Plaintiff v Defendants

DECLARATORY RELIEF - Standing of Deputy Commissioner to seek purely declaratory relief under s 36 of the Supreme Court Act 1986 (Vic) - Substitution of Commissioner as plaintiff pursuant to rr 9.06(b)(i) and 9.06(c) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) - Commissioner relied on contemporaneous corporate documents as prima facie evidence of beneficial ownership of the shares in company - Evidence adduced by the defendants failed to displace that evidence - Entitlement to declaratory relief sought was established - Purported declarations of trust were not valid and effective and did not operate to alter or affect the manner in which the shares were held - Declarations made accordingly.

PROPERTY LAW - Declarations of trust and associated share transfers were executed by defendants in advance of the shareholder being placed in liquidation - Whether declarations of trust and associated share transfers were voidable transactions pursuant to s 172 of the Property Law Act 1958 (Vic).

The standing of the Deputy Commissioner to bring this proceeding

The burden of proof referable to the declaratory relief sought by the Deputy Commissioner

Evidence given by or on behalf of the Deputy Commissioner

The defendants' application for leave to amend their defence

Factual material advanced on the first limb of the Deputy Commissioner's case

The beneficial owner of the four shares in Jinacan from 25 August 1987 to 11 August 2006

Are the transfers voidable pursuant to s 172 of the Property Law Act?

Section 172 of the Property Law Act

1 In this proceeding the Deputy Commissioner of Taxation of the Commonwealth of Australia ('the Deputy Commissioner') seeks declaratory relief as to the beneficial ownership of the four issued shares in a company named Jinacan Pty Ltd ('Jinacan'), the fifth defendant. Jinacan's only asset is a commercial property located at 624 Sydney Road, Brunswick, Victoria ('624 Sydney Road'). The property is valued conservatively at $8.5 million. [1]

2 The Deputy Commissioner contends that the beneficial owner of the four issued shares in Jinacan is the fourth defendant, Glen Geriatric Services Pty Ltd (in liquidation) ('Glen'). At all relevant times, Glen operated a commercial contract cleaning business under the trading name AES Property Services. Glen ceased trading in around December 2004 and its assets and goodwill, excluding the four shares in Jinacan, were acquired by a new corporate vehicle named AES Services Pty Ltd ('AES Services') operated by Mr George Haritos, the third defendant, and his brother-in-law, Mr Alex Kyritsis.

3 Glen was placed in liquidation pursuant to a creditors' voluntary winding up on 17 October 2006, and was dissolved on 19 May 2008. The Commissioner of Taxation ('the Commissioner') was an unsecured creditor of Glen in the amount of $514,093.87 at the time of its entry into liquidation and received no dividend in respect of that debt. The defendants initially denied Glen's indebtedness to the Commissioner but during the course of opening on the first day of the trial, Counsel for the defendants, Mr Mitchell, confirmed that they no longer ask the Court to make a finding that Glen had no indebtedness at the time of dissolution. In so doing, the defendants effectively acknowledged that the 'running balance account' ('RBA') operated by the Australian Taxation Office ('ATO') showed that there was a debt owed and that the Commissioner did not receive any dividend from the liquidation.

4 At the time Glen was wound up, the shares in Jinacan were not listed as an asset in its Report as to Affairs required to be submitted to the liquidator. It seems that Glen's apparent ownership of the Jinacan shares only came to light following a covert audit conducted by the ATO in 2009, in respect of the tax affairs of Mr Haritos and Mr Kyritsis, and as a result of amended assessments and work undertaken preparatory to freezing orders being sought by the Commissioner.

5 On 10 June 2009, the Commissioner sought and obtained a freezing order from Mandie J directed at Mr Haritos, Mr Kyritsis and their new contract cleaning company, AES Services, and concerning properties in Prahran, Toorak and South Yarra registered in their names. A number of third party freezing orders were also made by Mandie J on the same day, directed at Mr Haritos' wife, Mrs Effie Haritos, who is the first defendant in this proceeding, Mr Kyritsis' wife, Mrs Betty Kyritsis, who is the second defendant in this proceeding, Stella Haritos, Steven Kyritsis, Anastasios Haritos, Grattan Heights Pty Ltd ('Grattan Heights'), Kyritsis Nominees Pty Ltd ('Kyritsis Nominees'), Diamond Sun Pty Ltd ('Diamond Sun'), Jinacan and Bega Nominees Pty Ltd ('Bega Nominees'). These third party freezing orders concern various properties in Toorak, South Yarra, Prahran, Camberwell, Caulfield North and Brunswick. Insofar as a freezing order relates to Jinacan, it applies to 624 Sydney Road.[2]

6 On 30 January 2012, Efthim AsJ granted the Deputy Commissioner's application for orders that Glen be reinstated pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) ('Corporations Act'), and gave leave pursuant to s 500(2) of the Corporations Act to prosecute this claim against Glen. Glen was reinstated by the Australian Securities Investment Commission ('ASIC') on 10 February 2012 with Mr Kenneth Lamb of Worrells as its liquidator. Mr Lamb wrote to the solicitors for the Deputy Commissioner by letter dated 29 October 2013, noting that as the subject matter of the proceeding relates to events prior to his appointment he 'neither consent[s] or oppose[s] the application ... and will abide by the decision of the Court provided that [the Deputy Commissioner] does not seek to enforce any order or judgment against the company and/or the Liquidator'.

7 Mr David Misso of Neesham White Gentle appeared on the first day of the hearing as the solicitor for Jinacan. He informed the Court that the fifth defendant would not be appearing at the hearing and would abide by the order of the Court. Accordingly, in these reasons, a reference to 'the defendants' is a reference to the three active defendants in this proceeding: Mr Haritos, Mrs Haritos and Mrs Kyritsis.

8 In this proceeding, the Deputy Commissioner seeks declaratory relief as follows:

(1) A declaration that, as at the date of its dissolution, Glen was the beneficial owner of four, alternatively three, Jinacan shares.

(1) the purported declaration of trust signed by George Haritos on 11 August 2006 was void, invalid and of no effect; and/or

(2) the purported declarations of trust executed by Effie Haritos and Betty Kyritsis on 11 August 2006 were void, invalid and of no effect.[3]

9 The Deputy Commissioner's claim has two alternative limbs. The first limb argument is based on the information recorded on the ASIC register and in the corporate books and records of Jinacan, showing that at all material times prior to 11 August 2006 or thereabouts the four issued shares in Jinacan were held as follows:

(a) Mr Haritos held one share in his name but he was not the beneficial owner; and

(b) Glen was the beneficial owner of the remaining three shares.

10 The Deputy Commissioner alleges that the ASIC register and those books and records establish that:

(a) at all material times the beneficial owner of the four Jinacan shares was Glen; and

(b) the purported transfers of the beneficial ownership of two shares in Jinacan to each of Mrs Haritos and Mrs Kyritsis by declarations of trust dated 11 August 2006 were void, invalid and of no effect.

11 The defendants contend, however, that the ASIC register was incorrect and that at all material times each of Mrs Haritos and Mrs Kyritsis beneficially owned two shares in Jinacan. In this regard, they rely upon the three declarations of trust dated 11 August 2006, which purport to declare that the shares in Jinacan are held on trust for Mrs Haritos and Mrs Kyritsis (as to two shares each).

12 The Deputy Commissioner's alternative or second limb argument addresses the position that would apply if, contrary to his primary or first limb contentions, the Court finds that the transfers associated with the declarations of trust dated 11 August 2006 were valid and effective to vest the beneficial ownership of the Jinacan shares in each of Mrs Haritos and Mrs Kyritsis. In that event, the Deputy Commissioner says the transfers are voidable at the instance of the Deputy Commissioner pursuant to s 172 of the Property Law Act 1958 (Vic) ('Property Law Act').

The standing of the Deputy Commissioner to bring this proceeding

13 The Deputy Commissioner's stated purpose in bringing this proceeding is to enable him to pursue the recovery of taxation debts owed to the Commissioner by Glen, Mr Haritos and Mr Kyritsis.[4] Mr Haritos and Mr Kyritsis are the equal beneficial shareholders of Glen. The Deputy Commissioner submits that, if he is successful in establishing an entitlement to the declaratory relief sought in relation to Jinacan, he anticipates that:

(a) steps will be taken by the liquidator of Glen (as owner of the four shares in Jinacan) to wind up Jinacan and realise its assets;

(b) those assets will be distributed to Glen (as the asserted sole shareholder of Jinacan) after payment of any outstanding liabilities;

(c) Glen will then be wound up and its assets distributed to its shareholders after payment of any outstanding liabilities, including the outstanding liability to the Commissioner of Taxation; and

(d) distributions paid to Mr Haritos and Mr Kyritsis as shareholders of Glen upon its winding up will be available to the Commissioner in satisfaction of their respective tax liabilities.

14 The Deputy Commissioner's pleading avers by way of preamble that:

The Plaintiff is a Deputy Commissioner of Taxation of the Commonwealth of Australia and under section 255-5 of Schedule 1 of the Taxation Administration Act 1953 (Cth) ... is entitled to bring this proceeding in his official name.[5]

15 Division 255 of schedule 1 of the Taxation Administration Act 1953 (Cth) ('the Taxation Administration Act') prescribes general rules about collection and recovery of tax-related liabilities. Section 255-5 sits within sub-div 255-A, headed 'Tax-related liabilities', and provides as follows:

Recovering a Tax-Related Liability That is Due And Payable

(1) An amount of a tax-related liability that is due and payable:

(a) is a debt due to the Commonwealth; and

(b) is payable to the Commissioner.

(2) The Commissioner, a Second Commissioner or a Deputy Commissioner may sue in his or her official name in a court of competent jurisdiction to recover an amount of a tax-related liability that remains unpaid after it has become due and payable.

A 'tax-related liability' is defined in s 255-1(1) to mean 'a pecuniary liability to the Commonwealth arising directly under a taxation law (including a liability the amount of which is not yet due and payable).'

16 In advance of closing submissions, I raised with counsel for the respective parties the question of whether, in circumstances where the only relief sought by the Deputy Commissioner was declaratory, the proceeding was relevantly to be regarded as one brought 'to recover an amount of a tax-related liability that remains unpaid after it has become due and payable', and thus one that was capable of being commenced by the Deputy Commissioner in his official name. A written submission addressing this issue was filed on behalf of the Deputy Commissioner after the conclusion of oral argument. A responding submission was filed on behalf of the defendants, to which the Deputy Commissioner replied.

17 The Deputy Commissioner contended that s 255-5(2) of schedule 1 conferred power on him to bring the proceeding and that the expression 'to recover an amount of a tax-related liability' should be given a liberal construction. Reliance was placed upon the decisions in Bluehaven Transport Pty Ltd v Commissioner of Taxation,[6] DCT v Broadbeach Properties Pty Ltd,[7] Re W Carter Smith; Ex Parte DCT,[8] Hutchins v Commissioner of Taxation,[9] and DCT v Casualife Furniture International Pty Ltd[10] as supporting 'a wide construction of the power conferred on the Deputy Commissioner under s 255-5(2)'.[11] It was said that the power under s 255-5(2) 'is not confined to initiating proceedings which will, in themselves, directly result in the payment to the Commissioner of an amount of a tax-related liability, but extend[s] to the initiation of proceedings which form part of a process of such recovery, involving a number of discrete litigation steps' and that the 'current declaratory proceedings are proceedings of that nature and have been brought 'in the course of' recovery proceedings in the relevant sense.'[12] Further, the Deputy Commissioner asserted that '[t]he only purpose of these proceedings is the recovery of taxation liabilities.'[13]

18 In Sarkis v Deputy Commissioner of Taxation (2005) 59 ATR 33 ('Sarkis'), a case where the Deputy Commissioner had been granted judgment against the taxpayers for an amount of over $5,000,000, the Court of Appeal confirmed the appropriateness of the Deputy Commissioner seeking declaratory relief similar to that sought in the present case. Nettle JA, with whom Warren CJ and Charles JA agreed, upheld the trial judge's finding that the Deputy Commissioner did have standing to seek the sort of declaratory relief that was awarded. His Honour found that the question raised was a real one, concerning the real interest of the parties and not a theoretical one. He said:

In this case the Deputy Commissioner had a real interest in establishing that Fadi and Claudette Sarkis [the taxpayers] were beneficially entitled to the property. She wished to ensure that in the event of execution proceedings the Sarkis's could not contend that the property was immune from execution. It is not to the point that the question might just as well have been determined in subsequent proceedings or even that that is the way in which it would usually be done. A plaintiff is not necessarily to be refused declaratory relief just because another form of relief is available, and here a declaration was a more satisfactory remedy because it enabled the Deputy Commissioner to ascertain in advance of execution proceedings whether the property would be available for execution. Practically speaking, it would have been a waste of time and resources to insist that execution proceedings be instituted in order to determine whether the property was available for execution.[14]

19 In Sarkis, however, the Court of Appeal was not addressing the question of whether the proceeding was relevantly one brought 'to recover an amount of a tax-related liability that remains unpaid after it has become due and payable' within the meaning of s 255-5(2) and thus whether the Deputy Commissioner had standing to seek the declaratory relief.[15] Rather, the argument before the Court focussed on whether the Deputy Commissioner had a sufficient interest in the subject matter of the proceeding to substantiate standing. The Court of Appeal found that in circumstances where the Deputy Commissioner had been granted judgment against the taxpayers, the Deputy Commissioner demonstrably had a real interest in raising the question of whether the taxpayers were beneficially entitled to the property, and thus in seeking the declaratory relief.

20 Recently, in Deputy Commissioner of Taxation v Karas (2013) 278 FLR 402 ('Karas'), the defendants applied to strike out a statement of claim brought by the Deputy Commissioner, or alternatively to have the averment in the preamble struck out, on the basis that the Deputy Commissioner did not have standing to prosecute the proceeding. The only relief sought by the Deputy Commissioner in the proceeding was declaratory relief and there was no issue that the first defendant was indebted to the Deputy Commissioner in the sum of $47,147,983. The defendants contended that the Deputy Commissioner was required to establish something more than being an unsecured creditor in order to have standing to make the claims advanced in the proceeding.

21 Elliott J dismissed the application to strike out the proceeding for want of standing, finding that the case was indistinguishable from Sarkis. However, in dealing with the application, his Honour found that there was 'no legitimate basis' upon which the proceeding could be characterised as a proceeding to recover 'an amount' of a tax-related liability within the meaning of s 255-50(1) of schedule 1 of the Taxation Administration Act.[16] He said:

Senior [C]ounsel for the Deputy Commissioner properly conceded that this proceeding relates to recovery of an amount of a tax-related liability, rather than being a proceeding to recover such an amount. He also accepted that the proceeding was but a step in relation to the ability to recover. However, he submitted that the language of s 255-50(1) should be construed broadly to include such concepts.

In my view there is no legitimate basis upon which this proceeding can be characterised as a proceeding to recover an amount.

If the Deputy Commissioner succeeds in obtaining the declarations sought, and does nothing further, he would recover nothing. To actually recover any part of the judgment debt, the Deputy Commissioner needs to take steps which are entirely outside this proceeding. Moreover, there is no need to bring this proceeding to take those steps; that is, this proceeding is not a necessary step to recovery. It is a step the Deputy Commissioner has chosen to take, to use the words of Nettle JA in Sarkis, to 'ensure that in the event of execution proceedings [the taxpayer] could not contend that the property was immune from execution'.

The conclusion I have reached is not just a question of form, it is a matter of substance.[17]

Accordingly, his Honour struck out the preamble to the statement of claim.

22 In this case, while no application was made to strike out the preamble, the same reasoning as Elliott J gave in Karas would apply. That is, the present proceeding could not be characterised as one to recover 'an amount' of a tax-related liability within the meaning of s 255-50(1) of schedule 1 of the Taxation Administration Act; rather, it is merely a proceeding that relates to the recovery of such an amount. Thus the question arises whether, in those circumstances, the Deputy Commissioner is empowered to commence a proceeding in his official name in the Supreme Court seeking purely declaratory relief.

23 The long title to the Taxation Administration Act describes it as '[a]n Act to provide for the administration of certain Acts relating to Taxation, and for purposes connected therewith'. Section 3A of the Taxation Administration Act provides that '[t]he Commissioner has the general administration of this Act.' (A similar power is conferred on the Commissioner under s 8 of the Income Tax Assessment Act 1936 (Cth) and s 1-7 of the Income Tax Assessment Act 1997 (Cth)). Section 7 provides that '[t]here shall be such Deputy Commissioners of Taxation as are required', and s 8 permits the Commissioner to delegate certain powers or functions, as follows:

(1) The Commissioner may, either generally or as otherwise provided by the instrument of delegation, by writing signed by the Commissioner, delegate to a Deputy Commissioner or any other person all or any of the Commissioner's powers or functions under a taxation law or any other law of the Commonwealth or a Territory, other than this power of delegation.

(4) A delegation under this section does not prevent the exercise of a power or the performance of a function by the Commissioner.

24 Relevantly for present purposes, s 36 of the Supreme Court Act 1986 (Vic) ('Supreme Court Act') empowers the Court to make binding declarations of right without granting consequential relief. The power to seek declaratory relief is one that would be available to the Commissioner when exercising his powers under the umbrella of the general administration of the Taxation Administration Act or one or other of the Income Tax Assessment Acts. What is not clear, however, is whether the power to seek only declaratory relief, absent any relief directed to recovery of an amount of a tax-related liability, is one that could be delegated to a Deputy Commissioner. In that regard, the power under s 36 of the Supreme Court Act would not readily fall within the description of a power or function capable of delegation under, for example, s 8 of the Taxation Administration Act, namely the Commissioner's power or function 'under a taxation law or any other law of the Commonwealth or a Territory.'

25 Nevertheless, in his supplementary written submissions and reply submissions, the Deputy Commissioner sought to rely upon two separate instruments headed in each case 'General Delegation' under the Taxation Administration Act and dated 2 July 2012 and 13 December 2011 respectively. These instruments were produced as attachments to the Deputy Commissioner's primary and reply submissions respectively. The defendants objected to the Court receiving evidence of a delegation in this way, after evidence had closed. Further, the defendants noted that the instrument dated 2 July 2012 post-dated the commencement of the proceeding.

26 Perusal of the two instruments reveals that neither instrument deals expressly with powers available under the Supreme Court Act. This is perhaps not surprising given the limited scope of the power to delegate conferred by s 8. Furthermore, each of the instruments expressly excludes from the 'general delegation' the Commissioner's powers under s 3A of the Taxation Administration Act concerning the general administration of the Act. Thus, I am not satisfied that even if the instruments were received in evidence, either delegation would assist to establish the standing of the Deputy Commissioner to seek declaratory relief in isolation from the recovery of 'an amount' of a tax-related liability within the meaning of s 255-50(1) of schedule 1 of the Taxation Administration Act.

27 The Deputy Commissioner also advanced a further submission to the effect that if, contrary to his earlier submissions, the Court were to find that s 255-5(1) does not empower the Deputy Commissioner to bring this proceeding, then he applied instanter for orders that the Commissioner of Taxation be substituted as plaintiff pursuant to rules 9.06(b)(i) and 9.06(c) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) ('Supreme Court Rules'). The Deputy Commissioner confirmed in his reply submissions that he 'has the consent of the Commissioner to propose, if necessary, that the Commissioner be substituted as the Plaintiff in these proceedings.'[18]

28 Rule 9.06 of the Supreme Court Rules permits an order for substitution of a plaintiff to be made '[a]t any stage of a proceeding'. The Deputy Commissioner contends this to be the appropriate course having regard to the manner in which the trial has been conducted, the lack of any prejudice to the defendants and the absence of any objection by the defendants to the standing of the Deputy Commissioner.[19]

29 The defendants now appear to oppose that course and contend that the proper plaintiff for a declaration of the kind sought in this proceeding is the liquidator of Glen and that accordingly, the Court should refuse to grant the declaratory relief sought by the Deputy Commissioner.

30 For the reasons set out above, I am satisfied there is a real doubt about the standing of the Deputy Commissioner to seek only declaratory relief in this proceeding. The point is an important one if any declaratory relief is to be granted, and the proceeding should not be allowed to founder on a technical issue.

31 In circumstances where the proceeding was conducted by all parties on the basis that there was no effective substance to the issue of standing, I am not satisfied that the defendants will suffer any prejudice if the substitution sought by the Deputy Commissioner is granted. Moreover, having regard to the requirements of the Civil Procedure Act 2010 (Vic) ('Civil Procedure Act') and, in particular, the overarching purpose and the requirements imposed under s 8, that the Court must seek to give effect to it in the exercise of any of its powers, and under s 9, that the Court shall further the overarching purpose in making any order or giving any direction in a civil proceeding, an order for substitution will best achieve those objectives.

32 For the reasons which follow, I am also satisfied that there is a proper basis for the Commissioner to seek declaratory relief in the terms sought. Here, as in Sarkis, the Commissioner has demonstrated a real interest in establishing that Glen was beneficially entitled to the shares in Jinacan.[20] If granted, the relief sought will be of utility in the sense that it will enable the Commissioner to ascertain in advance of execution proceedings that property will be available for execution. In my view, the Commissioner is a proper plaintiff and it is not to the point that such a proceeding might also have been commenced by the liquidator of Glen. Accordingly, I will allow the Commissioner to be substituted as plaintiff.

The burden of proof referable to the declaratory relief sought by the Deputy Commissioner

33 At the outset of closing submissions, Counsel for the defendants, raised an issue about the burden of proof that applies in respect of the various declarations sought by the Deputy Commissioner. He pointed to the first declaration sought, concerning Glen's beneficial ownership of the Jinacan shares, and characterised it as being a 'positive' declaration, whereas the second and third declarations sought, concerning the alleged invalidity or ineffectiveness of the Declarations of Trust signed by Mr Haritos and Mrs Haritos and Mrs Kyritsis on 11 August 2006, were in the nature of 'negative' declarations. He contended that in the case of the 'negative' declarations, the Deputy Commissioner has to satisfy a more difficult onus in order to establish an entitlement to the relief sought, in the sense that he needs not only to make out a cause of action as a foundation but also needs to negative any defence to that cause of action.

34 In support of this contention, Counsel relied on a decision of McClelland CJ in Equity in Massoud v NRMA Insurance Ltd (1995) 62 NSWLR 657 ('Massoud') where the question of onus in the context of declaratory relief was considered and dealt with in some detail by his Honour. Massoud was a case where the defendant, an insurer, had cancelled Mr Massoud's policy, on the basis (so it alleged) that he had knowingly made false statements in connection with a claim. Mr Massoud responded by issuing proceedings seeking declaratory orders that the insurer's purported avoidance of the policy was wrongful and void. McClelland CJ found that a declaration having been sought, Mr Massoud was required to prove that he had not made false statements, notwithstanding the fact that if the matter had proceeded in the usual way, the legal or evidentiary onus may have been the other way. His Honour summarised the guiding principles by which the incidence of the onus of proof is to be determined, as follows:

(1) a party who seeks relief has the burden of satisfying the court of facts which (in the absence of proof of other facts) would justify the grant of that relief;

(2) what those facts are depends primarily upon:

(a) the nature of the relief sought; and

(b) the operation of any relevant presumptions;

(3) in the case of relief by way of declaratory order, the precise terms of the declaration assume particular significance in that (subject to any relevant presumption) the party seeking the declaration has the burden of proof of any matter which is a necessary element of the declaration sought (even if in proceedings by that party for relief of another kind, or in proceedings by the other party, that matter would not arise unless raised (and the burden of proof consequently assumed) by the other party).[21]

See also Hume v Munro (No 2) [1943] HCA 7; (1943) 67 CLR 461 where Latham CJ said:

... In an action for a declaration that a right alleged to be claimed by the defendant does not exist the onus rests upon the plaintiff of establishing first that a claim sufficiently definite and intelligible in its terms to be a proper subject of adjudication has been made against him by the defendant. ... Next, the plaintiff seeking a declaration denying any possible foundation for the alleged claim of right must exhaust the possibilities and show that the claim cannot possibly be supported. It is not for the defendant in such a proceeding to make a claim and to justify that claim.[22]

35 In my reasons set out below dealing with the declarations of invalidity sought, I have considered the entirety of the evidence adduced and reached the requisite state of satisfaction for the making of such declarations. I am satisfied that the purported declarations of trust cannot possibly be supported and that the Deputy Commissioner has established a proper foundation for the declarations sought.

Evidence given by or on behalf of the Deputy Commissioner

36 The case advanced by the Deputy Commissioner at trial relied for the most part on documentary evidence. However, evidence was given by Mr Aris Zafirou, an Executive Level Officer in the Australian Public Service, employed in the Strategic Recovery branch of the ATO as the Operational Director for Debt - Project Wickenby, to explain the ATO's electronic record keeping systems, the liquidation of Glen and steps taken by the ATO to seek to recover Glen's RBA deficit debt. The evidence given by Mr Zafirou was of most relevance in the context of the second limb argument advanced by the Deputy Commissioner. Mr Zafirou gave evidence honestly and frankly and sought to assist the Court wherever possible. His evidence should be accepted in its entirety. Counsel for the defendants did not suggest to the contrary.

37 In addition to calling evidence from Mr Zafirou, the Deputy Commissioner relied upon a large body of documentary material. In all, six volumes of Court Book were received in evidence and made the subject of a joint tender by the parties. They contained corporate records, taxation records and other documents that had been obtained from ASIC by conducting searches of Jinacan, Glen and other related entities, documents obtained on subpoena from financial institutions such as the Commonwealth Bank of Australia ('CBA'), and affidavit material that had been filed by or on behalf of the defendants in opposition to the various freezing orders made by the Court commencing in June 2009.

38 The Deputy Commissioner contended that the documentary evidence tendered establishes unequivocally that as at 11 August 2006, the beneficial owner of the four Jinacan shares was Glen.

39 Before closing the Deputy Commissioner's case, Senior Counsel for the Deputy Commissioner, Mr Crutchfield SC, stated that 'we intend to hold the defendants to their pleaded case'. This precautionary statement was made against a background where interlocutory orders had been made for the provision of 'outlines' of the substance of the evidence that the defendants proposed to give. However, the 'outlines' filed by them were sketchy and incomplete, and did not address or reflect some of the matters raised in the pleading by way of defence or the arguments foreshadowed by their counsel, Mr Mitchell, in their written and oral outline of opening submissions.

40 In essence, the defendants' pleaded case was that:

(a) Glen never in fact had an interest in Jinacan;[23]

(b) Glen did not beneficially own shares in Jinacan;[24]

(c) at all material times, Mrs Haritos and Mrs Kyritsis were the beneficial owners of two Jinacan shares each;[25]

(d) the distributions of Jinacan dividends to Glen, and the financial statements showing Glen as the owner of the four Jinacan shares, were errors made by Gillards, the accountants.

41 In seeking to meet that pleaded case, the Deputy Commissioner relied in particular on:

(b) minutes of meeting of directors and shareholders of Jinacan, the majority of which had been signed by Mr Haritos;

(c) the initial declaration of trust made by Mr Haritos dated 25 August 1987;

(d) financial statements prepared by Gillards up to the date of signing of the August 2006 Declarations of Trust (and excluding the 2005 income year statements, which were prepared after that date);

(e) Jinacan's annual returns submitted to ASIC, the majority of which had been signed by Mr Haritos or Mr Kyritsis; and

(f) other documents comprising books of the companies.

42 The Deputy Commissioner contended that each of those documents relied upon was prima facie evidence of its contents. In this regard, he relied upon s 1305 of the Corporations Act, which provides:

(1) A book kept by a body corporate under a requirement of this Act is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book.

(2) A document purporting to be a book kept by a body corporate is, unless the contrary is proved, taken to be a book kept as mentioned in subsection (1).

Under s 9 of the Corporations Act, the term 'books' includes a register; any other record of information; financial records however compiled, recorded or stored and a document.

43 In Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1, Austin J explained the effect of s 1305(1) in the following terms:

The statement in s 1305(1) that the company's books are prima facie evidence of a matter stated or recorded in them does more than merely to convey that they are the starting point to proof or a 'first view'. All other things being equal, the fact that a matter is stated in a book kept by a company is sufficient to prove that matter in civil proceedings. That does not reverse the onus of proof in the proceedings in any general way, but it means that the tendering of the book is evidence of the matter recorded in it, and that matter will be thereby proven unless other evidence convinces the tribunal of fact to the contrary, on the balance of probabilities.

Section 1305(1) does not make the company's books conclusive evidence of the matters they contain, in the sense of requiring the tribunal of fact to make a finding in terms of the content of the books in the absence of proof to the contrary by the opposing party. The books are prima facie evidence of the matters stated in them, but the weight of that evidence is to be measured in accordance with the common sense of the tribunal of fact.[26]

44 Relevantly, in respect of the minutes of meetings of directors and shareholders, s 251A of the Corporations Act provides:

(1) A company must keep minute books in which it records within 1 month:

(a) proceedings and resolutions of meetings of the company's members; and

(b) proceedings and resolutions of directors meetings (including meetings of a committee of directors)

(2) The company must ensure that minutes of a meeting are signed within a reasonable time after the meeting by 1 of the following:

• (a) the chair of the meeting;
• (b) the chair of the next meeting.

(6) A minute that is so recorded and signed is evidence of the proceeding, resolution or declaration to which it relates, unless the contrary is proved.

45 However, the Deputy Commissioner argued that, irrespective of whether the technical requirements of s 251A are satisfied, the minutes are admissible as business records because they were maintained systematically and methodically at all relevant times by Gillards (the accountants), and thus are evidence of the truth of the matters they represent. In this regard, the Deputy Commissioner relied on the decision of the High Court in Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345, where their Honours in the plurality explained the reliance that may be placed on minutes as a contemporaneous record, stating:

But the minutes were more than just one of several pieces of evidence from whose united force ASIC sought to have the tribunal of fact draw an inference. The minutes were a formal and near contemporaneous record (adopted by the board as an accurate record) of the proceedings at the meeting. The minutes were evidence of what they represented. They were more than a foundation for some further inference. Absent evidence to the contrary, ASIC proved its case by tendering the minutes and, through the evidence of Mr Baxter, identifying the document referred to as the 'ASX Announcement'. [27]

Evidence given by or on behalf of the defendants

46 The Deputy Commissioner's first limb case rests primarily upon the contemporaneous documentary evidence, and does not rely upon adverse credit findings being made.[28] Nevertheless, I propose to make some brief observations about the witnesses who were called by the defendants to give evidence to challenge the accuracy of the documentary records.

47 Oral evidence was given by each of the defendants (Mr Haritos, Mrs Haritos and Mrs Kyritsis), their accountant, Mr Leon Moscovitch, and the liquidator of Glen, Mr Samuel Richwol. The defendants argued that this oral evidence effectively contradicted or raised questions about the accuracy of the information recorded in the documents relied upon by the Deputy Commissioner. Much of the evidence adduced by or on behalf of the defendants at trial had not been outlined in their summaries of evidence. Further, and perhaps more importantly, little if any of the evidence given by Mr and Mrs Haritos and Mrs Kyritsis was corroborated by any written documentation or by any independent witness.

48 Mrs Kyritsis was the first of the defendants to give evidence. She is the sister of Mr Haritos and the wife of Mr Kyritsis. Neither Mr Haritos nor Mrs Haritos was present in Court when she gave her evidence. Mrs Kyritsis had a poor recollection of the detail of the transactions in issue and the corporate affairs of the companies involved. She readily admitted that she left most of the business to her husband and her brother. For the most part, she responded frankly to questions asked, both in examination in chief and cross-examination, often admitting that she had no recall of the matter, but acknowledging that she had signed relevant documents put before her. She purported to have a good recollection about the initial purchase of 624 Sydney Road and how and why it was purchased, and her resignation as a director of Glen in February 2005.

49 Mrs Haritos was the next defendant to give evidence. She was a late inclusion in the list of witnesses to be called on behalf of the defendants. A brief summary of her evidence was provided on 19 March 2014 in advance of her being called on 20 March 2014. Mr Haritos was not present in Court when she gave evidence.

50 The substance of the evidence given by Mrs Haritos was very similar to that of Mrs Kyritsis. She also had a poor recollection of the detail of the transactions in issue and the corporate affairs of the companies involved, and readily admitted that she left most of the business to her husband. She also purported to have a reasonably good recollection about the initial purchase of 624 Sydney Road and how and why it was purchased, and her resignation as a director of Glen in February 2005. Once again, however, there was a lack of detail in the evidence she gave about the purchase of the property and the means by which it was funded, and no supporting documents were produced.

51 When Mr Haritos gave evidence, both his wife and his sister (who by then had already given their evidence) were present in Court for much of the time. Mr Haritos is a successful businessman. He undertook tertiary education at RMIT, holds directorships in a number of companies and has been a director for more than 25 years. He said that in the early days he did not have a good understanding of his obligations as a company director, but he has 'got a fair understanding today.'

52 Mr Haritos was a less impressive witness than either his wife or his sister. His evidence lacked the frankness that was evident in many of the responses given by the women. He also sought to give long-winded answers and explanations in response to questions. On some occasions, when asked about particular documents his response was framed in terms that appeared to suggest he did not understand the basics of the transaction, or was incredulous at what the document showed. For example, under cross-examination, in response to a question about the initial share transfers and allotments that took place when Jinacan was purchased as a shelf company on 23 August 1987, Mr Haritos responded:

And when my solicitor completed the purchase of the company, he told me to take it to my accountants. So the property purchased in Sydney Road goes into Jinacan. How can me and Alex possibly hold a one share each of for [sic] in the company, in Jinacan, which meant that we would have owned half the premises. That was not the intention. That's not what the girls' money went in for.

(emphasis added)

53 At other times, he sought to convey the impression that he simply did what the accounting firm of Gillards told him to do - holding meetings as directed, signing important documents without understanding them and not having any real understanding of what had taken place - and suggested that Gillards had simply mucked everything up. For the most part, I was not persuaded by his evidence. Gillards and Mr Moscovitch had performed work for Mr Haritos and Mr Kyritsis and their companies over many years. Mr Haritos never challenged Gillards or Mr Moscovitch about any of the work undertaken by them, or the accuracy of what was recorded in those documents, and he paid their bills on a regular basis. I think it is most unlikely that Mr Haritos did not understand the affairs of the corporate entities involved, particularly Jinacan and Glen, and what was happening with them over time.

54 The defendants put forward their accountant, Mr Moscovitch, a director of Gillards, as a person whose evidence should be accorded real weight because he 'is independent and impartial' as he 'no longer provides services to [Mr Haritos] his family or their associated entities.'[29] Mr Moscovitch gave his evidence candidly and frankly. He said that he had suffered some health issues and had gone through an illness in May 2006. He acknowledged that there were some matters he could not recall, and that sometimes he could not readily explain what had taken place. But for the most part, in giving his evidence, Mr Moscovitch sought to assist the Court.

55 Mr Richwol is a liquidator, with the firm O'Keefe Walton Richwol. He was appointed as the liquidator to Glen following a meeting of creditors in October 2006. Mr Richwol gave evidence about the events concerning Glen being placed in liquidation, and work undertaken by Mr Con Kokkinos, a manager with his firm, who handled the Glen file under Mr Richwol's supervision and chaired the relevant meetings of creditors of Glen. The evidence given by Mr Richwol is of most relevance in the context of the second limb argument advanced by the Deputy Commissioner.

56 Mr Richwol gave his evidence candidly and frankly and sought to assist the Court.

The defendants' application for leave to amend their defence

57 For the most part, the evidence given by Mr Moscovitch supported a different version of events to that advanced by the defendants at trial. In my view, the fairly consistent theme of Mr Moscovitch's evidence was that the four shares in Jinacan were beneficially owned by Mr and Mrs Haritos and Mr and Mrs Kyritsis as to one share each.[30] This contradicted the evidence given by the defendants themselves, to the effect that at all material times, Mrs Haritos and Mrs Kyritsis were the beneficial owners of two Jinacan shares each.

58 In virtually the final breath of their closing submissions, Counsel for the defendants sought leave to amend their defence to embrace Mr Moscovitch's version of events as an alternative argument. The Deputy Commissioner strongly opposed the application for leave, primarily on the basis of the evident prejudice that would arise if the late amendment were granted. Having expressly stated at the closing of the Deputy Commissioner's case that he was holding the defendants to their pleaded case, Senior Counsel contended that he was not required to cross-examine witnesses or tender documents to meet a case he did not know existed.

59 As I have noted, Mr Moscovitch's version of events on several important issues was contrary to the evidence given by the defendants themselves. No notice of that alternative case had been given to the Deputy Commissioner. The matter had been conducted, and witnesses had been cross-examined, on the basis that the defendants contended the shares in Jinacan were beneficially owned by Mrs Haritos and Mrs Kyritsis as to two shares each. The evidence given by the defendants did not support the alternative case and the Deputy Commissioner argued that he might have run the case quite differently had he known that, contrary to what was pleaded, it would be contended that the shares in Jinacan were held as to one share each by Mr & Mrs Haritos and Mr & Mrs Kyritsis. In those circumstances I refused leave to amend. In so doing, I also referred to the requirements of the Civil Procedure Act, and in particular the requirement stated in s 8 that the Court, in exercising any of its powers, must seek to give effect to the overarching purpose of facilitating 'the just, efficient, timely and cost-effective resolution of the real issues in dispute.'[31]

Factual material advanced on the first limb of the Deputy Commissioner's case

60 I turn now to consider the factual material advanced by the Deputy Commissioner on the first limb of his case as a foundation for the declaratory relief sought. Where relevant, I will also refer to evidence that was given about those matters by or on behalf of the defendants.

61 In 1987, Mr Haritos was working in the real estate industry. Prior to the purchase of Jinacan, Mr Haritos had identified the commercial property at 624 Sydney Road, on which a supermarket was operated, as a good investment prospect. Some discussion took place between the Haritos and Kyritsis families, which culminated in Mrs Haritos and Mrs Kyritsis apparently entering into a contract to buy the property. A short time later, Jinacan, a newly incorporated shelf company, was nominated as the purchaser of the property under the contract of sale.

Purchase of Jinacan by the Haritos and Kyritsis families

62 On 23 August 1987, Jinacan was effectively 'sold' to the Haritos and Kyritsis families and used as a corporate vehicle to facilitate the purchase of 624 Sydney Road. A succession of meetings of the directors of Jinacan took place that day to give effect to the change in ownership. At the first meeting, held on 23 August 1987 in the presence of the initial directors, the initial directors resigned and each of Mr and Mrs Haritos were appointed as directors in their place, each of them having consented to act as directors. The initial secretary also resigned and Mr Haritos was appointed as the new secretary and public officer.

63 On the same day, each of Mr and Mrs Haritos respectively also became registered as the holder of one ordinary share in Jinacan in place of the subscriber shareholders, and the registered address of Jinacan was changed to 5 Grattan Street, Prahran. The minutes record that a second meeting of directors followed, held in the presence of Mr and Mrs Haritos, and resolutions were passed recording that two shares be issued at par, one to each of Mr and Mrs Kyritsis (then known as 'Curtis'), and that they also be appointed as directors. Later that day, the names of each of Mr and Mrs Haritos and Mr and Mrs Kyritsis were entered on the Jinacan register of members and also on the register of directors.

Share transfers and initial declaration of trust on 25 August 1987

64 Two days later, on 25 August 1987, a meeting of the directors of Jinacan was held at 5 Grattan Street, Prahran, with each of Mr and Mrs Haritos and Mr and Mrs Kyritsis recorded as being present. The minutes, signed by Mr Haritos as Chairman, record the approval of certain share transfers, as follows:

Resolved that the following transfers as submitted to the Meeting be approved and that the new share certificates be issued to the transferee under the common seal of the company.

G. Haritos (held in trust for A. & J.P. Cleaning Service Pty Ltd)

65 That same day, five security transfer forms were executed and duty stamps were affixed and cancelled. The first four recorded the transfer by each of Mr and Mrs Haritos and Mr and Mrs Kyritsis respectively of their one ordinary share in Jinacan to Glen (then A & JP Cleaning Service Pty Ltd) for consideration of $1.00. At that time, Glen operated a commercial cleaning business and Mr Haritos and Mr Kyritsis were its directors.

66 The fifth transfer, from Glen to Mr Haritos, was expressed to be 'held in trust' for Glen (then A & JP Cleaning Service Pty Ltd) and the consideration for that transaction was stated as 'transfer to trustee'. These transfers were then entered in both the Transfer Journal and the Register of Members of Jinacan.

67 A document entitled 'Declaration of Trust in respect of shareholding' was also executed by Mr Haritos on 25 August 1987 ('the initial Declaration of Trust'). The declaration stated:

I/We the undersigned [George Haritos] hereby declare that the following shareholding registered in my/our name in the following company/ies is held by me/us IN TRUST FOR the undermentioned beneficial owner.

I/We further declare that I/We have no title right or interest whatsoever in the said shareholding and agree to deal with the said shareholding at such time and in such manner as the undermentioned beneficial owner may require.

68 The appointment of officers and other transactions undertaken on 25 August 1987 were recorded in the Register of Officers, the Transfer Journal and also the Register of Members of Jinacan.

Accounting services provided to the Haritos and Kyritsis families and their businesses

69 In August 1987, when 624 Sydney Road was being purchased, the accounting firm of Gillards provided accounting services to both the Haritos and Kyritsis families and their businesses. Gillards is an incorporated accounting practice located in Malvern, Victoria.

70 Mr Moscovitch, a director of Gillards, said that he first undertook work for the Haritos and Kyritsis families and their associated entities in 1986, commencing with work undertaken for their contract cleaning company, Glen (then A & JP Cleaning Service Pty Ltd), and Jinacan shortly thereafter. Mr Moscovitch supervised the accounting work performed by members of Gillard's staff for them. Mr Moscovitch said Gillards did the accounting work for all of the corporate entities and for the individual returns of Mr Haritos and his wife, and Mr Kyritsis and his wife. He said Gillards did so on instructions and information provided by the husbands, mostly Mr Haritos but Mr Kyritsis also to a lesser extent, and never from their wives. Gillards was also involved in incorporating entities such as Kyritsis Nominees and Diamond Sun and probably also Grattan Heights, although Mr Moscovitch did not recall any personal involvement in the latter at the time of its incorporation. Each of those corporate entities was set up for the purpose of making property acquisitions.

71 On or about 25 August 1987, prior to the settlement of the purchase of 624 Sydney Road, Mr Haritos saw Mr Moscovitch at Gillards. Mr Haritos delivered the corporate secretarial file for Jinacan and gave instructions to him, including about the holding of the four issued shares in Jinacan. The evidence given by each of Mr Haritos and Mr Moscovitch presented different versions of what those instructions were.

72 When giving his evidence in chief, Mr Moscovitch was asked about the substance of his initial conversation with Mr Haritos concerning the ownership of the shares in Jinacan, as follows:

COUNSEL FOR THE DEFENDANTS: When Mr Haritos came to you with Jinacan and the purchaser of the property, were there discussions about shareholding, the shareholders of Jinacan?---I brought up with George the issue of why the shares were owned in the company.

And what was George's answer?---And George's answer to that was that he did not want to involve the wives' names in - or the wives in the company at that time but they were the beneficial owner of shares.

What was your response to that?---I didn't necessarily agree with it and had - I did point out to George had he - because George brought all the documents to me initially and I said I would not have set the structure up that way but that was the way George was, being he's - being of Greek background his attitude was that he handles all the affairs, his wife has no direct involvement even though it's for her benefit. He's grown up that way, he's brought his kids up that way - - -

...

COUNSEL FOR THE DEFENDANTS: I'm sorry, Mr Moscovitch. Please go on?---Yeah. And he's brought up his family that way and that's just been the way George is. He - - -

73 Mr Moscovitch said that he did not necessarily agree with that and he pointed out to Mr Haritos that he would not have set up the structure that way, with the corporate entity holding the shares, in circumstances where they were for the family. He said that as best he could recall, when he said to Mr Haritos that he would not have set the structure up this way, Mr Haritos said that he wanted to leave it that way because he did not want 'the girls' names involved directly'.

74 Mr Moscovitch said that his firm did not prepare the initial share transfers dated 23 August 1987. He said his firm, and usually staff in the corporate secretarial area working under his supervision, prepared most of the corporate documentation for Jinacan. He thought their work probably commenced with the share transfers dated 25 August 1987, from each of Mr and Mrs Haritos and Mr and Mrs Kyritsis to Glen (then A & JP Cleaning Service Pty Ltd)', but he could not be sure about that. Mr Moscovitch said that the fifth share transfer executed that day, from Glen to Mr Haritos as trustee for Glen, was undertaken because at that time the law required a minimum of two shareholders for each company.

75 In summary, the evidence Mr Moscovitch gave about the preparation of Jinacan's corporate books and records was that:

(a) Gillards carried out the company secretarial function for Jinacan;

(b) Gillards internal records were in most cases kept up to date and were generally accurate;

(c) annual documents were produced by Gillards based on those records;

(d) corporate documents were usually prepared using proforma documents as a base and they were often pre-filled by Gillard's staff;

(e) a member of Gillards staff would check the ASIC returns before filing them; and

(f) a copy of the forms would be printed out in hard copy and stored.

76 The defendants, on the other hand, contended that 624 Sydney Road was purchased for Mrs Haritos and Mrs Kyritsis as to 50 per cent each. They said that, upon advice given by their then solicitors, they nominated Jinacan as the purchaser. In their defence, the defendants say that at all times, Mrs Haritos and Mrs Kyritsis were the beneficial owners of two shares in Jinacan and 'Glen never in fact had an interest in Jinacan nor did it ever beneficially own shares in Jinacan'.[32] They contend that the four shares were beneficially owned by Mrs Haritos and Mrs Kyritsis as to two shares each.

77 Mrs Kyritsis said that in 1987, Mr Haritos was working in real estate and he came across the supermarket property at 624 Sydney Road. The four of them, Mr and Mrs Haritos and Mr and Mrs Kyritsis, discussed it and decided it would be a good investment.

78 Mrs Kyritsis said that she contributed money of her own to the purchase - from her earnings and money from her parents and from her in-laws - and Mrs Haritos did likewise, contributing her share from earnings and gifts from her parents. She could not recall precisely, but thought that she and Mrs Haritos contributed about $150,000 each. A little later on both families sold some properties in Caulfield, in Keeron Street, Fitzgibbon Crescent and Burrindi Road, that were also used to fund the purchase. The gist of Mrs Kyritsis' evidence was that from day one Jinacan, and thus 624 Sydney Road, would belong to Mrs Haritos and her and that it was to be for their benefit in case anything went wrong. She said 'we owned Jinacan, Effie and I, ... that was ours in case something went wrong.' She added, '[t]hat's what we understood from the beginning, that it was ours.' She said that she and Mrs Haritos generally deferred to their husbands to handle business dealings. Mrs Kyritsis did not know whose idea it was to undertake the purchase in the name of Jinacan and she said she was not involved in that decision.

79 No documentation concerning the purchase of 624 Sydney Road, such as the contract of sale, settlement statement, etc, was provided by the defendants by way of discovery of documents. In that regard, Mrs Kyritsis said that she did not think anyone had asked her to find and provide documents for the purpose of this proceeding - she admitted that she did not understand her obligations to make discovery, and no one had explained them to her.

80 Mrs Kyritsis said she recognised her signature on the security transfer form pertaining to the share in Jinacan that she held initially, but she was unable to recall anything about the creation of the document, her execution of the transfer or any discussions about selling or transferring her share. She noted, however, that the relevant events had taken place nearly 30 years ago. Perusal of the corporate documentation and records did not assist to refresh her memory.

81 The evidence given by Mrs Haritos was very similar in substance to that given by Mrs Kyritsis. She said that her husband worked in real estate and ran a cleaning business in 1987 when they first discussed the prospect of purchasing 624 Sydney Road. At that time, she and her husband owned a house in Kooyong Road, Caulfield and they jointly owned two houses with Mr and Mrs Kyritsis in Keeron Street, Caulfield. Mrs Haritos also had money of her own, having worked since she was 15 years old, and when she married she was gifted the proceeds of a property her father sold in Bowen Street, Prahran. She could not recall the exact amount she contributed to the purchase of 624 Sydney Road. She recalled signing the contract to purchase the property, and that it was later registered in the name of Jinacan, but could not recall why or where she went to do so - she said 'I don't recall seeing accountants' but she thought that lawyers were involved.

82 Mrs Haritos said that she did not have any idea about how the acquisition of 624 Sydney Road was to be structured - she said she did not give any instructions and it was her husband, who consulted the lawyers. Under cross-examination, she agreed that she did not care who owned 624 Sydney Road in a legal sense, but said that this was because she knew that a half share belonged to her and the other half belonged to her sister-in-law.

83 Mrs Haritos could not recall the meeting of Jinacan in August 1987 approving the transfers of shares nor the signing of the security transfer form in 1987 recording the transfer by her of her initial one ordinary share in Jinacan to Glen (then A & JP Cleaning Service Pty Ltd) for consideration of $1.00.

84 Mrs Haritos gave evidence that the shares in Jinacan were held beneficially by her and Betty because 'it's always been the case' and she did put a lot of personal money into it. The property was security for her and her sister-in-law - they had young children at the time and it was 'an investment that would have secured our future.'

85 Mr Haritos said that in 1987, when he was looking around at properties, 624 Sydney Road was the one he identified as being the most feasible - it was close to the city, and it had growth and stability of income. Mr Haritos went on to mention, in vague terms, several properties in Caulfield that he said were sold in or around 1987 to fund the purchase of 624 Sydney Road - a property in Kooyong Road, another two side by side in Keeron Street, the Kyritsis residence at 4 Fitzgibbon Crescent and the Kyritsis residence at Burrindi or Baliba Street (he could not recall precisely). He could not recall how much was raised by the sales but said that the selling of the properties, plus whatever money 'the girls' (a reference to his wife and his sister) had or were given at the time, paid for the purchase. Mr Haritos said that his father had also advanced his sister, Mrs Kyritsis, a considerable amount of money. In addition, he said, the property market was booming at that time and all of the properties that the families had earlier purchased were earmarked for development. He said that these other properties were sold after the purchase price was paid, and that in the meantime, finance for the purchase was arranged through a number of financial institutions and mortgage trusts, with mortgages being placed over the properties earmarked for sale.

86 Mr Haritos said that the other properties had been purchased by the families in the names of the relevant individuals jointly rather than in a corporate entity. The purchase of 624 Sydney Road was the first time that he had used a company.

87 Mr Haritos described the conversations that took place between them at the time of purchase as being to the effect that they 'needed to secure something for the girls and the family that was growing at the time.' At that stage, each family had one child. Each family agreed that they would contribute their share to the purchase price, and they committed to selling the other real estate they owned in order for 624 Sydney Road to be paid off. There was only the one registered mortgage to the ANZ Bank at the time of purchase, but Mr Haritos said that he 'would have arranged alternate finance within the banking sector.'

88 Mr Haritos was questioned about the security transfer forms executed in August 1987. He said that he could not remember signing the document but readily acknowledged that it bore his signature, as did the minutes of the directors meeting. He said that it would have been Mr Moscovitch at Gillards that set up the shareholding structure of Jinacan. He said that he gave Mr Moscovitch instructions that 624 Sydney Road was to be 'for the women 50/50' and was 'bought for the security of the girls on a 50/50 basis.'

89 Mr Haritos also gave evidence in chief about the purchase of 624 Sydney Road in the name of Jinacan. He was taken to the declaration of trust of the one ordinary share in Jinacan that was made on 25 August 1987, showing him as the registered holder and Glen (then A & JP Cleaning Service Pty Ltd) as the beneficial owner. He then gave evidence as follows:

COUNSEL FOR THE DEFENDANTS: And on its face what this document does is to declare a trust over the share you hold in favour of Glen which was the company operating the cleaning business. Can you explain to Her Honour why you would do that?---I got no explanation. This was done by Gillards.

It's your signature?---That's my signature.

90 When Mr Haritos was cross-examined about the documents that were executed in August 1987, which show Glen as the beneficial owner of all four shares in Jinacan, he professed not to understand them. Mr Haritos said that until recent times, the contents of these corporate documents were meaningless to him and he had believed that when he signed documents on earlier occasions, he signed them on the basis that they gave effect to the instructions he had given to Mr Moscovitch.

91 Mr Haritos was then taken to the documents recording the share transfers that took place on 25 August 1987, that were apparently prepared by Gillards. He acknowledged that he had signed the share transfers to Glen, the later share transfer from Glen back to him as trustee, and the relevant minutes of meeting giving effect to them, but said that they were not his instructions. He said he simply 'signed where it was indicated'. Senior Counsel for the Deputy Commissioner then put to Mr Haritos the gist of Mr Moscovitch's evidence:

COUNSEL FOR THE PLAINTIFF: Mr Moscovitch said to you, didn't he, that the effect of setting up this structure was that so far as the world was concerned, the shares in Jinacan were going to be regarded as legally and beneficially owned by Glen. He told you that, didn't he?---No.

And he told you that if you wanted to set up a structure whereby the wives would be the owners of the supermarket, this was not the way to do it. He told you that too, didn't he?---No.

Because the effect of this, as it's plain from the document, is that Glen is the beneficial owner of all of the shares in Jinacan. That's right, isn't it?---That's not correct.

...

If you go please to Tab 44. That's a declaration of trust, that you executed on the same day we were looking at, 25 August 1987. Do you see that?---I see the document.

Yes. And by that document you declared that you held your one share in Jinacan on behalf of Glen, didn't you?---No. I was asked to sign the document as where indicated.

Yes. And - what? Are you telling Her Honour you didn't read it?---It wouldn't have made any sense to me. I couldn't.

Well, Mr Haritos, I'll be submitting in due course to Her Honour that Her Honour will reject your evidence that you are some simple cleaner who doesn't understand corporate documents. Do you understand that? What do you say to that?---This document was prepared by Gillards.

Yes?---I did not instruct Gillards to prepare this document.

Well, why didn't you say to Mr Moscovitch, 'Leon, what you've prepared here doesn't reflect my instructions. Fix it up, please'?---My instructions were plain at the beginning and I knew my instructions stood till 2009.

Yes?---I did not know of all this mess that's going on.

92 I regard this evidence given by Mr Haritos as implausible. As noted earlier, Mr Haritos holds directorships in a number of companies and has been a director for more than 25 years.[33] Further, Mr Moscovitch described Mr Haritos as an intelligent and experienced businessman who was familiar with basic financial principles relating to companies and trusts. Mr Moscovitch's evidence was that he raised with Mr Haritos at the outset why it was that the shares in Jinacan were owned by the company and Mr Haritos directed him to leave it that way. In these circumstances, I do not accept that Mr Haritos did not understand the share transactions or the documents recording them.

Paucity of documentation concerning the 1987 events

93 No documentary evidence was produced by the defendants in support of their oral evidence about the sales of other properties undertaken to fund the purchase of 624 Sydney Road, or the financial contributions said to have been made by them, and in particular by each of Mrs Haritos and Mrs Kyritsis.

94 The joint tender bundle does not include any minutes of meetings of directors of Jinacan in 1987 dealing with the purchase of the property, covering matters such as affixing the company seal to the instrument of transfer and the like. The title search for the property shows that Jinacan became registered as the proprietor of 624 Sydney Road on 9 December 1987. The defendants gave evidence that the consideration for the purchase of the property was $1,500,000 or thereabouts. The title search for the property also shows that a mortgage to the ANZ Banking Group Limited, stamped to secure $10,000, was registered over the title contemporaneously with the transfer to Jinacan.

Meetings of directors and annual general meetings: 1988-1991

95 The minutes of meeting of directors of Jinacan held on 15 December 1988, 13 December 1989, 14 December 1990 and 31 December 1991 respectively, prepared by Gillards, record the tabling and approval of the balance sheet, the profit and loss account for the year and the adoption of the directors' report. Save for the 1988 meeting, where the minutes record only Mr Haritos and Mr Kyritsis in attendance, the minutes for each of the other directors meetings record that Mr and Mrs Haritos and Mr and Mrs Kyritsis were in attendance at the meeting and the minutes were signed by one or other of the men as Chairman.

96 Annual general meetings of shareholders of Jinacan were held on 30 December 1988, 29 December 1989, 31 December 1990 and 31 December 1991. The minutes, which were prepared by Gillards, record in each case that Mr Kyritsis, representing Glen (then A & J P Cleaning Service Pty Ltd), and Mr Haritos were present. At these meetings, the members resolved that the balance sheet and profit and loss statement for the respective year ended 30 June, together with the accompanying reports and statements be received, approved and adopted, and that no auditor be appointed. In each case, the minutes were signed by Mr Haritos as Chairman or Chairperson.

97 What these minutes show clearly is that from the outset, the shareholders attending the meetings of members of Jinacan reflected or accorded with what was recorded in the share register, namely that Glen and Mr Haritos were the shareholders of Jinacan.

Meetings of directors and annual general meetings: 1992-2000

98 At the trial, the Deputy Commissioner also referred to the minutes of meeting of directors of Jinacan held on 16 December 1992, 19 October 1993, 7 December 1994, 15 November 1995, 16 December 1996, 4 November 1997, 15 October 1998, 16 September 1999, and 24 August 2000. These minutes, prepared by Gillards, record that in each year the directors passed similar resolutions tabling and adopting the Balance Sheet and Notes thereto, the Profit and Loss Statement, the Directors' Report and Statement, and the Annual Return. In each case, Mr and Mrs Haritos and Mr and Mrs Kyritsis were noted as being present, and the minutes were signed by Mr Haritos, or occasionally by Mr Kyritsis as Chairman or Chairperson.

99 During that period, Annual General Meetings of members of Jinacan were held on 31 December 1992, 3 November 1993, 22 December 1994, 30 November 1995, 31 December 1996, 19 November 1997, 6 November 1998, 8 October 1999, and 15 September 2000. The minutes record that Mr Kyritsis, representing Glen (then A E S Property Services Pty Ltd), and Mr Haritos were present, and usually Mr Haritos was elected as Chairman. Relevantly, at each of these meetings, the shareholders resolved that the Balance Sheet and Notes thereto, the Profit and Loss Statement and the Directors Report and Statement thereon as at 30 June be received, approved and adopted by the meeting. It was also resolved that the recommendation of the directors with regard to dividends and emoluments be confirmed. In each case, the minutes were signed by Mr Haritos as Chairman or Chairperson.

100 Once again, these minutes consistently record the active presence of representatives of Glen at meetings of members of Jinacan, and serve to confirm knowledge on the part of Mr Haritos of Glen's status as the shareholder of Jinacan at all relevant times.

Meetings of directors and annual general meeting: 2001 - dividend declared

101 At a meeting of directors of Jinacan held on 15 June 2001, at which the minutes record Mr and Mrs Haritos and Mr and Mrs Kyritsis as present, the directors resolved 'to recommend the declaration of a dividend of $129,236 out of the profits of the Company.' The minutes record that the dividend was 'declared, pursuant to Section 160AQF(1) of the Income Tax Assessment Act, [and] that the recommended dividend of $129,236 be franked to the extent of 100%.' The minutes were signed by Mr Haritos as Chairperson.

102 The minutes of meeting of directors of Jinacan held on 27 August 2001, at which Mr and Mrs Haritos and Mr and Mrs Kyritsis were noted as being present, record that the directors passed resolutions, relevantly as follows:

It was resolved that the contents of the 2001 Annual Return be adopted and one director sign the declaration certifying that:

- the information contained in the Annual Return is correct, and

- there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due.

...

It was resolved that the Balance Sheet and Notes thereto as at 30 June 2001, the Profit and Loss Statement for the year ended 30 June 2001 and the Directors Report and Statement thereon be adopted.

Further, it was resolved that two directors be authorised to sign the Directors Report and Statement on behalf of the board.

It was resolved to recommend to the Annual General Meeting that no dividend be paid.

It was resolved to recommend to the Annual General Meeting that no directors emoluments (excluding fixed salaries of full time directors) be paid.

(emphasis added)

The minutes were signed by Mr Kyritsis as Chairperson.

103 The Annual General Meeting of members of Jinacan was held on 10 September 2001. The minutes record as being present at the meeting '[Glen] and Haritos, George (Chairperson)'. Relevantly, the meeting resolved that the Balance Sheet and Notes thereto as at 30 June 2001, the Profit and Loss Statement for the year ended 30 June 2001 and the Directors Report and Statement thereon be received, approved and adopted by the meeting. It was also resolved that the recommendation of the directors with regard to dividends and emoluments be confirmed. The minutes were signed by Mr Haritos as Chairperson.

104 The directors' resolution of 15 June 2001 concerning the payment of a dividend was apparently overlooked when the directors made their recommendations to the annual general meeting of members of Jinacan. Mr Moscovitch touched on this in his evidence. He said matters such as the payment of dividends would be company specific, and be prepared by a member of staff. He explained that the annual returns of Jinacan often did not disclose the payment of a dividend, even though one was actually paid. He said this was because annual returns were required to be lodged with ASIC by a certain date and often that was before the accounts had been finalised, so standard documents were prepared for ASIC showing no dividend having been paid.

105 When Mr Moscovitch was taken during cross-examination to the annual returns recording the payment of dividends by Jinacan he was surprised to see that dividends were paid to Glen. He said that the 'dividends were meant to be paid to the individuals'. He acknowledged, however, that the corporate records showed that Glen was the owner of the shares in Jinacan. He said that staff would have completed the forms, and if they had consulted the records, they would have seen Glen as the owner of the shares. His evidence confirmed that Gillards' staff had not made any error in creating documents that were consistent with the ownership structure shown in the company records for Jinacan.

106 At this point it is useful to refer to the Annual Returns for Jinacan that were lodged with ASIC, or its predecessor, the National Companies and Securities Commission ('NCSC'). The first annual return, lodged for the year ended 30 June 1988 was lodged by Gillards. It describes the principal activity of Jinacan as 'supermarket' and identifies Mr and Mrs Haritos and Mr and Mrs Kyritsis as directors and Mr Haritos as the secretary. The 'List of Members' shows that there are four issued shares, held as follows:

The Directors' Report states that the principal activities of the company during the year 'were investors and there was no significant change in the nature of these activities during that period' and that the directors recommend that no dividend should be paid. The balance sheet as at 30 June 1988 shows total liabilities of $1,643,184 and accumulated losses at the end of the financial year of $(49,830).

107 The annual return for the year ended 30 June 1989, lodged by Gillards, presents a similar picture. Relevantly, there was no change in officeholders or members and the balance sheet as at 30 June 1989 shows total liabilities of $2,592,294 and accumulated losses at the end of the financial year of $(316,056).

108 The annual return for the year ended 30 June 1990, lodged by Gillards, shows no change in officeholders. However, prompted by questions on the form, the list of members included for the first time a statement about beneficial ownership of the shares in Jinacan, as follows:

The principal activity of Jinacan is described as 'supermarket'. The balance sheet as at 30 June 1990 shows total liabilities of $2,406,386 and accumulated losses at the end of the financial year of $(682,526). The notes to the financial statements show 624 Sydney Road as an investment '(Non-current)' at $1,588,723 plus 'Building improvements' of $126,252 and under 'Creditors & Borrowings (Current) is shown a 'Loan - A.E.S. Services Pty Ltd' of $385,673.

109 The annual return for the year ended 30 June 1991, lodged by Gillards, presents a similar picture. There is no change in officeholders, however the list of company officers on the form, as completed, now shows whether or not the officers hold shares in the company, as follows:

110 The list of members of Jinacan continues to show Glen (then AES Property Services Pty Ltd) as the beneficial owner of three shares and Mr Haritos as owning one share non-beneficially. The balance sheet as at 30 June 1991 shows total liabilities of $2,524,693 and accumulated losses at the end of the financial year of $(802,176). The notes to the financial statements continue to show 624 Sydney Road as an investment '(non-current)' at $1,588,723 plus 'Building Improvements' of $126,252 and under 'Creditors & Borrowings (Current) is shown a 'Loan - A.E.S. Services Pty Ltd' of $519,752.

111 During his examination in chief, Mr Haritos was asked to read some of the shareholding information disclosed in the ASIC returns. He said that it did not make sense to him: 'It says I hold one share beneficially for AES Property Services. Am I reading it correctly?' He also said he did not recall loans from Glen to Jinacan that were shown in the notes to the profit and loss statement. He added that these documents were not documents that he 'would have had on file' nor were they documents that would ever have been discussed in his visits to Gillards. He said that he did not have knowledge of these documents until 2009, when the freezing orders were sought.

112 The annual returns for the years ended 30 June 1992, 30 June 1993, 30 June 1994, 30 June 1995, 30 June 1996, 30 June 1997, 30 June 1998, 30 June 1999, 30 June 2000, 30 June 2001 and 30 June 2002, lodged by Gillards, present a similar picture. There is no change in officeholders, the information recorded about the list of company officers and their holding of shares in the company is in the same form as before, as are the details of members and their beneficial ownership of shares.

113 The annual returns for the years ended 30 June 1996 and 30 June 1997 include a declaration signed by Mr Haritos on 31 December 1996 and 19 November 1997 respectively which relevantly states that 'the information given on this Annual Return of 4 pages and any annexures is complete and correct at the date of signing'.[34] The annual returns for the years ended 30 June 1998, 30 June 1999, 30 June 2000, 30 June 2001 and 30 June 2002 include a declaration in similar terms signed by Mr Kyritsis on 6 November 1998, 8 October 1999, 15 September 2000, 10 September 2001 respectively.

114 The 'Annual Company Statement' for Jinacan for the annual review dates 11 August 2003, 11 August 2004, 11 August 2005 and 11 August 2006, apparently generated from data in the ASIC database and then filed by Gillards, records the same essential information for the officers and members and the status of their (beneficial) shareholdings. Mr Kyritsis has signed the 11 August 2003 and 11 August 2005 statements and certified that the information in the form is true and correct. Mr Haritos signed the certification for the 11 August 2006 statement on 25 August 2006.

115 The lodgement fees for the Annual Statement Fee Invoice for 30 June 2003, addressed to Jinacan, were paid by cheque drawn by Glen on its CBA account. The lodgement fees for the Annual Statement Fee Invoices for 11 August 2005 and 11 August 2006, addressed to Jinacan, were paid by cheques drawn by AES Services (the new corporate vehicle for the cleaning business) on its CBA account.

Financial statements up to the date of signing of the August 2006 Declarations of Trust

116 The suite of financial statements for Jinacan for the years ended 30 June 1988 through to 30 June 2004 were also prepared by Gillards. The directors of Jinacan are recorded throughout the period as being Mr and Mrs Haritos and Mr and Mrs Kyritsis. The Directors' Report and the Statement by Directors are signed off in each case by Mr Haritos and Mr Kyritsis. In summary, the Directors' Reports (for the financial years 1988 through to 2002) and the financial statements for 2003 and 2004 financial years disclose profits and losses and net assets and liabilities of Jinacan as follows:

The net amount of the loss of the company after providing for income tax was $49,830.

The net amount of the loss of the company after providing for income tax was $266,226.

The net amount of the loss of the company after providing for income tax was $366,469.

The net amount of the loss of the company after providing for income tax was $119,650.

The net loss and extraordinary items of the company after providing for income tax amounted to $264,778.

The net loss and extraordinary items of the company after providing for income tax amounted to $194,936.

The net loss and extraordinary items of the company after providing for income tax amounted to $83,732.

The net loss and extraordinary items of the company after providing for income tax amounted to $90,454.

The net profit and extraordinary items of the company after providing for income tax amounted to $5,665.

The net profit and extraordinary items of the company after providing for income tax amounted to $38,407.

The net profit and extraordinary items of the company after providing for income tax amounted to $51,106.

The net profit and extraordinary items of the company after providing for income tax amounted to $NIL.

The net profit and extraordinary items of the company after providing for income tax amounted to $35,945.

The net profit and extraordinary items of the company after providing for income tax amounted to $NIL.

The net profit and extraordinary items of the company after providing for income tax amounted to $69,994.

The profit and loss statement records an operating profit of $75,868 after income tax

The profit and loss statement records an operating profit of $77,062 after income tax

117 The liabilities for major loans as recorded in the financial statements may be summarised as follows:

118 The 'Commercial Bill' facility referred to above was apparently an overdraft facility arranged with the CBA. Mr Haritos said that following the collapse of the real estate market in the 1990s, there were limited options for him to pursue and so he decided to expand the Glen business into a full-time role for himself. Glen procured a contract with VicRoads and sought to expand into the provision of cleaning services for entities within the State Government portfolio. Because of the payment terms involved in those contracts, Mr Haritos arranged an overdraft facility with the CBA that 'would have been' secured over the property owned by Jinacan. He explained that this overdraft was 'money available on the side for the company to use if and when required.' He said they were dealing with major clients at that time and this overdraft was simply a facility to enable the workforce to be paid until the major clients paid Glen, 30 or 60 days after the account was rendered.

119 In the financial statements for Jinacan for the year ended 30 June 1996, the notes to the accounts concerning 'Current liabilities' record a 'Shareholders Loan - Loan - Messrs Haritos & Curtis [Kyritsis]' of $504,025 for the 1996 financial year, being an increase from $72,538 in the 1995 financial year.

120 In the financial statements for Jinacan for the year ended 30 June 1999, the notes to the accounts concerning 'Non-Current liabilities' record a 'Shareholders Loan' of $601,013 for the 1999 financial year, being an increase from $529,764 in the 1998 financial year. The notes to the accounts provide a breakdown of the relevant 'Shareholders Loan' entry, as follows:

121 Mr Moscovitch was taken to the financial statements of Jinacan, and asked about the manner in which loans to the company were recorded. He said that usually he had a discussion with Mr Haritos about them. Mr Moscovitch said that moneys loaned by the Haritos and Kyritsis families were often shown as 'a shareholders' loan lump sum between all of them' because Mr Haritos would say '[j]ust put it as a total split between all of them'.

122 Mr Haritos confirmed that he would visit Mr Moscovitch once a year to prepare the financials and he would take him through the profit and loss statement and other relevant documents. Usually Mr Haritos or his staff would provide information to Mr Moscovitch's staff in advance to enable the relevant returns and other documents to be prepared and when they were ready, he would meet with Mr Moscovitch. Mr Haritos and Mr Moscovitch would then go through the financials, including the balance sheet and profit and loss account, noting whether the companies were in the black or in the red, and any matters that might require correction. Then a final document would be produced and Mr Haritos would provide a cheque for the lodgement and other fees. Mr Haritos said that on those occasions when he was unavailable, Mr Kyritsis would attend. Mr Haritos said that the only item that Mr Moscovitch would take him through was the profit and loss statement - and whether the company showed a profit, but otherwise he could not recall what the discussions were about. He added that the companies had to make a profit, because if they were running in the red he would have had to appoint an auditor.

123 When Mrs Kyritsis was shown the financial statements for Jinacan, she said she did not know whether she had seen them before, and she candidly admitted that she did not have any knowledge of lending or borrowings between Jinacan and her husband and brother. She said that she 'was never involved with the business' and did not 'know exactly what went on'. She added that she did not think she needed to check what happened on the business side of things because 'we knew that Jinacan was ours from the outset.'

124 Mrs Haritos did not give evidence about the financial statements for Jinacan.

125 As earlier observed,[38] the minutes for the meeting of directors held on 15 June 2001 record the directors' resolution to recommend the declaration of a dividend of $129,236 out of the profits of Jinacan, but no payment of such a dividend is recorded in the financial statements. However, Mr Moscovitch explained how this apparent irregularity arose.[39]

126 When the whole of the evidence is looked at, it is clear that a dividend was paid by Jinacan to its shareholder, Glen, for the financial year ended 30 June 2001. The income tax return for Jinacan for the financial year ended 30 June 2001 records a 'Class C franking account balance' of $129,236. The receipt of a dividend of $129,236 is also shown in the profit and loss statement for Glen (then AES Property Services Pty Ltd) for the year ended 30 June 2001 and the income tax return for Glen for the financial year ended 30 June 2001 records the receipt of 'Gross dividends' of $129,236. In other words, it is clear that Glen received the entirety of the dividend paid, thus confirming its status as the beneficial owner of the Jinacan shares.

127 A similar resolution to recommend the declaration of a dividend of $30,000 out of the profits of Jinacan was passed at a meeting of directors held on 12 June 2003. The profit and loss statement for Jinacan for the year ended 30 June 2003 records the payment of a dividend of $30,000. The income tax return for Jinacan for the financial year ended 30 June 2003 also records 'Franked dividends paid' of $30,000. Both the financial statements and the income tax return for Glen (then AES Property Services Pty Ltd) for the financial year ended 30 June 2003 record the receipt of a dividend of $30,000 from Jinacan.

128 The profit and loss statement for Jinacan for the year ended 30 June 2004 records that no dividends were paid and the financial statements for Glen (then AES Property Services Pty Ltd) show none were received. The financial statements also record non-current liabilities of Jinacan of $3,018,189, of which $2,522,018 comprised:

It will be recalled that Glen ceased trading in early 2005 and entered into voluntary liquidation on 17 October 2006.

129 Mr Haritos was unable to recall anything about the declaration of dividends by Jinacan to Glen. In essence, he said that the declaration of dividends was all Gillards' work - 'Gillards prepared all... the accounts and I never told Gillards to issue a dividend.' He said that he did not see those dividends or the note to the accounts that concerned them, and he cannot recall Mr Moscovitch taking him through them.

130 Mrs Kyritsis was generally unable to recall anything about the corporate documentation and affairs of Jinacan over the years, or any discussion that might have taken place about the payment of dividends by Jinacan. In essence, she agreed that she had not taken it upon herself to become involved in the financial or corporate affairs. This was so notwithstanding that she was a director of Jinacan and of at least three other companies, Glen (until she resigned in February 2005), Bega Nominees and Kyritsis Nominees.

131 Similarly, Mrs Haritos could not recall attending meetings of Jinacan where the declaration and payment of dividends was discussed.

132 The Deputy Commissioner relied on the payment of dividends by Jinacan, and the receipt of the entirety of these dividends by Glen, as evidence further confirming Glen's status as the holder of the beneficial interest in the four issued shares in Jinacan. Furthermore, as most, if not all, the directors meetings at which the payments of those dividends were recommended were attended by Mr and Mrs Haritos and Mr and Mrs Kyritsis, the Deputy Commissioner contended that they had knowledge of that status.

133 Documentation obtained by the Deputy Commissioner from the files of the CBA by way of subpoena issued in the proceedings concerning the freezing orders, was also relied upon as confirming Glen's status as beneficial shareholder. The documentation included several letters of offer from the CBA to the Directors of AES Property Services Pty Ltd in 2000 and 2001, in relation to the provision of banking facilities to assist it with a security deposit for cleaning contracts with clients such as Roads Corporation and Alstom Melbourne Transport Ltd. In each case, the CBA required the provision of security, including a 'First Registered Mortgage' by Jinacan over the property at 624 Sydney Road. The documentation for these various facilities were in each case executed by Mr Haritos and Mr Kyritsis as directors of Glen (then AES Property Services Pty Ltd).

134 Mr Haritos gave evidence that, in about 2000, an overdraft facility for Glen of approximately $1 million was arranged with the CBA. He said that the facility was something that 'just sits there and it's only activated if and when needed' and on occasions 'it will get drawn on for very short periods in the event there was a late payment of a particular invoice'. Mr Haritos said that he would have informed the women about it, in terms that he would have told his wife that 'there was no risk associated with it' and they would have had to sign the document giving security against the property.

135 In July 2004, the CBA approved an application made by Glen (then AES Property Services Pty Ltd) to assist the restructure of its expired 'BetterBusiness Bill Facility'. Once again, in each case, the CBA required the provision of security, including a 'First Registered Mortgage' by Jinacan over the property at 624 Sydney Road and the documentation for these various facilities was executed by Mr Haritos and Mr Kyritsis as directors of Glen.

136 Following the sale of the commercial cleaning business by Glen to AES Services in January 2005, AES Services sought finance from the CBA. A letter of offer from the CBA to the Secretary of AES Services dated 15 March 2005, in relation to the provision of overdraft and other facilities to AES Services in the sum of $1.5 million, recorded the CBA as requiring the provision of security as follows:

Security is to be to the Bank's satisfaction and is to comprise:

• A Registered Equitable Mortgage by AES Services (Aust) Pty Ltd ACN 111 306 542 over the whole of its asset(s) and undertaking(s) including uncalled capital.
• A Guarantee unlimited as to the amount by Jinacan Pty Ltd ACN 006 828 735 supported by:
  • - A First Registered Mortgage by Jinacan Pty Ltd ACN 006 828 735 over a commercial property situated at 614-624 Sydney Road, Brunswick VIC 3056.
• A Guarantee unlimited as to the amount by AES Property Services Pty Ltd ACN 005 771 139 [Glen] supported by:
  • - A Registered Equitable Mortgage by AES Property Services Pty Ltd ACN 005 771 139 [Glen] over the whole of its asset(s) and undertaking(s) including uncalled capital.
• A Guarantee limited to $1,500,000.00 by George Haritos.

• A Guarantee limited to $1,500,000.00 by Alex Kyritsis.

137 The offer from the CBA, which included the security schedule set out above, was accepted and a 'Business Purpose Declaration' was executed by Mr Haritos and Mr Kyritsis as directors of Glen (then AES Property Services Pty Ltd) on 17 March 2005. It will be noted the 624 Sydney Road property was required as security for the business loan and that no guarantee was sought by the CBA from Mrs Haritos or Mrs Kyritsis. The certificate of title for 624 Sydney Road records the registration of a mortgage to the CBA on 8 February 1996 and its discharge on 11 May 2011.

138 The Deputy Commissioner also relied upon a credit card application made by Mrs Kyritsis to the CBA in September 2001 as confirming that she did not own any shares in Glen. In response to a request for 'details of your share of assets and investments' Mrs Kyritsis listed only a motor vehicle and household items, and left blank the space for disclosure of 'Other assets/investments (e.g. shares etc.)'. Mrs Kyritsis signed the declaration on the form acknowledging that she has 'been truthful in all information provided'.

139 Mrs Kyritsis was shown the credit card application she made to the CBA. The form was signed by her but appeared to have been filled out by someone else. The list of assets disclosed in support of her application did not include any beneficial interest in 624 Sydney Road, whether by way of shareholding in Jinacan or otherwise. When cross-examined about her omission to list her claimed 50 per cent interest in 624 Sydney Road as an asset, her response was to the effect that this was only a credit card application and she thought she had already listed enough other assets to support it. When Mrs Kyritsis was asked about another application made to the Laiki Bank (Australia) Limited ('Laiki Bank') in 2006 by her son, where she had agreed to act as a guarantor, she gave a similar response.[40]

The beneficial owner of the four shares in Jinacan from 25 August 1987 to 11 August 2006

140 The Deputy Commissioner relied upon the tender of the raft of documents and records described above, and the effect of ss 1305 and 251A of the Corporations Act, to prove its case. In addition, in circumstances where many of the documents relied upon by the Deputy Commissioner had been signed by Mr Haritos, the Deputy Commissioner also called in aid the common law assumption that '[l]egal instruments of various kinds take their efficacy from signature or execution' and the law will treat signed documents as the best evidence of intention.[41]

141 The Deputy Commissioner pointed to the fact that for some 19 years, Mr Haritos and Mr Kyritsis had signed documents in their capacity as directors of Jinacan evidencing an ownership structure whereby Glen held the beneficial interest in the Jinacan shares. No evidence was adduced to suggest that the accuracy of the information recorded in the documents was ever challenged or called into question by them. Indeed, as noted earlier, Mr Moscovitch's evidence was that Gillards rendered fees on a regular basis and their bills were always paid. Furthermore, the affairs of Jinacan had been conducted in a manner consistent with Glen holding the beneficial interest in the Jinacan shares at all relevant times. The minutes of the annual general meeting of members and the payment of dividends bear this out.

142 Mr Kyritsis was not a party to the proceeding. He was a director of Jinacan and Glen at all relevant times but was not called by the defendants to give evidence in support of their case.

143 Each of Mrs Kyritsis and Mrs Haritos had difficulty remembering events in the corporate life of Jinacan from August 1987, such as the initial declaration of trust and share transfers to Glen (then A & JP Cleaning Service Pty Ltd), but each nevertheless professed to have a good recollection of the discussions which they contend took place at about the same time concerning the purchase of 624 Sydney Road and the manner in which it was funded. Each of Mrs Kyritsis and Mrs Haritos signed important documents such as the security transfer forms transferring their shares in Jinacan to Glen, and they attended meetings of directors of Jinacan over many years at which the nature of the business transacted confirmed that they were not the beneficial owner of the Jinacan shares. Whilst they had difficulty recalling or remembering the various meetings, neither of them seriously challenged the accuracy of the minutes, or their signatures appearing on the various documents. In those circumstances, it seems clear that the Jinacan shares initially registered in their individual names were transferred to Glen with the consent of Mrs Haritos and Mrs Kyritsis, each of whom signed the relevant transfer forms and participated in the meeting of directors at which those transfers were approved.

144 When Mrs Haritos and Mrs Kyritsis were later presented with opportunities to reveal their asset position to banks and other financial institutions, they did not disclose or assert any beneficial interest in the Jinacan shares. However, when Mr Haritos was presented with similar opportunities to reveal his asset position, he effectively claimed a 50 per cent interest in 624 Sydney Road, reflecting his 50 per cent shareholding in Glen. In other words, the defendants' respective conduct in this regard is consistent with the position contended for by the Deputy Commissioner rather than the position advanced by them.

145 Furthermore, and perhaps most critically, the defendants failed to produce any documents that might substantiate their claims and support their case that at all material times Mrs Kyritsis and Mrs Haritos were each the beneficial owners of two Jinacan shares and that the corporate records, to the extent they suggested otherwise, reflected errors made by Gillards.

146 In this proceeding, evidence was given by each of the defendants about the monetary gifts and family properties that were said to have been sold to fund the purchase of 624 Sydney Road. The evidence given was expressed in very general terms, street names were mentioned but often without property addresses, details of amounts realised on sale or when those sales took place. No objective material capable of corroborating those assertions was put forward. This is so notwithstanding that at least some material capable of verifying their version of events could have been obtained from public records such as land titles and dealings including transfers recording the consideration paid, mortgages and assessments for statutory charges such as rates and land tax.[42]

147 The defendants now seek to rely upon these sketchy and unsubstantiated assertions as evidence of the funds contributed by them, or at least by Mrs Haritos and Mrs Kyritsis, to the purchase of 624 Sydney Road. The Deputy Commissioner learned of these matters for the first time at trial and did not have any real opportunity to test them. This was because they were not articulated in their defence, and the outlines of evidence they filed in advance of the trial failed to set out the substance of the evidence they proposed to give - for example, the two page outline filed for Mr Haritos was framed in the most general of terms and relevantly stated:

• was purchased in or about 1987;
• money used to settle the purchase came from members of my family and from loans;
• the fourth defendant [Glen] did not provide any part of the purchase price;
• the property has been tenanted.

Furthermore, little relevant material was provided on discovery, and evidence given by Mrs Kyritsis suggested that she was unaware of her discovery obligations.

148 The evidence that was adduced by the defendants at trial appeared to be directed to establishing a foundation for a claim that 624 Sydney Road was held on a resulting trust for Mrs Haritos and Mrs Kyritsis. But in closing submissions, Counsel for the defendants confirmed that:

it was not submitted by the defendants that the payment of the purchase price of the building gives rise to a resulting trust over the shares in Jinacan. Now it is very likely to give rise to a purchase moneys resulting trust over the property as against Jinacan, but that's not in this dispute.

149 Mr Moscovitch, their accountant, was put forward by the defendants as an 'independent and impartial' witness whose evidence should be accorded real weight.[43] AS I have said, the consistent theme of his evidence, when viewed as a whole, was that the shares in Jinacan were held beneficially by Mr and Mrs Haritos and Mr and Mrs Kyritsis as to one share each. That was effectively the structure that was established when the shelf company was purchased on 23 August 1987, although no evidence was given about why that structure was chosen. Importantly, it was also not the case advanced by the defendants in their evidence.

150 It is clear that Mr Haritos' instruction to Gillards was that the structure, with the corporate entity holding the beneficial interest in all four Jinacan shares, was the one that had been chosen and was to be followed. For the most part, the corporate documentation prepared over the ensuing years reflects that position, at least until the events of August 2006 took place, and there is no evidence to suggest that the other directors of Jinacan did not acquiesce in that state of affairs. Furthermore, Jinacan's asset, 624 Sydney Road, was actively used as security for business loan advances made to Glen and the dividends declared in the 2001 and 2003 financial years were paid to Glen, thus confirming Glen's status as the holder of the beneficial interest in the four issued shares in Jinacan. To the extent that applications to banking institutions were made or supported by the defendants, the information provided by them about their respective assets was not consistent with the position now advanced by the defendants.

151 The defendants acknowledge that in order for them to succeed on their primary defence, the Court must first accept the oral evidence given by Mr and Mrs Haritos and Mrs Kyritsis that the company documentation and records were not prepared in accordance with instructions given to Gillards accountants. But I am not satisfied that there is any proper basis for doing so. In my view, the corporate documentation prepared and filed up until August 2006, generally reflects the tenor of the instructions that were given by Mr Haritos to Mr Moscovitch, in the sense that Mr Haritos confirmed that he wished to leave the structure as it was, with the corporate entity recorded as holding the beneficial interest in the shares.

152 From at least 25 August 1987, the defendants established a corporate structure whereby Glen was the beneficial owner of the four issued shares in Jinacan, which was the registered proprietor of 624 Sydney Road. That structure was apparently convenient for commercial or fiscal reasons, and they conducted their business affairs on that basis for many years. When the contract cleaning business operated by Glen became uncompetitive, and the business was effectively sold to AES Services, Glen continued to hold the shares in Jinacan. In August 2006, when Glen was facing the spectre of liquidation, that structure apparently ceased to be convenient.

153 The position in which the defendants now find themselves is not dissimilar to that described by Young J in Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692:

Unfortunately, it very often happens in cases in this court that a person has arranged his affairs for commercial or fiscal reasons employing a particular structure, which with respect to creditors and the Government he expects to be recognized as no sham, but when it comes to a dispute with his former wife or former business associates it is not in his interests to maintain the structure and he pleads before this Court that one must not look at the structure at all but rather at the 'realistic' or 'practical' effect of what has happened. ... So long as the law permits people to erect structures which have meaningful legal consequences then if a person elects to erect such a structure he must take the consequences of such erection for better, for worse, for richer or poorer, in commercial sickness or commercial health.[44]

154 In closing submissions, the defendants also advanced an argument to the effect that the oral evidence given by the defendants demonstrated that the three shares registered in the name of Glen were held pursuant to a resulting or an express oral trust that arose on their registration to Glen, and the share held by Mr Haritos was subject to an express oral trust in favour of Mrs Haritos. Counsel for the defendants argued that the trust for Mrs Haritos and Mrs Kyritsis was declared on formation, and reiterated throughout the life of Glen, and finally documented in August 2006. It was said that all witnesses who could speak to the circumstances in which the 1987 shareholding of Jinacan was created gave evidence that Glen was not intended to beneficially own any share in Jinacan, and the evidence about how the purchase price of 624 Sydney Road was paid supported the objective likelihood that the Jinacan shares should be beneficially owned by Mrs Haritos and Mrs Kyritsis. However, that version of events is not borne out by the corporate records, and in particular the payment of dividends, and I am not satisfied that the defendants have made out such a case. The evidence given by them is contradicted by that of Mr Moscovitch, such that there is no one coherent theme. Further, the defendants failure both to produce any documents that might substantiate their claims and to advance that version of events in a timely way when the freezing orders were sought, is telling.

155 Accordingly, when regard is had to all of the evidence adduced and tendered before me, I find that the defendants have failed to displace the objective contemporaneous evidence recording Glen as the beneficial owner of the four Jinacan shares at all relevant times during the period between 25 August 1987 and 11 August 2006 or thereabouts.

156 Before turning to deal with the August 2006 Declarations of Trust, it is useful to set out a little of the background and the corporate context in which they were executed.

157 In around early 2005, Glen ceased trading. Mr Haritos said that in late 2004, Glen was unable to compete in the cleaning industry because it had a WorkCover premium rate in excess of 12 per cent against the industry standard of 3.5 per cent. He consulted a family friend, Mr Edwin Chang, and arranged for him to become involved and negotiate with Work Safe to devise a strategy or proposal for moving forward.

158 The new structure identified was that Glen would sell its business to another company, the newly incorporated AES Services, with whatever contracts remaining after the major contracts with Connex and Yarra Trams expired at the end of 2004. A new premium rate was negotiated with Work Safe and the new entity took up the business effective from 1 January 2005. At that point in time, Glen had outstanding receivables for work already performed of about $300,000 to $400,000 and owed its trade creditors approximately $2 million. It was also registered or recorded in Jinacan's corporate books and records as the holder of the beneficial interest in the four Jinacan shares.

159 In February 2005, Mrs Haritos and Mrs Kyritsis resigned as directors of Glen, following advice given to them by a family friend, an accountant, whom they identified as Mr Chang. Mrs Kyritsis said that she did this because Mr Chang advised her and Mrs Haritos that it was not beneficial for them to remain as directors when they were not involved in the affairs of the company. Mrs Haritos said Mr Chang advised her to step down because 'there's no gain of being in that company'. She said that she did not really understand the reasons why, but that was the advice and she felt others knew better than she did, so she stepped down. Mrs Haritos added that Mr Chang was the only one who explained any pieces of paper to her.

160 Mr Moscovitch gave evidence about the background to the execution of the August 2006 Declarations of Trust. He said that in 2005 or 2006, he and Mr Haritos attended a meeting at the ATO's offices in Box Hill to discuss Glen's RBA. He could not remember the exact date of the meeting. At the meeting, representatives of the ATO indicated that the ATO would consider ignoring the interest on Glen's outstanding debt if a satisfactory arrangement could be reached to pay off the debt. Mr Moscovitch said that at the end of the meeting, the ATO and Mr Haritos 'basically came to an arrangement' that he would pay the debt off and the ATO would overlook the interest if he stuck to the payment plan. Payments were made over time but the interest continued accruing and when Mr Haritos repaid the principal, the ATO demanded payment of the interest. Mr Moscovitch said that Mr Haritos was unhappy about this and he said to Mr Moscovitch that he had 'had enough of this' and was 'going to put the company into liquidation'. Mr Moscovitch added that Mr Haritos had had enough of the ATO holding Glen to the obligation to pay the penalty interest.

161 Mr Moscovitch said that it was in this context that Mr Haritos requested that the beneficial owners of the shares in Jinacan be noted. Accordingly, having received instructions from Mr Haritos, Gillards prepared the August 2006 documents.

162 Prior to the lodgement of various forms with ASIC on 28 August 2006, the records maintained by ASIC and Gillards for Jinacan recorded that:

(a) Mr Haritos held one share in Jinacan but was not the beneficial owner of that share - the beneficial owner was Glen; and

(b) Glen was both the legal and beneficial owner of the remaining three shares in Jinacan.

163 The background to the notification of those changes was that by letter dated 16 August 2006, Mr Moscovitch wrote to Mr Haritos and Mr Kyritsis, enclosing:

...[D]ocumentation in relation to change of beneficial owner of shares of the company for signature as indicated:-

1. Minutes of Meeting of Directors
2. Change to company details - Form 484
3. Notices of Beneficial Ownership
4. Declaration of Trust

When completed, please return the above to our office in the envelope enclosed by 25th August, 2006 for lodgement with [ASIC].

It will be noted that, in his letter, Mr Moscovitch described the enclosed documentation as relating to a 'change of beneficial owner of shares' rather than as documentation clarifying the status quo of the beneficial ownership.

164 Following receipt of that letter, Mr and Mrs Haritos and Mrs Kyritsis purported to execute the suite of documents prepared by Gillards. The first category of documents, styled 'Declaration of Trust' and prepared on Jinacan's letterhead, provided as follows:

The person or persons described in the Schedule as Trustee, being registered as the holder of the security described in the Schedule ('the security') HEREBY DECLARE that:

The person described in the Schedule as the Beneficial Owner has provided all the money for the purchase of the security by the trustee.

The security will at all times be held by the Trustee UPON TRUST for the Beneficial Owner.

The Beneficial Owner is and has at all times been entitled to the benefits of the security together with all dividends, distributions and profits accrued and to accrue in respect thereof.

The Beneficial Owner shall be entitled to hold the scrip for the security.

The Trustee or its successor or assignee will when called upon by the Beneficial Owner, execute a transfer of the security to the Beneficial Owner or to such other person or persons, company or corporation as the Beneficial Owner shall direct.

The Beneficial Owner is hereby authorised to complete any transfer of the security executed by the trustee in blank by inserting the name of any transferee or otherwise completing such transfer to be duly registered.

The Trustee undertakes to deal with the security and exercise and perform all the rights, duties and powers attributable to the owner of the security as directed by the Beneficial Owner.

165 Three Declarations of Trust were executed and dated 11 August 2006, each with a Schedule containing the following details respectively:

166 There is no evidence of any formal instructions having been given by Glen (then AES Property Services Pty Ltd) in respect of these Declarations of Trust. Importantly, in the case of the three shares registered in the name of Glen, it did not sign any Declaration of Trust. However, the execution clause on the document bore the words 'rules that govern the execution of documents by the company', indicating that the document was prepared for execution by a corporate entity rather than an individual.

167 The first Declaration of Trust was signed by Mrs Haritos and the third one was signed by Mrs Kyritsis, but neither of them was an officer or director of Glen at that time, each of them having resigned on 10 February 2005. Furthermore, evidence given by the defendants suggested that those notices were signed by Mrs Haritos and Mrs Kyritsis respectively in the presence of Mr Haritos, and probably also Mr Kyritsis, both of whom were directors of Glen. It is not clear what, if any, authority Mrs Haritos and Mrs Kyritsis had to make a declaration, purportedly on behalf of Glen, declaring that each of them now held the beneficial interest in the shares. No minute of meeting of directors or any other formal instruction from Glen was produced authorising those transactions, or appointing Mrs Haritos and Mrs Kyritsis to act on behalf of the company.

168 The second Declaration of Trust is stated to be 'signed sealed and delivered' by Mr Haritos, 'in the presence of' a witness, but the document was not witnessed. Prior to the execution of that document, Mr Haritos held the share in Jinacan on trust for Glen. He was relevantly a director of that company, but again, there is no evidence of any formal instruction having been given by Glen authorising him to declare a trust over that share in favour of his wife.

169 Furthermore, in respect of each Declaration of Trust there was no evidence that Mrs Haritos and Mrs Kyritsis as the putative 'Beneficial Owner' respectively had (as was stated in the Declaration of Trust) 'provided all the money for the purchase of the security by the Trustee' nor is the relevant purchase price stated. It will be recalled that when the four shares in Jinacan were first transferred by each of Mr and Mrs Haritos and Mr and Mrs Kyritsis to Glen (then A & JP Cleaning Service Pty Ltd) on 25 August 1987, the consideration stated was $1.00, and the transfer forms were stamped accordingly. Since then however, Jinacan had acquired a substantial asset in that it had become the registered proprietor of 624 Sydney Road and carried on business as a property investor.

170 To the extent that the Declaration stated that the putative 'Beneficial Owner' respectively 'is and has at all times been entitled to the benefits of the security together with all dividends, distributions and profits accrued and to accrue in respect thereof', the evidence is to the contrary. All of the dividends that had been paid by Jinacan to that point were paid to Glen.

171 The second category of documents purportedly executed on or around 11 August 2006, was correspondence addressed to the Secretary of Jinacan styled 'Notice of Beneficial Ownership', which provided as follows:

I hereby give notice that I hold the shares on behalf of the person described as the beneficial owner below:

172 The first letter is signed by Mrs Haritos and the third one is signed by Mrs Kyritsis, in each case purportedly on behalf of Glen (then AES Property Services Pty Ltd), but as noted above, neither of them was an officer or director of Glen.[45] The second letter is signed by Mr Haritos in his own right, but in respect of the one share he held as a non-beneficial owner for Glen, that share having been transferred to him on 25 August 1987. Once again, there is no evidence of any formal instructions having been given by Glen in respect of these 'Notice[s] of Beneficial Ownership'.

173 The third category of document executed was the minutes of a meeting of directors of Jinacan dated 11 August 2006. These minutes were apparently prepared by Gillards and were enclosed in the letter to Mr Haritos and Mr Kyritsis dated 16 August 2006. The minutes record that on 11 August 2006 a meeting of directors of Jinacan was held, attended by Mr and Mrs Haritos and Mr and Mrs Kyritsis, where the following 'change of beneficial owners' was noted as follows:

It was noted that the beneficial owner of shares registered in the name of the following members had changed:

A.E.S. PROPERTY SERVICES PTY LTD

Beneficial Owner: HARITOS, EFFIE

No. of shares: 1

A.E.S. PROPERTY SERVICES PTY LTD

Beneficial Owner: KYRITSIS, BETTY

No. of shares: 2

HARITOS, GEORGE

Beneficial Owner: HARITOS, EFFIE

No. of shares: 1

The secretary was requested to complete the documents required to reflect the change to members of the compnay [sic].

Mr Haritos signed the minutes 'as a correct record' in his capacity as Chairperson.

174 The corporate records of Jinacan were also altered or adjusted to reflect the purported execution of the August 2006 suite of documents. A document headed 'Share/Option Allotment, Conversion, Consolidation, Redemption, Return of Capital and Subdivision Journal from 25/08/1987 to 11/08/2006', apparently prepared by Gillards, records as follows:

The consideration for the transaction in each case is shown as being 'cash' but no amount is stated. Each transaction is recorded as an 'Allotment' but the date on which the respective allotments are said to have taken place differs - one apparently took place on 25 August 1987 and the other three took place on 11 August 2006.

175 Another corporate document for Jinacan headed 'Register of Members at 11 August 2006' records the following information:

176 Another document headed 'Register of Notices of Beneficial Ownership at 16/08/2006' was also prepared, apparently by Gillards, containing the following information:

It will be noted that the last entry on this form does not reflect or accord with the date of 'change of' beneficial ownership shown in the August 2006 letter signed by Mr Haritos. The first and second entries show Mrs Haritos and Mrs Kyritsis respectively as the beneficial owners as at 11 August 2006.

177 Mr Moscovitch said that the Declarations of Trust were prepared 'to rectify what was incorrect earlier' and to 'highlight' that the share was held or owned by, for example, Mrs Haritos, and that she was 'the beneficial owner going back to the original setup of the company'. However, Mr Moscovitch could not explain why the Declarations of Trust effectively recorded Mrs Haritos and Mrs Kyritsis as the beneficial owners of two shares each. He acknowledged that this position did not accord with his original instructions. He confirmed that the Declarations of Trust had been backdated and that he was told 'that was the date the change was made', but he could not recall by whom. He also readily acknowledged that the annual statements that Gillards filed with ASIC following the making of the declarations presented a confusing picture of the share ownership, recording that the three shares held by Glen were not beneficially owned but the one share held by Mr Haritos was beneficially owned.

178 Mr Moscovitch effectively confirmed that the Declarations of Trust were directed to ensuring that Glen would no longer hold a beneficial interest in the Jinacan shares on entry into liquidation. In cross-examination, it was put to Mr Moscovitch that M Haritos had told him that the purpose of the Declaration of Trust was to ensure that there was no argument whatsoever that Glen owned any shares in Jinacan. Mr Moscovitch agreed. He also agreed that the reason for that was because the shares in Jinacan were a valuable asset.

179 The evidence given by the defendants about the Declarations of Trust was confused and inconsistent and largely contradicted that given by Mr Moscovitch.

180 Mr Haritos gave evidence that when he said to Mr Moscovitch that he wanted to liquidate Glen, Mr Moscovitch organised for Gillards to prepare 'a pile of documents' for them to sign. These documents included the August 2006 Declarations of Trust and share transfers. Mr Haritos said he had '[n]o idea' why these Declarations of Trust were executed - Mr Haritos believed they were administrative steps that had to be taken because the company was going into liquidation. Mr Haritos said he did not understand these Declarations of Trust to make any change to the identity of the beneficial owners of the Jinacan shares '[b]ecause the shares in Jinacan belonged to the girls from 1987' and 'that was what we all believed in, until 2009.'

181 Mr Haritos said that before the company went into liquidation, Mr Moscovitch arranged an appointment for him to see Mr Richwol who would act as the liquidator. Mr Haritos said that he probably collected the August 2006 pile of documents from Gillards, took them home, and Mr and Mrs Kyritsis came around, each of them signing where indicated.

182 Mrs Kyritsis was also shown the Declarations of Trust and associated documents and asked about them. She said that she thought the Declarations of Trust were intended to 'reiterate who the owner of the shares was' but she did not know who prepared the document. Elsewhere she said that she could not recall attending a meeting of Jinacan where the topic of a change of beneficial ownership was considered, nor could she recall whose idea it might have been or whether anyone discussed it with her. In giving her evidence, she said 'I'm not very clear headed at the moment'. She said she could not remember attending a meeting held at her parents' house on 11 August 2006, but she had no reason to believe that the minutes were not accurate. She agreed that she left all of these company matters to her husband, Mr Kyritsis, and brother, Mr Haritos.

183 Mrs Haritos recalled signing the Declaration of Trust but not the notice of beneficial ownership. When asked by her Counsel what she thought she was doing when she signed the Declaration of Trust, she responded:

That I was the trustee of that company. I think. No, I'm not sure. I don't know.

184 On 25 August 2006, Gillards lodged with ASIC a Form 484: Change to company details for Jinacan. The form notified ASIC of changes to the three shares held by Glen (then AES Property Services Pty Ltd), namely, that as from 11 August 2006 they were no longer held beneficially. No notification was given in respect of the one share held in the name of Mr Haritos. An internal document prepared by Gillards on the same date also records the one share in Jinacan held by Mr Haritos as being 'non-beneficially owned' and the member recorded as holding the remaining three shares is simply stated as being Glen, without any additional notation.

185 The Annual Company Statement for Jinacan for the annual review date of 11 August 2008 records the members of Jinacan as follows:

The directors of Jinacan are also stated as being Mr and Mrs Haritos and Mr and Mrs Kyritsis. Mr Haritos certified that the information in the form is 'true and correct'. However, the information recorded in the statement concerning his 'beneficial ownership' of one share is clearly at odds with the suite of documentation purportedly executed by him in August 2006.

186 The Annual Company Statement for Jinacan for the annual review date of 11 August 2009, certified by Mr Haritos, provides the same information as was reported in 2008. However, the Annual Company Statement for the annual review date of 11 August 2010 updates that information and records Mr Haritos as being the non-beneficial owner of one share in Jinacan.

187 The Annual Company Statement for Jinacan for the review date of 11 August 2010 that was apparently lodged with ASIC by Gillards, continues to show the issued capital of Jinacan as $4.00, comprised of 4 shares, and records that three of those shares are held by Glen (non-beneficially) and one share held by Mr Haritos (non-beneficially). That statement also bears the signature of Mr Haritos. The directors of Jinacan are also stated as being Mr and Mrs Haritos and Mr and Mrs Kyritsis.

188 In October 2006, following the August 2006 Declarations of Trust, Kyritsis Nominees made an application to Laiki Bank for a loan. Mr and Mrs Kyritsis were named as guarantors, and they provided personal details in support of the application. The loan was taken on and closed on 14 August 2007. The 'guarantor's statement' completed in the name of Mrs Kyritsis records her as a director of AES Services and lists her assets as her home, a motor vehicle and household items. No reference is made to ownership of any shares in Jinacan nor any beneficial interest of any kind in 624 Sydney Road. Mrs Kyritsis signed the declaration on the application form acknowledging that 'all the information given in this Application is true and correct'.

189 When cross-examined about this loan application and guarantee document, Mrs Kyritsis said that she could not remember the form or anything about it - she said that the handwriting on the form was not hers but she acknowledged that it was signed by her.

190 Mr Moscovitch said that he was not aware of Gillards having given any assistance to members of the Haritos or Kyritsis families with applications for credit cards or finance from the CBA or Laiki Bank. He said it was possible that at various times he may have been asked to forward documentation such as financial accounts to the banks, but at no time was he or his firm acting as a financial adviser to the families.

191 In October 2007, Mr Haritos made an application to the CBA to increase his credit card limit to $100,000. In his application, Mr Haritos listed his assets as being his home and other 'Property/Real estate valued at $10,900,000' of which he was shown to have a 50 per cent interest. His application was supported by a 'diary note' reference letter from his Relationship Manager at CBA Corporate Banking dated 22 October 2007 listing the various other properties relevant to his asset and liability position. The 624 Sydney Road property was shown as being owned by him as to 50% and as having a value of $1.6 million, no liabilities, and an income stream of $110,000 per annum. No mention was made of the property being beneficially owned by Mrs Haritos and Mrs Kyritsis via shareholdings in Jinacan. Mr Haritos signed the declaration on the application form acknowledging that he has 'been truthful in all information provided'.

192 In the course of dealing with applications made by Messrs Haritos and Kyritsis and AES Services to vary the freezing orders made over properties, including 624 Sydney Road, the solicitors for the Deputy Commissioner made several requests by letter to their solicitor, Mr Grundy, for the provision of documents in order to enable the Deputy Commissioner to consider his client's claim in respect of the beneficial ownership of 624 Sydney Road. However, little documentation or information was forthcoming.

193 Material was filed on behalf of the defendants in opposition to the making of freezing orders in related proceedings commenced in the Practice Court in 2009. On behalf of Messrs Haritos and Kyritsis, who were named as the second and third defendants, two affidavits were sworn by Mr Lionel Wirth, then an employee solicitor with the law practice of Mr Grundy, seeking to explain the assets of Messrs Haritos and Kyritsis including the ownership of shares in Jinacan. In the first affidavit affirmed on 29 September 2010, Mr Wirth stated:

[George] Haritos is registered as a shareholder of one-quarter of the shares in Jinacan and the remainder of the shares are owned by a deregistered company, Glen Geriatric Services Pty Ltd. However, I am informed by [Mr Leon] Moscovitch and believe that the ASIC register is incorrect and shares in Jinacan are beneficially held in equal shares by [George] Haritos, Effie Haritos, [Alex] Kyritsis and Betty Kyritsis.

194 Later, in a letter to the solicitors for the Deputy Commissioner dated 5 October 2010, Mr Wirth sought to correct an error in the information earlier provided. He enclosed a letter from Mr Moscovitch dated 20 September 2010, in which he set out information contained on the ASIC Register that had formed the basis for the statement made in Mr Wirth's first affidavit. Mr Wirth said that Mr Moscovitch had recently obtained his file from the Australian Federal Police and had located the August 2006 suite of documents which 'disclose that the beneficial shareholders are in fact Effie Haritos and Betty Kyritsis as to two shares each.' Further, he said that his 'client is unaware of any reason why the ASIC register does not reflect the beneficial ownership of the shareholding in Jinacan'.

195 In a further letter to the solicitors for the Deputy Commissioner dated 17 January 2011, Mr Wirth enclosed an email that Mr Moscovitch had apparently sent to 'Glenys', a member of Mr Haritos' staff, a few days earlier, concerning the shareholding in Jinacan, stating as follows:

Jinacan Pty Ltd was set up in August 1987. The company was set up to buy a property for Effie Haritos and Betty Kyritsis to provide an income for them should something happen to George or Alex.

The beneficial owners of the company are Effie Haritos and Betty Kyritsis. Funds to buy the property were provided by Effie, Betty, other members of the Haritos & Kyritsis families and borrowed money.

In 2006, the shares were transferred to Effie and Betty to confirm their beneficial ownership of the shares in Jinacan. Previously these shares were held in trust for them.

196 Mr Moscovitch said that he could recall discussions with Mr Wirth, and receiving his file back from the Australian Federal Police, but could not say precisely when. His recollection was that one share in Jinacan was held beneficially for Mr and Mrs Haritos and Mr and Mrs Kyritsis, so that each of them held a 25 per cent interest in Jinacan, and that remains his understanding. He acknowledged that he must have had some discussions with Mr Grundy once he obtained the file, and he was aware of the litigation commenced by the ATO, but he could not recall why he sent the email to Glenys at AES Services in January 2011. He believed that it would have been sent in response to a question about the background of the two companies, Jinacan and Bega Nominees and the shareholdings in them, but he was unable to explain why he had written that Mrs Haritos and Mrs Kyritsis held two shares each, adding that 'I know that George and Alex each had one share.' As noted earlier, Mr Moscovitch informed the Court that he had difficulty recollecting events due to an illness around this time.

197 Mr Haritos said that he was not involved in giving instructions or information to his solicitor, Mr Grundy, for the preparation of affidavits that were filed by Mr Wirth in opposition to the applications for freezing orders.

198 Mrs Kyritsis did not recall having seen Mr Wirth's affidavit or any of the material that was filed on behalf of the defendants in opposition to the making of freezing orders in related proceedings commenced in the Practice Court in 2010. Mrs Kyritsis said that those proceedings took place at a difficult time in her life, and she had left it to her husband and brother to deal with matters concerning the freezing orders.

199 Mrs Haritos was also taken to the affidavits of Mr Wirth. She said she did not know him but did know of his principal, Mr Grundy. Mrs Haritos said that at the time the freezing orders were being sought, due to a medical condition she was unable to recall much about anything.

Income tax returns for the years ended 30 June 2005 and 2006 prepared by Gillards

200 The income tax returns for Jinacan for the years ended 30 June 2005 and 2006 were prepared by Gillards and sent to Mr Haritos under cover of a letter from Mr Moscovitch dated 30 July 2007. In that letter, Gillards requested that 'prior to signing the Minutes of Meeting, Declarations & Returns where indicated that you read all declarations and be made aware of the current situation.'

201 The bundle of documentation enclosed included the financial statements for Jinacan for the years ended 30 June 2005 and 30 June 2006, which were each dated 30 July 2007.

202 The Statement of Financial Position of Jinacan, as shown in these financial statements, revealed 'non-current liabilities' in the form of 'Shareholders Loans - Haritos & Kyritsis' in the sum of $2,949,184 as at 30 June 2006, $2,934,899 as at 30 June 2005 and $2,522,018 as at 30 June 2004. Mr Moscovitch explained that in the 2004 accounts, the Bega Nominees loan and the AES loan have been 'expunged' or 'transferred to the shareholders'. He said that would have been done by Gillards on instruction.

203 The profit and loss statement contained in the financial statements for Jinacan for the year ended 30 June 2005, dated 30 July 2007, disclosed that a dividend of $46,000 was paid for the year ended 30 June 2005. The income tax return for Jinacan for the year ended 30 June 2005 recorded the payment of franked dividends in the sum of $23,000 to each of Mrs Haritos and Mrs Kyritsis. It will be noted that this dividend payment actually predates the Declaration of Trust made in August 2006.

204 Mrs Kyritsis was cross-examined about her personal income tax returns. She said that Mr Moscovitch had prepared them and she could not remember whether or not any income by way of dividends from Jinacan was included in any of her returns. She agreed that she would not know whether Jinacan was paying her dividends or not and added that if she needed money, her husband 'Alex gave [her] money'.

205 The Commissioner contends that, notwithstanding the contents of the ASIC Jinacan register and their purported Declarations of Trust, Glen remained the beneficial owner of the four Jinacan shares at all material times prior to its dissolution in October 2006. On the basis of the evidence adduced before me, I am satisfied that is the position.

206 In my view, the purported Declarations of Trust were not valid and effective and did not operate to alter or affect the manner in which the shares in Jinacan were held. As at 11 August 2006, Mrs Haritos and Mrs Kyritsis were not directors of Glen and they had no authority, ostensible or otherwise, to execute on behalf of Glen the purported Declarations of Trust relating to the three shares it held in Jinacan. Counsel for the defendants contended that Mrs Haritos and Mrs Kyritsis executed the documents 'with the express authority of the company, conferred by its director George Haritos',[46] he having asked them to sign the Declarations of Trust, which they both did. But that submission proceeded on the assumption that Mr Haritos had the requisite authority to authorise them to do so on behalf of Glen, when no such authority was established or made out. Moreover, in circumstances where the two directors of Glen were present at the time when these documents were being executed by their wives, purportedly on behalf of Glen, it is passing strange that Mr Haritos would authorise them to do so. It is also unusual that the execution of important documents would be delegated to the putative beneficial owners, for execution on behalf of the trustee, rather than by the directors themselves. Indeed, Counsel for the defendants acknowledged it was 'odd' that in each case the beneficiary of the trust - no longer a director of Glen - had executed the Declaration of Trust on behalf of Glen, but Counsel contended nevertheless that it was not invalid.

207 Similarly, in the case of the Declaration of Trust concerning the share held by Mr Haritos as trustee, no evidence was adduced before the Court to demonstrate that at the time when he purported to execute the declaration, he had authority from Glen to do so. It will be recalled that under the initial Declaration of Trust executed on 25 August 1987, Mr Haritos acknowledged that he had 'no title right or interest whatsoever' in the Jinacan share and 'agree[d] to deal with the said shareholding at such time and in such manner as ... the beneficial owner [Glen] may require.' As he held no beneficial interest in the Jinacan share, Mr Haritos had no power to assign or otherwise declare any trust in relation to it absent a direction from Glen. No evidence was given about any direction to Mr Haritos or request made by Glen, and Mr Haritos appears to have signed the suite of documents in his personal capacity rather than as trustee for Glen.

208 Counsel for the defendants further argued that the trust for Mrs Haritos and Mrs Kyritsis was declared on formation, reiterated throughout the life of Glen, and finally documented in August 2006. I have rejected the factual foundation for that submission earlier in these reasons.

209 It is clear from the face of the transfers to Glen executed on 25 August 1987 that Glen provided consideration, in the sum of $1.00 for each of the four Jinacan shares. As these transfers were executed prior to completion of the purchase of 624 Sydney Road property, such nominal consideration was consistent with Jinacan having no net assets at that point. No evidence was led of the payment by Mrs Haritos and Mrs Kyritsis in August 2006 of any fresh consideration for the transfer of the shares. The oral evidence that was adduced about their contributions to the purchase price of Jinacan's sole asset, 624 Sydney Road, was vague and unsubstantiated, and in any event the defendants did not contend that any such payments gave rise to a resulting trust over the shares in Jinacan. As I have noted earlier, even if, as Mr Moscovitch said, the Declarations of Trust were prepared 'to rectify what was incorrect earlier', he acknowledged that the position set out in the Declarations of Trust did not accord with his original instructions and he could not explain why they effectively recorded Mrs Haritos and Mrs Kyritsis as the beneficial owner of two shares each.

210 The assertion that the two women were relevantly the beneficial owners of the Jinacan shares was seemingly first made, or drawn to the attention of the Commissioner, in the letter from the defendants' solicitor, Mr Grundy, to the Deputy Commissioner dated 5 October 2010. In that letter, Mr Grundy sought to correct information that Mr Moscovitch had provided him in relation to the freezing orders.

211 The late revelation of this information falls to be viewed against the background of the freezing orders that were made against Jinacan and 624 Sydney Road in June 2009.

212 If, as the defendants now contend, it were the case that 624 Sydney Road was purchased for Mrs Haritos and Mrs Kyritsis only, it is surprising that this was apparently overlooked or not recalled when the defendants placed material before the Court when seeking a variation of the freezing orders in September 2010. At that time, a fundamentally different version of events was allowed to be put before the Court. In any event, as I have noted earlier, the evidence given at trial by their accountant, Mr Moscovitch, did not support the defendants' version of events.

213 In the circumstances, I find that each of the purported Declarations of Trust were not valid and effective and did not operate to alter or affect the manner in which the shares in Jinacan were held. Accordingly, it follows that Glen remained the beneficial owner of the four Jinacan shares at all relevant times.

Are the transfers voidable pursuant to s 172 of the Property Law Act?

214 In light of the conclusion I have reached on the Deputy Commissioner's first limb argument, it is not necessary for me to address the second limb argument, or at least not in any great detail. As I have noted earlier, Counsel for the defendants argued throughout that the trust for Betty and Effie was declared on formation, reiterated throughout the life of Glen, and finally documented in August 2006, rather than contending that the act of execution of each of the Declarations of Trust itself effected any change in beneficial ownership. Thus, the parties were in agreement that the execution of the Declarations of Trust did not alienate any interest that Glen might have held in the shares in Jinacan.

215 Nevertheless, having heard evidence referable to the second limb argument, for completeness I set out the factual circumstances of the claim by way of explaining the findings I would make and the conclusion I would reach if, contrary to my view, the second limb argument were in some way enlivened.

216 In summary, the Deputy Commissioner contended as follows:

(a) in August 2006, when the Declarations of Trust were executed, Glen was indebted to the Commissioner in the amount $514,032 in respect of an RBA deficit debt (the 'Glen Tax Debt');

(b) the Declarations of Trust were executed with an intention to defeat the Commissioner's claim in respect of the Glen Tax Debt;

(c) accordingly, the Declarations of Trust are voidable at the instance of the Deputy Commissioner pursuant to s 172 of the Property Law Act.

217 The defendants' response to the second limb argument was to say that the Declarations of Trust were not intended to, and did not, alienate any interest Glen might have held in the Jinacan shares. Further, the defendants said that the controlling mind of Glen was relevantly Mr Haritos, rather than Mr Kyritsis, which was confirmed by Mr Moscovitch. When Glen ceased trading at the end of 2004, Mr Haritos, Mr Kyritsis and AES Services set about paying off creditors of Glen. Glen's corporate records show that they made payments of more than $2 million to its creditors in the approximately 18 months after it ceased trading. Mr Haritos' evidence was that he believed that the Declarations of Trust were ineffective to do anything other than document the status quo, but in any event, having made those payments, he did not believe there were any creditors of Glen who might be defrauded. Thus, the defendants contended, there was neither an intention to defraud nor an intention to alienate.

Section 172 of the Property Law Act

218 Section 172 of the Property Law Act is headed 'Voluntary conveyances to defraud creditors' and provides as follows:

Save as provided in this section, every alienation of property made, whether before or after the commencement of this Act, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced.

This section shall not affect the operation of a disentailing assurance, or the law of bankruptcy or insolvency for the time being in force.

This section shall not extend to any estate or interest in property alienated for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the alienation, notice of the intent to defraud creditors.

The parties were agreed that if the Court were to find that the Declarations of Trust were effective to assign Glen's beneficial interest in the Jinacan shares to Mrs Haritos and Mrs Kyritsis, then the assignments would fall for consideration within the purview of s 172. For the most part, the parties were also agreed as to the applicable legal principles concerning intent to defraud, as set out below.

219 Section 172, and its counterparts in other jurisdictions, is 'derived from "the Elizabethan statute"[47] which was intended to prevent debtors alienating property when this would prevent their creditors from recovering the moneys owed to them.'[48] The provision applies to all forms of property, both legal and equitable.[49]

220 In Marcolongo v Yu Po Chen [2011] HCA 3; (2011) 242 CLR 546 ('Marcolongo') the High Court considered the operation of s 37A of the Conveyancing Act 1919 (NSW). In a joint judgment, French CJ, Gummow, Crennan and Bell JJ observed that the concept of 'defraud' within the meaning of that section (and correlative state and federal provisions) should receive a liberal construction consistent with the case law deriving from the Elizabethan Statute.[50] Accordingly, the phrase 'intent to defraud creditors' should be understood as encompassing an intention to 'delay, hinder or [otherwise] defraud' consistently with the application of the phrase used in the Elizabethan Statute.[51]

221 Further, in Marcolongo, their Honours in the majority also noted that whilst the concept of 'defraud' does not extend to encompass equitable or constructive fraud, it does not require a finding of actual dishonesty in the sense of an actual intention or purpose of causing loss. Rather, they said, it was necessary to show 'an intention to hinder, delay or defeat creditors and in that sense to show that accordingly the debtor had acted dishonestly.'[52]

222 The nine 'badges' of fraud as they were called by Lord Hatherley LC in Allen v Bonnett,[53] are commonly applied as a useful 'check list' for detecting the presence of fraud. Relevantly for present purposes those 'badges' include:

Unusual statements of fact in the deed (so a statement that the deed is made without any fraudulent intent is a suspicious circumstance);

223 An intention to defeat creditors is usually sought to be inferred from the circumstances in which the property is alienated.[55] Although intent must be found as a fact, it need not be the sole, nor predominant, intent. It may exist concurrently with a genuine and good faith intention to dispose of property.[56] In ascertaining intent, the critical period to examine is the period leading up to the date of the transfer and the critical mind is that of the transferor. Where that transferor is a corporate entity, the critical mind is that of the person controlling the transferor's actions in effecting the transfer.[57]

224 The manner in which intent is to be ascertained was considered in Deputy Commissioner of Taxation v Yeo [2007] VSC 29; (2007) 66 ATR 428, where Harper J noted that direct evidence of the necessary intent to defraud creditors is very seldom available. His Honour observed:

Given that intent is a state of mind, it cannot be seen or otherwise perceived. In practice, therefore, the available evidence is almost invariably circumstantial. One ascertains someone else's intention by looking at what that person has done or said as circumstantial evidence from which an inference can be drawn concerning the intention in question. [58]

225 The observation made by Harper J reflects what was said by Clyne J in Re Trautwein; Richardson v Trautwein (1944) 14 ABC 61, which was quoted with approval by the Full Court (Wilcox, Gummow and von Doussa JJ) in PT Garuda Indonesia Limited v Richard John Grellman [1992] FCAFC 188; (1992) 35 FCR 515, as follows:

With regard to the applicant's claim under s 37A of the Conveyancing Act 1919 (NSW), it is, I think, clearly established that in determining whether or not an alienation has been made with intent to defraud creditors, a court must look at all the circumstances surrounding the alienation to ascertain if there were any such intent. It is not necessary to bring actual proof that the alienor had in his mind an intention to defraud creditors: for if it appears from the evidence that the effect might be expected to be and has in fact been to do so, the court will attribute the fraudulent intention to the alienor.[59]

226 In Cannane, Brennan CJ and McHugh J said that an intention to defraud creditors may be inferred where a disposition results in a 'subtraction of assets' available for payment of creditors.[60] Where a disposition is voluntary, rather than for valuable consideration, and a necessary consequence of the alienation is to defeat or delay creditors, the inference of intent to defraud may be drawn more easily.[61]

227 The relevant principles concerning 'intent to defraud' were also helpfully summarised by Gilmour J in Commissioner of Taxation v Oswal ('Oswal') in the context of the equivalent provision in the Western Australian Property Law Act 1958 (WA).[62] Gilmour J's summary incorporated observations made by Owen J at first instance in Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1,[63] which offer useful guidance, as follows:

. . .

3. Intention can be established by inference.

1. If the natural and probable consequences of the disposition are such that its effect will be to defeat or delay creditors, the necessary inference can be drawn and a court might more readily do so. But a finding to that effect is a finding of an actual or real intention, not one that is imputed to the disponor by virtue of a legal presumption.
2. The essence of the concept of defrauding creditors lies in a disposition which subtracts from the property which is the proper fund for the payment of the debts, an amount without which the debts cannot be paid ....
3. Other relevant circumstances from which the necessary inferences might be drawn include:

(a) the insolvency or difficult financial circumstances of the disponor (although establishing insolvency at the time of the disposition is not a necessary element); and

(b) whether the transaction was voluntary or the consideration was colourable, negligible or trivial.

...

1. It is not necessary that the disposition affects creditors as a class generally; it is sufficient if one or some creditors are adversely affected. In this context 'creditor' is not confined to those to whom a debt is (at the time of the disposition) presently due and owing. It extends to impending liabilities and future creditors ...[64]

228 The party seeking to avoid a disposition of property has the onus of proving an actual intent by the disponor at the time of the disposition to defraud creditors.[65]

229 The Deputy Commissioner contended that the following principles, relevant to the scope of the term 'creditors', are well-established:

the 'creditors' need not be existing creditors; they may be anticipated future creditors.[66] In such circumstances, however, the applicant must show that the relevant intention existed with the disposition of the property in question;[67]

the intention may be inferred if assets are given away at a time when the transferor is aware of an impending liability, even though that impending liability has not yet crystallised into an existing indebtedness;[68]

similarly, a person who makes a voluntary settlement immediately before entering into a financially hazardous venture could be said to have intended to defraud his or her creditors notwithstanding that there were no outstanding creditors at the date of the transfer.[69]

230 The defendants took issue with the Deputy Commissioner's third proposition (set out above), contending that this proposition from Mackay v Douglas (1872) LR 14 Eq 106 was applied by Starke J in dissent in Williams v Lloyd [1934] HCA 1; (1934) 50 CLR 341 ('Williams') but not followed by the majority in that case.[70] Further, the defendants say that in Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372, the Full Court's reliance on the dissenting judgment of Starke J in Williams was in error. The defendants submitted that a cautious investor quarantining capital from a speculative investment is not acting with intent to defeat creditors. For the purposes of deciding the present case, however, it is not necessary for me to resolve these differences in view.

231 Section 172(3) provides that s 172(1) will not apply to an interest in property where the transferee, acting in good faith,[71] and without notice of the intent to defraud, gave either valuable consideration,[72] or good consideration.[73] The burden of proof in relation to the s 172(3) defence lies on the transferee.[74]

232 Where, on the application of a prior creditor, an order is made setting aside a fraudulent disposition, the property is made available to the claims of all creditors generally, and subsequent creditors are let in and participate pro rata.[75]

233 Mr Zafirou gave evidence on behalf of the Deputy Commissioner about how the ATO maintains and uses its electronic record keeping systems, the ATO Integrated System ('AIS System') and the Receivables Management System ('the RMS System'). The AIS System records the amounts owing by individual taxpayers and records any payments made and any credits due. The RMS System, on the other hand, contains a record of all file notes recorded contemporaneously within the ATO's computer system. Once the entry is made by the relevant officer, it is saved within the system and cannot later be altered or amended.

234 Mr Zafirou also discussed the RBA operated by the Deputy Commissioner. The regime regulating the establishment and administration of the RBA is set out in Part IIB of the Taxation Administration Act. There was no dispute between the parties about the operation of the regime regulating the establishment and administration of the RBA and RBA debts. Mr Zafirou explained that the RBA is a total record of all of the corporate liabilities excluding income tax and fringe benefits tax. In essence, if there is an RBA deficit debt on an RBA at the end of the day, the tax debtor is liable to pay the Commonwealth the amount of the debt, and also a general interest charge. Any general interest charge or remission is calculated automatically by the computer system. Section 8AAZI of the Taxation Administration Act provides that the production of an RBA statement is prima facie evidence both that the RBA was duly kept and that the amount and particulars in the statement are correct.

235 Mr Zafirou also explained the system of parallel accounting operated by the Deputy Commissioner. He said the primary liability rests with the company as the employer and is recorded on the corporate account, but when director penalty notices are issued, the Deputy Commissioner has to create a manual account to reflect the director penalty notices issued in respect of the number of directors that have received them.

236 The RMS System notes that were tendered by the Deputy Commissioner showed that on 8 December 2005, the ATO notified Glen, via Gillards, that a notice of intended legal action had been issued to Glen. This step was followed up in March 2006, when the ATO issued a statutory demand to Glen in respect of a RBA deficit debt in the sum of $424,639.59, which with interest later became the Glen Tax Debt. Gillards, on behalf of Glen, informed the ATO that Glen could not pay the entire debt and on 19 May 2006, a compromise proposal was submitted to the Commissioner in respect of the RBA deficit debt. On or around 12 September 2006 the compromise proposal was rejected and the ATO sought payment in full of $507,478.43 within seven days.

237 Significant sums were paid by or on behalf of Glen to the ATO after it ceased trading. From 1 January 2005 until Glen was wound up in October 2006, it made a series of payments to the ATO totalling $451,686. Mr Zafirou acknowledged that this was the position.

238 Mr Zafirou also readily acknowledged that in the present case an error was made on the part of the Deputy Commissioner in relation to the directors' penalty notice account. He explained that the directors' penalty account showed an amount of $131,476.72 as owing between 3 October 2003 and 5 February 2007, which was an error. He said that, in essence, there was a misallocation on the main corporate account of the payments made and following an investigation, this error was corrected in 2007. He agreed that back in October 2003 the directors' penalty notices that were issued should have been discharged.

239 That error, however, was not picked up at the time the ATO rejected Glen's compromise proposal. Mr Zafirou agreed that in September 2006, the first reason given by the Deputy Commissioner for rejecting Glen's compromise proposal was that '[a]n amount of $131,476.72 is still outstanding from the Director Penalty Notices'. He said that the ATO understood that to be the position at the time, but he agreed that his more recent checking had shown it to be an incorrect statement.

240 Upon receiving the ATO's letter of 12 September 2006 rejecting Glen's compromise proposal, Gillards wrote to the ATO on behalf of the directors of Glen to request 'a breakdown of the $131,476.72 claimed as outstanding from Director Penalty Notices since 2003, and confirmation of whether this amount is included in the requested payment of $507,478.43.' The ATO responded, confirming that the 'outstanding amount of the Director Penalty Notice of $131,476.72 is a component of the total debt on the Integrated Client Account of $513,104.41 as at 12 October 2006.' Gillards then followed up again with the ATO, reporting that after checking their records and those of Glen, they believed that the relevant director penalties had been raised in error. They set out the various components of tax that were paid by their client's cheque for $379,132 that was banked by the ATO on 3 October 2003, and requested that the ATO revise their records and the allocation of director penalties to reflect the correct information. However, at that point the ATO did not accept that any mistake had been made with respect to the allocation of Glen's payments.

241 Mr Haritos was of the view that at the time when he gave instructions to Mr Moscovitch to liquidate Glen, the ATO was not owed any money. He said '[m]y understanding was that everybody was paid in full. There was [sic] no outstanding creditors.' He maintained this position notwithstanding the admission contained in the statement of affairs that he signed in October 2006. Those amounts claimed by the ATO were apparently penalties and interest rather than the principal sum.

242 As noted above,[76] Mr Haritos was unhappy that, having repaid the principal due to the ATO, the ATO continued to make demands for payment of the interest. It was in this context that Mr Haritos requested that the beneficial owners of the shares in Jinacan be noted and Gillards prepared the August 2006 documents.

243 Mr Richwol, of O'Keefe Walton Richwol, was appointed as the liquidator to Glen following a meeting of creditors in 2006. Mr Richwol recalled that when he first took on the job, Mr Moscovitch explained to him that the ATO got their figures wrong. Both Mr Haritos and Mr Moscovitch appeared to remain of this view throughout the liquidation.

244 Mr Richwol wrote to creditors of Glen informing them of O'Keefe Walton Richwol's role and giving notice of a meeting of creditors at which it was intended to propose a resolution that the company be wound up voluntarily, and enclosing a summary of affairs, a list of creditors, etc. He also informed them that Mr Kokkinos would be the contact point for further information. The notice of meeting of creditors, dated 28 September 2006, was signed by Mr Haritos. The notice informed creditors that it was proposed that the meeting would authorise the liquidator to destroy the books and records of the company after obtaining approval from ASIC. The form 509 Summary of Assets and Liabilities (made up to 28 September 2006) showed Glen as having total assets of $4,379.06, amounts secured by debenture or floating charge of $14,000 and (unsecured) creditors of $1,270,425.43, resulting in an estimated deficiency of $1,280,046.37.

245 The form 507 Report as to Affairs dated 17 October 2006 was signed and certified by Mr Haritos as being 'true to the best of [his] knowledge and belief'. The shares in Jinacan were not listed as an asset of Glen. Schedule H of the Report as to Affairs set out the list of unsecured creditors as follows:

Reasons for difference between amount claimed and admitted (if any)

246 The meeting of creditors held on 17 October 2006 was chaired by Mr Kokkinos and attended by Mr Moscovitch as proxy for Gillards and Mr Richwol as proxy for Mr Kyritsis and Mr Haritos. The minutes of meeting record that the directors attributed the failure of the company to 'bad debts, increases in [W]ork[C]over premiums which could not be passed on in existing agreements and numerous [W]ork[C]over claims and unfair dismissals.' The meeting also passed unanimously a resolution authorising 'the liquidator to destroy the books and records of the company within a period of five years after dissolution of the company subject to obtaining prior approval from [ASIC] pursuant to Section 542(4) of the Corporations Act'.

247 Following the meeting of creditors, by notice dated 2 November 2006, Mr Kokkinos informed the ATO that no dividend was likely to be paid. The Deputy Commissioner lodged a formal proof of debt dated 24 November 2006 in place of that earlier submitted, claiming that on 17 October 2006 Glen was, and remained, indebted to the Deputy Commissioner for the total amount of $580,093.87. This figure comprises a RBA deficit debt in respect of Business Activity Statements amounts of $514,032.19 and Superannuation Guarantee Charge general interest charge of $66,061.68.

248 On 21 June 2007, Mr Richwol reported to creditors by letter. He noted that the company had ceased trading on 1 January 2005 after the sale of the company assets to an entity in which the directors had an interest. However, it appeared that 'most trade creditors were satisfied from the available assets of the company and or from additional funds contributed by the directors to the company.' He reported that he had identified a preference amounting to $42,432.17 received by a company associated with the directors but added that he did not have funds to commence public examinations and to pursue the preference claim. He invited creditors who might have an interest in providing funding to do so to contact Mr Kokkinos.

249 The First Annual Meeting of Creditors was held on 18 December 2007. In his report to creditors, Mr Richwol informed them that as no creditor had been willing to contribute funding for the actions outlined in his earlier report, a settlement of the preference matter was negotiated resulting in the receipt of $23,337.68. He noted that no other claims that were identified were of commercial value to pursue. In addressing the issue of insolvent trading, he reiterated his earlier observations that the trade creditors were paid with the contribution of additional funds from the directors. In respect of Glen's liability to the ATO, he observed that the directors were of the opinion that the debt to the ATO had been extinguished, and that the amount outstanding related to penalties and interest that was incorrectly applied. He noted that the directors' view was one that was shared by their accountants. He invited creditors who may have had knowledge of any transaction or behaviour that they considered suspicious or dishonest, or of the whereabouts of concealed assets, to draw them to his attention for investigation. The ATO did not come forward at that point or seek to draw anything to his attention. Mr Zafirou agreed that the Deputy Commissioner had not attended the meeting of creditors of Glen nor did he take any steps to stop the destruction of the books of Glen.

250 Mr Richwol said that once the liquidation was complete, the creditors authorised him to destroy the books and records of the company after its dissolution. Following permission from ASIC (usually six months after the company has been de-registered), the documents would be destroyed as and when space restrictions in the liquidator's storeroom required that space be made available for new matters.

251 Mr Haritos also gave evidence about various amounts that he said were paid to creditors of Glen in the 18 months before it went into liquidation, namely between 1 January 2005 and 30 June 2006. In this regard, Mr Haritos referred to a document entitled 'Supplier Payments' which apparently recorded payments made to creditors of Glen after it had ceased trading. He said that it was prepared by the liquidator. However, when Mr Richwol was shown the document he said that he did not recognise it and it was not the type of document that would be generated by his firm. He also confirmed that the handwriting on the document was not that of Mr Kokkinos.

252 Mr Haritos said that in addition to the payments made to the ATO, substantial payments were made to Central Cleaning Supplies ($138,068.24), Aspect Protective Services ($91,587.80), Crown International Properties ($93,700.00), State Revenue Office - payroll tax ($90,655.02), wages ($668,220.60) and to Wyatt Gallagher for WorkCover premiums ($420,058.25). Mr Haritos said that the suppliers listed in the document were paid from monies that were transferred into Glen from AES Services, the newly incorporated entity, moneys received from the directors of Glen (Mr Haritos and Mr Kyritsis) and moneys received into Glen's account at the end of December 2005 for the most part as a result of cleaning contracts coming to an end. He said Mr Kyritsis provided about $50,000, he put in $750,000 and AES Services would have provided around about $1 million. There was also about another $300,000 to $400,000 that came in to Glen by way of income.

253 Mr Haritos' understanding was that everyone who was a creditor of Glen was paid in full and he said he made the payments because he believed that he had a moral obligation to see that everyone was paid. In the case of the ATO, and the ongoing dispute about the allocation of moneys received, Mr Haritos also explained that payments made to the ATO were often not entered correctly and his secretary spent countless hours on the telephone trying to track payments that had been made. In the meantime, however, the ATO continued to charge penalty interest.

254 According to the statement of affairs set out in the Report as to Affairs, the Commissioner was the only substantive creditor of Glen that was not paid. Mr Zafirou agreed that this was the statement of affairs showed.

255 The Deputy Commissioner also sought to rely upon a host of other matters involving a number of related entities, Kyritsis Nominees, Diamond Sun and Grattan Heights, the timing of their incorporation and identity of their shareholders, and the purchase of seven properties in and around Melbourne by them and relatives of the defendants from May 2006 through to January 2009. The Deputy Commissioner also relied on the defendants' admissions, made formally in their defence, that:

(a) between March 2005 and January 2009, payments in excess of $45 million derived from the trading operations of AES Services were deposited into a Westpac Bank business cheque account in the names of Mr Haritos and Mr Kyritsis trading as AES Services;[77]

(b) AES Services' income tax returns for the 2005, 2006, 2007 and 2008 income tax years failed to disclose as assessable income any of the moneys deposited in AES Services' Westpac Bank business cheque account;[78]

(c) between May 2006 and January 2009, Mr Haritos and/or Mr Kyritsis applied funds drawn substantially from these deposits made to AES Services' Westpac Bank business cheque account, for private purposes;[79] and

(d) the personal income tax returns of Mr Haritos and Mr Kyritsis for the 2005, 2006, 2007 and 2008 income years failed to disclose as assessable income any of the funds that were withdrawn substantially from the deposits made to AES Services' Westpac Bank business cheque account.

256 In essence, the Deputy Commissioner said that the three new companies were incorporated in early 2006 by Gillards. Kyritsis Nominees and Diamond Sun had Betty and Effie as their respective sole shareholders, directors and secretaries, but neither of the women had any real involvement in the business activities of those companies. Between May and October 2006, properties valued at $6,310,000 were purchased and registered in the names of the new corporate entities, and in the case of one property, in the name of the daughter of Mr and Mrs Haritos. The defendants admit that the funds for those purchases were drawn substantially from the undisclosed income of AES Services. Thereafter, until early 2009, the defendants continued to acquire further assets in the names of the corporate entities and family members.

257 Against that background, the Deputy Commissioner contended that the Court should infer that Mr Haritos' and Mr Kyritsis' purpose in acquiring assets in the names of relatives and entities controlled by them was to distance themselves from their creditors. Further, it was said that the Declarations of Trust were consistent with that course of conduct in that they operated to remove the value of the Jinacan shares, for no consideration, from the assets against which the Commissioner could recover the Glen Tax Debt and any subsequent tax debts owed in respect of undisclosed income. That is, if the Declarations of Trust were effective to transfer the beneficial interest in the Jinacan shares for no consideration, then the pool of funds available to Glen to satisfy the Glen Tax Debt was substantially reduced and the Deputy Commissioner was 'thereby prejudiced.'

258 The defendants objected to these contextual matters being 'tacked on' or called in aid to support the Deputy Commissioner's allegations concerning the Declarations of Trust relating to the Jinacan shares. To the extent that the defendants admitted that funds drawn from deposits made to AES Services' Westpac Bank business cheque account were applied by Mr Haritos and/or Mr Kyritsis between May 2006 and January 2009 for private purposes, they say they were loans made by AES Services to them. Further, the defendants say the character of funds drawn from AES Services' Westpac Bank business cheque account has been the subject of determination in another proceeding and the Deputy Commissioner is estopped by the earlier judgment and/or is estopped from re-agitating the allegation in this proceeding. [80]

259 The defendants also contended that it was impermissible for the Court to consider any subsequent conduct for the purpose of divining prior fraudulent intent: see Williams.[81]

260 I turn now to consider the question of whether if, contrary to the findings I have made in respect of the first limb of the Deputy Commissioner's case, the August 2006 Declarations of Trust were nevertheless found to be valid and effective to transfer the beneficial ownership of two shares in Jinacan to each of Mrs Haritos and Mrs Kyritsis, they were made with the intent to defraud creditors within the meaning of s 172 and are rendered voidable at the suit of the Deputy Commissioner. In doing so, I am mindful of the gravity of the matter and the seriousness of making such a finding.

261 The evidence established that at all relevant times, Mr Haritos, rather than Mr Kyritsis, was the controlling mind of Glen and the relevant decision maker. I accept Mr Moscovitch's evidence that prior to Glen being placed in liquidation, Mr Haritos gave him instructions requesting 'that the beneficial owners [of the shares in Jinacan] be noted.' Of course, it is implicit in that request that the registered holders at that time were not themselves the beneficial owners. It will be recalled that when the request was made, Glen was recorded as the holder in respect of three Jinacan shares and Mr Haritos was recorded as the legal owner in respect of the fourth share with Glen being the beneficial owner, as stated in the initial declaration of trust.

262 The suite of documents prepared by Gillards to give effect to Mr Haritos' instructions were, for the most part, expressed in terms of effecting a 'change of beneficial ownership' rather than as an acknowledgment of a pre-existing trust arrangement. As I explained above, the Declarations of Trust are, in each case, expressed in terms which do not accord with, and reflect, information recorded in other corporate records and documents that were prepared by Gillards.

263 Furthermore, in the form in which they were prepared, the Declarations of Trust sought to achieve a situation whereby the Jinacan shares would be beneficially owned by each of Mrs Haritos and Mrs Kyritsis as to 50 per cent, that is, two shares each. That was the version of events contended for by Mr Haritos in the evidence he gave, but as I have said, there was an absence of any independent or objective evidence supporting it and I have not accepted it. Gillards responded to the request Mr Haritos made and sought to give effect to it, but Mr Moscovitch could not explain why the Declarations of Trust effectively recorded Mrs Haritos and Mrs Kyritsis as the beneficial owner of two shares each and he acknowledged that that position did not accord with his original instructions. He also confirmed that the Declarations of Trust had been backdated.

264 At the time when Mr Haritos gave instructions to Mr Moscovitch to liquidate Glen, he was of the view that the ATO was not owed any money. Mr Haritos also believed that everybody was paid in full and there were no outstanding creditors of Glen. He maintained that position through to the commencement of the trial but during the opening, Counsel for the defendants effectively conceded that as at the date of its liquidation, Glen owed a debt to the Commissioner. It also seems clear that initially the Commissioner had claimed more than was later found to be due, as Mr Zafirou acknowledged, and this may have exacerbated any misunderstanding of the position on the part of both Mr Haritos and his advisers.

265 If the position was as Mr Haritos asserted, and there were no creditors of Glen, the question arises as to why in August 2006 Mr Haritos requested Mr Moscovitch to take action to 'note' the beneficial owners of the shares in Jinacan in advance of Glen being placed in liquidation.

266 It will be recalled that Mr Haritos said he had 'no idea' why the Declarations of Trust were executed - he thought they were something that Mr Moscovitch had to do with regards to the company going into liquidation - and he believed they were administrative steps that had to be taken because the company was going into liquidation. But Mr Haritos' version of events is contradicted by Mr Moscovitch's evidence, which I have generally preferred and accepted over his.

267 As I have noted earlier, when it was put to Mr Moscovitch, he agreed that Mr Haritos had told him that the purpose of the Declarations of Trust was to ensure that there was no argument whatsoever that Glen owned any shares in Jinacan. Mr Moscovitch also agreed that the reason for that was because the shares in Jinacan were a valuable asset. In these circumstances, Mr Moscovitch's evidence provides the foundation for a credible explanation for the execution of the Declarations of Trust.

268 Even if there was not consensus between the rival parties as to what amount, if any, was due to the Commissioner at the time Glen was placed in liquidation, Mr Haritos was aware that the Commissioner disputed his view and claimed to be owed in excess of $500,000, and would seek to enforce that debt notwithstanding Glen's attempts to resolve the dispute. The position in the present case is quite different from that before the Court in Williams,[82] in the sense that here, viewed from the perspective of Glen, there was something to fear, namely that the Commissioner would maintain his view and seek to prove the indebtedness of Glen in any liquidation. Moreover, it was evident from the Report as to Affairs signed by Mr Haritos, which did not disclose the Jinacan shares as an asset, that Glen was unable to pay the Glen Tax Debt.

269 If the Declarations of Trust were found to be valid and effective, a valuable asset of Glen would effectively disappear, in the sense that the transfers of the beneficial ownership of two shares in Jinacan to each of Mrs Haritos and Mrs Kyritsis would result in a 'subtraction of assets' available for payment of creditors and thereby would operate to hinder, defeat or delay creditors. Against the background of the events that took place concerning Glen in the period leading up to the making of the Declarations of Trust, I am satisfied that, were it necessary to do so, there would be a proper basis for the Court to draw the inference and make a finding that, in effecting the transfer of the beneficial interest in the Jinacan shares, Mr Haritos, as the controlling mind of Glen, intended to defraud creditors of Glen within the meaning of s 172 of the Property Law Act. Accordingly, if they were otherwise valid and effective, the Declarations of Trust and transfers would be voidable at the suit of the Commissioner, being relevantly 'a person thereby prejudiced', and should be set aside.

270 In light of the view I have formed on the preliminary issue concerning the standing of the Deputy Commissioner to seek purely declaratory relief, I will make orders for the substitution of the Commissioner in place of the Deputy Commissioner as plaintiff.

271 On the matters raised on the first limb argument, I am satisfied that it is appropriate to grant declaratory relief, and I will make declarations substantially in the form sought as follows:

(1) A declaration that as at 19 May 2008, being the date of its dissolution, Glen was the beneficial owner of four Jinacan shares.

(2) A declaration that in each case the purported declaration of trust signed on 11 August 2006 by:

272 In light of the relief granted on the first limb argument, no relief is called for on the second limb argument.

273 I will hear the parties on the precise form of the appropriate orders, including on the question of costs.

[1] In May 2009, the Australian Valuation Office valued 624 Sydney Road at approximately $8,500,000.

[2] The third party freezing order was varied by Justice Ferguson on 8 October 2010 to allow Jinacan to grant a mortgage to the ANZ Bank over 624 Sydney Road to secure an overdraft facility in favour of Transclean Facilities Pty Ltd.

[3] A further declaration set out in paragraph C of the prayer for relief was not pressed by the Deputy Commissioner in final submissions.

[4] Messrs Haritos and Kyritsis brought proceedings challenging the assessments pursuant to Part IVC of schedule 1 of the Taxation Administration Act 1953 (Cth). On 1 March 2013, the Administrative Appeals Tribunal constituted by Deputy President Forgie affirmed the assessments (with the exception of certain minor amounts and several adjustments conceded by the Commissioner): see Confidential and Commissioner of Taxation [2013] AATA 112 (1 March 2013). On 20 February 2014, Pagone J dismissed as incompetent the appeals of Messrs Haritos and Kyritsis from the AAT to the Federal Court. Messrs Haritos and Kyritsis now seek leave to appeal to the Full Federal Court.

[5] Further Amended Statement of Claim ('Statement of Claim'), [1].

[6] (2000) 157 FLR 26 ('Bluehaven'), 30 [14]-[15] and 32 [20].

[7] [2008] HCA 41; (2008) 237 CLR 473, 496 [58], where the High Court endorsed the view taken by Williams J in Bluehaven (2000) 157 FLR 26.

[8] [1908] NSWStRp 49; (1908) 8 SR (NSW) 246, 249-250.

[9] (1996) 65 FCR 269, 273 (Black CJ), 276 (Lockhart J) and 279 (Spender J).

[10] [2004] VSC 157; (2004) 9 VR 549, 568 [440].

[11] Plaintiff's Further Supplementary Submissions, 30 April 2014 [15].

[14] Sarkis (2005) 59 ATR 33, 42 [21] (citations omitted).

[15] As Elliott J noted in DCT v Karas (2013) 278 FLR 402, 407-408 [33], Nettle JA made no reference to s 255-50(1) in his judgment, although the subsection was in existence at the time.

[17] Ibid 407 [28]-[31] (citations omitted).

[18] Plaintiff's Reply to the Defendants' Further Supplementary Submissions, 27 May 2014, [1.1].

[19] See Plaintiff's Further Supplementary Submissions, 30 April 2014, [25]. When para 1 of the pleading and the issue of the Deputy Commissioner's standing was first raised in Court on 26 March 2014, Counsel for the defendants expressed the view that he did not think the standing point had any effective substance.

[20] Sarkis (2005) 59 ATR 33, 42, [21] (Nettle JA, with whom Warren CJ and Charles JA agreed).

[21] Massoud (1995) 62 NSWLR 657, 660-661.

[22] [1943] HCA 7; (1943) 67 CLR 461, 474.

[23] Defence to Statement of Claim ('Defence'), [42].

[26] [2009] NSWSC 1229; (2009) 236 FLR 1, 82 [396]-[397] (citations omitted).

[27] [2012] HCA 17; (2012) 247 CLR 345, 403 [138].

[28] Plaintiff's Supplementary Submissions, 2 April 2014, [33].

[29] First to Third Defendants' Outline of Opening Submissions, 13 March 2014, [19].

[30] In the First to Third Defendants' Outline of Closing Submissions, 13 March 2014, they acknowledged that the conflict in the oral evidence was that Mr Moscovitch believed strongly that his instructions had been that Mr and Mrs Haritos and Mr and Mrs Kyritsis would hold one share each beneficially, whereas the defendants contended that the Jinacan shares had always been held on trust for Mrs Haritos and Mrs Kyritsis as to two shares each: at [9].

[31] Civil Procedure Act s 7.

[33] See para [51] above.

[34] The annual returns for the earlier years bear Mr Haritos' name (in type) but these ones bear his signature also.