Melbourne Corporation of Australia Pty Ltd v Commissioner of Taxation

Date of hearing: 21 September 2020 - 25 September 2020 28 September 2020 - 3 October 2020 7 - 8 October 2020 25 - 26 October 2021 7 December 2021

Counsel for the Applicant: Mr J Hyde Page

Solicitor for the Applicant: Mark J Ord Lawyer & Consultant

Counsel for the Respondent: Ms KA Stern SC with Ms JE Jaques with Ms CT Ensor

Solicitor for the Respondent: Australian Government Solicitor

BETWEEN: PHOTO ADVERTISING (INTERNATIONAL) PTY LTD Applicant

AND: COMMISSIONER OF TAXATION Respondent

order made by: LOGAN J DATE OF ORDER: 21 october 2022

THE COURT ORDERS (IN ADDITION TO ORDER OF 19 AUGUST 2022) THAT:

1. The applicant's appeal be dismissed.
2. The applicant pay the respondent's costs of the appeal as agreed or assessed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

LOGAN J: 1 As contemplated by orders made on 19 August 2022 when the principal judgment (Melbourne Corporation of Australia Pty Ltd v Commissioner of Taxation [2022] FCA 972) was delivered, the parties have brought in, consensually, orders to give effect to that judgement. 2 Those in respect of the taxation appeal by Melbourne Corporation of Australia Pty Ltd (Melbourne Corporation) (QUD 513 of 2018) require no explanation other than I am satisfied that they give effect to the reasons expressed in the principal judgement. 3 In respect of the taxation appeal by Photo Advertising (International) Pty Ltd (Photo Advertising) (QUD 399 of 2019), although the parties are likewise agreed as to appropriate orders, having regard to what they regard as the issues between them, a brief explanation is, I consider, needed, in respect of those orders. Having regard to the objection, originating application and appeal statement, I had apprehended that penalties also remained at issue in that proceeding. It has, however, been drawn to my attention by the parties that, although formal amendments were not made, Photo Advertising did indicate that it was not pressing an issue as to penalties. That being so, because, as indicated in the principal judgement, the fate of the substantive taxation liability issues was governed by the fate of issues in Melbourne Corporation's taxation appeal, it is appropriate in Photo Advertising's taxation appeal that the penalties not be disturbed and that orders as promoted by the parties be made. I certify that the preceding three (3) numbered paragraphs are a true copy of the Supplementary Reasons for Judgment of the Honourable Justice Logan.

BETWEEN: MELBOURNE CORPORATION OF AUSTRALIA PTY LTD Applicant

AND: COMMISSIONER OF TAXATION Respondent

BETWEEN: PHOTO ADVERTISING (INTERNATIONAL) PTY LTD Applicant

AND: COMMISSIONER OF TAXATION Respondent

order made by: LOGAN J DATE OF ORDER: 19 August 2022

1. In respect of each proceeding, the parties endeavour to bring in, on or before 17 October 2022, short minutes of orders to give effect to these reasons for judgment.
2. Failing the filing of agreed short minutes of orders in accordance with Order 1: (a) the proceedings be listed thereafter on a date to be fixed by the Court after consultation with the parties for the hearing of submissions as to the consequential orders which should be made; and (b) the parties are to file, on or before 17 October 2022, their respective proposed minutes of orders, together with a related, explanatory outline of submissions of not more than five pages. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

LOGAN J: 4 Melbourne Corporation of Australia Pty Ltd (Melbourne Corporation) and Photo Advertising (International) Pty Ltd (Photo Advertising) have each invoked the original jurisdiction conferred on the Court by s 14ZZ(1)(a)(ii) of the Taxation Administration Act 1953 (Cth) (TAA) to appeal against objection decisions of the respondent Commissioner of Taxation (Commissioner) respectively dated 13 June 2018 and 30 April 2019. 5 The objections respectively relate to the following: Melbourne Corporation (i) amended assessments of income tax for the income years ended 30 June 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2010, 2011, 2012, 2013 and 2014; and (ii) penalty assessments for the income years ended 30 June 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2013 and 2014. Photo Advertising (i) assessments of income tax for the tax years ended 30 June 2006 and 2011; and (ii) penalty assessments for the tax years ended 30 June 2006 and 2011. 6 This judgment is published simultaneously with my judgment in an earlier taxation appeal, proceeding QUD 512 of 2018, heard prior to this proceeding (QUD 512 judgment). The occasion for that is explained in the QUD 512 judgment. 7 In accordance with an order made at the request of the parties in this proceeding, the evidence, oral and written, tendered in proceeding QUD 512 of 2018 has been tendered in this proceeding along with further oral and written evidence. However, as I made plain to the parties, this present proceeding must be determined on the whole of the evidence now before the Court. So I have approached that evidentiary whole on the basis that conclusions, including conclusions as to credibility of witnesses, which I have reached based on that earlier body of evidence are not binding. More particularly, I have adopted the approach that factual issues common to each proceeding may be differently resolved on the basis of the whole of the evidence. Therein may well lie the burden as much as the benefit offered by the procedure adopted for the hearing of this series of taxation appeals. 8 Common to each present taxation appeal, and every such proceeding, is that a burden falls on the applicant to prove the assessments concerned to be excessive: s 14ZZO, TAA; Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614, at 623 - 625. The proceeding being civil in character, it is both necessary and sufficient, in relation to any issues of fact upon which proof that the assessment is excessive depends, that the applicant do this on the balance of probabilities: s 140(1), Evidence Act 1995 (Cth) (Evidence Act); nothing more is necessary but nothing less will suffice. That said, where a finding in respect of a particular issue of fact would entail grave conclusions about conduct, the considerations identified in s 140(2) of the Evidence Act and the preceding discussion of principle in Briginshaw v Briginshaw (1938) 60 CLR 336 must be, and has been, taken into account. 9 For convenience, I have adopted in this judgment the same shortenings of the names of various corporate actors and legislation as I adopted for the purposes of the QUD 512 judgment. Further, unless I consider that the whole of the evidence in this proceeding dictates a different conclusion, I have not in this judgment again recited the history and ownership, and conclusions reached as to the control of, various corporations and trusts which feature in the QUD 512 judgment. Instead, I adopt that recitation and those conclusions for the purposes of this judgment. To that extent, these reasons for judgment must be read in conjunction with the QUD 512 judgment. 10 Of the two present taxation appeals, the lead appeal and certainly that which entails the greater number of issues to resolve, is QUD 513 of 2018. I therefore first address the issues in that appeal.

MELBOURNE CORPORATION - QUD 513 OF 2018 11 Melbourne Corporation was registered on 28 March 1956. Its sole shareholder since September 2004 has been Southsea Nominees. Mr Gould has been its sole director since 1 December 1997. Via Mr Gould's directorship of Melbourne Corporation and his control of Southsea Nominees, Melbourne Corporation is in all respects controlled by Mr Gould. 12 The background to Melbourne Corporation's appeal and the issues which arise for determination are, as the Court's practice envisages, set out in the respective appeal statements. That of the Commissioner in particular is a model of compliance with that practice. The following account of the background and the issues draws much upon what is there stated with such comprehensive precision. 13 Melbourne Corporation has claimed deductions under s 8-1 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) over the 2001 to 2014 income year period in respect of what at least purport to be management and consulting fees, and interest expenses, in relation to purported arrangements with various Australian entities. For reasons which I detail below, or have already given in the QUD 512 judgment and adopt, each of those entities, along with Melbourne Corporation, was, in each of those income years, and to the extent material, earlier, under the control of Mr Vanda Russell Gould. 14 The amended assessments issued to Melbourne Corporation for the income years mentioned at the commencement of this judgment disallowed these deductions. Consequentially, the Commissioner also disallowed deductions for related prior year losses. He also reduced the assessable income of Melbourne Corporation to exclude management and consulting fees and interest income purportedly derived with respect to arrangements with commonly controlled entities, where the Commissioner considered that such fees and interest are not deductible to the entities on the other side of the transactions. 15 The amended assessments have each been issued pursuant to s 167 of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936). 16 By virtue of s 170(1) of the ITAA 1936, the Commissioner's power to amend assessments in respect of the 2001 to 2007 income years was dependent upon his prior formation of an opinion that there had been an avoidance of tax due to fraud or evasion. The Commissioner formed such an opinion not only in respect of those but also the other income years in question. 17 For the 2008 and 2009 income years, a consequence of the Commissioner's audit was that Melbourne Corporation's income was adjusted downwards. No amended assessments in respect of those income years were issued by the Commissioner on the basis that there were no tax shortfalls in those years. 18 The Commissioner imposed administrative penalties on Melbourne Corporation in respect of each of the income years 2001 to 2007 and 2013 to 2014 pursuant to s 284-75(1) of Sch 1 to the TAA on the basis that Melbourne Corporation made a statement to the Commissioner that was false or misleading in a material particular, with the amount of the base penalty under item 1 of the table in s 284-90(1) being 75% of the tax shortfall because the shortfall resulted from intentional disregard of a taxation law by Melbourne Corporation or its agent. The Commissioner increased the penalty rate of 75% pursuant to s 284-220 of Sch 1 to the TAA by 20% to 90% for the income years after the 2001 income year on the basis that a penalty had previously been imposed. 19 Details of the adjustments as made by the respective amended assessments are: Year ended Previous taxable income Amended taxable income Penalty (2001 at 75% and other years at 90%) Shortfall interest charge 30 June 2001 -71,971 143,135 36,499.43 0 2002 0 50,104 13,528.05 0 2003 42,492 169,102 34,184.07 0 2004 53,386 532,851 129,455.55 0 2005 70,950 519,359 121,070.40 107,887.07 2006 31,233 220,384 51,070.75 36,615.57 2007 20,420 175,594 37,260.15 20,334.89 2010 4,750 0 0 0 2011 11,612 0 0 0 2013 2,980 205,879 54,782.70 6,225.38 2014 2,166 414,663 111,374.15 4,683.02 168,018 2,431,071 589,225.25 175,745.93

20 The Commissioner determined not to remit the penalties pursuant to s 298-20 of Schedule 1 of the TAA. Melbourne Corporation no longer presses any challenge via its taxation appeal to that remission decision. 21 Melbourne Corporation objected against these amended assessments and the penalty assessments. The Commissioner decided to disallow these objections by the objection decisions identified at the commencement of this judgment. 22 As to the 2001 to 2007 income years, one basis upon which Melbourne Corporation seeks to prove the income tax assessments to be excessive is by challenging the validity of the opinion as to fraud or evasion formed by the Commissioner. I set out in the QUD 512 judgment my understanding of what materially constitutes fraud or evasion and what is entailed in a challenge in an appeal such as the present to amendments based on the formation by the Commissioner as to the occurrence of an avoidance of tax due to fraud or evasion. I do not repeat what is there stated. Melbourne Corporation did not demonstrate, by reference to the material before the Commissioner at the time, some error of principle in the formation of his opinion. However this may be, a corollary of the conclusions I reach below as to both management fee and interest deduction claims is that I am not satisfied that Melbourne Corporation has established on the evidence that it was not open to form an opinion that there had been an avoidance of tax due to fraud or evasion insofar as that was necessary for the issuing of amended assessments in respect of the income years concerned. 23 In respect of the amended assessments for each of the income years in question, it is for Melbourne Corporation to prove the claimed management and consulting fees and interest expenses were allowable deductions under s 8-1 of the ITAA 1997. 24 As to that, the issues have become whether they were: (a) management or consulting fees or interest at all, including whether their being so designated was but a sham and, as to the interest claims, whether there was any related loan; (b) incurred at all; (c) incurred in gaining or producing the assessable income of Melbourne Corporation or necessarily incurred in carrying on a business for the purpose of gaining or producing its assessable income; (d) as to interest claimed in relation to the purported loan from the AA Trust, denied deductibility pursuant to s 26-25 of the ITAA97, because of a failure to withhold tax from that purported interest payment. 25 Further and in any event, because the Commissioner has determined pursuant to s 177F of Pt IVA of the ITAA 1936 that the whole of the deductions shall not be allowable to Melbourne Corporation, on the basis that the deductions are tax benefits within the meaning of s 177C of that Act as a scheme or schemes which were entered into or carried out for the dominant purpose of obtaining those tax benefits, it is for Melbourne Corporation to prove that those deductions are not such tax benefits within the meaning of Part IVA. 26 There are no separate issues for determination in relation to prior year losses. It is common ground that, if the Court finds that any deductions claimed for interest or management and consultancy fees are not allowable, then the prior year losses claimed should be reduced accordingly. 27 If it is that the deductions denied by the Commissioner are allowable, there may be an issue as to whether amounts of management and consulting fee income and interest income reversed by the Commissioner are assessable to Melbourne Corporation. 28 With respect to the penalty assessments (and in to the extent that Melbourne Corporation fails to prove the income tax assessments to be excessive), the issues are now whether: (a) penalties were correctly imposed at a rate of 75% of the tax shortfall. (b) penalties were correctly increased by 20% for all but the first year assessed. 29 It is convenient first to consider whether the claimed management and consultancy fee deductions are allowable. 30 The deductions in issue and the persons in respect of whose services management and consultancy fee deductions are allegedly incurred are summarized in the table below: Year ended Anglo American Trust Debbie Gould Melbourne Insurance Gould Family Trust Philadelphia Investments Leaver Trading Total Amount 30 June 2001 50,000 14,000 1,000 115,000 - - 180,000 2002 - - 1,000 - 17,000 - 18,000 2003 - - - 68,000 - - 68,000 2010 - - - - - 6,500 6,500 2011 - - - 5,000 - - 5,000 Total 50,000 14,000 2,000 188,000 17,000 6,500 277,500

31 Some of these entities have already been described by incorporation by reference of findings made concerning them in the QUD 512 judgment. For some of these, it is desirable to give further detail. Others have not earlier been described. 32 The "Debbie Gould" in the table is Mr Gould's former wife, Mrs Deborah Anne Gould. Oddly and inconsistently with Melbourne Corporation's claim, her tax return for the 2001 income year does not disclose any income from Melbourne Corporation. I did not have the benefit of hearing evidence from Mrs Gould explanatory of this or upon any other subject concerning the services she is said to have rendered in the 2001 income year. That is because she was not called as a witness. Given the statutory onus of proof, it was for Melbourne Corporation to call her. No satisfactory explanation was given for the absence of evidence from her. 33 Philadelphia Investments was incorporated in Australia on 8 June 1979. Since 10 September 2004, all of its issued shares have been held by Southsea Nominees. Mr Gould has been a director of Philadelphia Investments since 1 December 1997. 34 Leaver Trading Pty Ltd (Leaver Trading) was incorporated in Australia on 26 October 1982. Its shareholders are Mr John Leaver and Phillips River (as to 50% of issued shares each). Since 20 May 1982, Mr Leaver a director of Phillips River. He is currently its sole director. Mr Gould was a director of Phillips River from 20 May 1982 to 20 March 1989. Mr Leaver was another unexplained absentee from Melbourne Corporation's evidentiary case. Once again, it was for Melbourne Corporation to call him, if his evidence were of assistance to its case, or to provide a satisfactory explanation for his absence. 35 Each of the entities in the above table was either Mr Gould's spouse or within a group of companies which Mr Gould accepted were his private entities, subject to his effective, even if not formal, control.

Management fees claims - general 36 Although each such claim must be individually determined, Mr Gould's evidence was that he adopted a usual practice in the fixing of management fees and, for that matter, on intra-group loans. It is therefore convenient first to make some general observations about this practice and to set out related conclusions. 37 Using the 2001 income year and the AA Trust deduction claim as an example upon which to base these general observations, Melbourne Corporation claims, and Mr Gould's initial evidence (in 2012, in response to a notice under s 264 of the ITAA 1936) was that this is a consulting fee for "funds management" with the services provided by "the directors on behalf of the Anglo American Trust" (AA Trust), with payment being made by way of journal entry. He later gave other accounts, which I detail below. The journal entries in the general ledger of Melbourne Corporation for the 2001 income year reallocate the amount of fees payable to the AA Trust to show them as being payable to Southsea Nominees Pty Limited as trustee of the Gould Family Trust (Gould FT). 38 The individual by whom the AA Trust rendered the services for Melbourne Corporation is said to be Mr Gould. 39 As with this particular management fee deduction claim, each of the other claims is sought to be proved by a combination of evidence from Mr Gould attesting to the rendering of the service and a journal entry. 40 Prima facie, the journal entries offer some support for the incurring of a liability in respect of the rendering of a management service as claimed: s 1305, Corporations Act 2001 (Cth), Federal Commissioner of Taxation v Clark (2011) 190 FCR 206 (Clark), at [65]; and see also in any event, s 69, Evidence Act. 41 Melbourne Corporation was carrying on business for the purpose of gaining or producing assessable income in the income years in question. Thus, if one accepts the particular account given by Mr Gould and the journal entry, a foundation for a claim under s 8-1 of the ITAA 1997 is apparently made out. That is Melbourne Corporation's case in respect of each of the claimed deductions. 42 Under cross-examination in the present proceeding, Mr Gould stated that he determined management fees and interest "around the time or, you know, prior to the preparation of the financial statements." He later resiled from this, maintaining that he reviewed draft accounts prepared by staff and, prior to the end of a given income year, determined the amount of a management fee and to whom it was payable. He said he adopted a like practice in relation to the determination of interest on intra-group loans. 43 With one possible exception, there are no contemporary written agreements or other documents such as board minutes, invoices, billing records, calculation sheets or correspondence in evidence supporting the existence of any arrangement for the provision of management services by any of the entities concerned to Melbourne Corporation. The possible exception is in respect of those said to have been rendered by Leaver Trading. An invoice from Leaver Trading is in evidence, although it appears to relate to other than the 2010 income year, which is the only year in which management services are said to have been provided by that entity. 44 Melbourne Corporation submitted, and I accept, that the absence of a written agreement or of other documentary records is not, in itself, of any particular moment. There is nothing remarkable about informality attending either the internal managerial affairs of Melbourne Corporation or any other of the other entities which Mr Gould controlled or the relations between those entities. In Electrical Enterprises Retail Pty Ltd v Rodgers (1988) 15 NSWLR 473, at 489, Kearney J recognized just this characteristic of a closely held and controlled group of private, family companies, observing, "Within a group of companies, it is not surprising for internal arrangements to be made informally." Similarly and with reference to the alleged making of loans the existence of which was supported only by book entries and testimony that the agreement for a loan had been made orally, Nettle J, then a judge of the Supreme Court of Victoria, stated in VL Finance Pty Ltd v Legudi (2003) 54 ATR 221, at [30]: [30] In the circumstances I think it suffices to say of the book entries point that, in the absence of any suggestion of sham, there is no reason why loans agreed to by made by a family company to members of the family cannot be created orally or by conduct and sufficiently evidenced by book entry, and that it is enough to dispose of the consequences of the lack of cash in hand contention to observe that it has been the law since Spargo's case that obligations may effectually be set off one against another, leaving a net balance due, without any money changing hands. [Emphasis added - footnote references omitted] The qualification expressed by Nettle J in relation to sham and set-off will be noted. 45 Sometimes, the informality in relations will be such that one is left just to infer the existence of an agreement by conduct: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424, at [369]. 46 A great disservice can be done to the Australian business community, especially the small business community, by a failure on the part of the Commissioner, in his administration of national taxation laws, to recognise, as the courts do in cases great and small and in circumstances extending across a wide range of controversies, these ordinary features of Australian commercial life. 47 All this said, where, as here, informality is present, much can depend on the credibility one affords the accounts given by participants and, where they exist, representations in business records created under their supervision or with their approval. 48 It may readily be accepted that a corporation does not manage itself. This, too, was a point made by Melbourne Corporation. By the 2001 income year, Melbourne Corporation was serving Mr Gould's private business interests and those of some clients in his career following his cessation of direct involvement with the Gould Ralph incorporated accountancy practice. I accept that Mr Gould devoted some of his time to serving the interests of Melbourne Corporation in the 2001 income year and other income years for that matter. Other individuals did, too. At this level of generality, this part of Mr Gould's evidence I accept. 49 However, again to use the deduction claim concerning the AA Trust in the 2001 income year as an example, that claim is that a particular entity rendered this service in a particular amount. Moreover, in this particular income year, other entities allegedly did too - Mrs Gould, Melbourne Insurance and the GF Trust. Further, the combined total of the management fees claimed for the 2001 income year is about two thirds of the total in controversy and some three times greater than any amount claimed in any other of the income years in controversy. 50 There are truly great fluctuations in the range of alleged providers of management services and in the amounts said to have been incurred for the provision of such services. Yet further, although Melbourne Corporation and the AA Trust each thereafter remained members of Mr Gould's group of private entities, of the income years presently in question only in the 2001 income year has the AA Trust allegedly rendered management services to Melbourne Corporation. 51 If one widens the income year focus to the 2001 to 2015 income years, the general ledgers of Melbourne Corporation and the AA Trust disclose that the only additional record of a management fee having been incurred by Melbourne Corporation to the AA Trust is in 2003 in the amount of $4,735. Yet in the 2003 income year, the general ledger and financial statements of the AA Trust record that the AA Trust paid an identical amount of management fees to the amount of management fees it received. 52 Again looking to the 2001 to 2015 income year period, in each of the 2013 to 2015 income years, only a $500 fee in respect of management services is recorded in Melbourne Corporation's general ledgers with each specified as having been incurred on 30 June, to the GF Trust. 53 In my view, Mr Gould gave two plausible and related explanations for these features of the 2001 income year and of the radical differences in entity and amount within this year and from year to year over the years of the management services claims by Melbourne Corporation. One was in the answer, already quoted, from which he later resiled. The other was in a series of answers given by Mr Gould in the course of his oral evidence, which I now detail, albeit at some length (with parenthetical, related transcript and tender bundle "R" references). As it happens, the passages concerned have been taken up in the Commissioner's submissions (Appendix C). Of all of his oral evidence (both as tendered from proceeding QUD 512 of 2018 and as additionally given in the present proceeding), I thought this evidence was the most candid given by Mr Gould. (P-283 line 5): "I would have to draw upon my sort of, you know, tax knowledge as to whether to actually - to actually, basically, some form of management fee or just to let it be." (P-287 to P-289): There would be "an element of truth" in the proposition that management fee entries were made for tax planning purposes. Reference decision of Mr Justice Williams (identified at P-309 as Tweedle v FCT (1942) 180 CLR 1) and Ronpibon Tin v FCT (1949) 78 CLR 668. (P-287 line 7) A "consideration" in recording something as a management fee was to enable Melbourne Corporation to claim a deduction and not have any taxable income in that year. (P-287 line 27) "I … would have had an eye on the tax planning" (P-288 line 13). "I don't disagree" that "a management fee was in fact quantified to reflect an amount that suited [Mr Gould's] tax planning purposes for Melbourne Corporation" (P-288 line 38). Agreed that "[tax planning] was the only factor [in quantifying a management fee] save .. that you sought to ensure that the fee was, in your words, not an unreasonable sum". (P-288 line 40) "I would not have paid it had - have done a situation where Melbourne Corporation paid a management fee to another company which in itself then had a tax problem because of it. It would be highly unlikely I would do that." (P-289 line 5) (P-292 line 1): Melbourne Corporation may not charge onwords for work Mr Gould does for another company "was just part of, you know, the usual tax planning that one did". (P-324 line 15): accounts were "primarily designed for the obligations for taxation purposes". Also P-324 line 45. (P-347 to 349): ensuring Melbourne Corporation minimised its taxable income was a consideration "Absolutely. Certainly a consideration the tax planning is, you know, that's my job and basically, yes." (P-347 line 41). "…. the tax claiming comes in when you look at saying, well, can we also pay some, maybe, some managing fees. Or maybe, some superannuation payment. They're the two which have a bit more flex, a bit more variability to them." (P-348 line 33). "I need, ultimately, to do some calculations for Melbourne Corporation itself to work out whether it also needs to pay management fees or some superannuation in terms of its tax planning." (P-349 line 4). With reference to R6417 showing management fees of $200,000 and income of $336,745.12, "the primary consideration in including that [management fee] entry was "Absolutely" for tax purposes. "Basically, the tax planning, you know would be critical in terms of working out what was required to be paid here" (P-349 line 39). (P-353 line 5): "…. in the end, interest was applicable. How I dealt with it each - year by year was a matter to some extent for me. For instance, could Melboure Corporaiton pay it? Was it relevant to the calculation of Melbourne's taxable income, would be a factor, I guess." (P-354 line 20): "… it was little point in basically necessarily making the journal entries [for interest] if essentially it was essentially an academic issue [by which is meant] if the company was in a loss, bringing to account to make sure some interest accrual of a liability would just increase the loss. So from a tax point of view, it would be an academic issue." Also lines 30-47. (P-356 lines 20-38): "… may choose to elect not to pay interest … on the other hand, they could elect and so to pay interest… that's just normal tax planning which goes on in every family group." (P-378 lines 1-5): choosing to pay management fees. (P-378 line 40): "I just gave in the illustration about the director owing money to his company, he doesn't have to charge the company for interest if he chooses not to. That's the way the tax world works." (P-379 lines 1-12): Re factors in charging management fees being minimising taxable income in the entity charging the fee but equally the tax on the recipient. (P-380 line 1): "obviously I'm doing internal tax planning within the group, that's true" (as part of a related exchange at P-379 lines 38 to P-380 lines 41). (P-381 line 35): "I chose to do the tax accounting in the form I did - management fees rather than interest…. Yes, of course the tax position of the company is of critical importance." (P-382 line 19): "I have a degree of flexibility as to where I determine the liability should be paid from." (P-382 line 40): "obviously, I do have the discretion to work through what should be done at the end of each financial year." (P-382 line 43): Agreed that the amount in question was the only interest that Melbourne Corporation was liable to pay "for tax purposes". (P-382 line 36): "That is Australian tax planning that, essentially, you work out within your group where tax should be paid and you endeavour to minimise it, if you can." (P-415 line 45): responds "well certainly" that "the most likely explanation for the 1.6 million accured interest charge is that that was an entry made consistent with the practice you described this morning namely, to try to minimise the tax liabilities of the company." (P-497 line 25): "fundamentally … these accounts are prepared for tax purposes." (P-535 to P-536): I questioned Mr Gould about the loan arrangement and early tax cases. (P-557 to P-558): I questioned Mr Gould about the term "balancing charge" and Mr Gould agreed that the Court could form the view, at least subjectively, that his purpose "is just to get a tax deduction by a label which one uses - either management fee or interest" (P-558) [sic] 54 I was provoked to put to Mr Gould that the management fees and interest were "balancing charges" by the experience of hearing Mr Gould's oral evidence in proceeding QUD 512 of 2018, as tendered in this proceeding and the succession of answers, related in the above excerpts, in the course of his cross-examination in the present proceeding. I detected no hint of pretence, only disarming, unapologetic frankness in the answers given by Mr Gould in these excerpts. 55 It has been recognised at the highest level that revenue law considerations influence the form of most business transactions: Federal Commissioner of Taxation v Spotless Services Ltd (1996) 186 CLR 404, at 416. That is very different to giving the appearance of a business transaction so as to yield a benign tax consequence. 56 Allowing everything for the informality which might attend an arrangement, I am just not satisfied on the balance of probabilities that the AA Trust rendered any management services to Melbourne Corporation in the 2001 income year, much less that Melbourne Corporation incurred in that income year any expense, much less one in the amount of $50,000, in respect of such a service. I am of the same view in respect of each other claim for management services. These were just, as Mr Gould also admitted (at p 558), "closing adjustments", "made to achieve the best overall tax outcome for the group". As Mr Gould conceded (at p 558), the management fees had "a motivation of working out how to do the tax affairs of the entire group". 57 The impact of this particular claimed management fee, and the others in context, in conjunction with the claimed interest deductions, also in contest, is obvious enough. In most of the income years in question, Melbourne Corporation's income tax position, as returned, was that it had no tax liability. That was not, I find, a coincidence, but rather the result of a succession of ex post facto constructs by Mr Gould. The answer from which Mr Gould later resiled was true. It is inherently more likely than not, and I find, that the amounts of management fees, and interest, were fixed by Mr Gould after the close of the financial year to which they purported to relate and at a time when the financial accounts for the year concerned were prepared for his approval. In the exercise of the control he had over the entities concerned, he fixed those amounts arbitrarily and solely for taxation purposes. The resultant entries in accounts and tax returns were a mere charade. 58 Not everyone might agree with the famous observation by Holmes J (with whom Brandeis J agreed) in Compañía General de Tabacos de Filipinas v Collector of Internal Revenue 275 US 87 (1927), at 100, "Taxes are what we pay for civilized society", as an equally famous dictum of Lord Tomlin in Commissioners of Inland Revenue v Duke of Westminster [1936] AC 1 (Commissioners of Inland Revenue v Duke of Westminster), at 19, "Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be" attests. But everyone agrees that the ordering of affairs must be real, not an ex post facto construct, a mere sham. 59 Although a discrete body of evidence was led in relation to the management fee deduction claims and the interest deduction claims, it seemed to me more likely than not on the whole of the evidence that Mr Gould adopted like ex post facto practices in relation to interest deduction claims to those he did with management fee deduction claims. This conclusion has in turn also informed why I have concluded that neither has been proved on the balance of probabilities. 60 In conjunction with his submission that management fee and interest fee deduction claims were just ex post facto constructs by Mr Gould, the Commissioner put that, as Brennan J, at 618, and Toohey J, at 627, in Dalco recorded and Yeldham J had done at trial on the evidence in that case, I should conclude on the evidence in the present case that Mr Gould had "completely disregarded corporate structures and entitlements or used them purely for convenience in the lending of money and the claiming of expenses". 61 It is true that there is a disregard present here on the part of Mr Gould, or rather better put, a wilful lack of regard for the obvious, but that is in respect of the creation of an appearance of the incurring of deduction entitling expenditures in a given income year after the close of that income year. This is not a case where the interest income or management fees were in fact in respect of services performed or monies lent by Mr Gould personally under a corporate façade. In the present case, it has not been proved on the balance of probabilities that the services for which management fees were allegedly incurred or that the interest allegedly incurred was incurred either at all or as claimed. I do not therefore accept that, in this sense, the present case is like Dalco. It is, however, like Dalco in that the taxpayer has not discharged the statutory onus of proof and adopted a complex web of controlled corporate actors. 62 Explaining further why I am not satisfied that any of the management fees claimed was incurred as claimed and that each is a sham requires that I now additionally detail particular features of the evidence in relation to the particular income years in which they are claimed. 63 The Commissioner offered in submissions a detailed analysis of the evidence in respect of each claimed management fee. Regard to the evidence concerned discloses that the analysis is well-grounded in that evidence. I have therefore much drawn upon the submission in the following.

Management fee claim - the AA Trust - 2001 income year 64 I have used some features of this particular claim for the purpose of making some general observations above. As already noted, an explanation given by Mr Gould in 2012 for what the services provided by the AA Trust entailed in the 2001 income year was that they were "funds management" and that the services were provided by "the directors" on behalf of the AA Trust. In his later affidavit evidence in chief, Mr Gould stated that the fee was charged for "work done by" the AA Trust. Under cross-examination, Mr Gould gave varying accounts. At one stage, he stated that he could not "recall that far back". Later, he stated that a "very significant aspect" of the fee was a guarantee fee. Yet later, in response to the suggestion that the AA Trust had not provided management services, Mr Gould stated: you had a series of investments in clients of [Melbourne Corporation]. So that it had the ability, like without funding which came out of Anglo Australian Christian and Charitable Fund, income could not have been derived by [Melbourne Corporation]. 65 These accounts are not readily reconciled either with each other or with the statement in Melbourne Corporation's Appeal Statement, filed on Mr Gould's instructions, that Melbourne Corporation and the AA Trust had "agreed that $50,000 should be payable by [Melbourne Corporation] as consideration for work done by Mr Gould to manage [Melbourne Corporation]". Nor do they offer any insight into how $50,000 came to be fixed as a fee. 66 All the more difficult to reconcile with the payment of a fee by Melbourne Corporation to the AA Trust, which had no employees, for the services of Mr Gould (as director of Anglo American, the trustee of the AA Trust) is that, in the 2001 income year, Mr Gould was a paid employee of Melbourne Corporation in respect of whom that company also made superannuation payments. In theory, it might be possible for an individual to undertake some duties for an entity as an employee of that entity and some duties on behalf of a corporate consultant to that entity. Also in theory, in small business and within a tightly controlled group of companies, much informality might attend such an arrangement. In practice, and in the context of a controversy emerging in a taxation appeal, acceptance that such an arrangement existed would, and in this case did, require precise and credible proofs. Melbourne Corporation's case lacked this. 67 The related journal entry in Melbourne Corporation's general ledger (a term shortened to GL as appropriate) is dated 30 June 2001 but there is no indication on the face of the ledger as to when it was prepared. There is a consistent entry in the 2001 general ledger of the AA Trust recording consulting fee income of $50,000 from Melbourne Corporation on 30 June 2001. However, Melbourne Corporation's 2001 general ledger also records $51,000 of consulting fee income from Melbourne Corporation on 30 June 2001. Why on 30 June 2001 Melbourne Corporation has both purportedly incurred a management fee liability and derived a similar amount by way of consulting fee income is not clear. The Melbourne Corporation general ledger records a reallocation to Southsea Nominees, another company controlled by Mr Gould. Yet Mr Gould's affidavit evidence was that there was a novation to the GF Trust (of which Southsea Nominees was trustee), also controlled by Mr Gould. Further, the general ledger of the GF Trust and its financial statements for the 2001 income year only record consulting fee income of $35,656.19. 68 Once again, for reasons which I can canvas in the QUD 512 judgment, I accept that a novation might occur informally within a closely controlled group of private companies. However, exactly what is to be made of these inconsistent entries, considered together, remains something of an evidentiary mystery. And evidentiary mysteries do not make for proof on the balance of probabilities.

Management fee claim - Debbie Gould - 2001 income year 69 To read Mr Gould's letter to the Commissioner dated 15 December 2017, one might think that the basis upon which Mrs Gould was entitled to some form of consulting fee income was because she was a director of various companies within the group of private entities. Yet she did not become a director of Melbourne Corporation until 1 February 2008. 70 In Melbourne Corporation's Appeal Statement, the sum of $14,000 is said to be referable to an amount agreed as between Mr and Mrs Gould for work done by her to manage Melbourne Corporation. Mr Gould's affidavit evidence was not necessarily inconsistent with this. In that he stated that Mrs Gould "sometimes [did] things to help at my workplace" and that he remembered her "helping with the storage and filing of documents". However, in cross-examination, Mr Gould stated: Debbie Gould, you know, would have accompanied me basically going, I mean, often on trips to see Jim Raptis. We would have done inspection of properties. All sorts of things. And, basically, that's - I mean, she was entitled to something. 71 Consistently with this answer but not with the statement in the Appeal Statement filed on his instructions that there had been an agreement, Mr Gould also stated under cross-examination that there was no pre-existing liability to make a payment of $14,000 to Mrs Gould. 72 In a letter to the Commissioner dated 15 December 2017, Mr Gould stated that the $14,000 consulting fee was returned by Mrs Gould in her 2000 income year return. Yet Mr Gould stated in his affidavit evidence that he had decided on the fee on 1 July 2000, the first day of the 2001 income year. That accords with the journal entry in Melbourne Corporation's general ledger, which includes an entry dated 1 July 2000 in respect of a management fee liability to Mrs Gould. In cross-examination, Mr Gould stated that he had "tax planning implications" "in mind" when selecting the $14,000 figure. 73 When cross-examined about the answer in the letter and the statement in his affidavit, Mr Gould stated, "That does seem to be in my affidavit an error in terms of the date. The date, when I think about it, just doesn't feel right" and "it seems more logical to me that it's in the preceding year". 74 However this may be, payment of this liability did not, on Melbourne Corporation's case, occur until 2002. A debit entry of $13,000 dated 12 March 2002 in Melbourne Corporation's bank account statement is said to record part payment of the fee owed to Mrs Gould. There is a related entry of 12 March 2002 in Melbourne Corporation's general ledger in respect of a payment to Mrs Gould. The balance of $1,000 is said to have been added to Mrs Gould's loan account which was then re-allocated to Mr Gould via an entry in Melbourne Corporation's ledger of 30 June 2005. While these two general ledger entries explain how a liability apparently incurred in the 2001 income year was ultimately discharged, they do not explain why it was said Mrs Gould had returned the receipt of management fee income in the 2000 year. 75 Exactly what Mrs Gould did to warrant the payment of a management fee is not clear on the evidence recited. Nor is it clear that there was ever an antecedent agreement, however informal, that she would provide services to Melbourne Corporation. It is not even the position on the evidence that she undertook to provide services on the basis that a fair amount for that would be worked out at some stage before the end of the 2001 income year. The figure of $14,000 just looks arbitrarily to have been fixed by Mr Gould at some stage prior to the submission of Melbourne Corporation's 2001 income year tax return. 76 More likely than not, the amount was fixed on or after 19 April 2002. The 1 July 2000 entry in the Melbourne Corporation general ledger relied upon on is GJ000068 dated 30 June 2001. Yet entry GJ000065 in this general ledger is dated 19 April 2002.

Management fee claims - Melbourne Insurance - 2001 and 2002 income years 77 Melbourne Insurance was registered on 19 October 1987. It has 2 shares on issue, which have been held by Southsea Nominees as beneficial owner since 10 September 2004. Prior to this, one share was held by Mr Gould (not as beneficial owner) and one share by Mr Leaver (as beneficial owner). Southsea Nominees is the trustee of the GF Trust. Mr Warwick Desmond Davies has been a director of Melbourne Insurance since 29 June 2009. Mr Davies was not called to give evidence. His absence was not explained. Mr Henry George Townsing was a director between 28 June 2010 and 1 July 2010. Mr Gould was a director on 17 May 2016, on 29 February 2016 and between 12 September 2007 and 29 June 2009, and earlier between 21 August 1989 and 1 September 1989. Mr Leaver was a director between 1 September 1989 and 12 September 2007. 78 In respect of the 2001 income year management fee claim, accounts have differed over time as to what it represents. 79 In the letter to the Commissioner dated 15 December 2017, Mr Gould stated that "Melbourne Insurance expenses were filing fees and bank charges. The expenses were in principle reimbursed by Melbourne Corporation in the form of management fees". Yet, in the Appeal Statement, it is stated that Mr Gould and Melbourne Insurance made an oral agreement that Melbourne Insurance would provide management services to Melbourne Corporation, and that, during each of the 2001 and 2002 income years, Melbourne Corporation and Melbourne Insurance agreed that $1,000 should be payable by Melbourne Corporation as consideration for work done by Melbourne Insurance to manage Melbourne Corporation. 80 On the other hand, in his affidavit evidence, Mr Gould stated that, on or about 30 June 2001, he "determined that Anglo American should also charge Melbourne Corporation the sum of $1,000 as a fee, and that Anglo American should novate this $1,000 entitlement to Melbourne Insurance". On that account, if true, the liability was in respect of services proved by the AA Trust the liability in respect of which was novated to Melbourne Insurance. Also in his affidavit evidence, Mr Gould stated: The reason I thought it would be desirable for Anglo American to novate the $1,000 receivable to Melbourne Insurance was because I regarded Melbourne Insurance as having a need for financial support. Melbourne Insurance was not engaging in income earning activity, but I expected the company would continue to have expenses. 81 In cross-examination, Mr Gould stated: No doubt basically the driver of doing something about it was the fact that Melbourne Insurance had actual incurred expenses, where do we get the money from. So basically, that's why the management fee was paid and brought to account. 82 Melbourne Insurance's financial statements for the 2001 and 2002 income years are in evidence. These disclose that, while its assets in the form of cash at bank and money owing in loans for those two years were modest ($4,000 in 2001 and $5,000 in 2002), its expenses were even more so ($335 and $535 respectively). In any event, notwithstanding the asserted need for Melbourne Insurance to have income, its bank statements, read in conjunction with its general ledger do not record the 2001 fee in respect of management services as paid until 9 April 2002. 83 The 2001 year income tax return for Melbourne Insurance discloses no business income at all. 84 As for the asserted novation by the AA Trust to Melbourne Insurance, while the general ledger of the AA Trust for the 2001 income year does record the separately claimed $50,000 management fee in asset account 1-8350, it neither contains a record of the claimed $1,000 management fee nor any reallocation of that fee to Melbourne Insurance. 85 As for the 2002 income year claim, Mr Gould did not, in terms, address this in his affidavit evidence, although he did confirm that the Appeal Statement was filed on his instructions. If the service was in fact rendered by the AA Trust with the liability to pay it being novated to Melbourne Insurance, that explanation would find no support whether in the financial statements or the general ledger of the AA Trust for the 2002 income year, which make no reference to any such fee or its reallocation. 86 There is a journal entry (00858342, dated 30 June 2002) in Melbourne Corporation's 2002 general ledger in respect of the claimed $1,000 management fee but this entry looks to have been created after 13 February 2003. That is because its bears a later journal entry number than these preceding entries in Melbourne Corporation's 2002 general ledger: (a) 00858341 dated 13 February 2003; (b) 00858340 dated 30 January 2003; (c) 00858339 dated 29 January 2003; and (d) 00858338 dated 24 January 2003. 87 The 2002 year income tax return for Melbourne Insurance discloses no business income at all. Looking to the AA Trust's income tax returns for the 2001 and 2002 income years on the basis that it may have rendered the service with the liability being novated leaves one none the wiser. That is because only the claimed $50,000 management fee in its 2001 tax return and no business income at all is shown in its 2002 income tax return. 88 Another mystery is that, apart from the 2001 and 2002 income years, the financial statements and general ledgers of Melbourne Insurance contain no record of its accrued consulting or management fee income in the 2003 to 2005, 2007 to 2009 and 2011 to 2014 income years. Melbourne Insurance's general ledger and financial statements do record the derivation of management fee income in the 2006 and 2010 income years. For Melbourne Corporation, even nominally, to derive management fee income is therefore something of an aberration on the face of its accounting records. 89 Perhaps some further light might have been shed on these particular management fee claims by Ms Dorothy Lewis who was also a director of Melbourne Corporation in the 2001 income year, or by Mr Leaver, who was in that income year the sole director of Melbourne Insurance in these income years. Neither was called. 90 As it is, it is unclear on the evidence by which individual Melbourne Insurance provided a service to Melbourne Corporation in the 2001 income year. In that income year and the 2002 income year, according to its general ledger, financial statements and income tax return, it paid no wages at all. So, if these are to be believed, the service was not rendered by an employee of Melbourne Insurance. Equally unclear is the occasion for Melbourne Corporation to look to either the AA Trust or to Melbourne Insurance for management services in circumstances where Mr Gould was a paid employee of Melbourne Corporation in these income years.

Management fee claim - the GF Trust - 2001 income year 91 Inconsistency of explanation also attends this management fee claim. 92 In the letter to the Commissioner dated 15 December 2017, Mr Gould stated that: (a) the $115,000 was payable to Darlington McCarthur; (b) the management fees were not payable to Southsea Nominees or the GF Trust; (c) the related income was not receivable by Southsea Nominees or the GF Trust; and (d) the income related to Darlington McCarthur. 93 In his affidavit evidence, Mr Gould made these statements: (a) On or about 30 June 2001, he decided that Darlington McCarthur should charge Melbourne Corporation the sum of $115,000 as a fee; (b) It is not correct to say that this amount was a management fee that Melbourne Corporation was charged by the trustee of the GF Trust; (c) He "used Darlington McCarthur to hold assets for clients in a nominee capacity and also to perform nominee transactions. In cases where [Mr Gould] did this, the relevant client was charged a fee." (d) In June 2001, Mr Gould decided that Darlington McCarthur should charge Melbourne Corporation a fee of $115,000 as consideration for the role that Darlington McCarthur played in his personal accountancy practice, and that Darlington McCarthur should novate its entitlement to the $115,000 management fee so that this entitlement was held by the trustee of the GF Trust; and (e) He "thought it was permissible for Melbourne Corporation to claim a deduction for the $115,000 management fee because the provision of nominee services to clients of [Mr Gould's] accountancy practice was a source of revenue for Melbourne Corporation". 94 These statements were tested in cross-examination. Mr Gould was unable to explain the differing explanations as between the letter of 15 December 2017 and his affidavit evidence. This particular topic of cross-examination culminated in Mr Gould stating that "in no place is a complete, comprehensive explanation given" in respect of the explanation for the fee. 95 There is no body of contemporary documentary evidence which makes reference to the provision by Darlington McCarthur of nominee services to clients, for example, by the holding of assets for them. Nor are there contemporary documents in evidence which make reference to how Melbourne Corporation derived income as a result of the provision of nominee services to clients of Darlington McCarthur. An amount of $115,000 does appear in the 2001 general ledger of Darlington McCarthur. But that records $115,000 as having been received from Gould Ralph Services. Further, the 2001 income tax return of Darlington McCarthur returns this $115,000 as income, which is inconsistent with any explanation that it novated a liability of Melbourne Corporation to pay it to the GF Trust before 30 June 2001. Even though returned as income by Darlington McCarthur, the inclusion was nonetheless prima facie tax effective, in light of deductions claimed by it in that income year. In the result, it had no tax liability for that income year. 96 The 2001 financial statements and general ledger of the GF Trust make no reference to any accrual of $115,000 as income. That is consistent with the 2001 income tax return of the GF Trust, which does not return this sum as income. 97 Mr Gould was a director of Darlington McCarthur in the 2001 income year. In that income year, Darlington McCarthur had no employees. Once again, if it were via Mr Gould that Darlington McCarthur rendered services to Melbourne Corporation, why this was done in circumstances where Mr Gould was employed by Melbourne Corporation was not explained. 98 Also once again, on the face of accounting records in evidence, the incurring by Melbourne Corporation of a management fee liability to the GF Trust, or Darlington McCarthur for that matter, is something of an aberration. Melbourne Corporation's financial statements and general ledger do not record any fees having been incurred by Melbourne Corporation to Darlington McCarthur or to the GF Trust (or Southsea Nominees for that matter) in any of 2002, 2005 to 2010, or in 2013 or 2014 income years. 99 As for Darlington McCarthur, on the face of accounting records in evidence, it did not accrue management fees from any entities at all in 2002 to 2005, or 2007 to 2014 income years. On the other hand, it incurred management fees to other entities in 2002, 2003, 2006, and 2011 income years. 100 As for the GF Trust and again on the face of accounting records in evidence, it did not accrue "management" fee income from any entities at all in 2000 to 2002, 2005 to 2008 and 2010 income years. On the other hand, the GF Trust is shown on such records, as having incurred management fee liabilities to other entities in 2004 to 2010, and 2012 to 2014 income years, including to Melbourne Corporation.

Management fee claim - Philadelphia Investments - 2002 income year 101 I have described Philadelphia Investments in the QUD 512 judgment. Nothing in the additional evidence received in the present proceeding calls that description into question. It is one of the companies within Mr Gould's private group of companies. 102 Mr Gould has given or, by instructions in relation to the Appeal Statement, caused to be given, differing accounts as to why Melbourne Corporation incurred a management fee liability of $17,000 to Philadelphia Investments in the 2002 income year. 103 In a letter to the Commissioner dated 4 March 2016, Mr Gould stated: The management fees received by Philadelphia are in substance a recognition of a fee payable by other members of the group of entities to which Philadelphia belongs for the use of its substantial equity in its premises for security purposes; and In relation to the $17,000 paid by Melbourne in 2002 it is no longer possible to locate any record as to how this sum was calculated and the period to which it related would be for a period longer than a year. But as security equity was at least $500,000, a fee of $5,000 to $7,500 per year would not be unreasonable. 104 The evidence tendered in proceeding QUD 512 of 2018 disclosed, and the further evidence led in this proceeding does not contradict, that Melbourne Corporation was the registered owner of suites 301 and 302 and a basement storeroom in BMA House, 135 Macquarie Street, Sydney and Philadelphia Investments was the registered owner of Suites 401 and 402 of BMA House. Inferentially, the reference in the letter of 4 March 2016 to "substantial equity in its premises" is a reference to the suites it owned in BMA House. 105 In its Appeal Statement as filed, it was stated on behalf of Melbourne Corporation in relation to this particular deduction claim that, during the 2002 income year, Melbourne Corporation and Philadelphia Investments agreed that $17,000 should be payable by Melbourne Corporation as consideration for work done by Mr Gould to manage Melbourne Corporation (with no mention of any GST). The radically different explanation to that given in the 4 March 2016 letter is obvious. 106 In his affidavit evidence, Mr Gould stated that, on or about 30 June 2002, he decided that Philadelphia Investments should charge a $18,700 fee (GST inclusive) to Melbourne Corporation as consideration for work done by Philadelphia Investments, on which GST would be payable and that Philadelphia Investments should novate its entitlement to $18,700 to the GF Trust so that Melbourne Corporation owed this sum to the GF Trust. This is a yet different explanation. 107 Melbourne Corporation's general ledger for the 2002 income year contains no management fee entry into the Philadelphia Investments account (2-8200). All that there is in that ledger is a journal entry (GJ000076) whereby a management fee expense was immediately allocated to Southsea Nominees. That is not consistent with a reallocation such as would be consistent with the claimed novation. Further, that journal entry is, apparently, the last for the year ended 30 June 2002 with the next journal entry (GJ000077) being dated 31 March 2003. Overall, the impression created is that the management fee journal entry was created after 30 June 2002 upon an assessment of an overall position for the group of private entities. 108 The 2002 general ledger for the GF Trust is in evidence. It contains no record of the derivation of either $17,000 or $18,700. The same is true of its 2002 financial statements. These do not record any management fee income. 109 Melbourne Corporation's bank statements do not evidence any payment of $17,000 or $18,700 to Philadelphia Investments. 110 Philadelphia Investments had no employees by which it might have furnished a management service to Melbourne Corporation. In the letter dated 4 March 2016, Mr Gould stated: Philadelphia has no staff and was entirely dependent on other companies to attend to all its administrative requirements, such as accounting and secretarial expenses as well as costs included directly in managing its properties and administering its investment share portfolio. This answer is consistent with the 2002 income year income tax return, financial statements and general ledger of Philadelphia Investments, which record no salary and wage expenses or superannuation expenses 111 Once again, if Philadelphia Investments performed the service via Mr Gould, it is not apparent why this occurred in circumstances where Mr Gould was a paid employee of Melbourne Corporation. 112 Ms Lewis was also a director of Philadelphia Investments in the 2002 income year. Her absence from the witness box means that on this subject also I do not have the benefit of an explanation from her about the claimed performance for Melbourne Corporation of this service. 113 The incurring, as claimed by Melbourne Corporation, of a management fee liability to Philadelphia Investments was something of an aberration over the 2001 to 2014 income year period. On the face of Melbourne Corporation's general ledger and financial statements, it incurred no such expense to Philadelphia Investments in any of 2001, 2003, 2005 to 2011, or in 2013 or 2014 income years. The evidence concerning Philadelphia Investments also discloses that it did not accrue management fee income from any entities at all in the 2001, 2003 and 2005 to 2014 income years. On the other hand, according to the accounts in evidence, Philadelphia Investments incurred management fees expenditure to other entities in the 2004, 2005 and 2009 income years. At least according to Melbourne Corporation's 2005 income tax return, in one of these three years, the 2005 year, it was the provider of management services to Philadelphia Investments from which it derived a disclosed income of $50,000. 114 The claimed deduction in respect of a management fee payable to Philadelphia Investments was not just fiscally convenient for Melbourne Corporation. On the other side of the ledger, it was not fiscally inconvenient for Philadelphia Investments. Philadelphia Investments returned the income as "other gross income" in its 2002 income tax return but had prior year losses available such that it had no income tax liability for that income year.

Management fee claim - the GF Trust - 2003 income year 115 The claimed deduction in the 2003 income year of $68,000 in respect of a management fee liability to the GF Trust was the subject of an explanation given to the Commissioner on behalf of Melbourne Corporation by its solicitor by a letter dated 2 September 2015. In that letter, it was stated: GFT was the principal lending entity in relation to the loans that Melbourne used to fund its business operations. As the Audit Opinion recognizes, GFT was able to borrow substantial funds. It then on lent those funds to subsidiaries or related entities, which did not have the same access to debt. The $68,000 payment was a fee to reimburse the GFT for establishing, maintaining and revising those loan facilities, and for GFT's provision of those facilities on favorable [sic] terms. It satisfies the Audit Opinion's requirement that the intercompany service be 'actually performed' 116 A broadly consistent explanation was given by those solicitors on behalf of Melbourne Corporation in a further letter to the Commissioner dated 20 October 2015: As at 30 June 2003 Melbourne Corporation of Australia Pty Limited (Melbourne) owed $1,976,811 to GFT. The management fee of $68,000 related to the costs incurred in respect of that facility and the fees in circumstances where there was no interest charged on the loan that year 117 The impression thus far created by explanation is that the claimed fee related to the making available to Melbourne Corporation by the GF Trust of a finance facility. 118 However, in Melbourne Corporation's Appeal Statement as filed, a different explanation is given. It is stated that, during 2003, Melbourne Corporation and the trustee of the GF Trust agreed that a management fee should be payable by Melbourne Corporation as consideration for work done by Mr Gould to manage Melbourne Corporation. This explanation was taken up by Mr Gould in his affidavit evidence. He stated that: I would often perform work, for which I expected to be paid, with the intention of doing this work on behalf of Gould Family Trust… On or about 30 June 2003, I decided that: [the GFT] should charge a fee of $68,000 to Melbourne Corporation as consideration for work done by Gould Family Trust, on which GST would be payable (so, $74,800). The evidence discloses that neither the GF Trust nor, for that matter, Southsea Nominees had any employees in the 2003 income year. In itself, that is consistent with Mr Gould's statement that it was he who performed the work. 119 The reference to a fee on which goods and services tax would be payable will be noted. There is no consistent pattern in respect of the management fees claimed (or others evidenced) of either GST inclusion or exclusion. Nor is there any evident explanation as to why some fees were GST inclusive and others not. 120 However this may be, in cross-examination Mr Gould accepted the proposition that he had: no recollection at all of why the entry relating to a $68,000 or described as a $68,000 management fee in 2003 was made, save that it would have been made in order to minimise the taxation liability of your Australian private entities. He also stated that management fees had "a motivation of working out how to do the tax affairs of the entire group". As I have indicated in respect of other such evidence, I consider these answers to be completely candid and true. 121 There is no evidence that the claimed deduction was paid either before the end of the 2003 income year or ever for that matter. However, the claimed deduction is supported by entries (cf GJ000093 and GJ000094) in Melbourne Corporation's general ledger for the 2003 income year. Not, I find, by coincidence, these were the last entries made in the ledger for that year. But an entry for that year is not to be assimilated with an entry in that year recording a liability incurred prior to the end of that income year. 122 Inconsistently, the general ledger for the GF Trust for the 2003 income year makes no reference to Melbourne Corporation in relation to the amount of $68,000, instead referring to Southsea Nominees. 123 Once again, there is no consistent pattern of any annual payment of a management fee to the GF Trust nor any consistent explanation as to why it was paid. 124 Consistent with Mr Gould's answers under cross-examination as to the tax position of the group, the claimed incurring of a management fee did not just provide Melbourne Corporation with a tax deduction in the 2003 income year. Even though the management fee was returned as income by the GF Trust, the GF Trust had losses available to it in that income year. The end result was that it had no income tax liability for that income year.

Management fee claim - Leaver Trading - 2010 income year 125 This particular fee claim is bereft of an evidentiary explanation from Mr Gould. All that has been tendered is an invoice from Leaver Trading to Melbourne Corporation dated 9 December 2008. Yet that date falls within the 2009, not 2010 income year. This aside, the invoice contains but a bald, general statement. The invoice does not identify by exactly which individual Leaver Trading provided the service nor is there any other evidence on this subject. 126 Mr Gould ceased being a director of Leaver Trading in 1989. In the year ended 30 June 2010, Leaver Trading had but one director, Mr Leaver. And, as already noted, he did not give evidence in this proceeding. 127 In respect of Leaver Trading, there is no pattern of the incurring of a management fee liability by Melbourne Corporation to this entity. On the accounts in evidence, no management fee liability to Leaver Trading was incurred by Melbourne Corporation in the 2001 to 2007, 2011 or 2013 income years. Incongruently or at least unexplained, in the 2012 income year, Melbourne Corporation accrued fee income from Leaver Trading. 128 Considered in isolation, this claim must in any event fail because, even on the balance of probabilities, the incurring of the expenditure has not been proved. However, considered in conjunction with the other claims and in the wider context of management fees claimed as deductions or correspondingly declared as income, it is another indicator of a random, arbitrary quality in the amount of clamed management fees and the entity allegedly providing the service.

Management fee claims - GF Trust - 2011 income year 129 The claimed $5,000 deduction in respect of a management fee liability to the GF Trust in the 2011 income year is another example of this random, arbitrary quality in such deductions. 130 In the letter to the Commissioner dated 15 December 2017, Mr Gould stated that, "A service fee of $5,000 was payable to Golden Investments by Melbourne. No fee was payable to the Gould Family Trust". Inconsistently, in Melbourne Corporation's appeal statement as filed, it is stated that Melbourne Corporation claimed $5,000 for management fee payable to the GF Trust in its 2011 income tax return. It is further stated that, during 2011, Melbourne Corporation and the trustee of the GF Trust agreed that a management fee should be payable by Melbourne Corporation as consideration for work done by Mr Gould to manage Melbourne Corporation. 131 "Golden Investments" is a reference to Golden Investments Pty Ltd (Golden Investments), whose director was Mr Davies. 132 A more elaborate explanation was given by Mr Gould in his affidavit evidence about the claimed deduction. Unlike the appeal statement but like the letter of 15 December 2017, Golden Investments is mentioned in this explanation: In or about 2009 I used Golden Investments as the vehicle for an investment in a company called Itineris Holdings Pty Ltd. Golden Investments advanced a loan to Itineris Holdings Pty Ltd and acquired some convertible notes. During the 2009, 2010 and 2011 years I also used Golden Investments as a vehicle for the performance of some nominee transactions on behalf of clients, much as I had used Darlington McCarthur Pty Ltd in previous years… By reason of the work that was done in connection with the Itineris litigation and surrounding matters, as well as the use of Golden Investments to perform nominee transactions, I formed the view that Golden Investments should charge a fee to Melbourne Corporation. 133 A statement of claim in respect of District Court proceedings, presumably the "Itineris litigation", in which Golden Investments was one of the plaintiffs in a claim for compensation for loss and damage allegedly sustained, is in evidence. However, Melbourne Corporation was not another of the plaintiffs and there is no explanation by Mr Gould why Melbourne Corporation would come under any liability to pay Golden Investments any fee in respect of Golden Investments' litigation. The relevance of the statement of claim as an explanation for the claimed deduction is thus not evident. 134 There is a supporting journal entry for the claimed deduction in Melbourne Corporation's general ledger for the 2011 income year. That entry refers to the GF Trust, not Golden Investments, in respect of the claimed amount. Further, in the general ledger that claimed liability to the GF Trust perfectly offset the next day. 135 The evidence discloses the Golden Investments did not accrue management fee income from any entities at all in the 2005 to 2010 income years. On the other hand, Golden Investments incurred management fee liabilities to other entities in the 2005 and 2006 income years. Even assuming that, contrary to the journalised position in Melbourne Corporation's general ledger, the liability for the management fee was to Golden Investments, the liability to that entity and the amount of that liability are random and arbitrary. 136 Also bereft of any pattern of the incurring of a fee for management services is, as noted, the incurring of any liability to the GF Trust (or even Southsea Nominees) by Melbourne Corporation in respect of management services. On the face of the accounts in evidence, none was incurred in any of the 2002, 2005 to 2010, or in the 2013 or 2014 income years. 137 As it happens, the amount of the claimed management fee was returned as assessable income by Golden Investments in the 2011 income year. Once again, however, so returning that income had no adverse tax consequence because the deductions it claimed yielded it a loss (and thus no tax liability) for that income year.

Management fees - conclusions 138 I set out my understanding of what constitutes a sham in the QUD 512 judgment. I incorporate that by reference and do not repeat what is there stated. 139 The sham here reposes in the journal entries which purport to record management fee liabilities incurred by a particular entity prior to the end of a given income year and in the absence in fact of any such liabilities. Each such entry is but a façade in respect of a liability which was never incurred prior to the end of the income year concerned. In reality, the entity concerned rendered no management service at all to Melbourne Corporation. 140 In reaching that conclusion, I have taken into account its gravity and thus s 140(2) of the Evidence Act. In a sense, that conclusion goes beyond what is necessary to determine the income tax appeals. That is because in any event because I am not satisfied in respect of any of the management fees claims that Melbourne Corporation has discharged its onus of proof. However, the conclusion as to sham also has relevance in relation to the challenge made to the penalty assessments. 141 Mr Gould's explanations as to the various claimed management fees are not credible. This conclusion is not just supported by the inconsistent explanations which have been given. The amounts claimed and entities purportedly rendering the service are so random and arbitrary and so devoid of any plausible explanation either as to the amount concerned or the substantial variations as to amount and entity from year to year as to make it inherently unlikely that the services were rendered as claimed in the income year in respect of which they were claimed. This is confirmed by the analysis in detail given above of the various claims. In contrast, Mr Gould's unguarded explanation as to the fixing of the management fees (and interest) at the time when financial accounts were prepared is, especially when taken in conjunction with his repeated and unabashed references to taxation considerations, the inherently more likely explanation. That fixing was always after the close of a given income year. 142 I have given much anxious consideration to whether what is, undoubtedly, a practice over the years in question of fixing of management fee amounts (and interest) after the close of an income year was attended with an intention on the part of Mr Gould to defraud the Commonwealth. It was certainly well-open on the evidence to the Commissioner properly to advance such a submission. 143 In this proceeding, unlike proceeding QUD 512 of 2018, I did not have the benefit of directly observing Mr Gould from within the same courtroom when he gave his oral evidence. The exigencies of the COVID-19 pandemic and then prevailing public health restrictions dictated that the trial be conducted (when finally a trial was possible at all under prevailing circumstances) by video-link between a courtroom in Brisbane where I sat and a courtroom in Sydney from which Mr Gould gave his oral evidence. My experience is that, invariably, this method for the reception of oral evidence mutes non-verbal communication signals, although less so than with remote hearing platforms such as Microsoft Teams. Within the limits of the technology employed, I observed Mr Gould closely during the course of a wide-ranging cross-examination and his subsequent re-examination. 144 My very strong impression was, and remains, that Mr Gould genuinely believed that this practice was lawfully permissible. That he resiled from his evidence that the amounts were fixed at the time when financial accounts were prepared seemed to me to be the result of his having by then appreciated that the very deduction claimed had actually to be incurred prior to the close of an income year. I thought his answers about the influence of taxation considerations in decision-making stemmed from a combination of his having control of the relevant corporate actors (including those acting as trustee) in his private group entities during the income year and a notion that he could give precision after the close of an income year to an inchoate understanding on his part during an income year that these would deal with one another in an overall fiscally advantageous way by way of what might be termed ex post facto closing adjustments. 145 Mr Gould is possessed not just of postgraduate qualifications in accountancy but, by the time of the income years in question, was a highly experienced chartered accountant. Yet for all his training and experience as a chartered accountant, Mr Gould seemed to have convinced himself not only that cases such as Slutzkin v Federal Commissioner of Taxation (1977) 140 CLR 314 (Slutzkin) were still good law in an era when Pt IVA of the ITAA 1936 was applicable but also that an artificial, contrived arrangement having tax avoidance as its purpose might be given precision after the close of the income year concerned. Yet, as Scott v Commissioner of Taxation No 2 (1966) 40 ALJR 265 (Scott No 2) evidences, even in the era when Slutzkin was decided, the arrangement concerned had to be other than a sham. In Slutzkin, all of the essential steps occurred during, not after, the income year concerned and there was never any question that they were a sham. The conduct of Mr Scott in Scott No 2 was not dishonest, just mistaken. For reasons I now outline, Mr Gould's conduct (and his evidence) was not dishonest but it was more grave than that of Mr Scott in that he was wilfully blind to the obvious. 146 Although I readily acknowledge that reasonable minds might reasonably differ as to whether a more sinister view ought to be taken, having observed at length Mr Gould giving oral evidence, for the purpose of the further evidence in this proceeding, my conclusion is that Mr Gould was not dishonest in relation to the claiming either of the management fees or interest deductions at issue. Rather, he was mistaken, mistaken to the point of wilful blindness to the obvious (in the sense described by Gibbs CJ in Giorgianni v The Queen (1985) 156 CLR 473, at 482) in fixing and then causing to be claimed these amounts. It should have been obvious to him that it just was not possible ex post facto to give the appearance of expenditure being incurred, no matter that he controlled all the relevant corporate actors and no matter that it may have been possible for one entity via him, his former wife or another to render a service to another before the end of a given financial year or to reach an agreement as to compensation by way of interest for the use of money. Further, he appears additionally to have convinced himself, seemingly based on a mistaken understanding of the proposition that it is not for the Commissioner to dictate to a taxpayer how to run a taxpayer's business or one controlled by a taxpayer (Ronpibon Tin NL v Federal Commissioner of Taxation (1949) 78 CLR 47, at 60) and the statement in Commissioners of Inland Revenue v Duke of Westminster that every man was entitled to order his affairs so as to pay the least possible tax, that it was additionally possible, ex post facto, to assign a particular, fiscally advantageous value to such a purported service, irrespective of the nature and extent or even performance by the nominated entity of the service (and the same, mutatis mutandis, in relation to purported loan interest). That it is not for the Commissioner so to dictate may be accepted, but it is for the Commissioner to say how much a taxpayer did spend: Ronpibon Tin, at 60. Moreover, if the Commissioner says the taxpayer spent or did not spend a particular amount and assesses accordingly, it is, in an appeal such as the present, for the taxpayer to prove otherwise on the balance of probabilities. 147 Yet further, whatever may have been the position in Mr Gould's formative years in accounting practice as to the correctness in relation to the dictum of Lord Tomlin in Commissioners of Inland Revenue v Duke of Westminster and when s 260 of the ITAA 1936 was in force (cf Newton v Federal Commissioner of Taxation [1958] AC 450), it has not been true ever since Part IVA of the ITAA 1936, even in its initial iteration, came into force. Part IVA put to rest the attraction found in Slutzkin for Lord Tomlin's dictum. Further again, there is a fundamental difference between ordering affairs so as to pay the least possible tax and giving the appearance, via a sham, of so ordering affairs. 148 In reaching that conclusion for the purposes of this proceeding, I have considered the subject afresh, unconstrained by a conclusion which I reached on the evidence in proceeding QUD 512 of 2018. As it happens, the further evidence led in this proceeding, taken in conjunction with that tendered from the earlier proceeding, has led me even more strongly to a like conclusion. I have been especially influenced in that regard by the succession of answers Mr Gould gave about taxation considerations and a "balancing charge", quoted above and by observing Mr Gould when he gave those answers. 149 Also in relation to reaching this conclusion, I have particularly turned my mind to s 140(2) of the Evidence Act. 150 As it happens, the fixing after the close of the income year concerned of deductions subsequently claimed may have a lengthy provenance. The evidence tendered from proceeding QUD 512 of 2018 included a memorandum of 18 July 1997 on this subject, described for the purposes of that proceeding in the QUD 512 judgment. Nothing in the additional evidence led in this proceeding causes me to depart from the description of that memorandum given in that judgment. My conclusion that the amounts of the deductions claimed were fixed after the close of the income year is not dependent on that 1997 memorandum. However, the inquiry made in that memorandum is entirely consistent with the conclusion I have reached. 151 By the time Mr Gould came to give evidence in this proceeding he had been convicted of an offence against the Crimes Act 1914 (Cth) constituted by an intentional interference ("witness tampering") with an exercise of Commonwealth judicial power (in a taxation proceeding). An appeal against that conviction was then pending. The then currency of that appeal occasioned the making of an order under s 128 of the Evidence Act in respect of the evidence given by Mr Gould. 152 This proceeding was re-opened (see Anglo American Investments Pty Ltd (Trustee) v Commissioner of Taxation [2021] FCA 974) so as to permit the Commissioner to tender and cross examine upon a certificate evidencing the dismissal of that subsequent appeal against conviction. While I have taken that conviction into account in the conclusions I have reached concerning the credibility of Mr Gould's explanations and his state of mind, the fact of that conviction has not, in any way, been determinative of these conclusions. I should have reached them in any event, for the reasons given above. 153 For these reasons, Melbourne Corporation has failed to prove that it was entitled to deduct under s 8-1 of the ITAA 1997 any of the management fees claimed. 154 This conclusion means, as it did in proceeding QUD 512 of 2018, that it is unnecessary to consider the observations made in Fletcher v Federal Commissioner of Taxation (1991) 173 CLR 1 (Fletcher's Case), at 18, with respect to a possible need, flowing from a "disproportion between the detriment of the outgoing and the benefit of the income" to resolve how the outgoing was to be characterised for the purposes of s 8-1 of the ITAA 1997. It also means that it is unnecessary to consider whether Pt IVA of the ITAA 1936 would be applicable in the event they were not. I do no more than indicate that, were my conclusions as to sham transactions wrong, I would have concluded that the amounts of management fees (and interest) were wholly referrable to creating a tax deduction in a particular amount rather than the worth of any service and that, in any event, the overwhelming dominant purpose of all dealings between the entities concerned was to obtain a tax benefit.

Interest deduction claims 155 Melbourne Corporation has claimed as deductions under s 8-1 of the ITAA 1997 amounts of interest said to have been incurred in respect of advances under four separate loan agreements. These are: (a) loans from the GF Trust; (b) loans from the AA Trust; and (c) a loan from CVC IN; and (d) a loan from Photo Advertising. 156 Photo Advertising was incorporated on 19 June 1985. Its controlling shareholder is Southsea Nominees. Mr Gould has been a director since 1 April 1996. A Ms Christine Shean (Mr Gould's personal assistant) (Ms Shean) was a director from 31 October 2003. Ms Shean did not give evidence. 157 The interest deductions claimed, each of which was disallowed by the Commissioner, are summarised in the table below. Year ended Photo Advertising GF Trust CVC Investment Nominees / Sub Prime Anglo Australian Trust Total Amount 30 June 2001 50,000 - - - 50,000 2004 - 437,500 - - 437,500 2005 - 478,000 - - 478,000 2006 - 0 435,000 - 435,000 2007 - 171,000 - - 171,000 2011 - 269,500 - - 269,500 2013 - 337,000 - 6,300 6,300 2014 - 417,997 - - 417,997 Total 50,000 2,110,997 435,000 6,300 2,265,297

158 As can be seen, by far the largest in total of the interest deductions claimed relates to interest liabilities said to have been incurred in respect of loan debts to the GF Trust. On Melbourne Corporation's case, the interest claim in respect of the alleged loan from CVC IN is related to these. It is convenient to consider these deductions claims together and first.

Interest claim - GOULD FT - 2004 and 2005 and 2007 - 2014 income years

Interest claim - CVC IN - 2006 income year 159 I set out in the QUD 512 judgment my understanding of what constitutes a "loan" and "interest". I do not repeat what is there stated. 160 The contest between the parties in relation to the GF Trust and CVC IN interest claims raises three questions upon which Melbourne Corporation carries the onus of proof: (a) Were there loans at all? (b) Were the proceeds of the loans used for the purposes of gaining or producing assessable income by Melbourne Corporation or in the course of its carrying on a business to that end? (c) Was interest incurred by Melbourne Corporation in respect of these loans in the amounts claimed? As part of discharging its onus of proving the assessments concerned to be excessive, Melbourne Corporation must prove, on the balance of probabilities, and on the whole of the evidence, that each of these questions should be answered in the affirmative. 161 Melbourne Corporation's alleged indebtedness to the Gould FT was contended by it to have commenced in the 2001 income year with advances totalling $855,815.82 (see GL 2-8500). On closer examination, these alleged advances comprise "reallocations" on 30 June 2001 of $67,942.77; $200,000; $50,000; $130,000; $2,000 and $290,873.05, and a "management fee" of $115,000. 162 Mr Gould's evidence is that the origins of all advances from the GF Trust to Melbourne Corporation lie in the 1980s, when Melbourne Corporation entered into a loan facility agreement with the Commonwealth Bank to secure funds advanced to it from time to time, secured by a mortgage over a strata title property owned by it in BMA House, Macquarie Street, Sydney. The initial use to which this loan facility was put, Mr Gould stated, was in advances of funds for the purchase for investment purposes of shares listed on the Australian Stock Exchange. A copy of the mortgage concerned is in evidence. However, for reasons stated below, I am not persuaded, on the balance of probabilities, that the Commonwealth Bank loan was used for such investment purposes. 163 Mr Gould also stated that, in late 1992, he decided the loan facility with the Commonwealth Bank should be paid out via a borrowing from Cheung Wah Bank. The amount owing under the facility was then $352,678.39. A repayment of the loan from the Commonwealth Bank to Melbourne Corporation in 1992 is evidenced by a discharge in that year of the mortgage which secured that loan. 164 Although the Commonwealth Bank loan was repaid in 1992, evidence as to the use of funds borrowed from that bank in the decade between 1982 and 1992 is, at best, equivocal. In making that observation and in assessing Mr Gould's credibility concerning the origins of alleged advances from the GF Trust, I record that I have expressly taken into account that, initially in his cross-examination on this subject, some questions by senior counsel for the Commissioner were put to Mr Gould on a mistaken factual premise as to the identity of the borrower from the Commonwealth Bank whose loan debt was secured by mortgage security. Mr Gould's answers reflected his difficulty in accepting the premise, relative to his recollection. While that error was unfortunate, it was truly an aberration in what, to my observation, was an otherwise obviously meticulously prepared appearance for the Commissioner. Fortunately, the error was detected and an apology appropriately tendered both to the Court and to Mr Gould personally before the cross-examination was concluded. 165 Mr Gould's evidence is that the loan proceeds were used for share acquisitions. Such documentary evidence as there is in relation to this decade consists of the minutes of the GF Trust and the accounts of Melbourne Corporation. As the Commissioner submitted, an analysis of this evidence does not support a conclusion that the funds borrowed from the Commonwealth Bank were used for the purpose of share acquisitions during this period. 166 The 1983 income year minutes of the GF Trust record that, towards the end of that income year, it was resolved that Yale Investments was to be used merely "for the purpose of funnelling substantial borrowings which had been arranged in London to the Group." Yale Investments is yet another company controlled by Mr Gould. The minutes for the GF Trust for the following income year refer to "extensive borrowings" and that Yale Investments "had acquired the prime position within the Group to be the external source of finance for the Trust's group of companies". Mr Gould stated in his evidence that the reference in these 1984 income year minutes to "extensive borrowings" was a reference to the borrowings from the Commonwealth Bank. Of course Mr Gould was a pervasive, controlling influence but he was under the burden of trying to recall events up to the better part of four decades prior to his giving evidence. The 1985 income year minutes state that Yale Investments continued to be the principal borrowing vehicle from overseas. 167 Looking beyond the minutes to the accounts of Melbourne Corporation in the mid to late 1980s as lodged with its income tax returns gives no support for the source of funds for share acquisitions having been or being the borrowing from the Commonwealth Bank. Most of the loans recorded in its accounts for the 1985, 1986 and 1987 income years are "Loans Secured" with related interest being paid to Yale Investments, rather than to the Commonwealth Bank. In contrast, and at odds with the recorded preponderance of interest, Mr Gould stated that the reference to "Loans Secured" in Melbourne Corporation's 1985 income year was a reference to the Commonwealth Bank loan facility. Also at odds with this recollection is that, by the end of the 1987 income year, the "Loans Secured" to Melbourne Corporation had increased to $627,824, whereas its recorded Commonwealth Bank overdraft debt was $27,028.13. It is true that, after the 1987 income year, the loan debt to the Commonwealth Bank increased but there is no documentary evidence as to the use of this increased drawdown from that bank. 168 After such a lengthy passage of time, contemporaneous documentary evidence, where it is not contradicted by other such evidence, and where there is not otherwise reason to question its reliability, carries with it a particular persuasive force, relative to the frailties of human memory. It is possible that the proceeds of the borrowings from the Commonwealth Bank were used for share acquisitions but that use is not, as just detailed, supported by the minutes of the GF Trust and Melbourne Corporation. It does not follow from this that Mr Gould gave false evidence on this subject, only that, for the reasons given, his evidence was not persuasive. I am just not persuaded on the balance of probabilities that the borrowing from the Commonwealth Bank was used for a share acquisition purpose. As it happens, that is just one reason why Melbourne Corporation has not discharged its onus of proof. 169 Contemporaneous documentary evidence to support Mr Gould's statement that the loan facility with the Commonwealth Bank was paid out via a borrowing from Cheung Wah Bank is also, at best, equivocal. He stated that he recalled a loan agreement between Cheung Wah Bank and Melbourne Corporation dated October 1992. A written loan agreement of this date between these parties was not in evidence. However, there is in evidence a transfer of mortgage signed on behalf of the Commonwealth Bank. 170 The debt of $350,000 owing to Cheung Wah Bank by Melbourne Corporation was stated by Mr Gould to have been novated to CVC Fund Managers. 171 Melbourne Corporation tendered a copy of a deed of novation (referred to in Mr Gould's evidence) which, on its face, purports to novate a debt of $350,000 owing to Cheung Wah Bank by Melbourne Corporation to CVC Fund Managers. However, the copy tendered is not executed. Further, at odds with Mr Gould's recollection that the agreement was in writing, the copy tendered does not identify a related written loan agreement between Cheung Wah Bank and Melbourne Corporation (nor, for that matter, one for the "Philadelphia Investments debt" in the same amount). That is so even though it identifies written agreements for all other purportedly novated debts - see clause 1.1 definitions of "the transferred Darlington McCarthur Loan" and "Darlington McCarthur Loan Agreement" dated 18 February 1993; "the Penalton Loan Agreement" dated 15 November 1992; "the CVC Loan Agreement" dated 12 May 1993. Clause 3 of this copy does not refer to a written loan agreement for the Melbourne Corporation debt (or the Philadelphia Investments debt). The only other "loan agreement" referred to in this copy is in the schedule but this is a reference to a loan agreement dated 19 March 1990 (separately in evidence). The references to November 1992 and 1993 dated agreements in this copy raise an interrogative note about how it could relate to a novation to CVC Fund Managers in October 1992 of a debt owed by Melbourne Corporation to Cheung Wah Bank. Once again, Mr Gould's recollection is not, I find, reliable. 172 There is, in later year documentary evidence, some support for a novation to CVC Fund Managers of a debt owed by Melbourne Corporation to Cheung Wah Bank. That evidence comprises: (a) A deed dated 27 March 1995, affixed with the common seal of Cheung Wah Bank. [Mr Gould stated that this deed was executed on behalf of his Australian entities.] (b) A letter dated 19 June 1995, sent by Cheung Wah Bank to CVC Fund Managers, which records the amalgamation of various debts. (c) A 1996 general ledger worksheet of Cheung Wah Bank, which records an increment to the debt owed by CVC Fund Managers to Cheung Wah of $700,000. This entry is annotated, "Transfer from M Corp / Phil". Melbourne Corporation submitted, and I accept, that the reference to "M Corp" is a reference to Melbourne Corporation [I likewise accept that the reference to "Phil" is a reference to Philadelphia Investments]. (d) CVC Fund Managers' financial statements show an increased debt to Cheung Wah Bank and a $350,000 receivable owed by Melbourne Corporation. 173 Mr Gould stated that, in or about 1999, he decided to replace CVC Fund Managers in the role as private banking entity within the group of private companies he controlled with CVC Investment Nominees. He stated that the debts such companies previously owed to CVC Fund Managers were novated to CVC IN. This statement is not supported either by a formal deed of novation or by any other written agreement in evidence. Once again, especially within a private group of companies where, as here, all transactional actors are tightly controlled (here, by Mr Gould), the absence of such formality is not necessarily fatal to a conclusion that a novation as related by Mr Gould having occurred. 174 The evidence tendered in proceeding QUD 512 of 2018 has, as noted at the outset of these reasons for judgment, been tendered in the present proceeding. One aspect of that evidence concerned other asserted novations of debt from alleged other lenders successively via CVC Fund Managers and CVC IN to the trustee of the Gould FT. Also as mentioned above, the conclusion reached in the QUD 512 judgment about these particular alleged novations is nothing to the point in this proceeding. But the parties incorporated by reference in the present proceeding the submissions which they had made in proceeding QUD 512 of 2018 about what to make in this proceeding about the evidence tendered anew. Looking at that evidence in conjunction with the further evidence tendered in the present proceeding, I am just not satisfied, on the whole of the evidence, that Mr Gould is a reliable historian about the asserted novations now in question. My absence of satisfaction as to Mr Gould's reliability also extends to the reliability of the accounts prepared under his control or direction. 175 This absence of reliability extends to the documentary evidence I have mentioned which supports a subject loan novation from Cheung Wah Bank to CVC Fund Managers. I accept, as was put on behalf of Melbourne Corporation, that the 1999 year financial statements of the relevant entities are consistent with Melbourne Corporation's indebtedness to CVC Funds Manager having been novated to CVC IN. Melbourne Corporation is not obliged to prove its case to demonstration, only on the balance of probabilities. However, such are the reservations I have about the reliability of these financial accounts and about Mr Gould's reliability as an historian, I am not satisfied that there was a novation of Melbourne Corporation's indebtedness from CVC Fund Managers to CVC IN. 176 The next and last novation is alleged to have occurred in June 2001, from CVC Investment Nominees to Southsea Nominees as trustee for the Gould FT. It is likewise unsupported by any formal agreement. Prima facie, the occurrence of such a novation is consistent with entries in the financial statements of the entities concerned. As at June 2001, Mr Gould was a director of both Melbourne Corporation and the trustee of Gould FT. The sole director of CVC IN was Mr Gould's colleague, Mr Warwick Davies. Although I did not have the benefit of evidence from Mr Davies, it seems inherently likely on the whole of the evidence that CVC IN was operated in accordance with Mr Gould's wishes. Mr Gould stated that there was a novation. But, as I have stated, Mr Gould is not a reliable historian and neither are accounts prepared under his supervision reliable. 177 On the face of the accounts in evidence, on 30 June 2001 a loan account debt to CVC IN of $290,873.05 was reallocated from general ledger account 2-8100 to the Gould FT. 178 It is then Melbourne Corporation's case that, as between the 2001 and 2014 income years, there were 118 transfers to Melbourne Corporation, which totalled in all $8,209,538, increasing the amount it owed to the Gould FT. It is also Melbourne Corporation's case that there were 300 separate transfers by it totalling $5,171,616 as loan repayments. That there were movements of funds in Melbourne Corporation's bank account is evident from its bank statements. What is not evident from those statements is to what end those transfers occurred. 179 In support of its contended conclusion, Melbourne Corporation relied upon an analysis by Mr Jones (the same Mr Jones mentioned in the evidence tendered from proceeding QUD 512 of 2018). He sought to summarise in a table, entries in Melbourne Corporation's bank account statements and entries in the ledger accounts of various entities. I do not doubt that Mr Jones did his honest best in this analysis but its worth was dependent upon the reliability of these ledgers and the entries in these, in turn, were ultimately dependent upon the reliability of Mr Gould. 180 As the Commissioner submitted, and I find, Mr Jones' tabulation does not accurately reflect the basis of increases in a loan debt of Melbourne Corporation allegedly novated to the Gould FT. Mr Jones related that his tabulation was based on transfers into Melbourne Corporation's bank account by various entities other than the Gould FT. These were said to have been "reallocated" at the end of each income year via journal entries and transferred to a loan account from the Gould FT. Such indebtedness as there was from the Gould FT or South Sea Nominees (where its trustee capacity is not explicitly shown) to Melbourne Corporation is set out in entries set out in general ledger account 2-8500, which is in evidence. 181 For reasons which I detailed above by reference to management fee claims, these "reallocations" between 30 June 2001 and 30 June 2014, on the whole of the evidence, more likely than not occurred after the close of the income year concerned as part of Mr Gould's overall "closing adjustments". What is revealed is, as the Commissioner submitted, a complex reallocation of what were, nominally, loan accounts between Mr Gould's private entities whereby, in respect of each income year, Mr Gould gave a semblance of advances and repayments of loans which were, in turn, then used as the basis of charging what purported to be interest between his private entities as he thought fit in order to minimise taxation. There is a qualitative difference between, on the one hand, an informal understanding during an income year, or perhaps a standing understanding the origins of which precede a given income year, that funds transfers to and fro between members of a group of companies will always be by way of loan or, as the case may be, reduction of an existing loan balance and the formal recording of this when annual accounts are prepared and, on the other, there being no such understanding during or prior to a given income year and the fiscally advantageous creation in accounts of the appearance of such dealings. 182 In the course of Mr Jones' cross-examination, it became apparent that what he had described as "the individual credits and debits to the [Gould FT] Loan Facility" incorporated amounts advanced prior to "reallocation" to the Gould FT on "what the arrangement may have been between the entities". The tabulation is not reliable but that, in turn, is a reflection of ledger entries the reliability of which is, for reasons given above, are to be approached with caution. 183 An analysis offered by the Commissioner in submissions of what purports to be an overall increase in Melbourne Corporation's indebtedness to the Gould FT at the end of the 2001 income year, as a sequel to the alleged novation to the Gould FT of the debt allegedly previously owed to CVC IN by Melbourne Corporation, illustrates the type of fiscally advantageous, accounting creativity present. It also highlights, if the conclusion on this subject already reached were not enough, an additional reason why Melbourne Corporation has failed to discharge its onus of proving that these purported loans, even if not shams, were not deployed for any income producing purpose. 184 I have already mentioned the alleged "reallocation" of a loan debt of $290,873.05 on 30 June 2001. Also on the face of the accounts, on 30 June 2001 a debt of $130,000 was reallocated from GL account 2-8300 for Darlington McCarthur. It purportedly reflects a payment of $130,000 to Melbourne Corporation from Darlington McCarthur on 8 November 2001. The evidence discloses that, as to $115,000 thereof, Darlington McCarthur funded this payment by a receipt from Gould Ralph Services on 13 October 2000, which it returned as "Consulting fees" from Gould Ralph Services. 185 However, as the Commissioner submitted, there was at the time no apparent reason for Darlington McCarthur to derive consulting fees from Gould Ralph Services. At the time, it was Gould Ralph Services which conducted an accountancy practice. Further, Melbourne Corporation undertook some consulting work. Darlington McCarthur, on the other hand, if one accepts Mr Gould's description, was a provider of nominee services. The Commissioner submitted that it should be inferred that these were fees derived by Melbourne Corporation, paid by direction to Darlington McCarthur. The Commissioner further submitted that an explanation for this was that income derived by Melbourne Corporation had been diverted to Darlington McCarthur and then purportedly loaned back to it through the Gould FT, thereby giving rise to a purported loan on which interest could subsequently be charged. This was put to Mr Gould in cross-examination. He acknowledged that "the argument you've put has some plausibility". It is not necessary in a proceeding such as the present to go as far as drawing the inference the Commissioner invites, although I acknowledge that it is indeed "plausible". As it is, I am not satisfied, on the balance of probabilities, that Melbourne Corporation has established that this sum of $130,000 was a loan debt owed by it to the Gould FT. Rather, it looks like another of Mr Gould's "closing adjustments". 186 Also on 30 June 2001, and as the Commissioner submitted, a similar arrangement occurred with the purported reallocation of $200,000 in the Gould FT loan account. On 31 May 2001, Gould Ralph paid $266,400 to Darlington Macarthur's by way of payment of what purported to be accrued consulting fees (see GL accounts 1-1110 and 1-1130). Thereafter, on 13 June 2001, Darlington McCarthur paid $270,000 to the Gould FT by way of purported interest (see GL 1-1110 and GL 6-1020), thereby giving Darlington McCarthur a tax deduction, which eliminated its tax liability by giving it a tax loss of $18,748. This was notwithstanding that it had no loan from Southsea Nominees. Thereafter, on 21 June 2001, the Gould FT paid $40,000 and then another $50,000 to Melbourne Corporation, and a further $50,000 on 29 June 2001. These were treated as a loan from the Gould FT to Melbourne Corporation (see GL account 1-255). These amounts made up $150,000 of the $200,000 reallocated to loan account 2-8500 on 30 June 2001. 187 Also on 30 June 2001, the accounts disclose a purported management fee of $115,000 charged by Darlington McCarthur to Melbourne Corporation (and accrued to the Gould FT loan to Melbourne Corporation). I accept the Commissioner's submission that, given that Darlington McCarthur had already received income directly from Gould Ralph Services (see above), no basis for the charging of this purported management fee is apparent. It is, I find, just another fiscally convenient "closing adjustment". 188 Yet further, on 30 June 2001, the accounts disclose that the sum of $50,000 reallocated to GL account 2-8500 originated in a management fee charged by Anglo American to Melbourne Corporation, which was purportedly accrued as at 30 June 2001 (Account 2-6950) and then reallocated to the Gould FT (Account 206950; Account 2-8500). This, I find, is also just another fiscally convenient "closing adjustment". 189 So it is that, of the initial purported advance from Gould FT to Melbourne Corporation of $855,815.82, a total of $720,873 arose from nothing more than Mr Gould's manipulation of arrangements between entities he controlled, rather than actually arising in the course of or for the purposes of any income-producing activities or business. 190 Assuming, however, that Melbourne Corporation has proved on the balance of probabilities progressive increases in Melbourne Corporation's indebtedness to the Gould FT, and that this entailed a purpose giving rise to a deduction under s 8-1 of the ITAA 1997, it must also prove on the balance of probabilities that it did indeed incur a liability to pay interest on the sums borrowed. 191 I am just not satisfied on the balance of probabilities that any of the claimed interest deductions were in the nature of interest incurred at all. Although this is a conclusion reached on the whole of the evidence, one influential evidentiary contributor to this absence of satisfaction was the already detailed absence of satisfaction that Melbourne Corporation incurred management fees as claimed. A general pattern of "closing adjustments" is evident. However, there are also some particular features of the evidence in relation to the interest deduction claims which, while supporting a conclusion as to the existence of such a general pattern, also separately highlight why Melbourne Corporation has not discharged its onus of proof in relation to its interest deduction claims. 192 These particular features were highlighted by the Commissioner in submissions which were, on my own review of the evidence concerned, well-grounded in that evidence. What follows therefore owes much to those submissions and to my acceptance of them. 193 As a matter of initial impression of the accounts, the purported interest liabilities are truly fantastic, relative to the alleged loan indebtedness from time to time. Of course such an impression must defer to explanatory evidence which proves on the balance of probabilities that the amounts claimed were indeed interest. But such explanatory evidence was wanting. 194 Mr Gould's evidence was that the charging of interest and the amounts charged were part of "tax planning" and a matter for the director. The particular excerpts are set out above, as is what I have made of this evidence in the context of the evidence as a whole. I am well satisfied that the amounts claimed are not interest at all, just fiscally advantageous, after the event balancing charges, "closing adjustments". 195 Mr Gould also stated that, "[If] you were to calculate back, it's roughly about a 10 per cent interest rate". But this, with respect, was just an ex post facto rationalisation. He did not state that he had undertaken such a rough calculation either at the time of determining the rate or since or that the rate of 10 per cent formed any part of the rationale for the entries in the accounts which purported to record interest liabilities. Neither did he state, and there is no other evidence to this effect, that contemporaneous consultation of experts or some reference work informed the amount, if any, of interest to charge on the alleged loan liabilities from time to time. 196 Melbourne Corporation did lead expert evidence in an endeavour to provide a rationale for the amounts of the interest deductions claimed - from Mr Paul Hyde Page and from Mr Goode. I do not doubt that each of these gentlemen also did their honest best in proffering their opinions. But there was, with respect, an air of unreality about this body of evidence. Neither had been a source of advice to Mr Gould about the fixing of the amounts of claimed interest on the alleged loans in any of the income years in question. Their evidence really amounted to a retrospective calculation, divorced from contemporaneous events including alleged decisions, of an implicit interest rate over a confined period. Further, their opinions were based Mr Jones' tabulation, the flaws in which I have already highlighted. Mr Jones agreed under cross-examination that his tabulation and related calculation did not reflect the loan account as it appeared in the general ledger. As the Commissioner put in submissions, each of Mr Jones, Mr Paul Hyde Page and Mr Goode agreed that such an error would change the interest rate calculated, and upon which their opinion was based. Mr Paul Hyde Page agreed that the interest rate would be higher although the extent to which it would be higher was not quantified. Further, as the Commissioner accurately put in his submissions, evidence given under re-examination by Mr Paul Hyde Page was concerned with a change in interest periods, rather than a change in timing of advances. 197 It bears repeating that I do not accept Mr Gould's evidence that the interest liabilities claimed were incurred in the years in which they were claimed. For reasons already given, I reject his statements that that he determined the charging and amount of interest before 30 June in the income years in question. 198 In relation to the interest deduction claims, what is revealed is just an endeavour, income year after income year, to ensure that the most tax-effective amounts were included in particular entity's tax returns. Apart from reasons already given, this conclusion is supported by the following inconsistencies: (a) Interest was paid to entities to which there was, even purportedly, no loan debt. Mr Gould was expressly questioned about this in relation to the claimed interest deduction of $435,000 in the 2006 income year. Melbourne Corporation's original appeal statement put that this amount was paid to CVC IN. This statement was subsequently amended. Mr Gould's related affidavit evidence asserted that there had been a payment by direction of the Gould FT. I accept, as did the Commissioner in submissions, that a payment by direction can be effective at law. However, the changed explanation leaves me unpersuaded that it is accurate, as opposed to an endeavour later to explain a revealed discrepancy. (b) Mr Gould's stated that Melbourne Corporation's interest liabilities to the Gould FT were grounded in the liability of the Gould FT to meet its own onwards interest liabilities. Yet, according to Melbourne Corporation's Amended Appeal Statement (necessarily filed on Mr Gould's instructions), all of its alleged interest liabilities with respect to the Gould FT are accruals, save for the 2006 year, when an actual payment was made to CVC IN (not to the Gould FT). That is not, as the Commissioner submitted, consistent with an accrual being based upon the need to satisfy further interest liabilities. Further, as the Commissioner accurately submitted, an examination of the accounting evidence in respect of the 2004 income year discloses that in fact the interest liability said to accrue, in turn, from the Gould FT to CVC IN was accounted for only as an accrual, i.e. no money was transferred. This is not consistent with the position that interest accruals were based upon either the cash position of Mr Gould's various private entities, or a need to provide money to CVC IN to satisfy its own apparent onward liabilities. (c) In relation to the 2006 year and in response to a question from me in the course of his oral evidence, Mr Gould stated that this was payment was as a result of a direction from the Gould FT. In contrast, in 2019, Mr Gould stated that it was not until 2007 that the Gould FT was the principal borrowing vehicle of the his private group of companies. In the original Appeal Statement filed in these proceedings in 2018 (filed on Mr Gould's instructions), the sum payable in 2006 was included not under the heading of interest payable to the Gould FT but instead under a separate heading "CVC Investment Nominees Pty Ltd" with the interest being described as "payable" to CVC IN. 199 For these reasons, these particular interest deduction claims fail.

Photo Advertising 200 Melbourne Corporation claimed a deduction in respect of the alleged accrual on 30 June 2001 of an interest liability of $50,000 in respect of what was said to be a loan of $50,000 advanced to Melbourne Corporation. That purported advance was part of a total deposit of $240,000. Mr Gould stated that his intention was that this be treated as a loan advance to Melbourne Corporation by Photo Advertising. He did not identify the entity that transferred the funds and there was no other evidence of this. No supporting, written loan agreement was tendered. While that is not, in itself, fatal, it leaves much to an acceptance of the credibility of an account of some informal arrangement both in respect of a loan and in that loan attracting interest in the amount claimed. For reasons already given, I do not accept that Mr Gould is a reliable historian. In relation to this particular interest deduction claim, that absence of acceptance is heightened by regard to the tax return of Photo Advertising for the 2001 income year. As the Commissioner highlighted in submissions, the interest income returned by Photo Advertising in that income year was only $2,234. That is not consistent with the claimed deduction. For these reasons, Melbourne Corporation has not discharged its onus of proving either that there was a loan or that it incurred the interest claimed in relation to the alleged loan. The deduction claim therefore fails.

Anglo Australian Christian and Charitable Fund 201 The evidence discloses that the constitution of Anglo Australian Christian & Charitable Fund (AACCF) was adopted at a meeting on 14 November 2006. It was signed by Mr Gould and witnessed by Mr Peter Borgas (Mr Borgas). The AACCF was registered as a charity by the United Kingdom Charity Commission on 2 April 2007. Its chairman is Mr Gould. Mr Borgas is a director. The financial statements for the period ended 31 March 2008 record that the principal office of the AACCF was Russell Bedford House, London in the United Kingdom, with its trustees being Mr Gould, Mrs Gould and Mr Borgas. Russell Bedford House is the location of the offices of Lubbock Fine Chartered Accountants (Lubbock Fine). Apparently for the purposes of United Kingdom charity law, the independent examiner of the AACCF is Mr Russell Rich of Lubbock Fine. The evidence tendered from proceeding QUD 512 of 2018 discloses that Lubbock Fine is a firm with which Mr Gould has dealt over a prolonged period in relation to a number of entities under his control. According to advice given by Mr Gould to the Commissioner, the AACCF now undertakes the role of the appointor of JA Investments, another company with which Mr Gould is associated. 202 On the face of an entry in its general ledger for the 2010 income year, Melbourne Corporation made a donation of $210,000 to "Anglican Youth" on 22 February 2010. Another entry records that, on 1 March 2010, the AACCF transferred $210,000 to Melbourne Corporation, which was recorded as a loan. 203 A further ledger entry records a repayment on 20 June 2013 of $216,300, including interest of $6,300. The evidence discloses that this was funded by a purported loan from the Gould FT of $100,000, a purported loan from Melbourne Insurance of $100,000 and purported accounting services income from the AACCF of $5,500. 204 Melbourne Corporation's case is that it and the trustees of the AACCF agreed in June 2010 that interest of $6,300 should accrue on the loan from AACCF to it. 205 This deduction claim is supported, prima facie, by the accounting entries and, in turn by Mr Gould's evidence. The existence of a loan agreement, much less that any loan carried interest in the amount claimed is not otherwise supported by any documentary evidence. Once again, for reasons already given, that is not necessarily fatal to a deduction claim such as this. 206 On the evidence, Mr Gould was in effective control not just of Melbourne Corporation and Melbourne Insurance but also of the AACCF. The general ledgers were prepared under his control and supervision. Much therefore turns in relation to this deduction claim as well on Mr Gould's credibility. Under cross-examination, Mr Gould was unable to explain why money was provided to AACCF and then came back. In itself, that is not necessarily indicative of a sham loan, only perhaps a rather clumsy round robin having no evident purpose other than the obtaining of a tax benefit. There is no satisfactory explanation as to why, assuming there was a liability to pay interest, interest was payable in the amount claimed having regard to the size of the purported loan or payable only in respect of the one income year. 207 The fundamental difficulty about this deduction claim is that, when the matters just noted are viewed in the context of the whole of the evidence in the case and in light of the many instances of unreliability already detailed, I am just not satisfied on the balance of probabilities that Mr Gould is a reliable historian as to the existence of a loan and the reaching of an agreement to pay interest in the amount claimed. Related to that, I have no confidence in the reliability of the ledger entries as an accurate characterisation of the nature of the payments recorded - loan and interest. 208 Assuming, however, that there was a loan and that that loan was subject to an agreement that interest in the amount of $6,300 was payable in the 2010 income year in respect of it, Melbourne Corporation has not proved that it withheld tax from that interest payment. The interest payment was one to an overseas person. The Taxation Administration Act 1953 required that interest be withheld. In the absence of so doing, the effect of s 26-25 of the ITAA97 is that a deduction under s 8-1 of that Act is not allowable to it, whatever might otherwise have been Melbourne Corporation's entitlement to that deduction. 209 In light of these conclusions it is strictly unnecessary to reach conclusions in respect of the applicability of Fletcher's Case or Part IVA. I do no more than indicate that I am not persuaded that the amount of the alleged interest was anything other than fiscally convenient, rather than mutually agreed, commercial compensation for the use of money. Further and in any event, overwhelmingly, the dominant purpose of the round robin and payment out with the claimed interest (if it be that) of the loan (if it be that) was, overwhelmingly, just to gain a tax benefit represented by the amount of the interest deduction claim. 210 For these reasons, Melbourne Corporation has failed to prove that the claim for an interest deduction in the amount of $6,300 should be allowed.

Income Reversal and Carry Forward Losses 211 It necessarily follows from the conclusions which I have reached as to the failure by Melbourne Corporation to discharge its onus of proof in relation to each of the management fee and interest deduction claims that there is no foundation for disturbing the Commissioner's income reversal and carry forward loss adjustments made as a consequence of his disallowance of these deductions.

Penalties 212 The characterisation of conduct issues in relation to penalty are identical to those raised in proceeding QUD 512 of 2018. In the present case also, the Commissioner's assessing position, maintained on the appeal, was that the shortfall amount resulted from intentional disregard of a taxation law, in this instance, Melbourne Corporation or, as the case may be, Photo Advertising, or their agent, resulting in a penalty of 75% of the shortfall amount pursuant to item 1 in the table in s 284-90(1) of sch 1 to the TAA. In the alternative, the Commissioner submitted that these applicants had at least been reckless and so penalties should have been imposed at a rate of 50% pursuant to item 2 in the table in s 284-90(1) of sch 1 to the TAA. 213 As I mention above, I readily accept that there was a there was a reasonable basis on the evidence for a submission on behalf of the Commissioner that Mr Gould was actively dishonest. For reasons given above, and although my mind has fluctuated on the subject, the conclusion which I have reached when all is said and done is that he was wilfully blind, closing his mind over a sustained period to the obvious, which was that the practices he adopted could not possibly give rise to the tax deductions claimed or assessable income or losses returned. 214 For the reasons given in the QUD 512 judgment, my conclusion is that Mr Gould's conduct and that of Melbourne Corporation, is better characterised for penalty purposes as reckless, rather than an intentional disregard. For like reasons to those given in that case, I reject Melbourne Corporation's submission (an alternative to penalty being inapplicable because of an absence of any tax shortfall) that Melbourne Corporation's conduct should be characterised as a failure to take reasonable care. The penalty should therefore be 50% of the shortfall amount.

PHOTO ADVERTISING - QUD 399 of 2019 215 Photo Advertising has appealed against the Commissioner's objection decision with respect to amended assessments issued to it in respect of the years ended 30 June 2006 and 30 June 2011. That has become proceeding QUD 399 of 2019. The issues in dispute in that proceeding concern: (a) the inclusion of a trust distribution from the AA Trust in is assessable income; (b) the availability to it of carried forward losses in respect of purported management and consultancy income, interest income, and interest expenses; (c) penalties; and (d) interest and penalties. 216 The outcome of proceeding QUD 399 of 2019 depends on the outcome of proceeding QUD 512 of 2018 with the evidence in the latter (including that tendered upon re-opening) taken also to have been tendered in the former. It necessarily follows from the conclusions which I have reached in respect of proceeding QUD 512 of 2018, as detailed in my reasons for judgment in that taxation appeal, that Photo Advertising must fail in relation to its challenge to its income tax liability but succeed in relation to its penalty liability but only to the same extent as did Anglo American in relation to its penalty liability. There is no relevant distinction to be drawn in relation to the penalty outcome.

OUTCOME 217 I propose to afford the parties an opportunity to agree as to the minutes of orders which should be made to give effect to these reasons for judgment both in relation to Melbourne Corporation's appeal and Photo Advertising's appeal, or at least respectively to make submissions as to what the consequential orders should be. In so doing, the parties should also address the subject of costs. I certify that the preceding two hundred and fourteen (214) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Logan.