This correspondence further stated that the partnerships relevant to this proceeding were established verbally on 1 May 2007. This letter was the first time Dr Ludekens had stated positively that there were no written partnership agreements.
172 Mr Hawa requested further information from Dr Ludekens including details of the investors in all partnerships related to him (including names, ACNs or ABNs, and contact details), and any changes to interests held in these partnerships since 1 June 2007. Later that evening, Mrs Velardi emailed the home addresses and tax file numbers for Ms Gibson, Mr Martino and Mr Crowe to Dr Ludekens.
173 Also at or around this time, Dr Ludekens instructed Coghlans to prepare draft financial statements and draft tax returns for the purported partnerships. For this purpose, Dr Ludekens provided Coghlans with a spreadsheet setting out the allocation of partnership interests to investors in the Secondary Investment.
174 On 2 November 2007, Mr Martin Cash, an accountant then employed by Coghlans, sent a number of emails to Dr Ludekens via Mrs Velardi, attaching draft partnership financial statements and tax returns for the purported partnerships. On 7 November 2007, the documents were re-sent following a number of minor amendments by Coghlans.
175 Also at or around this time, Mr Hawa continued to correspond with Dr Ludekens, seeking further details regarding the purported partnerships.
176 On 9 November 2007, Dr Ludekens instructed Mrs Velardi to obtain the signatures of Ms Gibson and Messrs Crowe, Martino and Berlowitz on a page taken from the partnership financial statements prepared by Coghlans entitled "Partners' Declaration". Mr Van de Steeg arranged for Mr Martino to sign the document (see [119] above) and also signed the relevant document on behalf of his company, Ty-Tia. Mrs Velardi then sent the document to Ms Gibson (see [133] above) and Mr Crowe (see [146] above) for signature. At this time, these investors were also provided with a copy of a document entitled "Woodlots info" (which provided instructions on how to respond if contacted by the ATO about the Secondary Investment): see [133] and [146] above. Dr Ludekens provided Mrs Velardi with this document for distribution to investors.
177 On 13 November 2007, Dr Ludekens emailed Dr Love (see [104] above), Mr Tregambe (see [93] above), Ms Richards and Mr Poon a copy of the relevant partnership financial statements and tax returns, and requested that they forward these documents to their respective tax agents for the preparation of their 2007 income tax returns. Dr Ludekens also asked that they print, sign and return the Partners' Declaration page as soon as possible.
178 Mr Tregambe forwarded these documents to his accountant and later authorised his accountant to lodge his 2007 income tax return, which claimed a deduction for the partnership loss for the woodlot investment: see [93] above. Dr Love did the same: see [104]-[105] above.
179 On 14 and 15 November 2007, Mr Hawa received a set of signed partnership financial statements and special purpose financial reports for the purported partnerships.
180 On 19 November 2007, a Business Activity Statement for Lotus was lodged with the ATO. This statement reported the commission received from Gunns for the period ending 30 September 2007.
181 On 26 November 2007, Mrs Velardi collected a number of "welcome kits" from Dr Ludekens for distribution to the Van de Steeg Investors. These kits included:
1. A copy of the partnership financial statements;
2. A copy of the partnership tax return;
3. A copy of the partnership Certificate of Investment from Gunns and a Gunns Finance approval letter (both in the name of Mr P Van de Steeg and Mrs E Velardi); and
4. A covering letter, instructing investors to provide the partnership tax return and financial accounts to their accountants to include in their 2007 tax returns and requesting that investors "forward [their] tax refund (if any) to the partnership within 2 days".
Dr Ludekens was actively involved in the drafting of this letter.
182 Mrs Velardi provided the welcome kits to Mr Van de Steeg to distribute to investors. Ms Gibson and Mr Crowe received a welcome kit in about November 2007: see [135] and [149] above.
183 On 29 November 2007, Mr Van de Steeg met with Mr Martino and Mr Jasper to discuss the Secondary Investment: see [115] above.
184 Also on 29 November 2007, a number of meetings were conducted by ATO officers at the offices of Mr Lederman with Ms Richards and Messrs Van de Steeg, Crowe, Berlowitz, Martino and Tregambe: see, by way of example, [114] and [147] above. These meetings formed part of the ATO audit of the purported partnerships' claims for GST refunds. Mr Lederman was authorised in writing by a number of the investors to be present at this meeting as their tax advisor in relation to the Secondary Investment: see for example [137] above.
185 On 5 December 2007, Mrs Velardi emailed both Ms Gibson and Mr Crowe a partnership application that had been prepared by her on instructions from Mr Van de Steeg, and approved by Dr Ludekens. Ms Gibson and Mr Crowe were asked to sign (but not date) that application: see [139] and [151] above. At or around this time, Mrs Velardi also separately printed a copy of the partnership application for Mr Van de Steeg to take to Mr Martino in person, and filled out a copy of the partnership application with Mr Van de Steeg's details for him to sign. On 12 December 2007, Mrs Velardi sent a further copy of the partnership application to Mr Crowe by email: see [151] above. Messrs Crowe and Martino and Ms Gibson all signed the document, leaving the date blank as instructed: see [118], [139] and [151] above.
186 At or around this time:
1. Mr Crowe delivered the partnership financial statements and tax return to his accountant, and requested that his 2007 tax return be amended to claim a deduction for the woodlots: see [149]-[150] above;
2. Mr Berlowitz signed partnership application forms: see [166] above;
3. Dr Ludekens procured the signatures of Ms Richards and Mr Poon on partnership application forms: see [107] above; and
4. Dr Ludekens engaged Coghlans to act in relation to the GST audit being carried out by the ATO.
187 By 7 December 2007, the ATO had reached a preliminary position in relation to the input tax credits and GST refunds claimed by the purported partnerships. On this date, Mr Hawa faxed an ATO Decision Summary Report to Dr Ludekens. The cover sheet from Mr Hawa states that the decision summary is in respect of "11 partnerships associated with Dr Andrew Ludekens through Lotus Capital", but the decision summary itself purports to relate to the GST registered partnership "S Braham & Lotus Capital Group Pty Ltd & A Ludekens" (which is not the subject of this proceeding). In summary, the ATO's preliminary view was that the purported partnership - registered as it was, in the name of an entity that was not a signatory to the Gunns grower and finance agreements (namely, Lotus) - was not entitled to the input tax credits or GST refunds claimed.
188 On 17 December 2007, Mr Hawa spoke with Mr Lederman about the Decision Summary Report. Mr Lederman agreed that the partnerships as registered were not entitled to claim the input tax credits. As a solution, Mr Lederman proposed that the purported partnerships be re-registered in a manner that reflected the correct partners (such work to be done by Coghlans). That same day, Mr Hawa received a fax from Coghlans, stating that they had advised Dr Ludekens that the ATO's position was correct, and asking the ATO to amend the ABN and GST registrations for the purported partnerships to ensure that "the entities which entered into the Gunns Plantations Ltd Woodlot Project be the only partners named on the GST / ABN Registration". Coghlans also undertook to amend the 2007 tax returns submitted for these entities to ensure consistency between the partners involved in the Gunns woodlot investment and the partners reported on the tax returns.
189 On 18 December 2007, the ATO sent a number of finalisation letters to Coghlans in respect of the GST audit. These letters confirmed that the input tax credits sought by the purported partnerships had not been allowed. As previously foreshadowed in the Decision Summary Report, the reason for the ATO's decision in this regard was principally that the partnerships that were registered for GST (and which claimed the input tax credits) were not the same entities that entered into the agreements with Gunns. For example, in the case of the partnership registered in the name of Lotus and the respondents, only Dr Ludekens and Mr Van de Steeg had signed any documentation with Gunns. From the ATO's perspective, the situation was further complicated by the fact that the income tax return for this partnership purported to distribute the initial losses made on the investment to entities other than the named partners, including Messrs Poon and Tregambe, Dr Love, Ms Richards and the Ludekens Family Trust. At this time, the ATO indicated its preparedness to accept new registrations for partnerships that did not suffer from these defects (as had been proposed by the letter sent by Coghlans to the ATO on 17 December 2007).
190 Shortly after receipt of this correspondence, Dr Ludekens instructed Coghlans to cancel the registrations for the purported partnerships and register 'fresh' partnerships that did not include Lotus. The partners for these new entities would comprise the signatories to the ten woodlot applications as set out in the table at [69] above.
191 On 19 December 2007, Dr Ludekens emailed Mrs Velardi to tell her that most of the partnership Business Activity Statements had been re-lodged (with the rest shortly to follow). He requested that she print out the attached forms authorising release of GST refunds from the Coghlans trust account to Lotus, and obtain the signatures of Messrs Van de Steeg and Ezzy on behalf of the partnerships.
192 On 11 January 2008, the ATO received Mr Crowe's amended income tax return for the 2007 financial year, claiming a deduction of $130,250 in respect of primary production losses: see [150] above.
193 On or about 13 January 2008, Coghlans requested the cancellation of the registration of all of the purported partnership entities previously registered for the Gunns woodlot investment, and registered ten new partnership entities, all of which were constituted without Lotus (GST partnerships).
194 Also at or around this time, Coghlans lodged Business Activity Statements for the GST partnerships for the quarter ending 30 September 2007. These statements sought GST refunds for input tax credits claimed for the acquisition of the Gunns woodlots.
195 On 24 January 2008, Lotus received GST refunds of $2,214,640 from the Coghlans trust account. Of this amount, $2,015,000 related to the GST partnerships in issue in this proceeding. On this same day, the following transactions occurred:
1. Lotus transferred $1,768,000 to Ty-Tia;
2. Ty-Tia made two payments (of $1,000,000 and $576,000) to Meloka;
3. Meloka distributed this amount as follows:
(i) $1,000,000 to Korlea;
(ii) $100,000 to Jameter; and
(iii) the balance to various creditors.
196 On 29 January 2008, Lotus transferred a further $235,000 to Ty-Tia. On 30 January 2008, Ty-Tia made another two payments (of $200,000 and $30,375) to Meloka.
197 In or about February 2008, Ms Gibson called Mr Van de Steeg to inquire about the progress of the Secondary Investment. Mr Van de Steeg told her that the investment had proceeded without her, with a differently constituted group of investors: see [140] above. Also at or about this time, Mr Van de Steeg called Mr Martino and told him that the Secondary Investment would not be proceeding: see [117] above. Further, at around this time, Mr Van de Steeg instructed Mrs Velardi to tell Mr Crowe not to claim the deductions for the Gunns woodlots. However, by this stage, Mr Crowe had already lodged his amended tax return: see [150] above. Mr Van de Steeg subsequently instructed Mrs Velardi to ask Mr Crowe to provide his tax refund to Meloka: see [152] above.
198 On 8 February 2008, Mr Crowe received a letter from his tax agent, enclosing a tax refund cheque in the amount of $47,929.67: see [152] above.
199 On 12 February 2008, the Smithsons received letters from Gunns Finance advising that their loans were in arrears and that overdue interest would be charged at a rate of 2%. After Mr Smithson raised the matter with Mr Van de Steeg, Mr Van de Steeg said that there was the opportunity to take $100,000 worth of trees. Mr Smithson told Mr Van de Steeg that the Smithsons were not interested.
200 On 14 February 2008, Lotus amended its Business Activity Statement for the quarter ending 30 September 2007 to remove the commission received from Gunns as a sale for that period.
201 On 9 March 2008, the ATO received Mr Tregambe's tax return for the 2007 financial year. The deduction of $108,542 claimed for primary production losses was ultimately disallowed: see [93] above.
202 On 15 March 2008, Mr Patrick Cussen, a solicitor engaged by Coghlans, advised Dr Ludekens, Mrs Velardi, Mr Crouch and Mr Aldo De Luca (a principal of Coghlans) by email that in theory the interests in the woodlots were assignable. In Mr Cussen's opinion, the tax effects of an assignment were likely to be that the partners named in the applications would be entitled to deductions in the income year ending 30 June 2007, but the amount paid by the "new partners" may not be deductible by those parties in the income year ending 30 June 2008 as the ATO may treat the situation as one involving an outlay of capital. He suggested that a private ruling be sought from the ATO on the question of whether the new partners could claim these deductions.
203 On 19 March 2008, the ATO received Dr Love's income tax return for the income year ending 30 June 2007. The deduction of $217,083 claimed for primary production losses was ultimately disallowed: see [106] above.
204 On 25 March 2008, Mr Crouch spoke with Mr Blanden about assigning interests in the woodlots. Mr Blanden said that an assignment could be documented but that Gunns would need to consider credit issues before allowing the transfer of debt from one party to another.
205 Some time between March and June 2008, Mr Van de Steeg contacted Mr Crowe to tell him to amend his income tax return and reverse the deduction previously claimed for the Secondary Investment.
206 On 22 July 2008, following a meeting conducted with the ATO in or about mid June 2008, Coghlans provided the ATO with written submissions containing a "simple chronological account of the events". Both Mr De Luca and Dr Ludekens had "detailed input" into these submissions. The factual background was provided by Dr Ludekens. The submissions were also provided to Mr Cussen for his comment before finalisation.
207 On 11 August 2008, Coghlans lodged amendment requests for the 2007 income tax returns of eight of the ten purported partnerships, seeking to alter the statements of distribution of loss to include only those individuals named in the registered partnerships (and not the persons named in the tax returns as originally lodged).
208 On 30 July 2008, Mr Crouch emailed Mr Blanden, attaching a spreadsheet summarising proposed changes to woodlot ownership, whereby the Smithsons and the Velardis would be replaced with Messrs Van de Steeg and Ezzy as holders of the interests in the woodlots in question.
209 On 27 August 2008, Mr Trew prepared a further amended tax return for Mr Crowe, reversing the deduction previously claimed: see [154] above.
210 On 4 September 2008, Coghlans lodged requests to amend the 2007 tax returns for the other two purported partnerships, namely, those involving Lotus and the respondents on the one hand, and Lotus, Mr Ezzy and Dr Ludekens on the other. The effect of the amendment sought was to alter the statements of distribution of loss, such that losses would be distributed only to individuals named in the registered partnerships.
211 By early October 2008, Gunns had advised Mr Crouch that they would not consent to the assignment of interests and loan obligations connected to the woodlots as previously proposed.
212 On 21 January 2009, the ATO issued a notice of amended assessment to Mr Crowe, assessing his income tax liability for the 2007 financial year at $50,747.70. At or around this time, Mr Crowe called Mr Van de Steeg, seeking repayment of the tax refund that he had previously paid to Meloka. Mr Van de Steeg told him that he would repay this amount, but that he was unable to do so at that time. Mr Van de Steeg advised him to have the ATO transfer the debt into Mr Van de Steeg's name. Ultimately a series of payment plans with the ATO were established, by which Mr Van de Steeg was to repay the debt. Mr Van de Steeg defaulted on all of these payment plans: see [155]-[158] above.
213 On 29 January 2009, Messrs Van de Steeg and Ezzy, the Smithsons and the Velardis all received letters of demand from Shields Heritage, solicitors for Gunns Finance. These letters sought immediate payment of the arrears owing on the Gunns Finance loans, plus costs.
214 On 2 March 2009, Messrs Van de Steeg and Ezzy, the Smithsons and the Velardis executed a Deed of Variation, Indemnity, Assignment and Release prepared by Mr Lederman: see [51] and [67] above. Pursuant to this Deed, Messrs Van de Steeg and Ezzy agreed to indemnify the Smithsons and the Velardis in relation to all costs and liabilities arising from the partnerships bearing their names.
215 In or about March 2009, Coghlans prepared amendments to the Business Activity Statements for the GST partnerships and for Lotus for the quarter ending 30 September 2007. The purpose of these amendments was to reflect that the partnerships were liable to pay much of the GST in respect of the commission received from Gunns. Also at or around this time, a series of invoices (printed on letterhead specific to each of the GST partnerships and addressed to Dr Ludekens) were generated.
216 On 19 March 2009, Dr Ludekens reported the commission received from Gunns (previously reported as a sale in Lotus' Business Activity Statement for the quarter ending 30 September 2007) as a receipt in his own activity statement. At this time, he also claimed an input tax credit for a creditable acquisition in the sum of $3,028,747. On 23 March 2009, the Business Activity Statements for the GST partnerships were amended to show the receipt by each of a share of the Gunns' commission.
217 By about December 2009, Mr Crowe had received approximately $3,900 from Mr Van de Steeg in two instalments. This figure represented the amount of Mr Crowe's 2009 tax refund, which - rather than being paid to Mr Crowe - had been applied by the ATO in reduction of the tax debt still outstanding: see [159] above.
218 On 21 December 2009, Mr Crowe met with Mr Van de Steeg, Mr Trew and Ms Taylor. Mr Van de Steeg convinced Mr Crowe to again amend his tax return for the 2007 financial year to claim a deduction for the woodlots which Mr Van de Steeg agreed to transfer to him: see [160] above.
219 In or about January 2010, Gunns Finance obtained default judgment against the Velardis in proceedings commenced in the Supreme Court of Tasmania to recover the loan principal and interest still outstanding.
220 On 3 February 2010, ATO investigators contacted Mr Crowe. The ATO advised him to write to the ATO and cancel the latest amendment of his 2007 income tax return: see [162] above.
221 In or about March or April 2010, Gunns Finance served writs upon the Smithsons in proceedings commenced in the Supreme Court of Tasmania for recovery of the loan principal plus interest still outstanding.
222 On 19 September 2011, the ATO gave notice that it would audit each of the freshly registered GST partnerships. In the course of these audits, the ATO examined whether each partnership was entitled to register for GST or an ABN, or to claim input tax credits for its involvement in the 2006 Gunns Woodlot Project. In the interim reports issued by the ATO for each partnership, the ATO concluded that none of the GST partnerships was so entitled. The ATO determined that each partnership was liable to repay a share of the previously paid GST refunds, plus penalties. As at 6 December 2011, no objections had been lodged in respect of those decisions.