)] was the transfer by Orix of an amount of $9,627 from the GC Profit Share Account to assist in funding the purchase of a Mazda 3 vehicle for Mr Chidiac's daughter (Mazda 3 Transaction). 645 I do not accept that the pleading issue raised by Mr Carter has any merit. The allegation of a "secret benefit" necessarily carries with it an implication that GrainCorp was not aware of the payment. The fact that the money in the fund from which the benefit was paid might be held for GrainCorp emphasises, rather than detracts from, the proposition that an allegation it was a "secret benefit" necessarily carries with it that implication. It is inconceivable that an allegation that the use of money to which GrainCorp was the beneficial owner to provide a "secret benefit" could be understood as being advanced on any basis other than that GrainCorp was not aware that its funds had been used to provide the "secret benefit".
G.3.1. Overview 646 On 28 February 2013, at 1.26 pm, Mr Chidiac sent an email to Mr Georgiou in the following terms: … A while ago you indicated you could assist in buying a car for my daughter. I have never asked for anything from Orix that was not work related, so I hope this is not too much of an imposition. Could you let me what I could get this vehicle for ?? You can even use the Profit Share………………(ha) 647 Later that day, at 5.03 pm, Mr Georgiou forwarded Mr Chidiac's email to Mr Carter adding the subject line "Another penguin caught in our nets !!" and wrote: Read from below up........He wants a car for his daughter in our Newcastle yard….. told him I would contribute $5k ……from GC monies we are holding he knows nothing about…….he accepted !! 648 On 7 March 2013, Mr Georgiou forwarded an email chain between himself and Mr Chidiac to Mr Carter, in which Mr Georgiou wrote "come to me baby…" to Mr Carter. In the forwarded email chain, Mr Georgiou wrote to Mr Chidiac that he would "cover $5k and the new tyres so effectively $8700 for you". Mr Chidiac responded thanking Mr Georgiou and stating, "Take it off the profit share !!!!". 649 On or about 25 March 2013, the transaction took place and $9,627 was paid from the GC Profit Share Account to subsidise the purchase of the Mazda 3 vehicle for Mr Chidiac's daughter. 650 There is no dispute that this transfer of funds from the GC Profit Share Account occurred. The two issues identified by the parties in respect of the facts of this transaction are: (a) was GrainCorp (other than Mr Chidiac) not aware of the use of GrainCorp profit share funds being advanced to Mr Chidiac in the amount of $9,627 in respect of the Mazda 3 purchase (Issue 39); and (b) was this payment done as an illegal inducement or alternatively a bribe to Mr Chidiac showing or having shown favour to Orix in relation to the affairs or business of GrainCorp? (Issue 40).
Chubb 651 Chubb submits that the answer to both those issues is clearly yes. 652 Chubb submits that I should infer that GrainCorp did not know of the Mazda 3 Transaction for the following reasons. 653 First, there is no evidence that GrainCorp knew about the Mazda 3 Transaction. The only person from GrainCorp included on any of the emails regarding this transaction is Mr Chidiac, the beneficiary of the transfer. There is no suggestion in any of the contemporaneous documents that Orix personnel took any steps to bring the transaction to the attention of GrainCorp, or to obtain its consent. 654 Second, what Mr Georgiou was communicating by his 5.03 pm email to Mr Carter was that he was compromising Mr Chidiac's loyalty to his employer by the provision of a benefit to him, and hence, he was "another penguin caught in our nets". 655 Third, if GrainCorp knew and allowed the transfer to proceed, then it must be inferred that it consented to the use of its money in the GC Profit Share Account to be applied for what was a plainly personal purpose that benefitted Mr Chidiac (that is, the purchase of a car for his daughter) but it is highly improbable that GrainCorp did consent to the use of its money in that way. 656 Chubb submits that it follows from the above that the payment was made as an inducement or bribe to Mr Chidiac, in order to compromise his loyalties toward his employer and dispose him favourably toward Orix in relation to the affairs or business of GrainCorp.
Mr Carter 657 Mr Carter submits that on the evidence available it is not possible to determine whether GrainCorp was aware of the transaction. He submits that Chubb has called no witnesses from GrainCorp and has not produced any documents from which an inference that GrainCorp was not aware of the transaction could be drawn. Further, he submits that the Briginshaw principles apply and that a claim of fraud still requires the Court to be satisfied that all other reasonable alternative possibilities have been excluded. 658 Mr Carter accepts that Mr Chidiac had no apparent authority to be dealing with the GrainCorp profit share moneys. He submits, however, that there remains the requirement of a "corrupt purpose" that separates gifts from bribes. Mr Carter submits that Chubb is simply assuming that because Mr Georgiou uses language such as "come to me baby" and "another penguin caught in our nets" then the corrupt purpose is established, contrary to established authority.
G.3.3. Consideration 659 I am satisfied that GrainCorp (other than Mr Chidiac) was not aware of the transfer of the funds from the GC Profit Share Account to Mr Chidiac to assist his daughter in purchasing the Mazda 3 vehicle. 660 Mr Chidiac clearly acknowledged in his 28 February 2013 request to Mr Georgiou that he had "never asked for anything from Orix that was not work related" and went as far as to suggest "You can even use the Profit Share …..(ha)". It is implausible that Mr Chidiac advised anyone at GrainCorp that he had requested a non-work related favour from Orix and that Orix used money held in the GrainCorp Profit Share Account to fund the payment. 661 Further, I am comfortably satisfied, on the balance of probabilities, and having regard to the quality of evidence required to reach such a serious and adverse conclusion as required by s 140(2) of the Evidence Act that the payment was made to Mr Chidiac as an illegal inducement or alternatively a bribe to favour Orix in its business dealings with GrainCorp. No other explanation is plausible in the light of Mr Georgiou's candid email to Mr Carter with the heading "Another penguin caught in our nets" and the connection drawn by Mr Georgiou in his 8 July 2013 email to Mr Carter and others, referred to at [368] above, between the relationship he had established with Mr Pereira and what he had now achieved with Mr Chidiac. 662 Contrary to Mr Carter's submissions, the Briginshaw principles, as now reflected in s 140(2) of the Evidence Act, do not require the Court to be satisfied in commercial cases, including cases involving allegations of fraud or dishonesty, that all other reasonable alternative possibilities have been excluded. Rather, they require a tribunal of fact to reach an actual persuasion of an alleged fact's occurrence or existence having regard to the nature of what is sought to be proved, the seriousness of the allegation made, whether there was an inherent unlikelihood of the fact alleged occurring and the gravity of the consequences flowing from a particular finding: Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362 (Dixon J).
G.4.1. Overview 663 On 21 October 2013, at 4.51 pm, Mr Chidiac sent an email to Mr Georgiou, asking Mr Georgiou to assist him with the purchase of a Subaru Liberty vehicle sold by one of Orix's retail centres. 664 In subsequent email correspondence, Mr Georgiou and Mr Chidiac discussed how much money in the GC Profit Share Account should be used. Mr Georgiou noted: Tony if we stick to unusual number like $9985.53 or whatever its much better than a round 9k or 10k if you get my drift !. 665 On 1 November 2013, Mr Chidiac confirmed that he wanted a contribution of $9,228.24 from the GC Profit Share Account to purchase the vehicle. 666 On 14 November 2013, at 12.13 pm, Mr McCulloch, who had been earlier informed by Mr Georgiou in an email at 4.22 pm on 1 November 2013 to transfer the agreed amount to Jeff DeGroot, instructed finance staff to journal the transfer in Willow. At 4.59 pm on the same day, Mr McCulloch forwarded the 4.22 pm email to Mr Dundas. 667 Between 14 November and 25 November 2013, when Mr Dundas replied to Mr McCulloch's 14 November 2013 email, Mr Pereira made an unsuccessful attempt to access money in the CCA Profit Share Account, which Mr Dundas stopped after he raised the transaction with Mr Carter. 668 On 25 November 2013, at 10.37 am, Mr Dundas responded to Mr McCulloch's 14 November 2013 email, copied to Mr Georgiou and Satyendra Satyadasan in which he wrote: Willy, I have spoken to John Carter about this transaction. John does not want these funds to be transferred from the Grain Corp profit share account. We will have to take a loss on this. Saty, please reverse the journal from the Profit Share account. 669 Less than 10 minutes after Mr Dundas sent the above email, Mr Georgiou responded with: Gaz JC and Willy explained it to me…..no probs. 670 The two issues identified by the parties in respect of this transaction are: (a) did Mr Carter authorise Mr Chidiac to receive a $9,228.24 discount from the purchase price of an off-lease Subaru Liberty (Issue 42); and (b) was the: (i) initial transfer of $9,228.24 from the GC Profit Share Account toward the purchase of a Subaru Liberty for Mr Chidiac; and (ii) subsequently, Orix taking a loss in the amount on the sale of the Subaru Liberty following the reversal of the transaction, done as an illegal inducement or alternatively a bribe to Mr Chidiac (Issue 41)? 671 It is convenient to address first Issue 42 because it focuses on what Mr Carter authorised which in turn is relevant to whether the discount was done as an illegal inducement or bribe.
Chubb 672 Chubb submits that the answer to both Issue 41 and Issue 42 should be yes. 673 Chubb submits that this transaction was a repeat of the Mazda 3 Transaction, and was a transaction that personally benefitted Mr Chidiac, as the reversal of the transaction did not affect the benefit provided to Mr Chidiac. 674 Chubb submits that I should find on the balance of the probabilities that Mr Dundas queried the transaction with Mr Carter on 25 November 2013, following which the transfer of funds was reversed, and that the more probable inference is that Mr Carter authorised Orix to take a loss on the sale.
Mr Carter 675 Mr Carter submits that both Issue 41 and Issue 42 should be answered "no". 676 Mr Carter submits that as with the Mazda 3 Transaction, Chubb has not demonstrated the required element of a corrupt purpose. 677 Mr Carter disputes Chubb's submission that the Court should draw an inference that Mr Carter instructed Mr Dundas that Orix would have to "take a loss". He submits that an inference cannot be drawn from the evidence of a witness when direct evidence from that witness would have been available. 678 Mr Carter submits that the far more likely scenario is that Mr Carter refused the transaction and Mr Dundas concluded that as a result of that refusal Orix would have to take the loss.
G.4.3. Consideration 679 As made clear by Mr Dundas' 25 November 2013 email, the $9,228.24 transfer from the GC Profit Share Account did not ultimately proceed. Although the funds were not transferred from the GC Profit Share Account, Mr Dundas noted in his email that Orix would take "a loss on this" and hence Mr Chidiac still obtained the benefit of a discount in the same amount on the purchase price of his vehicle. To that extent, it provided Mr Chidiac with a similar benefit to what he received with respect to the purchase of the Mazda 3 vehicle. 680 Unlike the Mazda 3 Transaction, however, Mr Carter appears to have expressly forbidden the use of the GC Profit Share Account to provide the benefit. 681 Mr Dundas stated in his 25 November 2013 email that Mr Carter did not want the $9,228.24 to be transferred from the GC Profit Share Account. 682 I am not satisfied to the requisite standard mandated by s 140(2) of the Evidence Act, that the 25 November 2013 emails from Mr Dundas and Mr Georgiou provide a sufficient factual basis to draw an inference that Mr Carter was aware of and authorised that Orix bear the loss of $9,228.24 from its own funds, for the following reasons. 683 First, the emails were not sent to Mr Carter, unlike the emails with respect to the Mazda 3 Transaction, other than the email of 1 November 2013 from Mr Georgiou asking Mr McCulloch to transfer the funds from the GC Profit Share Account. There is no contemporaneous document in evidence demonstrating that Mr Carter was informed that the Subaru Liberty transaction proceeded or that it was funded by Orix taking a loss. 684 Second, Mr Dundas only states in his email that Mr Carter had said that he "does not want the funds transferred from the profit share". The comment by Mr Dundas that "We will have to take a loss on this" is not attributed to Mr Carter and is made in a separate sentence. 685 Third, Mr Georgiou does not state in his email what he was told by Mr Carter. He only states that Mr Carter (and Mr McCulloch) had "explained it to me". Mr Georgiou does not explain or identify what "it" was that was explained to him. It is not evident whether "it" was that no payment could be made out of the GC Profit Share Account or the payment would proceed but not out of the GC Profit Share Account and therefore Orix would have to bear the cost of the payment and thereby take a loss on the transaction.
G.5. Mr Carter's knowledge of the GrainCorp Transactions (Issues 43 and 44)
G.5.1. Overview 686 The issues identified by the parties with respect to Mr Carter's knowledge of the GrainCorp Transactions are, whether at the time Mr Carter signed the Policy on 30 October 2014, he knew: (a) in about March 2013, money from the GC Profit Share Account had been used to contribute to the purchase of a personal vehicle (the Mazda 3 vehicle) by Mr Chidiac (Issue 43(a)); (b) GrainCorp was not aware of the use of funds from the GC Profit Share Account being advanced to Mr Chidiac in the amount of $9,627 in respect of the Mazda 3 purchase (Issue 43(b)); (c) in about November 2013, money had been, or was intended to be, transferred from the GC Profit Share Account to contribute to the purchase of another personal vehicle (the Subaru Liberty vehicle) by Mr Chidiac, and that Mr Chidiac instead of receiving that payment received the benefit of a discount on his purchase from Orix (Issue 43(c)); and (d) both the contribution in Issue 43(a) and the discount in Issue 43(c) had been given to Mr Chidiac as an illegal inducement or alternatively as a bribe to Mr Chidiac (Issue 44)).
Chubb 687 Chubb submits that the answer to each of these issues is yes. 688 Chubb submits that Mr Carter learnt about the Mazda 3 Transaction when he received Mr Georgiou's 28 February 2013 and 7 March 2013 emails. 689 Chubb submits that if Mr Carter read the emails of 28 February 2013 and 7 March 2013, it follows that Mr Carter knew that GrainCorp did not know about the funds being advanced toward the purchase of the Mazda 3. Chubb submits that this is because Mr Carter knew that the benefit was being provided to compromise Mr Chidiac, as an inducement or bribe and such an inducement or bribe was only effective if its payment was not known to GrainCorp. Further, Chubb submits that based on the email correspondence Mr Carter received, there is no suggestion that GrainCorp's consent was being sought for the transaction. 690 Chubb submits that Mr Carter knew about the proposed transfer from the GC Profit Share Account toward the purchase of the Subaru Liberty vehicle, because there is unchallenged evidence from Mr Dundas that he brought this to Mr Carter's attention, supported by two contemporaneous emails sent on 25 November 2013 by Mr Dundas and Mr Georgiou. 691 Chubb submits that Mr Carter knew that both the Mazda 3 Transaction and the Subaru Liberty transaction were to provide an inducement or bribe to Mr Chidiac, to dispose him favourably toward Orix in relation to his employer's business affairs. Chubb submits that Mr Carter accepted in cross examination that, had he read the 28 February 2013 and 8 July 2013 emails in relation to the Mazda 3 Transaction, he would have understood Mr Georgiou meant that Mr Chidiac had been compromised in Orix's favour by taking the benefit offered to him. 692 Chubb further submits that if Mr Carter knew about the Subaru Liberty transaction, in light of what Chubb submits that Mr Carter knew in relation to the Mazda 3 Transaction, he would have understood the Subaru Liberty transaction to be done for the same purpose.
Mr Carter 693 Mr Carter accepts that Issue 43(a) and Issue 43(c) should be answered yes, but otherwise submits that the remaining issues should be answered no. 694 Mr Carter submits that his denials that he read Mr Georgiou's 28 February 2013 and 7 March 2013 emails should be accepted because there is no evidence that he responded to them or that suggests that he read either of them. Further, Mr Carter submits that his subsequent refusal to allow the GC Profit Share Account to be used to assist in the purchase of the Subaru Liberty demonstrates his likely response if he had been aware of the proposed use of the account to assist in the purchase of the Mazda 3 and is thus consistent with his evidence that he did not read those emails. 695 Next, Mr Carter submits that Chubb's submission that Mr Carter refused the Subaru Liberty transaction due to increased scrutiny from Mr Dundas does not fit with the Mercedes transaction or the Cyril Rodrigo transaction in which Mr Carter directed Mr Georgiou to take it to "the pencil" (being a reference to Mr Dundas). 696 Finally, Mr Carter submits that the GrainCorp Transactions are not capable of causing Mr Carter to have contemplated a "claim" being made under the Policy. Mr Carter submits that Chubb has not identified any acts or omissions that the alleged bribes to Mr Chidiac were supposed to have induced him to perform and a gift is not necessarily an illegal bribe.
G.5.3. Consideration 697 I am comfortably satisfied, on the balance of probabilities, and having regard to the quality of evidence required to reach such a serious and adverse conclusion as required by s 140(2) of the Evidence Act, that Mr Carter was aware that the contribution made to Mr Chidiac towards the purchase of the Mazda 3 was given to Mr Chidiac as an illegal inducement or a bribe. 698 Mr Chidiac was the Group Manager of Procurement & Shared Services at GrainCorp. Mr Georgiou's 28 February 2013 and 7 March 2013 emails to Mr Carter made plain that Mr Chidiac was seeking personal benefits from Orix and that in return Orix was prepared to provide them on the basis that it would compromise Mr Chidiac's position with his employer and give Orix valuable leverage over him. It is implausible, given the relationship that Mr Georgiou had established with Mr Pereira, with the knowledge and approval of Mr Carter, that Mr Carter did not expect that a compromised Mr Chidiac would also provide Orix with a valuable commercial advantage in its negotiations and dealings with GrainCorp. 699 I do not accept Mr Carter's evidence that he did not read and understand the significance of Mr Georgiou's 28 February 2013 and 7 March 2013 emails. 700 It is implausible that the heading to the 28 February 2013 email, "Another penguin caught in our nets !!" would not have caused Mr Carter to read the email. Mr Carter is asked by Mr Georgiou to "Read from below up", he is told it is for a car for Mr Chidiac's daughter and the contribution would be made from "GC monies we are holding". The email from Mr Chidiac that was forwarded to Mr Carter by Mr Georgiou revealed unequivocally that the request was not work related, he was looking for a favour and he had gone as far to suggest that Orix could use the GC Profit Share Account to provide the funds. 701 Mr Carter accepted in cross examination that he understood "a penguin" to be a person who had taken a benefit and, after some initial prevarication, that the only way the heading "Another penguin caught in our nets !!" could be read was that Mr Georgiou was of the view that Mr Chidiac's acceptance of the payment had compromised him towards Orix. Even without the heading, it was clear given the request made by Mr Chidiac that he was compromising himself, namely by requesting the "assistance" for the purchase of his daughter's car and the suggestion that the GC Profit Share Account could fund the request. 702 In the circumstances, the absence of any email response from Mr Carter is explicable on the basis that it would have been almost self-evident to Mr Carter that it was an improper request and the only benefit to Orix of complying with the request would be an expectation that, to use Mr Georgiou's colourful expression, Orix had captured "another penguin in its nets". 703 Equally, it is implausible that Mr Carter would not have read Mr Georgiou's "come to me baby…" 7 March 2013 email, that forwarded Mr Chidiac's "Thankyou …. .yet again… Take it off the profit share !!!!" email earlier that day. The language "come to me baby…" could only have conveyed to Mr Carter that Mr Georgiou had successfully captured another penguin for the benefit of Orix in its dealings with GrainCorp. The email emphasises the informality and self confidence that Mr Georgiou had in emailing Mr Carter about controversial topics and the extent of his use of language that devoid of a shared understanding of the context in which the emails were being sent would have been meaningless. 704 Mr Georgiou's emails made plain to Mr Carter that GrainCorp was not aware of the proposed use of the GC Profit Share Account to fund the "personal favour" requested by Mr Chidiac, and equally that the request was well outside any implied authority that Mr Chidiac may have been represented by GrainCorp to have had with respect to the disbursement of funds from the GC Profit Share Account. 705 The submission by Mr Carter that Mr Georgiou was in effect seeking to implicate him by sending emails of this character to him is illogical. Mr Carter responded to many emails sent to him by Mr Georgiou. On no view could Mr Georgiou have rationally thought that it was not likely that Mr Carter would open and read all emails that he received from Mr Georgiou. The emails that Mr Carter received from Mr Georgiou on 28 February 2013 and 7 March 2013 unambiguously disclose the request for an improper benefit and Mr Georgiou's enthusiasm to provide it in order to capture another penguin. 706 I am not satisfied, however, to the requisite standard mandated by s 140(2), that Mr Carter was aware that Orix had assisted Mr Chidiac's purchase of the Subaru Liberty by taking a loss on the transaction for the reasons I have set forth at [682] to [685] above. The unchallenged evidence of Mr Dundas is not sufficient to meet that standard. Mr Dundas only gave evidence that Mr Carter told him that he did not "want the money to be taken from the GrainCorp profit share account", in response to Mr Dundas's query "Why are we using money from the GrainCorp profit share account towards the purchase of a Subaru for Mr Chidiac?". Mr Carter's recorded response is consistent with it being taken as a loss by Orix but cannot establish that Mr Carter knew that Orix was taking a loss on the purchase of the Subaru Liberty.
H.1. Overview 707 On 30 October 2014, Mr Carter signed the acknowledgement in the Proposal on behalf of Orix (Acknowledgement). The Acknowledgement contained various personal assurances from Mr Carter, as the person who signed the Proposal on behalf of Orix. The assurances included a declaration in the following terms (Declaration): We (the undersigned): … declare that after enquiry that the statements, particulars and information contained in this application and in any documents accompanying this application are true and correct in every detail and that no other material facts have been misstated, suppressed or omitted; … 708 None of the alleged facts constituting the SRS arrangements, Slush Fund arrangements or the GrainCorp Transactions were disclosed in the Proposal or otherwise to Chubb. 709 The answer "No" was given to question 7(b) in the Proposal (Facts and Circumstances Question) which read: Is the Company, or any director, officer or employee aware, after enquiry, of any fact, circumstance, act or omission which may give rise to a claim that may be covered under a Directors & Officers Liability Insurance policy? 710 Chubb contends that in making the Declaration and answering the Facts and Circumstances Question in the negative, Orix made fraudulent representations to Chubb, and in failing to refer to any of the facts about the Slush Fund arrangements, the SRS arrangements and the GrainCorp Transactions in the Proposal, Orix made a fraudulent non-disclosure to Chubb. Mr Carter was the signing officer of Orix for the Proposal. Chubb contends that the Declaration and the answer to the Facts and Circumstances Question were both dishonestly made by Mr Carter given Mr Carter's knowledge as at 30 October 2014 of the facts giving rise to the SRS arrangements, Slush Fund arrangements and the GrainCorp Transactions, and his dishonesty is attributed to Orix. Chubb submits it is entitled to deny indemnity to Mr Carter pursuant to cl 7 of the Policy as a person engaged in, or aware of, the fraudulent non-disclosure or misrepresentation made by Orix to Chubb (Fraud Term Defence). 711 In the alternative to the Fraud Term Defence, Chubb seeks to rely on s 28(3) of the Insurance Contracts Act to reduce any claims Mr Carter makes on the Policy to nil, on the basis that (a) by giving the answer to the Facts and Circumstances Question and making the Declaration, Mr Carter and Orix fraudulently misrepresented the risk to Chubb before the Policy was entered into, and (b) by failing to disclose to Chubb the facts that Mr Carter (and through him, Orix) knew about the Slush Fund arrangements, the SRS arrangements and the GrainCorp Transactions, Orix fraudulently breached its duty of disclosure under s 21 of the Insurance Contracts Act, and (c) had the duty of disclosure not been breached or the misrepresentations not been made, Chubb would not have offered any policy on any terms to Orix (ICA Defence). 712 Further, Chubb seeks to rely on the exclusion under cl 4.1 of the Policy. The exclusion applies where the claim for payment is based on, arises from, or attributable to any dishonest or fraudulent act or omission of the insured or an intentional breach of the law by the insured, if that conduct is established through, relevantly, a judgment. The fraudulent and dishonest conduct that Chubb now alleges against Mr Carter regarding the SRS arrangements, Slush Fund arrangements and GrainCorp Transactions is, in substance, the same conduct that founded Orix's claim in the Orix proceedings and the charges in the Criminal proceedings. Although Chubb has not presently declined indemnity to Mr Carter in reliance on cl 4.1, if there is judgment in these proceedings that Mr Carter engaged in that conduct, Chubb contends that this will be a further basis upon which Chubb is entitled to decline an indemnity in answer to the claims by Mr Carter for his costs in the Orix proceedings and the Criminal proceedings (Fraud Exclusion Defence). 713 Chubb also contends that it is entitled to repayment of the Sums Advanced from Mr Carter because (a) cl 5.5(a) of the Policy expressly provides that if defence costs have been advanced to Mr Carter, they must be repaid to Chubb if Mr Carter is not entitled to such payment and pursuant to cl 7 of the Policy, Mr Carter, as a person engaged in, or aware of, the fraudulent non-disclosure or misrepresentation made by Orix to Chubb, is not entitled to any indemnity under the Policy, and (b) if there is a judgment in these proceedings finding that Mr Carter engaged in the alleged conduct, then there will be a judgment of the kind required for the operation of the exclusion in cl 4.1 of the Policy.
H.2. Fraudulent Misrepresentations (Issues 45 to 48)
H.2.1. Overview 714 Chubb's fraudulent misrepresentation case is advanced pursuant to cl 7 of the Policy. Clause 7 provided: The Proposal shall be construed as a separate proposal by each Insured and with respect to statements and particulars in the Proposal no statements made or information possessed by any Insured shall be imputed to any other Insured to determine whether cover is available for that other Insured. Where there is any fraudulent non-disclosure or misrepresentation to the Insurer, the Insurer irrevocably waives any right to rescind, avoid or cancel the Policy but the person or persons who engaged in, or was or were aware of, the fraudulent non- disclosure or misrepresentation shall not be entitled to any indemnity under this Policy. Where there is any non-disclosure or misrepresentation which is not fraudulent, the Insurer irrevocably waives any right to cancel the Policy or to reduce its liability under the Policy in respect of any Claim or Investigation arising from the matter not disclosed or misrepresented. Only statements made in the Proposal and knowledge possessed by an Insured who is the subject of a claim under this Policy shall be imputed to the Company for the sole purposes of determining if cover is available for indemnifiable Loss with respect to such Insured. (Bolding in original.) 715 The parties have identified the following four issues regarding the fraudulent misrepresentation case advanced by Chubb: (a) did Mr Carter dishonestly sign the Proposal that: (i) recorded the answer to the Facts and Circumstances Question in the negative (Issue 45(a)); and/or (ii) contained his declaration that after enquiry, no other material facts had been suppressed or omitted from the Proposal where the Proposal did not refer to any of the matters found to be known by Mr Carter about the SRS arrangements, the Slush Fund arrangements and/or the GrainCorp Transactions (Issue 45(b)); (b) did Mr Carter in fact know of a "fact, circumstance, act or omission which Mr Carter knew [might] give rise to a claim that [might] be covered under a Directors & Officers Liability Insurance Policy", being: (i) if the answer to Issue 11 was in the affirmative, was Mr Carter also aware that this may give rise to a claim under the Policy? (Issue 46(a)); (ii) if the answer to Issue 13 was in the affirmative, was Mr Carter also aware that this may give rise to a claim under the Policy? (Issue 46(b)); (iii) if the answer to Issue 31 was in the affirmative, was Mr Carter also aware that this may give rise to a claim under the Policy? (Issue 46(c)); (iv) if the answer to Issue 32 was in the affirmative, was Mr Carter also aware that this may give rise to a claim under the Policy? (Issue 46(d)); (v) if the answer to Issue 33 was in the affirmative, was Mr Carter also aware that this may give rise to a claim under the Policy? (Issue 46(e)); (vi) if the answer to Issue 34 was in the affirmative, was Mr Carter also aware that this may give rise to a claim under the Policy? (Issue 46(f)); (vii) if the answer to Issue 35 was in the affirmative, was Mr Carter also aware that this may give rise to a claim under the Policy? (Issue 46(g)); (viii) if Mr Carter was aware of the fact in Issue 36 and if the answer to Issue 37 was in the affirmative, was Mr Carter also aware that this may give rise to a claim under the Policy? (Issue 46(h)); and (ix) if the answer to Issue 44 was in the affirmative, was Mr Carter also aware that this may give rise to a claim under the Policy? (Issue 46(i)); (c) what were the relevant "facts, circumstances, acts or omissions" that were known by Mr Carter that are referred to in Issue 45? (Issue 47); and (d) what were the relevant potential "claims" that were known by Mr Carter that are referred to in Issue 45? (Issue 48). 716 It is convenient to deal with Issues 45 to 48 together, given the extent to which the issues are intertwined and directed at Mr Carter's knowledge at the time that he signed the Proposal.
Fraudulent Misrepresentation 717 Section 26 of the Insurance Contracts Act provides: (1) Where a statement that was made by a person in connection with a proposed contract of insurance was in fact untrue but was made on the basis of a belief that the person held, being a belief that a reasonable person in the circumstances would have held, the statement shall not be taken to be a misrepresentation. (2) A statement that was made by a person in connection with a proposed contract of insurance shall not be taken to be a misrepresentation unless the person who made the statement knew, or a reasonable person in the circumstances could be expected to have known, that the statement would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms. 718 The Insurance Contracts Act does not define what constitutes fraud for the purposes of the legislation. 719 The common law position on fraud was succinctly stated in the seminal decision of the House of Lords in Derry v Peek (1889) 14 App Cas 337 at 374 (Lord Herschell): …[F]raud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth. 720 This statement was approved in Prepaid Services Pty Ltd v Atradius Credit Insurance NV (2013) 302 ALR 732; [2013] NSWCA 252 at [38] (Meagher JA, with Macfarlan and Emmett JJA agreeing). At [39]-[40], Meagher JA stated: For fraudulent misrepresentation to be made out it must be established that the representor had no honest belief in the truth of the representation in the sense in which the representor intended it to be understood: John McGrath Motors (Canberra) Pty Ltd v Applebee [1964] HCA 1; 110 CLR 656 at 659-660 (Kitto, Taylor and Owen JJ); Krakowski v Eurolynx Properties Ltd [1995] HCA 68; 183 CLR 563 at 578-579 (Brennan, Deane, Gaudron and McHugh JJ). In Forrest v Australian Securities and Investments Commission [2012] HCA 39; 86 ALJR 1183 at [22] (French CJ, Gummow, Hayne and Kiefel JJ) it was emphasised that a false statement "made through carelessness and without reasonable grounds for believing it to be true, may be evidence of fraud but does not necessarily amount to fraud". As Lord Herschell observed at 374, the formulation in Derry v Peek covers the whole ground because someone who knowingly represents what is false obviously has no honest belief, and someone who is indifferent to whether a representation is true or false can have no honest belief as to its truth. Being reckless or indifferent as to the truth of something describes a state of mind or consciousness: Angus v Clifford [1891] 2 Ch 449 at 471 (Bowen LJ); Le Lievre v Gould [1893] 1 QB 491 at 500-501 (Bowen LJ); Banditt v R [2005] HCA 80; 224 CLR 262 at [2] (Gummow, Hayne and Heydon JJ); Fidock v Legal Profession Complaints Committee [2013] WASCA 108 at [93]-[97] (Martin CJ, Newnes and Murphy JJA). The fact of that indifference is the basis for the conclusion as to the absence of any real belief, which is a finding as to the relevant person's state of mind: Banditt v R at [2].
"May give rise to a claim" 721 The Facts and Circumstances Question requires consideration of the meaning of "may give rise to a claim". 722 In the context of a consideration "of facts that might give rise to a claim" in s 40(3) of the Insurance Contracts Act, the Court of Appeal of the New South Wales Supreme Court stated that it is not necessary that the notified facts identify the likely claimant or claimants and it is sufficient if the notification may be of a problem which of itself might give rise to a claim or claims by persons with particular characteristics, even if the quantum of the claims and the identity of the claimants may not be known at the date of notification: P&S Kauter Investments Pty Ltd v Arch Underwriting at Lloyd's Ltd (2021) 105 NSWLR 110; [2021] NSWCA 136 at [31] (Meagher JA, Bathurst CJ and Bell P agreeing). 723 The meaning of circumstances that "may give rise to a claim" was also considered by Lindgren J in FAI Insurance Co Ltd v McSweeney (1999) 10 ANZ Ins Cas 61-443 at 75,033-75,034: In my opinion, it is not desirable to attempt to define precisely the shade of meaning signified by the expression "may give rise to a claim". The appropriate connection between the known circumstances and the claim referred to in question 13(b)(ii) is, perhaps, best described by saying that circumstances "may give rise to a claim" if they would, as at the time of the proposing of the insurance, immediately suggest to a reasonable person in the proponent insured's position who reflected upon those known circumstances, that the bringing of a claim against the insured in respect of them was a "definite risk" or a "real possibility" or "on the cards". Perhaps the notion of the "springing to mind" of the making of a claim also appropriately expresses the shade of meaning intended. The expression is concerned with the making of a claim as distinct from the mere existence of legal liability. Ordinarily it can be expected that what will be known will include the fact that the circumstances have actually led a person at least to contemplate the making of a claim. However, I do not exclude the case where the underlying circumstances establishing liability themselves, of their nature, would prompt a reasonable person immediately to foresee the making of a claim as a real possibility. In such a case, the length of time that has passed without any suggestion of a claim and the degree of obviousness of liability may assume importance (cf the hypothetical case described by Pidgeon J in Hendry Rae at 347). 724 As to s 28(3) of the Insurance Contracts Act, the reduction in the liability of the insurer looks to the position of the insurer rather than the position of the insured. The burden of proof rests with the insurer to prove that it would not have entered into the contract on the same terms and for the same premium as it did if the matter that ought to be disclosed was disclosed: Manchester Unity Total Care Building Society v MGICA Ltd (1991) 6 ANZ Ins Cas 61-062 at 77,154 (Beach J).
Overview 725 As explained at [707] above, the Acknowledgement signed by Mr Carter on 30 October 2014 contained the following Declaration: We (the undersigned) …… (d) declare after enquiry that the statements, particulars and information contained in this application and in any documents accompanying this application are true and correct in every detail and that no other material facts have been misstated, suppressed or omitted; 726 The first page of the Proposal describes the content of the Insured's duty to make disclosure to Chubb under the heading "Your Duty of Disclosure" in the following terms: Before you enter into a contract of general insurance with an insurer, you have a duty, under the Insurance Contracts Act 1984, to disclose to [Chubb] ('the insurer') every matter that you know, or could reasonably be expected to know, is relevant to the insurer's decision whether to accept the risk of the insurance and, if so, on what terms. You have the same duty to disclose those matters to the insurer before you renew, extend, vary or reinstate a contract of general insurance. Your duty however does not require disclosure of any matter:
Submissions 729 Chubb submits that the Court should find that Mr Carter did not read the Acknowledgement before he signed it and therefore it could not have been honestly signed as he could not have had any belief as to the truth of the Acknowledgement if he had not even read it. It submits that the failure to read the Acknowledgement before signing it was a "signal failure" that can properly be characterised as a fraudulent misrepresentation. In the alternative, Chubb submits that Mr Carter was recklessly indifferent as to whether the Acknowledgement was true or false. 730 Chubb further submits that even if the Court was satisfied that Mr Carter had read the Acknowledgement, his failure to take any steps necessary to give honestly the assurance in the Acknowledgement constituted dishonesty (and fraud) in the knowingly sense and therefore would still have constituted a fraudulent misrepresentation. 731 Mr Carter accepts that he did not read the Acknowledgement carefully, however, he submits that he assumed "everything was in order" based on the email from Mr Forster, Orix's company secretary at the time, at 1.44 pm on 30 October 2014, which stated that "essentially the asset numbers and revenue numbers in the declarations are slightly down on the prior year and the general market conditions are such we shouldn't see any surprise increases".
Consideration 732 Mr Carter accepted in cross examination that the Acknowledgement formed part of the Proposal and in turn formed part of Chubb's requirements for presentation of risk and it would be provided to Chubb to assist it in its underwriting deliberations. 733 The Acknowledgement relevantly included the Declaration. The Declaration confirmed that after enquiry, "no other material facts have been misstated, suppressed or omitted". 734 The Acknowledgement was signed by Mr Carter at his home on or about 30 October 2014, together with proposals for civil liability insurance and financial institutions bond & electronic computer crime insurance. In aggregate the three insurance proposals comprised some 70 pages. Each of the proposals had been completed in handwriting by Mr Forster. Mr Carter gave evidence, that I accept, that he relied on Mr Forster to complete the proposals as Mr Forster "had done it forever and a day" and Mr Carter did not personally satisfy himself that the proposals were complete and accurate in every way from his perspective. 735 When pressed as to how he could simply have relied on Mr Forster to complete the Proposal, Mr Carter stated that it did not cross his mind whether Mr Forster would have known as much as he did about the activities of Orix. Mr Carter accepted, however, that Mr Forster did not have any commercial dealings with CCA or GrainCorp. 736 As submitted by Mr Carter, he accepts that he did not read the Acknowledgement "carefully" as he assumed that "everything was in order" from Mr Forster's email of 30 October 2014. He also accepts that if the Court were to find that he had actual knowledge of the dishonest or illegal conduct alleged by Chubb then his failure to cause Orix to disclose information at the time he completed the Proposal would constitute "reckless indifference". 737 I am satisfied that Mr Carter signed the Acknowledgement without giving any real consideration to its contents. Mr Carter accepts that he did "not read it carefully". Moreover, given my findings above as to Mr Carter's knowledge of the extent of the SRS arrangements, the Slush Fund arrangements and the Mazda 3 Transaction as at 30 October 2014, he could not have signed the Acknowledgement honestly if he had read the Acknowledgement with sufficient care to understand the Declaration that he was making. 738 I am also satisfied, given Mr Carter's evidence that he signed the Acknowledgement on the assumption that Mr Forster had completed the Proposal correctly and his concession that Mr Forster was not involved in any commercial dealings with CCA or GrainCorp, that he could not honestly have represented that he was providing the Declaration "after enquiry" had he read the Acknowledgement with sufficient care to understand the Declaration that he was making. 739 I am therefore comfortably satisfied, on the balance of probabilities, and having regard to the quality of evidence required to reach such a serious and adverse conclusion as required by s 140(2) of the Evidence Act, that Mr Carter was at least recklessly indifferent to the truth of the Declaration that he made in the Acknowledgement and he could not have had any real belief as to the truth of the Declaration. That is a finding as to Mr Carter's state of mind at the time he completed the Proposal: Derry v Peek at 374; Prepaid at [39]-[40]. 740 I am therefore satisfied that in making the Declaration, Mr Carter dishonestly signed the Proposal.
H.2.4. Answer to the Facts and Circumstances Question (Issue 45(a) and Issues 46 to 48)
Overview 741 As set out above, the Facts and Circumstances Question, to which a negative response was given in the Proposal, was: Is the Company, or any director, officer or employee aware, after enquiry, of any fact, circumstance, act or omission which may give rise to a claim that may be covered under a Directors & Officers Liability Insurance policy? 742 The question extended to the awareness of any director, officer or employee of Orix "after enquiry" and focused on the awareness of a causal relationship between any "fact, circumstance, act or omission" and a "claim" that may be covered under directors and officers liability insurance. Further, awareness that a claim "may" exist and the claim "may" be covered under directors and officers liability insurance was sufficient to require a positive response to the question. 743 The most probative indication of what "might be covered" under a directors and officers liability policy would be the specific cover in fact provided under the policy in issue. Here the Policy extended to loss incurred as a result of civil actions, including civil penalties and related defence costs, cover for loss incurred in criminal claims, including related defence costs and cover for legal representation expenses incurred due to investigations by various regulatory bodies, including ASIC. Further, as submitted by Chubb, another matter plainly relevant to an insurer would be what is generally referred to as "moral hazard", namely the character of the person seeking the insurance.
Submissions 744 Chubb submits that Mr Carter could not have had any honest belief in the negative answer that he provided to the Facts and Circumstances Question because he did not read the Proposal before signing it and therefore did not even know what the relevant question and answer was, or in the alternative, he was recklessly indifferent as to whether the answer was true or false, for the same reason. 745 Alternatively, Chubb submits that if the Court were to find that Mr Carter had read the question and answer before signing the Proposal, he could not have been satisfied that the negative answer was correct because he could not have been satisfied that the inquiries that needed to be made had been undertaken. 746 Next, Chubb submits that even if Mr Carter had read the question and answer and turned his mind to potential claims he could not have answered the question honestly because he conceded in cross examination that he did not familiarise himself with the terms of the Policy before he signed the Proposal and in order to consider honestly the connection between any claims and the Policy, he would need to appreciate the scope of the cover provided by the Policy. 747 Chubb also submits that Mr Carter's evidence as to his state of mind that he provided in his 12 April 2023 affidavit, served shortly prior to the commencement of the hearing of the proceedings, ought to be considered with considerable scepticism given its timing. Chubb submits that Mr Carter's previous affidavits had been directed only at his knowledge of pleaded facts and to some extent, whether the pleaded facts were relevant. In his 12 April 2023 affidavit, Mr Carter gave evidence of his alleged state of mind as at October 2014. It included claims that (a) he did not believe that it could be a criminal offence to make a gift to an employee, (b) he did not associate providing gifts to executives of clients as bribes unless they provided a substantial benefit to perform an act in the giver's favour against the employer of the person receiving the benefit, (c) he had no knowledge of any statutory duties imposed on directors under the Corporations Act or that ASIC could prosecute an individual for breaching such duties, and (d) he was not aware that a director could be sued for making "management mistakes" or that Orix or ASIC could bring such proceedings. 748 Chubb submits that the objective evidence, in particular, Mr Carter's experience and courses he attended, and the terms of Orix's internal compliance documents together with Mr Carter's evidence in cross examination, demonstrate that Mr Carter's 12 April 2023 affidavit as to his state of mind in October 2014 was directed at obfuscation on a topic that Mr Carter understood to be important in the proceedings. Chubb submits that Mr Carter gave dishonest evidence for forensic purposes and that Mr Carter appreciated that he owed the duties to Orix described in detail in the Orix's Code of Ethics (Code of Ethics), and if he breached those duties it was possible that Orix could bring a claim against him, if it suffered any loss as a result of that breach. 749 Mr Carter submits that for Chubb to succeed on its fraudulent misrepresentation case with respect to the Facts and Circumstances Question it must establish that Mr Carter was aware that the alleged facts relied upon by Chubb may give rise to a claim under the Policy. 750 Mr Carter accepts that if the Court were to find that he had actual knowledge that the SRS invoices "were intended as a sham" then Chubb would have established that he was aware of a possible claim under the Policy. Mr Carter, however, otherwise submits that even if he were aware of the Mercedes transaction, the use of the CCA Marketing Account for Mr Pereira's personal expenditure and the Mazda 3 Transaction, that knowledge would not have been sufficient for him to become aware of a possible claim under the Policy. Mr Carter further submits that the facts regarding the $13.90 inspection fee are not capable of giving rise to a claim because the inspection fee was a replacement of the $500 introducer fee and therefore CCA would not have suffered any loss. 751 Mr Carter submits that Chubb's challenge to his evidence that had he been aware of these transactions he would not have known they could give rise to a claim under the Policy should be rejected. He submits that (a) Chubb impermissibly seeks to view Mr Carter's awareness through the prism of a lawyer, (b) references to the Corporations Act in the Orix Compliance Manual produced in August 2014 (Compliance Manual) does not carry with it any necessary inference that Mr Carter was aware of his statutory duties, (c) the fact that the responsibilities outlined in the Code of Ethics may have their source in the Corporations Act does not necessarily convey that Mr Carter must have been aware of all of his directors' duties, (d) his evidence that he was not aware of his statutory duties is not implausible given his evidence that he did not associate the provision of gifts to clients or their executives as bribery and that a bribe was providing a substantial benefit at the same time as asking a person to perform an act in your favour against the interests of their employer, (e) his evidence that he could not be sued for "management mistakes" reflects the business judgment rule, and (f) it was hardly surprising that Mr Carter was not that aware that a claim for restitution for a mistake could be made. 752 Further, Mr Carter submits that his evidence in response to the knowledge counterfactuals put to him by Chubb given at the end of the fourth day and on the fifth day of his cross examination was not, contrary to Chubb's submissions, "dishonest evidence given for his own forensic purposes". He submits that (a) his evidence was consistent with his evidence that he understood ASIC could only bring an action if a director was not acting honestly, (b) he was giving truthful evidence as a layperson about what he understood to be Orix's disclosure obligations, (c) given the framing of the questions and their generality it is not surprising he was confused at times, and (d) in any event, Chubb failed to put to him "fairly and squarely" that his answers were dishonest, citing Bale v Mills (2011) 81 NSWLR 498; [2011] NSWCA 226 at [44] (Allsop P, Giles JA and Tobias AJA).
Consideration 753 The Facts and Circumstances Question is directed at knowledge after enquiry, of matters which "may give rise to a claim that may be covered under a Directors & Officers Liability Insurance policy". Given my findings as to the extent of Mr Carter's knowledge of the SRS arrangements, the Slush Fund arrangements and the GrainCorp Transactions, the relevant question is whether by reason of his knowledge of those matters, Mr Carter knew that they may give rise to a claim that may be covered under a directors and officers liability policy. 754 The phrase "may give rise to a claim" suggests something between a "probability" in the sense of "more likely than not" and a "possibility" in the sense of "a chance, however, likely". The language of "a definite risk", a "real possibility", "on the cards" and the notion of the "springing to mind" advanced by Lindgren J in FAI Insurance at 75,033-4 provide a useful guide to the shade of meaning to be given to "may give rise to a claim". 755 I accept that in determining the weight to be given to Mr Carter's evidence as to his knowledge of whether matters may give rise to a claim under the Policy, it is important not to assess the credibility of Mr Carter's denials through the prism of a lawyer. It is also necessary to make allowances for the difficulty that any witness faces in answering questions as to their knowledge of the significance of historical matters that they have otherwise denied knowing or for which they have no recollection, particularly in the context of a lengthy cross examination and answering questions framed by reference to multiple contested assumptions. 756 Having taken those matters into account, however, and noting his concession with respect to the SRS arrangements, I am not able to accept Mr Carter's evidence that had he been aware of the matters giving rise to the Slush Fund arrangements and the GrainCorp Transactions, contrary to his denials, he would not have recognised that these matters may have given rise to a claim under the Policy. Mr Carter's denials of knowledge must be assessed against all the objective evidence and the apparent logic of events. 757 I do not accept Mr Carter's evidence in his 12 April 2023 affidavit and in cross examination that he was not aware, or only had an incomplete and limited understanding, of the statutory duties he owed to Orix under the Corporations Act, and his obligations to act in good faith and honestly and to avoid conflicts of interest at the time he signed the Proposal. His evidence was inherently implausible given his experience, corporate governance courses that I am satisfied that he attended, and the concessions and acknowledgements that he otherwise made in the course of his cross examination. His alleged limited and idiosyncratic understanding in 2014 of his duties, responsibilities and liabilities as the Managing Director of Orix is not credible. 758 By 2014, he had been a director of a significant Australian corporation for approximately 13 years and its Managing Director for the previous 10 years and had attended at least two corporate governance courses directed at directors' duties. 759 I infer from a signed acceptance form in Mr Carter's personnel file and credit card details of a credit card in Mr Carter's name, that approximately a year after Mr Carter had been appointed to the board of Orix he attended a six day course for directors called "Board Step". The course included a session entitled "Responsibilities & Accountabilities", with the description "Corporate governance: the director's responsibilities, legal obligations, accountability, awareness and management of personal and corporate risks". 760 Mr Carter's personnel file also included a corporate training application form and course pamphlet for a course titled "Governance & Accountability Workshop Series", to be held on 12 September 2003, held by CPA Australia. 761 Next, the internal compliance documents of Orix that were current during Mr Carter's term as Managing Director of Orix included the Compliance Manual, a gifts and gratuities policy and the Code of Ethics. 762 The Compliance Manual included a foreword attributed to Mr Carter, that contained the following passage: … However, at the personal level we also need to strive for consistently high standards in order to experience a full measure of job satisfaction and to avoid exposing ourselves to the very real risk of personal liability that comes from laws such as The Corporations Act, The Occupation [sic] Health & Safety Act and the Privacy Act. (Emphasis added.) 763 Mr Carter could not recall reading the Compliance Manual but agreed in cross examination that the manual was an important document for a managing director to read, it was a fundamental document to ensure compliance within Orix and it was fundamental for all Orix senior management to have a working understanding of their compliance obligations under the manual. 764 Specific guidance concerning the giving of gifts was provided in the Code of Ethics and in the Orix Gifts, Gratuities and Invitations Policy dated June 2011 (Gifts Policy). Mr Carter was cross examined at length about his understanding of the Code of Ethics and the Gifts Policy. 765 Mr Carter agreed that the Code of Ethics provided a practical guide to the application in practice of Orix's core values and relationship principles with integrity, honesty and concerns for equitable outcomes and those matters were important for the Orix board. Mr Carter also agreed that the Code of Ethics identified particular duties that he owed to Orix including duties to Orix to act honestly, in good faith and in the best interests of Orix and to use due care and diligence in fulfilling the functions of his office and to use the powers of his office properly and for the best interests of Orix. 766 The section of the Code of Ethics that was attributed to directors largely reflected duties that had their source in the Corporations Act. 767 The Code of Ethics included the following principle concerning the protection of the reputation of Orix: Directors and staff must not engage in conduct likely to have an adverse effect on the business of the company or on its relationship with employees, customers or suppliers. 768 Mr Carter agreed that he was aware at all times that the Code of Ethics was reminding readers to think of the effects that their conduct might have on Orix's business relationships. 769 Mr Carter also agreed that the "Conflicts of Interest, Bribery and Inducements" principles in the Code of Ethics stressed the importance of avoiding circumstances in which there could even be the possibility of a conflict of interest and the blanket ban on accepting expensive or inappropriate gifts or gratuities was to ensure that staff members were not placed in a compromised position. Mr Carter accepted that the acceptance of a gift by a staff member could raise an expectation that the giver would receive some benefit in return and agreed that should be avoided. 770 The Code of Ethics included the following principle directed at bribes and improper inducements: The giving of money or gifts of substantial value to gain a business advantage over a competitor is unacceptable and in some cases constitutes a criminal act. Where such behaviour deprives a rival company of an opportunity to compete fairly, it is morally reprehensible. 771 Mr Carter agreed that he understood "at the time" that the giving of money or gifts of substantial value to gain a business advantage over a competitor was unacceptable and he appreciated that the giving of a bribe was a criminal act. He also agreed that he understood that the Code of Ethics prohibited the provision of substantial benefits to employees of other organisations because of their potential to compromise those employees. 772 The Gifts Policy provided that as a matter of company policy Orix employees could not accept gifts or gratuities other than the exchange of small tokens of goodwill between Orix and its suppliers on special occasions. Mr Carter agreed that he was familiar with the Gifts Policy from the time of its publication in June 2011 and similar Orix policies in existence prior to June 2011. 773 After some prevarication, Mr Carter accepted that at the time he was the Managing Director of Orix he understood that the Gifts Policy was stating the obvious fact that human beings can be influenced into providing favourable treatment to a giver upon receiving gifts of value. 774 Again, after some prevarication, Mr Carter accepted that there was a risk of compromising an employee of a customer's obligations to their employer if substantial gifts, gratuities or invitations were provided to the employee. 775 Mr Carter also gave the following evidence relevant to assessing his likely understanding at the time he signed the Proposal of the implications of making gifts or providing benefits to employees of other parties: Right. And do you agree that it's basic commercial morality that one party not try and influence the representative of the other with expensive gifts or benefits?---Yes. All right. And do you agree that the giving of such expensive gifts and benefits creates a very real risk that the recipient will not always act in the best interests of their employer but will prefer the interests of the giver?---Not necessarily. There's a risk, isn't there?---There [is] always a risk. A very real risk. Would you agree?---No. I would say there's a risk. Do you agree that to give a gift or benefit to influence [an] employee of another party to not act in the best interests of their employer would be commercially improper -?---Yes. -- - and not lawful?---Yes. And if the counterparty found out about it, just completely destructive of the business relationship between the parties?---I - I don't know if that would be correct or not. There's a very real chance of it, though. Do you agree?---There - there would be a chance, whether it's real or not. Right. And the questions I've just asked you are something that you were well aware of during your time as managing director of ORIX. Do you agree?---Yes. 776 Mr Carter also agreed that the prohibition in the Code of Ethics on tenderers being given information about any offer from other tenderers was directed at maintaining a fair playing field for tendering and it would be a grossly unfair practice to provide information from one tenderer to another tenderer to assist it in formulating its bid. 777 At the conclusion of Mr Carter's cross examination, Chubb put a series of hypothetical propositions to him for the purpose of seeking to extract concessions that had he in fact been aware, contrary to his denials, of the more critical facts giving rise to the SRS arrangements, Slush Fund arrangements and the GrainCorp Transactions, he would have appreciated that those facts needed to be disclosed by Orix to Chubb at the time that he signed the Declaration and answered the Facts and Circumstances Question. 778 I am satisfied that Mr Carter knew the following matters at the time that he signed the Proposal on 30 October 2014 containing the Declaration and the negative answer to the Facts and Circumstances Question. 779 As explained at section F.3.3. above, I am satisfied that Mr Carter knew at least the following facts about the payments to SRS: (a) that Mr Pereira was an employee of CCA; (b) that SRS was a nominee company of Mr Pereira; and (c) that SRS invoiced Orix in excess of $300,000 for fees that were not supported by any service performed by SRS, as the SRS invoices were simply to facilitate the payment out of funds that had been allocated to the credit of ledgers kept in relation to the introduction element that had been included in quotations by Orix, (together, SRS Facts). 780 Mr Carter accepted in cross examination that if a director or senior manager, with knowledge of the SRS facts, facilitated payment of the SRS invoices they would have understood that (a) it would not have been a proper use of Orix's funds held to the credit of the introducer account, (b) the payments of a benefit in excess of $300,000 to the nominee of Mr Pereira would have been a very substantial encouragement to Mr Pereira to favour Orix in CCA's fleet dealings, (c) the payments would have been unlawful and in breach of Orix's Code of Ethics, and (d) Chubb would have wanted to know in assessing the directors and officers liability risk that the director or senior manager had facilitated the making of those payments. 781 Mr Carter, however, claimed that he would not have understood that if a director or senior manager, with knowledge of the SRS facts, did not stop the provision of each of those benefits to or at the request of Mr Pereira, that there would have been at least a potential for a claim to be made against the director or senior manager by each of ASIC, Orix and CCA and it was a matter that ASIC might want to investigate. 782 I do not accept that evidence. In the light of Mr Carter's knowledge of his duties as a director and chief executive officer of Orix, as summarised above at [757] to [775] (Mr Carter's knowledge of his duties) and the concessions summarised at [780] above, it is implausible that he would not have understood that there was not at least the potential for such claims and investigation to be advanced. Further, although he did not accept that he would have understood that there was the potential for any claim from ASIC, Orix or CCA arising from this conduct, he did accept that if a director or senior manager had engaged in, or knowingly facilitated, unlawful conduct, there was a possibility that the director or senior manager could face a claim by someone. 783 As explained at [341]-[352] and [448]-[454] above, I am satisfied that Mr Carter authorised the payment of $145,000 from the CCA Marketing Account, in circumstances where he knew, given Mr Georgiou's 4 January 2011 and 18 April 2011 emails, the content of the invoice for the Mercedes vehicle and Mr Georgiou's handwritten annotation on Mr Pereira's 19 April 2011 email, that it was for the purpose of buying a Mercedes vehicle for Mr Pereira (whether outright or financed with the rental to be paid from the CCA Marketing Account) (Mercedes purchase). 784 Mr Carter accepted in cross examination that if a director or senior manager at Orix organised or approved the Mercedes purchase, they would have understood that (a) this was personal expenditure incurred for Mr Pereira, (b) it was not a proper use of the CCA Marketing Account, (c) the payments would have, in those circumstances, been unlawful and in breach of Orix's Code of Ethics, and (d) that Chubb would have wanted to know if a director or senior manager had organised or approved the Mercedes purchase in assessing insurance risk. 785 Mr Carter denied, however, that he would not have understood that (a) there was at least a potential for a claim to be made by ASIC, CCA or Orix against the senior manager or director arising from the Mercedes purchase, and (b) it was a matter that ASIC would or could want to investigate. 786 I do not accept that evidence. In the light of Mr Carter's knowledge of his duties and the concessions summarised at [784] above, it is implausible that he would not have understood that there was not at least the potential for such claims and investigation to be advanced. 787 As explained at sections E.7.3. and E.9.3. above, I am satisfied that Mr Carter knew the following facts about the use of the CCA Marketing Account for Mr Pereira's personal expenditure: (a) that both he and Mr Georgiou had approved Orix paying money that had been credited to the CCA Marketing Account for the personal benefit of Mr Pereira, who was at all times an employee of CCA (Personal Benefit Payments); (b) that CCA was unaware of the Personal Benefit Payments; and (c) the Personal Benefit Payments were in the order of hundreds of thousands of dollars, (together, Personal Benefit Facts). 788 Mr Carter accepted in cross examination that if a senior manager or director with knowledge of the Personal Benefits Facts had approved the Personal Benefit Payments, they would have understood that (a) it was not a proper use of funds recognised in the CCA Marketing Account, (b) the magnitude of the spending for Mr Pereira's personal benefit would have provided a very substantial encouragement to Mr Pereira to favour Orix in CCA's fleet dealings, (c) it would have been unlawful, (d) it would have been in breach of Orix's Code of Ethics, and (d) and it would have been a matter that Chubb would have wanted to know in assessing in insurance risk. 789 Mr Carter denied, however, that he would not have understood that (a) there was at least a potential for a claim to be made by ASIC, CCA or Orix against the senior manager or director arising from the Personal Benefit Facts, and (b) it would have been a matter that ASIC may have wanted to investigate. 790 I do not accept that evidence. In the light of Mr Carter's knowledge of his duties and the concessions summarised at [788] above, it is implausible that he would not have understood that there was not at least the potential for such claims and investigation to be advanced. 791 As explained at [480] above, I am satisfied that Mr Carter knew the following facts about the $13.90 inspection fee: (a) that the $13.90 inspection fee element had been created in the CCA quotations by, among others, Mr Georgiou and Mr McCulloch, in order to collect an amount of monthly rent attributable to that element to increase the funds available in the CCA Marketing Account (Inspection Fee Element); and (b) that this was not known to CCA, other than Mr Pereira; and (c) that he, Mr Georgiou and Mr McCulloch knew this to be the case, but took no steps to stop the use of the Inspection Fee Element for this purpose. (together, Inspection Fee Facts). 792 Mr Carter accepted in cross examination that if he had known of the Inspection Fee Facts and approved the Inspection Fee Element, that would not have been a proper activity undertaken by Orix and it could have had a negative impact on the relationship between CCA and Orix. Mr Carter claimed he did not know whether it would have been unlawful but agreed that if it was unlawful, Chubb would have wanted to know, in assessing the directors and officers liability risk, that a senior manager or director had known and approved the collection of the Inspection Fee Element. 793 Mr Carter denied, however, that he would have understood that (a) there was at least a potential for a claim to be made by ASIC, Orix or CCA against the senior manager or director in relation to the approval and collection of the Inspection Fee element, and (b) it would have been a matter that ASIC may have wanted to investigate. 794 I do not accept that evidence. In the light of Mr Carter's knowledge of his duties and the concessions summarised at [792] above, it is implausible that he would not have understood that there was not at least the potential for such claims and investigation to be advanced. 795 As explained at section G.5.3. above, I am satisfied that Mr Carter knew the following facts about the GrainCorp Transactions: (a) Mr Georgiou had organised a sum of money to be paid on behalf of Mr Chidiac from the GC Profit Share Account in order to fund, partially, the purchase of a car for Mr Chidiac's daughter (Mazda 3 Transaction); (b) Mr Georgiou made the payment with the intention of compromising Mr Chidiac; and (c) Mr Carter had known about the payment, and the potential for compromise, and did nothing to stop it, (together, GrainCorp Facts). 796 Mr Carter accepted in cross examination that if he had known the GrainCorp Facts, the Mazda 3 Transaction would have been unlawful and he would have understood that Chubb would have wanted to know in assessing the directors and officers liability risk, a senior manager or director had been involved in the making of that payment. 797 Mr Carter denied, however, that he would have understood that (a) there was at least a potential for a claim to be made against the senior manager or director by ASIC, Orix or GrainCorp arising from the GrainCorp Facts, and (b) that ASIC may have wished to investigate the GrainCorp Facts. 798 I do not accept that evidence. In the light of Mr Carter's knowledge of his duties and the concessions summarised at [796] above, it is implausible that he would not have understood that there was not at least the potential for such claims and investigation to be advanced. 799 As explained at section E.10.3. above, I am satisfied that Mr Carter knew the following facts about the payment of $47,200 to Mr Chua: (a) he and Mr Georgiou both knew that Mr Pereira requested a payment of $47,200 to Mr Chua, who was a personal friend of Mr Pereira's (Chua Payment); (b) the Chua Payment had been made; and (c) a false payment authority had been created to facilitate the Chua Payment being made out of the CCA Profit Share Account, (together, Chua Payment Facts). 800 Mr Carter accepted in cross examination that if a senior manager or director of Orix knew of Chua Payment Facts, the Chua Payment would have been unlawful and in plain breach of Orix's Code of Ethics, Chubb would have wanted to know, in assessing the directors and officers liability risk, that a senior manager or director had been involved in making the Chua Payment or creating the payment instruction. Further, in response to a question whether it might be a matter that some authority might wish to investigate, Mr Carter simply replied, "I don't know which one". I infer from that answer an acceptance that he understood an authority may have wanted to investigate the matter, but he was unable to identify which particular authority may have wanted to do so. 801 Mr Carter denied, however, that he would have understood that there was at least a potential for a claim to be made against the senior manager or director by ASIC, Orix or CCA arising from the Chua Payment Facts. 802 I do not accept that evidence. In the light of Mr Carter's knowledge of his duties and the concessions summarised at [800] above, it is implausible that he would not have understood that there was not at least the potential for such claims and investigation to be advanced. 803 Moreover, Mr Carter's denials that he understood at the time that he answered the Facts and Circumstances Question in the negative on 30 October 2014, that any of the SRS Facts, the Mercedes purchase, the Personal Benefit Facts, the Inspection Fee Facts, the GrainCorp Facts and the Chua Payment Facts had at least the potential for claims and investigation to be advanced and thereby were matters relevant to Chubb's insurance decision, cannot be accepted given the following emails passing between Mr Carter, Mr Georgiou and Mr McCulloch on 9 September 2014 with the subject line "Profit Share & Accrual", some 6 weeks before Mr Carter signed the Proposal: (a) at 2.40 pm, Mr McCulloch forwarded to Mr Georgiou and Mr Carter an email from Ms Tunnicliff, where she advised Mr McCulloch: Hi Will, Bryan will be in Sydney and coming into our office this Thursday morning, he has asked me to ask you to please send him the profit share reports, he's said you usually send them straight to him but he's not received last years or any this year. He's also asked for a list of all deductions from the accrual account since last split. Mr McCulloch confirmed to Mr Georgiou and Mr Carter in his email: George CCA don't have profit share. We clarified that 18 months ago. W (b) at 3.41 pm, Mr Georgiou responded to Mr McCulloch and Mr Carter: Correct bro….nothing formal…..but you always produced some report for him showing sale results v RV etc….some of this money was moved into a "marketing account" to pay for his other Mgrs accessories, reduced ET's reduce capital cost of some cars , and at one point, paid a chq back to CCA as a goodwill gesture amongst other things. See below: $277,787.08 as at 31 July 2013 and after the $70k transfer to his account From: George Georgiou Sent: Tuesday, 27 August 2013 6:04 PM To: William McCulloch; John Carter Subject: RE: BP Thanks bro Whats left in the profit share account? Regards George From: William McCulloch Sent: Tuesday, 27 August 2013 5:48 PM To: George Georgiou; John Carter Subject: BP Balance $115,816.14 Above is after transferring $70k to his account from accrual? Will go up another $4k next week with month end invoicing (c) at 3.49 pm, Mr Carter responded to Mr Georgiou and Mr McCulloch: Also….don't want anything to go to him in writing….no paper trail….only verbal…. (d) at 3.55 pm, Mr Georgiou responded to Mr Carter and Mr McCulloch: With all due respect….what would he do with it even if it was in writing ? He can't share it with anybody ! (e) at 4.01 pm, Mr Carter responded to Mr Georgiou and Mr McCulloch: Look at the thank you note which brought down O'Farrell….Trust me….been correct on everything about this account so far…..[no] slip ups (f) at 4.03 pm, Mr Georgiou responded to Mr Carter and Mr McCulloch: Roger that !!! OK Wilbo……he's here Thurs before we head of for their awards night……just give me what you want/have. G 804 The email exchange highlights Mr Carter's awareness of the impropriety and potential illegality of the arrangements that Orix had in place to provide funds for Mr Pereira's benefit, and in turn to promote Orix's interests by capturing and maintaining his assistance in its commercial dealings with CCA. An awareness made plain by his exhortation of the need for there not to be any paper trail in relation to payments out of the CCA Marketing Account and CCA Profit Share Account for the benefit of Mr Pereira in order to ensure that he and Mr Georgiou and Mr McCulloch are not "brought down" in a similar manner to "O'Farrell". I readily infer a reference to the resignation of the former New South Wales premier, Barry O'Farrell over his denial that he had received a "gift" in the form of a bottle of Grange, a denial that was subsequently shown to be false because of a thank you note that Mr O'Farrell had written. Further, the email chain again highlights Mr Carter's involvement and oversight of the two accounts and the extent to which Mr Georgiou deferred to his directions with how the accounts were to be operated. 805 For all of the foregoing reasons, I am comfortably satisfied, on the balance of probabilities, and having regard to the quality of evidence required to reach such a serious and adverse conclusion as required by s 140(2) of the Evidence Act, that at the time he answered the Facts and Circumstances Question in the negative Mr Carter knew by reason of his knowledge of at least, the SRS Facts, the Mercedes purchase, the Personal Benefit Facts, the Inspection Fee Facts, the GrainCorp Facts and the Chua Payment Facts, that they may give rise to a claim that may be covered under a directors and officers liability policy or was recklessly indifferent as to what might give rise to a claim covered by a directors and officers liability policy.
H.3.1. Overview 806 Issue 49 identified by the parties is whether Mr Carter fraudulently failed to cause Orix to disclose to Chubb any of the matters found to be known by him about the SRS arrangements, the Slush Fund arrangements and/or the GrainCorp Transactions. 807 Chubb contends that Mr Carter failed to disclose matters that he should have disclosed when signing the Proposal. Proof of non-disclosure so as to enable an insurer to a remedy requires consideration of s 21 of the Insurance Contracts Act.
H.3.2. Statutory provisions and legal principles 808 Section 21(1) of the Insurance Contracts Act, as it existed at the time the Policy was entered into in 2014, provided: (1) Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that: (a) the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or (b) a reasonable person in the circumstances could be expected to know to be a matter so relevant. 809 Section 21(1) has two elements: (a) there are matters known to the insured; and (b) the matters known are material to the insurer in the sense that they satisfy either one or other of limbs (a) or (b). 810 In CGU Insurance Ltd v Porthouse (2008) 235 CLR 103; [2008] HCA 30, the High Court stated at [52]-[53] (Gummow, Kirby, Heydon, Crennan and Kiefel JJ): The statutory test for disclosure now to be found in s 21 of the Insurance Contracts Act focuses on the "reasonable insured", not the "prudent insurer", and operates, first, by reference to the actual knowledge of the insured (s21(1)(a)), and secondly, by reference to what "a reasonable person in the circumstances could be expected to know" (s21(1)(b)). The latter statutory phrase has been interpreted as meaning that one should take into account only factors which are "extrinsic" to the insured, such as the circumstances in which the policy was entered into, rather than "intrinsic" factors such as the individual idiosyncrasies of the insured. Whilst it is possible to take into account the circumstances of the insured, the ultimate question under s 21(1)(b) turns on consideration of a reasonable person's state of mind, not the insured's state of mind. A test of disclosure, which operates by reference to both the insured's actual knowledge and the knowledge of a reasonable person in the same circumstances, is calculated to balance the insured's duty to disclose and the insurer's right to information. The insurer is protected against claims where the insured's disclosure is inadequate because the insured is unreasonable, idiosyncratic or obtuse and the insured is protected from exclusion from cover, provided he or she does not fall below the standard of a reasonable person in the same position. (Footnotes omitted.) 811 Section 21 of the Insurance Contracts Act requires that there be knowledge of a matter before there is a duty to disclose it. If a matter is not known to the insured, then it is not necessary to consider either limb of materiality under paragraphs (a) or (b) of the section. 812 The meaning of "known to the insured" for the purposes of s 21(1) of the Insurance Contracts Act is well settled: ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65 at [1672] (Jacobson, Gilmour and Gordon JJ); All Class Insurance Brokers Pty Ltd (in liq) v Chubb Insurance Australia Limited (No 2) (2021) 154 ACSR 78; [2021] FCA 782 at [159] (Allsop CJ). The following authoritative statements as to its construction can be distilled from those authorities: (a) the term "known" in the phrase "every matter that is known to the insured" has its ordinary English language meaning: Commercial Union Assurance Co of Australia Ltd v Beard (1999) 47 NSWLR 735 at 745 [37] (Davies AJA, Meagher JA agreeing); (b) "knows" means considerably more than believes or suspects, or even strongly suspects: Permanent Trustee Australia Limited v FAI General Insurance Company Limited (in liquidation) (2003) 214 CLR 514; [2003] HCA 25 at [30] (McHugh, Kirby and Callinan JJ); and (c) constructive knowledge is insufficient; actual knowledge is required: CIC Insurance Ltd v Midaz Pty Ltd [1999] 1 Qd R 279; (1998) 10 ANZ Ins Cas 61-394 (Pincus JA, Moynihan and Byrne JJ agreeing). 813 Knowledge of a matter for the purposes of s 21 includes an opinion held by the insured: Prepaid at [99] (Meagher JA, Macfarlan and Emmett JJA agreeing), but whether the opinion is relevant to the insurer's decision will depend upon, among other things, the subject matter of the opinion, the identity of the person holding it, the facts and premises upon which it is based and whether those facts are true or believed to be true by the insured: Prepaid at [99]-[100]. 814 As to the second element, materiality for s 21(1) of the Insurance Contracts Act is satisfied if the insured is aware that a matter is relevant to the insurer's underwriting decision. 815 The High Court in Permanent Trustee at [70]-[72] (Gummow and Hayne JJ) held that the "insurer" for the purposes of s 21(1)(a) of the Insurance Contracts Act is the particular insurer, and not the "prudent insurer" but that the assessment of whether the risk would be accepted is determined to be objective, stating at [32]: … The focus of attention is upon the risk, ie the particular insurance hazard. It is not, as such, upon the much broader question of the commercial willingness of the insurer to accept the risk, still less emotional or individual reactions to that question. Assessment of the risk, ie the insurance hazard, is susceptible to objective ascertainment. Assessment of other considerations including commercial and emotional responses, would ordinarily be much less readily ascertained on retrospective assessment. We do not consider that there is any particular difficulty in keeping these concepts separate as the language of the Act requires. The Act focuses on the particular risk of the insurance propounded. (Emphasis in original.) 816 The ultimate question raised in s 21(1)(b), however, turns on the consideration of a reasonable person's state of mind, as opposed to the insured's state of mind raised in s 21(1)(a): CGU Insurance at [53].
H.3.3. Submissions 817 Chubb submits that Orix had a duty to disclose the matters identified at section H.2.4 above: (a) by reason of what is set out in those sections above, Mr Carter knew of those matters and his knowledge can be imputed to Orix (in accordance with cl 7 of the Policy), which means that the threshold requirement for s 21(1) of the Insurance Contracts Act is satisfied; and (b) those matters known to Mr Carter were material under s 21(1) of the Insurance Contracts Act, either because Mr Carter knew them to be matters relevant to the decision of Chubb to accept the risk (s 21(1)(a)) or a reasonable person in the circumstances could be expected to know them to be relevant (s 21(1)(b)). 818 Chubb submits that Mr Carter appreciated the need for Orix to disclose each of those matters to Chubb as they plainly were relevant to the character of Mr Carter and Mr Georgiou and plainly were relevant to the potential for claims to be made against them. 819 As with its fraudulent misrepresentation case, Chubb submits that the non-disclosure must have been at least reckless in light of the complete lack of disclosure of any of those matters whatsoever, which is sufficient to establish dishonesty. 820 In terms of its s 21(1)(a) knowing fraud case, Chubb submits that arises on the basis that Mr Carter understood Orix's obligation to a sufficient extent to understand it had a duty to make disclosure of those matters to Chubb. 821 Mr Carter contends that it is not open to Chubb to advance any fraudulent disclosure case that seeks to rely on s 21(1)(b) to establish materiality. Mr Carter submits that no such case has been pleaded. He submits that the materiality element of Chubb's fraudulent non-disclosure case is limited to a case based on Mr Carter's actual knowledge of, or reckless indifference as to, whether the matters identified at section H.2.4. were relevant to the decision of Chubb whether to accept the risk under the Policy and, if so, on what terms. 822 Mr Carter submits that his denials in response to the knowledge counterfactuals put to him by Chubb at the conclusion of his cross examination were consistent with his evidence that where the conduct was unlawful then the insurer would want to know. Mr Carter submits that in giving that evidence (a) he was giving truthful evidence as a layperson about what he understood to be his disclosure obligations, (b) given the framing of the questions and their generality it is not surprising he was confused at times, and (c) in any event, Chubb failed to put to him "fairly and squarely" that his answers were dishonest, citing Bale at [44]. 823 Mr Carter submits that there is a "plethora of difficulties" with Chubb's submission that because he was reckless that was "sufficient to establish dishonesty". He submits that it was never fairly and squarely put to him that when he signed the Proposal, he "did not care whether the answers were true or not", contrary to the statements made by the High Court in Prepaid at [55], he may not have read the Proposal closely but he relied on Mr Forster who had filled out the forms, and he understood that he was required to disclose matters that may affect the risk to the insurer and that was sufficient to demonstrate that he was not acting dishonestly. 824 Mr Carter otherwise again seeks to contend that he did not have actual knowledge of any unlawful or dishonest conduct, including contending that "nowhere in the evidence does Chubb establish that Mr Pereira had an interest in SRS" and "[a]ll that Mr Carter was doing was ensuring that the company which he thought was doing inspections was not connected to Mr Pereira".
H.3.4. Consideration 825 It is first necessary to address Mr Carter's s 21(1)(b) pleading point. 826 At an interlocutory hearing on 22 March 2023, less than four weeks prior to the commencement of the final hearing, Chubb contended that it was open to it on the current pleadings to rely on s 21(1)(b) of the Insurance Contracts Act but sought leave to amend its defences to include specific references to s 21(1)(b) to make it clear that it was seeking to establish the materiality limb of its fraudulent non-disclosure case by both the s 21(1)(a) "knowledge of Mr Carter" gateway and the s 21(1)(b) "reasonable person" gateway. Mr Carter opposed any amendment to include any specific references to s 21(1)(b) on the basis that the materiality limb as pleaded by Chubb was limited to a case based on Mr Carter's actual knowledge of or reckless indifference to whether the impugned matters were relevant to Chubb's decision whether or not to accept the risk. Ultimately, Chubb agreed not to press the proposed s 21(1)(b) amendments on the condition that it was without prejudice to its contention that by particularising s 28(3) of the Insurance Contracts Act, it was open to it to contend that Mr Carter's duty to disclose the matters identified at section H.2.4. alleged to have been known to him arose under either s 21(1)(a) or s 21(1)(b). 827 In his written opening submissions served prior to the final hearing, Mr Carter maintained that Chubb should not be permitted to rely on the objective materiality test in s 21(1)(b) because it was outside Chubb's pleaded case. 828 At the commencement of the final hearing on 13 April 2023, senior counsel for Chubb confirmed that Chubb had not abandoned its attempt to rely on s 21(1)(b) as an alternative gateway to establishing materiality in its s 28(3) fraud case. 829 Chubb's reference to the particularisation of s 28(3) was a reference to the particulars provided to paragraph 12 in Chubb's further amended defences. Both paragraphs were pleaded in the following terms: In further answer to paragraph 4, and in the alternative to paragraphs 10 and 11, says that the [Respondent/Cross-Respondent] is entitled to reduce any claims that the [Applicant/Cross-Applicant] makes on the Policy, including for the advancement of 'Defence Costs' in respect of the 'Criminal Proceeding' defined in paragraph [23(a)/21(a) ] below, to nil, on the basis that if the [Plaintiff/Cross-Applicant] had not engaged in the conduct described in paragraphs 5 to 9 above, the [Respondent/Cross-Respondent] would not have offered any Policy to OACL on any terms. Particulars S 28(3) of the Insurance Contracts Act 1984 (Cth) 830 I do not accept that the particularisation of s 28(3) in paragraph 12 of the further amended defences necessarily discloses any pleaded case relying on the reasonable person gateway in s 21(1)(b). The alleged entitlement to reduce any claims made on the Policy to nil is pleaded to be by reason of the conduct described in paragraphs 5 to 9 of the defences. 831 Mr Carter's alleged knowledge at the time he completed and signed the Proposal, including facts giving rise to the SRS arrangements, the Slush Fund arrangements and the GrainCorp Transactions (Material Facts), is pleaded in paragraph 5. 832 The negative answer to the Facts and Circumstances Question is pleaded in paragraph 6 and the Declaration is pleaded in paragraph 7. Next, it is alleged in paragraph 8 that the negative answer to the Facts and Circumstances Question and the making of the Declaration were fraudulent representations because of the failure to disclose any of the Material Facts. 833 Finally, and most significantly for present purposes, in paragraph 9 it is alleged that at the time that Mr Carter completed the Proposal: [Mr Carter] knew the Material Facts were matters relevant to the decision of [Chubb] whether to accept the risk and, if so, on what terms, and that his failure to refer to any of those facts in the Proposal amounted to a fraudulent non-disclosure by [Orix] and [Mr Carter]. 834 The language in paragraph 9 incorporates the test for materiality in s 21(1)(a). It does not purport to incorporate or make any reference to the reasonable person materiality test in s 21(1)(b). The s 28(3) fraudulent non-disclosure defence advanced by Chubb in the proceedings is limited to the case that Mr Carter knew (by actual knowledge or reckless indifference) that the Material Facts were relevant to the decision of Chubb whether to accept the risk and, if so on what terms. 835 I accept, as explained in CGU Insurance at [52]-[53], that s 21(1)(b) was included to protect an insurer where the insured's disclosure is inadequate because the insured is "unreasonable, idiosyncratic or obtuse". It does not follow, however, that reliance can be placed on that test if it is not pleaded or that particularising a reliance on s 28(3) of the Insurance Contracts Act is sufficient to bring that test into play. 836 I am comfortably satisfied, on the balance of probabilities, and having regard to the quality of evidence required to reach such a serious and adverse conclusion as required by s 140(2) of the Evidence Act, that Mr Carter fraudulently failed to disclose to Chubb the facts giving rise to each of the Slush Fund arrangements, the SRS arrangements and the Mazda 3 Transaction. 837 I am satisfied that Mr Carter knew at least the facts giving rise to each of the Slush Fund arrangements, the SRS arrangements and the Mazda 3 Transaction that I have identified in section H.2 above. 838 Given the extent of Mr Carter's experience, training and his knowledge of the compliance manuals of Orix it is implausible that Mr Carter did not appreciate that the following matters were plainly relevant to the character of Mr Carter and Mr Georgiou and were plainly relevant to the potential for claims to be made against them. 839 First, agreeing to establish and then operate a scheme in which funds ostensibly payable to CCA were diverted into accounts controlled by Orix and then disbursed for purposes that were not for the benefit of CCA, but rather to benefit an employee of CCA and Orix in its commercial dealings with CCA, in circumstances where the employee was responsible for CCA's fleet procurement commercial dealings with Orix (the Slush Fund arrangements). 840 Second, agreeing to pay fictitious invoices to a company nominated by an employee of CCA for services that were never to be provided to Orix and which payments were to be recovered from CCA as an element in Orix's invoices to CCA (the SRS arrangements). 841 Third, agreeing to a request to use funds held in a profit share account for GrainCorp to partly fund the purchase of a car for a GrainCorp employee's daughter in circumstances where the employee was responsible for GrainCorp's fleet procurement commercial dealings with Orix (the Mazda 3 Transaction). 842 I do not accept Mr Carter's denials that he did not appreciate that each of the facts surrounding each of the Slush Fund arrangements, the SRS arrangements and the Mazda 3 Transaction that I have identified in section H.2.4. above, were matters relevant to the decision of the insurer whether to accept the risk and, if so, on what terms. Nor do I accept Mr Carter's submission that Chubb was precluded from advancing the proposition that his conduct in signing the Proposal was reckless and that was sufficient to establish dishonesty. 843 The statements in Prepaid at [55] sought to be relied upon by Mr Carter were clearly fact specific and do not prescribe any particular form of words that must be used. They were directed at a failure by a cross examiner to put an alternative pleaded case that an insured "did not care whether the answers were true or not". The following extract from Mr Carter's cross examination was sufficient to provide Mr Carter with an opportunity to deal with the contention that he was reckless in signing the Proposal: And when you signed these proposals, did you under - did you - when you - sorry. When you signed - yes. When you signed these proposals in October 2014, did you understand that you were giving a personal assurance to ACE that you had read and understood the important notices and privacy statement?---No. Right. Well, did you understand that you were giving a personal assurance to ACE that you were telling ACE that, after inquiry, all of the statements, particulars and information contained in the application and any accompanying documents were true and correct in every detail?---No. And did you understand that you were giving a personal assurance to ACE that you were telling ACE that no other material facts had been misstated, suppressed or omitted?---No. Right. Can you turn to page 11786, please? Okay. Now, in light of those answers that you just gave me, please read this acknowledgement to the extent necessary. What I'm going to suggest to you is that you couldn't have possibly have read this page before you signed at the bottom of it; do you agree?---Sorry, what was that? Sorry, I missed that. Well, in light of the answers you just gave me - - -?---Yes.
H.4.1. Overview 847 Issue 50 is whether, by reason of the answers to Issues 45 or 49, Chubb was entitled to deny indemnity to Mr Carter under cl 7 of the Policy. 848 As noted above, even where fraudulent misrepresentation or non-disclosure is established, Chubb has waived its rights to avoid the Policy and instead, is confined to the narrower remedy under cl 7 of the Policy to deny coverage to a person who engaged in, or was aware of, the fraudulent misrepresentation or non-disclosure.
H.4.2. Submissions 849 Chubb submits that it is entitled to deny indemnity to Mr Carter on the basis that by failing to disclose any of the matters to Chubb at the time that he signed the Proposal containing the Facts and Circumstances Question and made the Declaration, he engaged in fraud. 850 Mr Carter denies that he engaged in fraud in signing the Proposal but accepts that if he is found to have engaged in and was aware of the fraud at the time he signed the Proposal, Chubb is entitled to deny indemnity under the Policy.
H.4.3. Consideration 851 It follows, given my findings above that Mr Carter engaged in and was aware of fraud at the time he signed the Proposal, that Chubb is entitled to deny Mr Carter indemnity under the Policy.
H.5.1. Overview 852 Chubb relies upon the ICA Defence pursuant to s 28(3) of the Insurance Contracts Act in the alternative to the Fraud Term Defence, discussed above. 853 Issue 51 is whether, if Mr Carter is found to have known about the SRS arrangements, the Slush Fund arrangements and/or the GrainCorp Transactions, had Mr Carter made full disclosure to the insurer of those facts, the insurer would have offered any policy to Orix, and if so, on what terms? 854 Section 28 of the Insurance Contracts Act, in the form that applied to the Policy, provided: (1) This section applies where the person who became the insured under a contract of general insurance upon the contract being entered into: (a) failed to comply with the duty of disclosure; or (b) made a misrepresentation to the insurer before the contract was entered into; but does not apply where the insurer would have entered into the contract, for the same premium and on the same terms and conditions, even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into. (2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract. (3) If the insurer is not entitled to avoid the contract or, being entitled to avoid the contract (whether under subsection (2) or otherwise) has not done so, the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made. 855 Therefore, there are two remedies provided by s 28: (a) avoidance, if the making of the misrepresentation or the non-disclosure was fraudulent; and (b) a reduction to the amount in the liability of the insurer in respect of the claim that would place the insurer in the position it would have been in if the misrepresentation not been made or the failure to disclose not incurred. 856 The availability of those remedies in this case must be read subject to cl 7 of the Policy, which affects entitlement to rely on the remedies available under s 28 of the Insurance Contracts Act. 857 As set out above, cl 7 of the Policy provides: The Proposal shall be construed as a separate proposal by each Insured and with respect to statements and particulars in the Proposal no statements made or information possessed by any Insured shall be imputed to any other Insured to determine whether cover is available for that other Insured. Where there is any fraudulent non-disclosure or misrepresentation to the Insurer, the Insurer irrevocably waives any right to rescind, avoid or cancel the Policy but the person or persons who engaged in, or was or were aware of, the fraudulent non- disclosure or misrepresentation shall not be entitled to any indemnity under this Policy. Where there is any non-disclosure or misrepresentation which is not fraudulent, the Insurer irrevocably waives any right to cancel the Policy or to reduce its liability under the Policy in respect of any Claim or Investigation arising from the matter not disclosed or misrepresented. Only statements made in the Proposal and knowledge possessed by an Insured who is the subject of a claim under this Policy shall be imputed to the Company for the sole purposes of determining if cover is available for indemnifiable Loss with respect to such Insured. (Bolding in original.) 858 The effect of cl 7 is that Chubb waived its right to avoidance if the conditions of ss 28(1) and (2) of the Insurance Contracts Act were otherwise satisfied in consideration for a lesser right to deny indemnity under the Policy to the person or persons who engaged in, or was or were aware of, the fraudulent non-disclosure or misrepresentation. 859 Further, the last sentence of the second paragraph of cl 7 has the effect of waiving Chubb's rights in relation to a claim arising from non-fraudulent non-disclosure or non-fraudulent misrepresentation where the claim or investigation causally relates to matters not disclosed or misrepresented. The waiver does not extend to circumstances where: (a) the non-disclosure or misrepresentation is fraudulent; or (b) the non-disclosure or misrepresentation is not causally related to the claim made or investigation arising.
H.5.2. Submissions 860 Chubb submits that had the fraudulent misrepresentations and fraudulent non-disclosure not been made, it would not have offered any policy on any terms to Orix, and in those circumstances, it submits that it is entitled under s 28(3) of the Insurance Contracts Act to reduce its liability to nil in respect of the claims now made by Mr Carter. 861 In establishing what Chubb would have done, Chubb relies on the evidence given by two of its former employees, Mr Madell (who was the Australia and New Zealand Head of Financial Institutions at the relevant time), and Mr Brown (who reported to Mr Madell at the relevant time). 862 Chubb submits that nothing in the cross examination of Mr Madell or Mr Brown relevantly detracted from their evidence that, had the following matters been disclosed to them, they would not have offered any policy on any terms to Chubb: (a) that Mr Carter was party to an agreement that if Mr Pereira, set up a company and caused that company to invoice Orix for certain fees, that Orix would pay that company's invoices, and that to Mr Carter's knowledge a company associated with Mr Pereira then did invoice Orix for over $300,000 in fees for services that Mr Carter knew the company had not provided to Orix, and Mr Carter authorised the payment of those invoices and any future invoices rendered by that company for the same fees; (b) that Mr Carter knew, and authorised Mr Pereira's use of funds held by Orix for personal expenditure between 2009 to 2015 that in total was in vicinity of hundreds of thousands of dollars, including $145,000 to purchase a Mercedes Benz in 2011; (c) that Mr Carter knew that on at least two occasions, money held in customer profit share accounts by Orix, which he believed belonged to the customer, had been used to pay for vehicles at the request of procurement managers of those respective customers being in circumstances where he either knew that these transfers were not authorised by the relevant customer or he had no reason to believe that they were so authorised. The two occasions being: (i) a payment made from the profit share for GrainCorp in March 2013 toward the purchase a vehicle for the daughter of Mr Chidiac; and (ii) a payment made from the profit share account for CCA in July 2013 to purchase a vehicle for Mr Chua. (together, Assumed Matters.) 863 Mr Carter advances the following submissions in response to Chubb's ICA Defence. 864 First, Chubb's ICA Defence has not been made out because Mr Carter had no actual knowledge of dishonest or fraudulent behaviour. 865 Second, the Court should bear in mind the general judicial warnings about the unreliability of counterfactual evidence, and in the present case, the weight to be given to the evidence of Mr Madell and Mr Brown as to what they would have done had the Assumed Matters been disclosed to them. 866 Third, the cross examination of Mr Madell establishes that Chubb would still have offered the Policy unless there had been dishonesty. Mr Carter submits that Mr Madell accepted in cross examination that if a company associated with Mr Pereira, of which Mr Pereira was not a director or shareholder, received payments for services actually provided to CCA, while Mr Pereira was employed by CCA, there was "nothing of concern". Next, he submits that Mr Madell accepted that he was not sure what he would have done had he been told that the payment of the invoice for services occurred when Mr Pereira was about to leave CCA. Further, he submits that Mr Madell agreed that he would want to know if Mr Pereira was going to benefit financially before he would make any decision to refuse cover. 867 Fourth, in the absence of any evidence from Mr Madell's superior, Demetra Day, who was the Financial Institutions Underwriting Manager, Asia Pacific, or Nick Small, the Chief Underwriting Officer - Financial Lines, the Court should infer that the renewal decision was a joint decision by Mr Madell and Ms Day, and therefore the Court should not accept the counterfactual evidence of Mr Madell. Mr Carter submits that Mr Madell could not recall in cross examination if he made the renewal decision alone or in consultation with Ms Day. Mr Carter submits that as Ms Day still works for Chubb, the Court can readily draw a Jones v Dunkel inference that her evidence would not have assisted Chubb. 868 Fifth, Chubb's decision to renew the Policy in 2015 constituted a waiver or election not to pursue its rights to deny cover. Mr Carter submits that the best proof of what would have happened is not the counterfactual evidence but the fact that the Policy was renewed in 2015.
H.5.3. Consideration 869 I am satisfied that Chubb has established its ICA Defence and is entitled to reduce its liability to nil under the Policy. 870 First, I have determined that Mr Carter had actual knowledge of dishonest or fraudulent conduct as at the date that he answered the Facts and Circumstances Question in the negative and made the Declaration and appreciated that it was necessary to disclose that conduct to Chubb or was recklessly indifferent to what Orix was required to disclose. More specifically, I am satisfied that Mr Carter has actual knowledge at that time of each of the Assumed Matters (other than (c)(ii), the Subaru Liberty transaction). The Assumed Matters broadly aligned with the facts giving rise to the SRS arrangements, the Slush Fund arrangements and the GrainCorp Transactions. 871 Second, I accept the counterfactual evidence given by Mr Madell and Mr Brown that if the Assumed Matters had been disclosed to them that Mr Brown would not have recommended renewal and Mr Madell would not have agreed to enter into the Policy. I accept that all counter factual evidence must be carefully scrutinised. It may well be infected by hindsight and be self serving: Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 5) (1996) 64 FCR 73 at 76 (Lindgren J); Rosenberg v Percival (2001) 205 CLR 434 at [156] (Kirby J). It must be weighed against the surrounding objective circumstances: Deloitte Touche Tohmatsu v Cridlands Pty Ltd (2003) 134 FCR 474; [2003] FCA 1413 at [161] (Selway J); Simply Irresistible Pty Ltd v Couper [2012] VSCA 128 at [89] (Neave JA, Buchanan JA and Hollingworth AJA agreeing); Funk Coffee and Food Pty Ltd v Hype Investments Pty Ltd [2021] SASCFC 28 at [154] (Kelly and Livesey JJ, Kourakis CJ agreeing). 872 Here, I am satisfied given the content of the Assumed Matters that the counterfactual evidence given by Mr Madell and Mr Brown is inherently plausible and persuasive. 873 Both Mr Brown and Mr Madell were asked to assume that the Assumed Matters were disclosed to them at or prior to their consideration of the Proposal. 874 Mr Brown gave evidence that if the Assumed Matters had been disclosed to him before the Policy was entered into, consistent with his practice, he would have referred the matter to Mr Madell with a recommendation that Chubb not offer any renewal terms to Orix. Mr Brown stated that in referring the matter to Mr Madell he would have (a) told him that he did not have confidence that Orix had sufficient measures in place to prevent further instances of bribery and corruption and (b) expressed concern that if this conduct was permitted by the managing director, he could not see how Chubb could have any comfort that there was not more going on at Orix that could give rise to a significant claim under any renewed policy. 875 Mr Madell gave evidence that if the Assumed Matters had been disclosed to him he would have formed the view that Orix likely had a poor governance culture and lacked the necessary internal protocols, controls and procedures to prevent bribery and corruption. He stated that if Mr Carter had remained the Chief Executive Officer of Orix, he would have refused to offer any financial lines insurance to Orix on any terms as it was simply untenable to put the capital of Chubb behind a company whose Chief Executive Officer had disclosed conduct, that in Mr Madell's view, could amount to bribery or other related criminal conduct, or was otherwise serious dishonest or unethical conduct. 876 Third, no alleged concession made by Mr Madell or Mr Brown relevantly detracted from the force of their counterfactual evidence. Rather than challenging their likely response had the Assumed Matters been disclosed to them, Mr Carter sought to test their evidence by qualifying or recasting the Assumed Matters. The fundamental difficulty with that approach is that these qualifications or recasting did not reflect the evidence or the factual findings that I have made. I do not accept that SRS provided any actual services to CCA, Mr Pereira was about to leave CCA nor that Mr Pereira did not expect to benefit financially from payments made to SRS. 877 Fourth, I do not accept that any alleged concession made by Mr Madell in the course of his cross examination casts any material doubt on his evidence that he was the relevant decision maker. The decision whether or not to offer terms to renew Orix's directors and officers liability policy in 2014 with Chubb was within the authority of Mr Madell. He had authority for Financial Institution matters up to the limit of $20 million. The Policy was for $15 million. 878 Mr Madell gave evidence that in exceptional cases, such as when Chubb was being asked to provide a much higher than usual limit of liability or proposing to deny renewing a risk to a longstanding global client of Chubb, he might discuss the matter with Ms Day, or Mr Small. 879 Mr Madell also gave evidence that, before formally refusing to offer terms to Orix, he would likely have spoken to Ms Day to ensure the relevant internal stakeholders were made aware of his decision, but noted that Ms Day had never overruled any decision he had made to refuse renewal of terms. 880 The alleged concession relied upon by Mr Carter was made in the following exchange in Mr Madell's cross examination: Now, the approval that you've referred to in paragraph 99, do you recall whether other persons, apart from yourself, were involved in that approval being given. That is, involved in this?---I - - - In the decision-making process for that approval to be given?---I do not - I do not recall any other persons being involved in the decision-making process. Do you recall making that decision by yourself without the involvement of any other persons?---Truthfully, I can't recall. So is it fair to say that you don't know, today, whether that decision was made solely by you or was made by you in conjunction with somebody else?---The - the decision, I recall, certainly sat within my authority. But I truthfully, cannot today, say whether the decision-making process involved another member. If it had involved another member, is the - I withdraw that. On previous occasions, where you had questions about extending cover, would you have raised that issue with Ms Denetra [sic] Day?---There - there would be - certainly, I - I can certainly recall there would have been occasions when a discussion would have been had over extension of a - of a risk or not. 881 The alleged concession was only that he could not recall whether another person may have "been involved" in the decision making process and that on some occasions he had a discussion with Ms Day "over the extension" of risks. It does not detract from his evidence that he was the relevant decision maker, nor is it sufficient to raise an issue that Chubb was required to explain or contradict facts requiring an answer: BCI Finances Pty Ltd (in liq) v Binetter (No 4) (2016) 348 ALR 227; [2016] FCA 1351 at [129] (Gleeson J). The absence of Ms Day does not therefore permit the drawing of any Jones v Dunkel inference that her evidence, had it been given, would not have assisted Chubb and could bolster the drawing of an inference that it was a joint decision of Mr Madell and Ms Day. 882 Fifth, I do not accept that any decision by Chubb to renew the directors and officers liability insurance for Orix in 2015 gave rise to any waiver or election not to pursue its rights against Orix under s 28(3) of the Insurance Contracts Act. Nor do I accept that it is the best evidence, rather than the counterfactual evidence, given by Mr Madell and Mr Brown of what Chubb would have done had the Assumed Matters been disclosed prior to the renewal decision being made in 2014. These contentions were not otherwise developed by Mr Carter in his closing submissions and were not addressed by Chubb. In any event, the decision by Chubb in December 2015 to provide directors and officers liability insurance to Orix for the period 31 January 2016 to 31 January 2017 was made in the knowledge, and on the basis, that Orix had dismissed Mr Carter in June 2015, Orix had appointed an independent auditor and was obtaining legal advice.
H.6 1. Overview 883 Issue 52 is if Chubb were to establish each of the Slush Fund arrangements, the SRS arrangements and the GrainCorp Transactions as pleaded, to what extent would the legal costs for which Mr Carter claims coverage in the Criminal proceedings and the Orix proceedings be excluded by operation of cl 4.1 of the Policy. 884 Chubb relies on cl 4.1 of the Policy, which provides: 4. EXCLUSIONS For the purposes of determining the applicability of any Exclusion the Wrongful Act or other conduct of an Insured shall not be imputed to any other Insured. The Insurer shall not be liable to make any payment under this Policy: 4.1 based on, arising from or attributable to: (a) any dishonest or fraudulent act or omission of the Insured or an intentional breach of the law by the Insured; or (b) any personal profit or advantage gained by the Insured to which such Insured was not legally entitled; provided that this Exclusion shall only apply if it is established through a judgment or any other final adjudication (including any appeal thereof) or any written admission by such Insured that the relevant conduct occurred. For the avoidance of doubt, this Exclusion includes any conduct or contravention in respect of which a prohibition in section 199B of the Corporations Act 2001 (Cth) applies. No fact pertaining to, conduct of or knowledge possessed by an Insured will be imputed to any other Insured to determine whether this Exclusion applies. (Bolding in original.) 885 Chubb has not presently relied on cl 4.1 of the Policy to deny coverage to Mr Carter, as it accepts that the exclusion does not apply until there is a "judgment or any other final adjudication (including any appeal hereof) or any written admission by such Insured that the relevant conduct occurred".
H.6.2. Submissions 886 Chubb submits that if there is a judgment in these proceedings finding that Mr Carter engaged in the conduct alleged with respect to the Slush Fund arrangements, the SRS arrangements and the GrainCorp Transactions then there will be such a "judgment" for the purposes of cl 4.1. Further, Chubb submits that conduct amounts to bribery or the provision of an illegal inducement, and there is conduct that is "dishonest or a fraudulent act or omission of the Insured or an intentional breach of the law". 887 Mr Carter submits that it is not necessary to consider cl 4.1 because if Chubb succeeds in establishing either fraudulent misrepresentation or fraudulent non-disclosure then Chubb's claims would succeed independently of cl 4.1.
H.6.3. Consideration 888 Given my findings that Chubb has succeeded in establishing both fraudulent misrepresentation and fraudulent non-disclosure and there is now to be a judgment in its favour, cl 4.1 would now be engaged. I also accept, however, that both the fraudulent misrepresentation and fraudulent non-disclosure claims have succeeded independently of any reliance by Chubb on cl 4.1 of the Policy.
I.1. Overview 889 Issues 53 and 54 are concerned with the quantification of the legal costs claimed by Mr Carter. They are: (a) if Mr Carter is entitled to be indemnified under the Policy, are the legal costs claimed by Mr Carter in these proceedings referrable for work done claims that are covered by the policy? (Issue 53); and (b) to the extent that they are, what is the quantum of those costs? (Issue 54). 890 Following the conclusion of the hearing, on 3 July 2023, the parties provided an agreed position with respect to whether legal costs claimed by Mr Carter are referrable to work done for claims covered by the Policy and the quantum of costs claimed.
I.2. Agreed Position 891 The table below sets out the amounts that Chubb and Mr Carter agree: (a) Mr Carter is entitled to recover if it is found he is entitled to indemnity under the Policy; and (b) the amount Mr Carter is required to repay Chubb if he is ordered to repay the amounts previously advanced to him under the Policy. Item Amount (all including GST) Proceeding Costs (NSD 448 of 2023; NSD 437 of 2023; NSD 59 of 2021 and former NSW Supreme Court Proceedings 2020/00174863 and 2020/00283307) Proceeding costs claimed by Mr Carter $1,390,989.57 Amounts Mr Carter and Chubb agree do not constitute Defence Costs under the Policy $34,686.3 Sub-total of Proceeding costs claimed by Mr Carter $1,356,303.27 Criminal Proceeding Costs (No. 2015/00098199) Total Criminal Proceeding costs $3,956,612.94 Amounts Mr Carter and Chubb agree do not constitute Defence Costs under the Policy $87,417 Amount already advanced by Chubb as Defence Costs under the Policy ($723,005.12) Sub-total Criminal Proceeding costs claimed by Mr Carter $3,146,190.82 Total Total claimed costs agreed as Defence Costs under the Policy if Mr Carter is found to be entitled to indemnity under the Policy (not including interest and costs) $4,502,494.09 Total amount agreed to be repaid to Chubb if Mr Carter is ordered to repay Chubb the amount it advanced previously (not including interest and costs) $723,005.12
892 Given my findings that Mr Carter is not entitled to indemnity under the Policy, it is the figure for the total amount to be repaid of $723.005.12 by Mr Carter to Chubb, not the total claimed costs by Mr Carter of $4,502,494.09, that is relevant.
J. CHUBB'S CLAIM FOR REPAYMENT OF THE SUMS ADVANCED (ISSUE 55)
J.1. Overview 893 Issue 55 is whether the requirement to repay the Sums Advanced under cl 5.5(a) of the Policy is only enlivened where the exclusion under cl 4.1 of the Policy applies, or whether it also operates where the insured is not entitled to indemnity for any other reason. 894 Chubb relies on cl 5.5(a) of the Policy to seek repayment of the sums it had advanced to Mr Carter for defence costs. Clause 5.5(a) provides: The Insurer shall advance Defence Costs on an ongoing basis prior to the final payment or settlement of any Claim and shall advance Legal Representation Expenses provided that any payment shall be repaid to the Insurer in the event that the Insured or the Company (as applicable) is or are not entitled to such payment. For the avoidance of doubt, Exclusion 4.1 only applies where the conduct in question has been established to have occurred by written admission or any final adjudication. (Bolding in original.)
J.2. Submissions 895 Chubb submits that is entitled to repayment of the Sums Advanced on two bases. 896 First, Chubb relies upon a contractual term to that effect. Chubb's primary submission is that cl 5.5(a), properly construed, provides that any costs advanced under it "shall be repaid to the Insurer in the event that the Insured … is … not entitled to such payment". 897 Second, if there is a judgment in these proceedings finding that Mr Carter engaged in the conduct alleged in the Slush Fund arrangements, the SRS arrangements and the GrainCorp Transactions, then such a judgment would engage the operation of cl 4.1. In those circumstances, Chubb submits that Mr Carter appears to accept that cl 5.5(a) would require him to repay the Sums Advanced. 898 Mr Carter accepts that cl 5.5 of the Policy allows Chubb to recover the Sums Advanced and there is no need to consider cl 4.1.
J.3. Consideration 899 Mr Carter concedes, and I accept, that cl 5.5(a) is engaged if for any reason an "Insured" or the "Company" is not entitled to such payment. The inclusion of a specific reference to "Exclusion 4.1", textually and in context, is to make clear that if cl 4.1 is relied upon to establish an absence of entitlement to payment then it can only be relied upon if the conduct in question has been the subject of a written admission or a final adjudication. It does not carry with it any necessary inference that cl 4.1 provides an exclusive pathway to the recovery under cl 5.5 of sums advanced to an insured.
K. DISPOSITION 900 For the foregoing reasons, Chubb is entitled to decline Mr Carter's claims for indemnity under the Policy and Chubb has established that it is entitled to recover from Mr Carter the sums that it has already paid to Mr Carter pursuant to the Policy by way of defence costs. Mr Carter's second cross claim filed on 28 September 2020 against Chubb in proceeding NSD 448 of 2022 is to be dismissed with costs. The parties are now to confer and provide consent, or competing, draft orders to give effect to these reasons for judgment in proceeding NSD 437 of 2022. I certify that the preceding nine hundred (900) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.
Carter
Chubb Insurance Australia Ltd
[2021] SASCFC 28
[2017] VSCA 88
[2003] HCA 25
[2012] VSCA 128
[2005] HCA 80
[2013] WASCA 108
(2014) 224 FCR 1
(1996) 64 FCR 73
(2011) 81 NSWLR 498
(2016) 348 ALR 227
(1938) 60 CLR 336
(2008) 235 CLR 103
(1993) 41 FCR 59
(1999) 47 NSWLR 735
(2003) 134 FCR 474
(2012) 200 FCR 296
(2014) 87 NSWLR 609
(1956) 94 CLR 470
(1905) 2 CLR 421
(2017) 372 ALR 440
(1990) 170 CLR 146
(2021) 105 NSWLR 110
(2004) 218 CLR 451
(2003) 214 CLR 514
(2013) 302 ALR 732
(2001) 205 CLR 434
(1992) 176 CLR 256
[2008] HCA 30
[2001] HCA 18