Plaintiff v Defendants

Supreme Court of Victoria|2007-11-23|Before: Mandie J

TAXATION - application pursuant to s.40 Stamps Act 1958 - persons allegedly receiving payments of money as or for duty and not accounting for the same

STATUTES - repeal of Stamps Act 1958 - effect of repeal on application made after date of repeal pursuant to repealed section - s.14(2)

1 By originating motion filed 30 September 2005 the plaintiff, the Commissioner of State Revenue (as the Comptroller of Stamps) ("the Commissioner") makes application for relief pursuant to s.40 of the Stamps Act 1958 (Vic) ("the Act"). There are seven defendants, only one of whom has entered an appearance, namely the fourth defendant ("Mr Bulzomi"). Mr Bulzomi was represented by Mr P Solomon of Counsel.

2 Section 40 of the Stamps Act provided as follows:

"40. Failure to appropriate moneys received as duty

executor or administrator of such person or officer

3 The Commissioner filed a summons on the originating motion dated 25 September 2005 ("the summons"). The summons sets out the relief sought by the Commissioner which includes:

"3. Pursuant to section 40(2) of the Stamps Act 1958 (Vic) ("the Act") each of the defendants show cause:

(a) why that defendant should not deliver to the plaintiff an account upon oath of all duties and sums of money received by that defendant as or for the duty upon or in respect of any instrument; and

(b) why the same should not be forthwith paid to the plaintiff.

Further to paragraph 3 above, pursuant to s40(3) of the Act each of the defendants:

(a) deliver to the plaintiff an account upon oath of all duties and sums of money received by that defendant as or for the duty upon or in respect of any instrument; and

(i) such duties or sums of money as appear to this Honourable Court to be due; and

4 By earlier orders made herein, the initial hearing was limited, as against Mr Bulzomi to the question of the "show cause" orders sought in paragraph 3 of the summons, pursuant to s.40(2) of the Act. The said orders proposed that all issues should be determined as against the other defendants. However, Mr Lucarelli QC, who appeared with Mr Paterson of counsel, for the Commissioner said that the plaintiff would limit itself to dealing with Mr Bulzomi's position and seek to have the matters raised on his behalf determined first before proceeding further against the other defendants. I acceded to that course.

5 An important matter raised by Mr Solomon relates to the repeal of the Act. Section 284 of the Duties Act 2000 provided: "The Stamps Act 1958 is repealed."[1] The repeal took effect on 1 July 2001 when the Duties Act 2000 came into operation. Thus this proceeding was commenced long after the repeal of the Act. Mr Solomon contended that the procedure provided for under s.40(2) and (3) of the Act did not survive the repeal of the Act. Before turning to the submissions on that issue, it is appropriate to summarise the factual material relied upon by the plaintiff.

6 The Commissioner relied on substantial affidavit material which set out the facts relied upon by him. These facts, for present purposes, may be taken as proved on a prima facie basis only as against Mr Bulzomi (who has not at this stage filed any affidavit material). I will summarise the facts (together with the related statutory provisions) most of which are conveniently to be found in the plaintiff's outline of submissions filed 12 September 2007 (being a summary of the plaintiff's affidavits and exhibits). That outline is the source of much that follows.

7 The first defendant ("Aid & Abet") was incorporated on 29 April 1992. On 25 September 2002, Aid & Abet changed its name to Aidlaw Pty Ltd.

8 The activities of Aid & Abet of relevance are those from 1999 to the end of 2001. During that period the activities of Aid & Abet were controlled by Mr Bulzomi, Spiros Kalotihos ( the second defendant) and Anne Maree Kalotihos ( the third defendant) ("the non-corporate defendants").

9 The following persons were directors and/or secretaries of Aid & Abet.

10 Anne Maree Kalotihos and Wendi Crupi were the directors of Aid & Abet and Anne Maree Kalotihos was its secretary during 1999 and until 15 March 2000. Anne Maree Kalotihos was the sole director and secretary of Aid & Abet from 15 March 2000 after Wendi Crupi ceased to be a director. Anne Maree Kalotihos ceased to be the sole director and secretary of Aid & Abet on 8 June 2001. Mr Bulzomi was the sole director and secretary of Aid & Abet from 8 June 2001 until 5 September 2002.

11 On 5 September 2002, Mr Bulzomi ceased to be a director and secretary and from that date until 18 October 2002, Spiros Kalotihos was the sole director and secretary of Aid & Abet. From 18 October 2002 until 28 February 2005, the sole director and secretary was one "Mika". Mika ceased to be a director and secretary on 5 September 2002 and, from that date, the sole director and secretary of Aid & Abet was "Xing". There is real doubt as to the existence of Xing. If he does exist, there is a real doubt as to his whereabouts and to the existence of his stated principal residence.

12 Wendi Crupi and Anne Maree Kalotihos were shareholders of Aid & Abet from 1999 until 2000. In 2000 Wendi Crupi ceased to be a shareholder and Dominic Crupi became a shareholder in her place. In 2002, Anne Maree Kalotihos and Dominic Crupi ceased to be shareholders and Mika became the sole shareholder in their place. Mika ceased to be the sole shareholder on 28 February 2005 when Xing became the sole shareholder.

13 Section 40A(1) of the Act empowered the Commissioner, by gazettal, to declare a person to be an "authorised person" in relation to any class of instruments chargeable with duty.

14 Pursuant to s.40A(3)(a) of the Act, an authorised person was permitted to endorse relevant instruments for stamp duty. If an instrument was so endorsed by an authorised person in the prescribed manner, the instrument was deemed to be stamped under the Act (as the case may be): to the amount of stamp duty shown on the endorsement; (or as exempt from duty).

15 On 12 December 1996 Aid & Abet was declared to be an authorised person.[2] The main classes of instruments that Aid & Abet was permitted to endorse were transfers of land, mortgages, declarations of trust and leases.

16 As an authorised person Aid & Abet was allotted the authorised person number "AP 318". That number was to be used on all endorsements made by Aid & Abet which, along with its trading name, needed to be incorporated into the approved rubber stamp to be used by it to endorse instruments.

17 As an authorised person, Aid & Abet was required to ensure that the endorsement of each instrument for stamp duty contained the following: the expression "Vic stamp duty"; the AP number (i.e. AP 318); the amount of stamp duty (if any) in respect of which the instrument was endorsed; a Transaction Number; the date of endorsement; and the signature of a person approved by the Commissioner to endorse instruments (i.e. an authorised signatory) on behalf of Aid & Abet. The first two items of information were customarily endorsed by way of a rubber stamp and the rest of the information above was customarily endorsed by hand.

18 As an authorised person Aid & Abet was required to report the instruments and the amounts of stamp duty which it had endorsed during the specified period. At the outset Aid & Abet was required to report weekly to the Commissioner. Later, as a result of a request made by Aid & Abet, it was to report monthly.

19 As an authorised person Aid & Abet was required to show in each weekly statement or monthly statement certain "prescribed particulars", namely: the total number of each class of instrument endorsed by Aid & Abet for the relevant week or month; the total amount of stamp duty that Aid & Abet had endorsed in that week or month in respect of each class of instrument; and if no stamp duty was endorsed during a relevant week or month, then Aid & Abet was required to forward a relevant weekly statement or monthly statement to the Commissioner having entered the word 'nil' in the total stamp duty amount column of that statement.

20 At the time that Aid & Abet lodged a weekly statement or monthly statement it was required to pay to the Commissioner the total amount endorsed for stamp duty during the relevant week or month. The payment of that amount could be made by cheque(s) made payable to the State Revenue Office ("SRO") including cheques drawn by Aid & Abet, by clients of Aid & Abet or in cash.

21 As an authorised person Aid & Abet was required to maintain various records for three years. The records to be maintained had to be sufficient to demonstrate that the correct stamp duty had been accounted for on the weekly statements or monthly statements forwarded to the SRO. For example, in relation to a transfer of land that had been endorsed for stamp duty, Aid & Abet was required to maintain: the contract of sale or copy thereof; and the vendor's statutory declaration under s 63A of the Act. Aid & Abet was told that the maintenance of audit trail information was mandatory.

22 The Commissioner supplied to authorised persons (such as Aid & Abet) the Paradox Runtime Software Package (more commonly referred to as "the DRS computer software program") to enable the electronic recording of all of the details of endorsements of instruments for stamp duty sufficient to: enable Aid & Abet to complete or produce the weekly statements or the monthly statements; satisfy the Commissioner's requirements for the making and keeping of proper electronic records of endorsements for stamp duty made by Aid & Abet as an authorised person.

Aid & Abet's activities as an authorised person prior to October 1999

23 Prior to October 1999 Aid & Abet generally complied with its reporting and payment obligations as an authorised person.

24 In the period prior to October 1999, Aid & Abet's authorised person's activities operated on the following basis: it received from each client (including a firm of solicitors, Goldstein Partners) a separate cheque made payable to the SRO for the amount of stamp duty payable on each instrument or set of related or group of instruments of that client to be remitted to the Commissioner; upon entering details of the instruments for which it had received such cheques in the computer containing the DRS software program, Aid & Abet was able to print out the relevant transaction reports for each week as required which included various details of those instruments and a corresponding A&A weekly statement containing the prescribed particulars of those instruments in respect of the period covered by the statement.

25 On the lodgement of the weekly statement, Aid & Abet deposited with the Commissioner each of the cheques it had received from its clients (including Goldstein Partners) in respect of the instruments the prescribed particulars of which it had included in that statement.

26 As a result, prior to October 1999, Aid & Abet appears to have paid to the Commissioner the stamp duty payable on each instrument or related group of instruments it had endorsed by providing corresponding cheques made payable to the SRO which it had received from its clients (including Goldstein Partners).

Aid & Abet's activities as an authorised person during the October 1999 to June 2001 period

27 However, in the period from October 1999 to June 2001, Aid & Abet did not report many of the endorsements it had made. Aid & Abet and the non-corporate defendants paid to the Commissioner only a fraction of the stamp duty moneys that were to be remitted to the Commissioner and that were deposited into Aid & Abet's bank accounts by Goldstein Partners. The system employed to achieve that end was described by the plaintiff as "the Goldstein System" and I will adopt that terminology.

28 During the same period, Aid & Abet processed instruments received for endorsement from "non-Goldstein" clients in the same way that it had done prior to October 1999.

29 The operation of the Goldstein System may be summarised as follows:

• Goldstein instruments which were to be endorsed for stamp duty by Aid & Abet were so endorsed;

• Goldstein transaction sheets were prepared and were forwarded to Goldstein Partners on a weekly basis recording, among other things, the details of the Aid & Abet endorsed Goldstein instruments and the amounts of stamp duty endorsed by Aid & Abet;

• Aid & Abet requested Goldstein Partners to deposit the stamp duty money payable on Goldstein instruments into Aid & Abet's bank accounts;

• the total stamp duty due on the Goldstein instruments listed on the Goldstein transaction sheet which was to be remitted to the Commissioner was deposited by Goldstein Partners into Aid & Abet's bank accounts.

30 In communications with investigators of the SRO, Mr Bulzomi ultimately confirmed that the Goldstein System operated in the foregoing manner. He also confirmed that Goldstein Partners was Aid & Abet's major client.

31 While Aid & Abet and the non-corporate defendants operated the Goldstein System (during the October 1999 to June 2001 period), Aid & Abet:

• failed to disclose prescribed particulars of a number of the non-Goldstein client instruments which the Commissioner's investigators found that it had endorsed during that period in the weekly statements and monthly statements which it lodged at the SRO;

• utilised the cheques made payable to the SRO received in respect of the undisclosed non-Goldstein client instruments to make payments to the Commissioner for stamp duty payable on instruments which predominantly were Goldstein instruments which it had endorsed;

• appropriated or otherwise improperly withheld the corresponding amount of the stamp duty moneys it had directly received from Goldstein Partners to be remitted to the Commissioner;

• had stamp duty moneys deposited into Aid & Abet's bank accounts; and

• did not pay at least $3.784 million of stamp duty money received as or for duty to the Commissioner. This represented approximately one-third of the stamp duty money deposited into Aid & Abet's bank accounts by Goldstein Partners for Goldstein instruments endorsed by Aid & Abet during the October 1999 to June 2001 period.

32 The non-corporate defendants controlled the activities of Aid & Abet including:

• directing that stamp duty money be deposited into Aid & Abet's bank accounts or paid by cheque in favour of Aid & Abet;

• under-reporting to the SRO for most of the relevant periods the amount of stamp duty due;

• determining the amount of stamp duty to be paid out of Aid & Abet's bank accounts to the SRO for each relevant period (which generally was less than the stamp duty actually due); and

• operating Aid & Abet's bank accounts including the withdrawals or transfers of stamp duty moneys from these accounts.

33 As a result, the Commissioner contends that the non-corporate defendants:

• received sums of money as or for duty upon or in respect of numerous instruments;

• neglected or omitted to appropriate such money to the due payment of such duty;

• otherwise improperly withheld or detained the same; and

• thereby became accountable to the Commissioner for the amount of such duty.

34 The Commissioner contends that the non-corporate defendants are therefore liable pursuant to s. 40(2) of the Act to show cause.

Mr Bulzomi's control of the activities of Aid & Abet

35 As I have said, from 8 June 2001 until 5 September 2002, Mr Bulzomi was the sole director and secretary of Aid & Abet.

36 Mr Bulzomi was also an authorised signatory of Aid & Abet from 27 November 1996 until November 2001 when Aid & Abet was terminated as an authorised person.

Mr Bulzomi's involvement in Aid & Abet's Management from 1999 to 2001

37 From 1999 to 2001, Mr Bulzomi was involved in the management of Aid & Abet. In particular Mr Bulzomi has admitted that he:

• monitored Aid & Abet's staff and oversaw work done by those staff;

• was involved (after he became a director) in meetings of Aid & Abet as to its financial position;

• assisted staff when they had difficulty balancing DRS returns (meaning weekly statements or monthly statements);

• signed Aid & Abet cheques used to pay the SRO in respect of amounts recorded in the DRS returns;

38 The Commissioner says that the evidence suggests that Mr Bulzomi was the operations manager of Aid & Abet with responsibility for supervision of the staff who entered information into the DRS software that produced the weekly statements and the monthly statements. Mr Bulzomi was described as the manager of Aid & Abet involved with others in making decisions as to the engagement and dismissal of staff and the determination of remuneration for Aid & Abet staff.

39 Mr Bulzomi was a signatory to the ANZ trading account into which stamp duty moneys payable to the Commissioner were deposited and the Bank of Melbourne trading account of Aid & Abet.

40 There is evidence that Mr Bulzomi signed a number of cheques drawn on Aid & Abet's bank accounts including for stamp duty payable to the Commissioner.

41 Mr Bulzomi has admitted that he endorsed instruments on behalf of Aid & Abet in the period from July 1999 to June 2001.

Mr Bulzomi's control of endorsement activities for the October 1999 to June 2001 period

42 During the October 1999 to June 2001 period, Mr Bulzomi was in control of the endorsement activities of Aid & Abet. In summary, Mr Bulzomi exerted his control over these activities in that he:

• selected and retained various instruments for stamp duty endorsements to be made by himself;

• selected and allocated the balance of the instruments to employees of Aid & Abet for endorsement and supervised their work;

• dealt with inquiries by clients in connection with the endorsement of instruments;

• printed out transaction reports using the DRS software program;

• directed and supervised Aid & Abet employees to check the information in the transaction reports against that in the Goldstein transaction sheets and other transaction sheets;

• supervised and approved Goldstein transaction sheets which were used to request payment of stamp duty moneys from Goldstein Partners which resulted in stamp duty money being paid into Aid & Abet's bank accounts;

• approved or signed weekly statements or monthly statements and provided them to Aid & Abet employees for filing with the SRO;

• collected and made use of cheques made payable to the SRO received by Aid & Abet;

• selected and provided to Aid & Abet employees the cheques made payable to the SRO to accompany each weekly statement and monthly statement when it was filed with the SRO; and

• drew and/or signed Aid & Abet cheques made payable to the SRO (out of the stamp duty money which had been deposited into Aid & Abet's bank accounts.)

The endorsement of instruments for stamp duty by Mr Bulzomi

43 Mr Bulzomi selected instruments to be endorsed by him and endorsed instruments for stamp duty during the October 1999 to June 2001 period. This is proved in several ways.

44 First, Mr Bulzomi admitted that he endorsed instruments.

45 Secondly, Aid & Abet employees say that he allocated instruments to himself to endorse and he did endorse instruments. He told staff that some instruments could not be processed by them and that he would be processing those instruments.

46 Thirdly, the Commissioner's investigations have found that Mr Bulzomi had endorsed instruments throughout the October 1999 to June 2001 period and had signed all of the instruments endorsed by an authorised signatory at Aid & Abet during the period 1 October 1999 to 18 April 2000 (i.e. the first 6 months approximately of the operation of the Goldstein system).

Allocation and supervision by Mr Bulzomi of endorsement work by Aid & Abet employees

47 During the October 1999 to June 2001 period (when the Goldstein System operated) the following procedure was followed for endorsements:

• when instruments for endorsement were received at Aid & Abet they were placed into yellow folders and an instruction sheet from the client was stapled to the front of each yellow folder;

• unless exempt from stamp duty, the non-Goldstein clients' instruments were accompanied by cheques made payable to the SRO (and not Aid & Abet) for stamp duty and cheques for the lodgement fees (if any). These cheques were stapled to the inside of the yellow folders. The yellow folders with Goldstein instruments did not usually have cheques stapled to the inside as Goldstein Partners paid for the stamp duty and lodgement fees in a lump sum to Aid & Abet for the Goldstein instruments endorsed;

• once the yellow folders were prepared, a reference number was allocated to each folder (and written on the instruction sheet). The reference number was used to keep track of the instrument(s) in each folder and to enable the client to be billed. After the reference number was allocated, the yellow folders were provided to Mr Bulzomi. He strictly controlled the allocation of the instruments to be endorsed by himself or by employees of Aid & Abet;

48 Once Mr Bulzomi had allocated instruments to be endorsed by Aid & Abet employees they took the following steps:

• the amount of stamp duty payable on an instrument was calculated and checked against that recorded on the instruction sheet provided by the client and the relevant cheque made payable to the SRO (if any);

• the details of the proposed endorsement were keyed in on the computer that ran the DRS software program. Once the details of the proposed endorsement were entered into the computer, it re-confirmed the amount of stamp duty that was payable for that instrument and recorded the fact that the instrument was endorsed;

• the rubber stamp was impressed on the instrument and the details required by the rubber stamp were completed;

• the cheques made payable to the SRO were detached from the yellow folders containing the instruments. The reference number on the instruction sheet was written on the reverse side of each of the cheques. Those cheques were placed in a drawer of the endorsing table. (The yellow folders for the Goldstein instruments did not usually have cheques for stamp duty or lodgement fees attached to them);

• the details of the amount of stamp duty endorsed on non-Goldstein clients' instruments were recorded on a document known as a Various Transaction Sheet which was maintained on a weekly basis;

• the details of the amounts of stamp duty endorsed on Goldstein instruments were recorded on a Goldstein transaction sheet which was also maintained on a weekly basis; and

• the yellow folders with the endorsed instrument(s), which needed to be lodged at the Land Registry, were placed on the lodging table.

49 Mr Bulzomi supervised the Aid & Abet employees who did the endorsing work. Whenever an issue arose as to the amount of stamp duty for which an instrument should be endorsed, Mr Bulzomi was the person that the Aid & Abet employees turned to for assistance.

Mr Bulzomi dealing with enquiries by clients in connection with the endorsement of instruments

50 If an enquiry as to the amount of stamp duty to be endorsed on an instrument arose (generally as a result of a difference between the amount calculated by an Aid & Abet employee compared with the amount listed on the instruction sheet or the attached cheque made payable to the SRO), it was necessary to seek clarification of the discrepancy from the client (including Goldstein Partners). Aid & Abet employees were under direction from Mr Bulzomi that they were to prepare a draft fax about the mismatch for approval by himself or, in his absence, Spiros Kalotihos. Mr Bulzomi approved most of those faxes. The rest were approved by Spiros Kalotihos. After the faxes were approved, they were sent to the client (including Goldstein Partners). Any mismatch in relation to Goldstein instruments was first discussed with Mr Bulzomi, or in his absence, Spiros Kalotihos, before a fax was prepared and approved by him for sending to the client. The client, including Goldstein Partners, would respond to the enquiry by speaking with the Aid & Abet employee responsible or with Mr Bulzomi when the Aid & Abet employee could not resolve the mismatch with the client.

51 At Aid & Abet, transaction reports were produced at around the same time the corresponding weekly statements or monthly statements were produced using the DRS software program on the Aid & Abet computer in the endorsing area. The transaction reports were generally printed by Mr Bulzomi. When a Transaction Report was required by an Aid & Abet employee, it was necessary to request Mr Bulzomi to print it out. Once transaction reports were printed out and the entries therein checked as stated below they were kept in a file on a table in the endorsing area.

Directing and supervising Aid & Abet employees to check the information in the transaction reports against that in corresponding Goldstein transaction sheets and other transaction sheets

52 Following the printing out of each Transaction Report, as directed by Mr Bulzomi, Aid & Abet employees checked the information in the Transaction Report against that in the corresponding Goldstein transaction sheet(s) and other transaction sheet(s). The purpose of that task was to reconcile the stamp duty entries on the Goldstein transaction sheet(s) and the other transaction sheet(s) with the stamp duty entries in the corresponding Transaction Report. Once the Aid & Abet employees were satisfied that the information on the Transaction Report matched the details in the other sheets, the employees gave to Mr Bulzomi: the Transaction Report; the corresponding other transaction sheet(s); the corresponding cheques made payable to the SRO that had been placed in the drawer in the endorsing area; and the corresponding Goldstein transaction sheet(s).

53 Having been provided with the Transaction Report, the other transaction sheet(s) and the Goldstein transaction sheet(s), Mr Bulzomi would later return them to Aid & Abet employees and they would be filed in a file or files kept in the endorsing area.

Mr Bulzomi directing and approving Goldstein transaction sheets and requesting payment of stamp duty money from Goldstein Partners

54 At the end of each week during the October 1999 to June 2001 period, the Goldstein transaction sheet was forwarded by facsimile to Goldstein Partners with a request for payment of stamp duty money and lodgement fees. This was done after each of the Goldstein instruments listed in the Goldstein transaction sheet had been endorsed for stamp duty. The facsimile seeking the deposit of the stamp duty moneys and lodgement fees into Aid & Abet's bank accounts or payment cheques drawn in favour of Aid & Abet were ordinarily approved and signed by Mr Bulzomi or in his absence Spiros Kalotihos. The facsimile and the Goldstein transaction sheet were not sent unless the total stamp duty sought was approved by Mr Bulzomi or, in his absence, Spiros Kalotihos.

55 The stamp duty moneys requested from Goldstein Partners in the facsimile coversheet accompanied by the Goldstein transaction sheet, usually requested that the amount of stamp duty due be deposited into Aid & Abet's bank accounts. Mr Bulzomi sometimes spoke to persons at Goldstein Partners about the deposit or payment of the stamp duty money referred to in the Goldstein transaction sheets. If the stamp duty money was not deposited into Aid & Abet's bank accounts by Goldstein Partners, or paid to Aid & Abet by cheque as requested, then Spiros Kalotihos would telephone Goldstein Partners at Mr Bulzomi's request and ask for the stamp duty money.

56 The bank statements of Aid & Abet's bank accounts confirm that, during the October 1999 to June 2001 period, the stamp duty money requested in the facsimile cover sheets accompanying the Goldstein transaction sheets was deposited by Goldstein Partners into Aid & Abet's bank accounts.

57 On four occasions, Aid & Abet requested that payment be made by cheques made payable to Aid & Abet. They are four cheques dated 29 May, 5 June, 21 June and 26 June 2001. Those four cheques were paid into the Bunnett Trust account.

Mr Bulzomi directing a change to the Goldstein System - payment of stamp duty moneys by cheque

58 During the period 29 May 2001 to 26 June 2001, Goldstein Partners provided to Aid & Abet four cheques totalling $737,781.20. That amount was comprised of $676,959.30 for stamp duty money and $60,821.90 for Land Registry registration fees due on various Goldstein transaction sheets. The four cheques were provided as part of the operation of the Goldstein System. The four cheques were forwarded by Goldstein Partners in response to Goldstein transaction sheets numbered GTS 84, GTS 85, GTS 87 and GTS 88.

59 The Goldstein transaction sheet GTS 84 shows that Goldstein Partners was to pay $244,443.60, of which $225,337.60 was for stamp duty (in relation to the endorsements recorded in that Goldstein transaction sheet) and the balance was for Land Registry registration fees. Mr Bulzomi had recorded on GTS 84 that $244,443.60, was paid by Goldstein Partners by cheque 008303. The Goldstein transaction sheet GTS 84 bears Mr Bulzomi's handwriting.

60 The Goldstein transaction sheet GTS 85 shows that Goldstein Partners was to pay $242,748.50, of which $224,380.50 was for stamp duty (in relation to the endorsements recorded in that Goldstein transaction sheet) and the balance was for Land Registry registration fees.

61 The Goldstein transaction sheet GTS 87 shows that Goldstein Partners was to pay $160,871.80, of which $147,205.80 was for stamp duty (in relation to the endorsements recorded in that Goldstein transaction sheet) and the balance was for Land Registry registration fees.

62 The Goldstein transaction sheet GTS 88 shows that Goldstein Partners was to pay $89,717.40, of which $80,035.40 was for stamp duty (in relation to the endorsements recorded in that Goldstein transaction sheet) and the balance was for Land Registry registration fees.

63 The facsimile coversheets which accompanied GTS 84, GTS 85, GTS 87 and GTS 88 each sought the provision of a cheque as opposed to "direct deposit in our account" and were said to be sent by Mr Bulzomi. Mr Bulzomi was said to be the Aid & Abet contact on each of these cover sheets as he was stated to be the sender and Aid & Abet operator.

64 The four cheques totalling $737,781.20 were deposited into the Bunnett Trust account. Two were deposited on 14 June 2001 and another two were deposited on 29 June 2001.

Mr Bulzomi approving and signing weekly statements or monthly statements

65 Aid & Abet was required by the SRO to lodge weekly statements (later monthly statements). Aid & Abet filed the weekly statements (and later) the monthly statements with the SRO. The weekly statements (and later) the monthly statements were printed out by Mr Bulzomi and they were filed by Aid & Abet employees at the request of Mr Bulzomi.

66 Mr Bulzomi was the person at Aid & Abet responsible for the completion of the weekly statements and the monthly statements. Many of the weekly statements and some of the monthly statements filed by Aid & Abet with the SRO in respect of the October 1999 to June 2001 period were signed or approved by Mr Bulzomi. At least one of the weekly statements was signed by Spiros Kalotihos. Any of the weekly statements or monthly statements signed by Aid & Abet employees were so signed at the direction of or with the approval of Mr Bulzomi.

67 On some occasions the SRO did not accept the weekly statements for filing because the total amount of stamp duty stated in it did not balance with the total amount of the cheques that the Aid & Abet employees had been given to pay with that document. On those occasions the Aid & Abet employees returned the weekly statements and the cheques that had been given to Mr Bulzomi. He took them away and he gave the weekly statements and cheques back to the Aid & Abet employees for them to re-file with the SRO.

Mr Bulzomi collecting and making use of cheques made payable to the SRO

68 During the period starting from the end of June 2000, on some occasions both Mr Bulzomi and Spiros Kalotihos directed an Aid & Abet employee to remove from the yellow folders containing the non-Goldstein instruments (and being instruments that were yet to be endorsed) cheques made payable to the SRO and to provide those cheques to them. On those occasions either Mr Bulzomi or Spiros Kalotihos explained to the Aid & Abet employee that the cheques were needed to make up stamp duty payments due to the SRO because the stamp duty money from Goldstein Partners had not been deposited into Aid & Abet's bank accounts. Mr Bulzomi and Spiros Kalotihos also said to the Aid & Abet employee that when Aid & Abet received from Goldstein Partners, stamp duty due on the relevant instruments would be replaced. On those occasions Mr Bulzomi and Spiros Kalotihos would generally ask an Aid & Abet employee to give them cheques made payable to the SRO for a general sum (approximately $80,000 to $100,000).

69 As a result of those instructions the Aid & Abet employee removed cheques made payable to the SRO from the yellow folders containing unprocessed non-Goldstein instruments totalling an amount close to the amount that had been requested. Those cheques were then given to Mr Bulzomi or Spiros Kalotihos as directed. The Aid & Abet employee was told by Mr Bulzomi and Spiros Kalotihos that they would make a record of the cheques made payable to the SRO that were given to them so that they would know which cheques would be missing when Mr Bulzomi was given the other transaction sheet and the remaining cheques made payable to the SRO.

Selection and provision to Aid & Abet employees of cheques to be filed with the weekly statements and the monthly statements

70 All the cheques made payable to the SRO (in respect of instruments endorsed during that week that had been placed in the drawer in the endorsement area) were collected together and attached to the relevant transaction sheet and provided to Mr Bulzomi or collected by him.

Drawing and/or signing Aid & Abet cheques payable to the SRO

71 When a weekly statement (or monthly statement) was filed at the SRO by an authorised person, it was necessary for it to be accompanied by stamp duty money recorded as payable in that statement. During the October 1999 to June 2001 period it was usual for Aid & Abet to pay the stamp duty disclosed in the weekly statement (or monthly statement) by cheques made payable to the SRO along with an Aid & Abet cheque made payable to the SRO. The Aid & Abet cheque made payable to the SRO was for an amount equal to the difference ("cheque for the difference") between the cheques made payable to the SRO and the amount stated in the weekly statement (or monthly statement) filed with the SRO.

72 During the October 1999 to June 2001 period Mr Bulzomi drew and/or signed various cheques for the difference. These cheques were deposited with the SRO at the time that the weekly statements or monthly statements were filed along with cheques made payable to the SRO which Aid & Abet had received from its clients.

73 The various cheques for the difference were drawn and/or signed by Mr Bulzomi.

Mr Bulzomi's involvement in the avoidance of detection

74 In the course of Aid & Abet completing its endorsement activities under the control of Mr Bulzomi, various actions were taken that hindered the subsequent SRO investigation of those activities. In summary, the actions were:

• endorsing instruments using unauthorised signatures or without a signature;

• deleting entries as to endorsements made in the DRS software program used by Aid & Abet;

• failing to provide to the SRO copies of all transaction reports;

• failing to provide to the SRO back up copies of data as to the endorsement of instruments for stamp duty; and

• providing to the SRO investigators a manual reconciliation of the endorsements purportedly made by Aid & Abet during May 2001 which failed to state all the endorsements which Aid & Abet made and the stamp duty due on those endorsements.

75 Mr Bulzomi either directed or was involved in each of the above activities which may be detailed further as follows.

76 Aid & Abet received approval from the SRO to use an approved stamp to endorse instruments for stamp duty. The approved stamp included the name of the authorised person (namely Aid & Abet) and the AP Number attributed to that authorised person (namely AP 318 for Aid & Abet). The information on the approved stamp enabled any person inspecting an endorsed instrument to ascertain the identity of the authorised person. During the period commencing on 13 April 2000 and ending on 6 December 2000, Aid & Abet also used an unapproved stamp to endorse instruments for stamp duty. The unapproved stamp did not include Aid & Abet's name and included an incorrect AP Number (namely AP 818). Mr Bulzomi has identified the unapproved stamp as having been used by Aid & Abet to endorse instruments. The effect of using the unapproved stamp was that the endorsement did not indicate that it had been completed by Aid & Abet.

77 The SRO's investigations of Aid & Abet's endorsement activities included obtaining instruments apparently endorsed by Aid & Abet from the Land Registry. To identify those instruments reference was made to the information included on the endorsement. The SRO investigators were only able to identify instruments endorsed by Aid & Abet using the unapproved stamp because the SRO had become aware that Aid & Abet had used that stamp. Accordingly, the SRO investigators were able to ascertain the total value of the stamp duty endorsed by Aid & Abet during the October 1999 to June 2001 period. That total value of the stamp duty endorsed was then compared with the total amount of stamp duty received from Aid & Abet to establish that not all of the stamp duty endorsed by Aid & Abet during that period had been paid to the Commissioner.

78 Mr Bulzomi provided the unapproved stamp to Aid & Abet employees for them to use in place of the approved stamp. The Aid & Abet employee used the unapproved stamp to endorse documents for stamp duty. The unapproved stamp was used from 13 April 2000 until 6 December 2000. During that period there were 1,817 endorsements out of a total of 2,031 endorsements which the Commissioner found were completed by Aid & Abet's use of the unapproved stamp.

79 On 30 November 2001 Mr Bulzomi was asked by SRO investigators about the use of the unapproved stamp. Mr Bulzomi said that the original stamp had been mislaid and that Aid & Abet had a replacement stamp made. He said the replacement stamp had the number "AP 818". He said that the original stamp was found after a couple of weeks. Mr Bulzomi said that an officer of the SRO had pointed out to him that the replacement stamp had the wrong AP Number. Mr Bulzomi said that as a result the stamp with "AP 818" was destroyed and Aid & Abet reverted to using only the original "AP 318" stamp.

Endorsing instruments using unauthorised signatures or without a signature

80 Aid & Abet was required to include on every instrument endorsed for stamp duty the signature of a person approved by the Commissioner for that purpose. The Commissioner had approved various persons as authorised signatories to complete endorsements by Aid & Abet as an authorised person. Numerous endorsements completed by Aid & Abet were not signed by persons who were authorised signatories. Further, there were various endorsements completed by Aid & Abet during the October 1999 to June 2001 period with indecipherable signatures or marks or no signature at all. Mr Bulzomi himself was unable to recognise various signatures on a sample of nine endorsements on instruments. Mr Bulzomi directed an Aid & Abet employee to complete endorsements on some instruments by copying his (Mr Bulzomi's) signature on the imprint of the rubber stamp. The Aid & Abet employee did copy Mr Bulzomi's signature on the imprint of the rubber stamp to complete endorsements on some instruments. Mr Bulzomi told the employee that if anyone at the Land Registry asked any questions regarding signatures on endorsements, as not being signatures of authorised signatories, the employee was to inform that person that he (the employee) did not know anything about it.

Deleting entries as to endorsements made in the DRS computer software program used by Aid & Abet

81 Aid & Abet's endorsement activities could be verified by the documents produced (i.e. transaction reports and weekly statements or monthly statements) and the data maintained by the DRS software program. Mr Bulzomi made deletions of stamp duty entries that had been made in the DRS computer software program. In addition, Mr Bulzomi directed an Aid & Abet employee to delete stamp duty entries that had been recorded on the DRS computer software program and the Aid & Abet employee carried out those instructions. When asked why the employee was required to delete stamp duty entries in the DRS computer software program, Mr Bulzomi told the Aid & Abet employee that the deletions were necessary because the stamp duty recorded on the Goldstein transaction sheet(s) or the other transaction sheet(s) did not balance with the amount of stamp duty available for payment and that the employee had made an incorrect entry.

82 As an authorised person, Aid & Abet was required to use sequential transaction numbers on each instrument that it endorsed for stamp duty. Generally speaking, up until 16 June 1999, Aid & Abet had allotted consecutive transaction numbers in respect of instruments that it endorsed for stamp duty. After 16 June 1999, Aid & Abet used non-consecutive or non-unique purported transaction numbers for the endorsement of instruments for stamp duty. Specifically, after 16 June 1999, Aid & Abet allotted transaction numbers that it had previously used and allotted non-sequential numbers for endorsements recorded on the same day.

83 Mr Bulzomi has admitted that the transaction numbers used at Aid & Abet were not consecutive. On 16 August 2001 Mr Bulzomi provided to the SRO two transaction reports. They showed that the numbers appearing in the clients' reference column were not a series of sequential transaction numbers. In other words, the numbers ascribed by Aid & Abet to the instrument referred to therein were non-sequential. The use of non-sequential transaction numbers made an investigation or an audit of the endorsement activities of Aid & Abet very difficult.

84 The material before the Court provides evidence of Mr Bulzomi's failure to provide to the SRO all relevant transaction reports and his explanations for failing to do so. That material also provides evidence of his failure to provide the SRO with other relevant information and the explanations that he gave for failing to do so. However for the purposes of this stage of the proceeding it is unnecessary to refer to that material.

Mr Bulzomi's control of the payment out of stamp duty

85 During the period when Aid & Abet was using the Goldstein System it failed to remit to the Commissioner substantial sums of stamp duty money it had received for that purpose. Aid & Abet received $3,784,590.30 from Goldstein Partners on account of stamp duty to be paid to the Commissioner, which it failed to pay. By 31 December 2001 the balance of Aid & Abet's bank account was only $24,523.98. The stamp duty moneys withdrawn from Aid & Abet's bank account (which led to the reduction of the balances of these bank account to $24,523.98) were paid to certain persons and entities and to the beneficiary of the Bunnett Trust account.

86 The said persons and entities that received these payments included the second to seventh defendants.

87 Many of the cheques used to pay these persons and entities were written and/or signed by Mr Bulzomi. Details of these cheques are in evidence.

88 The payments of stamp duty money to these persons and entities included:

(a) the sum of $297,240.08 to Mr Bulzomi by way of cash cheques signed by him; and

(b) the sum of $205,000.000 to the seventh defendant. From 1 November 2000 to 27 July 2004 Mr Bulzomi was the sole shareholder, director and secretary of the seventh defendant.

Mr Bulzomi's control of the transfer of stamp duty money

89 During the October 1999 to June 2001 period, stamp duty money was transferred from the Aid & Abet's ANZ trading account into its Bank of Melbourne trading account and into a St George bank account. Many of the cheques used to so transfer the stamp duty money were written and/or signed by Mr Bulzomi. Details of the cheques, totalling $1,915,000, are in evidence.

The consequences of the repeal of the Stamps Act

90 Mr Solomon submitted that, having regard to the repeal of the Act prior to the commencement of this proceeding, the Commissioner had no basis in law for the institution of this proceeding under s.40(2) and (3) of the Act or for seeking orders thereunder.

91 Mr Solomon submitted that the Commissioner could not rely upon the procedure contained in the now repealed provisions of s.40(2) and (3) of the Act.

92 The parties accepted that the determination of the question of the effect of the repeal depended upon the proper interpretation of s.14 of the Interpretation of Legislation Act 1984 ("the Interpretation Act").

93 The relevant provisions of s.14 of the Interpretation Act are:

the repeal... of that Act or provision shall not, unless the contrary intention expressly appears -

(e) affect any right, privilege, obligation or liability acquired, accrued or incurred under that Act or provision;

(g) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, ... as is mentioned in paragraphs (e) ... -

and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, ... as if that Act or provision had not been repealed ..."

94 Mr Solomon conceded that s.40(1) of the Act created a right in the Commissioner and a correlative liability in the persons who received sums of money as therein described and that that right and correlative liability were preserved by s.14(2) (e) of the Interpretation Act. Mr Solomon made that concession "subject to reserving the point if this matter goes further". Mr Solomon further conceded, subject to the same reservation, that, if the Commissioner had a good cause of action in debt under s.40(1) of the Act before it was repealed, the repeal of the Act would not have destroyed his entitlement to sue for that debt[3].

95 I need not be concerned as to what point Mr Solomon was seeking to reserve nor as to what effect, if any, his reservation had. It is sufficient, for the purposes of this proceeding, that he made that concession. Indeed it seems to me that it was proper for him to make that concession because, in my opinion, it is clear that, if rights and correlative liabilities existed under s.40(1) of the Act prior to the repeal of the Act, they are preserved by s.14(2)(e) of the Interpretation Act.

96 It is clear that s.14(2)(g) of the Interpretation Act would preserve any investigation, legal proceeding or remedy in respect of rights and liabilities existing under s.40(1) of the Act at the time of the repeal and, most probably, if a proceeding had been commenced under s.40(2) and (3) of the Act prior to the repeal of the Act, such a proceeding would have been preserved by s.14(2)(g) of the Interpretation Act.

97 However, what is the position in relation to a proceeding commenced after the repeal of the Act? The position was referred to by Gibbs J (as he then was) in Yrttiaho v Public Curator (Queensland)[4], in relation to the same language in Queensland legislation:

"Plainly enough, par.(e) and the words that follow it require that, unless the contrary intention appears, an amending enactment shall be construed so that, notwithstanding the amendment, proceedings pending thereunder at the time of the amendment can be continued, and proceedings can be initiated after the amendment in respect of substantive rights acquired before the amendment took effect."

98 Gibbs J was dealing with an amending statute but the same interpretation must apply to a repealing statute. In that case, also, Menzies J agreed with Gibbs J and said that the relevant provisions were intended to preserve "the availability of proceedings."[5]

99 In that regard, the essential submission made on behalf of the Commissioner was that the concluding words of s.14(2) of the Interpretation Act had the effect of preserving the plaintiff's right to institute a legal proceeding under s.40(2) and (3) of the Act. I agree that these words have the effect that the plaintiff's right to institute a legal proceeding in relation to any obligations and liabilities that had accrued under s.40(1) of the Act would be preserved but this does not mean that the particular procedure laid down by s.40(2) and (3) of the Act is preserved. In other words, if there is a debt to the Comptroller under s.40 of the Act at the time of the repeal of the Act, a legal proceeding might be instituted after the repeal of the Act to recover that debt. But it is a different thing to conclude that the particular procedure established by s.40(2) and (3) of the Act can survive the repeal of the Act and the Commissioner advanced no good reason, in my view, for such a conclusion.

100 It was submitted on behalf of the Commissioner that the procedure in s.40(2) and (3) of the Act was "not separate" from the rights and liabilities arising under s.40(1) but it was not contended, as I understood it, that the statutory procedures were necessary to the operation of s.40(1) or that s.40(1) was not operable without the succeeding subsections. In my opinion it is clear that s.40(1) creates a debt in respect of any sum of money received by a person as or for stamp duty where that person does not appropriate that money to the payment of such duty or otherwise improperly withholds or detains the same. The section makes clear that the debt is "recoverable as such accordingly" and thus an action might be brought to recover the debt. The procedure in the following subsections is thus an optional mode of procedure available to the Comptroller, offering, inter alia, the procedural advantage of forcing a person to go on oath. However this statutory procedure is not necessary to the operability of s.40(1).

101 I do not think that it is open to conclude that there is any implication arising from the relationship between s.40(1) on the one hand and s.40(2) and (3) on the other, such that any preservation of the rights and liabilities under s.40(1) necessarily carries with it the preservation of the statutory procedure under s.40(2) and (3).[6]

102 I conclude that the plaintiff cannot obtain any of the orders sought because the empowering provisions had been repealed prior to the institution of this proceeding.

Is Mr Bulzomi a person who has received any sum of money as or for duty upon or in respect of any instrument or otherwise a person as described by s.40(1) of the Act?

103 In deference to the submissions made by the parties on this question, and in case I am wrong about the effect of the repeal of the Act, I will proceed to deal with the above question.

104 Mr Solomon submitted that, on the material the only person who had received money "as or for duty" was the authorised person (Aid & Abet). All the monies were received by Aid & Abet and were either remitted to the SRO or paid into Aid & Abet's bank accounts.

105 Mr Solomon submitted that money received by Aid & Abet "as or for duty" that was deposited in Aid & Abet's bank accounts then became part of a mixed fund and it could not be said that Mr Bulzomi had received any part of that money. Mr Solomon further submitted that if Mr Bulzomi was associated with payments that were made by Aid & Abet out of those bank accounts to persons other than the SRO, this did not make Mr Bulzomi a person who had "received" money "as or for duty".

106 In relation to cash cheques (drawn on Aid &Abet's bank accounts) apparently signed by Mr Bulzomi, Mr Solomon submitted that what was written on the back of the cheques showed where the funds had gone and there was nothing in respect of which Mr Bulzomi should show cause.

107 Mr Solomon further submitted that the fact that, during the period 8 June 2001 until 5 September 2002, Mr Bulzomi was the sole director and secretary of Aid & Abet did not satisfy the language of s.40(1) of the Act.

108 In relation to the plaintiff's contention that on four occasions Mr Bulzomi had requested cheques and had them deposited into the Bunnett trust account, Mr Solomon submitted that there was no evidence as to who "received" that money.

109 Finally, Mr Solomon submitted that the argument advanced on behalf of the Commissioner that the material showed that Mr Bulzomi was at all relevant times in control of the whole process and activities of Aid & Abet and therefore, as such, a person who "received" all the moneys "as or for duty" was a hopeless argument.

110 In relation to the scope of any show cause order that might be made, Mr Solomon submitted that it should be restricted to limited categories in respect of which Mr Bulzomi had a case to answer.

111 It must be emphasised that at this stage the only question would be whether the Commissioner had made out a prima facie case within s.40(1) of the Act such that a show cause order should be made.

112 In my opinion, but for the repeal of the Act, the Commissioner would have established, on a prima facie basis, that Mr Bulzomi is a person who, within the meaning of s.40(1) of the Act, had:

• received sums of money as or for the duty upon of in respect of various instruments;

• omitted to appropriate such money to the due payment of such duty;

113 In that regard I would have thought that the Commissioner had made out a prima facie case on the widest basis upon which he relied, namely, that Mr Bulzomi exercised such control over the receipt and disposition of all of the moneys as or for duty paid to Aid & Abet and not remitted to the SRO that he should be regarded, on a prima facie basis, as having himself "received" all that money as or for duty.

At a glance

Court

Decision date

Before

Source

Judgment (210 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (1)