Later in cross-examination, counsel suggested to Mr Vizard that there were times when he sat down and discussed the amounts of his loan account, to which Mr Vizard responded "Not that I recall". Mr Vizard said that nobody ever drew to his attention the increase in his loan account or asked what the amount of $5M was. He never asked Mr Hilliard to explain the make-up of the loan account[83]. As to the nature of the expenses that contributed to the significant increase in the loan account, he couldn't say. "We ran - the accountants ran intercompany loans and I didn't concern myself with the detail". He did not notice the loan recorded of $5M as "it was just an intercompany loan ... I was only interested in the net position as between all the companies in the whole group"[84].
176 Mr Lay gave evidence that he did not specifically recall discussing with Mr Vizard the level of his loan account[85]. As to whether he made enquiries about the loan account with PAS, he said "I can't specifically answer that. We did make enquiries at times, but whether it was that company or other companies and in what year I can't be specific"[86]. As to whether he knew why the loan account balance was around $5.3M (in 1996), Mr Lay said "I do recollect that around about that time Mr Vizard may have purchased his personal residence and from memory, that money was borrowed from within the private company group to acquire his private residence, and that may account for that, but I cannot offer any other explanation"[87]. I note that Mr Hilliard said it was in 1993 or 1994 that the Vizards purchased the Toorak property from the Performing Arts Services Trust, through the loan account[88].
177 Mr Hilliard's counsel said that Mr Hilliard was not cross-examined on his evidence as to the explanation he gave Mr Vizard of the loan account. Further, it was highly unlikely, objectively, that Mr Lay did not discuss with Mr Vizard the size of or the movements in his loan account. It was the most rudimentary of matters and it was highly likely that any such discussions would have involved Mr Vizard either saying what the purpose was of the loan account or at least putting Mr Lay off enquiries[89]. Further, if Mr Hilliard had stolen money from the PAS Group, why would he put the amounts in a loan account which was to be seen by Mr Lay and Mr Vizard? Counsel submitted that such conduct was consistent with a gullible carrying out of the machinations and instructions of Mr Vizard, rather than with theft.
178 In all the circumstances, and having regard to all that counsel said, I do not accept that Mr Vizard knew that the proceeds of cheques being drawn on the PAS Group accounts were recorded as being in the loan account. I find that Mr Hilliard exaggerated the extent to which he explained the loan account to Mr Vizard for the purpose of bolstering his case. There was a lack of specificity in Mr Hilliard's evidence as to which payments were recorded in the loan account, apart from his saying "most payments" were so recorded. Ultimately, I accept Mr Vizard's explanation that he was not concerned about the detail of the loan account, that he treated that as an intercompany loan, and what concerned him was the PAS Group's overall position. This may reflect a somewhat lax approach by Mr Vizard to the scrutiny of the PAS Group's financial statements, but that is a different matter. In my view, the issue of the loan account is, at best, equivocal. It does not assist Mr Hilliard's case.
The facts, continued
179 Returning then to a chronological sequence of events, at some time before Christmas in 1999, Mr Vizard and Mr Hilliard had a discussion as to whether Mr Hilliard wanted to continue in his role. It seemed to Mr Vizard that Mr Hilliard was not as enthused as he previously had been. Mr Vizard said that Mr Hilliard's role had slightly changed following the sale of Mr Vizard's remaining interest in the Artists' Services business to Granada in 1998. Mr Hilliard said that he would think about it and they agreed to talk again in the New Year. In March or April 2000, they had a brief conversation in which Mr Hilliard said he would like to stay on. But around June 2000 they had another conversation in which Mr Hilliard said that he would like to finish up. Mr Hilliard nominated mid October 2000 as an appropriate time to finish. I refer below to Mr Hilliard's evidence as to the circumstances in which he left the PAS Group.
180 In October 2000 Mr Stevens took over from Mr Hilliard as the internal accountant for the PAS Group. He commenced work a day or so before Mr Hilliard ceased employment, and remained until 2003. There was an initial handover period in which Mr Hilliard showed Mr Stevens the office setup and facilities at Vizard House, East Melbourne. Mr Hilliard and Mr Stevens also drove to Mr Vizard's farm at Roxby Park, taking with them "half a dozen boxes" from the office in East Melbourne[90]. Apart from the day trip to the farm, Mr Stevens said that he spent six to eight hours with Mr Hilliard during the handover period.
181 Mr Stevens' duties were broadly similar to those performed by Mr Hilliard, though there were some differences. Whereas Mr Hilliard had used the office computer to prepare the monthly reports (including final figures, balance sheets, profit and loss accounts, and other registers), Mr Stevens was not computer literate and thus prepared handwritten monthly statements of all transactions, which were then passed to Clarke Bentleys (who had taken over the office computer used by Mr Hilliard) who produced typed monthly reports based on the data provided by Mr Stevens. The monthly reports contained a summary of cash movements for the month, a listing of assets, and then separate accounts for each entity. As to the receipt of the accounts, invoices and correspondence that he was required to work on, Mr Stevens said that "some mail went directly to Mr Vizard's house. The rest of it went to Mr Vizard down at Port Melbourne and I used to go down once or twice a week and pick up the mail and anything that was there. The invoices for the farm were processed by the farm manager once a month and sent up with covering schedules". Mr Stevens added that, initially, a lot of the accounts, invoices and correspondence about financial matters were addressed to Mr Hilliard. It became clear during cross-examination that accounts and invoices were sent to Mr Vizard at both the Port Melbourne and East Melbourne offices. During his three years of employment, Mr Stevens drew all the cheques for signature. They were signed by Mr Vizard, and sometimes by Mrs Vizard. Mr Vizard asked Mr Stevens to sign cheques but, having never signed on other people's accounts in all his working life, Mr Stevens declined. There was a practice of monthly meetings between Mr Vizard, Mr Lay and Mr Stevens. Mr Stevens agreed in cross-examination that, at those meetings, Mr Vizard demonstrated to his observation a high degree of familiarity with the format of the financial accounts of the group. He also agreed that Mr Vizard appeared to his observation to have a close working knowledge of the affairs of each of the companies in the group.
Mr Hilliard's evidence as to his arrangements with Mr Vizard
182 Mr Hilliard said that in late 1991 or early 1992 Mr Vizard told him that he would like to investigate the possibility of setting up a fund in a recognised tax haven. He asked Mr Hilliard to contact Guy Jalland of Herbert Geer & Rundle lawyers to arrange a meeting, which he did. The three men met and discussed options. Mr Jalland came back a few weeks later and presented a proposal. Mr Jalland went away, and Mr Vizard and Mr Hilliard "had a little talk about it". According to Mr Hilliard, the problem Mr Vizard saw was that an overseas entity able to issue invoices for television production work would have to be at arms length, hence Mr Vizard would lose control of the entity. If Mr Vizard kept control of it, he would have to pay tax, but the whole idea was to not pay tax. There was a further meeting at which Mr Hilliard told Mr Vizard he was uncomfortable with it. Mr Vizard said the upside was that "we could get a whole lot of money overseas without paying tax on it. The downside is that if it came out we would go to gaol". Mr Vizard then said "I don't think we will go through with that one". It is convenient at this point to note that in cross-examination Mr Vizard denied that he discussed with Mr Hilliard setting up a fund in a recognised tax haven, or that he asked Mr Hilliard to engage Mr Jalland to advise on that matter. Mr Vizard said that he knew Mr Jalland from working at Herbert Geer & Rundle, but he did not recall any conference in his (Mr Vizard's) office attended by him, Mr Jalland and Mr Hilliard. Mr Vizard, in effect, denied Mr Hilliard's evidence as to their dealings with Mr Jalland[91]. Later in cross-examination, Mr Hilliard's counsel referred Mr Vizard to several documents (two of which Mr Lay later identified as Clarke & Co file-notes, one undated and the other from 1992, handwritten by a member of his staff[92]) which referred to a payment of $26,500 to Herbert Geer & Rundle in relation to "offshore investment investigations - not proceeded with". Counsel asked Mr Vizard whether he recalled discussing the matters in the file-notes with Mr Lay at that time. Mr Vizard said he recalled one of the matters, but said nothing about offshore investments. Then, when Mr Hilliard's counsel sought to tender those documents following the evidence of Mr Lay, Westpac's counsel objected, which led Mr Hilliard's counsel to concede that the document went only to Mr Vizard's credit and that he did not press the tender. Thus, although there are documents tending to suggest that Mr Vizard sought and received advice from Herbert Geer & Rundle as to offshore investments, the substance of the advice remains obscure and it cannot be said (if this was the underlying contention of Mr Hilliard's counsel) that the advice involved a possible illegality. As a matter of substance, the matter comes to nothing.
183 Returning to the Mr Hilliard's version of events, a little while later, in early 1992, Mr Vizard told Mr Hilliard "I still want to pursue the idea of a fund overseas or a stash of money that nobody knows about" and "I would like you to go away and think about it and make some recommendations as to how we would go about it". Mr Hilliard did this and came back to Mr Vizard and said "You could always draw cash out of Performing Arts Services and either keep it in a safety deposit box or, you know, do something with it confidentially that nobody would know about". Mr Vizard said that he did not want to have large cash cheques coming out of the PAS Group "because that would look odd". A few weeks later they had a further discussion (in Mr Vizard's offices at St Kilda Road, South Melbourne) during which Mr Hilliard told Mr Vizard that "I could use my company, IAT ... to channel funds away from PAS and then withdraw those funds in cash and pass them to Mr Vizard, at the same time making the bookkeeping look as though it was ordinary activity". Mr Vizard said "That's a good idea. Let's give it a go".
184 Thus in 1992 Mr Hilliard began to withdraw cash from IAT and give it to Mr Vizard and then draw cheques on the PAS Group to pay back the amounts to IAT. By the middle of 1993, he had withdrawn "hundreds of thousands of dollars" from IAT. He drew from IAT regularly, the amounts being below $10,000. He would put the money in an envelope and give it to Mr Vizard, "at our meetings in his office or perhaps even at his home, but mostly in his office". These meetings were always "one-on-one".
185 As to the money withdrawn from the PAS Group, Mr Vizard told Mr Hilliard that "You will have to account for it as the purchase of antiques, furniture, that sort of thing", or other activities that were already happening, "and disclose it as such"[93].
186 Initially, Mr Hilliard did not seek any additional remuneration, but at the meeting in mid 1993 referred to above (at which Mr Hilliard said he told Mr Vizard that the cash payments made to Mr Vizard were included in the loan account) they discussed how the arrangement with IAT was going and Mr Vizard "expressed himself quite satisfied and then he said to me 'But you can't do all this without getting something for your trouble'". Mr Hilliard replied "Well, how best would we be able to do that?" to which Mr Vizard responded "Well, come to me with some suggestions". Mr Hilliard said "Well, how about if you pay some of my Diners Club bills from time to time?" Mr Vizard said "Well, that's fair enough but I would like to see the bills and we will do it on a case by case basis".
187 Mr Hilliard subsequently asked Mr Vizard "if it would be alright to purchase some shares and also further on I asked him about paying some holiday arrangements". Mr Vizard said it was okay to purchase the shares. From time to time Mr Hilliard came to Mr Vizard with a Diners Club bill which Mr Vizard looked at and said "All right". Mr Vizard also approved Mr Hilliard's share purchases and "the Cunard and British Airways arrangements", saying "That's fine. Go ahead". Approval was given before the relevant expenditure. In the case of the Diners Club bills, Mr Vizard gave his approval after the expenditure[94].
188 Mr Hilliard described in evidence in chief how payments made from IAT were used to provide cash to Mr Vizard and how cheques were drawn on the PAS Group accounts to reimburse money to IAT. Mr Hilliard's "policy" was to take out the money from IAT first and then reimburse IAT from the PAS Group. He did it that way because that was what Mr Vizard wanted and agreed to in early 1992[95]. Mr Hilliard said he drew cheques on the PAS Group "that corresponded to previous amounts that would have been withdrawn from IAT, by and large. It was not a precise exercise and it varied but it was - that was the policy"[96].
189 In order to explain how this occurred, Mr Hilliard prepared some tables[97] which showed in chronological order cash cheques drawn on IAT and the cheques drawn on the PAS Group to reimburse IAT. The payments were cross-referenced to the relevant bank statement, cheque butt or cash book entry in the Court Book. Mr Hilliard accepted that his tables were not complete and accurate, the reasons for the imprecision being that the arrangement with Mr Vizard began in 1992 whereas the records on which the tables were based only go back to 1993; further, Mr Hilliard said he relied only on information discovered by Westpac, provided by IAT or ANZ, and included in the Court Book, some of which was illegible. Also, some of the amounts "were tacked on to cheques for telegraphic transfers", in the sense that when Mr Hilliard asked for telegraphic transfers to pay legitimate expenses to IAT's service providers, he "added on some cash and paid it all in the one cheque"[98]. And, when IAT customers paid in cash, instead of banking the money Mr Hilliard said he would put it in with the money for Mr Vizard. I interpolate that during his evidence in chief, it became apparent that some of the cheques in Mr Hilliard's table in exhibit 13 did not have a corresponding cheque butt in the Court Book.
190 In effect, Mr Hilliard's evidence was that by looking at bank statements issued by the ANZ (starting from 2 June 1993) and cheque butts, he had made an assessment as to which cheques shown on particular bank statements and drawn on the IAT account were likely to be cash cheques. These cheques were typically recorded in the IAT cashbook as having been paid to "ANZ". As to payments in respect of which the cheque butts are blank, Mr Hilliard said that they represented cash payments "because it's in round figures and it accords with my knowledge and recollection of what I was doing"[99]. Mr Hilliard said that he put the cash drawn from IAT cheques in his filing cabinet, and when it reached an amount of $15,000 to $20,000 he gave it to Mr Vizard. Still in evidence in chief, but on the following day, Mr Hilliard said that he accumulated money and put it into envelopes in $20,000 lots and gave it to Mr Vizard. Asked by his counsel whether it was exactly $20,000 or approximately $20,000, Mr Hilliard said "exactly $20,000 most times"[100]. Mr Hilliard never asked Mr Vizard what the purpose of the cash was and Mr Vizard never told him, apart from what he said at the beginning as to wanting a "secret fund".
191 As to the records kept of the transactions, Mr Hilliard said that he had kept computer records of the payments drawn from the PAS Group. Mr Hilliard said that he also used to make a printout of the running total whenever he gave Mr Vizard money and would destroy the printout after Mr Vizard had seen it[101].
192 In June 2000 Mr Hilliard told Mr Vizard that he was feeling uncomfortable with the arrangement, that he had some health problems and he would like to resign. Mr Hilliard told Mr Vizard that if he was going to resign "of course we would have to stop because I [Mr Hilliard] couldn't keep drawing on PAS cheques". Mr Vizard "was not best pleased but he accepted the inevitable"[102]. Mr Hilliard said that he told Mr Vizard the arrangement was going to stop on 30 June 2000. Mr Hilliard had kept computer records of the payments drawn from the PAS Group, but at Mr Vizard's direction he erased those records when the arrangement finished[103]. He also destroyed the hard copy of the computer printouts he had shown Mr Vizard at the time of giving him cash payments. As to the issue of the destruction and/or theft of business records, I note that Mr Stevens said that he could not find any accounting records for the PAS Group for the financial years up to and including 1999/2000. Further, Mr Hilliard admitted in cross-examination that he was dishonest in that he left the PAS Group taking with him business records that did not belong to him[104]. I interpolate that these records included memos to Mr Vizard regarding "sensitive audit issues" and the Vizard Foundation assets, and documents relating to the insider trading. Mr Hilliard agreed with Westpac's counsel's suggestion to him that none of the documents in his affidavit of discovery supported his story of giving cash to Mr Vizard[105]. But Mr Hilliard disagreed with counsel's suggestion that "a document supporting your story of cash that you gave to Mr Vizard would be the very first document that you would want to keep".
193 Mr Hilliard said that the only benefits he received from the arrangements had been approved by Mr Vizard. Apart from these benefits, all the money withdrawn from IAT had been given to Mr Vizard. He denied that he had stolen money from Mr Vizard and the PAS Group, or that he had gambled away money drawn from the PAS Group.
194 As to his asset position, Mr Hilliard said in evidence in chief that it was "precarious. I live on New Start allowance, basically"[106]. He had about $500 to $600 in the bank, a bit of old furniture, and a 1987 Holden Commodore worth about $3000. He lived in rented premises in Castlemaine and was unemployed. He had tried to obtain work but it was difficult given his criminal record.
195 Mr Hilliard was cross-examined as to his assets and income. He said that when he worked as a bookkeeper for the firm of undertakers in 1984 his salary was about $30,000 per year. Working for Wandana Travel between 1985 and 1990 his salary started at $35,000 per year and went up to $40,000. Then in the first half of 1991 IAT had effectively no business which meant that Mr Hilliard sought and found employment with the PAS Group, starting on an annual salary of $45,000 in 1991 which increased to about $60,000 in 2000. Mr Hilliard agreed that between 1984 and 2000 he earned only a modest salary, indeed in the period from 1984 to 1991 his salary was his only source of income but as to the period of 1991 to 2000 he said he had "other sources of income". There was rental income in the form of distributions from a trust which owned a factory in Moorabbin, which one-third interest Mr Hilliard had purchased in about 1995. His partner Ms McCready also owned a one-third interest in the trust. The combined income from their two-third interest in the trust was $2000 per month which went to their joint bank account[107]. There were also directors fees from IAT, which varied but were around $5000 per year. He did not receive directors fees in 1991 or 1992, but from 1993 onwards. Also, there were "bonuses from Mr Vizard and other payments". The amount of the bonuses varied. The largest was $7,500 and there was one of $2,500. Mr Hilliard said the bonuses were regular and "would be in the middle of the year, the financial year end, I think. I really don't know"[108]. There were also share dividends. Mr Hilliard had started purchasing shares with money drawn from IAT in 1992, a little before the arrangement with Mr Vizard started. He agreed that the shares he purchased using IAT's money were "in the hundreds of thousands of dollars"[109]. Also, he paid Diners Club bills with cheques drawn on the IAT account, as to which Mr Wood approved[110].
196 Westpac's counsel referred Mr Hilliard to IAT's financial records for the years 1991 to 2000, to ascertain whether Mr Hilliard had in fact received directors fees, salary or dividends from IAT in that period. In essence, Mr Hilliard said that he had falsified the financial records of IAT for each year. The financial records were false in several ways. First, they did not record purchases Mr Hilliard made (shares, stamps, and paying Diners Club bills) using IAT's funds. Secondly, they did not include payments IAT received from the PAS Group. Thirdly, they did not record any of the cash Mr Hilliard took from IAT's bank account. Fourthly, IAT's income was understated in that drawings that Mr Wood and Mr Hilliard took from the company were not recorded[111]. I note that the financial records show that IAT paid Mr Hilliard a salary of $11,000 in the 1994-1995 financial year but otherwise IAT's financial records did not show any directors fees or dividends having been paid to him. However, he denied that he had lied about having received such fees. "It just wasn't recorded"[112].
197 Mr Hilliard admitted that he provided false information to the Commissioner of Taxation, in that he did not declare in his income tax returns the benefits he received from Mr Vizard and IAT. Also, in the financial years ended 1992 through to 1995 he did not include in his tax return information as to his share trading. He said that from 1996 or perhaps 1997 onwards he began to disclose in his tax return information about share trading.
198 As to his tax return for the year ended 30 June 1997[113] (which Mr Hilliard said he did not think was false), the declared taxable income was $98,528[114] with $32,932.20 as tax payable, giving a net income of $65,596. As to his income for the year ended 30 June 1998[115] (which Mr Hilliard said was true), the declared taxable income was $90,299 with $33,042.53 as tax payable, giving a net income of $57,256. For the year ended 30 June 1999[116] (which tax return Mr Hilliard said was true) the declared taxable income was $93,874 with $34,720.90 as tax payable, giving a net income of $59,153. For the year ended 30 June 2000[117] (which tax return Mr Hilliard said was true) the declared taxable income was $147,933 with $60,130.51 as tax payable, giving a net income of $87,802.
199 As to Ms McCready's income, Westpac's counsel referred Mr Hilliard to evidence she had given in 2001 during an application to vary a Mareva order made in respect of the couple's assets. In effect, she had agreed that in the nine year period between 1991 and 2000 her taxable income was mostly in the $20,000 to $30,000 range. Counsel asked Mr Hilliard if that was correct, to which he replied "I didn't have anything to do with her tax returns, I'm afraid, so I can't swear to it"[118]. Counsel pressed Mr Hilliard as to whether he had any idea of her income over that nine year period. Mr Hilliard repeated his answer that he had not seen her tax returns, and later said that he had no idea what Ms McCready's earnings were[119]. He then qualified this, saying that he "would imagine they were" more than $30,000 in some of those years. Her salary would have been "a lot higher" when she worked as a management consultant for Touche Ross, "but in exact terms even in round terms I really don't know what it was"[120]. Ms McCready was unemployed in 2000. Mr Hilliard said she had been unemployed "for some time between four years and one year. I really don't know. She took jobs and consultancies on an infrequent basis". Mr Hilliard was re-examined on this matter, to which I refer below.
200 As to their net asset position, Mr Hilliard was referred to a personal financial plan[121] dated 9 May 2000, prepared for Mr Hilliard and Ms McCready by an investment adviser employed by Westpac, and based in part on information the couple had provided to the bank. The plan was prepared in the context of the couple seeking advice as to planning for their retirement. As to whether the information in the plan was correct, Mr Hilliard said that "some of the figures may be estimates, but yes, by and large it's correct"[122]. The plan lists the assets owned by Mr Hilliard and Ms McCready as follows: