AGIUS v R

The appellant, Robert Francis Agius (Mr Agius) and three others, Carol Abibadra (Ms Abibadra), Deborah Judith Jandagi (Ms Jandagi) and Kevin Zerafa (Mr Zerafa) were charged on indictment presented on 27 February 2012 with two counts of conspiracy.

The first count was that between about 1 January 1997 and about 23 May 2001, they conspired with each other and with Owen Trevor Daniel (Mr Daniel) to defraud the Commonwealth, contrary to s 86(1) and s 29D of the Crimes Act 1914 (Cth).

The second count was that between about 24 May 2001 and about 23 October 2006, they conspired with each other and with Mr Daniel to dishonestly cause a loss or deliberately cause a risk of loss to a third person, namely, the Commonwealth, knowing or believing that the loss would occur or that there was a substantial risk of loss occurring, contrary to s 135.4(5) of the Criminal Code Act 1995 (Cth).

Following a five month trial, on 31 July 2012, Mr Agius and one of the alleged co-conspirators, Mr Zerafa, were convicted on both counts. The jury was unable to reach a verdict in respect of the other two co-accused.

On the first count, Mr Agius was sentenced to imprisonment for 4 years and 5 months, commencing on 31 July 2012 and expiring on 30 December 2016. On the second count, he was sentenced to imprisonment for 4 years and 6 months, commencing on 31 December 2016 and expiring on 30 June 2021. The sentencing judge fixed a single non-parole period of 6 years and 8 months, expiring on 30 March 2019.

Because of the nature of the matters raised in the appeal, it is necessary to set out in some detail the particulars of the conspiracy and the overt acts alleged by the Crown.

The particulars supplied by the Crown extended for some 850 pages. However, the principal allegations as they appear from that document can be summarised as set out below.

The conspiracy alleged was an agreement made between about 1 January 1997 and about 10 April 2008 to defraud the Federal Commissioner of Taxation (the Commissioner) of tax revenue by dishonestly concealing the true taxable incomes of corporate and individual clients of Owen T Daniel & Co Burwood (OTD) by a scheme promoted by and/or on behalf of Mr Agius (the scheme) through Mr Daniel, who died on 7 February 2006, Mr Zerafa, Ms Jandagi and Ms Abibadra. The alleged co-conspirators with Mr Agius all worked with Mr Daniel at OTD. For convenience, they are referred to as the OTD accountants.

It was alleged that Mr Agius and the OTD accountants agreed to defraud the Commonwealth by agreeing to dishonestly deprive the Commonwealth of, or to jeopardise the Commonwealth’s entitlement to, income tax, or dishonestly cause a loss or risk of loss to the Commonwealth of income tax. The means by which the agreement was alleged to be effected was by Mr Daniel and/or Mr Zerafa and/or Ms Jandagi and/or Ms Abibadra concealing from, and failing to declare to, the Australian Taxation Office (the ATO), the true taxable incomes of corporate and individual clients of OTD by implementing a scheme promoted by and/or on behalf of Mr Agius.

It will be noted from these particulars that it was not alleged that Mr Agius participated in the actual implementation of the fraud. Rather, it was alleged that the OTD accountants implemented the scheme which was promoted by him.

The effect of the scheme was particularised as, first, falsely inflating the expenses of the companies, thus reducing their taxable income. It was also alleged that the scheme had the effect of disguising income coming into Australia as loans, thus depriving the Commissioner of income tax payable on this dividend income, or exposing the Commissioner to the risk of that deprivation.

Mr Agius was described in the particulars as an expatriate Australian accountant practising in Vanuatu in the firm Moore Stephens, which later changed its name to PKF Vanuatu, Chartered Accountants & Business Advisers (PKF Vanuatu).

The agreement was alleged to have been formed in Sydney some time between 1 January 1997 and 1 May 1997. It was alleged that the original parties to the agreement were at least Mr Agius and Mr Daniel. It was alleged that the other co-conspirators joined the conspiracy at times between 1997 and 2000.

It was alleged that the corporate and individual clients of OTD which utilised the scheme during the course of the conspiracy were: Anscott Pty Ltd (Anscott) and its officers, Barbara Ruth Leimroth (Ms Leimroth) and Horst Reinhard Leimroth (Mr Leimroth); Australian Safety Specialists Pty Ltd (ASS) and its officers, Phillip Waller (P Waller) and David Waller (D Waller); Bemawell Pty Ltd (Bemawell) and its officer James Gerard O’Rourke (Mr O’Rourke); Different Solutions Pty Ltd (Different) and its officer, Clarissa Elizabeth Mattingly; Gladesville Bridge Marina Pty Ltd (GBM) and its officers, Phillip Barry Southcombe (Mr Southcombe) and Eva Maria Southcombe (Ms Southcombe); Hunter Civil & Hire Pty Ltd (HCH), Daley Labour Pty Ltd (Daley Labour) and Hydro-Magda Pty Ltd (Hydro-Magda) and their officers, Geoffrey Clive Daley (Mr Daley), David Allan Pritchard (Mr Pritchard) and Mark Patrick Bennett (Mr Bennett); Jiess Building & Carpentry Services Pty Ltd (Jiess) and its officer Glyn Morgan Jones (Mr Jones); Kylood Pty Ltd (Kylood) and Hilisa Pty Ltd (Hilisa) and their officer, Anthony Joseph Luis Hilli (Mr Hilli); Pacific Computing & Innovation Pty Ltd (Pacific Computing) and its officer, Stephen Victor Hawkins; PHY Electrical Contractors Pty Ltd (PHY) and its officers, Paul Boutros Mereb and Youssef Saadallah Mereb; Outboard World Pty Ltd (Outboard World) and its officer, Michael Joseph Calleija; and Tara Consulting Pty Ltd (Tara) and its officer, Margaret ‘Collette’ McKenna (Ms McKenna). These companies are collectively referred to as the Australian companies. As the trial developed, evidence was not led of the utilisation of the scheme by Different, Pacific Computing, PHY and Outboard World or their respective officers.

The scheme was particularised as being implemented by a number of steps. As it will be necessary to deal with the factual allegations in some detail later in this judgment, it is only necessary to provide a broad outline of these steps.

It was alleged that the scheme involved the creation of nominee companies in Vanuatu on behalf of each of the Australian companies, with names that were deliberately different from the Australian companies, in order to assist PKF Vanuatu to conceal their accounting for the monies transferred in Steps 1-3. It was also alleged that in order to falsely substantiate the appearance of payments made during the ordinary course of business, with respect to the monies transferred in Step 1, documents were created by or on behalf of Mr Agius, through PKF Vanuatu, to pretend that such transfers were for services such as management and consultancy fees, insurance premiums or loan interest, including invoices for the cost of such services. It was also alleged to have involved the creation of false loan documentation in order to pretend that monies coming back to Australia from New Zealand were loans from foreign lenders. Such loan monies were not assessable income.

Finally, the scheme was said to have involved the preparation and lodgement of false tax returns. As I have indicated, it was not alleged that Mr Agius participated in this particular overt act.

It is convenient to deal separately with the case presented at trial in respect of each company said to have utilised the scheme and their respective officers. In respect of each such company, a statement of facts was agreed upon and the officers gave evidence.

The involvement of ASS in the scheme covered the period from the 1998 financial year to the 2005 financial year.

In the 1998 financial year, ASS transferred amounts of AUD $40,025 and $20,025 to an account with ANZ Bank in Auckland, held in the name of Billbury Pty Ltd (the Billbury account). Of the first amount, $32,000 was transferred from the Billbury account into an ANZ Bank account in the name of Uniton Pty Ltd (the Uniton account), of which $31,961.66 was transferred to ASS. The whole of the latter amount was transferred from the Billbury account to the Uniton account and $19,961.81 was transferred back to ASS.

No tax deductions relevant to the proceedings were claimed in that year. However, accrued expenses of $150,000, recorded in the unaudited accounts as costs of goods sold, was said to relate to Billbury expenses. The transfers from Uniton to ASS were recorded in the unaudited accounts as “Uniton Ltd (Loan)”.

The transactions in the 1999 financial year followed a similar pattern. Money was transferred by ASS to Billbury by six transactions, the whole or a greater part of the funds the subject of each transfer was transferred from the Billbury account to the Uniton account and the bulk of the funds were then transferred back to ASS. Of the money transferred to Billbury, $400,150 was recorded as management and consulting fees. The accounts also recorded the payments from Uniton to ASS as loans from Uniton to ASS and recorded $14,660 as an interest expense, of which $14,200 was said to relate to Uniton. The amounts of $400,150 and $14,660 were claimed as deductible expenses in the 1999 ASS tax return.

The transactions in the 2000 financial year were a little more complex. As was previously the case, a series of transactions took place by which monies in Australian dollars were transferred from ASS to the Billbury account. These funds appear to have been paid into the Uniton account and, after some relatively small deductions, transferred to ASS. In addition, one transfer of $12,805 was made by ASS directly into the Uniton account. In addition to these transactions, three transfers in United States dollars were made. Of these transfers, one was made into the Uniton account and one was made into the Billbury account. The third was made into an account of a Vanuatu company, International Finance Trust Company Ltd (IFTC), with the ANZ Bank in Vanuatu (the IFTC Vanuatu account). These payments did not flow back to ASS in the year in question.

In the unaudited accounts for the 2000 financial year, $500,000 of the $504,504 “Management and Consulting” fees was said to relate to the claimed Billbury expenses. This amount, along with $57,994, said to be “Interest expenses” in respect of the Uniton loan, was claimed as a deduction in the 2000 tax return.

The transactions for the 2001 financial year followed a slightly different pattern. As in the previous years, ASS transferred funds in Australia dollars into the Billbury account. In addition, one transfer of $52,194.24 was made by ASS directly into the Uniton account.

As in the previous years, the monies paid into the Billbury account were paid, with some small deductions, into the Uniton account. The bulk of these funds were paid to ASS. However, in respect of one transaction, $204,885 was paid into an account operated by P Waller and D Waller (collectively, the Wallers) with the National Australia Bank Ltd (NAB) in Sydney (the Waller account). This money was subsequently transferred by them to ASS.

In addition, ASS made three transfers in United States dollars. Two were to the Billbury account and one was to an account held by IFTC with the ANZ Bank in Auckland (the IFTC account). The money the subject of these transactions did not flow back to ASS or the Wallers in the 2001 financial year.

A figure of $550,000 was included in the prepared profit and loss statement for ASS as management and consulting fees. In the unaudited accounts, they were recorded as relating to Billbury. A further $150,000 was recorded in the unaudited accounts as “May & June Management Fees” which had been accrued but not paid for. The profit and loss statement ultimately included in the unaudited accounts showed $700,000 as management and consulting fees relating to Billbury and interest expenses of $122,127 relating to Uniton. These amounts were claimed as deductions in the 2001 tax return.

The flow of funds in the 2002 financial year was similar to that which occurred in the 2001 financial year. ASS, by a series of transactions, transferred money into the Billbury account. After some small deductions, the funds were transferred out of that account into the Uniton account. In respect of two of these transactions, the funds were transferred to ASS, after a further small deduction. In respect of the other transfers into the Uniton account, the funds were transferred to the Waller account.

In addition, an amount of $109,939.99 was transferred directly by ASS into the Uniton account. This amount was paid back to ASS with another transaction, subject to small deductions.

Following receipt of the funds by the Wallers, they paid them to ASS, subject to rounding adjustments.

In the unaudited accounts for the 2002 financial year, amounts totalling $706,520 were recorded under management and consulting fees. Of this amount, $360,605 was recorded against the description “Billbury” as professional fees/marketing, $109,914.99 was originally described as loan interest but was subsequently recorded as management fees, whilst $236,000 was recorded as product insurance. These amounts recorded as management fees formed part of a total of $715,073 described as management fees which were claimed as tax deductions in this financial year.

In addition, an amount of $192,400 was claimed as a deduction as interest related to Uniton.

In the 2003 financial year, ASS, in a series of Australian dollar transactions, caused money to be deposited into the Billbury account. After small deductions, these funds were paid into the Uniton account. One of the deductions, an amount of $5,308.82, was paid into the IFTC account. ASS also made one direct transfer of funds, totalling $173,220.62, to the Uniton account.

After deductions, the amounts which were transferred to the Uniton account were transferred to the Waller account. One of the deductions, an amount of $18,400, was paid into the IFTC account. After minor adjustments, the funds transferred to the Waller account were transferred to ASS.

In addition, ASS, by three United States dollar transactions and one Australian dollar transaction, transferred funds into the IFTC account. None of the monies transferred into that account flowed to ASS in the 2003 financial year.

In this financial year, payments from ASS to Billbury totalling $300,000 were recorded as management and consulting fees. The sum of $265,327 was recorded as an accrued interest expense. The agreed statement of facts stated that this expense related to Uniton.

The amounts of $300,000, $265,327 and $94,515 (the latter amount recorded as an accrued insurance expense) were claimed as tax deductions for the 2003 financial year.

The flow of funds for the 2004 financial year followed a similar pattern to previous years, but was more complex. By four separate Australian dollar transactions, ASS transferred funds into the Billbury account. The funds from two of these transactions, subject to small deductions, were paid into the Uniton account. These funds, subject to some further small deductions, one of which was paid into the IFTC account (an amount of $341.47), were paid into the Waller account. Although it is not clear how much, it appears that at least part of these amounts was transferred back to ASS.

The other two transactions by which funds were transferred to the Billbury account each involved an amount of $50,000. These amounts, subject to small deductions, were transferred to an account with the ANZ Bank in the name of Edgecumbe Finance Ltd (Edgecumbe Finance), a company incorporated in the Republic of Ireland (the Edgecumbe account). This money was subsequently paid into the Waller account. It appears that one of these transactions was transferred back to ASS, however, it is not clear whether the other transaction was.

In addition to the monies transferred to Billbury, three Australian dollar transfers of $238,794.17, $86,000 and $60,030 were made by ASS into the Uniton account. These amounts, subject to deductions amounting to $32,581, $341.47 of which was transferred to the IFTC account, were paid into the Waller account.

Finally, an amount of $94,515 was transferred by ASS into an account with the ANZ Bank in the name of Lime Street Commercial & General Insurance Ltd (Lime Street) (the Lime account). This amount, subject to a deduction of $2,938.50, was transferred to Uniton and subsequently, subject to a small deduction, to the Waller account. It is not clear if it was transferred back to ASS.

Of the total funds paid into the Waller account, $742,961, the majority, $427,464, was transferred back to the ASS account. In addition, $30,000 was transferred from the Waller account into a NAB account operated by Worldwide Sales and Imports (Worldwide account). It was noted in the agreed statement of facts that this was an account operated by the Wallers.

In the prepared accounts for that year, $295,454.55 was recorded under the marketing ledger as Billbury expenses on a cash basis. This amount was claimed as a deduction in the 2004 financial year.

An amount of $298,732.30, made up of $297,009.73 (Uniton interest less withholding tax) and $1,722.57 (Edgecumbe Finance interest less withholding tax), was claimed in the tax return as interest expenses.

The sum of $94,515 was recorded in the accounts as insurance expenses to Lime Street.

No relevant tax deductions were claimed in the 2005 financial year, although the flow of funds showed a similar pattern.

ASS made four Australian dollar transfers in that year. The first, an amount of $100,000, was paid into the Billbury account. These funds, subject to a small deduction, were transferred into the Uniton account. From this account, subject to small deductions, they were transferred to the Waller account and ultimately $85,000 was repaid to ASS.

The second transfer of $100,000 was paid into the Lime account. Of that amount, $96,909.06 was transferred into the Uniton account. Subsequently, $10,000 was paid back into the Lime account. The balance, subject to a small deduction, was transferred to the Waller account.

The third transfer of $297,009.73 was paid directly into the Uniton account. It was subsequently transferred in two tranches to the Waller account and thereafter, it was paid back to ASS in two tranches, with a deduction of $100,000.

The fourth transfer of $1,722.57 was paid into the Edgecumbe account. It was not transferred out of that account in the 2005 financial year.

In addition, three transfers were made out of the Worldwide account. The first of $150,000 was to the Billbury account. Subject to some small deductions, these funds were transferred to the Uniton account. Subsequently, the funds were transferred to the Waller account and then to ASS.

The second transfer of $249,500 was transferred into the Lime account. These funds, after deduction of $7,575.98, were transferred to an account held by Uniton with the Bank of New Zealand (the Uniton BNZ account). Subject to some deductions, these funds were then transferred to the Waller account and subsequently back to ASS.

The third transfer of $103,000 was made to Lime Street. Of this amount, $90,000 was transferred to the Uniton account and, after a small deduction, to the Waller account.

There were also two further transfers made from the Uniton account to the IFTC account, one of $4,000 and one of $29,700. None of the monies transferred into the IFTC account flowed back to ASS in the 2005 financial year.

P Waller gave evidence that he first met Mr Daniel in January or February 1998. He said that after that meeting, he and D Waller decided to appoint OTD as their accountants. He stated that he remembered Mr Daniel saying at that meeting that he could help minimise their tax.

P Waller gave evidence that he recalled that some time after that meeting, perhaps a couple of weeks later, Mr Daniel contacted him and D Waller and said that he would like to introduce them to a Mr Agius from a company in Vanuatu who could help with their tax. P Waller said that he met Mr Agius with Mr Daniel within a month or two thereafter, before 30 June 1998. He said that at the meeting, Mr Agius explained how his company, Moore Stephens, in Vanuatu, could help them. He said that Mr Agius explained that Moore Stephens was an international financing company/accounting company and explained how he could help them in other areas such as in Hong Kong, where ASS did a lot of dealings in purchasing products. P Waller gave evidence that Mr Agius told them how ASS and the Wallers could benefit by using a couple of companies that he had set up, one of them being Billbury. He stated that Mr Agius explained how ASS could get a false invoice sent from Billbury in England. He said that Mr Agius told the Wallers that after the money had been sent around the world, a company called Uniton would set up a loan and that that company would lend to the Wallers personally, so that there would be a cash flow for their business. P Waller described this as “basically we were getting a false invoice, paying it and then drawing down a false loan.” He said that Mr Agius told them that they would have more documents than necessary to cover any audits or any questions that the taxman would ask them.

P Waller said that as a result, he and D Waller signed documents for a $1 million loan with Uniton. He said that Mr Agius and Mr Daniel explained that the loan would not be paid back, but interest would be paid on the loan yearly. He said that this in fact occurred.

P Waller said that he recalled receiving an interest bill from Uniton in the sum of $200,000. He said that he and Ms Abibadra, an OTD accountant with whom he worked, worked out that this was part of the scheme for reducing profits, as by sending off the extra few bills, the loan was being legitimised. P Waller was also shown Uniton invoices of $173,195.62 for interest in the 2002 financial year and $297,009.73 for interest in the 2004 financial year. He said that the position with these invoices was the same as the earlier invoices.

P Waller said that during the course of the meeting with Mr Agius, Mr Agius drew a round circle highlighting what would occur. He said that the diagram basically showed the profits from ASS, with an arrow going up to Billbury, then an arrow down to Uniton and then an arrow back to the Waller account. P Waller drew a diagram which reflected his recollection of the document.

That diagram showed ASS profit flowing to the ANZ Bank in New Zealand as a result of a Billbury invoice, then flowing to Uniton and subsequently back into the Waller account. P Waller said that originally, he and Ms Abibadra would work out what the profits were for the business for the month and then would transfer that information to a Ms Kelly Fawcett (Ms Fawcett), who worked for Moore Stephens in Vanuatu. P Waller said that Mr Agius mentioned in the original meeting that Ms Fawcett would be the contact in Vanuatu and that she was the contact that they had in fact predominantly used over the years. He described that the system was that if, for example, there was a $40,000 payment that ASS was going to pay to Billbury, that $40,000 would be drawn down on Uniton through Ms Fawcett within four to five days. He said that Ms Fawcett would then send the money back through another account in New Zealand into their personal account in Australia.

P Waller said that he recalled that there was a start up fee of $8,000 to cover all of the paperwork. He recalled Mr Daniel and Mr Agius saying, “there will be plenty of paperwork. You will be well covered. It’s well worth the $8,000”.

P Waller gave evidence that he asked what should be done if the tax office did an audit. He said that Mr Agius responded, “There won’t be a problem, you’ll have plenty of paperwork and they’d only be fishing if it did come in.” P Waller gave evidence that at one stage, Mr Agius told him and D Waller that he (Mr Agius) had a number of clients in Australia participating in the same scheme and that the scheme had been successful for many years.

P Waller said that subsequently, he called Mr Daniel and said that he was happy to go ahead and for him (Mr Daniel) to start the paperwork.

P Waller gave evidence that ASS dealt with IFTC on a number of occasions. He was referring to a document on the letterhead of that company dated 10 June 1998, relating to a remittance of $40,000 into the Billbury account on 8 June. The document directed the ANZ Bank to transmit $8,000 into the IFTC account. P Waller gave evidence that the $40,000 came from ASS and the $8,000 was a bill for setting up the paperwork. He said that he did not have anything to do with Ms Fiona McConachie (Ms McConachie), who signed the document. It should be noted that the document was also signed by Mr Agius.

P Waller gave evidence that in about April 2004, he had a meeting with Mr Agius in ASS’s office in Seven Hills. He said that Mr Agius came in to discuss the loan with Uniton, which had reached its peak of $3 million, and that it was necessary to find another avenue for reducing overseas tax.

P Waller gave evidence that the $3 million borrowed was part of the scheme whereby a fictitious loan had been set up which was just a way of getting the money back to the Wallers as a loan, so the interest payments on the loan were also tax deductions. He said that ASS never got any part of the $1 million or $3 million into its own hands from any overseas lender.

P Waller said that at the meeting, Mr Agius said that he had agreed to purchase an insurance company called Lime Street Insurance. He said that Mr Agius told him that the idea “was to look at ways of insuring something that you would not normally insure with a normal insurance company”. He said that at the time of that meeting, Mr Agius had not secured Lime Street but, some time later, he came back and said, “We’ve now secured Lime Street and we can go ahead”, and documentation came over and monies were paid to Billbury.

P Waller said that as far as he was concerned, Lime Street was Mr Agius. He said that after he got the insurance documentation, he fairly quickly paid the initial amount for the insurance, $300,000. He said that he could not recall whether anything was done to get the bulk of the $300,000 back into the Waller account.

P Waller said that he first heard the name Edgecumbe Finance when he received two inward payments from that company into the Waller account. He said that Ms Abibadra told him that she contacted Vanuatu and spoke to Moore Stephens and was told that there was a mistake and the money that was previously sent to pay a Billbury bill should have come back as a Uniton credit but came back as an Edgecumbe Finance credit instead. He said that she said that the only way to fix this was to arrange the documentation for $150,000 to cover a new loan.

P Waller was shown an invoice from Edgecumbe Finance, dated 30 June 2004, to the Wallers, claiming a net amount of interest of $1,722.57. When asked whether he had any recollection of Edgecumbe Finance, he stated that that was the company that the Wallers had received incorrect loan documents for and new documents were drawn up under Edgecumbe Finance. He stated that the Wallers never received a loan from Edgecumbe Finance and did not owe Edgecumbe Finance any interest on any loans. He was also shown an Edgecumbe Finance letter dated 9 February 2004, purporting to be a loan facility agreement, together with a guarantee and indemnity. He said that he did not think there was any real purpose for the document.

P Waller was shown a Billbury invoice dated 27 January 1998, recording a fee for professional marketing and consulting services. He said that Billbury did not provide any of the services set out in the invoice and that it was never intended that they be provided.

P Waller said that most of the money paid to Billbury came back into the Waller account.

P Waller was also shown two invoices dated 17 August 1999 and 25 August 1999, both relating to work done for a company, Lincoln Investments Ltd. The first was from Moore Stephens and the second from IFTC. The second was signed by Mr Agius. He stated that on receipt of these invoices, he rang Ms Abibadra and asked what Lincoln Investments was all about. He said that she informed him that she did not have a clue and told him just to pay the bills.

P Waller was shown the profit and loss statement for ASS as at 30 June 1999. He referred to the management and consulting fees shown as an expense in that profit and loss statement and said that 99% of those expenses were not genuine business expenses, something he knew at the time. He stated that he knew that ASS’s tax return for the 1999 financial year contained false claims for deductions and false descriptions of non-existent expenses.

P Waller was asked about the loan draw downs and interest payments made to Uniton. He stated that this had nothing to do with the Billbury accounts, rather, it was a second bite of the cherry, namely, interest payments. He was referred to an invoice from Uniton dated 30 June 2001, saying that there was an amount of $109,914.99 interest payable. He said that ASS was not indebted to Uniton for that amount. In relation to his own tax returns for that period, he stated that there were certain things in it, such as Billbury and personal loans that were not truthful. He said that Ms Abibadra was responsible for the preparation of his personal tax returns.

P Waller was shown a further invoice for $50,000 from Billbury for carrying out a marketing survey in China. He said that it was not genuine. He was also shown another invoice from Billbury for $25,000 relating to the performance of the marketing survey in China with additional matters relating to high visibility personal protective safety clothing. He said that Billbury did not provide any services of that nature to ASS.

P Waller said that in the latter part of 2001, he went to Vanuatu for a holiday, as Mr Daniel told him that it would be a good idea to make the arrangements look legitimate.

P Waller was referred to a letter addressed to him dated 1 July 2003 from Lime Street, relating to a recent application for Key Man Insurance and enclosing a certificate of cover. The letter was signed by Mr Agius. Attached to the letter was a certificate of cover. P Waller identified the signature witnessing the affixing of the common seal of Lime Street as that of Mr Agius.

P Waller said that the bulk of the money paid as insurance premiums came back to the Waller account. He said that to his recollection, it all came back, except for maybe a $25 bank charge. P Waller was also shown the policy and again identified the signature of the witness to the affixing of the common seal as being that of Mr Agius.

P Waller was also asked about an interview he had with the ATO in April 2005. He said that in September 2004, Mr Daniel indicated that the ATO was requesting certain documents regarding Billbury and Uniton. He said that the night before the audit meeting with the ATO, he had what he described as a role play or a run through with D Waller, Mr Daniel, Ms Abibadra and Mr Zerafa, to go through questions that the ATO could possibly ask. He said that either Mr Daniel or Mr Zerafa would ask questions such as, “Where did you first meet Robert Agius?”. He said that he was told that the last thing he was supposed to say was “In Owen T Daniel’s office”. He said that it was ultimately decided that he would be better off just mentioning that he met Mr Agius in his old employer’s office and that he knocked on the door peddling his wares and offering offshore tax advice.

P Waller said that he had a contact, a Mr Dennis Turner (Mr Turner), who worked in London in the same business as ASS and had spent many years building up distributor clients from China and around the world. He said that at the meeting, it was decided that Mr Turner was a good person to use as a deflector to the ATO, to say that ASS had a contact in England by the name of Mr Turner who was employed by Billbury. He said that the participants at the pre-audit meeting built a story around this. In cross-examination, Mr Zerafa denied that he attended this meeting.

P Waller confirmed that Mr Turner had nothing to do with Billbury.

P Waller said that at the subsequent meeting with the ATO on 12 April 2005, the lead auditor told him that there was no such company as Billbury. As a result, he walked out of the meeting and telephoned Mr Agius in Vanuatu and Mr Agius said, “Get to the fax machine now, I’ll send you the registration paperwork Billbury”.

In cross-examination, P Waller accepted that the first meeting with Mr Daniel may have been on 17 March 1998, not January or February. He accepted, after being referred to his diary notes, that the meeting at which he was introduced to Mr Agius may have taken place on 27 March 1998 and that Mr Daniel contacted him to arrange for that meeting.

He repeated his evidence that it was explained to him that Mr Agius worked with an international accounting firm, Moore Stephens, and that Mr Agius explained that the proposed arrangements involved offshore transactions and that he would provide the necessary documents to satisfy the ATO.

So far as Ms Fawcett was concerned, P Waller acknowledged that his original evidence was incorrect and that it was around 2000 or 2001 when he started to contact her.

In cross-examination by counsel for Ms Abibadra, P Waller acknowledged that the first interest bill received from Uniton was in the sum of $202, the second in the sum of $14,200, the third in the sum of $52,194, the fourth in the sum of $109,914 and the fifth, for the financial year ending June 2002, in the sum of $173,195. He accepted that his evidence in chief regarding an interest bill of $200,000 may have related to his first request for a drawdown from the Uniton loan on 12 April 2002 and that he may have been referring to the interest invoice from Uniton for the financial year ending June 2003 in the sum of $238,794.

In cross-examination by senior counsel for Mr Agius, P Waller stated that when he first met Mr Daniel, he (Mr Daniel) said that he could help him minimise tax. P Waller acknowledged that at that stage, there was no suggestion that the tax minimisation might become part of an illegal scheme.

P Waller acknowledged that it was intended that money would be sent offshore in exchange for, or in response to, an invoice from Billbury and that the amount to be sent offshore would match the amount claimed. He said that that happened every time money was sent offshore and that he did not send money to Billbury when there was no invoice.

In cross-examination, P Waller was shown four invoices from Billbury which predated any conversation between him and Mr Agius. He said that the invoices themselves were back dated and denied that it was a baseless allegation that Mr Aguis was involved in the scheme to set up false invoices.

P Waller acknowledged that he concurred in taking out the Lime Street insurance policies without inquiring whether cheaper policies could be taken out elsewhere. He stated, in that context, that “We were not paying for the insurance we said we were paying for”.

In relation to the 1998 financial year, P Waller acknowledged that ASS sent about $60,000 to Billbury. It was pointed out to him in cross-examination that there were invoices in that year totalling $150,000. He agreed that this was inconsistent with his evidence that in respect of each payment, there was a corresponding invoice. P Waller stated that he could only assume that the invoices were backdated.

P Waller agreed that in that year, $150,000 was claimed as an accrued expense. He said that he could not explain why there were only invoices to the value of $60,000. He stated that he did not authorise Mr Daniel or anyone in his employ to send any internal accounting documents to Vanuatu.

In that context, it was suggested to P Waller that the invoices did not come from overseas but were in fact created by OTD. P Waller said that he could not answer that question.

P Waller was asked similar questions concerning the 2001 financial year. It was pointed out to him that there was $550,000 paid to Billbury and invoices totalling $700,000. He said that he could not explain how that happened and that he also could not explain why there were no invoices which matched the transfers to Billbury in that year. It was suggested to him that the likely explanation was that the invoices were created by Mr Daniel. P Waller stated that he did not believe that to be the case.

P Waller was cross-examined in a similar fashion in relation to the 2004 financial year and again acknowledged that he could not identify any invoices which matched the transfers to Billbury in that year.

In relation to the 2005 financial year, P Waller acknowledged that there was no invoice to support the payment of $150,000 from the Worldwide account to Billbury in that year. It was again put to him that the likelihood was that the invoices were created by OTD when the ATO started to investigate. He stated again that he did not know who made the invoices and assumed that the invoices were coming from Vanuatu.

P Waller was also cross-examined about research and development claims made by ASS. He said that it was possible that he told the tax auditor that research by Billbury formed part of the claim for research and development. He acknowledged that the claim for research and development was entirely fraudulent and that, to the extent that he had stated that Billbury was involved, that was a lie.

P Waller also acknowledged that he deliberately misled the tax investigator, Mr Mark O’Flynn (Mr O’Flynn), by telling him that Mr Daniel had nothing to do with the research and development claim. He acknowledged that the claim for around $600,000 was fraudulent and had nothing to do with Mr Agius. P Waller was also cross-examined about the claim for accrued expenses relating to Lime Street in the 2003 financial year. He acknowledged that while he had stated that he first heard about Lime Street in April 2004, he had made a claim for it in his 2003 tax return. He explained the discrepancy as involving “creative accounting”.

D Waller stated that he was a director of ASS between 1997 and November 2005. He gave evidence that he met Mr Daniel in early 1998 and that OTD was retained as the accountants for ASS in early 1998.

D Waller gave evidence that a few months thereafter he met Mr Agius. At this meeting, D Waller stated that they discussed ASS, including the nature of the business and future growth expectations. He said that Mr Agius gave a presentation and told him and P Waller that Moore Stephens was an accounting business that looked after firms similar to ASS by minimising their tax.

D Waller said that he was told that Moore Stephens were located in Vanuatu. He said that Mr Agius talked about an offshore company structure that his firm controlled. D Waller said that Mr Agius stated that he (Mr Agius), or the Vanuatu company, would provide an invoice for services rendered, which would be recorded in the ASS accounts as a business expense. Mr Agius then explained that the funds would be transferred back to pay for those expenses and that the Wallers would receive these funds as a loan, which they would never have to repay.

D Waller gave evidence that Mr Agius drew a diagram showing the cash flow. In the course of his evidence, D Waller drew a diagram which he said was similar to that shown to him by Mr Agius. The diagram was in similar form to that drawn by P Waller and showed money flowing from ASS to Billbury via an ANZ Bank account to Uniton and then back to ASS.

D Waller said that he recalled Mr Agius speaking about Billbury and Uniton and a New Zealand bank account. He said that he recalled discussions about the ATO and how the transaction would be explained if they made inquiries. He gave evidence that it was mentioned that Moore Stephens had a few clients minimising their tax in this way and that they had no previous issues with the ATO. He said that Mr Agius had said that all of the documents would be provided if the ATO were to contact him or P Waller in relation to an audit.

D Waller gave evidence that he recalled being told at the meeting that the initial charge would be $8,000. D Waller said that he had no personal role in relation to any of the payments which were made by ASS to New Zealand or any dealings in that context with anyone at OTD.

D Waller said that at some stage, he came to hear of a company named Lime Street. He said that P Waller had told him that he had had a meeting with Mr Agius in which Lime Street was brought up. He said that Lime Street was providing ASS with an insurance policy and that D Waller was being insured for Key Man Insurance. He gave evidence that, similar to Billbury, it was a fictitious company that was providing ASS with an invoice for which ASS would pay and would then receive the funds back. He stated that he had never heard of Key Man Insurance.

D Waller was shown an invoice from Billbury addressed to ASS dated 3 June 1998. He said that none of the work described in that invoice was carried out by Billbury on behalf of ASS.

D Waller said that he did not have any knowledge of the manner in which the monies paid out of ASS to the ANZ Bank in Auckland subsequently came back and found their way into his personal tax returns.

D Waller said that he was made aware that the ATO was proposing to conduct an audit into ASS. He said that he was made aware of this by P Waller and that there was a meeting concerning the audit in the office of OTD the day before the audit meeting with the ATO was to take place. He said that the only information that he had prior to the meeting at OTD was that P Waller had told him “the guys at Owen T Daniel’s would like to discuss the audit”.

He remembered that at the meeting, people were role playing in relation to the type of questions that might be asked and the types of answers which should be given. He said that some of the suggested answers were untrue.

D Waller gave evidence that he did not have a lot of input in the meeting, which was chaired by P Waller, who was the one answering all of the questions. He said that the answers given by P Waller were untruthful so far as they related to Billbury and Uniton.

D Waller was asked whether he knew Mr Turner. He said that he did and that because of the work that Mr Turner had been doing in relation to research of products, Mr Daniel thought it would be a good idea to use his name as the person working for them from Billbury. He said that the research work done by Mr Turner had nothing to do with either Billbury, Uniton or Lime Street.

D Waller was shown notices of demand from Uniton and Edgecumbe Finance demanding the repayment of loans. He said that no money was owed by him to either Uniton or Edgecumbe Finance.

In cross-examination, D Waller repeated his evidence that Mr Agius explained to him that Moore Stephens was an international accounting firm that helped clients similar to ASS to minimise their tax, that the proposed arrangements would involve offshore transactions and that he (Mr Agius) would provide the necessary documents for tax purposes.

At the relevant time, Mr O’Flynn was an officer of the ATO. He was responsible for conducting the audit into the taxation affairs of ASS and the Wallers. He gave evidence that during the course of an interview that he had with the Wallers, P Waller indicated that Billbury carried out consulting work in finding products, factories and markets in Europe and China. Mr O’Flynn said that P Waller told him that Mr Turner spoke constantly with D Waller in relation to Billbury. He said that P Waller also said that when he first contacted Mr Agius regarding a loan, Uniton offered a facility. He said that P Waller told him that he contacted Mr Agius because he could not get a business loan in Australia.

Mr O’Flynn also said that P Waller told him that the Wallers initially took out a personal loan of $1 million and intended to increase this to $4 million. He said that he was told that there was no security for the loan, just personal guarantees and that the funds were paid into a personal bank account.

Mr O’Flynn said that P Waller told him that both Billbury and Uniton had the same principal, Robert Agius.

In 1983, the directors of GBM, Mr and Ms Southcombe (collectively, the Southcombes), engaged OTD as their and GBM’s accountants and tax agents on an ongoing basis.

The agreed statement of facts states that Mr Agius was not involved in the preparation of the GBM accounts or in the preparation and lodgement of income tax returns for GBM or the Southcombes.

In 1997, prior to receipt of funds from any New Zealand accounts, the unaudited accounts of GBM recorded $328,000 as accrued management and consulting fees. These fees were claimed as expenses in the 1997 GBM tax return.

The accounts for 1997 recorded an unsecured loan in an amount of $210,588. This amount was recorded on documents prepared by Ms Southcombe as “Uniton/Security Life Nominees Ltd”.

In 1998, GBM made eight transfers out of an account held by it with Colonial State Bank (GBM A/c No 1) into the Billbury account. The total value of the transfers was $328,280. Each of the transfers, rounded down to the nearest hundred, was transferred into the Uniton account. Subsequently, subject to some small deductions, and one deduction of $8021.34, they were transferred back to the GBM A/c No 1.

Each of the outgoing payments was recorded in the accounts as management and consulting fees, being payments for fees previously accrued.

In the 1998 unaudited accounts, $250,000 was recorded as management and consulting fees, with a corresponding entry under unsecured loans. The incoming amounts from Uniton, totalling $284,709.26, were recorded as unsecured loans. The total closing balance of the unsecured loans shown in the accounts was $745,297, made up of the 1997 unsecured loan of $210,588 plus the amounts of $250,000 and $284,709.26.

The $250,000 management and consulting fees were claimed as expenses in the 1998 tax return for GBM.

In the 1999 financial year, six transactions, in similar form to those in the 1998 financial year, took place. The total amount transferred out of the GBM A/c No 1 in these transactions was $250,210.

The unaudited accounts for GBM recorded $250,000 of the money paid out in the 1999 financial year as management and consulting fees. An additional $50,000 was also recorded as management and consulting fees and a corresponding entry was made in the accounts as a loan.

The sum of $300,000, being the total amount referred to in par 128 above, formed part of the total management and consulting fees of $320,747, claimed as expenses in the GBM 1999 income tax return.

The incoming payments from the Uniton account were recorded as unsecured loans. The closing balance of loans recorded in the name of Uniton was $1,079,666. In the income tax return for the 1999 financial year, GBM claimed $39,884 as interest expenses. This was described in the ledger as “Vanuatu interest”.

In the 2000 financial year, similar transactions took place. Seven transfers were made out of the GBM A/c No 1 to the Billbury account. The total value of these transfers was $300,210. The amounts received in respect of four of the transfers were paid into the Uniton account and then, subject to small deductions, paid back into the GBM A/c No 1. The other two transfers were transferred to the IFTC account and from there, subject to small deductions, paid into the GBM A/c No 1.

In addition, one transfer of $35,694.51 was made out of the GBM A/c No 1 directly into the Uniton account and then, subject to small deductions, back into the GBM A/c No 1.

In the same year, GBM made a United States dollar transfer of $1,300 into the IFTC account.

In that year, $119,974, described as interest expenses, was claimed by GBM as a tax deduction. It was made up of $41,933.20, recorded as interest paid to non-residents, $68,302, recorded as an accrued interest expense and $9,679.82, recorded as “Int Fin Trust Co US $5503.03”.

The closing balance for unsecured loans in the unaudited accounts was $1,094,834.45.

In 2001, two transfers were made from the GBM A/c No 1 to the Uniton account. The amount of the first transfer, with a small deduction, was paid out of this account into the GBM A/c No 1 four days later. The second transfer was transferred from the Uniton account into an account operated by a company, Security Life Nominees Ltd (Security Life), with the ANZ Bank in New Zealand (the Security Life account). On the same day, the money was transferred, with a small deduction, into the GBM A/c No 1.

In addition, a transfer was made from the GBM A/c No 1 directly to the Security Life account. Three days later, this transfer, with a small deduction, was transferred to the GBM A/c No 1.

In the same year, a United States dollar transfer of $3,453.25 was paid into the IFTC account.

In its tax return for the 2001 financial year, GBM claimed $91,451 as interest expenses. This was said to be made up of what was described as $45,845.77 interest to Uniton and $50,605 interest to Security Life.

In the accounts, the funds from Uniton and Security Life which flowed into the GBM A/c No 1 account were described as loan draw downs. The closing balance for unsecured loans stated in the accounts was $1,245,223.

There were two transfers made by GBM in the 2002 financial year. These were made out of an account of GBM with the Commonwealth Bank of Australia (CBA) (GBM A/c No 2). The first was made into the IFTC account and the second was made into the Security Life account. The latter transfer, with a small deduction, was transferred back to the GBM A/c No 2.

In this financial year, a tax deduction of $137,200 for interest expenses was claimed in the tax return lodged by GBM. This was made up of amounts referred to in two Security Life invoices.

The funds flowing back to GBM from Security Life were described as unsecured loans.

In the 2003 financial year, six transfers, totalling $271,473.04, were made from the GBM A/c No 2 to the Security Life account. The first of these, with a small deduction, was transferred back to the GBM A/c No. 2.

The other five transfers, with small deductions, were transferred from the Security Life account into the IFTC account. The second and third transfers, with an addition of some $900, were then combined and transferred into the Edgecumbe account and then into an account with the NAB in the name of Robert and Pauline Agius (the Agius account). These funds, subject to a small deduction, were then transferred to a Ms Ingrid Algie (Ms Algie), Ms Southcombe’s sister (AB 17/7895). The monies the subject of the fourth, fifth and sixth transfers were not transferred out of the Security Life account in the year in question.

In the 2003 tax return, $116,208 was claimed as interest expenses.

In the 2004 financial year, four transfers were made out of the GBM A/c No 2 into the Security Life account. The total amount transferred was $185,112. Subject to small deductions, these transfers were paid into the IFTC account. The first three of these transfers, totalling $129,870.47, were then combined with three transfers made to the IFTC account in the 2003 financial year, amounting to $164,787.21 and, subject to a deduction of $4,657.68, were transferred into an account with the Westpac Banking Corporation entitled “Des Last Pty Ltd t/a Gladesville Bridge Yacht Sales” (Des Last account). This account was operated by Ms Southcombe.

The fourth transfer was in an amount of $55,028. Of this amount, subject to small deductions by Security Life, $19,415 was transferred into the Edgecumbe account. After a small deduction, these funds were transferred into an account with the CBA entitled “Fit for a King” (the Fit for a King account), operated by Mr Arthur Isbester (Mr Isbester).

In that year, an amount of $112,070.24 was claimed as interest expenses.

It is convenient to deal with the flow of funds in the 2005-2007 financial years together. In the 2005 financial year, three transfers were made from the GBM A/c No 2 into the Security Life account.

The first and second of these transfers were each in an amount of $55,028. These monies were transferred together, subject to a small deduction, in the same year into the Edgecumbe account. Thereafter, in the same year, after a deduction of $9,870.46, the money was transferred into the Fit for a King account.

The third transfer, which took place on 16 June 2005, was in an amount of $891,196.37. Of this amount, $285,330.46 was transferred into the IFTC account on 22 December 2006. On 3 April 2007, a portion of this transfer, $100,015, was transferred into the Edgecumbe account and thereafter, on the same day, into an account with the ANZ Bank entitled “Impressive Concepts Account” (the Impressive Concepts account), operated by Mr Isbester. On 14 June 2007, a further portion of $219,000 was transferred from the IFTC account into the Impressive Concepts account.

The balance of the third transfer was paid from the Security Life account into the Edgecumbe account between 27 September 2005 and 22 December 2006. In the same period, funds totalling $600,000 were paid out of the Edgecumbe account into the Fit for a King account.

In the 2005 financial year, a tax deduction of $41,510 was claimed for interest expenses. No relevant deductions were claimed in the subsequent years.

Ms Southcombe gave evidence that she met Mr Daniel around 1982 or 1983 and that he had acted as her and her husband’s accountant for many years.

Ms Southcombe gave evidence that she looked after the office arrangements, the office staff and all of the paperwork for GBM. She said that she also supplied tax information to GBM’s accountant. She said that her husband looked after the outdoor staff, the maintenance of GBM’s marina and the work that was conducted on the boats for GBM and that he was also involved in the brokerage business.

Ms Southcombe said that around March 1998, Mr Daniel told her that he had a very good friend, Robert Agius, who he believed could be of value to her and her husband. She said that she subsequently met Mr Agius at the OTD office. She said that he was introduced by Mr Daniel as an expert in tax who worked in a very reputable worldwide company. Mr Daniel told her that Mr Agius would be very helpful to them and that a large number of clients used his assistance to minimise tax. There was a discussion of how tax minimisation may be available, but she said she did not understand it.

She said that either Mr Daniel or Mr Agius told her at the meeting that Mr Agius was based in Vanuatu with a firm, Moore Stephens.

Ms Southcombe said that she recalled asking whether there was any criminality involved in Mr Agius’ proposals and she was assured that there was not.

Ms Southcombe said that she recalled that either Mr Daniel or Mr Agius mentioned that funds would be forwarded overseas and returned.

Ms Southcombe identified a brochure she was given headed “Moore Stephens Vanuatu”. She said that she believed that she received the brochure at the first meeting.

She recalled that after the meeting, either her or her husband telephoned Mr Daniel and said that they (the Southcombes and GBM) would go along with what was suggested “because it sounded like something that all the big companies seemed to do”. She said that she subsequently learnt from Ms Jandagi that OTD was communicating with both Mr Agius’ office and a company called Hamilton Holdings Pty Ltd (Hamilton Holdings) in order to set up the necessary paperwork.

Ms Southcombe gave evidence that she thought that Hamilton Holdings was a company that could not be taxed and “it was a company I think that was sort of between Billbury and Uniton that sort of maintained accounts of monies et cetera.” She said that she knew that Hamilton Holdings was located in Vanuatu and that she received paperwork in relation to that company from OTD in May 1998.

Ms Southcombe was referred to the recording in GBM’s accounts of $328,000 as forming part of the total management and consulting fees for the 1997 financial year (see par [123] above). She said that the figure was provided by Ms Jandagi who “worked out that figure from our taxes”.

Ms Southcombe was referred to an email that she forwarded to Ms Jandagi in May 1988. She acknowledged that the 1997 tax return had been lodged by the time of that email. She said that the $328,000 was paid by GBM by June 1998 and that the claim for the tax deduction was made by Ms Jandagi.

She said that at the time she wrote the email, she did not understand what was happening in the process or whether there was a time urgency in forwarding the funds. It was only when she received a response to the email that she realised that it was urgent.

Ms Southcombe was referred to an email forwarded to her by Ms Jandagi on 1 June 1998. The email stated that Hamilton Holdings could not be associated with Ms Southcombe in any way and the Southcombes could not be directors or shareholders of the company. Ms Southcombe said that she thought this was very strange but that she was told it was a vehicle that was set up by Mr Agius for his purposes. She said that she could not be certain whether she was told that by Mr Agius or Ms Jandagi.

Ms Southcombe was referred to a handwritten diagram which she said she received in a meeting with Mr Daniel and Mr Agius. She said that the meeting was subsequent to the first meeting and occurred because she and her husband did not understand the process and wanted to know how the scheme was structured. The diagram showed a box with arrows indicating invoices from Billbury and loans from Uniton. Ms Southcombe that said she was told that the box represented GBM and that the diagram indicated invoices going to Billbury, cash being paid to Billbury and loans from Uniton. When asked about the word “invoice” on the diagram, she said that she was told by Mr Agius that “they would be providing us with invoices”. She said that Mr Agius also told her that the invoices would be management and services invoices from Billbury. She said that she understood that the total scheme was for tax minimisation and was part of Robert Agius’ tax minimisation scheme.

Ms Southcombe said that at the time the payment of $328,000 was made, GBM had not received any invoices and that invoices were only received in the latter part of 2000 from Billbury.

Ms Southcombe said that in February 1999, she was told by Mr Agius that Mr John Warmington (Mr Warmington) of Moore Stephens Vanuatu would be the contact person for her, her husband and their companies.

Ms Southcombe was asked about loan interest payments to Uniton. She said that she would receive statements and there would be interest payments noted on the statements. She was shown an invoice which referred to a draw down facility of $1 million, the invoice being for $39,893.83. She said that when she received the invoices, she would arrange for a payment of that amount by GBM. She said that GBM had not received a payment of $1 million from Uniton.

Ms Southcombe said the payments which came from Uniton as a loan were approximately the same amounts as payments which had gone out to Billbury.

Ms Southcombe said that at some stage, she raised her concerns with Mr Agius about her lack of understanding of payments coming from Uniton in May 2000. She said that “we stopped the invoices” when the loan amount was close to $1 million on the balance sheet. She said that she initially raised the matter with Ms Jandagi and, subsequent to that, had a number of face-to-face meetings with Mr Agius in OTD’s offices. She said that initially, those meetings were in the presence of Ms Jandagi, but in 2005, Mr Zerafa attended.

Ms Southcombe also indicated that she was concerned about not receiving invoices from Billbury. She referred to an email written by her to Ms Jandagi on 7 December 1998, in which she said that Mr Agius had told her in July that he had virtually finished the invoices they had requested. In the email, she also complained that since then, she had referred to four emails that she had sent to Mr Agius in relation to the invoices, without any response at all.

Ms Southcombe gave evidence concerning a further email that she sent to Ms Jandagi on 3 March 1999 following up on her email of 7 December 1998. She indicated that she had emailed Mr Agius nine times requesting invoices in relation to the funds transferred to Billbury in the 1998 financial year. She stated in that email that those requests had been going on for nine months and that it was “Absolutely ridiculous” and this was “no way to have an association or have things work.”

Ms Southcombe indicated that by 2000, “we” (presumably the Southcombes and GBM) had had enough and did not wish to be involved in the scheme any more or have the Uniton loan on the balance sheet. She said that Ms Jandagi told her that all of the other clients were happy with the scheme and did not want to get out of it, that she did not know how GBM could get out of the scheme and that the best thing that could be done was to minimise their involvement. She said that the only thing done in that particular year was to pay $17,000 in interest because she did not want the balance on the loan on the balance sheet to keep escalating. She said that after the 2001 financial year, there were more interest payments made because there was no alternative but to continue to pay them as there was no way out of the loan.

Ms Southcombe said that after that time, they decided to try and get rid of the loan by paying it off and making payments towards the principal of the loan to reduce it. In that context, she said that the funds that they were sending overseas, in her mind, were not for a tax deduction, but were to get out of the loan, because the tax deduction was only on the interest, not the principal. She said that the payments went into the hundreds of thousands of dollars.

She also said that she had meetings with Mr Agius and Ms Jandagi to try and get some of the money back. She said that it was a difficult situation. She said that Mr Jandagi suggested that it could come back through the OTD trust account and that she requested this to occur. However, she said that Mr Agius and Mr Zerafa decided that this was inappropriate. Ms Southcombe gave evidence that on 23 September 2003, she received an email from Mr Agius concerning the proposal to transfer funds back to GBM through the OTD trust account. The email stated that if questioned, she could not hope to hide behind the OTD trust account as “they [OTD] have to disclose”.

Ms Southcombe said that in a conversation that she had with Ms Jandagi in 2003, Ms Jandagi said that there was another way to get the funds back from Vanuatu and that a number of clients had debit cards. She said that Ms Jandagi told her that the system was that Mr Agius would arrange for funds to go onto a debit card and that clients could then go each week and get cash out using the debit card. She said that GBM did not proceed with that course.

Ms Southcombe said that Mr Agius suggested that GBM open a marina in Vanuatu but that they were not interested. She said that she owed her sister some money and in desperation, she contacted Mr Agius to see whether she could get a cheque from him to give to her sister and Mr Agius agreed. She said it was for $71,000, which was deducted from the loan. Ms Southcombe was shown a cheque in the sum of $71,071.93 in favour of Ms Algie. She said that Ms Algie was her sister and identified the signature on that cheque as that of Mr Agius. She said that she got the cheque by mail from Vanuatu.

She said that in mid to late 2003, Mr Agius suggested that another means of getting the money back was to jointly buy a boat. Mr Agius forwarded half of the money for the purchase of the boat and Ms Southcombe put in the other half and, when the boat was sold, the Southcombes retained the full funds. Ms Southcombe said that $290,000 came back via the boat method and she received a payment from Mr Agius in the sum of $280,000. She said that the boat was bought for $580,000 and $280,000 was received from Mr Agius. She said that Mr Agius “was never a part of the boat”. She stated it was a facade to get back some of the money that had been sent overseas.

To support the facade, Ms Southcombe said that she wrote to Mr Agius, referring to the purchase, and received a handwritten reply from him which, so far as relevant, said “Thanks I’ve looked up the website and agree the boat is a dream. I’m counting out my pennies now”. Ms Southcombe said that the purpose of the arrangement was that Mr Agius would pretend to be a half-owner and send the money. He suggested sending a fax, outlining the boat and making it sound as though they were friendly and knew each other.

She also said that she was told that another means of getting the money back involved receiving cash payments (see below).

Ms Southcombe was referred to an email of 22 May 2000 from Mr Warmington. She said that the reference in the email to instructions having been issued on that day was to arrange for an amount of $20,000, which had been paid over by GBM, to be transferred back. She said that those funds, in large measure, were returned.

In an email written by Ms Southcombe to Mr Agius on 3 December 1999, Ms Southcombe inquired as to whether it would be satisfactory to pay an IFTC account in Australian dollars. She said that, at the time, her understanding was that IFTC was an entity, which came under Moore Stephens and was associated with Mr Agius, which forwarded accounts for services to them.

In answer to questions from the trial judge as to the reason that Ms Southcombe felt it was necessary to repay the loan, she said that the accountants made her feel like it was a genuine debt and that it was treated like a real loan. She agreed, however, that she had never received a loan, saying that she received sums of money that came back to her from the money GBM sent overseas, which were added to the principal of the loan, and that was the reason the loan increased on the balance sheet. She said that it looked very real when she looked at the balance sheet. She also said, without nominating a particular date, that she came to a realisation that the scheme was wrong and wished to get out of it. She said that “we” were always told by Mr Agius and Mr Daniel that they would never call on the loan. She said that she had real loans and knew that the only way to reduce the loan was to pay the principal, so GBM was making payments to the principal, for which there was no tax benefit. She said, however, that monies that were repaid were in the main returned “but not through our bank account”.

Ms Southcombe said that in about November 2000, she became aware of the company Security Life. She said that she was informed by Mr Agius and Ms Jandagi that the paperwork for the Uniton loan only went to $1 million and that therefore they needed to refinance it with another company, Security Life. She said that Mr Agius did the paperwork and organised the change.

Ms Southcombe was shown a loan facility offer dated 1 November 2000 from Security Life addressed to the directors of GBM. She said that she recalled receiving the document and that she and her husband witnessed the affixing of the common seal of GBM and Ms McConachie signed on behalf of Security Life. Ms McConachie was employed by Moore Stephens.

Ms Southcombe was referred to a draw down notice, headed “Drawdown 1”, referring to a request for a drawdown of $973,800 from the loan facility and advising that that money had been paid into the Uniton account as requested. She said that she had never given such instructions. She made similar comments in relation to subsequent draw down notices, described as Drawdowns No 2, 3 and 4. She was referred to the reference to penalty interest in Drawdown 4 and said that that item just seemed to appear on the invoices.

Ms Southcombe was referred to seven Billbury invoices covering the period from 31 December 1996 to 30 June 1997. She said that she did not receive them on the dates they bore, but that they first came to her in the latter half of 2000. She said that they came together from Mr Agius directly. She said that the invoices matched payments that GBM had made to the Billbury account. She was also referred to the services described on the invoices and said that GBM had not received services of that kind.

Ms Southcombe said that she had had a meeting with Mr Agius, Ms Jandagi and her husband at OTD’s office on 15 March 2004. She said that the reason for the meeting was that contracts had been exchanged on the sale of the Marina in January 2004 but that there was still a huge loan on the balance sheet. She said that it was at that meeting that Mr Agius suggested things like establishing a marine business or building a marina in Vanuatu. However, nothing was sorted out at the meeting.

On 15 March 2005, Ms Southcombe emailed Mr Agius, referring to a meeting that she had had with Ms Jandagi and indicating that they would like to make the interest payments for 2004 on the GBM loan. She requested the necessary invoices. She received a response from Mr Agius that he was arranging invoices “as we speak”.

Ms Southcombe said that she had further meeting with Mr Agius around the week of 11 April 2005. She recalled that Mr Zerafa was present at that meeting and he and Mr Agius told her and her husband that the only way that repayment of the loan could be managed was if it was paid out by forwarding $800,000 into the New Zealand account. She said that that happened and it allowed GBM to be wound-up because all debts had been repaid. She said that the payment was made into the Security Life account. In that context, she was referred to an email from Mr Agius of 13 June 2005, in which he stated that he believed she was doing the right thing paying back the loan.

Ms Southcombe gave evidence that in the second half of 2005 she met with Mr Agius in Sydney on a number of occasions. She said that on those occasions, he repaid monies that had been sent over as the payments on the principal of the loan. She said that the monies were in cash between $30,000 and $50,000. She estimated that they were paid over $500,000 in total.

She said that the payments originally came from Mr Agius and then from a man he described as a very good friend of his, Mr Isbester. She said that the majority of the payments came from Mr Isbester.

Ms Southcombe said that the payments made by Mr Agius were made to her at her Drummoyne home or in a park adjacent to that home. She said that Mr Agius first spoke to her about Mr Isbester in mid-2005, saying that he was a very good friend and as he (Mr Agius) was coming less to Australia, he could organise the funds to be returned through Mr Isbester. She said that she met Mr Isbester in the park near her Drummoyne home. Thereafter, Mr Isbester came to Drummoyne from time to time and gave her cash in amounts of around $20,000.

Ms Southcombe said that to enable that procedure to take place, Mr Agius made up a pro forma letter to be signed by her. She referred to an example of that letter dated 17 February 2006. The letter said “I authorise Robert Agius to send $130,000.00 (one hundred and thirty thousand dollars) to the account designated by Robert Agius”. She said that from the second half of June 2006 and going forward, the general situation that occurred for the delivery of further amounts of cash was that authorities would be forwarded to Ms Fawcett for Mr Agius and then Mr Agius would organise the funds to be forwarded to Mr Isbester, who would then go to their home and give them the payments.

Ms Southcombe gave evidence that towards the end of 2006, she met with Ms Jandagi and a Mr Andrew Hager at a cafe near the offices of OTD. At that meeting, Ms Jandagi told her that OTD had been visited by the Australian Federal Police (AFP), who took a number of files, including a GBM file. Thereafter, she tried to contact Ms Jandagi on numerous occasions but was unable to do so.

Ms Southcombe gave evidence that in late 2006, as a result of being unable to speak to Ms Jandagi, she contacted Mr Isbester and told him that she needed to speak to Mr Agius, as they did not know what was happening. She said that Mr Isbester told her that Mr Agius was in Sydney and Mr Isbester organised for her and her husband to meet Mr Agius in a cafe in the Sutherland area.

She said that she and her husband met Mr Agius at the cafe and told him of their meeting with Ms Jandagi and of being informed that the AFP had visited the OTD office and taken files. She said that Mr Agius told them that they had nothing to worry about because the loan had been paid back. She said that after that meeting, she never had another face-to-face meeting with Mr Agius.

Ms Southcombe said that she and her husband did not get back all the money that she believed should come back from overseas. She said that in April 2007 she asked Mr Isbester if he could contact Mr Agius and forward some funds back to them. She said that Mr Isbester showed her an email to Mr Agius which he said related to the request. The email referred to a tip on a racehorse. Ms Southcombe explained that the reference in the email to 100/1 meant that Mr Isbester wanted $100,000 and the signatures “E” and “P” stood for Eva and Phillip Southcombe.

Ms Southcombe said that in May 2007, Mr Isbester informed her that he had received $219,000 from Mr Agius. She said that she and her husband did not receive any of the money and stated “he still did owe us other funds which then very slowly trickled to nothing”.

Ms Southcombe was referred to a demand addressed to the directors of GBM from Security Life demanding payment of $258,697.16. She said, without objection, that her husband contacted Mr Isbester and questioned the notice. Mr Isbester informed him that he would contact Mr Agius and find out what the notice was about. Thereafter, she was informed by Mr Isbester that Mr Agius had said that he had sent this particular notice to all of his clients to give some authenticity to the loans that they all had and as GBM had paid out the loan, it should be discarded.

In cross-examination by senior counsel for Mr Agius, Ms Southcombe acknowledged that until the incident giving rise to the proceedings, she believed that Mr Daniel was an honourable man and a skilled accountant. She said that she had a long and trusted history with him and that if it were not for Mr Daniel, GBM would not have entered into the tax scheme. She said that Mr Daniel introduced them to Mr Agius and said that he was a tax expert and someone they definitely should listen to who would assist them on tax matters. She acknowledged that if a tax matter arose that needed advice, Mr Daniel was the one she went to.

Ms Southcombe was asked about her conception of the scheme at the beginning and said that it was at the second meeting, when Mr Agius drew a diagram, that she got a little bit of an understanding.

Ms Southcombe was challenged as to her evidence that she received the Moore Stephens brochure from Mr Agius at her first meeting with him. It was pointed out that the brochure indicated that Mr Agius had a Master of Business Administration degree which was not conferred upon him until 1999. In that context, she reiterated that she thought she was given the brochure at the first meeting, stating that it was a long time ago. She said that if she did not receive it at the first meeting, she received it at another meeting with him. She was asked if she thought that it might have been given to her by Mr Daniel and she said no, it was given to her by Mr Agius.

Ms Southcombe was asked in cross-examination about the $328,000 claimed as part of the total expenses for the 1997 tax return. It was suggested to her that the tax return making this claim was lodged before she met Mr Agius. She denied this, stating that there was no way that the figure of $328,000 was worked out prior to meeting him.

Ms Southcombe was referred to a record of unsecured loans to GBM prepared by her which showed unsecured loans in an amount of $210,588. It was suggested to her that this had something to do with another tax scheme. She denied this. It was pointed out to her that the unsecured loan account, as at 30 June 1997 had a figure of $210,988, with a notation “GBM debt to Security Life Nominees Nil” and then a difference of $210,588. She accepted that the document formed part of the accounting process of GBM but could not explain the entry $210,588 as per the tax return. It was suggested to her that it was indicative of some sort of tax scheme involving GBM and OTD which was in existence long before she knew Mr Agius. She denied this.

It should be noted that the document on which she was cross-examined purported to be a summary of unsecured loans up to 30 June 2003. As such, it was plainly created after Ms Southcombe had met Mr Agius. Further, the nil balance as at 30 June 1997 against Security Life indicated, consistently with her evidence, that no loan had been made to GBM at that time.

Ms Southcombe was cross-examined about the $328,000 paid to Billbury, in particular, why that payment appeared in the 1997 tax return. It was suggested to her that the payment was made before she met Mr Agius. She rejected that, saying that she had to have met him before that for the $328,000 to be paid.

It was suggested to Ms Southcombe that Mr Agius did not send her any Billbury invoices. She denied this. She was shown a Billbury invoice addressed to a company, Moderne Art Printing Co Pty Ltd (Moderne Art). It was suggested to her that it was a pro forma invoice which came from her house. She said that she did not recognise it and that she did not produce the Billbury invoice. She also said that she never had an interest in a business called Moderne Art.

Ms Southcombe acknowledged that the invoices from Billbury were in existence when her house was searched by the AFP. She said that she was not present for the search. She was referred to a record of interview dated 18 June 2008 in which it was recorded that her solicitor (Mr Hodges) had discussed with the accountant and liquidator whether they had any of GBM’s records or documents and recorded that there were none in existence. The record of interview also recorded Mr Hodges stating that he was not sure whether it was the director, the accountant or the liquidator who had destroyed all of the records a few months after the company’s liquidation. Ms Southcombe denied that she gave instructions to her solicitor to supply this information.

Senior counsel for Mr Agius suggested to Ms Southcombe that Mr Isbester gave her funds to enable her to make a payment in respect of the outstanding loan. She denied this. She also denied that Mr Agius told her that it would be difficult to arrange for her to receive further monies from Vanuatu.

Ms Southcombe denied the suggestion that when she, her husband, Mr Agius and Mr Isbester went to the park at Drummoyne, she had a private conversation with Mr Isbester in which she agreed to give him interest free loans from time to time. She said that there was only one meeting in the park and that was when Mr Agius introduced her and her husband to Mr Isbester. Ms Southcombe also rejected the suggestion that Mr Agius was not present at the meeting at a cafe in Sutherland.

Ms Southcombe agreed that she did not mention anything to Mr Warmington about wanting to cease involvement with Mr Agius. It was suggested to her that she never said anything to Ms Jandagi about this at that time. She said that she thought that she did say this to Ms Jandagi some time in the 2000/2001 financial year. It was suggested to her that Ms Jandagi did not tell her that none of the other clients wished to cease involvement in the scheme and GBM should minimise their involvement. She denied this.

In cross-examination, Ms Southcombe stated that it was Mr Agius who made all of the suggestions about how to get the money back. She said, however, that Ms Jandagi did mention payments through the trust account of OTD. In that context, Ms Southcombe said that in the year 2000, she was more concerned about getting out of the scheme than getting the money back. She said that the latter concern came later, when they started making payments towards the principal of the loan. It was suggested to Ms Southcombe that there was no discussion in June 2003 as to how to retrieve monies. She rejected this. However, she said that she was dealing directly with Mr Agius regarding the return of monies.

Ms Southcombe accepted that after making the payments in 2005, she did not raise any difficulties about retrieving monies with Ms Jandagi. She agreed that the funds were not being recorded in the books of GBM and that it was just cash that she was receiving.

Ms Southcombe was cross-examined by counsel for Ms Jandagi as to the meeting which took place after the AFP had seized files from the offices of OTD. It was suggested to her that Ms Jandagi did not say that she had nothing to worry about as the loan had been repaid. It was also suggested to her that Mr Hagar was not present at the meeting, contrary to her statement. She rejected this. It was put to her that she had said that Mr Hagar was present because she (Ms Southcombe) was aware of Ms Jandagi’s connection with him and she thought that it would give her statement some credibility. She rejected this proposition.

Ms Southcombe also denied that she never had any discussion with Ms Jandagi about the provision of a debit card.

Senior counsel for Mr Zerafa asked Ms Southcombe about the transfer of $891,196.37, recorded in the agreed statement of facts as having been made on 16 June 2005: see par [152] above. She agreed that she understood that this payment was made to repay the loans. She stated that Mr Agius paid back monies owed to GBM prior to that payment, citing as an example the $71,000 paid to her sister and the $290,000 for the half share of the boat. She said that after that, there were still monies owing to them and Mr Agius paid them that money, but the majority of the money from the payout of the loan was paid back through Mr Isbester.

Ms Southcombe was also referred in that context to the payment to the Fit for a King account and payments by Edgecumbe Finance to Mr Isbester. She said that she was not sure of the identity of the account into which monies flowed back to Mr Isbester and said that she had nothing to do with Edgecumbe Finance. She acknowledged, having regard to the time that money was transferred back to the Fit for a King account, that the transactions must have been contemplated earlier than she had said in her evidence. She denied that this meant that her evidence was confused.

In that context, she repeated her evidence that funds were coming back to them and that the first way was the cheque to her sister and then the half share of the boat. She said that it was only after that had occurred that Mr Isbester was introduced.

Ms Southcombe agreed that the arrangement with Mr Isbester was strange. She denied however that she believed that Mr Isbester was simply washing money through his business to have cash delivered to her.

In further cross-examination by senior counsel for Mr Agius, Ms Southcombe was asked about a document which she agreed was a transaction audit trail dated 30 June 1997. She was asked, by reference to a code which she acknowledged related to management and consulting fees, whether that was a document created by her on 23 July 1997 to explain the fees. She responded that she did not print off audit trails but that it may have been something done in the accountant’s office. She denied that the document made nonsense of her claim that the $328,000 payment was conceived in March 1998 and that she was simply telling lies when she asserted this.

It was put to Ms Southcombe by senior counsel for Mr Agius that the repayment of the loan indicated that, in her view, it was binding and enforceable. She denied this, saying that the loan was not a legal loan but was rather a scheme devised by Mr Agius which created difficulties because of the way it was managed. She said that she was told that it would be forgiven and it was not forgiven. She said that Mr Agius said that GBM had no option but to pay out the loan, although she agreed that in hindsight she should have obtained legal advice.

In re-examination, Ms Southcombe identified the transactions which, excluding components of $35 in each case, amounted to the $328,000, paid to Billbury in the 1998 financial year.

Mr Southcombe gave evidence that he commenced using the services of OTD in about 1983.

He said that his role in relation to GBM was looking after outside activities, while his wife looked after the office activities.

Mr Southcombe gave evidence that in March 1988, Mr Agius was introduced to him and his wife by Mr Daniel as an accountant from Moore Stephens in Vanuatu. He said that Mr Agius was portrayed as a bit of an expert on accounting and taxation matters and someone who might be able to help them minimise their tax. He said that he was given this information by Mr Daniel.

Mr Southcombe said that Mr Daniel initially told him and Ms Southcombe that Mr Agius was involved in some schemes to minimise tax and that a number of his clients were taking advantage of the schemes and also that a lot of well-known larger businesses in Australia were involved in similar schemes.

Mr Southcombe said that at that meeting, Mr Agius outlined to some degree how the scheme worked, although it seemed a little bit confusing to him at the time. However, he recalled that Mr Agius said that it involved establishing a company overseas through his Vanuatu company, that bills for work would be sent to them and payment for that work would be paid by them, they would claim interest on those payments and they would have an on-flow of tax advantage from this involvement.

Mr Southcombe identified the Moore Stephens brochure (referred to at par [161] above) as having been given to the Southcombes at the meeting.

Mr Southcombe said that he and Ms Southcombe agreed to go ahead with the scheme and, some time after the initial meeting, they received paperwork in regard to a new company that was to be set up. He was referred to a letter from OTD to the directors of GBM dated 20 May 1998 enclosing a certificate of incorporation of Hamilton Holdings and said that that was a document which accompanied the letter.

He was also referred to an invoice from IFTC for fees in relation to Hamilton Holdings and said that he saw it in relation to the establishment of the latter company.

Mr Southcombe said that he and Ms Southcombe had another meeting at the offices of OTD with Mr Daniel and Mr Agius a couple of months after the first meeting. He said that he recalled that at that meeting, Mr Agius drew a diagram identifying how the scheme worked. He was shown the diagram, to which I have referred in par [168] above, and said that Mr Agius told him, referring to the diagram, that the scheme involved receiving invoices from Billbury for work done on behalf of GBM and paying those invoices. He said that then, there was “a bit of a money-go-round which still left me a little bit confused and we were to claim taxation advantages as to the payments that were being made”. Mr Southcombe said that his understanding was that the invoices were not for work actually performed by Billbury and that the loan from Uniton referred to in the diagram was not a genuine loan.

Mr Southcombe gave evidence that his understanding was that the last payment GBM made to Billbury was in the 2000 financial year, although payments thereafter were being made to overseas bank accounts. He said that he thought that the payments made after 2000 related to interest on the loan, but there were payments made on the principal some time after. He stated that GBM had a loan with Security Life and an initial loan with Uniton for a figure of up to $1 million. He stated that they were then told they had to get another loan for $1,500,000, because they had exceeded the first loan. He said that the Security Life loan, like the Uniton loan, was not a genuine loan. He said that he was told that both loans would be forgiven.

Mr Southcombe gave evidence that he and Ms Southcombe came to a definite view that they had made a mistake by entering into the scheme and that they did not want to continue. He said that he attended meetings with OTD in relation to removing GBM from the scheme. He said he remembered one particular meeting where both Mr Agius and Mr Zerafa were present. He said that in a meeting which he thought took place in 2005, he was told that the only way out of the scheme was to pay out the principal of the loan.

Mr Southcombe gave evidence that before this meeting, there was another meeting that he and Ms Southcombe had with Ms Jandagi. He thought that this meeting was also in 2005. He said that he remembered being advised at that meeting that the interest payments on the loan had to be made and that it was shortly after that that he and Ms Southcombe were told by Mr Zerafa and Mr Agius that they had to pay out the loan to get out of the scheme. He said that there were other meetings which he could not recall, but said that he remembered that from 2000 to 2005, he and Ms Southcombe made it clear that they wanted to get out of the scheme.

In regard to the question of the return of money after payment of the principal, Mr Southcombe said that he remembered a discussion about obtaining a debit card as a means of getting the money back, but it was not proceeded with. He also described the transaction by which a boat was bought with Mr Agius “and half of the payment for the boat was returned to us when the boat was sold”. His description of this transaction was in similar terms to that of Ms Southcombe. Mr Southcombe confirmed that the principal of $900,000 was paid a month after the meeting with Mr Agius and Mr Zerafa.

Mr Southcombe described the method by which money was returned following the repayment of the principal. He said that Mr Agius was delivering money to the Southcombes about every one and a half months.

Mr Southcombe said that when he received the money directly from Mr Agius, it was usually handed over in the park beside his house at Drummoyne. The amount paid each time was between $40,000 and $50,000 in Australian dollar notes. He said that this arrangement went on for quite a while but that Mr Agius said that he was coming to Australia less often and that he would make alternate means of getting the money to them. He said that it was shortly thereafter that Mr Agius introduced him to Mr Isbester.

Mr Southcombe said that he and Ms Southcombe accepted that Mr Isbester could be the courier for the money deliveries and that for about three years he delivered money to them. He said that the amount varied. “It was usually about $20,000, but over a period it started to dwindle quite significantly”. He said that he first met Mr Isbester in the park next to their Drummoyne house and then, after the Southcombes moved to Hunters Hill, Mr Isbester came to their house and, during a short period after that, he arranged to meet Mr Southcombe in a car park in Hunters Hill.

Mr Southcombe recalled being told that the OTD offices had been visited by the AFP. He said that he and Ms Southcombe were asked to meet Ms Jandagi at OTD. He said that when they got to the office, they were told that Ms Jandagi was at a cafe up the road and they went and met her there. He said that he and Ms Southcombe met Ms Jandagi and Mr Hagar at the cafe. He said that they were told by Ms Jandagi that she was visited by the AFP and that they had taken a number of files, including those of GBM and Mr Hagar, but that she thought that the Southcombes did not have any problems because they had paid out the loans.

Mr Southcombe said that following that meeting, he contacted Mr Isbester and told him that the OTD offices had been visited by the AFP and that he and Ms Southcombe would like to speak to Mr Agius. Mr Isbester said that Mr Agius was in Sydney at the time and later that day they met him with Mr Isbester and Mr Isbester’s wife in a cafe near Hurstville.

Mr Southcombe said that during that meeting, the Southcombes told Mr Agius that OTD had been visited by the AFP and that they were very concerned that a number of files had been taken, including theirs and Mr Hagar’s. Mr Agius said that he did not know Mr Hagar and that Mr Hagar was not involved in the scheme involving Mr Agius. Mr Southcombe said that Mr Agius said that he did not think that they had any problems because their loan was repaid and not to worry about it. Mr Southcombe said that this was the last time he saw Mr Agius.

Mr Southcombe said that the arrangement with Mr Isbester continued, but as the Southcombe’s were mindful that the AFP had become involved, the meeting took place under the pretext that they were to deal with arrangements for a 60th birthday party to be catered for by Mr Isbester.

Mr Isbester confirmed that he received a notice of demand from Security Life in an envelope with a Port Villa postmark. He said that the money the subject of the demand was not owed to Security Life.

Mr Southcombe gave evidence that in November 2007, he spoke with his solicitor to two AFP officers, Federal Agents Scott Miller and Anthony Fox, and informed them of his arrangements to meet with Mr Isbester. He referred to a meeting with Mr Isbester on 8 January 2007, at which Mr Isbester handed him an envelope which he said contained $3,000. He also said that he recalled Mr Isbester saying that the tax status of Vanuatu was vitally important to the economy of the country and he believed that the government would not assist the AFP in allowing anything to interrupt that relationship. The meeting was observed by officers of the AFP.

A similar meeting took place on 22 January 2008, when Mr Isbester handed over further funds. This meeting was also observed by officers of the AFP.

Mr Southcombe gave evidence that in a subsequent conversation with Mr Isbester, he told him that they (the Southcombes) were extremely concerned about the non-return of money that they were supposed to be getting and that he (Mr Isbester) “had well over $200,000 of our money and we were getting it in dribs and drabs”. He said that he told Mr Isbester that he wanted to speak to Mr Agius.

Following this, Mr Isbester said that he had a conversation with Mr Agius from his solicitor’s office. That conversation was recorded by the AFP. He said that during the conversation, he recalled Mr Agius saying that he would contact Mr Isbester and get back to him, but he did not. He said that he subsequently contacted Mr Agius on 31 March 2008, who said that he had met Mr Isbester on 29 March and that Mr Isbester had agreed to make payments but they would be only small. He said that he received one further hand over of money on 9 April 2008 in an amount of $5,000, which was handed over to the AFP.

In cross-examination by senior counsel for Mr Agius, Mr Southcombe affirmed that he received the Moore Stephens brochure at the first meeting. As with Ms Southcombe, it was suggested to him that this was not possible as the brochure referred to Mr Agius obtaining a Master of Business Administration degree, which was only obtained in 1999. Mr Southcombe said that notwithstanding, he and Ms Southcombe were given a document similar to that, even if it was not the same. He rejected the suggestion that the brochure was not supplied in 1998 but rather given to him later by Mr Daniel.

Mr Southcombe said that he had never heard of, or had an interest in, a business called Moderne Art. He was shown the pro forma invoice from Billbury addressed to that company and stated that he did not know that it was found in his house or, if it was, how it got there.

In cross-examination, it was suggested to Mr Southcombe that Mr Agius did not say that the loan would be forgiven or not enforced. He denied this.

Mr Southcombe was also asked about the instructions given to Mr Hodges, to which I have referred in par [212] above. He said that he did not give those instructions but that he just gave a general instruction to assist the ATO and the AFP in their investigation and make full restitution of any monies owed to the ATO. He said that he did not recall giving any direction or instruction that the directors, accountants or liquidators had destroyed the company’s records. He could not offer any explanation as to why the Billbury invoices were not seized when the warrant was executed at his home. Mr Southcombe said that there could well have been destruction of documents following the liquidation of GBM because when the business was sold, his home was at the place of business and when they left the premises, they destroyed a lot of what they regarded as unwarranted or unnecessary records.

Mr Southcombe acknowledged that he gave the Moore Stephen brochure to the AFP after it was kept in his home for about nine years. He stated that it appeared to be the same document that Mr Agius presented to him.

Mr Southcombe rejected the suggestion that Mr Agius was not present at the meeting at the cafe at Hurstville.

Mr Southcombe acknowledged in cross-examination that were it not for Mr Daniel, he would not have contemplated entering into the scheme and that he relied on Mr Daniel and his advice in relation to it.

Mr Southcombe was asked in cross-examination about his concern in recovering the money. He said that he believed that the $900,000 used to pay out the loan was GBM’s money as there was no tax or financial benefit whatsoever. He rejected the proposition that the loan was legally binding, saying that he paid the fictitious loan because his wife was mentally unwell and the Southcombes were desperate to get out of the scheme and were told that this was the only way to do so. He accepted that the urgency attached to getting out of the scheme did not arise from any financial problem.

In cross-examination by counsel for Ms Jandagi, Mr Southcombe said that it was made clear at various meetings at the office of OTD that he and Ms Southcombe wished to get out of the scheme and that they were told that no other clients had wanted to do that and that there was no exit strategy in place. He rejected the suggestion that Ms Jandagi did not tell him that one exit strategy was the use of a debit card.

It was suggested to Mr Southcombe that it was not Mr Hagar who was with Ms Jandagi when the meeting at the cafe near OTD’s offices took place but rather Mr Zerafa. Mr Southcombe said that it was possible that Mr Zerafa was there, but Mr Hagar was also there.

Senior counsel for Mr Zerafa cross-examined Mr Southcombe on the meeting in May 2005 which dealt with the exit strategy. He suggested that Mr Agius was not there but rather that the meeting involved Mr Zerafa and Ms Jandagi. Mr Southcombe said that he recalled Mr Agius being present.

Mr Southcombe acknowledged that the scheme had been working efficiently throughout 1999 and 2000, in that payments had gone offshore and money had come back as a loan. He acknowledged that this continued in 2001, but notwithstanding, he and Ms Southcombe were not happy with the arrangement and had realised that they had made a mistake in becoming involved. He was asked why, if there was a letter forgiving the loan, he needed to embark on the process of paying it. He responded that that was what they were told to do. He said that he did not ever see a letter forgiving the loan but said that he was told about it by Ms Southcombe.

Mr Southcombe agreed that the arrangement for being paid in cash by Mr Agius had been in existence prior to the May 2005 meeting. He denied that he went to some lengths not to tell the accountants at OTD about the amounts of cash which were received back from Mr Agius.

Mr Southcombe denied that the arrangement in which cash was received back was a private arrangement between him, Mr Agius and Mr Isbester to get back significant quantities of cash, which he did not want to reveal with his accountants. He said that he was not aware that the arrangement with Mr Isbester was that there would be a payment from overseas into his business, Fit for a King. He said that all that he was told was that he was being given money by Mr Agius. He said that he did not know what Mr Isbester was doing with money which he received from Mr Agius which was not paid over to him. He was asked whether he was aware that what was occurring was simply a naked form of money laundering or washing money through Mr Isbester’s business. He repeated that all he was aware of was that Mr Isbester was a conduit through which Mr Agius was sending them money.

Mr Southcombe denied that the reason he did not tell Ms Jandagi and Mr Zerafa about the cash system was because he knew that they would not approve of it. He agreed that he received over half a million dollars in cash.

Finally, it was put to Mr Southcombe that he would not have entered into the arrangements if he thought they were dishonest. He responded that that was probably right.

Federal Agent Seidel gave evidence of surveillance operations carried out on meetings between Mr Southcombe and Mr Isbester. I have set out details of those meetings above, including Mr Southcombe’s evidence of intercepted telephone conversations. A number of those telephone conversations were between Mr Isbester and Mr Agius concerning transfers of funds. In addition, there was a conversation between Mr Isbester and Ms Southcombe of 18 December 2007, in which Ms Southcombe complained about Mr Isbester letting her down.

The lawfully intercepted telephone recordings included a conversation between Mr Southcombe and Mr Agius on 28 March 2008, when Mr Southcombe complained to Mr Agius about the return of money from Mr Isbester. Mr Southcombe indicated to Mr Agius that some $209,000 had not been returned. Mr Agius said that he would discuss the matter with Mr Isbester, saying that all that he could do was to speak to him. Mr Southcombe was recorded as telling Mr Agius that the payments started off as being $30,000 to $40,000 at a time, and everything seemed to be going quite smoothly, but that after that, Mr Isbester broke commitments.

Ms McKenna, the sole director of Tara, engaged OTD to act for her and Tara as accountants and tax agents in 1997.

It was acknowledged in the agreed statement of facts that Mr Agius was not involved in the preparation of unaudited accounts for Tara or in the preparation and lodgement of Tara’s or Ms McKenna’s income tax returns.

Neither Ms McKenna nor Tara were involved in transfers of funds to or from New Zealand in the 1998 or 1999 financial years. However, $40,000 management and consulting expenses were claimed as a tax deduction for the 1998 financial year and $50,000 was claimed in respect of such expenses for the 1999 financial year.

In the 2000 financial year, six transfers were made out of an account operated by Tara with the CBA (the Tara account) into the Billbury account, totalling $77,650. Some portion of these funds was then transferred into the Security Life account and subsequently, $68,830.89 was transferred back into the Tara account.

The transfers out of the Tara account were recorded as management and consulting expenses. These expenses were claimed as a deduction in Tara’s tax return for the 2000 financial year.

The money returned to the Tara account was recorded in the accounts as shareholders’ loans.

In the 2001 financial year, there were three transactions out of the Tara account, all on the same day.

The first of these transfers, an amount of $20,026.10, was paid into the Billbury account. The bulk of the funds were transferred into the Security Life account and, of these funds, in the 2002 financial year, $19,990 was paid into an account in the name of Ms McKenna with the CBA (the McKenna account). Of these funds, $12,500 was transferred back to the Tara account.

The other two transfers were to the IFTC account and the Security Life account. No further transfers of these funds appears to have taken place during the financial year in question.

In the unaudited accounts for Tara for the 2001 financial year, $60,000 was recorded under management and consulting fees, with a corresponding entry under other creditors. This $60,000 was claimed as a deduction by Tara in its tax return for the 2001 financial year.

In the 2002 financial year, four transfers were made out of the Tara account into the Billbury account. The bulk of these funds was transferred into the Security Life account and then, with some adjustments, into the McKenna account. The total amount transferred out of the Tara account was $82,957.30 and the amount which flowed back to the McKenna account as a result of these transfers totalled $88,950. However, $6,542.54 was transferred from the McKenna account back into the Security Life account. Of the money transferred into the McKenna account from these transfers, $43,700 was transferred back to the Tara account.

In the Tara unaudited accounts, the transfers out of the Tara account were recorded as management and consulting expenses. In respect of these amounts, $70,000 was claimed as a deduction in Tara’s 2002 tax return.

The transfers from the McKenna account to the Tara account were described as shareholders’ loans.

In the 2003 financial year, two transfers of $25,026.10 were made from the Tara account into the Billbury account. Of the first transfer, $22,119.54 was transferred to the Security Life account and $2,797.98 was transferred to the IFTC account. Of the second transfer, $24,908.25 was transferred to the Security Life account.

In addition, a further transfer of $12,148.68 was made from the Tara account directly into the Security Life account. The bulk of the funds transferred into the Security Life account, with small deductions, was transferred into the McKenna account in the year in question. These transfers from the Security Life account to the McKenna account totalled $58,800. In the 2003 financial year, $18,000 was transferred back into the Tara account.

In addition, Ms McKenna made a payment of $2,045.45 out of her MasterCard account to Mr Agius’ firm in Vanuatu.

In that year, two of the outgoing transactions were recorded as management and consulting expenses. A tax deduction for $75,000 was claimed in respect of these expenses in the 2003 tax return lodged by Tara.

The incoming payments from the McKenna account to the Tara account were recorded as a decrease in shareholders’ loans.

In the 2004 financial year, two transactions were made from the Tara account into the Billbury account. The first of the transfers, with a small deduction, was paid into the Security Life account. The second transfer totalled $35,028. Of this amount, $32,273.83 was paid into the Security Life account and $2,602.74 was paid into the IFTC account. A third transfer of $19,917.46 was made by Tara directly into the Security Life account.

The total amount received by Security Life as a result of these transfers was $82,083.71. Of this amount, $40,000 was transferred into the IFTC account, $10,000 into the McKenna account and $13,925 to the account of Ms Anne McKenna, Ms McKenna’s sister, a resident of the Republic of Ireland.

In the same year, $40,000 was transferred from the IFTC account into the McKenna account.

In the 2004 financial year, $15,000 was transferred from the McKenna account back into the Tara account.

In that year, Ms McKenna also made three payments from her MasterCard account to Mr Agius’ firm in Vanuatu.

No relevant tax deductions were claimed in the 2004 financial year.

In the 2005 financial year, two transfers, totalling $51,656, were made out of the Tara account into the Billbury account. From this account, $4,230.13 was transferred into the IFTC account and $46,710.66 was transferred into the Security Life account. From the Security Life account, $47,700 was transferred into the McKenna account and $16,025 was transferred to another Irish relative of Ms McKenna, a Ms Deidre McKenna.

In the 2005 financial year, $20,000 was transferred from the McKenna account back into the Tara account.

No relevant tax deduction was claimed in the 2005 financial year. The incoming payment from the McKenna account to the Tara account was recorded as a decrease in shareholder’s liability to Tara.

Ms McKenna gave evidence that she was the sole director, secretary and shareholder of Tara.

Ms McKenna stated that she first went to OTD in late 1998, where she met Mr Daniel and Mr Zerafa. Ms McKenna said that at the first meeting that she had with Mr Daniel and Mr Zerafa, she asked them how she could reduce her tax and Mr Daniel drew a diagram of the way she could do so. She was shown a diagram and she identified it as the diagram Mr Daniel drew up for her when he was describing how she could reduce tax and the way he was going to set things up. She referred to the words “your company” in the box in the middle of the diagram and pointed to references to “UK”, “US” and “Van”. She said that “Van” stood for Vanuatu. She said that as Mr Daniel drew the diagram, he explained that with various different invoices, it was possible to send money overseas and, in that way, to reduce tax.

Ms McKenna said that Mr Daniel explained how the scheme was supposed to work, but that she never really understood what it was about. She said that he assured her that “everything was above board, that it was clearly legal and that the tax office knew about the way this actually worked”. She said that at a subsequent meeting, held only between her and Mr Zerafa, Mr Zerafa mentioned a Lebanese man that the ATO had audited and found did not have to pay any extra tax.

Ms McKenna said that at the first meeting, she was told that Mr Agius was involved and ran the scheme out of Vanuatu. She was told that Mr Agius was Australian and would not do anything illegal because he came in and out of the country on business quite frequently and came over for the rugby season.

She subsequently clarified her evidence by saying that the time at which the diagram was drawn up was at the second meeting that she had at OTD.

Ms McKenna was referred to the diagram and to the amount of $8,000 appearing alongside the box “Van”. She said that she thought that the amount of $8,000 was set up costs, stating that she believed that she was told that by Mr Daniel.

Ms McKenna said that after the meeting at which the diagram was drawn, she agreed to go ahead and she had another meeting with Mr Zerafa who explained the documentation that needed to be put in place. She said that she thought that she missed a lot of what they explained because she did not realise they had to set up a company in Vanuatu, which Mr Zerafa did.

Ms McKenna said that at that meeting with Mr Zerafa, she was shown a loan document from another company to indicate the way that the scheme would be set up. She remembered that the loan document was for $1 million and she was told that the loan was to enable funds to be returned to Australia into either Tara’s bank account or her own account.

Ms McKenna was shown a facsimile dated 9 July 1999 from Mr Zerafa marked for the attention of Mr Agius which commenced “A client by the name of Tara Consulting Pty Limited would like to have set up an offshore company and loan facility. Could you please arrange for this and have all documents sent to our office. We would also like a facility to set [sic] as a personal loan to the sole director/shareholder (Colette McKenna).”

Ms McKenna said that she did not know that this communication had been sent, nor did she know that the new company would be called Network Industries Pty Ltd (Network Industries).

Ms McKenna was referred to the statement in the facsimile that “$40,000 overseas creditors have been included in the 1997/98 accounts” and that invoices for this amount needed to be issued on a quarterly basis. She said that in July 1999, she did not know anything about the details of any invoices or amounts necessary for her to be in the scheme.

Ms McKenna said that she told Mr Zerafa that she did not mind what the company which was to be set up for her was to be called. She said that Mr Zerafa came up with the name Capel Holdings. She said that she became aware that a company named Capel Holdings Pty Ltd had been incorporated overseas, although she was not aware of that at the time. She was not aware of a company called Network Industries being incorporated.

Ms McKenna was shown an email from Mr Zerafa to her dated 21 July 1999 indicating that the Billbury account was the account to which funds should be transferred and stating that the initial amount to be transferred was $15,000, which she may now transfer, and that there would be two further transfers of $12,500. The email stated that she should advise Mr Agius when the transfer had been completed. She said that she thought Billbury was the company set up in England for management fees. She said that she was told that either by Mr Daniel or Mr Zerafa. She said she transferred the initial amount of $15,000 and the two subsequent transfers of $12,500. She said that she was aware the Billbury bank account was in New Zealand.

Ms McKenna was shown a letter to her from Security Life dated 30 July 1999 relating to a one million dollar loan facility. She stated that she did not receive the documents enclosed with that letter.

Ms McKenna said that she recalled the company IFTC. She said that they sent her bills, which she paid, and she identified IFTC invoices, which she said were the $8,000 set up fees to set up the scheme.

Ms McKenna was referred to an Australian dollar facility agreement with Security Life dated 30 July 1999, which she acknowledged was signed by her. She said that it was signed by her in 2004 after the tax audit of Tara had started. She was asked if she received any money from Security Life and she said that she received money back from IFTC, but some of the transfers may have had Security Life on them. She said that she never met any person from Security Life.

Ms McKenna said that her understanding of the loan facility agreement was that it was required for the tax audit. She said that she knew that there was a loan involved, but said that she thought that Mr Daniel and Mr Zerafa were setting up something which was within the tax laws. She said that she never received the loan or ever worked out for herself how much the repayments should be, saying that Mr Zerafa told her how much was needed to be transferred for the year.

Ms McKenna said that she became aware that the company Capel Holdings was going to be set up in about 1999. She said that she was not given a reason why that company was being set up. She said that she was charged fees in addition to the $8,000 setup fees in respect of Capel Holdings.

Ms McKenna said that she had a motor vehicle accident in August 2000 and for at least a year after that, she did not send any money overseas. She said that after that period, Mr Zerafa told her that she needed to continue making overseas payments. She said that from that period, she was told the total amount to be paid each year, which was around $50,000 to $70,000 in some years. She said that depending on her cash flow position she decided the amount of individual payments, to make up a particular total.

Ms McKenna indicated that when making the individual instalments she wanted to get them back as soon as possible. She said that the money usually came back to her personally by payment into her bank account.

Ms McKenna said that at some point, she became aware, from Mr Zerafa, that the ATO wanted to conduct an interview about Tara. She said that before the ATO interview, she was approached by Mr Daniel with a brochure to do with PKF Vanuatu. She said that Mr Daniel told her that if anything was asked about the scheme, she was to say that she got the brochure on a plane and that Mr Agius had set it up for her. She said that this was untrue, she had not got a brochure and had never been to Vanuatu. She said that before that time, she had never heard of PKF Vanuatu.

Ms McKenna said that up to that time, as far as she was concerned, Mr Agius had not been her contact for Billbury, but rather it had been Mr Zerafa.

In relation to the interview with the ATO, she said that she was asked how she first came to be involved with Billbury and she said that she told the tax officer, untruthfully, that she had heard about it from England. She said that she that was not asked anything about Vanuatu.

Ms McKenna said that it was after that meeting that the loan document with Security Nominees was produced for her to sign and invoices were generated to support the management funds. She identified the loan facility agreement dated 30 July 1999 as the one provided to her to sign and said that she left it with Mr Zerafa. She said that no one else apart from Mr Zerafa was present when she signed it.

Ms McKenna was asked about the services said to be provided to Tara in the Billbury invoices. She said that in effect, none of those services were provided, saying that she first saw the invoices in 2004.

Ms McKenna said that she was asked by Mr Zerafa to write a document to support the proposition that Billbury had provided her with services. She was shown a document entitled “IP Multicast Design and Addressing Report” which stated “Prepared by Billbury Ltd for Tara Consulting Pty Ltd”. She said that it was not prepared by Billbury, but it was prepared by her. She said that she gave the document to Mr Zerafa. She said that a revised version was probably given to him in or around October 2004 and that the ATO had it at the second meeting which took place with her.

Ms McKenna said that she met Mr Agius in 2005. She said that she believed the meeting took place after the second tax audit meeting. She said that she recalled that Mr Zerafa had said that Mr Agius would be able to assist with the audit and explain tax matters and things of that nature.

Ms McKenna said that Mr Zerafa and Mr Daniel were at the meeting that she had with Mr Agius. She said that she ended up confused at that meeting because Mr Agius did not give her any tax advice regarding the audit. She said that he was “rather aggressive and wanted an invoice paid”. She said that she did not know why he wanted an invoice paid because as far as she knew, she did not owe any money. The invoice was for approximately $4,000. She said that previous to that, she had transferred money and $4,000 had been taken out as fees before the money came back.

She said that Mr Agius had a paper invoice at the meeting and the name on the invoice was “International Finance”.

Ms McKenna said that the upshot of the meeting was that she said that she was not paying the invoice because she did know why she had to.

Ms McKenna was then asked about a number of invoices from Security Life, which she said she paid. She denied, however, that she had a loan of $1 million from that company. She stated that the funds she paid out to Billbury in New Zealand came back from Security Life into her account.

Ms McKenna was asked about the MasterCard payments referred to in the agreed statement of facts (see pars [285], [292] above). She said that she made those payments as a result of being sent a credit card authorisation form. She said that the forms came from IFTC. She said that she dealt with Ms Fawcett through IFTC, but did not deal with anybody at Moore Stephens itself.

Ms McKenna was shown a letter from Billbury addressed to the directors of Tara confirming the valued consultancy agreement. She said that she never made a request to Billbury for the services described in the letter and never requested that a letter of that nature be sent to her. She said that she did not think that the letter was ever actually sent to her.

Ms McKenna was also shown a consultancy agreement between Tara and Billbury, which she acknowledged she had signed. She said that she signed it at the same time as she signed the loan agreement with Security Life. She said that Billbury did not provide Tara with any of the services described in the consultancy agreement.

Ms McKenna was shown two other consultancy agreements, one commencing on 1 July 2000 and the other on 1 July 2001. She recalled that she got them all at the same time from Mr Zerafa.

So far as Capel Holdings was concerned, Ms McKenna was referred to an email of 12 May 2005, enclosing an invoice for renewal fees and stating that if she wished to maintain registration of the company, she needed to let IFTC know by 30 June 2005. She said that she did not keep the company registered in Vanuatu. She said that she never understood the connection that she had with Capel Holdings.

Ms McKenna was shown a notice of demand from Security Life, demanding $58,033.15 for outstanding loan monies including interest. She said that as far as she was concerned, she did not owe Security Life any money and she gave the document to her lawyer.

Ms McKenna was shown a letter dated 27 July 2004, addressed to a Mr Walter Vun, a special investigator with the ATO, and signed by her. The letter gave details of the Security Life loan and interest payments made and stated that the facility was arranged by Mr Agius, a partner of Moore Stephens. She said that Mr Zerafa prepared the letter. In his evidence, Mr Zerafa said that the letter was drafted by Mr Daniel. In cross-examination, he stated that it was correct, in his understanding, that Mr Agius arranged the facility.

In cross-examination by senior counsel for Mr Agius, Ms McKenna acknowledged that she only saw Mr Agius once and that was in 2005. She acknowledged that he did not give her any advice about tax matters.

Ms McKenna acknowledged that in the financial year ending 30 June 1998, she made a false claim for a deduction of $40,000. She admitted that she sent no money overseas in that year. She rejected the proposition that her 1998 tax return was lodged before her meeting with Mr Daniel.

Ms McKenna acknowledged that she also made a false claim for a deduction in the 1999 financial year in the sum of $50,000. Again, she admitted that she did not send that money overseas and she said that she did not understand it “that’s the way Kevin [Mr Zerafa] did the books”.

Ms McKenna acknowledged that she was very much influenced by Mr Daniel and Mr Zerafa over the years. She was referred to her evidence concerning Mr Daniel drawing a diagram and acknowledged that in her statement to the AFP, she made no mention of Mr Agius.

It was put to her that the first time that Mr Agius’ name appeared in a statement was in her statement to the police on 20 April 2010, in which she said that Mr Daniel told her that “Robert Agius set up the scheme and he runs it from Vanuatu.” She did not have an answer as to why she did not include that in her former statements. She denied that it was to try and get herself out of trouble, although she acknowledged that it was after she gave an undertaking to assist the AFP.

Ms McKenna acknowledged that Mr Daniel asked her to lie about the origin of the tax scheme and Mr Agius’ involvement. She was referred to her answer in her examination that Mr Daniel told her to say that she got the brochure on a plane and that Robert Agius had set it up for her and that, in fact, she had not got a brochure and had never been to Vanuatu.

Ms McKenna was cross-examined on the fact that there was a false loan document which was backdated and signed by her, a false technical report which was prepared by her and a request by Mr Daniel to tell lies about Mr Agius. She acknowledged that the Security Life loan agreement was prepared for the purpose of the tax audit, saying that it was given to her to sign by Mr Zerafa. She acknowledged that its purpose was to mislead the tax investigators. She was then asked whether this was designed to deflect attention from OTD and she said she would take the cross-examiner’s word for it. She agreed that she was being asked to lie about Mr Agius in order to advance Mr Daniel’s position with the tax office.

Ms McKenna was asked about the Billbury invoices. She said that she saw a few of them in 2000 and a lot more of them in 2004. She acknowledged that on each occasion, they were given to her by Mr Zerafa.

Finally, in cross-examination by senior counsel for Mr Agius, Ms McKenna again acknowledged that she entered into the transactions because she trusted Mr Daniel and acted on his advice. She agreed that she was asked to lie about Mr Agius in relation to her receipt of the brochure and contact with Billbury.

In cross-examination by senior counsel for Mr Zerafa, Ms McKenna was referred to a letter addressed to her dated 18 August 1999 from OTD, enclosing a letter of offer relating to the $1 million loan facility. She was asked whether Mr Daniel sent her that document on 18 August 1999. She stated that the only document she remembered was the one from 2004, which she signed. It was put to her that it was possible that Mr Daniel sent a copy of the letter to her earlier and asked her to sign it and she had not done so. She responded that she did not remember.

She was further asked whether the loan agreement came to her and her accountant’s attention at the time of the audits in 2004 and 2005 and had not been signed and she was asked to sign it. She stated that she remembered signing it in 2004. She did not know whether the signature “F McConachie” was on the document when she signed it and accepted that it was possible that the signature was there since the document was first produced in 1999.

Ms McKenna was asked further questions about the involvement of Mr Daniel. She said that he explained the scheme to her originally but, after that, she dealt with Mr Zerafa, although Mr Daniel came to the second audit meeting.

Ms McKenna was asked further questions about the diagram that she had said Mr Daniel drew for her at the meeting at the end of 1998. Referring to the diagram, she said that she understood that in the centre of it there was a reference to Tara and that funds headed to New Zealand and then travelled to Vanuatu and then the United States. She said that the reference to Vanuatu was not there because of the involvement of a Vanuatuan entity, but because they (presumably Mr Daniel) mentioned Vanuatu and spoke about Mr Agius. She said that she did not understand from the outset that a company in Vanuatu would be set up.

Ms McKenna agreed that it was possible that on 1 March 1999, she attended a meeting with Mr Daniel and Mr Zerafa for the purpose of finalising the tax returns and accounts for Tara for the 1998 financial year. She said that she could not guarantee the date, although she knew that she had a meeting with Mr Zerafa and Mr Daniel where Mr Daniel explained the diagram.

Ms McKenna was further cross-examined about the meeting that she had with Mr Agius in December 2005 at which he demanded that some outstanding invoices be paid. She said that she thought that she went to the interview to get tax advice, but she did not receive any. She said that she did not know what the invoices were for and she did not pay any more of them.

Mr Michael Dalby (Mr Dalby) was a retired taxation officer who, at the time of his employment with the ATO, was allocated to the tax audit of Tara and Ms McKenna. He said that on 28 October 2004, he received material from Mr Zerafa in connection with the audit. That material provided details of Billbury, including an address at Bath Avon in England with a contact, Simon Agius.

Mr Dalby stated that in the second audit interview with Ms McKenna on 22 March 2005, he asked Ms McKenna how she came to get invoices from Billbury. He said that she stated that she had heard about that company by word of mouth and that she had never visited their office in Bath. She said that she had always dealt with Mr Agius and had not used Billbury as an advisor until she came to Australia.

Mr Dalby said that at the audit meeting, he asked Ms McKenna about the deposits in her personal bank accounts from IFTC, which roughly equalled the Tara payments to Billbury. He stated that she said that this was arranged by Mr Agius and she paid interest to Security Life.

Mr Hili was the director of both Kylood and Hilisa.

OTD were the accountants and tax agents for Kylood and Hilisa. The retainer by which OTD was engaged included the preparation of unaudited accounts and the preparation and lodgement of tax returns for each company.

Mr Agius was not involved in the preparation of the unaudited accounts or the preparation and lodgement of the tax returns for each company.

In 2001, neither Kylood nor Hilisa participated in transactions involving any flow of funds between Australia and New Zealand. However, the Kylood unaudited accounts recorded $220,000 as accrued management and consulting fees. This formed part of the deductible expenses claimed in that company’s tax return for the 2001 financial year.

In the 2002 financial year, eleven transfers were made out of an account operated by Kylood with the NAB (the Kylood account) to a New Zealand account with the ANZ Bank in the name of Centurion Technology and Marketing Inc (Centurion) (the Centurion account). The total value of the transfers was $460,275. Of this amount, $4,876 was transferred into the IFTC account, while $454,237.12 was transferred into the Edgecumbe account. Of this latter amount, $446,075 was transferred into an account with the NAB in the name of Mr Hili (the A Hili account). From this account, $448,200 was transferred back to the Kylood account. The reason for a greater amount being transferred out of the A Hili account into the Kylood account than had flowed into the A Hili account from the Edgecumbe account was not explained in the agreed statement of facts.

The unaudited accounts for the 2002 financial year recorded a figure of $255,000 as management and consulting fees. This was made up of $430,000, representing the total of the outgoing payments from the Kylood account, plus a fee of $45,000, less $220,000, being the reversal of the accrued management and consulting fees shown in the 2001 accounts indicating that fees of $220,000 had been paid.

The unaudited accounts also referred to the amount of $7,851.97 as interest paid on a loan. This amount was recorded under shareholders’ loans.

The amounts of $255,000 and $7,851.97 were claimed as deductions in the Kylood 2002 tax return.

The transfers into the Kylood account, with one exception, were recorded under shareholders’ loans.

It should be noted that although Hilisa did not participate in any similar transactions in the year in question, its accounts recorded the sum of $55,000 as management and consulting fees. This amount was claimed as a tax deduction in Hilisa’s tax return for the 2002 financial year.

In the 2003 financial year, Kylood made one transfer of $45,025 to the Centurion account. Subject to a small deduction, this amount was transferred to the Edgecumbe account, and then, subject to another small deduction, to the A Hili account.

Hilisa operated an account with the NAB (the Hilisa account). In the 2003 financial year, two transfers were made out of this account into the Centurion account, which, subject to small deductions, were subsequently transferred into the Edgecumbe account and then the A Hili account. In addition, one transfer of $7,097.71 was made from the Hilisa account directly into the Edgecumbe account. Subject to a small deduction, this amount was then transferred into the A Hili account.

The total amount received by A Hili account as a result of these transfers was $96,450. Subsequently, in the 2002 financial year, $110,000 was transferred form the A Hili account into the Hilisa account.

In that year, $2,050.17 was also transferred from the Hilisa account into the IFTC account.

In the unaudited accounts of Hilisa for the 2003 financial year, $65,000 was recorded as management and consulting fees. The unaudited accounts also recorded the $7,091.71, the subject of the direct transfer to the Edgecumbe account (less a bank fee), as interest. Each of the management and consulting fees and the interest payment were claimed as deductible expenses in the Hilisa tax return for the 2003 financial year.

In the 2004 financial year, a single transfer of $5,500 was made from the Hilisa account to the IFTC account. There were no relevant tax consequences in that year.

Mr Hili gave evidence that from about 26 November 1987, he operated Kylood. He agreed that the company was deregistered in February 2003 but before that, he had caused Hilisa to be incorporated on 15 January 2002.

Mr Hili indicated that the Kylood’s business was, among other things, a contract painting company and that he also had involvement in a company named Comex Building Pty Ltd (Comex), together with Mr Jones. He said that Mr Jones was also a director of that company, as was a Mr Bennett.

Mr Hili said that when Comex was trading, it was trading in the building construction field. He said that Hilisa was still operating.

Mr Hili said that he started to use OTD as accountants in about 1981. He said that he met a Mr Daniel and, from the early 1980s through to the end of that decade, Mr Daniel worked for him and his companies. He said that he did not get business advice from Mr Daniel in that period.

Mr Hili said that he continued to use OTD throughout the 1990’s. He agreed that in 1997, and other years, there was a general period of the year when he went to OTD for the purpose of having the annual tax returns prepared.

Mr Hili agreed that in early 1997, and on other occasions, he raised the subject of the amount of tax he was paying. He recalled that Mr Daniel told him about the idea of using an offshore entity to “kind of send money overseas and reduce your tax liability in that way.” He said that there was a general discussion as to where the money was to be sent, saying that it may be Ireland or New Zealand or maybe Vanuatu.

Mr Hili said that this proposal was raised with him in 1997 and that he was not interested. He said that he recalled that Mr Daniel drew a rough diagram and said, indicating to the diagram, “you send the money here to New Zealand it will go here and then there and then back to Australia”. He said that he did not go into the arrangement at that stage because he did not quite understand it and if he did not understand a matter he normally did not sign up for it.

Mr Hili said that Mr Daniel raised the same proposal in 1998 and he rejected it again.

Mr Hili said that in 1998 or 1999, he introduced Mr Jones to Mr Daniel at a meeting at which there was a discussion about tax arrangements. He said that at that meeting, Mr Daniel put forward the same proposal.

Mr Hili said that he recalled that at that meeting, Mr Jones asked about the legality of the scheme asking, “Is it legal? What if we get audited”. He said that Mr Daniel was very confident, saying, “No worries, if we get audited we’ve got all of the documentation”. He said that Mr Daniel said that he had documentation to back up the scheme so “if we were looked at it was all kosher”. Mr Hili said that by the end of that meeting, his understanding of the scheme was that “we would send some money to New Zealand and later it would come back”. He said that he thought the money being sent to New Zealand was “like a loan or something” and that the money sent over was interest on the loan. He stated that that was all he could really remember. He said that the way they understood it was that “we had a loan for a million dollars or whatever overseas and we were paying interest on the loan and it’s like a tax deduction, something like that”.

Mr Hili said that after the meeting he, Mr Jones and their co-director in Comex, Mr Bennett, agreed to go into the scheme. He said that after that, he recalled Mr Daniel telling Mr Zerafa and Ms Abibadra that he and Mr Jones would join the scheme.

Mr Hili said that thereafter, he thought that Ms Abibadra contacted him by phone and said that he, Mr Jones and Mr Bennett had to come in to sign some paperwork. He said that a week or so thereafter, they attended the office of OTD and saw either Mr Daniel or Ms Abibadra. He was asked to recall what the paperwork was and said that it was “stuff to do with the scheme”. He said that each of them had their own individual offshore companies and they had to sign something to do with that and to do with the offshore loan. He stated that at the time, he understood that the purpose of the overseas companies was to facilitate the transfer of funds. He said that he did not read the documents, he trusted Mr Daniel and he signed them. He said that either Mr Daniel or Ms Abibadra said that they would be in touch with an amount to send, that Mr Daniel would come up with a figure and someone would ring on his behalf.

Mr Hili agreed that the essence of what was said was that the money would be sent from his company’s account to an overseas company’s account and he would get a company tax deduction. Then, the money would come back to him and be paid into his personal account in the form of a loan, so he would not have to pay tax on it. He said that if it was Ms Abibadra who gave him the papers to sign, then she said something along those lines.

Mr Hili said that a couple of weeks thereafter, Ms Abibadra rang him on his mobile and told him a figure to send, an account number and a reference number. He said that from memory, the amount was a high figure and he told Ms Abibadra that he did not have that amount of money, saying, “that’s too much in one hit” and she told him that he could send it in smaller amounts.

Mr Hili said that he wrote the details on a business card. He was shown the business card, which had a figure of $30,000 on it. He said that he could not say specifically that someone said that he should send $30,000, but he may have offered to send that amount. He said that he thought the original amount was a lot more than that but he said he could send $30,000 at a time.

Mr Hili identified the bank account that he wrote on the business card as the ANZ Bank, Auckland, New Zealand, Centurion Technology and Marketing Inc. He confirmed that that this information was given to him by Ms Abibadra.

Mr Hili said that after the phone conversation, he would have sent the money out of the Kylood account. He said that he gave the details of his personal account to OTD, likely to Ms Abibadra.

Mr Hili was asked again about the conversation that he had with Ms Abibadra and noted that it was ten years ago, but he did remember that the amount he had to send over was too large and he could not send it over in one hit. He stated that someone told him “Yeah, you can just, so long as it adds up to that figure so you can send over what you want but you wouldn’t want to send over five grand at a time, it would take you too long. You’d have to be there every week sending money over”. He said that he sent the money over in $25,000 or $30,000 lots. He said that he was told that he could do that as long as it added up to $150,000 or $200,000, whatever it was at the time.

Mr Hili said that when he first sent monies overseas, he did not have any idea of who Centurion was. He said that he had no idea what it did and it had never supplied Kylood, Hilisa or him with any products or services. He said that Centurion was his offshore entity, so it could not have given any services per se. He said that he assumed that it was located in New Zealand, but he was never told by anyone at OTD what function Centurion carried out.

In relation to the $30,000 that Mr Hili caused to be paid overseas, he said that he transferred that amount from his personal account to his company account, and then it went offshore, and that was the reason it came back into his personal account.

Mr Hili said that he recalled IFTC, saying that he got bills from them which he paid. He said that he heard about Edgecumbe Finance at about the same time as he heard of IFTC, saying that he probably received a bill or correspondence from them. He said that initially, he did not know why IFTC was billing Kylood.

It was drawn to Mr Hili’s attention that Kylood sent $460,000 overseas between 15 January and 19 June 2002. He said that he must have been told to send that amount by Ms Abibadra, as the money dealings were initially with her.

Mr Hili confirmed that in 2002, all of the payments came out of Kylood, but by 2003, there were some payments out of Hilisa.

Mr Hili was asked about the $220,000 management and consulting fee disclosed in the income and expense statement for Kylood for the 2001 financial year. He said that it had something to do with the scheme and that none of his companies received any management and consulting services from overseas. Mr Hili was asked whether he knew, when he and his company were involved in the scheme, that the year by year totalling of overseas expenses would end in the Kylood tax return for each year as a deductible expense. He said that he knew this in the first instance, but he did not know that they were spread over a couple of tax periods, because he only sent the money over in one year period. He then stated that he knew that part of the overseas payments ended up as deductible expenses for the 2003 financial year. He subsequently stated that he did not know who made the decision as to how the total of overseas payments would be divided up into different yearly tax returns.

Mr Hili was shown a guarantee and indemnity dated 15 January 2002 in favour of Edgecumbe Finance. He stated that he may have signed it, but that he would not have read it in its entirety. He said that he did not have any knowledge at the time of the reason he would be giving a guarantee and indemnity to Edgecumbe Finance. He said that it all had to do with the scheme.

Mr Hili said that he recalled going to the OTD office with Mr Jones and signing some documents. He said that Mr Daniel was probably there at the time and possibly also Mr Zerafa. He was asked whether he knew why he or his companies were paying money to Edgecumbe Finance, which was recorded as interest payments. He said that it all had to do with the scheme but he did not know how it affected the scheme.

Mr Hili was taken to the ledger report for Kylood for the period 1 July 2001 to 30 June 2002. He was directed to amounts of $30,025 shown on the ledger alongside the name Billbury. He said that this had something to do with the scheme and that Billbury was an offshore entity. He did not know how Billbury fitted into the scheme and said that he could not remember if he received any invoices from that company. He agreed that none of his companies ever made any payments to Billbury.

Mr Hili said that he never had any contact or discussion with persons outside of Australia in connection with the scheme. He said that IFTC would have got his bank details from the offices of OTD because the money was to be returned into his account. He said that he only heard the name IFTC later in the scheme’s years.

Mr Hili was referred to documents from Edgecumbe Finance recording loan drawdowns. He said that he never got the money the subject of these loan drawdowns, that he did not owe Edgecumbe Finance $1 million and that this was all part of the scheme. Mr Hili was shown a statement from Edgecumbe Finance dated 30 June 2003 addressed to him claiming interest payable of $47,121.72 for the period 1 July 2002 to 30 June 2003. He said that neither he nor his companies paid that bill. He said that although he knew that monies came back into his personal account, he did not know they came from Edgecumbe Finance, just that the money had come back. Mr Hili was also shown an invoice from Edgecumbe Finance dated 30 June 2004 claiming interest due for the period 1 July 2003 to 30 June 2004. He said that if he was asked the same questions about that invoice as he was for the invoice for the previous year, his answers would be the same.

Mr Hili was shown a document dated 17 September 2003 headed “Message 0503”, expressed to be “from Kevin … To Mike”, inquiring of Mike whether he had printed out the Centurion invoice for Kylood. Mr Hili said that he did not know who Mike was and he had no knowledge of what the Centurion invoice related to. The document in question was apparently retrieved from the office of OTD.

Mr Hili said that in about mid-2004, he and Mr Jones had a discussion about their continued involvement in the scheme. He said that they had received a letter from the ATO asking to explain a few things and they thought that they would try to fix it up. He said that his and Mr Jones’ initial response was to tell Mr Daniel that they did not want to be in the scheme anymore and whatever they had done had to be fixed up, “like reverse it or whatever”. He said that they gave Mr Daniel this instruction at a meeting at the OTD office at which Mr Daniel, and possibly Mr Zerafa, was present.

Mr Hili said that at the meeting, he told Mr Daniel that they did not want to be in the scheme anymore and “that it looks really bodgie”. He said that he told Mr Daniel to get them out. He said that at the time, he and Mr Jones needed to ascertain their tax position and the amounts which had been given to them. He said that either Mr Daniel or Mr Zerafa said that if he got out of the scheme, he would have to pay a lot of tax. He said that the amount was $150,000 or something. Mr Hili said that Mr Jones did not say very much but rather let him do the talking.

Mr Hili said that no explanation was given to him as to why he would be up for a lot of tax if he got out of the scheme. He was shown a document in his handwriting and identified that as notes he took of the amounts he was told at the meeting. The document showed figures alongside Comex, Hilisia/Hili and Jeiss/Jones of $55,000, $44,000 and $45,000, respectively, totalling $144,000. He said that those figures were given to him by either Mr Daniel or Mr Zerafa.

Mr Hili said that at the end of the meeting, both he and Mr Jones wanted out of the scheme. He said that as far as he knew, nothing was done subsequent to the meeting to get them out.

Mr Hili was shown a draft letter to a Mr Abdo Dirani (Mr Dirani) of the ATO dated 28 October 2004, a further draft of the same day and a letter written to Mr Dirani on that day. He said that the second draft was prepared by him and had the words “Attention: Kevin Zerafa” written on it because he wanted Mr Zerafa to look at it. He said that he would probably have faxed it to OTD’s office and then sent it off to the ATO. The letter denied any offshore dealings in Vanuatu or otherwise. Mr Hili said that he regarded the statements that he had no offshore assets and was not a shareholder in any international business companies as accurate, although he recognised that he may have been a director of a company in Vanuatu.

Mr Hili was referred to a letter written by him to Mr Dirani of the ATO on 17 April 2004. The letter enclosed what were described as personal guarantee documents for security against his loan with Edgecumbe Finance. He said that the letter was not drafted by him and that at the time it was written, he did not consider that he had any genuine loan from Edgecumbe Finance. He was also asked about his answer to the question about the advantages in using Edgecumbe Finance instead of an Australian bank. His response was that it was very difficult to obtain development funds for builders from Australian banks as they required property assets over which to take a first mortgage over and Edgecumbe Finance did not. He said that this answer was untrue.

Mr Hili also said that the statement in the letter that he had had discussions in Sydney with Mr Agius, a partner in Moore Stephens, who said that he could arrange offshore finance using personal guarantees, was also untrue. He said that at the time of writing the letter, he had not met Mr Agius nor, to his knowledge, had Mr Jones.

Mr Hili said that near the end of November 2006, he was contacted by someone from OTD to attend a meeting. He said that he went with Mr Jones and, from memory, they met Mr Zerafa and Ms Abibadra. He said the meeting was something to do with a raid carried out by the AFP. He said that his recollection was that Mr Zerafa may have said that. He said that he learnt that some of his files had been taken, Mr Hili asked whether it had anything to do with the Vanuatu scheme and this question was not answered. He said that there was no reference to the scheme at the meeting and that he mentioned the scheme, but Mr Zerafa and Ms Abibadra did not say anything about the scheme, “like there was no scheme”. He said that Mr Zerafa said that maybe he or Mr Jones should take legal advice. He said that Ms Abibadra may have said that she did not know much about the scheme.

Mr Hili was then asked to refresh his recollection by reference to a statement he had made to the AFP in November 2008. He then said that although it was a long time ago, he recalled Mr Zerafa saying “Its Owen’s fault”. He said that he might have asked, “What did they take? Have we got something to be worried about”, and was told, “Better just get legal advice”. He said that the statement assisted him in recalling that Mr Jones said “Do we need to be worried at all”. He also recalled Mr Jones asking Mr Zerafa whether he was serious or not when he said that they were okay with the tax department, because all of this related back to the tax department. He said that his recollection was that Mr Zerafa did not say anything in response.

Mr Hili was referred to a notice of demand from Edgecumbe Finance dated 2 May 2007, demanding payment of $106,576.18. He said that when he received it, he referred it to one of his solicitors and did not pay the amount demanded.

Mr Hili was shown an email from Mr Agius to his solicitor, a Ms Felicity Black, dated 7 May 2007, apparently written in connection with the notice of demand. The email, which is indicative of the involvement of Mr Agius in the scheme, is in the following terms:

In cross-examination by senior counsel for Mr Agius, Mr Hili again acknowledged that the statement in his letter of 7 April 2004, that he had discussions with Mr Agius who said that he could obtain offshore finance using personal guarantees, was entirely false and that this statement had moved to a more prominent position in the letter than where it appeared in the draft.

Mr Hili agreed in cross-examination that Mr Daniel had actively promoted the tax minimisation plan on four occasions. He agreed that $220,000 was claimed by Kylood in 2001 as a tax deduction, although transfers of money overseas did not begin until 15 January 2002. In those circumstances, he agreed that the process appeared to be that someone at OTD would record a false expense in the company’s books and after, that money would be transferred overseas.

In cross-examination by counsel for Ms Abibadra, Mr Hili acknowledged that he had always found Mr Daniel to be a good and capable accountant and that he was comfortable with Mr Daniel looking after his taxation affairs. He acknowledged that as far as he was concerned, Ms Abibadra did not do his taxation work.

Mr Hili acknowledged that it was fair to say that he did not really understand what was being proposed at meetings. He understood Centurion to be a company that was not his personal entity, but was “my contact over in New Zealand”. He did not know why another company, Miyuki Enterprises Pty Ltd, was set up, although he had a rough idea after the court case.

Mr Hili acknowledged that Mr Daniel appeared very enthusiastic about the offshore arrangements and alluded to the fact that “it was the done thing and it was fine.” He said that he took that as meaning that the scheme was legal.

Mr Hili agreed that a number of the transfers to the New Zealand account were made on the instructions of, or after discussions with Ms Lynda Meek, another employee of OTD, rather than Ms Abibadra. He accepted that in relation to the first deduction of $220,000, there was no money transferred. However, he denied the suggestion that Mr Daniel explained that such a deduction could be obtained, even though no money had been transferred.

Mr Hili agreed that it was likely that the guarantee of the loan from Edgecumbe Finance was presented to him for his signature at the same time that he signed the tax return for 2001. In respect of the $220,000, Mr Hili agreed with the suggestion that it was recorded as an accrued liability for the 2001 financial year and paid in the subsequent year.

In cross-examination by senior counsel for Mr Zerafa, Mr Hili denied that he was told that neither Mr Daniel nor Mr Zerafa knew what had to be done overseas to get out of the scheme or that there was a proposal that he would meet with Mr Agius to consult with him as to what was needed to be done to get out of the scheme. He agreed, however, that when he told Mr Zerafa and Mr Daniel that he wanted to get out of the scheme, there was no opposition from either of them.

Mr Hili denied that he believed that the legal obligations which he had purportedly entered into were binding and effective. He stated that the transactions were a sham from the beginning to the end. He said that if the arrangement with Edgecumbe Finance was a loan facility, he would have received a loan and he did not receive one. He denied that he drew down any funds.

Mr Hili acknowledged that when he was told by Mr Zerafa to seek legal advice, he was not given any instructions as to what to say to his lawyers.

Mr Jones was the sole director of Jeiss.

In 1999 or 2000, Mr Jones, on behalf of Jeiss, engaged OTD as both Jeiss’, and his own personal, accountants and tax agents. The retainer between OTD and Jeiss included the preparation of unaudited accounts and the preparation and lodgement of income tax returns.

Mr Agius was not involved in the preparation of Jeiss’ unaudited accounts or the preparation and lodgement of its tax returns.

In the 2000 financial year, no money was paid out of any Jeiss account to any New Zealand bank accounts. However, the unaudited accounts for that year recorded $110,000 as management and consulting fees. These expenses were claimed as a deduction in the 2000 tax return.

In the 2001 financial year, $50,025 was transferred by Jeiss out of an account held by it with the NAB (the Jeiss account) into the Billbury account. Of this amount, $42,000 was transferred into the Edgecumbe account and $8,000 was transferred into the IFTC Vanuatu account. Of the money transferred to the Edgecumbe account, $39,600 was transferred to an account held by Mr Jones with the NAB (the Jones account).

In the Jeiss unaudited accounts for the 2001 financial year, $154,000 was recorded as management and consulting fees and was claimed as a deductible expense in the 2001 tax return.

The transfer of $50,025 was initially recorded as a shareholder loan but was subsequently recorded under the heading of “Other creditors”. Mr Jones did not record the amount he received as a result of the transaction as income in his income tax return for the 2001 financial year.

In the 2002 financial year, there were three transfers of funds from the Jeiss account into the Billbury account. Subject to small deductions, these funds were transferred into the Edgecumbe account.

In addition, Jeiss made two transfers of relatively small amounts into the Edgecumbe account and the IFTC account.

Of the funds transferred into the Edgecumbe account, $150,200 was transferred into the Jones account. Of this amount, $150,000 was transferred back to the Jeiss account.

In the unaudited accounts for 2002, $186,000 was recorded as management and consulting fees. $7,630 was included as interest payable to Edgecumbe Finance, being in part the transfer made directly into the Edgecumbe account from the Jeiss account, to which I have referred above. These amounts were claimed as deductions in the tax return for the 2002 financial year. The transfers from the Jeiss account to the Billbury account were recorded in Jeiss’ ledger and OTD’s hand-written journal as relating to previously accrued management and consulting expenses.

The $150,000 transferred from the Jones account to the Jeiss account was recorded as shareholder loans. Mr Jones did not declare the amount he received as income in his 2002 income tax return.

In the 2003 financial year, five transfers, totalling $210,134, were made from the Jeiss account into the Billbury account. In addition, a transfer of $6,289.66 was made from the Jeiss account into the Edgecumbe account.

From the monies transferred into the Billbury account, $203,293.74 was transferred into the Edgecumbe account, whilst $4,200 was transferred into the IFTC account. Of the latter amount, $2,368.42 was transferred from the IFTC account into the Jones account.

Of the money transferred into the Edgecumbe account, $206,500 was transferred into the Jones account. Of the money transferred into the Jones account, $150,000 was transferred back into the Jeiss account.

In the unaudited accounts for the 2003 financial year, $65,000 was recorded as management and consulting fees and was claimed as a deduction in Jeiss’ 2003 income tax return. The transfer from Jeiss to Edgecumbe Finance was described as interest but no tax deduction was claimed.

None of the monies paid into the Jones account were declared as income by Mr Jones in his income tax return for the 2003 financial year.

In the 2004 financial year, $26,580.54 was transferred from the Jeiss account into the Edgecumbe account. Of this amount, $23,300 was transferred into the Jones account and $3,545.96 was transferred into the IFTC account. In addition, $2,243.33 was paid from the Jeiss account into the IFTC account.

There were no relevant tax deductions claimed in that year.

In considering the evidence of Mr Jones, regard should be had to the evidence of Mr Hili, to which I have referred above.

Mr Jones acknowledged that from 12 January 1996, he was the sole director of Jeiss. He said that the company was involved in building maintenance and painting. He said that he went to OTD because Mr Hili was already using Mr Daniel and, as they were working together, it was sensible to have the same accountant.

Mr Jones recalled a meeting at OTD in the late 1990’s or the year 2000. He said that he, Mr Hili and Mr Bennett were present at the meeting, initially with Mr Daniel but after that, Mr Zerafa and Ms Abibadra came to the meeting. He said that at the meeting, they discussed tax matters. He said that at the meeting, Mr Daniel proposed a scheme and told him that it was a tax scheme to reduce tax to virtually nothing. He said that he recalled Mr Daniel saying that “he could send some money overseas and it would float around a whole stack of countries and it would come back here and could be claimed and you could reduce your tax.” He said that the countries named were New Zealand, Vanuatu and Ireland. Mr Jones said that he recalled the money was going to New Zealand. He said that he was told that they were paying for consulting fees and the money would come back as a drawdown on the loan.

Mr Jones said that they questioned it because it sounded pretty risky. He said that Mr Daniel said that other people were doing it and that it was not a big deal. Mr Jones said that he recalled that the loan would be obtained through an Irish bank but that he could not remember much about that side of it.

Mr Jones said that he asked how well it would stand up if they were audited by the ATO and they were told it was fine, that plenty of people were doing it and that it was no big deal.

He said that by the end of the meeting, he and Mr Hili and Mr Bennett had agreed to go into the scheme.

In cross examination by senior counsel for Ms Abibadra, Mr Jones accepted that it was only after he had indicated to Mr Daniel that he would participate in the scheme were Mr Zerafa and Ms Abibadra called into the meeting.

Mr Jones said that at the time of the meeting, he did not have an exact understanding of how New Zealand or the other overseas places fitted into the picture. In relation to New Zealand, he said that he knew that it was the place “where the money had to take the spin around the globe before it came back”. Mr Jones also said that nothing was said about fees at the meeting, but there were fees taken out before the transfers came back into his personal bank account.

Mr Jones said that sometime after the meeting, Ms Abibadra contacted him and gave him the details of where to send the money and asked that once it was sent, to facsimile a copy of the overseas transfer to her. He was referred to a telegraphic transfer to the Billbury account and said that he got the information to make that transfer and its amount ($50,000) from Ms Abibadra.

Mr Jones was also referred to an inwards transfer into his personal account for $39,585 by order of Edgecumbe Finance at a post box in Port Villa, Vanuatu. He said that before he got that document, he had not heard of Edgecumbe Finance and did not know who they were. He said that he just knew that it was money coming back to him.

Mr Jones said that he had never heard of a firm named Moore Stephens during the course of sending overseas payments, saying that the only company he knew of from the start was Billbury, which was the company to which he was sending money in New Zealand. He said that the name of Billbury was given to him by Ms Abibadra. He said that did not know what the company did and it did not provide any services to Jeiss. In particular, he said that he did not get any management and consulting services for Jeiss from any overseas entity. He said that he did not need management and consultancy services.

Mr Jones said that he could recall getting documents from IFTC. He was referred to an invoice from that company addressed to a company, Guns of America Ltd (Guns of America), at the OTD address. Mr Jones said that Guns of America was the name of the company that he was given. He said that when he received invoices from IFTC, he did not actually recall what they were for. He said that he just paid what he was told to pay.

Mr Jones was also referred to an invoice for interest from Edgecumbe Finance dated 30 June 2001. The invoice referred to a drawdown facility of $1 million. Mr Jones said that he knew it was a phoney loan and that he did not draw $1 million down from Edgecumbe Finance as a loan.

Mr Jones was referred to the Jeiss profit and loss account for the financial year ending 30 June 2000, showing management and consulting fees of $110,000. He said that they were falsely claimed consulting fees. He said that he did not know how the figure was arrived at.

Mr Jones was referred to the income and expense statement for Jeiss for the period ending 30 June 2001. He was referred to the management and consulting fees in an amount of $154,000. He said that his evidence in respect of these fees was the same as his evidence in relation to the consulting fees of $110,000. Mr Jones said that he would have given the same answer in relation to the $186,000 management and consulting fees in the profit and loss statement for Jeiss for the year ending 30 June 2002.

Mr Jones also said that he would have given the same answers in relation to the $65,000 management and consulting fees shown in the profit and loss statement for Jeiss in the year ending 30 June 2003, or any other amounts referable to such management and consultancy fees.

Mr Jones was also asked about an entry in a document described as the Jeiss Building & Carpentry Services Pty Ltd Coding Report from 1 May 2002 to 31 May 2002, recording an entry of $100,000 alongside the words “Billbury Pty Ltd (see Carol)”. He said that he would give the same answer in relation to this payment to Billbury as he gave in relation to the previous payments.

In relation to the $110,000 expenses claimed in the 2000 year, Mr Jones accepted the suggestion by counsel for Ms Abibadra that Mr Daniel had explained to him that “you could claim the deduction for $110,000 even though funds had not been sent offshore, but you would need to set up transfers offshore in the following tax year to make the figure up”.

Mr Jones was again referred to money which came back into his personal account from Edgecumbe Finance. He said that he was not aware that those monies were not declared in his personal tax return for the particular year as assessable income. He said that he did not understand that the Edgecumbe Finance payments were loan drawdown payments.

Mr Jones said that he was concerned when he received the ATO letter dated 21 November 2003. He said that he asked Mr Zerafa about it and Mr Zerafa said not to worry about it, “it’s just a generic letter. I’ll prepare a response.” Mr Jones was referred to a response dated 16 December 2003 under his name stating that he had had dealings with an international finance company, Edgecumbe Finance, and setting out what were described as inward transactions. He said that the author was Mr Zerafa. The letter said that Edgecumbe Finance was a bank located in Dublin, Ireland. Mr Jones said that he had no knowledge that Edgecumbe was located in Dublin. Mr Jones said that he signed the letter and caused it to be sent off to the ATO on the instructions of Mr Zerafa.

Mr Jones said that he recalled a meeting at OTD on 19 April 2004. He said that he and Mr Hili came in to see OTD following receipt of a letter from the ATO saying that he and Mr Hili were at high risk of being audited. He said that he and Mr Hili went to OTD because they wanted to get the tax repaid, “all the money that we’d been ripping off, we wanted to correct it”. Mr Jones said that they were told that they would have to pay a fortune back in tax and that they said that they did not mind and they would do whatever was necessary to pay it back. He said that he subsequently received a payment plan from the ATO to pay about $5,000 per month over 12 months and he thought that he was paying off the tax avoided as a result of the scheme.

Mr Jones was asked about a meeting that he had at the office at OTD with Mr Hili in November 2006. He recalled that either Ms Abibadra or Mr Zerafa said that they had been raided by the AFP and they were looking for all documents in relation to the scheme. Mr Jones said that either he or Mr Hili said that they thought they were square with the ATO and asked “is everything okay”. He said that there was no real reply to that. He said that they were told just to seek legal advice and also that most of the documents were shredded and not to worry about it, “It was mainly all Owen’s idea”.

In cross-examination by senior counsel for Ms Abibadra, Mr Jones accepted that he could not be sure of the words that he used in the conversation in November 2006.

In cross-examination by senior counsel for Mr Agius, Mr Jones accepted that the plan was put to him by Mr Daniel and that there were no invoices received for management and consulting fees.

Mr O’Rourke was a director of Bemawell. He engaged OTD to act as the accountants and tax agents for Bemawell. The retainer included the preparation of unaudited accounts and the preparation and lodgement of income tax returns. It also included the preparation and lodgement of Mr O’Rourke’s personal tax returns.

Mr Agius was not involved in the preparation of the unaudited accounts or preparation or lodgement of tax returns.

In the 2003 financial year, transfers of $50,000 and $100,027 were made out of an account held by Bemawell with the St George Bank Ltd (the Bemawell account) into the Lime account. Of these amounts, a sum of $8,847.66 (partly converted into US dollars) was transferred into the IFTC account. A further $138,939.46 was paid into the Edgecumbe account. Of the latter amount, $138,764 was transferred from the Edgecumbe account to an account held by Mr O’Rourke with the St George Bank (the O’Rourke account). An amount of $136,000 was then transferred from the O’Rourke account back to the Bemawell account in transfers of $40,000 and $96,000, the latter transfer taking place after the end of the 2002/2003 financial year.

In the unaudited accounts for Bemawell for the 2003 financial year, $100,000 was recorded as insurance expenses and $50,000 as fringe benefit expenses. These amounts were claimed as tax deductions in the tax return for that year.

Both of the transfers made from the Bemawell account, in amounts of $50,000 and $100,000, were recorded as shareholder loans (from Bemawell to a shareholder). The incoming payment of $40,000 from the O’Rourke account to the Bemawell account was recorded as a shareholder loan to Bemawell.

None of the monies which flowed into the O’Rourke account were declared as income in Mr O’Rourke’s 2003 income tax return.

In the 2004 financial year, two transfers were made out of the Bemawell account into the Lime account, each in an amount of $75,027. The chart showing the flow of funds attached to the agreed statement of facts also refers to a payment in the 2003 financial year of $100,027, which ultimately resulted in a transfer of $96,000 out of the O’Rourke account into the Bemawell account in August 2003. I have dealt with this transaction in dealing with the flow of funds for the 2003 year.

Of the two amounts transferred into the Lime account in the 2004 financial year, $12,041.04 was transferred into the IFTC account and $134,855.79 was transferred into the Edgecumbe account. Of the funds transferred into the Edgecumbe account, $134,712 was transferred into the O’Rourke account and subsequently $124,000 was transferred back into the Bemawell account.

In the unaudited accounts for that year, the final balance of insurance expenses was recorded as $151,711. This amount incorporated the two transfers of $75,027 from the Bemawell account to the Lime account. This amount was claimed as a tax deduction in Bemawell’s tax return for the 2004 financial year.

In the 2005 financial year, transfers were made out of three accounts operated by Bemawell. The first, in an amount of $75,000, was made out of an account with the St George Bank, known as the Bemawell 422 account, into the Lime account. Of this amount, $7,500 was transferred to the IFTC account and $65,200 into the Edgecumbe account. Of the latter amount, $65,131 was transferred into the O’Rourke account and thereafter transferred into the Bemawell account.

The second transfer, in an amount of $12,529.36, was made out of another account with the St George Bank, known as the Bemawell P account, into the Security Life account. Of this amount, $12,503.19 was transferred to the Edgecumbe account. From these funds, $12,381 was transferred to the O’Rourke account and $10,000 was subsequently transferred into the Bemawell account.

The third transfer involved the transfer of $75,000 from the Bemawell account into the Lime account. Of these funds, $72,723.76 was transferred to the Edgecumbe account in the 2006 financial year. Thereafter, $72,681 was transferred to the O’Rourke account. None of these funds appear to have been transferred back to the Bemawell account.

In addition, a transfer of USD$481.21 was made from the O’Rourke account into the Edgecumbe account.

The two transfers out of the Bemawell accounts of $75,000 were noted in the records of Bemawell as relating to insurance. An amount of $155,829 for insurance expenses was claimed as a tax deduction in Bemawell’s tax return for the 2005 financial year.

None of the monies received by Mr O’Rourke were declared by him as income in that year.

In the 2006 financial year, three transfers were made out of the Bemawell account into the Lime account. The total amount of these transfers was $250,000. In addition, a transfer of $23,404.47 was made from the Bemawell account into the Security Life account.

From the monies transferred into the Lime account in the 2006 financial year, $234,073.51 was transferred into the Edgecumbe account and $10,000 was transferred into the IFTC account.

Of the monies transferred into the Security Life account, $20,377.36 was transferred to the Edgecumbe account and $1,129.99 was transferred to the IFTC account.

Thereafter, $326,705 was transferred from the Edgecumbe account to the O’Rourke account. Of that amount, $245,000 was transferred back to the Bemawell account.

No relevant tax deductions were claimed in the 2006 financial year.

Mr O’Rourke gave evidence that from May 2000, he was the sole director of Bemawell and the sole signatory of its bank accounts. He said that he engaged OTD as Bemawell’s accountant for the 2003 financial year.

Mr O’Rourke gave evidence that he recalled going to the OTD office and meeting Mr Daniel and Mr Agius in mid-March 2003. He said that prior to that meeting Mr Daniel had asked him whether he wanted to save some tax.

He said that to prior to meeting Mr Agius, Mr Daniel had not told him anything about Mr Agius and he could not remember if there had been any discussion about how tax could be reduced.

Mr O’Rourke said that during the meeting, Mr Agius drew a diagram showing how he could send money overseas and reduce his tax. He identified the diagram, which he said that Mr Agius wrote out in his presence.

Mr O’Rourke said that at the time, he did not have a great understanding of the proposal. He stated that “The fact was that another company was to be set up and it would be run that way; insurance policies.” He said that he was told by Mr Agius that the other company would be set up in Vanuatu. He said that by the end of the meeting, he was of the view that Mr Agius was in business with Mr Daniel and was based in Vanuatu.

Mr O’Rourke was referred to the letters “VAN” at the top right of the diagram below that, “NZ”, and the letters “OZ”. He stated that they stood for Vanuatu, New Zealand and Australia, respectively.

Mr O’Rourke was also referred to three circles in the diagram. He identified the letters in the first one, “FC”, as finance company. However, he was unable to recall what the letters “CC” and “IC” in the centre and right circles, respectively, referred to. However, he indicated that “YC” referred to Bemawell.

Mr O’Rourke was referred to the drawing of a stick figure man on the diagram, a circle representing his company and the letters “OZ”. He identified that the words “set up” and “$8,000”, which appeared immediately below that notation, referred to the cost of setting up the new company. He said that the new company was the one that would be involved in sending the money to New Zealand and on to Vanuatu and then to Ireland and back to him. At that stage of his evidence, he was able to identify the circle with the letters “CC” as referring to consulting company.

Mr O’Rourke gave evidence that Mr Agius, referring to the diagram, said in broad terms that money would go to New Zealand, “Edgecumbe Trust perhaps”, and then on to Vanuatu. He said that he thought that Edgecumbe Finance was an Irish company. He said that bills would come from IFTC.

Mr O’Rourke was referred to the reference on the diagram to cash going from his company to the consulting company. He said that he assumed that this referred to money he sent to New Zealand for the insurance premium. He was also referred to the words “loan document” and said “That one would need to be set up to bring the money back”. He identified the money as money sent over to New Zealand “as for the insurance policy”, saying that he was given that information by Mr Agius.

Mr O’Rourke said that his understanding was that the money would come back as a loan to him from a company he thought was called Edgecumbe or Edgeware. He said that the amount that was to come back was the amount he sent, minus around 3%, or a certain figure for charges. He identified a business card which Mr Agius gave him when they met at Five Dock. Mr O’Rourke was referred to a fax to OTD with a handwritten date, 14 March 2003, on which there were certain handwritten notations. He was referred to a circle around a figure of $150,000 and said that it was in his handwriting and represented monies to be sent overseas. He said that the handwritten figure of $50,000 was a reference to the first instalment of that amount.

Mr O’Rourke said that the typed reference in the fax to MAM Holdings Ltd (MAM Holdings) being available was a reference to the company that was set up using the $8,000 payment. He stated that the reference to Centurion was, he thought, a reference to the company where the money was sent to set up that company. However, he said that further money did not go to Cenurion, it went to Lime Street.

Mr O’Rourke said that he was familiar with the name of the company Lime Street, stating that that was where he was told to send the money for the insurance policy in New Zealand. He said that the $50,000 referred to in the fax was part payment for the insurance premium on the policy.

Mr O’Rourke was referred to a certificate of cover for insurance dated 24 March 2003 from Lime Street in favour of Bemawell, said to be a consequential risk policy covering legal and other claims incurred in the course of the company’s business of placing posters in public places. He identified the signature at the foot of the certificate as that of Mr Agius. He said that he did not receive an actual insurance policy. He said that he understood that the reason that the period of insurance was from 1 July 2002 to 30 June 2003, while the certificate of cover was dated 24 March 2003, was to enable the premium to be claimed in the 2003 financial year. He said that he did not make any decision to take out the insurance for the risk referred to in the certificate, but said that that decision was made by Mr Agius.

Following that evidence, Mr O’Rourke identified the reference “IC” in the circle on the diagram as relating to a company, IC Manning Insurance Co. He said that he remembered Mr Agius telling him at the meeting that he (presumably Bemawell) would send money to the insurance company, which would find its way back, through the finance company, to him. He said that Mr Agius told him that the money would go via Vanuatu, then continue to Ireland and back to him. Mr O’Rourke was referred to a letter from IFTC to him dated 28 May 2003 signed by Mr Agius. He explained that the statement in the letter that, “We did not know that funds had been received. Funds $42,000 returned to you”, referred to an inquiry he had made as to why funds had not come back.

Mr O’Rourke was also referred to a letter dated 27 May 2003 from Edgecumbe Finance offering a loan facility of $500,000 to Bemawell. He said that he did not personally receive $500,000 from Edgecumbe Finance, but that monies came back over a few years, although he did not know the total. He said that the monies that were received back went into his bank account and were the same monies that had earlier been sent out to the Bemawell account. He stated that as far as he was concerned, it was not a real loan, recalling that in the discussion he had had with Mr Agius, he was told that this was the way the money would come back.

Mr O’Rourke was asked further questions about the insurance policy. He said that he caused Bemawell to send money overseas as premium payments for the policy, but stated that if Bemawell made a claim, it was not going to get $500,000, if that was what the claim was worth. He said that the amount received would be a small amount of money, stating that he reached this understanding from Mr Agius. He acknowledged that after taking out setup costs, he received the bulk of the funds that Bemawell had transferred as payments for the insurance premium. In those circumstances, he stated that he did not think that he ever paid any genuine premium for the insurance policy and that if he ever had to make a claim, he would not expect to get anything out of it.

Mr O’Rourke was referred to a letter from Edgecumbe Finance to him relating to a request for a drawdown of $42,000 from the loan facility. He stated that he did not think he would ever have to pay back the $42,000. He said that the only time that he sought to contact Edgecumbe Finance was when they made a demand in 2006.

Mr O’Rourke was referred to the chart forming part of the agreed statement of facts which showed $100,027 going from Bemawell to Lime Street on 27 June 2003. He said that this amount was part of the premium payable for the insurance. He was referred to the fact that the chart showed $96,924.46 of this money going to Edgecumbe Finance and thereafter, $96,781 going into his account. He stated that the money was paid from his account into the Bemawell account in connection with Bemawell’s cash flow requirements at the time.

Mr O’Rourke was referred to a letter from IFTC to him dated 21 August 2003 signed by Mr Agius. The letter enclosed a certificate of cover for insurance of the same class as the previous certificate, the policy period being 1 July 2002 to 30 June 2003 and the amount of cover being $1 million. He acknowledged that the main difference was that it covered claims of $1 million rather than $500,000, otherwise, his earlier evidence applied. He said that he did not think that it was odd at the time that he had been paying an insurance premium for a policy period that had already passed, although he said that he did not have any real understanding of the insurance arrangement. He said that as far as he understood, MAM Holdings was just there for the purpose of the policy, although he did not understand what particular purpose it served.

Mr O’Rourke said that he paid the Edgecumbe Finance interest invoices as they came in, until the end. He acknowledged that Bemawell’s income tax return for the year ending 30 June 2003 made a false claim of $100,000 for insurance expenses.

Mr O’Rourke was asked about a certificate of cover for insurance for the policy period 1 July 2003 to 31 December 2003, covering the same risks as the preceding certificates of cover. He identified the signature on the certificate of cover as that of Mr Agius.

Mr O’Rourke stated that that certificate of cover came to him with a letter of 5 January 2004, after the policy period had expired. He did not have any explanation for the reason that this occurred.

Mr O’Rourke was referred to a letter of 6 January 2004 from Edgecumbe Finance referring to his request for a drawdown of $69,600 from his loan facility. He said that he did not make such a request but thought that it was just part of the procedure.

Mr O’Rourke was referred to the MAM Holdings financial statement for the year ending 30 June 2004. It referred to income said to have been derived by that company, in an amount of $250,000 for management fees. He stated that he did not know what those fees were.

Mr O’Rourke gave evidence of a conversation that he had had with Mr Zerafa in November 2006 or March 2007. He said that Mr Zerafa said that he and Mr O’Rourke should not speak inside the office because it might have listening devices, or words to that effect. He said that Mr Zerafa explained that the ATO had taken certain documents and that there would be no claim for overseas payments in that year.

Mr O’Rourke said that Mr Zerafa told him to get rid of whatever documents he had. He said that he did not do that. He was referred to Edgecumbe invoices of 26 March 2007 and stated that he was pretty certain that he did not pay those, but he paid the ones before that time.

Mr O’Rourke was referred to an email to him from Ms Fawcett of PKF Vanuatu stating that the balance of his retention funds was $23,041.40 and to his response of the same day that he did not require the facility any more. He said that at about that time, he endeavoured to contact Mr Agius and spoke to him on the phone. He said that his purpose in contacting Mr Agius was to ascertain how he would receive the retention funds back and said that Mr Agius told him he would have to think of a way to get them to him.

Mr O’Rourke said that he contacted Mr Agius because he had received a letter from Edgecumbe Finance stating that that company was going to take proceedings against him for not paying the interest. He said that Mr Agius told him that it was just a formal letter to make it appear legitimate and not to worry about it and he would think of a way to get the retention money to him. In that context, Mr O’Rourke was referred to a notice of demand from Edgecumbe Finance demanding payment of $72,797.81. He said that as far as he was concerned, he did not owe this money to Edgecumbe Finance.

Mr O’Rourke said that after he spoke to Mr Agius, he did not make any subsequent endeavours to get the money back or endeavour to contact Mr Agius again.

In cross-examination by senior counsel for Mr Agius, Mr O’Rourke acknowledged that it was Mr Daniel who first approached him about a possible tax scheme. He acknowledged that thereafter, he regularly dealt with Mr Daniel in regard to his tax affairs and after Mr Daniel became unwell, he dealt with Mr Zerafa. He agreed that he only saw Mr Agius once between 2003 and 2006. Mr O’Rourke acknowledged that the only face-to-face conversation that he had had with Mr Agius was the one with Mr Daniel in 2003, which was “not too long, half an hour, less perhaps.” He was referred to his record of interview, where he said that Mr Agius was only there for five or 10 minutes and stated “That could be right”. Mr O’Rourke said that he was always positive that Mr Agius drew the diagram. He was referred in that context to his record of interview in which he said that he thought that Mr Agius drew the drawing or “Owen drew the drawing, one of them drew the drawing”. He acknowledged that he could not say now that it was Mr Agius who did the drawing.

It was put to Mr O’Rourke that he had told Mr Agius that he needed insurance for his special needs as a fixer of phantom posters. This was a reference to Bemawell’s business of repairing illegally erected posters in public spaces. Mr O’Rourke denied that he told Mr Agius that he needed such insurance or that he told him that such insurance could not be obtained in Australia. Mr O’Rourke acknowledged, however, that he had tried unsuccessfully to get such insurance in this country.

Mr O’Rourke was asked whether he believed that he had an insurance policy with Lime Street, to which he answered yes and stated that he did not consider that he was paying excessive premiums. In re-examination, Mr O’Rourke was referred to this evidence. He said that he thought that the premiums were just part of the whole deal, “send the money away and have it come back”.

In cross-examination, Mr O’Rourke was referred to his record of interview with the AFP, where he stated that he was involved in the scheme on the advice of Mr Daniel directly. He agreed that Mr Daniel advised him at different times in each year when money should be sent abroad and that he sent the money acting on his instructions. He agreed that whatever be the legality or morality of what occurred, he was guided every inch of the way by Mr Daniel and later Mr Zerafa.

It was put to Mr O’Rourke that there was no meeting between him, Mr Daniel and Mr Agius, he denied this. He also rejected the proposition there was no telephone conversation between him and Mr Agius.

At all relevant times, Mr Daley was a director of HCH. He was described in the agreed statement of facts as having been deregistered as a director on 1 February 2006. This is presumably referring to him resigning from that position. Mr Bennett and Mr Pritchard were appointed directors of HCH on 20 November 2002.

Daley Labour was incorporated on 20 July 2001. Mr Daley was appointed as a director of that company on that day and resigned on 1 February 2006. Mr Pritchard was appointed a director of Daley Labour on 18 September 2006.

Hydro Magda was incorporated on 15 June 2001. Mr Daley was appointed as a director of Hydro Magda at the time of its incorporation. That company was deregistered on 1 October 2003.

OTD was engaged to prepare the unaudited accounts for HCH, Daley Labour and Hydro Magda and to assist in the preparation and lodgement of the HCH income tax returns. OTD was not engaged to prepare or lodge the personal tax returns of Mr Daley, Mr Bennett or Mr Pritchard.

Mr Agius was not involved in the preparation of the audited accounts or the preparation and lodgement of the tax returns.

There were no relevant overseas transfers of funds in the 2000 financial year. However, the accounts recorded an accrued expense of $112,000 as management and consulting fees related to Uniton.

In the 2001 financial year, four transfers of funds were made out of an account operated by HCH with the CBA (the HCH account) into the Uniton account. The first two transactions were in amounts of $112,000 and the last two were in amounts of $56,000.

From the funds the subject of the first transfer, $8,300 was transferred to the IFTC Vanuatu account. The balance, after a small deduction, was transferred to the Edgecumbe account and thereafter back to the HCH account.

The funds the subject of the second and third transfers, after small deductions, were transferred from the Uniton account to the Edgecumbe account and thereafter to the HCH account. The funds the subject of the fourth transfer were also transferred to the Edgecumbe account but were thereafter transferred to a bank account with the CBA in the name of Mr Daley (the Daley account).

In the unaudited accounts for 2001, $560,000 was recorded as management and consulting fees related to Uniton. There was a creditor closing balance of $336,000 recorded as relating to this item, being the amount of $560,000, plus the $112,000 referred to above in par [523], less $336,000, the total transfers from the HCH account into the Uniton account. The $560,000 was claimed as a deductible expense in the 2001 tax return lodged on behalf of HCH.

Mr Daley did not declare the monies he received from the transactions in his income tax return for the 2001 financial year.

In the 2002 financial year, three transfers were made out of the HCH account, the first and third in the sum of $112,026.10 and the second in the sum of $9,471.74. The first transfer was made to the Uniton account. After a small deduction, these funds were transferred to the Edgecumbe account and thereafter, subject to a minor adjustment, to the Daley account. These transactions took place between 30 July 2001 and 2 August 2001.

The second transfer was transferred to the Edgecumbe account. Subject to a minor deduction, these funds were transferred to the Daley account.

The third transfer of $112,026.10 was made into the Uniton account. Of the amount transferred, $109,483.38 was transferred to the Edgecumbe account and thereafter with minor deductions to the Daley account.

In addition to the transfers referred to above, $200,000 was transferred out of an account with the CBA in the name of Hydro Magda (the Hydro Magda account) into a New Zealand account with the ANZ Bank in the name of Southern Hemisphere Insurances Ltd (Southern Hemisphere) (the Southern Hemisphere account). Subsequent transfers out of that account occurred in the 2003 financial year (see below at par [548])

Of the amounts transferred into the Pritchard account, $59,800 was transferred into the Daley account and $40,000 into the HCH account.

From the monies paid into the Daley account as a result of these transactions, a total of $240,370 was paid into the HCH account.

In the HCH accounts for the 2002 financial year, $282,000 was recorded as a payment of “Consultancy Overseas”, which was accrued and related to Uniton. When added to the other creditors’ opening balance, a total of $618,000 was recorded as accrued expenses, which was then reduced by the total of the two transfers into the Uniton account (rounded to the nearest hundred dollars), to reach a figure of $394,000, which was recorded as the closing balance for other creditors.

The $282,000 was claimed as a tax deduction for the year in question.

In the Daley Labour accounts, $73,000 was recorded as management and consulting fees related to Uniton. The figure was claimed as a deductible expense in the Daley Labour 2002 tax return.

In the Hydro Magda unaudited accounts for the 2002 financial year, $200,000 was recorded as management and consulting fees accrued and related to Uniton. In addition, $200,000 was recorded as part of the insurance expenses and was said to relate to Southern Hemisphere. These two amounts were claimed as deductible expenses in the Hydro Magda 2002 income tax return.

Neither Mr Daley nor Mr Pritchard declared as income any of the monies which they received as a result of these transactions.

In the 2003 financial year, eight transfers were made out of the HCH account. The first and second of these were made into the Uniton account. The funds were transferred with minor adjustments into the Edgecumbe account and thereafter into the Daley account.

The third transfer was made at the same time as the transfer of an identical amount out of the Hydro Magda account. Both transfers were made into the Uniton account. As with the first two transfers, these funds were transferred, with minor deductions, into the Edgecumbe account and thereafter into the Daley account.

On 17 April 2003, a further transfer of $28,028 was made out of the Hydro Magda account into the Uniton account.

On 24 April 2003 and 6 May 2003, transfers of $65,528 and $73,028 respectively were made out of the HCH account into the Uniton account. These funds were combined with the $28,028 transferred out of the Hydro Madga account on 17 April 2003 and, subject to a minor deduction, were transferred from the Uniton account to the Edgecumbe account. In addition, on 6 May 2003, $39,508.02 was transferred from the HCH account to the Edgecumbe account. Subject to minor adjustments, an amount representing the proceeds of these three transfers from the HCH account was transferred to the Daley account.

On 17 June 2003, $85,028 was transferred out of the HCH account into the Uniton account. Of this amount, $4,370.38 was transferred to the IFTC account and $84,864.23 was transferred to the Edgecumbe account. No further transfer of these funds appears to have been made.

On 18 June 2003, a further transfer of $75,028 was made out of the HCH account into the Uniton account. This amount, subject to a minor deduction, was transferred directly into the Daley account.

Of the $564,000 paid into the Daley account, $49,780 was transferred into an account with the CBA in the name of Daley Labour (the Daley Labour account), $30,000 into the Hydro Magda account and $456,600 back into the HCH account.

In addition, although no funds were paid into the Pritchard account as a result of these transactions, $40,000 was transferred from the Pritchard account into the HCH account.

The transactions in the 2003 financial year with which I have dealt all involved payments from or into the HCH account. Additional transfers of monies took place that year not involving HCH. One of those transactions involved Southern Hemisphere, to which I have referred above at par [532]. Although the transfer of $200,000 from the Hydro Magda account into the Southern Hemisphere account took place in the 2002 financial year, the subsequent transfers of these funds took place in the 2003 year. From the Southern Hemisphere account, $59,900 was transferred into the Pritchard account and $131,093.31 was transferred into the IFTC account. From the IFTC account, $131,028.31 was transferred into the Edgecumbe account and then, subject to a minor deduction, into the Pritchard account. From the IFTC account, $60,000 was also transferred back to the Southern Hemisphere account.

On 11 September 2002, $39,480.02 was transferred from an account held by Mr Daley with the Newcastle Permanent Building Society into the Edgecumbe account and, subject to minor deductions, into the Daley account.

On 27 September 2002, $59,800 was transferred from the Pritchard account to the Daley account.

On 2 October 2002, $100,026.10 was transferred from the Daley account into the Uniton account and, subject to minor deductions, transferred to the Edgecumbe account and thereafter the Pritchard account.

On 2 December 2002 and 13 December 2002, two transfers totalling $95,552.20 were made from the Hydro Magda account into the Uniton account and, subject to minor deductions, into the Edgecumbe account and thereafter the Pritchard account.

From 27 November 2002 to 29 January 2003, four transfers were made from the Pritchard account. The first and second, totalling $94,403, were transferred into the Hydro Magda account. On 29 January 2003, one transfer of $26,664 was made to an account with the CBA in the name of Mr Bennett (Bennett account) and subsequently transferred to the Hydro Magda account. On the same day, a transfer of $26,664 was made into another account with the CBA in the name of Mr Pritchard (the Pritchard No 2 A/c). On 12 February 2003, $73,028 was transferred out of the Daley Labour account into the Uniton account and subsequently, $72,907.05 was transferred into the Edgecumbe account. Of this amount, $5,827.66 was transferred into the IFTC account and $67,000 into the Pritchard account. Of the latter amount, $66,983 was transferred to the Hydro Magda account.

On 29 May 2003, $26,528 was transferred from the Hydro Magda account to the Uniton account. This amount, subject to a minor deduction, was transferred to the Edgecumbe account. There does not appear to have been any further transfer of these funds in the year in question.

In the unaudited accounts for HCH for the 2003 financial year, $680,500 was recorded as payment of “Consultancy Overseas” which related to Uniton. The total amount of accrued expenses was reduced by the total outgoing transfers from HCH in the year in question. The $680,500 was claimed as a deduction in the tax return lodged on behalf of HCH for the 2003 financial year.

In addition, $43,786 was recorded in the accounts as “Directors Loans Edgecumbe Loan Interest”. The inward payments from the Daley account to HCH were recorded as “Directors Loans – Funds Advanced”.

There were no relevant tax deductions claimed in the tax returns lodged by Daley Labour or Hydro Magda in the year in question.

None of the money which flowed to Mr Daley or Mr Pritchard as a result of these transactions was disclosed as income in the 2003 financial year.

The flow of funds in the 2004 and 2005 financial years can be dealt with together. On 19 August 2003, $75,028 was transferred from the HCH account into the Uniton account. These funds, subject to minor deductions, were transferred into the Edgecumbe account. Thereafter, $75,000 was transferred into the Daley account and, with a small deduction, transferred back into the HCH account.

On 19 December 2003, four transfers were made out of the HCH account. The first, in an amount of $2,941.94, was paid into the IFTC account. The second, in an amount of $24,530.56, was paid into the Edgecumbe account. Of this amount, $22,500 was paid into the Pritchard account which, after a minor deduction, was paid back into the HCH account.

The third transfer, in an amount of $75,923.06 was also paid into the Edgecumbe account. On 8 January 2004, $74,000 of this amount was paid into the Daley account. In January and March 2004, two transfers totalling $76,000 were made from the Daley account into the HCH account.

The fourth transfer, in an amount of $69,988, was transferred into the Uniton account and, after a minor deduction, into the Edgecumbe account. No further transfer of these funds appears to have taken place.

On 7 April 2004, 13 April 2004 and 20 April 2004, three transfers totalling $218,384 were made from the HCH account into the Uniton account. From these transfers, $218,217.12 was paid into the Edgecumbe account which, subject to minor deductions, was transferred to the Pritchard account and then back to the HCH account.

On 24 June 2004 and 29 June 2004, two transfers totalling $150,796 were made out of the HCH account into the Uniton account. Of these transfers, $147,115.51 was transferred to the Edgecumbe account on 19 July 2004. On 18 August 2004, two transfers totalling $150,740 were made from the Edgecumbe account into the Daley account and thereafter, on 19 August 2004, $150,702 was transferred to the HCH account.

In summary, in those years, transfers totalling $617,591.56 were made out of the HCH account. Of these amounts, $299,740 flowed into the Daley account and $240,500 into the Pritchard account. The monies paid from the Daley account into the HCH account totalled $301,683, whilst the money paid from the Pritchard account to the HCH account totalled $240,462.

There were no relevant tax consequences for HCH from these transactions in either the 2004 or 2005 financial years. Further, neither Mr Daley nor Mr Pritchard declared any of the monies received by them as income in their tax returns for the 2004 or 2005 financial years.

Mr Daley agreed that on 27 September 1999, HCH was incorporated and he was appointed as a director. He agreed that Mr Bennett and Mr Pritchard were appointed as directors on 20 November 2002. He said that initially he, Mr Bennett and Mr Pritchard were equal shareholders in the company, but after Mr Britton became involved, their shareholding went down to 25% each. He said that Mr Bennett and Mr Pritchard did not want to be known as shareholders of the company and thus, were not recorded on the ASIC register.

Mr Daley said that Daley Labour was incorporated to supply labour to HCH, a firm, Gardner Perrott (with which Mr Bennett and Mr Pritchard were associated), and anyone else in the “Onesteel Business Precinct”. He said that Hydro Magda was set up to clean up contamination at the BHP site in Newcastle.

Mr Daley said that after the incorporation of HCH, he set up a bank account for that company at the Mayfield branch of the CBA. Mr Daley said that there were regular meetings regarding HCH’s affairs between him, Mr Pritchard, Mr Bennett and Mr Britton.

Mr Daley was asked about a meeting which took place on 4 July 2000 at the OTD Five Dock office. He said that he, Mr Pritchard, Mr Bennett and Mr Britton were at the meeting and Mr Zerafa joined it a short period of time after it commenced. Mr Daley said that the meeting was originally with Mr Daniel and when he went to the meeting, he did not expect to meet anyone other than Mr Daniel.

Mr Daley was referred to an entry in his diary on 4 July 2000, where he wrote “Sydney visit; accountant; Owen T Daniel; 72A New Line, Five Dock, tax on shareholders investments’ and offshore trading, Robert Ages [sic].” He said that the only way that he would have got the name Robert Agius was via a phone call to OTD’s office. Mr Daley was referred to a diary entry that he made on the same day, titled “Offshore trading”. He said that he also got that information from a phone call.

Mr Daley said that Mr Agius was not at the meeting of 4 July. He said that at that meeting, Mr Daniel offered HCH a tax accounting proposition, suggesting that offshore trading was an opportunity for tax minimisation. He said that Mr Daniel outlined the process of tax minimisation by drawing some circles on a piece of paper and taking him and his fellow shareholders through the steps of the minimisation.

Mr Daley said that Mr Daniel outlined that the tax shelter would be used by claiming that a service was provided. He said that Mr Daniel outlined that the service should relate to intellectual property, not to any physical or material substance. He said that Mr Daniel suggested that the “around the world trading scheme” was a scheme where HCH would make a claim for intellectual property services, HCH would receive invoices for those services, and the invoices would be paid from the HCH account. From the HCH account, money would be sent first to a bank account in New Zealand, then to several other countries, then, at some stage during the transaction, money would be taken out at Vanuatu, as a processing fee, and then the money would return to HCH through a company in Ireland called Edgecumbe Finance. He said that the purpose of the claim relating to intellectual property services was that it was very hard to substantiate, as opposed to the payment of an invoice on something material that they would have to produce if it was ever challenged. He said that this was said by Mr Daniel.

Mr Daley said that at the time of the meeting, he was unfamiliar with the nature of the intellectual property that was being spoken about. He stated that at the meeting, it was part of the discussion that a loan would be taken out in his name, as he was the known director of HCH. He said that it was discussed that he would take a loan out for $1 million and the money would return to a bank account of Edgecumbe Finance. He said that, to the best of his recollection, the money would go through Vanuatu and that Robert Agius’ name was mentioned at that stage. He said that Mr Daniel told him and his fellow shareholders that Mr Agius would be in town at a later date and that he would organise a meeting with him.

Mr Daley said that it was pointed out by Mr Daniel that it would be very hard for anyone to “join the circles from outside”, stating that that would be anyone from the ATO or the AFP. He said that Mr Daniel told him and his fellow shareholders that it was a very good tax avoidance scheme and that they should keep their mouths shut. He also recalled Mr Daniel introducing Mr Zerafa as his right-hand man and saying that he would be the point of contact for HCH.

Mr Daley said that following the meeting, he and his fellow directors decided to proceed with the scheme. He said that he informed Mr Daniel of this decision on 5 July 2000. Mr Daley said that after that meeting, he met Mr Daniel on one or two other occasions, but did not know if he actually sat down and had a business meeting with him.

Mr Daley said that the implementation of the scheme probably did not start until August and the first transaction was on 12 or 13 December 2000. He said that prior to the transaction, there was correspondence between him and Mr Zerafa regarding the amounts of money that were to be sent and the details of who to send the money to.

Mr Daley was referred to a facsimile addressed to him from “Kevin/Robert/Owen” of 12 December 2000 stating that funds should be sent to the Uniton account. He identified the person referred to as “Robert” in the fax as Mr Agius, “the Vanuatu connection”. He said that this was explained to him by Mr Daniel as at that time, he had not met Mr Agius.

Mr Daley confirmed that he wrote the figure $112,000 on the facsimile, stating that he wrote it after a discussion with Mr Zerafa. He said that the substance of the discussion was that that was the amount of money that, after a review of the tax figures, HCH could afford to send in around the world trading. He said that he caused the transfer of funds to occur on 13 December 2000 and notified Mr Zerafa of the bank account to which the money was to be returned to. He said that his expectation was that $112,000, less costs or processing fees, would be returned.

Mr Daley was referred to a fax of 15 December 2000, signed by Mr Zerafa, confirming that the money would be sent back on that day. The facsimile asked him to complete a document described as a “Company Application and Trust Account Opening Authority” for a company, Cloak Room Ltd (Cloak Room). Mr Daley said that that was the company where the money was transferred into. He said that he came to understand, some time after signing the document, that that company was located in Vanuatu.

Mr Daley was referred to the flow of funds document contained in the agreed statement of facts, showing $8,300 being paid into the IFTC account on 15 December 2000. He said that he received invoices from that company. He said that he understood that the $8,300 fee was for the management of the around the world trading scheme.

Mr Daley said that subsequent to the payment of $112,000, he received invoices divided into four equal payments relating to intellectual property. He identified four invoices from Uniton, each in an amount of $28,000, as those invoices. He said that the services described on the invoices were never provided by Uniton or by any overseas company.

Mr Daley identified a document from Edgecumbe Finance dated 14 December 2000 addressed to him and described as an Australian Dollar facility loan agreement for $1 million that came to him on 23 January 2001. He said that it had been signed on behalf of Edgecumbe Finance when he received it. He said that he understood that its purpose was to provide a paper trail for money that was coming back into his bank account. He said that as far as he was concerned, it was not a genuine loan, he never received any loan amount from Edgecumbe Finance and the only thing that he got back was the money that was sent overseas, less the consultancy fee or less the other service costs.

Mr Daley was also referred to an undated letter from Edgecumbe Finance stating that the loan had been fully repaid. He said that he received this at the same time as the loan agreement and that if there was ever a problem with the loan, that letter could be submitted and the loan was forgiven. He confirmed that as at the time of receipt of the letter, he had not paid Edgecumbe Finance $1 million plus interest and costs.

Mr Daley was referred to a facsimile from him to Mr Zerafa of 21 February 2001, confirming that $112,000 had been transferred to Uniton and giving the HCH account details. He said that this was sent following a discussion between him and Mr Zerafa confirming that HCH would transfer money to Uniton and that, in the fax, he was confirming the amount to send and the return bank details. He said that before he caused money to be sent overseas, there was a discussion between the managers of HCH and a recommendation was sought from OTD’s offices. He said that in most cases, recommendations would be given by Mr Zerafa.

Mr Daley referred to a fax from him to “Owen Daniel/Kevin Zerafa” of 29 May 2001, in which he gave changed account details for money to be sent back to Australia. The account provided was his personal account with the CBA. He said that the purpose of this was to complete the paper trail and show that the money was returned into a bank account in his name, so that the money could then be loaned to HCH as a loan to the business. He said, in that context, that any money that went out around the world returned to an account in his name after a period of time.

Mr Daley was asked whether he had heard of Moore Stephens. He said that he had heard of the name of that firm from Mr Agius.

Mr Daley said that he was the sole director of Hydro Magda, although the business was run by Mr Pritchard and Mr Bennett. He said that they controlled the environmental clean-up work on the BHP Newcastle site which was to be undertaken by that company.

Mr Daley stated that he recalled that Mr Bennett raised the need for Hydro Magda to have an insurance policy to cover the risks consequent upon the work being done.

Mr Daley described the BHP site as probably one of the most toxic and worst contaminated sites he had ever seen, other than a gas plant and that it could not be contaminated any further than it already was. He said, in that context, that he recalled Mr Bennett saying words to the effect that Hydro Magna needed a “smoke and mirrors” style policy. As the site could not be contaminated any further, the policy was a smoke and mirrors exercise. He explained that “smoke and mirrors” was just a way of saying that the insurance policy was probably a sham.

In that context, Mr Daley said that Mr Bennett asked him to get onto the Vanuatu connection, Mr Agius, and see if he had an insurance company or could create an insurance policy. It was suggested that the premium for the policy could act as an around the world payment as well.

Mr Daley said that he subsequently contacted Mr Zerafa and said that HCH needed an insurance policy to the value of $100 million. He said that the original discussion with Mr Zerafa was only a discussion that HCH needed an insurance policy to cover the clean-up of some hazardous and toxic material, but there were subsequent discussions as the need for the policy approached.

Mr Daley said that a policy was obtained from Southern Hemisphere to cover the environmental clean-up.

Mr Daley was referred to a facsimile from Hydro Magda to Georgie at OTD setting out details of the coverage that the proposed policy was to provide and asking how long it would take Mr Agius to arrange the policy. The facsimile stated that the policy needed to be backdated to 28 February 2002.

Mr Daley then gave evidence that he recalled attending a meeting in August 2001 at OTD’s offices and being introduced to Mr Agius. In that context, he was referred to his diary entry of 14 August 2001, which contained an entry, “Owen/Robert second company work outside OT Daniel invoice SPL”. He said that the second company was Hydro Magda and SPL referred to intellectual property relating to spent pot linings, which would be the reason for the invoices to Hydro Magda.

Mr Daley said that at the meeting he had with Mr Daniel and Mr Agius, Mr Daniel introduced Mr Agius and then left the room. He said that after Mr Daniel left the room, the discussion related to around the world trading. He said that Mr Agius used similar words to what Mr Daniel had earlier said. He said that Mr Agius told him, Mr Pritchard and Mr Bennett that “round the world trading is a good taxation minimisation scheme, it’s used by sending money out round the world and claiming a tax deduction for it and receiving it back through Ireland or Edgecumbe Finance as a loan and taking the loan down in the director’s name.” He said that at the meeting, Mr Agius gave him documentation relating to Moore Stephens, saying that it was a large international company which had offices all over the world.

Mr Daley was referred to a certificate of cover from Southern Hemisphere, the insured being Hydro Magda. The certificate of cover was dated 1 March 2002 and was said to cover the period 1 March 2002 to 28 February 2003. The amount of the premium was said to be $600,000. Mr Daley stated that the signature on the certificate of cover was that of Mr Agius. He said that the policy was the policy obtained for the clean-up of the site.

While premium payable was said to be $600,000, Mr Daley said that only $200,000 was paid, the policy being cancelled after the clean-up contract was completed.

Mr Daley said that he had discussions with Mr Zerafa in which he raised his concern that documents were not in place to cover the overseas payments. He recalled a discussion between the directors about the need to have non-materialistic invoices, as if they were materialistic, it could be substantiated. He said, in that context, that it was Mr Bennett who suggested that spent pot linings be used as the vehicle. He described spent pot linings as a toxic substance that is in abundance throughout the aluminium industry and has to be disposed of but there is no efficient way to do it.

Mr Daley was referred to a letter written by him to the directors of Southern Hemisphere, dated 14 June 2002, stating that Hydro Magda accepted that any claim made on the insurance policy would be subject to the availability of Cloak Room to provide funds to meet the claim. He said that the letter was written after discussions with Mr Zerafa. He said that Mr Zerafa said in the discussions, “You know you can’t claim on the policy”, and the words used in the letter were designed to have the effect that if a claim was made, it would only be to the value of what was left in Cloak Room. He said that at a director’s meeting of 14 June, Mr Bennett suggested that some money be left in the Uniton account to cover anything that should arise out of the work being done at BHP. In answer to questions by the trial judge, Mr Daley confirmed that the policy was a non-existent policy, although Hydro Magda made a payment of $200,000 to Southern Hemisphere.

Mr Daley was then asked a number of questions about Uniton. He identified that Uniton was the company set up to take the premium where the premium “first landed to be later on sent as part of the round the world trading scheme”. He said that he did not initially have an understanding as to why Uniton was involved and he did not understand Uniton to be connected with consultancy services provided to the HCH Group. He said that he did not understand Uniton to be an insurance company.

Mr Daley was asked if he knew of any payments made out of the HCH account to Billbury. He said that some payments were forwarded, not by him, but by others to Billbury in connection with around the world trading out of the Daley Labour account. He said that it was done either by Mr Pritchard or Mr Ian Shute (Mr Shute). Mr Shute provided bookkeeping/accountancy services for the company. He said that the reason the payments were made was for Daley Labour to seek a tax advantage.

Mr Daley said that he had a personal account with the Newcastle Permanent Building Society, which was used on at least two occasions in connection with overseas transfers of money. He said that he was not sure why that occurred.

Mr Daley said that after Mr Bennett and Mr Pritchard left their previous employment, they became directors of HCH and thereafter, the financial affairs and future planning and direction of the business was basically done by them. He said that he was responsible for transactions leading up to the middle of 2002 but thereafter, he was somewhat relieved of banking activities. However, he was aware that in the second half of 2002, overseas payments were still being made.

Mr Daley said that he became concerned about the overseas payments after the events of 11 September 2001. He said that he read that the AFP were looking for large sums of money being sent overseas and he was concerned that HCH would come under the spotlight. He said that he was worried that HCH was involved in something that was illegal.

Mr Daley said that he raised these concerns with Mr Bennett and Mr Pritchard who told him that there were too many people doing it and that it was a recognised system of tax minimisation. He said that he discussed it with Mr Shute, who said on one occasion that he thought that what was being done was outside of the Tax Act and was wrong. He said that that was towards the end of 2002.

Mr Daley said that from the middle of 2003, he was developing extreme concerns about the position he had put himself in and he wanted to get out of the scheme. He said that it got to a stage where he wanted to sell his share capital and he asked Mr Bennett and Mr Pritchard to buy it, but they were reluctant to do so. He said he was going to the tax department in Newcastle and explain to them what happened. He said that he did so but the person in Newcastle said that he should go to the tax office in Sydney and put his case there. He said that he did not do that.

Mr Daley was referred to invoices he received from Edgecumbe Finance, including one dated 30 June 2002 for $39,480.02. He denied that he had ever borrowed money from Edgecumbe Finance and stated that he did not know why Edgecumbe Finance was invoicing him for interest on a loan he did not receive. He said that any payments of interest were made from HCH and were in connection with around the world trading.

Mr Daley acknowledged that when he signed the 2003 tax return for HCH, which claimed total expenses of just over $5.9 million, there were amounts claimed that related to payments that had been made under the around the world trading scheme, the bulk of which had come back to HCH or one of the companies in the group. He said that he did not regard the expenses as legitimate. He confirmed that Daley Labour did not incur any management and consulting fees from overseas suppliers of such services and confirmed that the figure of $186,000 for management and consulting fees in the Daley Labour accounts for the 2003 year and the $73,000 referable to the same expenses in the accounts for the preceding year were not genuine expenses. He said that these claims formed part of the around the world trading scheme.

Mr Daley said that towards the end of 2005, he was charged with the role of closing down the around the world trading scheme. He said that HCH had some outstanding invoices from PKF Vanuatu and some overseas trading that needed to be concluded. He said that he contacted Mr Zerafa and asked how to shut down the scheme and Mr Zerafa said to merge Edgecumbe Finance and Uniton and with the money outstanding and the money in the around the world transaction going out, close the scheme down. This apparently involved setting off monies paid to Uniton against monies said to be owed to Edgecumbe Finance. The mechanism was to assign both Mr Daley or HCH’s debt to Edgecumbe Finance and Uniton’s debt to HCH, to Cloak Room, and then set the two off against each other. Mr Daley identified notes that he said he took of the conversation. The notes were in the following terms:

Mr Daley said that he had a meeting with Mr Agius at Mr Agius’ apartment in Sydney in December 2005 and a meeting with him in the Mayfield area in January 2006. He said that he had been seeking the meetings to close down the around the world trading scheme.

He said that at the meeting at Mr Agius’ apartment, he and Mr Agius talked about closing down the around the world trading, how much was left owing and how much was outstanding. Mr Agius said that he would ring up and confirm what the amount owing was and the figure discussed was something like $129. However, Mr Daley said that after Mr Agius made a phone call, he found that it was a significantly greater amount, around $200,000. Mr Daley said that Mr Agius told him that he would confirm exactly what the amount of money was before a decision was made what to do about it.

Mr Daley said that the second meeting with Mr Agius took place on 10 January 2006 at a pie shop in Mayfield. He said that Mr Agius told him the amount to come back was originally $200,000, but after costs and fees were taken out, it amounted to $192,000. Mr Daley said that he asked Mr Agius what the options were to hang onto the money, because he was having a conflict with the other directors. He said that Mr Agius said that he just started up a Blue Water Superannuation scheme or fund, but Mr Daley said that he wanted the money invested in a blue chip Australian company. Mr Daley said that he asked Mr Agius to transfer the money out of the name of HCH and put it into Blue Water Superannuation in his name. He stated that Mr Agius wrote out a transfer agreement “on a pie bag … and I signed it”. Mr Daley identified the document which he signed stating that it was written out by Mr Agius. He said that the $192,000, as far as he understood it, was still with Mr Agius in a superannuation policy in his name in Vanuatu.

In cross-examination by senior counsel for Mr Agius, Mr Daley acknowledged that he had agreed to join Mr Daniel’s scheme on 4 July 2000, prior to meeting Mr Agius in August 2001. He agreed that the proposal put by Mr Daniel was that HCH would be given an invoice for consulting or management fees and it would be paid. He said that that may be what was put by Mr Daniel, but that was not what happened. However, he agreed that the scheme involved the reception of payment for intellectual knowledge.

Mr Daley agreed that it was he, Mr Bennett, Mr Pritchard and Mr Britton who decided that $112,000 would be claimed as a deduction for the 2000 financial year. He agreed that the money was sent some eight or nine months before he met Mr Agius and that the tax return for the 2000 financial year was lodged before he met him.

Mr Daley agreed that the quantum of payments was decided from time to time by him and his fellow directors. He agreed that by the time he met Mr Agius, in August 2001, HCH had sent $448,000 to New Zealand in five separate transactions and had received $439,300 in return. He agreed that Mr Zerafa and Mr Daniel had prepared and lodged tax returns for the 2000 and 2001 financial years, prior to him meeting Mr Agius.

Mr Daley also agreed that between 13 December 2000 and 19 December 2003, 33 payments were made by HCH, Hydro Magda and Daley Labour and only four invoices were received. He also agreed that the Edgecumbe Finance loan documents arrived eight months before he saw Mr Agius.

Mr Daley was referred to the letter of 2 August 2002, seeking to cancel the Southern Hemisphere insurance policy, and agreed that it was a serious letter intended to effect cancellation of an existing policy. It was suggested to him that the policy was directed to death or injury caused by the presence of pollutants which were already there, but Mr Daley said that the site was already polluted and it could not be polluted any more. He said that the policy had nothing to do with death. However, Mr Daley agreed that under normal circumstances, the policy would be expected to cover death or injury caused by the presence of pollutants. He said that there was a need for a policy for two reasons. First, as part of the tender process by which the contract was obtained and, second, as a vehicle to send money in the around the world trading scheme.

In cross-examination, Mr Daley also agreed that Mr Agius did not provide him with any assurances in relation to the scheme, stating that he was not aware if he asked him about its legitimacy and he did not raise any concerns that he had about it. He was shown four invoices from Uniton to HCH and said that it could be correct that they came from the OTD office.

In cross-examination by senior counsel for Mr Zerafa, Mr Daley said that Mr Daniel was the man who first outlined around what around the world trading was, but it was explained to him that Mr Zerafa would be the point of contact.

Mr Daley was cross-examined on a meeting that he had with Mr Agius and Mr Shute. It was suggested to him that this meeting took place in November 2005. He agreed that he told Mr Agius that he wanted to stop paperwork coming from Edgecumbe Finance, but said that he did not recall Mr Agius saying to him that he could not do the paperwork, “That is going to keep coming in while you have a loan”. He denied that he said “I can’t pay the loan. It’s over a million dollars. I can’t get that sort of money together, even for a short time”. He stated that he did not remember Mr Agius saying that he would find a way of doing it by way of book entry, or that Mr Agius said to him that a deed of assignment could be arranged, assigning the Edgecumbe Finance loan and the money due from Uniton to Cloak Room and then set each off against the other.

It was put to Mr Daley that he was wrong in suggesting that he contacted Mr Zerafa to terminate the arrangements and it was he who gave directions about merging Edgecumbe Finance and Uniton. Mr Daley rejected these propositions. It was also put to him that that information came to him from Mr Agius, at a meeting attended by him and Mr Shute, he denied this. He also rejected the proposition that Mr Zerafa had little to do with the arrangements which were entered into to wind-up the overseas payments.

Mr Daley rejected the proposition that the insurance arrangements with Southern Hemisphere had nothing to do with Mr Zerafa. He was cross-examined about Hydro Magda’s letter to Southern Hemisphere of 14 June 2002 (see par [600] above) and acknowledged that it was a severe limitation on the ability of Hydro Magda to make any claims on the policy. He said that Mr Zerafa pointed out that a claim could not be made on the policy and that he drafted the letter of 14 June 2002.

In re-examination, Mr Daley confirmed that the HCH tax return for the 2001 financial year was lodged after he had met Mr Agius.

Mr Shute was engaged as an accountant/bookkeeper by HCH under a letter of engagement of 19 March 2002. Although the letter of engagement referred to him being employed as an accountant, he explained that he was always going to play a “subservient” role to OTD. He said that his dealings with OTD were exclusively with Mr Zerafa.

Mr Shute said that he became aware of international payments made by HCH, which he discussed with Mr Pritchard, in April 2002. He said that he found it peculiar because there was no paperwork for $448,000 of Uniton payments.

Mr Shute said that Mr Pritchard told him that the payments were part of a tax reduction programme. He said that it was explained to him that the money went from Uniton in New Zealand to Vanuatu to take advantage of the country’s tax haven status and then to a finance company in another country. He said that Mr Pritchard explained that Mr Daley then drewdown on a loan he had with his finance company and that Mr Daley had in place a piece of paper which said that the loan had been forgiven. Mr Shute said that he told Mr Pritchard that he was not prepared to give advice on the matter although he would do the bookkeeping.

Mr Shute said that he was unable to locate any Uniton invoices and was told that OTD had them. He said that as a result, he rang Mr Zerafa and asked him if he had Uniton invoices and Mr Zerafa said that he needed a description from Mr Daley as to what the consulting work was for before he could do the invoices. He said that he informed Mr Daley of this and Mr Daley said that he would talk to Mr Zerafa. Mr Shute said that he did not see any Uniton invoices until they were given to him by the people investigating the scheme.

Mr Shute gave evidence of a subsequent discussion that he had with Mr Pritchard where Mr Pritchard said that the money went to New Zealand and then went around the world. He said that it went around the world and ended up in Edgecumbe Finance, after which it came back to Mr Daley, who on lent the money to the company as a director’s loan. He said that Mr Pritchard told him that Mr Daley took it out of the company and split it up between him, Mr Bennett and Mr Pritchard. He said that Mr Pritchard told him to keep “tight-lipped” about it.

Mr Shute said that he and Mr Daley had a meeting with Mr Zerafa in May 2002, where Mr Zerafa explained that the money went from HCH as a consultancy fee to Uniton in New Zealand and then went from Uniton to Vanuatu and on to Edgecumbe Finance in Ireland and back to Mr Daley by way of a loan drawdown. He said that Mr Zerafa confirmed that it was a personal loan.

Mr Shute stated that he expressed concern to Mr Zerafa that the loan would continue to build up and would have to be repaid. He said that Mr Zerafa told him that Mr Daley had a letter which forgave the loan. Mr Shute said that he asked how that was legal and Mr Zerafa said that it was a loan and the key to it was that, being a loan, Mr Daley paid interest on it.

Mr Shute was asked about his understanding of the Uniton consulting fees and said that initially he thought that they were consulting fees for consulting that was received but that as time went on, he became aware that it was simply a way of changing the profit numbers.

Mr Shute said that Mr Daley told him that Vanuatu formed part of the around the world arrangements and that Cloak Room was a company sitting inside of Vanuatu that was supposed to capture the payments coming in via Uniton and going out via Edgecumbe Finance. He said that Mr Zerafa told him that it was part of the structure.

Mr Shute was shown a letter from Edgecumbe Finance to Mr Daley confirming that the $1 million loan had been fully repaid. He said, somewhat unsurprisingly, that in those circumstances he could see no reason why Mr Daley was paying interest on the loan.

Mr Shute gave evidence about a meeting in November 2005 at OTD’s Burwood office attended by him, Mr Daley, Mr Bennett, Mr Pritchard, Mr Daniel and Mr Zerafa. He said the intention of the meeting was to finalise the “around the world stuff”. He said that Mr Daley was concerned that the paperwork was saying that he still owed $1 million and his wife wanted to see him stop the loan.

Mr Shute said that during the course of the meeting, Mr Daniel asked whether Mr Daley was sure that he wanted to stop the arrangement, suggesting that it could stay dormant as in the future he might want to generate another tax deduction. Mr Shute said that Mr Daley responded “We won’t be doing it again … the whole thing might be illegal”. He said that Mr Daniel replied, “We don’t think that’s the case. We think all of the transactions are legal and there’s no way the tax office will do anything about stopping this”. He said that Mr Zerafa said, “We can’t stop it from here but Robert Agius will be in town within the next fortnight so I’ll set up a meeting with him and you can talk it through with Robert”.

Mr Shute said that there was a subsequent meeting at the OTD office in Burwood. He said that the only participants were him, Mr Daley and Mr Agius. He said that Mr Daley opened the meeting by saying “Robert, what do we need to do to stop the paperwork coming to me from Edgecumbe”. He said that Mr Agius replied, “You will get the paperwork while ever you’ve got a loan with Edgecumbe”. He said that Mr Agius also said, “We’ll have to find a way to repay that loan”, to which Mr Daley responded, “There is no way that I can get my hands on that sort of money”. He said that Mr Agius replied, “we’ll have to find a way to repay the loan through the books”.

Mr Shute then said that Mr Agius explained that it was a matter of issuing shares at a premium in Cloak Room and the share premium account would be used to assign the loan from Edgecumbe Finance to Cloak Room and then Cloak Room would use that to offset the receivable it had from Uniton. He said that Mr Agius said that when he got back to his office, he would draw up a deed of assignment and “send it across to you to sign it and that will be it”. He said that Mr Agius said that Mr Daley still owed him some money for the work he had done. Mr Agius said that the amount due was $6,500, saying that he had not been paid for a long time. He said that Mr Daley then agreed to pay Mr Agius $6,500 in cash.

Mr Shute said that he had no subsequent meetings or dicussions with Mr Agius.

In cross-examination by senior counsel for Mr Agius, Mr Shute acknowledged that the process was that first, the directors would decide upon an amount to claim. He said that this was done without the assistance of Mr Zerafa or Mr Daniel. He agreed that once the amount was decided upon, it was recorded in the books as an accrued expense. He said that in effect, the scheme was a series of bookkeeping entries by the directors of the company and the transfers of funds to match those entries.

In cross-examination, Mr Shute agreed that in May 2002, he went to the OTD office where Mr Zerafa gave his explanation of the scheme, which he understood. He said that he had complete faith in the advice OTD were giving, which led to him to join the scheme. He agreed that Mr Daniel urged Mr Daly, Mr Bennett and Mr Pritchard not to abandon the scheme, whilst Mr Agius gave no such urging or advice but simply tried to explain a way to legally bring the matter to an end.

Mr and Ms Leimroth (collectively, the Leimroths) were each registered as directors of Anscott.

OTD had been engaged since the incorporation of Anscott as the accountants and tax agents for Anscott and the Leimroths. The retainer included the preparation of unaudited accounts and the preparation and lodgement of income tax returns.

Mr Agius was not involved in the preparation of the accounts or in the preparation and lodgement of the tax returns.

In the 2001 financial year, no funds flowed out of any accounts maintained by Anscott or the Leimroths to New Zealand. However, the accounts prepared for Anscott recorded $60,000 as “Billbury Fees” in the management and consultancy ledger. This was claimed as a deduction in the tax return lodged by Anscott in the 2001 financial year.

In the 2002 financial year, three transfers were made out of an account in the name of Anscott with the NAB (the Anscott account) into the Centurion account. The first two of these transfers, amounts of $20,025 and $30,025 respectively, were transferred, with minor deductions, into the Edgecumbe account. Thereafter, after further minor deductions, these funds were transferred into an account in the name of the Leimroths with the Berrima Credit Union (the Leimroth account). The third transfer, an amount of $42,169.30, was made into the Centurion account. Of this amount, $10,179.62 was transferred into the IFTC account and $31,849.42 was transferred into the Edgecumbe account. Of the latter amount, $31,700 was transferred to the Leimroth account.

The payments out of the Anscott account were recorded as payment of accrued management and consulting expenses in respect of which a deduction of $140,000 was claimed in the 2002 financial year.

Neither of the Leimroths declared any part of the monies which flowed to them as income in their 2002 tax returns.

In the 2003 financial year, a transfer of $9,028 was made out of the Anscott account into the Centurion account. Of this amount, $8,977 was transferred back to the Anscott account.

In addition, a transfer of $3,681 was made from the Anscott account into the Edgecumbe account. The money was recorded as a loan from Anscott to a shareholder.

In that year, Anscott claimed $100,000 management and consultancy expenses as a deduction in its 2003 income tax return.

In the 2004 financial year, three transfers totalling $3,635.51 were made from the Anscott account to the IFTC account. One transfer of $7,402.76 was also made out of the Anscott account into the Edgecumbe account. Of this amount, $2,718.67 was paid into the IFTC account and $4,500 was paid into the Leimroth account.

In the 2005 financial year, seven transfers totalling $61,176 were made from the Anscott account into the Centurion account. Of this amount, $110.28 was transferred into the IFTC account and $7,698 was transferred into the Edgecumbe account. This latter amount, with a minor deduction, was subsequently transferred to the Leimroth account. No further transfers of funds out of the Centurion account took place in the 2005 financial year.

In addition, transfers of $544.16 and $2,018.97 were transferred from the Anscott account into the IFTC account.

A further transfer of $7,858.48 was made from the Anscott account into the Edgecumbe account. With minor deductions, this amount was subsequently transferred into the Leimroth account.

Of the transfers out of the HCH accounts, $45,420 was recorded as a payment of accrued expenses whilst $17,154.58 was recorded as purchases and claimed as a deduction in the 2005 financial year as part of the total costs of sales.

In the 2006 financial year, Centurion transferred $52,947.50 into the Edgecumbe account out of the funds it had received from Anscott in the previous year. With minor adjustments, these funds were transferred into the Leimroth account.

In addition, amounts of $8,835.51 and $1,338.42 were transferred from the Anscott account into the Centurion account and the Edgecumbe account respectively.

Ms Leimroth said that she and her husband employed Mr Daniel as their accountant from 1979. She said that Mr Daniel arranged the incorporation of Anscott. She said that ultimately, Anscott carried on the business of Berrima Diesel Service.

Ms Leimroth said that in about 2000, Mr Daniel introduced her and her husband to Mr Zerafa who was going to take over the work that Mr Daniel had been doing for them. She said that she believed that after the introduction, Mr Zerafa started to do their tax work.

Ms Leimroth said that she recalled receiving a phone call in early 2001 from Mr Daniel in which Mr Daniel said that he would like them to come and visit his office as he needed to talk to them. She said that subsequently, there was a meeting between her, her husband, Mr Daniel, Mr Zerafa and Mr Agius. She said that Mr Agius indicated that he had quite a lot of international companies that he worked with and that he was a chartered accountant.

Ms Leimroth said that Mr Agius did not say very much at the meeting, but Mr Daniel led the conversation. She said that Mr Daniel told the Leimroths that there was a tax scheme that would be beneficial to them. She said that she was told that it involved sending some money to an overseas bank account which was to form part of a drawdown loan account. She said that she was told that money would be returned to them minus costs levied on them.

Ms Leimroth said that Mr Zerafa did not say very much at the meeting.

Ms Leimroth was shown an email from Mr Zerafa dated 18 July 2001. The email stated that Ms Leimroth may have received forms and documentation regarding a company Driscoll Investments Ltd, stating that that was the overseas company “we are setting up for you”. The email also stated that it was necessary to start transferring funds to Uniton’s Auckland bank account.

Ms Leimroth said that the only documentation she could remember receiving was the documentation concerning the setting up of the loan with what was called a “letter of comfort”. She was referred to the handwritten note on the email containing the words “1st transfer only” and said that that was her note as she noted that as she was told that the first transfer would go to Uniton but the other transfers may go elsewhere.

In that context, it was pointed out to her that it was an agreed fact that the first transaction to Uniton was redirected internally to Centurion. She said that she recognised that name because it “came [up] a bit later”.

Ms Leimroth was referred to the statement in the email that $20,000 should be sent initially and $9,000 would be retained by Moore Stephens as payment for the set-up of the company. She said that there were no accounts rendered that she was paying for from Uniton.

Ms Leimroth confirmed that she gave Mr Zerafa her and her husband’s personal account details with Berrima District Credit Union Ltd by email dated 1 August 2001.

Ms Leimroth confirmed that she received an email from Mr Zerafa, sent 13 August 2001, advising that Centurion was the “co-ordinate for future telegraphic transfers” and giving details of that company’s bank account with the ANZ Bank in Auckland.

Ms Leimroth was referred to a loan facility agreement from Edgecumbe Finance dated 20 August 2001. She said that although she could not be sure, she thought that she signed it around that time and that the signature purporting to sign on behalf of Edgecumbe Finance was on it at the time that she received it. Ms Leimroth said that she did not obtain a $1 million loan. However, she had the use of the facility and could use it as a loan.

Ms Leimroth said that it was her understanding that when money was sent out, she would receive a somewhat similar amount of money back.

Ms Leimroth identified that the document she described as a letter of comfort was an undated letter from Edgecumbe Finance to her and her husband confirming that the Edgecumbe Finance loan had been fully repaid. She stated that she had not paid or repaid the $1 million.

Ms Leimroth was referred to a transaction whereby money went from Anscott to Centurion and said that that, and like transfers, were made pursuant to arrangements made with Mr Zerafa and Mr Daniel. She said that the amount that was transferred was generally governed by any spare money that there was in the business after the bills were paid. There was no fixed amount.

Ms Leimroth said she recalled inquiring in 2002 about the fees paid to Edgecumbe Finance or Centurion.

Ms Leimroth denied receiving any invoices from either Uniton or Centurion. She said that she received no services from either of those companies other than the transferring of money. She said that her normal practice was to only pay on receipt of an invoice, but what was occurring was not part of what she and her husband were familiar with “on a day-to-day basis which is, … what is involved in a workshop”.

Ms Leimroth said that the financial material that she presented to Mr Zerafa included payments made to Uniton or Centurion. She was asked if she understood that those payments would be claimed as expenses in the Anscott tax return but she said that she was not sure how they would be claimed.

Ms Leimroth was referred to an account from PKF Vanuatu dated 9 October 2003, referring to fees for professional services to Walton Holdings Ltd. She accepted that the document was found at her home. She denied that she had a business address at the address shown on the invoice. She said that she was not aware of whether PKF Vanuatu performed any services relating to Walton Holdings Ltd for her or Anscott.

Ms Leimroth stated that at the original meeting concerning the scheme she asked whether it was legal or illegal. She said that the scheme covered unfamiliar ground to them. She gave evidence that her and her husband were led to believe that it was within the bounds of what was able to be done.

Ms Leimroth was referred to payments made to IFTC in the 2004 financial year. She said that she received the details of those payments from Mr Zerafa. She was referred to a number of transfers in that year, all of less than $10,000, and said that they were in those amounts because she was told by Mr Zerafa that the banks at that time were looking closely at any amounts over $10,000 being sent overseas.

Ms Leimroth was referred to the fact that money was sent back into a joint account held personally by her and her husband. She said that she was asked to give Mr Zerafa the name and number of that personal account, which she provided him, but that she did not give the details of that account to anyone else at OTD. She said that the only other time that she gave those details was right at the end of “this whole mess” to a Ms Kelly Fawcett in the Vanuatu office. She said that she needed to contact Ms Fawcett because the money was taking a lot longer to come back into the Building Society.

Ms Leimroth confirmed in cross-examination by senior counsel for Mr Agius that she had no contact with Mr Agius after the meeting she had referred to. She agreed that she trusted Mr Daniel and followed his advice and, by the early 1980’s, she and her husband regarded Mr Daniel as a friend. She agreed that it was absolutely fair to say that if it had not been for the urging of Mr Daniel, she would have never gone into any tax minimisation arrangement, agreeing that it happened because of her complete trust in Mr Daniel. In that context, she agreed that it would be fair to say that Mr Agius did not make much of an impression except that she and her husband were certainly aware that he was there and had a role in the whole thing.

Ms Leimroth agreed in cross-examination that Mr Zerafa provided her with all of the instructions on what to do regarding the transfer of monies overseas.

Ms Leimroth was referred to the fact that Anscott did not send any money to New Zealand in the year ending 30 June 2001, although $60,000 was recorded in the accounts as Billbury fees. She was referred to the fact that the tax return for that year showed an amount of $78,000 as management and consultancy fees. She said that she did not know how that figure was made up. She agreed that she assumed that Mr Zerafa would deal properly with her accounts.

In cross-examination by counsel for Mr Zerafa, Ms Leimroth denied that she had been included in a tax minimisation scheme prior to the meeting with Mr Daniel, Mr Zerafa and Mr Agius. It was pointed out to her that it was an agreed fact that the first claim for an overseas payment, namely, $60,000 as management and consultancy fees, was made in the tax return for the 2001 financial year. She said that this was done by the accountants.

Ms Leimroth was also referred to the fact that the accounts for Anscott for the 2001 financial year recorded an amount of $265,000 for creditors and borrowings. She agreed that that amount had increased from $205,000 to $265,000 in the 2001 year. However, she stated that she did not know if that increase reflected the $60,000 claimed for overseas commitments. She said that she had no idea to whom the company owed $205,000.

Ms Leimroth was unable to explain increases in the creditor’s balance from 1997 to 2005, except to say that the business had grown.

In re-examination, Ms Leimroth was referred to the heading Billbury fees under the item Other Creditors. It was pointed out to her that the amount in the accounts was $60,000. She said she had never heard of Billbury fees.

Mr Leimroth agreed that he established Anscott in March 1979. He said that he did the hands-on diesel mechanics work for the business conducted by Anscott and his wife did the paperwork for the business.

Mr Leimroth said that he regarded Mr Daniel as a very good accountant, an expert in his field.

Mr Leimroth said that he recalled being introduced to Mr Zerafa in late 2000 and from that time, Mr Zerafa undertook the work that Mr Daniel had previously undertaken for him, his wife and Anscott.

Mr Leimroth recalled a meeting at OTD’s office in the first half of 2001. He said that he received a call from Mr Daniel to come into the office. He said that they had some taxation proposal and he went and sat in front of “three chartered accountants, experts in the field”. He identified them as Mr Daniel, Mr Zerafa and Mr Agius.

Mr Leimroth said that he could not recall any details of what was said at the meeting and that all he knew was that he and his wife were told about a system which would reduce their tax and that they had all the paperwork for him and his wife to go through and they explained it to them. He recalled that Mr Agius was introduced as a chartered accountant and a tax expert in reducing their taxes. He recalled being told that Mr Agius was from Vanuatu.

All Mr Leimroth could recall of the meeting was that he was told that money would be paid through the bank to be deposited into an account in Vanuatu and money would come back minus a deduction. He said that there was no real loan because “I didn’t borrow money off them”.

Mr Leimroth said that he recalled that he and his wife received some paperwork which spelt out the way the money was to be paid and how it would come back and that if the money was not sent at the correct time, there would be a charge for a late deposit. He identified the document to which he was referring as the loan facility agreement from Edgecumbe Finance. He said that he signed the document at the OTD office at Five Dock. Mr Leimroth said that he was told by Mr Daniel that the transaction was legal. He said that he recalled receiving a letter of comfort and he understood that it meant that “at the end of the time if we send this back to Owen it means we owed nothing. It was all cleared up”.

In cross-examination by senior counsel for Mr Agius, Mr Leimroth agreed that he had not spoken or had any communication with Mr Agius since the meeting he had with him. He was asked whether he entered into the proposal because of his complete trust in Mr Daniel and replied “Yeh of course, into Owen Daniel and Kevin Zerafa and of course Robert Agius. There was [sic] three chartered accountants. I tried to trust them completely”. He agreed that Mr Daniel made the arrangements sound normal and attractive.

Ms Brooks gave evidence that she was employed at OTD until November 2006. She said that she was admitted as a certified practising accountant in 2005.

Ms Brooks agreed that from time to time, she was instructed by Mr Zerafa to prepare financial statements for his clients. She agreed that before the accounts were finalised, he had a practise of reviewing the profit and loss statements and handwriting additional figures. She agreed that those figures had no supporting documentation and did not result from consultation with the client. She said that the additional expenses would then be entered by journal entries into the accounts by debiting the expenses and crediting the directors’ loan account.

Ms Kalache gave evidence that she was employed by OTD as a personal assistant to Ms Jandagi and Mr Zerafa from September 2004. She agreed that at that time, she worked closely with Mr Zerafa. She agreed that Mr Zerafa, from time to time, made handwritten adjustments to expenses on clients’ financial accounts without any instructions and without supporting documents. She said that after the accounts were altered, accounts would be finalised and the tax return would be completed based on the altered figures.

Ms Peril gave evidence that she was engaged as Mr Daniel’s personal assistant from mid-February 1999. She said that she came to know Mr Agius as he came to the OTD office for meetings with Mr Daniel and at other times with Mr Zerafa, Ms Jandagi and Ms Abibadra. She said that this happened about four or five times a year and the meetings were always first with Mr Daniel and then he would be passed on to the others.

Ms Peril said that she recalled Mr Agius and Mr Daniel seeing OTD clients together.

Ms Peril was asked about an email from Mr Agius to her dated 14 March 2003. The email concerned the transactions with Mr O’Rourke and Bemawell. She said that she assumed the email came to her because persons dealing with the firm knew she would convey the content of the email to Mr Daniel.

The email dealt with what were described as setup costs and contained the comment:

Ms Peril said that, on the instructions of Mr Daniel, she replied, “Thanks Rob, Owen says he fully understands”.

Mr Agius did not give evidence. However, each of Mr Zerafa, Ms Abibadra and Ms Jandagi gave evidence and were extensively cross-examined.

Mr Zerafa gave evidence that in about mid to late 1997, when he started preparing financial accounts under the guidance of Mr Daniel, he had seen references to payments overseas for which he had no details and did not know what they related to. He said that he questioned Mr Daniel, who told him to code them to management fees.

Mr Zerafa said that in about mid-1998, Mr Daniel told him that there was an arrangement that was set up by the Moore Stephens accounting firm whereby clients would make certain payments overseas. These payments would then be sent to various companies around the world, including Ireland, and would return to clients as loans from a loan company. He said that Mr Daniel always explained to him that the reason that he thought it was legal was because he had a client who was audited specifically on these arrangements and had gone through the audit. He had identified the client as John Fraser Pty Ltd.

Mr Zerafa said that there were multiple circumstances in which clients of OTD came to be involved in the scheme. He gave as an example circumstances in which he was asked to prepare a set of accounts for a client. He said that those preliminary accounts would be taken to Mr Daniel for review and finalisation. Mr Daniel would then call in the client to talk about these preliminary accounts and, at those meetings, would introduce or suggest the arrangements to the client.

Mr Zerafa said that he was aware that there were entities in Vanuatu which formed part of the scheme.

Mr Zerafa said that in 2004, when him and Ms Jandagi started to take more control of the firm, he still did not really understand how the structure worked, so he decided it would be best for the firm not to involve any future clients in the scheme. He said that Ms Jandagi and Ms Abibadra agreed that he should approach Mr Daniel about the matter and suggested that no further clients be recommended or offered the scheme. He said that he told Mr Daniel of his concerns, presented him with an ATO brochure and expressed concerns with certain views expressed by the ATO in the brochure. He said that Mr Daniel was not happy with his view but from 2004 he could not recall any clients being introduced to the scheme.

Mr Zerafa said that when a client indicated that they wanted to stop their association with the scheme, he told them to stop making claims for overseas payments. He told them they would need to make payments for any amounts that were accrued in their accounts to clear them from their accounts, but at that point, he did not really know what else to do to cease the scheme further.

Mr Zerafa said that over time, he became aware of Mr Robert Agius in Vanuatu. He said that when Mr Daniel first explained the scheme to him in a little more detail, he mentioned that the scheme was run by Moore Stephens Chartered Accountants and his contact was Mr Agius.

Mr Zerafa said that he recalled meeting Mr Agius for the first time in about mid-1998. He said that “Often when we [the OTD accountants] found out when Robert [Mr Agius] was going to be in the office, Owen [Mr Daniel] would ask to keep a list of clients that would want to see him, so we were able to contact them when we actually found the date that he was going to be in Sydney”. He was shown some handwriting on an email chain dated 7 October 2004 and identified the first entry as Ms McKenna. He said that he recalled that at about that time, Ms McKenna sent him a request to see Mr Agius. He also identified the words “Tony Hili” and “Phil Waller” in his handwriting on the email chain.

Mr Zerafa said that generally they would keep a list of clients who wanted to see Mr Agius. He said when “we did find out that there was a day that he was going to be in Sydney one of the secretaries would contact these clients … and ask them if they wanted to make an appointment on that particular day”. He said that the names were put on the list either as a result of clients themselves requesting to see Mr Agius or as a result of Mr Daniel requesting that clients should see Mr Agius. He said that at meetings with Mr Agius, his role was to go in with the file and take notes of what was said.

Mr Zerafa said that he understood that taxpayers were claiming the benefit of the payment of management and consultancy expenses. He said that there were a couple of companies that he became familiar with, one of them being Billbury and the other Uniton. He said that he did not question the tax justification because he had received multiple assurances from Mr Daniel that the scheme was legal. He said that the structure itself “was put in place by a firm of accountants who were much more superior than me or the firm I was working for at the time so I never really questioned the … tax justification”. He did not specifically identify the firm to which he was referring.

Mr Zerafa said that in 2001, it was his understanding that funds were initially sent to New Zealand. He said that from New Zealand, the funds would go to Vanuatu, “there were companies in Ireland, companies in England, before returning to the clients’ accounts here in Australia”. He said that as far as he was concerned, there was a loan agreement that had been put in place and funds were coming back in accordance with that loan agreement. He said that he never questioned the tax consequences.

In relation to the loan agreements, Mr Zerafa said that he was told that letters of forgiveness were given to the client mainly for estate planning purposes, “where these amounts or these loan amounts or the loan forgiveness letter should be kept with their will”.

Mr Zerafa said that it would have been around 2002 that he became aware of the use of insurance companies in the scheme. He said that he saw an insurance policy form that he believed was from Hydro-Magda. He said that he discussed it with Mr Daniel and Mr Daniel explained to him how PKF Vanuatu had incorporated some insurance companies which were registered insurance companies in Vanuatu. He said that Mr Daniel told him that clients were able to obtain insurance policies through these companies.

Mr Zerafa said that he did not create any Billbury or Uniton invoices. He said that the first time that he saw either of those invoices was when the ATO began their audit activity.

Mr Zerafa said that he did not create any loan facilities.

Mr Zerafa said that he only had limited involvement in the operations of the Wallers and ASS. He said that he gave some tax advice regarding capital gains tax when the Wallers were looking at selling their business.

Mr Zerafa said that he did not recall attending a pre-ATO audit meeting with the Wallers. He denied that, at a pre-audit meeting on the evening of 11 April 2005, some coaching had taken place and that he did most of the speaking.

Mr Zerafa was referred to a letter dated 12 September 2001 from OTD to the Wallers enclosing a statement of interest payable to Uniton which was signed by him. He described the letter as part of a generic letter that was sent with multiple Uniton documents. He said that the letter would be sent to each client that had any dealings with Uniton.

In cross-examination, Mr Zerafa said that he was familiar with the fact that ASS and the Wallers had been involved in the scheme. He denied that he attended a pre-tax audit meeting on 11 April 2005 and took a leading role in advising the Wallers about what to expect to happen at the ATO audit meeting. He denied that at that meeting, he said “Be prepared for a good cop, bad cop … just don’t panic”. He also denied that he told P Waller that the last thing he should say was that he met Mr Agius in the OTD office.

Mr Zerafa said that he had little or no involvement with the day-to-day operations in terms of the accounting or tax of GBM. He said that he was not involved in seeking to get the loan from Edgecumbe Finance off the books of GBM.

Mr Zerafa was referred to an email of 23 September 2003, referred to by Ms Southcombe in her evidence (see par [178] above) written by Mr Agius to Ms Southcombe concerning the return of money paid by GBM in connection with the scheme. The email contained the following remarks:

Mr Zerafa said that he recalled the phone call referred to in the email. He said that he recalled receiving a phone call from Mr Agius asking about the deposit of funds into the OTD Trust account. He said that he told Mr Agius “we wouldn’t accept any funds being deposited into our trust account”.

In cross-examination, Mr Zerafa gave evidence that he knew that GBM was involved in the scheme. He said that he had seen documents and invoices from IFTC and other scheme related companies. Mr Zerafa said that he had heard of Hamilton Holdings and understood that it was part of the scheme and was located in Vanuatu. He said that he understood that there was an overseas loan connected in some manner with the participation of GBM in the scheme.

Mr Zerafa said that he did not have any recollection of the Southcombes trying to get themselves and their company out of the scheme.

Mr Zerafa said that he was asked to attend a meeting with Mr Daniel and Ms McKenna in relation to finalising her 1999 accounts. He said that at that meeting, Mr Daniel had explained the process to Ms McKenna, “pitched the scheme to her” and she had agreed to enter into it. Mr Zerafa said that he was then asked to provide certain details to the officers of Moore Stephens in Vanuatu.

Mr Zerafa subsequently gave evidence that he believed that the meeting was in relation to the 1998 tax returns. He said that when he entered the meeting, “Owen had said to me that he had explained to Ms McKenna the operation of the scheme”. He said that he saw the diagram that Mr Daniel had drawn for Ms McKenna, which “looked like other diagrams we had previously seen”. He identified the diagram that Ms McKenna said was drawn at the meeting (see par [298] above) and said “that looks like the diagram that Mr Owen Daniel drew at the meeting with Ms McKenna”.

Mr Zerafa was shown the email to Ms McKenna dated 21 July 1999 (see par [309] above) and said that the figures contained in that email were advised by Mr Daniel.

Mr Zerafa was shown a preliminary income and expense statement for Tara for the year ending 30 June 1998. He said that those preliminary accounts would be taken to Mr Daniel before tax returns and accounts were finalised. He said that Mr Daniel “would give us notes as to what adjustments, changes that need to be made to the accounts before they finished”. He said that in most instances, those notes and adjustments would be recorded on those preliminary accounts. He identified the handwriting on the document as his.

Mr Zerafa was then shown a document which was described as a final income and expense statement for the year ending 30 June 1998 which contained management and consulting fees of $40,000, which had not been shown on the preliminary document. He said that the document was a revision of the previous accounts and the figures were advised by Mr Daniel. He said that the management fees included in the 1999 year were included in a similar fashion, with Mr Daniel advising of the amount to be included.

Mr Zerafa said that Mr Daniel did not explain to him how he reached the figure that was ultimately recorded in the income and expense statement.

Mr Zerafa was referred to the fax written by him to Mr Agius dated 9 July 1999, to which I have referred in par [305] above. He said that the facsimile stemmed from instructions given by Mr Daniel to set up Ms McKenna in the scheme. He said that it was sent to the attention of Mr Agius because he was the person he knew at PKF Vanuatu or Moore Stephens. He said that the document which accompanied this facsimile contained details of what should appear on invoices issued to the new company. He said that he obtained that information from Mr Daniel, who told him it was provided by Ms McKenna.

In relation to the tax audit of Ms McKenna and her company, Mr Zerafa denied that he had created any invoices in the name of Billbury, which were supplied to the auditor. He was referred to the consulting agreements which were sent to Mr Dalby in connection with the audit and said that Mr Daniel gave them to him.

Mr Zerafa was referred to evidence given by Ms McKenna that she met Mr Agius in 2005 after he (Mr Zerafa) had told her that Mr Agius would be able to assist with the audits and explain the tax matters. He agreed that something of that nature occurred as Ms McKenna wanted some additional advice about the scheme. He said that he could not assist her because he was not familiar with the intricacies and details of the scheme and that, after he explained that to Ms McKenna, she emailed him asking him to organise a meeting with Mr Agius.

Mr Zerafa said that he was present at the meeting with Mr Agius and Mr Daniel. He said that the meeting opened with a discussion about outstanding fees that Ms McKenna was said to owe IFTC and that that was all he could recall being discussed. He said that tax issues were not raised with Mr Agius.

Mr Zerafa said that prior to the meeting, he had discussed with Mr Daniel the matters that he was unable to assist Ms McKenna with. Mr Daniel told him that it was necessary to refer to PKF Vanuatu to have those matters attended to.

In cross-examination, Mr Zerafa said that he did not understand what happened once the funds left Tara in Australia. He said that he had an honest belief that it would be properly done because the structure had been put in place by Moore Stephens, repeating that Mr Daniel had told him that it had been done for many years and he believed it was legal. It was put to Mr Zerafa that he was present from the start of the meeting when Ms McKenna was first introduced to the scheme. He denied this. In particular, he denied being in the room when the diagram was drawn or being there when Mr Daniel assured Ms McKenna that it was clearly legal. He denied that he assured Ms McKenna that the firm had clients who were using the scheme and that they had been audited by the ATO. He said that he did not know a Lebanese client who was audited or involved in the scheme.

Mr Zerafa said that he did not recall it being said in his presence that the scheme revolved around a loan that had to be taken out and that the loan could be taken from a company in Ireland. It was suggested to him that Ms McKenna never went in and said that she knew anyone in the scheme and asked to be put into it, but rather that at a pre-arranged meeting, Mr Daniel pitched the scheme to her.

In cross-examination, Mr Zerafa was asked the reason he sent the last annual return of Tara to Mr Agius with his facsimile of 9 July 1999. He said that it was because Mr Daniel explained to him that it needed to be sent to enable Mr Agius to set up the scheme. He said that he assumed that Mr Agius needed to be provided with details of what should appear on invoices issued by the new company to enable him to draw up invoices. He rejected the proposition that Ms McKenna did not ask him to call the new company, Network Industries, and that he was the one who came up with the name Capel Holdings.

Mr Zerafa also rejected the suggestion that he showed Ms McKenna the Edgecumbe Finance loan document and told her that the funding could be returned to her. He said that this would have been explained at the initial meeting with Mr Daniel. He agreed that the loan document came from Mr Agius to OTD but denied that he showed it to Ms McKenna.

In cross-examination, Mr Zerafa was also referred to the email he forwarded to Ms McKenna on 21 July 1999 (see par [309] above). He said that he knew that there was a direct connection between the sending of the funds by Tara and Mr Agius, stating that Mr Agius and his firm PKF Vanuatu put the structure in place and the payments related to the structure.

Mr Zerafa agreed that the effect of the scheme was to write-off what would otherwise have been the taxable profit of Tara to either a very low figure or a tax refund. He agreed that that was the precise object of the scheme.

Mr Zerafa was asked why he asked in his fax what details should appear on the invoices issued by the new company. He said that he believed that Mr Daniel had given him instructions or an attachment to send with the fax. He said that the attachment contained details of the invoices. He said that he read the facsimile as telling Mr Agius that details of what should appear on invoices issued by the new company would be sent with the fax. He agreed that the invoices were part of the scheme. He said that he obtained that understanding when Mr Daniel first explained the scheme to him.

Mr Zerafa was cross-examined about the tax audit meeting with Ms McKenna which he attended. He agreed that Ms McKenna’s statement that she had always dealt with Mr Agius was untrue. He agreed that Mr Daniel was there at the time that Ms McKenna made that statement and that neither he nor Mr Daniel did anything to correct it.

Mr Zerafa said that he had little involvement with Mr O’Rourke or Bemawell until Mr Daniel’s death. He said that up to that time, Mr Daniel dealt directly with Mr O’Rourke. Mr Zerafa indicated that there was a point at which Mr O’Rourke indicated that he no longer wished to be part of the arrangements. He said that he advised Mr O’Rourke to contact PKF Vanuatu. He said that he did this because he had no knowledge of how to extricate a client from the scheme. Mr Zerafa gave evidence that Mr O’Rourke did not involve him in the progress of his discussions with representatives of PKF Vanuatu.

Mr Zerafa was asked about the meeting referred to by Mr O’Rourke at which Mr O’Rourke was told of the visit by the AFP to the offices of OTD. He said that, as with all other clients, “we took the opportunity to explain to Mr O’Rourke that OTD had been visited by the AFP and their files seized from our office”. He said that he suggested to Mr O’Rourke that they go outside to have a cup of coffee to discuss the matter. Mr Zerafa said that he did not specifically say that he thought that there were listening devices, but he felt uncomfortable speaking in the office about those matters for a number of reasons. First, he said that the offices were not soundproof and second, the fact that the AFP stayed overnight in the office, without any representative from OTD being present, made him feel very uneasy.

Mr Zerafa denied that he said to Mr O’Rourke that he should get rid of whatever documents he had. He said that he told Mr O’Rourke that he should gather his documents together and seek legal advice. He said that this was the same advice he gave to other clients.

In cross-examination, Mr Zerafa said that he first met Mr O’Rourke sometime after December 2003. He said that he became aware that Bemawell and Mr O’Rourke had gone into the overseas scheme when he saw references to overseas payments.

Mr Zerafa said that he recalled an occasion when Mr O’Rourke came to the office and gave him (Mr Zerafa) paperwork concerning tax matters relating to Bemawell and himself. He denied saying to Mr O’Rourke that they should not speak inside the office because there may be listening devices. Rather, he said that he invited Mr O’Rourke outside for a coffee to have a discussion.

In cross-examination, Mr Zerafa said that he remembered telling Mr O’Rourke that the AFP had taken certain documents. He agreed that he told Mr O’Rourke that no claims would be made in relation to overseas payments for that year when the returns were made. Subsequently, he said that he did not think that he said that at the meeting and denied that he said that there were not going to be claims for deductions in relation to overseas payments for that year. He also denied telling Mr O’Rourke that he should get rid of whatever documents he had relating to overseas payments. However, he agreed that for the year in question, there were no claims made by Bemawell for deductions in respect of overseas payments.

Mr Zerafa said that when the Leimroths were introduced to the scheme by Mr Daniel, Mr Daniel had advised him that they were taking part in the scheme. Mr Zerafa was referred to his email to Ms Leimroth of 18 July 2001 (see par [664] above). He said that the email was produced at the time or around the time that the Leimroths were introduced to the scheme by Mr Daniel. He said that when Mr Daniel advised him that they would be taking part, Mr Daniel gave an instruction to send the details in the email to Ms Leimroth with further details of how much to pay and where to pay it. He said that he did not play any part in choosing between Uniton, Billbury or anybody else for payments to be made and did not understand why, in the case of the Leimroths, it was Uniton and not Billbury.

Mr Zerafa was referred to the transfers made by Ms Leimroth in the 2004 financial year (see par [679] above). Contrary to the evidence of Ms Leimroth, he denied that he gave advice that if she sent money in amounts of less than $10,000, reporting risks would be avoided. He stated that he did not give her advice about the amount that was to be paid in any particular year.

Mr Zerafa said that the first time he met the Leimroths was around 1998, when he was asked to prepare accounts for Anscott. He said that Mr Daniel had mentioned to him that they were going to enter the scheme. However, he said that he did not recall attending a meeting with Mr Agius and the Leimroths at the OTD office.

Mr Zerafa was cross-examined on the email sent by him to Ms Leimroth on 18 July 2001 (see par [664] above). The email requested Mr Leimroth to send $20,000 initially and $9,000 would be retained by Moore Stephens as payment for the setup of the company. He said that the money was to be returned via a loan. However, he acknowledged that this was not said in the email but was rather what he understood. He was asked about the statement in the email “Please be sure to state your reference number 7062 on all correspondence including the TT”. He said that those were the details given to him by Mr Daniel to have the scheme set up. He said that he understood that there was a structure and that Mr Daniel explained to him that payments were to be made to an overseas entity. He said that he was not aware of how the scheme worked overseas.

Mr Zerafa was also referred to a fax sent by him to Ms Leimroth on 7 September 2001, in which he gave her bank account details relating to all future payments for telegraphic transfers. He agreed that that was in respect of funds connected with the overseas scheme and that the monies were to come back to the Leimroths’ personal account. He said, however, that once the structure was set up, clients generally took carriage of making transfers.

Mr Zerafa was referred to the letter of comfort given to Ms Leimroth (see par [672] above) and said that he understood and was told by Mr Daniel that it related in part to their estate planning and that the document was for an estate planning purpose.

Mr Zerafa was referred to documents in which Ms Leimroth advised him that Anscott was making transfers of under $10,000. He denied that he advised her to do this to avoid the transactions being reported by banks to AUSTRAC.

Mr Zerafa said that his involvement in the scheme, so far as it concerned HCH, was through assisting in procedural matters on which Mr Daniel gave him instructions. He said that he was initially introduced to Mr Daley in a phone conference in November or December 2000 as the person who would be tasked with assisting with HCH’s needs. He said that Mr Daniel had informed him that HCH and Mr Daley would be participating in the scheme.

Mr Zerafa said that in the phone conference, Mr Daniel had requested that there be an initial payment totalling $112,000.

Mr Zerafa said that he met Mr Shute sometime during the 2002 financial year. He said that Mr Shute asked him about some overseas payments and he explained to Mr Shute that the payments were part of an overseas structure by which the company would make payments and claim tax deductions. He said that not much more detail than that was given and he did not recall discussing invoices with Mr Shute.

Mr Zerafa said that at a later time, Mr Daley saw him about leaving HCH and that he gave Mr Daley some advice. He said that Mr Daley disclosed to him that he was having some issues with his partners, although he did not disclose what the actual issues were. He said that later on, Mr Daley and Mr Shute asked him about the scheme and he referred the matter to Mr Daniel. He said that there was no meeting with Mr Daniel, at which he was present, concerning HCH exiting from the scheme.

Mr Zerafa was referred to the fax dated 12 December 2000 to Mr Daley from Kevin/Robert/Owen, to which I have referred in pars [578] and [579] above. He said that the fax was sent after the telephone conference with Mr Daley, which took place in Mr Daniel’s office. He said that Mr Agius and Mr Daniel were present with him during that conference. He said that in the conference, Mr Daniel explained to Mr Daley that he needed to transfer some funds to an overseas company and that OTD would send him details about the transfer. He said that he did not recall Mr Agius saying anything during the conference. He said that he did not know the basis on which the amount of $112,000 was settled on as the amount to be transferred.

In relation to the insurance purportedly taken out with Southern Hemisphere, Mr Zerafa said that Mr Daniel advised that Hydro-Magna would be taking out an insurance policy. He said that the arrangement was that the insurer was an overseas insurer and payments would be made to it. He said that Mr Daley would then have an opportunity to draw on his loan facility to borrow those funds. He said that he was aware of payments being made in accordance with the arrangement but he did not assist in making those payments.

Mr Zerafa was referred to the letter of 14 June 2002 written to Mr Daley by the directors of Southern Hemisphere imposing limitations on the amounts which could be claimed under the policy (see par [600] above). He denied having any part in drafting or preparing that letter and said that he would not have understood the matters to which the letter was referring.

Mr Zerafa said that he recalled a Vanuatu company called Cloak Room, associated with HCH, but said that he did not know its functions. He said that he did not have any understanding that there was a limitation on the cover provided by the policy.

Mr Zerafa was referred to the letter from Edgecumbe Finance to Mr Daley purporting to forgive the $1 million loan. He said that the letter was given to him by Mr Daniel, who asked him to forward it to Mr Daley. He said that Mr Daniel explained that the letter was to deal with estate planning issues. He said that it did not give him any concern because he had often seen loans being forgiven.

Mr Zerafa said that apart from the accounting aspects of Daley Labour, he did not have any recollection of taking any steps to facilitate the participation of that company in the scheme.

Mr Zerafa was referred to the evidence of Mr Shute that he rang Mr Zerafa to ask if he had any Uniton invoices (see par [628] above). He said that he recalled such a conversation and that he said that he did not have invoices. He denied that he said anything about procuring invoices, stating that it was not his function to do so.

Mr Zerafa agreed with the evidence of Mr Shute that at a meeting between him, Mr Shute and Mr Daley in May 2001, he gave assurances as to its legality. He agreed that he told Mr Shute that there were lots of people doing the scheme and that the ATO would not close it down. He said that the basis for saying this was that that was what was explained to him by Mr Daniel.

Mr Zerafa was asked about the meeting between Mr Daley, Mr Shute, Mr Bennett and Mr Pritchard and him and Mr Daniel on 24 November 2005. He said that his recollection was that “all of the partners of Hunter Civil & Hire had come into our [OTD’s] Burwood office and had met with Owen [Mr Daniel] and myself and discussed them wanting to close up, close up the scheme”. He said that Mr Daniel discussed the matter with them and said that they would need to speak to Mr Agius. He said that Mr Daniel also said that the structure could remain in place without them having to use it.

Mr Zerafa said that he believed that there was a subsequent meeting in the OTD office. He agreed with the evidence of Mr Shute that on 30 November 2005, there was a meeting between him, Mr Shute, Mr Daley and Mr Agius. He said that he did not have any involvement in making specific proposals as to how HCH would be able to extricate itself from the scheme. He denied that he gave Mr Daley a direction to merge Edgecumbe Finance and Uniton in order to close down the scheme. He said that that was not within his knowledge. He was referred to the notes which Mr Daley said that he took of the conversation, but denied that he gave the advice referred to in the notes. He said that at that particular time, he did not know anything about a loan from Cloak Room to Edgecumbe.

In cross-examination, Mr Zerafa was asked about the facsimile of 12 December 2000 to Mr Daley from “Kevin/Robert/Owen”, to which I have referred in par [578] above. He said that before the fax was sent, he recalled that there was a telephone conference between Mr Daley and Mr Agius and Mr Daniel. He said that he was called into the telephone conference and Mr Daniel discussed with Mr Daley transfers to Uniton and said that OTD would fax Mr Daley the account co-ordinates that the funds were to be sent to. He said that as all three of him, Mr Agius and Mr Daley were part of that phone conference, he put all three names on the fax. He said that both he and Mr Agius were present at the phone conference when Mr Daley was told the amount of $112,000. He said that he had no doubt that Mr Agius heard what Mr Daley was told.

Mr Zerafa said that he did not have any further discussions with Mr Daniel or Mr Agius at the conclusion of the telephone conference. He said that Mr Daniel gave him the necessary instructions to send a fax with those details. Mr Zerafa said that he could not recall if Mr Daniel told Mr Daley in the conversation that the funds would have to be sent to Uniton.

Mr Zerafa said that after the facsimile, there were times when Mr Daley would contact him, advising that he had made overseas payments. Initially, he used to tell Mr Daniel, but after a while, he just placed the facsimiles in the client’s file.

Mr Zerafa said that he did not see any invoices in relation to the scheme for HCH. He said that he knew that Cloak Room existed and was a company associated with Mr Daley.

Mr Zerafa was cross-examined about the meeting between him, Mr Daley and Mr Shute, to which I have referred in pars [630] and [631] above. He said that the meeting occurred in mid to late 2002. He agreed that Mr Shute made known to him that he needed to understand what was going on so that he could do the bookkeeping correctly. He agreed that in response, he pulled a sheet of paper off a foolscap pad and positioned it in the middle of the table so that he could draw on it and explain the money flow in relation to overseas payments.

He agreed that while he was drawing the diagram, he basically said to Mr Shute and Mr Daley that the money went as a consulting fee from HCH to Uniton in New Zealand, then went from Uniton in New Zealand across to Vanuatu, then went from Vanuatu to Edgecumbe Finance in Ireland, which was a financial company in Ireland, and then went from Ireland back to Mr Daley as a loan drawdown. His only qualification was that he did not believe that he said that funds went to Vanuatu.

Mr Zerafa agreed that Mr Shute asked how the scheme was legal and he said words to the effect, “Well the first payment, that’s just simply a consultancy fee and the company can pay whatever provided there’s some consultancy actually received. It can pay whatever the consultancy is worth to the company. The second leg of the transaction from New Zealand to Vanuatu and from Vanuatu to Edgecumbe Finance are offshore transactions”.

Mr Zerafa also agreed that he told Mr Shute “The final leg is just simply a drawdown on a loan” and that he agreed with Mr Shute that it was a personal loan not a company loan. He also agreed that he told Mr Shute that as it was a loan, Mr Daley needed to pay interest and that Mr Daley had a letter of forgiveness in respect of the loan.

Mr Zerafa was asked again about the meeting at which Mr Daley requested the steps to be taken to close down the involvement of HCH in the scheme. He said that he believed the meeting was between him, Mr Daley, Mr Daniel and maybe Mr Shute. He said that Mr Daley indicated that he wanted to get out of the HCH group, without disclosing any reasons for wishing to do so.

It was again put to Mr Zerafa that he told Mr Daley that the answer was to virtually merge Edgecumbe Finance and Uniton in order to close down the scheme. He denied saying anything like that and said that Mr Daniel did not say that either. He said that he did not recall Mr Daley making any notes at the meeting.

Mr Zerafa said that he never discussed how HCH would get out of the scheme with Mr Shute. He said that he did not have knowledge of how to cease the overseas scheme and that he had no connection or control over any of the overseas entities, so he did not know how to have them closed or shut down. He repeated that the advice given by Mr Daniel was that if he wished to close down the structure, he would need to discuss it with Mr Agius. He agreed that Mr Daniel may have said that the arrangement could stay dormant, as in the future they might want to generate another tax deduction.

Mr Zerafa said that he and Mr Daniel advised that it was PKF Vanuatu that would need to assist them with closing the scheme down. He was asked if Mr Daniel said, “we cannot stop the paperwork coming in from Edgecumbe from here. … Robert Agius was the man who could make that happen … and Robert Agius, fortunately, was coming to Australian within the fortnight so they [sic] Kevin would set up a meeting between Geoff [Mr Daley] and Robert Agius to talk about the loan agreement”. Mr Zerafa agreed that words to that effect were said, but more specifically to the structure, not to specific parts of the scheme. He said that he did not recall saying that he knew that Mr Agius would be in town within a fortnight, but it was quite possible that he said that he would try and set up a meeting for them.

Mr Zerafa agreed that after Mr Daniel died, he was aware that a number of clients were pressing OTD, through him, to have steps taken to effectively get out of the scheme. He said that his advice was that Vanuatu would need to give advice as to how to close up the structure.

Mr Zerafa gave evidence that he became involved in the efforts of Mr Hili and Mr Jones to extricate themselves from the arrangements. He stated that he received a number of letters and emails from Mr Hili requesting that documentation coming from Vanuatu cease. He said that he advised Mr Hili that he would need to speak to Mr Agius with regard to closing the scheme. He said that he told him that because he did not know how to cease their involvement.

Mr Zerafa was referred to the letter written by Mr Jones of 16 December 2003 to the ATO, which Mr Jones said was prepared by Mr Zerafa (see par [458] above). He said that Mr Daniel drafted the letter. He said that he did not have any reaction to the way the information was being provided and he regarded the relationship between Jeiss and Edgecumbe Finance as one involving a commercial loan facility.

In relation to the letter written by Mr Hili to the ATO dated 17 April 2004 (see pars [404]-[405] above), he said that Mr Daniel drafted the response. It was pointed out to him that the reference to Mr Agius had been moved in the final version from where it appeared in the draft and said that he did not have any recollection regarding that modification.

In cross-examination, Mr Zerafa said that he became aware that Hilisa went into the overseas scheme when he saw invoices for interest around 2002 or 2003. He said that he believed that he did not have anything to do with setting up the scheme for Mr Hili or Mr Jones or their companies.

Mr Zerafa was cross-examined about a message from him to “Mike”, who he identified as Michael Stewart, asking whether he had printed out the Centurion invoice for Kylood and that he needed it today. Mr Zerafa said that he believed it was in connection with a workers’ compensation audit. He denied that he knew the source from which Mike printed out the Centurion invoice, agreeing that his only involvement was that Mr Daniel asked him to follow it up.

In the context of the transactions concerning Mr Hili and Mr Jones, it was suggested to Mr Zerafa that the transactions by which Mr Hili and Mr Jones caused their companies to send money overseas, which came back to them as a loan, in practical terms involved borrowing one’s own money. He responded that there was a structure of multiple companies overseas, that he did not understand their connection or how they worked and where funds were transferred. He said that he was told that PKF Vanuatu had put the structure in place and that a loan agreement was entered into with one of these entities.

He acknowledged that he knew the money sent out of Australia by Kylood or Hilisa, for management and consulting fees, was going to be claimed as a tax deductible expense and come back tax free as a loan. He agreed that that was the structure of the scheme, although he denied that it “smacks of dishonesty”.

Mr Zerafa was asked about a diary entry of Mr Hili, “Tony Hili with Owen”, dated 1 April 2004 at 9am. He acknowledged that it appeared from this note that he had an appointment with Mr Hili and Mr Daniel on that day and agreed that it may have been in connection with the tax inquiry letter of 25 March, to which I have referred above at par [399]. Mr Zerafa was referred to the response to that office dated 19 April 2004 (see par [404]), and asserted that from his point of view, the answers contained in that letter were factual and not misleading.

It was suggested to Mr Zerafa that a simple explanation for the transactions the subject of the ATO inquiry was that they were part of a perfectly legal international tax minimisation scheme which had been devised or set up by the well-known international accounting firm of PKF Vanuatu, which had previously been audited by the ATP. Mr Zerafa said that that was not an appropriate answer because it was not answering the questions asked. He denied assisting Mr Daniel in drafting the response. Mr Zerafa acknowledged that the letter sent by Mr Hili to the ATO said nothing about the international tax minimisation scheme, stating that this was because the ATO were requesting answers to specific questions and the response was attending to those questions.

Mr Zerafa was also asked about a letter from the ATO to Mr Jones of 21 November 2003, to which I have referred in par [458]. Mr Zerafa acknowledged that the letter said that information that the ATO held indicated that Mr Jones may have had international transactions for the period 1 July 2001 to 30 June 2003. He also acknowledged that the letter was giving the taxpayer an opportunity to voluntarily disclose something that should have been disclosed earlier. He also agreed that the focus was on Mr Jones’ international transactions.

Mr Zerafa denied that he had always regarded Mr Jones as having control of the disposition of any funds located in one of the jurisdictions referred to in the ATO letter (which included Vanuatu). It was suggested to him that Mr Jones would have the ability or expectation to control those funds because of the prior arrangements that the bulk of them would be sent back to him. Mr Zerafa said that that was part of the structure, which he did not understand.

Mr Zerafa was referred to the letter signed by Mr Jones addressed to Mr Dirani of the ATO dated 16 December 2003 (see par [458] above). It was suggested to him that he was the author of both the draft and the final copy of the letter, which he denied. He said that his involvement was going through the files and retrieving any information that could be provided to Mr Daniel to draft a response. He said that the reason he did not draft the letter was because he had no understanding of the intricacies of the scheme and at the time, he did not have the experience to answer it.

Mr Zerafa denied that Mr Jones showed him the letter from Mr Dirani to Mr Jones and that he told Mr Jones that he had nothing to worry about. He said that he would not comment on such a letter to a client as he would not have had the experience at the time to be able to advise a client on these matters. He reiterated that he did not understand the overseas structure. He said that he knew that there was an overseas company, but did not understand its function. He said that he understood that there were other companies, such as Billbury, Uniton and Edgecumbe Finance, but did not understand how they fit into the structure.

Mr Zerafa acknowledged that there were times when, to his knowledge, Mr Agius was at OTD’s office in connection with the scheme and that Mr Agius was the one person who would have been expected to know about the scheme’s structure or intricacies. He said that he did not ask Mr Agius to explain the scheme.

Mr Zerafa was asked about a meeting where Mr Hili and Mr Jones spoke to him and Mr Daniel about wanting to get out of the scheme. He said that the meeting would have taken place in mid to late 2004.

Mr Zerafa said that he did not recall Mr Hili referring to any letters from the ATO at the meeting, but agreed that Mr Hili said words to the effect “We’re not comfortable with this and we want to fix it up”. Mr Zerafa said that Mr Hili did not ask for the scheme to be reversed, nor did he say anything about the scheme being “bodgie”.

Mr Zerafa stated that he recalled Mr Hili or Mr Jones asking whether there were any other schemes available.

Mr Zerafa said that Mr Hili’s concern was that he no longer wanted to pay any funds overseas. He said that Mr Hili was aware that there was an accrual in his accounts and he wanted to reverse that accrual so that he would no longer have to pay any amounts overseas. He denied that Mr Jones said words to the effect, “we want to make things right, we want to pay back what we have been ripping off” and that Mr Daniel responded, “you will have to pay back a fortune”. Mr Zerafa said that Mr Hili did most of the talking.

Mr Zerafa agreed that he told Mr Hili and Mr Jones that OTD would work out a payment scheme with the ATO.

Mr Zerafa was asked about a letter received by Mr Hili on 29 September 2004 from the ATO stating that the ATO had reviewed the pattern of Mr Hili’s offshore dealings to and from Vanuatu, which suggested the possible use of international business companies as part of tax planning. He said that it was his understanding that Mr Hili did not have any international transactions to and from Vanuatu.

Mr Zerafa said that Mr Daniel told him that he would respond to the letter. He was referred to a draft and agreed that it looked like Mr Hili had made his own amendments. He said that he would have given the draft to Mr Daniel, but denied that he discussed the contents of the letter with him. He was referred to the response of the ATO, dated 28 October 2004, and denied that the final form was conveyed by him to Mr Hili.

Mr Zerafa was referred to a fax that he received from Mr Hili dated 7 February 2006 asking not to receive any more correspondence from Vanuatu. He agreed that he received this fax at about the time of Mr Daniel’s death.

Mr Zerafa said that he did not take much action concerning the document as Mr Daniel had just passed away. He said that later, at a time when Mr Hili was no longer making any claims or participating in the scheme, he had a discussion with Mr Hili about ceasing the structure. He said that he explained to Mr Hili that he did not understand the structure and that it would be a matter for PKF Vanuatu to deal with. He said that Mr Hili subsequently emailed PKF Vanuatu directly about the matter.

Mr Zerafa said that he knew of the company Guns of America Ltd and that it was an overseas company, but he did not understand how it fitted into the scheme. He said that he was aware that Mr Jones was associated with Guns of America Ltd, as OTD had some kind of list of Australian companies and their associated entities.

Mr Zerafa was further cross-examined about the meeting he had with Mr Hili, Mr Jones and Ms Abibadra in November 2006. He agreed that he told them that the office had been raided by the AFP, that some records had been taken and that he advised Mr Hili and Mr Jones to seek legal advice. He said that he did not recall Mr Jones asking if they (Mr Jones and Mr Hili) were okay with the tax department. He said that he recalled Ms Abibadra saying something to the effect that she was not familiar with their work and had not been the accountant dealing directly with their accounts.

Mr Zerafa denied that he told Mr Hili and Mr Jones not to worry and that he had destroyed all of the incriminating documents. He also denied ever telling Mr Jones that Mr Jones was “square with the tax office”. He said that he recalled Mr Jones or Mr Hili asking if the raid had anything to do with the overseas scheme and telling them “that at this stage we thought it was”.

Mr Zerafa agreed that it was perfectly plain to him that the purpose of Mr Agius’ visits to OTD’s office was to promote the scheme to the clients of OTD who were introduced to him at that office.

Mr Zerafa said that he was aware that IFTC and PKF Vanuatu were related.

Mr Zerafa was referred to pages in his diary which were crossed out with the words “Robert Agius, meetings”. He said that when it was known that Mr Agius was coming to the OTD office, Mr Daniel would ask him and the other accountants to cross out the whole day. He said that it was necessary for them to keep free the time that Mr Agius was in the office. He said that Mr Daniel wanted the other accountants available to assist in any way with files or taking notes or messages.

However, Mr Zerafa denied that there were occasions when he, Mr Daniel and Mr Agius discussed overseas scheme matters. He agreed, however, that it was plain to him that Mr Daniel and Mr Agius were discussing those matters. He said that he was called into meetings with Mr Daniel and Mr Agius to answer questions about the files about a dozen times over 10 years.

Ms Abibadra gave evidence that her practice when she worked at OTD was that she would print out a set of preliminary accounts which would be handed to Mr Daniel for completion during interviews or phone conversations with clients. She said that once Mr Daniel had finalised the accounts, he would give them back and there would be notations on them and “you would enter those notes … or, we call it have adjusting and balancing journals into the system”. She said that thereafter, a final set of accounts would be produced and the information would be incorporated into a tax return.

Ms Abibadra said that she first had contact with Mr Agius when Mr Daniel brought him to her office and introduced him. She said that Mr Daniel advised her that Mr Agius worked for Moore Stephens in Vanuatu and that he would be helping out clients “with any international requirements that they needed”.

Ms Abibadra stated that she observed that Mr Daniel and Mr Agius were friendly with each other, as well as professional. She said that she could not remember any particular meeting that she had had with Mr Agius or being present at any meeting at which Mr Agius provided advice to clients.

Ms Abibadra said that she became aware of Vanuatu arrangements in the course of preparing draft accounts. She said that in some instances, there were some balancing journals that needed to be included. She said that she did not know how to account for them so she had to ask Mr Daniel. She said that Mr Daniel explained to her that those clients had some overseas expenses which needed to be accrued. She said that it was then that she learned about the tax plan.

She said that she became aware of the arrangements in about 1998 and it may have been in respect of the draft accounts of ASS. She said that on that company’s draft accounts, there were additional trade creditors and she did not know to what they related or how to journalise them. She said that she asked Mr Daniel and he told her that it had something to do with the international side of the business and Mr Agius. She said that Mr Daniel explained to her that the client would send money to a New Zealand bank account, then the money would travel to Ireland, via Vanuatu, and then come back to Australia via a loan. She said that he told her that there was a setup in Vanuatu done by Moore Stephens which enabled this practice.

Ms Abibadra said that Mr Daniel did not tell her what part Mr Agius played in the arrangements. She said that she did not need to know what was happening in Vanuatu, she just needed to know how to account for the transactions in the accounts. She said that Mr Daniel explained to her that once the money went through to Ireland via Vanuatu, it could come back as a loan to a client and there was no tax implication on a loan to an individual.

Ms Abibadra said that on receiving this information, the entries would be recorded as an accrued liability. She said that it became common practice. She said that all she knew about the role of Moore Stephens was that they were the company who were setting it up. She said that she understood them to be a reputable international accounting firm.

Ms Abibadra said that she asked more questions about the arrangement in 2004, when a questionnaire was received from the ATO in relation to ASS. She said that she was the contact person for ASS and she took the letter to Mr Daniel and asked him about it. She said that he told her that there was nothing to worry about and any additional information other than that provided by the client would be provided by Mr Agius. She said that he also told her that the tax plan had passed an audit many years beforehand.

Ms Abibadra said that she did not ask for clarification as to how the tax plan worked because she believed that the client had provided the ATO with the information they needed to show what had happened. She said that it was an Australian tax audit and she did not need to know what happened overseas, only what happened in Australia. She said she was told that by Mr Daniel.

Ms Abibadra said that she attended the audit meeting with three ATO officers on 12 April 2005. She said that the meeting was a very broad meeting to start with. She said that the tax officers were requesting information and Mr Daniel once again reassured her that everything was fine and that all information would be provided to them at a later stage.

Ms Abibadra said she that could not recall any occasion where she advised any clients to participate in the Vanuatu arrangements or being present at any meeting at which it was suggested to a client that they should participate.

Ms Abibadra agreed that she attended a meeting, before the ATO interview on 12 April, with Mr Daniel, Mr Zerafa and the Wallers. She said “David and Phillip [the Wallers] just came in to see Owen [Mr Daniel] to ask general questions about an audit and Owen [Mr Daniel] explained that the ATO will ask for information and we will get that to them at a later stage”. She said that the meeting did not involve anything of great importance, it was just on how an audit process and collating documents would work. She said that she could not recall exactly what was said, but it was basically an overview. She said that Mr Daniel said that the ATO would ask for particular papers and “we will get back to them, just tell them we will get back to them”.

She denied that the meeting took place in the evening and continued for some hours until it was dark. She said that she did not work past 5.30pm, so it was highly unlikely that she would be there for an evening appointment. She said that she had dance lessons starting at 7.00pm on Monday and Thursday nights in that year and the year before and after.

Ms Abibadra was asked about the audit meeting she attended on 12 April. She said that when the confirmation of the audit meeting had been made with the ATO, Mr Daniel came into her office and advised that he would like her and Mr Zerafa to go to the audit meeting to make up the numbers. She said that because the ATO would have three representatives, the three OTD representatives and the Wallers would make more numbers than the ATO.

Although Ms Abibadra said that she could not remember the specifics of the meeting, she recalled an ATO officer, Ms Karen Potts, asking about a safety mask which ASS said that they were developing. She said that once Ms Potts had finished her line of questioning, Mr O’Flynn took over and either P Waller or Mr Daniel would answer his questions. She said that Mr O’Flynn was not very coherent at the meeting and she believed him to be drunk as there was a “strong stench coming across that table”. She said that Mr Daniel got quite heated when he was trying to explain things at the meeting to Mr O’Flynn. She said that Mr O’Flynn would interject and Mr Daniel would answer back. She said that the meeting was about Billbury and all other parts of the arrangements. She said that when Mr Daniel was trying to explain, Mr O’Flynn would ask more questions and Mr Daniel would get agitated. She said that she found it quite disturbing and the meeting was quite tense, she said that she had never been to a meeting like that before.

Ms Abibadra said that she did not say anything at the meeting as Mr Daniel had advised her and Mr Zerafa not to speak. She said that she could not recall either of the Wallers saying anything at the meeting which was untrue.

Ms Abibadra was reminded of evidence given by Mr Hili and Mr Jones that after they said they would participate in the scheme, Mr Daniel called her and Mr Zerafa in and asked them to set the scheme up for the clients. She said that she had no recollection of that meeting occurring. She said that based on general practice, Mr Daniel would not have called two people in to do the one job. She said, also based on general practice, that Mr Daniel would bring in the contact for any assistance he needed and that it was Ms Lynda Meek, who was assisting Mr Daniel with Mr Hili and Mr Jones’ accounts.

Ms Abibadra said that she could not recall now doing any work in relation to the setting up of the Vanuatu arrangements for Mr Hili or Mr Jones or providing them with any paperwork in relation to those offshore arrangements. She said that she did not have any recollection of any dealings she had with Mr Hili in relation to his use of those arrangements. However, she agreed that it was possible that Mr Hili might have called in and asked what the accrued liability was. She said that he would have said “What do I owe”, referring to expenses claimed but not paid. She said that she might have pulled out the file and given him the information.

Ms Abibadra said that the expenses she was referring to were management and consultancy fees relating to offshore arrangements. She said that the same thing could have occurred with Mr Jones.

Ms Abibadra said that she did not have any involvement in relation to any steps taken to remove Mr Hili or Mr Jones from participation in the scheme.

Ms Abibadra was asked about the evidence given by Mr Hili and Mr Jones regarding a conversation that they had with her and Mr Zerafa in November 2006. She said that her recollection was that Mr Zerafa asked her to go to the meeting. She said that Mr Hili and Mr Jones had come in because they wanted their financial accounts and Mr Zerafa asked her to go to the meeting so he could advise them that their files had been taken. She said that OTD had received information from its solicitors that if any clients wanted their work, OTD could advise them that their information had been taken.

Ms Abibadra said that when the meeting commenced, Mr Zerafa explained that there had been a search and their file had been taken. She said that Mr Hili and Mr Jones asked if their specific file had been taken and Mr Zerafa advised that it had. She said that she made it clear to Mr Hili and Mr Jones that she was not the person preparing their accounts. She said that she did not know what stage they were at or what had happened throughout the years for the full preparation.

Mr Abibadra said that at that stage of the meeting, Mr Hili got very upset and got up in an angry manner and came around towards her. Mr Jones asked him to sit down, which he did, and he apologised. She said that Mr Zerafa advised them to seek their own legal advice and the meeting ended amicably.

Ms Abibadra was asked whether Mr Zerafa told her why he had asked her to attend the meeting. She said that there were three people involved in the search, herself, Mr Zerafa and Ms Jandagi, and that the lawyers had advised OTD that they were the ones who should tell the clients of the situation.

Ms Abibadra said that there was nothing said at the meeting about documents being destroyed or shredded. She said that everything had been taken and there was nothing left to destroy.

In cross-examination, Ms Abibadra agreed that Mr Daniel met Mr Agius from time to time at the OTD office. She said that she was introduced to Mr Agius in the context of him being from Moore Stephens, Vanuatu. She said that she did not know that Mr Agius was the senior partner of Moore Stephens, Vanuatu.

Ms Abibadra said that she knew that both Mr Agius and Mr Daniel were accountants. She said that the person Mr Agius always came to see at the office was Mr Daniel. She said that she did not know whether they had some business interest or accountancy practice interest in common, but she knew that some of the clients used the services of PKF Vanuatu (Moore Stephens).

She agreed that Mr Daniel told her of a tax plan which had some connection with Mr Agius. She said that Mr Daniel described the overseas transactions as a tax plan. She said that he did not refer to it as an international tax minimisation scheme.

Ms Abibadra agreed that when Mr Daniel explained the overseas tax plan to her, he said that there would be overseas loans connected with it.

Ms Abibadra agreed that from time to time she observed Mr Agius and Mr Daniel seeing clients of the firm together. She said that Mr Agius was the person giving tax advice to some of the OTD clients and, to her understanding, he also offered other services. She said that she did not know what he was doing at any particular meeting.

Ms Abibadra was asked whether, when Mr Daniel told her about the overseas tax plan, he included information which enabled her to correctly journalise the entries that had been troubling her. She said that he did not tell her anything that he had done with the overseas plan and just explained how to journalise the entries. She said that she did not believe that he did anything overseas, that was left to Moore Stephens. She said she did not discuss the matter with Mr Agius.

It was suggested to Ms Abibadra in cross-examination that at the pre-audit meeting of 11 April 2005, there was a rehearsal with the Wallers, in effect a coaching session, where the Wallers were told that if certain questions were asked by the ATO officers, they were to lie in their answers. She denied this and said that she was not present at such a meeting.

Ms Abibadra was also cross-examined about the November 2006 meeting. She said that she did not hear either Mr Hili or Mr Jones saying anything about them, thinking that they were square with the ATO. She also said that she did not recall Mr Zerafa telling Mr Jones or Mr Hili that it was basically all Mr Daniel’s idea. She said that she did not say to Mr Hili that she had no knowledge of any details of offshore transactions. Rather, she said that she explained to them that she was not the person doing their work and did not have full knowledge of their accounts and overseas work.

It was suggested to Ms Abibadra that when Mr Hili got up, it was because she had been untruthful to him in telling him that she had not done his tax work and had nothing to do with his international tax plan. She denied that, saying that he was not directly upset at her, but upset at the situation. She denied that she ever said words to the effect “What scheme? I don’t know anything about a scheme”. She also denied saying that incriminating documents had been destroyed. She said that to her recollection, there was no talk of shredding and no talk of the scheme being Mr Daniel’s idea.

Ms Jandagi, Mr Daniel’s daughter, commenced working at OTD in 1980 and became a partner of OTD in 2000. She gave evidence that the method of preparing tax returns and company accounts, generally speaking, was that draft figures would be produced from the clients’ records, put into a draft balance sheet profit and loss statement and then discussed with the client for any final alterations or adjustments that were required. She said that the adjusted figures were put into the computer and final accounts and tax returns were prepared.

Mr Jandagi said that she believed that she started to do work on behalf of the Southcombes in 1998, although she said that it was possible that she did some work for them prior to that time. She said that she recalled a lot of emails between herself and Ms Southcombe concerning the arrangements with Mr Agius. She said that generally speaking, she printed them out and gave them to Mr Daniel.

Ms Jandagi said that she met Mr Agius at the OTD offices. She said that she was introduced to him by Mr Daniel, as a partner of Moore Stephens, an international accounting firm, and as a tax specialist. She said that she believed that clients of OTD had dealings with him, although she did not know the nature of the dealings.

Ms Jandagi described the general office routine relating to the signing of mail. She said that the receptionist would type all of the mail and put it into a manila folder and whoever was available around 4.00pm would sign it.

Ms Jandagi said that she had never met Ms McKenna, Mr O’Rourke, Mr Hili, Mr Jones or the Wallers. She said that to the extent that she signed mail to them, it would have been part of the normal mail-out process.

Ms Jandagi said that she did not have any involvement with Tara or with any of its accountancy work. She said that she did not do any accounting for Kylood or have anything to do with Hilisa. She confirmed that, with the exception of GBM, she had not done any work for any of the other witnesses who gave evidence in the proceedings, or for their companies.

Ms Jandagi said that at the time she prepared the financial returns and company accounts for GBM for the year ending 30 June 1997, she was not aware that Ms Southcombe had met Mr Agius or that she had agreed to any form of arrangements in relation to overseas transactions. She was asked about the figure of $328,000, recorded in the accounts for that year, relating to the arrangements. She said that she did not see any Billbury invoices relating to that year. She was referred to a journal entry of $36,000 under the heading “Directors” in the financial records for that year for GBM and said that it was an example of a journal entry that Mr Daniel would give her to finalise before it appeared in the accounts.

Mr Jandagi was referred to a preliminary income and expense statement for GBM for the year ending 30 June 1997, which did not contain the amount of $328,000 for management and consultancy expenses and to the fact that it was contained in a subsequent printout of 15 March 1998. She stated that that indicated that sometime between July 1997 and March 1998, a journal entry had been made for $328,000. She said that she did not recall making that journal entry. She also said that as at 16 March 1998, she did not know much about the financial affairs of the Southcombes.

Mr Jandagi said that in her preparation of the GBM accounts for the year ending 30 June 1997, she did not ask to see any invoices for the $328,000 accrued expenses. She said that for these expenses, she relied on Mr Daniel’s journal entries, while in relation to other expenses, she relied on the figures provided by Ms Southcombe.

Ms Jandagi said that she did not see any documents in terms of agreements and the like regarding the various loans which were on the books of GBM and the Southcombes’ other business entities. She also said that when she prepared the tax return for the year ending 30 June 1997, she did not know that the figures in it included overseas payments.

Ms Jandagi said that she first became aware of the arrangements that the Southcombes had with Mr Agius when she received an email in May 1998 asking some questions. She said that at that time, she did not have any dealings with Moore Stephens in Vanuatu, nor with Mr Agius. She denied that she phoned Ms Southcombe and advised her of the incorporation of Hamilton Holdings in Vanuatu. She said that she did not see company documents relating to Hamilton Holdings or any loan agreements that the Southcombes or GMB may have entered into at that time.

Ms Jandagi was referred to an email of 17 June 1998, inquiring about the best method to pay Mr Agius. She said that, in accordance with her practice, she printed it and took it to her father for instructions. She said that the note on the email was addressed to Alison, the receptionist, and said “Get in touch with Robert Agius”. Ms Jandagi said that she was given the information she required by the receptionist. She said that she subsequently emailed Ms Southcombe on 22 June, giving Billbury’s details as the bank details for Mr Agius. She said that prior to that time, she did not have any details for Billbury accounts or anything in relation to payments to be made to Mr Agius.

Ms Jandagi was also referred to an email from Ms Southcombe dated 26 June 1998, inquiring where she should log the new loan from Vanuatu. She said that on receiving the email, she asked Mr Daniel what type of loan Ms Southcombe was referring to and he said, “the loan is the loan received back in from Vanuatu. … [It] would be an unsecured loan under long term liabilities”.

Contrary to the evidence of Ms Southcombe, Ms Jandagi denied that she attended a meeting with Mr Daniel and Ms Southcombe on 24 March 1998. She also said that prior to that time, she had not attended any meeting with Mr Agius, Ms Southcombe and Mr Daniel.

Ms Jandagi was referred to an income and expense statement for GBM as at 30 June 1998 showing management and consultancy fees of $250,000. She said that that entry came about because of a journal entry that Mr Daniel had provided. She said that if she made the entries, she was given the information to do so by Mr Daniel, either written or verbally. She said that she did not ask about the journal entries because Mr Daniel provided her with the information that she needed to do what she needed to do with the final accounts, and she did as she was instructed.

Ms Jandagi was asked about an email to her from Ms Southcombe of 7 December 1998, in which Ms Southcombe expressed concern that Mr Agius was not responding to her emails. Ms Jandagi said that Mr Daniel was the one who handled matters related to Moore Stephens and Mr Agius, so whenever she got an email like that, she printed it and gave it to him.

Ms Jandagi said that she had nothing to do with the refinancing for GBM with Security Life. She also said that she had never seen a Uniton interest invoice and had no need to see them.

Ms Jandagi said that from January 2001 to June 2002, Ms Southcombe did not raise any concerns with her about the state of the loans on GBM’s books. She denied that she had a conversation with Ms Southcombe about a debit card or that she replied to a request or did anything about an email from Ms Southcombe to her requesting that Ms Jandagi arrange a debit card for her. She further denied that she had discussions with Ms Southcombe about the return of funds to her or that she suggested that the OTD trust account be used for the return of funds. She said that she was certain about the latter matter, because the trust account was set up to process ATO refunds.

Ms Jandagi denied that she ever made a suggestion to Mr or Ms Southcombe regarding the return of funds and denied that she ever said anything about the purchase of a painting with the funds. She was referred to the portion of the email of 26 September 2002 relating to interest payments and interest adjustments. She said that she did not have a specific recollection of the email but that it was the type of thing that she would have printed and given to Mr Daniel.

Ms Jandagi was also asked about an email from Ms Southcombe to her of 14 October 2002, in which Ms Southcombe said that she thought it would be easier if “I could meet with yourself and Robert [Mr Agius] when he comes this week to consider the alternatives”. She said that she did not have a meeting with Mr Agius and Ms Southcombe in the period after 14 October 2002. She was also referred to an email from Ms Southcombe to Mr Agius of 24 October 2002 which stated “Following our meeting I met with Debbie to discuss the options that you presented. Debbie and I agreed that we would have the company pay off the loan over a period of time”. Ms Jandagi said that she had a recollection of Ms Southcombe coming into the office and, as she was walking out of the door, she recalled her mentioning the loan and saying that she was going to start making some repayments on the principal of the loan over the next 12 months. She reiterated that between July 2002 and June 2003, she did not have discussions with Ms Southcombe concerning the return of monies to her, Mr Southcombe or GBM. She said that during this period, she was not aware of any arrangements for the return of money to the Southcombes.

Ms Jandagi denied that she had any knowledge of any arrangements concerning the purchase of a boat or of payments made to Ms Southcombe’s sister. She said that like the previous periods, in the 2003 to 2004 period, she had no discussions with Mr or Ms Southcombe regarding the return of funds or the cessation of the arrangements they had entered into. She said that she was not aware that interest amounts which were being claimed in the accounts were being returned to the Southcombes.

Ms Jandagi denied that she was present at a meeting with the Southcombes and Mr Agius on 14 March 2004, or any meeting where the issue of exiting the arrangements was discussed. Ms Jandagi said that she visited Ms Southcombe in hospital on 16 June 2004. She said that on that visit, there were no business discussions and she did not say, in relation to the overseas transactions, that she would “fix it”.

Ms Jandagi was asked about an email from Ms Southcombe to her of 15 February 2005 and her reply of 17 February 2005. She was referred to the statement in Ms Southcombe’s email “When I last saw Rob I think it was with you and he had said make no further payments. That was shortly after I came out of hospital and I was still not the best”. She denied that she had met with Ms Southcombe and Mr Agius in the period between the hospital visit and the email of 15 February 2005. She explained her response saying that Ms Southcombe was asking her whether the money sitting in GBM as a result of the sale of the marina was available for her to withdraw to purchase a home. She said that her reply was that she needed to do the current figures, so that she would be able to give her a figure that she could withdraw from the company from her shareholder’s loan accounts. She said that she did not respond to the matters in the email concerning Mr Agius as Mr Daniel was looking after Ms Southcombe’s tax affairs and she had no knowledge to enable her respond to those matters.

Ms Jandagi was referred to an email from Ms Southcombe to Mr Agius of 15 March 2005 stating, “We had a meeting yesterday with Debbie and decided we would like to make interest payments for 2004 on our loan for Gladesville Bridge Marina. Could you please forward the necessary invoices”. Ms Jandagi denied that any meeting occurred around that time or that she used words to the effect of “making the loans look legitimate”. It should be noted that the response to the email from Mr Agius was that he was arranging invoices “as we speak”.

Ms Jandagi was referred to an email from Ms Southcombe to her of 29 April 2005, stating that Ms Southcombe had received invoices from Mr Agius and that the interest expense needed to be altered from $100,000 to $112,070.24. Ms Jandagi was referred to the general ledger printout of 29 April 2005 and stated that she had dealt with this request by way of journal entry.

Ms Jandagi recalled a meeting with the Southcombes of 25 May 2005 in which she and Mr Zerafa addressed the issue of the sale of the marina and the capital gains implications that that would have for GBM, along with the Southcombe’s desire to withdraw money from GBM for their home purchase. She said that she and Mr Zerafa pointed out to the Southcombes that the withdrawal of the money would leave them owing money to GBM, which would create a significant Div 7A problem for them.

Ms Jandagi said that prior to May 2005, she had had discussions about the capital gains tax implications with Mr Daniel and had consulted PKF Sydney concerning the issue.

Ms Jandagi was referred to the statement in the agreed facts that Ms Southcombe paid off the loan by payment of $891,196.37 on 15 June 2005. She said that around 2005, the Southcombes had let Mr Zerafa and her know that they wanted to close GBM because it was not trading anymore as the marina had been sold. She indicated that they wanted to know what action they needed to take to get the company ready for liquidation. She said that she and Mr Zerafa gave the Southcombes a list of items that needed to be taken care of, including paying off all liabilities, including all loans.

Ms Jandagi was referred to the AFP search of the OTD premises in October 2006. She said that she and Mr Zerafa were concerned about what they were allowed to say to clients whose files had been taken from the office. She said that she was particularly concerned because she knew that she had an appointment with the Southcombes later that month. She said that the solicitor told her and Mr Zerafa that “If anybody has appointments with you, you should let them know that their file has been taken by the AFP and they should seek their legal advice”.

She said that she recalled the Southcombes attending the office after the AFP search and she asked whether they would like to have coffee up the road. She said that she did that because she was going to tell them that their files had been taken. She said that she knew that Ms Southcombe had not been mentally well and she was not really sure how she was going to take the news. She denied that she had any concern about the office being bugged.

Ms Jandagi said that as they were walking along the pavement, Mr Southcombe asked if something was wrong and she said “I just wanted to let you know that your files have been taken by the Australian Federal Police”. She said that they then looked at each other and each one ran for their cars and left her standing there. She said that she was very upset and distressed by what had happened and she did not wish to speak to them. She said that probably a week later, she was sitting in a cafe with Mr Hagar and the Southcombes approached her in the cafe, wanting to know if she had any up-to-date information about what had happened. She said that she told them that they should seek their own legal advice. She denied that she had arranged for the Southcombes to meet her at the cafe.

Ms Jandagi was cross-examined by senior counsel for Mr Agius concerning the closing balance of $328,000 for trade creditors in the accounts for the year ending 30 June 1997. It was put to her that this was a figure that emerged during the meeting on 2 March 1998. She said that she was not sure when the figure emerged, but it would have been out of some discussion. It was put to her that if Mr Agius was not in Sydney between 18 January 1998 and 18 March 1998, he could not have met either her, her father (Mr Daniel) or the Southcombes before the GBM accounts were finalised. She agreed. It was then suggested to her that the tax returns were prepared with no contribution from Mr Agius and she said that she was not sure about that, although she agreed that he was not in Australia.

Ms Jandagi was referred to the summary of unsecured loan account totals, to which I have referred in par [208] above. She was also shown the preliminary balance sheet for the year ending 30 June 1997, which showed an unsecured loan liability of $210,588. She agreed that that came from a handwritten note from Ms Southcombe showing unsecured loans for the period from 1993 to 1997. It was then suggested to her that the loans were a debt to Security Life. Although Ms Jandagi agreed with this, the suggestion seems to be incorrect on its face. The summary shows unsecured loans as at 30 June 1997 in an amount of $210,588, with a GBM debt to Security Life as nil.

In cross-examination by the Crown, Ms Jandagi agreed that the first figure in the unsecured loan schedule in the loan account, of $210,588, was obviously not part of the debt to Security Life. She said that she knew that the loan from Security Life was an international loan, but stated that she did not discuss it with Ms Southcombe, who provided her with the figures and she accounted for it in the balance sheet on the basis of those figures.

In cross-examination by the Crown, Ms Jandagi said that she first became aware of dealings between Mr Agius and the Southcombes in May 1998, when Ms Southcombe sent her an email posing a few questions. She said that she did not understand the email when she got it, but it seemed to her that either Ms Southcombe or her company had made some arrangement with Moore Stephens. She agreed that after the email, in May 1998, she started to see some communications either to, or from, or with reference to, Vanuatu. She said that she knew it had something to do with Mr Agius, but she did not understand what the Southcombes had gone into with him.

Ms Jandagi agreed that from 1998 to 2004, she did not know of any other clients of OTD who had similar dealings with Mr Agius. She said that she only knew the details of clients she worked with and none of them had any dealings with Mr Agius or Moore Stephens. She said that it was only after 2006 that she became fully aware that the arrangements between the Southcombes and GBM involving Mr Agius concerned an international tax plan. Ms Jandagi agreed that it was clear to her that Mr Agius was coming to the office to see both Mr Daniel and clients.

It was suggested to Ms Jandagi that in about June 2004, Mr Zerafa came to her and Ms Abibadra with a document from the ATO portal and suggested that no further clients of the firm be put into the international tax minimisation scheme. She stated that Mr Zerafa had said that he had seen an article on the ATO portal that the ATO were looking at some companies in Vanuatu and he wanted to speak to Mr Daniel about it. She denied that Mr Zerafa said that no further clients of OTD should be put into the scheme. She also said that Mr Zerafa did not tell her the results of the discussions he had with Mr Daniel.

In relation to the expenses of $328,000 in the 30 June 1997 accounts, Ms Jandagi denied that she worked out the figure, repeating that the figure was worked out by Mr Daniel.

Ms Jandagi was referred to an email to her from Ms Southcombe of 25 May 1998, which referred to the establishment of Hamilton Holdings by Mr Agius. She was also referred to the statement in the email that Ms Southcombe did not understand the structure that had been set up. Ms Jandagi said that she did not understand what Ms Southcombe was referring to as she had never seen anything like it before. She said that she just glanced at the email and handed it to Mr Daniel, who was handling the matter from beginning to end.

Ms Jandagi agreed that the email clearly showed that Ms Southcombe understood that the payment of $328,000, recorded as an expense, was to be sent overseas. She was referred to her reply to the email of 1 June 1998 which stated, “The company, Hamilton Holdings Limited, cannot be associated with you [the Southcombes] in any way and you cannot be directors or shareholders of this company”. The email also stated that the Southcombes involvement was that GBM received invoices from England for work performed on that company’s behalf and they were paid through the New Zealand bank account. The email stated “The amount is correct $328,000 and it is not imperative that this whole amount be paid in the 1998 financial year”. She said that Mr Daniel advised her to put that information in the email.

Ms Jandagi denied that she had ever met Mr Warmington or that Ms Southcombe had informed her before the end of the 2000 calendar year that she and her husband had had enough of the scheme and did not wish to be involved anymore. She denied that she told Ms Southcombe that her other clients were happy with the scheme and did not want to get out, that she did not know how they could get out of the scheme and that the best thing to do was minimise their involvement. She stated that she did not have any clients in the scheme and she had no idea of other clients’ arrangements. She again denied that she was at any meeting with the Southcombes and Mr Agius in which exiting the scheme was discussed.

Ms Jandagi denied that she became aware that interest payments being made by GBM to an overseas entity were coming back to the Southcombes.

Ms Jandagi also denied that she knew that from the latter half of 2000, Ms Southcombe was seeking Billbury invoices from Mr Agius so that they would match up with the payments which were made. She repeated her denial that she ever discussed obtaining a debit card for Ms Southcombe or that she told Ms Southcombe that other clients had arrangements to obtain the funds back from Vanuatu by the use of a debit card. She repeated her denial that she said that the OTD trust account could be used for the return of funds.

Ms Jandagi agreed that Ms Southcombe was very much a hands-on person in relation to the accounting work for her companies. She agreed that she was proficient at computers and journals and that she was rational and sensible.

Ms Jandagi was referred to the email from Ms Southcombe to Mr Agius of 14 October 2002, to which I have referred in par [871] above. She repeated her evidence that Ms Southcombe mentioned that they were going to make some principal repayments on the loan and that “she mentioned a time period; from memory, I think it was over the next 12 months”. After refreshing her memory with the email, she accepted that she and Ms Southcombe agreed that they would have the company pay off the loan over a period of time. She did not recall Ms Southcombe saying that the funds forwarded would be held in the Hamilton Holdings account. She denied that she said that the Southcombes would borrow the funds as a personal loan and that Ms Southcombe said that she had already forwarded the sum of $26,419.22, which she wanted to be placed in the Hamilton Holdings account.

Ms Jandagi was referred to an article in the Sydney Morning Herald of 15 February 2003 entitled “Tax Office eyes dodgy Vanuatu tax scheme”. She stated that she did not see the article at the time and denied that Ms Southcombe had ever spoken to her about the article. She said that had Ms Southcombe raised the article with her, she would have spoken to Mr Daniel about it.

Ms Jandagi was asked in cross-examination about the management and consulting fees contained in the 1998 income tax return. She said that she knew that those management fees were in connection with the arrangement that Moore Stephens had put in place for GBM, but did not understand how it worked. She stated that she trusted her father’s judgment to know what was good for his clients to do in their business. When asked how these fees moved from zero, at the end of the financial year, to a journal entry of a quarter of a million dollars as a deduction in the 1998 tax return, she repeated that they “were part of arrangements set up by Moore Stephens, and they were done from a journal entry that Owen [Mr Daniel] has provided”. It was put to her that common sense would tell her that such an expense, even as an accrued expense, would be disclosed by GBM. She said that she believed it would have been disclosed to Mr Daniel and it was put into the accounts as a journal. She said that for the purpose of preparing the accounts and returns, she was provided with a disc to put the figures on and then Mr Daniel consulted with the client and gave her the finalised journal entries.

In relation to the hospital visit, to which I have referred in par [873] above, it was put to Ms Jandagi that during the course of the visit, Ms Southcombe made it plain that she was desperate to speak about a serious problem she had involving the scheme and Mr Agius. Ms Jandagi denied this.

Ms Jandagi was asked about the email from Ms Southcombe and Mr Agius of 15 March 2005, in which Ms Southcombe stated that following discussions with Ms Jandagi, they decided to resume interest payments for 2004. She said that she recalled that the meeting which took place after the sale of the marina had involved discussions about winding-up GBM. She that said Ms Southcombe mentioned to her that rather than make interest payments on the loan, she was considering adding interest onto the amount, basically compounding the interest on the loan. Ms Jandagi said that the option was discussed and she told Ms Southcombe that she did not believe it was a good option as they were trying to wind-up the company and were anticipating getting all of the assets and liabilities off the balance sheet at that stage. Ms Jandagi denied that she said to Ms Southcombe that she and her husband had to continue to make interest payments on the loan.

Ms Jandagi also denied that she told Ms Southcombe prior to 2005 that the Uniton paperwork was close to the $1 million limit and that they needed to refinance the Uniton loan with Security Life. It was put to her that that occurred at a meeting in the presence of Mr Agius. She said that she did not recall a meeting of that nature.

Ms Jandagi was cross-examined about the conversations which took place with the Southcombes after the AFP had raided the OTD office. She denied that, knowing of the appointment with the Southcombes, she left the office before they arrived, leaving instructions with the OTD receptionist to ask the Southcombes to go to the coffee shop and meet her there. She repeated her account of what had subsequently occurred and denied that it was a complete invention.

Ms Jandagi also denied that she told the Southcombes that although the AFP had taken their files, she did not think that it would be a problem for them because they had paid out the loan.

In relation to the accounts for the year ending 30 June 1999, Ms Jandagi repeated her evidence that the journal entries were given to her by Mr Daniel and that she wrote “Vanuatu” alongside the adjustment for management and consulting figures because Mr Daniel gave her that notation. She said that she could not recall why he said that.

The appellant relied on eight grounds of appeal against his conviction. Consistent with the approach taken by the parties, it is convenient to deal with Grounds 1-3 together.

These grounds of appeal were set out as follows:

The appellant submitted that the evidence departed substantially from the particulars of the conspiracy provided by the Crown. In that context, the appellant submitted that this was demonstrated by two documents, schedules A and B to the written submissions, filed by him in support of a no case submission the subject of Ground 1.

The schedule described as “Schedule A” first set out a summary of the Anscott transactions, containing a table with six columns labelled “Company”, “Year”, “Deduction Claimed”, “Money sent to Centurion”, “Invoices” and “Money Received”. The schedule also contained similar tables for the other companies about which evidence was given in the proceedings.

Schedule B contained what was said to be a summary of the evidence given in relation to each of the companies.

It is unnecessary to deal with these schedules in detail. They set out what might be described as a truncated form of some, but by no means all, of the evidence that was given.

The appellant submitted that all of the Australian companies (the participants in the scheme) were clients of OTD and that Mr Daniel and Mr Zerafa were trusted advisers who urged them to enter into the scheme, sometimes before or without meeting the appellant. The appellant noted that the Crown had submitted that the heart of the case was the provision of false invoices to the Australian companies to enable payments to be made and false expenses to be recorded. He said, by contrast, that the so-called transfer of funds “was no more than payment of funds to clear a journal entry of accrued expenses”. He referred to a number of instances where deductions were claimed without any movement of funds.

The appellant submitted that the evidence established that there was a system whereby the OTD accountants, as directed by Mr Daniel, claimed taxable expenses by journal entries, without justification. It was submitted that this was contrary to the Crown’s case, as particularised, and that the argument that the journal entries related to the “Moore Stephens scheme” did not accord with the rest of the evidence and should not be regarded as evidence of the conspiracy alleged by the Crown.

The appellant submitted that the evidence of the diagrams differed significantly from one Australian company to another. He submitted that only two of the diagrams in evidence were said to have been prepared by the appellant, the GBM diagram and the Bemawell diagram. In respect of Bemawell, he pointed out that Mr O’Rourke could not be sure whether the appellant or Mr Daniel had drawn it.

In relation to the GBM diagram, the appellant submitted that it was drawn after the company had already recorded false deductions and lodged the 1997 tax return in which they were claimed.

The appellant submitted that the other diagram said to have been drawn by the appellant, the ASS diagram, was not in evidence as it had not been retained by the Wallers. He said that the diagrams were drawn by each of the Wallers from memory and were different from each other and from the GBM and Bemawell diagrams.

The appellant pointed out that the other diagrams were said to have been drawn either by Mr Daniel or Mr Zerafa.

The appellant also pointed out that none of the diagrams mentioned Moore Stephens, none showed journal entries, which was how the deductions were claimed, and none mentioned tax savings or deductions. Further, he submitted that the evidence showed that the procedures set out in the diagrams were not followed.

The appellant noted that it was common ground that he had no part in the fraudulent preparation and lodgement of tax returns and that, contrary to the Crown’s assertion, the evidence showed no more than modest payments to the appellant.

The appellant also submitted there was insufficient evidence to support the contention that the appellant was involved in the production and provision of false invoices. He submitted that the evidence established that Anscott, Jiess and Hilisa did not receive invoices, that P Waller and Mr Daley were not aware of the source of invoices received by ASS and HCH respectively and that Ms McKenna said that the Tara invoices were given to her by Mr Zerafa.

The appellant submitted that having regard to the evidence given by Ms Southcombe at the trial of Mr Isbester (a portion of this evidence was admitted by consent at the hearing of the appeal), her testimony about false invoices should be regarded as worthless. He submitted that the preponderance of the evidence was that the appellant did not send false invoices to anyone.

The appellant submitted that the evidence of Ms Southcombe at the trial was that she received all of the invoices at once in the latter part of 2000 directly from the appellant in Vanuatu and that she put them into a file after receiving them. He referred to the evidence of Ms Southcombe that the invoices were not discovered by the AFP during the course of their search of her premises because they were in “another room”. The appellant pointed out that the AFP did discover a blank pro forma Billbury invoice addressed to a company, Moderne Art, one of OTD’s clients. The appellant also referred to the evidence of Mr Hodges, which I have set out in par [212] above.

The appellant pointed out that the invoices were first disclosed when the Southcombes provided their statements to the AFP on 30 April 2009.

By contrast, at the Isbester trial, an exhibit tendered by the Crown contained Billbury invoices seized from a computer belonging to Ms Southcombe. Ms Southcombe’s evidence was that she had no explanation as to how those invoices ended up on her computer. She gave the same explanation in relation to the Moderne Art invoice.

A further bundle of Billbury invoices was tendered at the Isbester trial in respect of which Ms Southcombe gave evidence to the effect that they would have come from Vanuatu. On 5 July 2012, Ms Southcombe also produced a series of emails from Billbury with invoices attached, which she said she had located the night before.

Senior counsel for the appellant submitted that there were so many inconsistencies in the evidence of the conspiracies that the Court should find that there was more than one conspiracy, different from the one charged. He submitted that the evidence established that various people conducted themselves in such different ways that it was “difficult to spell out of it a constant sufficiency of evidence sufficient to procure a conviction”. He also submitted that the evidence in fact pointed to the existence of other tax minimisation arrangements which were different to the one charged.

In support of this submission, senior counsel referred particularly to the evidence of Ms Southcombe and Ms Leimroth. He stated that in each case, there was clear evidence of a large liability in each of the companies’ accounts, before the conspiracy was alleged to have commenced. He said that these entries were largely unexplained and were consistent with liabilities created pursuant to a system within OTD by which false deductions were claimed by means of journal entries. He referred in particular to a liability of $210,588 in the GBM accounts and a current liability of $205,000 in the Anscott accounts for the 2001 year. He noted that the existence of these liabilities was raised with the trial judge in connection with the no case submission and her Honour’s conclusion was that the jury would be entitled to infer that they were legitimate loans.

Senior counsel for the appellant referred to the document to which I have referred in par [208] above, which showed an unsecured loan due by GBM as at 30 June 1997 in the sum of $210,588. He also referred to a document written by Ms Southcombe showing that the loan existed in 1994. He noted her evidence that she was unable to explain the entry.

Senior counsel for the appellant also noted that Ms Southcombe was unable to explain how the management and consulting fees of $328,000 ended up in the 1997 tax return. He referred to her evidence that Ms Jandagi worked out the figures (see par [164] above).

Senior counsel for the appellant also referred to the evidence of Ms Southcombe concerning her receipt of the Moore Stephens’ brochure, which she said that she received at the first meeting with Mr Agius (see par [161]). He submitted that the brochure did not exist at the time of the first meeting and, pointing to the cross-examination on this issue, submitted that it demonstrated the unreliability of her evidence.

Senior counsel for the appellant also submitted that an important part of the Crown case was that Mr Agius created Billbury invoices. He said that this alleged fact depended, to a considerable extent, on the veracity of Ms Southcombe’s evidence, which was scarcely believable. He referred to her evidence that she received all of the invoices at once, in the latter part of 2000. He also referred to a statement made by her to the AFP to the effect that no invoices were received after 23 May 2000. This statement was not in evidence and although it was referred to during the course of cross-examination, there was no reference to the part of it which stated that she received no invoices after 23 May 2000.

Senior counsel for the appellant also pointed to a statement of Mr Hodges to the AFP that the company records had been destroyed post-liquidation. He said that this was notwithstanding the subsequent disclosure to the AFP in April 2009.

Senior counsel for the appellant referred to the evidence given at the Isbester trial, to which I have referred above. He submitted that that evidence was inconsistent with Ms Southcombe’s evidence in this trial.

Senior counsel for the appellant made it clear that his submission was not that Ms Southcombe had fabricated the emails, but rather that there was a reasonable doubt that she had received them from Mr Agius.

Senior counsel for the appellant referred to the evidence of Ms Leimroth, to which I have referred in pars [683]-[687] above. He submitted that she could not explain either the initial liability of $205,000 in the accounts, nor the increase of $60,000, which occurred in the 2001 year.

The Crown submitted that it was incorrect to suggest that the evidence departed substantially from the particulars. It submitted that any variation in evidence, in the manner in which the scheme operated, was encompassed by the particulars. Further, the Crown pointed out that the agreed facts and flow of funds documents were tendered and admitted without objection.

The Crown responded to the appellant’s submission that many payments were not matched by false invoices by pointing to the fact that throughout the eight companies, there were many instances of matching invoices and the particulars of the scheme did not depend on matching invoices.

The Crown stated that it did not assert at the trial that the scheme, at its heart, involved the provision of false invoices. Rather, it referred to the provision of such invoices as a common means of making a false claim for a tax deductible expense.

The Crown submitted that there was no issue that Mr Daniel and/or Mr Zerafa urged some of the directors to participate in the scheme. It was submitted, however, that having regard to the evidence, the proposition that the appellant did not promote the scheme to some of the directors and initiate the false documentation was untenable.

The Crown submitted that it was not to the point that some claims were made before transfers took place. It submitted that the evidence of the directors was that the claims of false deductions were made after the scheme was “pitched” to them. It submitted that there was also no issue that the journal entries were used to account for the false claims. It was submitted that this was consistent with the implementation of the scheme alleged by the Crown.

In relation to Ms Southcombe, the Crown pointed out that her evidence was that the figure of $328,000 for fees in the 1997 year came from Ms Jandagi, shortly after the meeting with Mr Agius (see par [164]). The Crown also pointed out that in Ms Jandagi’s evidence, she stated that she relied on a journal entry given to her by Mr Daniel in recording the expense (see par [860]). The Crown also referred to the denial by Ms Southcombe that she had been involved in a prior tax minimisation scheme.

So far as the diagrams were concerned, the Crown pointed out there had been no challenge to Ms Southcombe’s evidence regarding whether a meeting with Mr Agius had occurred or her evidence that Mr Agius had drawn the diagrams. It was pointed out that the Wallers were not cross-examined on the issue and although Mr O’Rourke was cross-examined as to who drew the diagram, it was not suggested to him that it was not drawn at a meeting which he attended with Mr Agius and Mr Daniel at which the scheme was explained.

The Crown submitted that the differences in the diagrams and differences in the evidence of the witnesses about them was irrelevant, as was the fact that the diagrams did not mention Moore Stephens, show journal entries or refer to tax deductions.

The Crown submitted that its case was not presented on the basis that the appellant “controlled the system”. Rather, the case was that the appellant and the OTD accountants had different roles in the scheme. It was not significant that Mr Agius had no part in the preparation and lodgement of the returns, as the Crown case was that he came to Sydney to promote the scheme.

The Crown submitted that the evidence at the trial “bore out the submission that the appellant arranged for documentation to be produced and provided to at least some of the clients to conceal the true nature of the transfers”. It was submitted that the documents in the agreed folders contained dozens of documents issued by holders of the accounts at the Auckland branch of the ANZ Bank, to which payments were made. The Crown pointed out that the appellant was a signatory of each of these accounts.

In relation to Anscott, the Crown pointed out that invoices relating to the false loan from Edgecumbe Finance were seized from the Leimroth’s home. In relation to ASS, the Crown pointed out that a large quantity of false Billbury invoices and false Uniton loan documents were seized from the OTD office. It also pointed to the fact that a number of documents relevant to ASS’s participation in the scheme, including IFTC invoices and fund transfer authorities relating to Billbury, Uniton and Lincoln Investments, were signed by Mr Agius, as were the letters and certificates of cover from Lime Street.

The Crown also pointed to the fact that the Southern Hemisphere letter to Hydro-Magda of 25 June 2002 and the certificate of cover in favour of HCH were signed by the appellant.

In relation to Hilisa, the Crown submitted that the email from the appellant to Mr Hilli and Mr Jones’ lawyer, signed by Mr Agius on behalf of Edgecumbe Finance and IFTC, threatening debt collection proceedings (see par [409]), demonstrated the appellant’s involvement in the scheme.

The Crown conceded that there was a difference in Ms Southcombe’s evidence concerning Billbury invoices at the appellant’s trial and the Isbester trial. It was submitted, however, that the evidence needed to be considered in light of the contemporaneous documents. Reference was made in particular to an email of 19 May 1998 from Ms Southcombe to Moore Stephens, about the need “to transfer quite a lot of money, which Robert Agius is aware of, between now and the end of June ‘98” and stating “Our last transfer was for A$45,000” and the appellant’s reply the following day stating “Have you received back the $45,000 yet?” and stating that the loan papers would be sent on Friday.

The Crown also referred to the email from Ms Jandagi to Ms Southcombe, to which I have referred in par [167] above, and the email from Ms Southcombe to Ms Jandagi, forwarded to the appellant, referred to in par [165] above.

The Crown also referred to the fact that directions as to the disposal of the various amounts making up the $328,000, sent by GBM to New Zealand in the 1998 financial year, were made up of facsimiles from IFTC, signed by the appellant. The Crown also referred to the fact that it was the appellant who signed the cheque for $71,071.93 in favour of Ms Southcombe’s sister (see par [180] above).

The Crown submitted that the evidence given by Ms Southcombe concerning the Billbury invoices could not be disregarded. The Crown referred, in particular, to the emails to which I have referred in pars [174] and [175] above, submitting that it was impossible for those emails to have been invented.

In dealing with this issue, the Crown finally referred to the intercepted telephone conversations, about which Federal Agent Seidel gave evidence (see pars [268] and [269] above) as demonstrating the involvement of the appellant in the scheme.

The Crown submitted that it was plain that in the present case, the jury accepted the evidence of the company directors in relation to the involvement of the appellant in the scheme. It was submitted that the advantage that the jury had in seeing and hearing the directors was substantial and this was not a case where an appellate court could be satisfied that there was a miscarriage of justice. The Crown submitted that the Crown’s evidence which was admitted against the appellant overwhelmingly pointed to his guilt.

Senior counsel for the Crown submitted that it was not to the point that the administration of the scheme differed in each case. He submitted that it was immaterial whether the proposal to enter the scheme was put to the directors by Mr Daniel, the appellant or conjointly.

In relation to GBM, senior counsel for the Crown pointed out that although Ms Southcombe was challenged as to the time of the first meeting, she was not challenged on her evidence that there was such a meeting with the appellant at which he drew the diagram to which she referred.

Senior counsel for the Crown also referred to the evidence concerning the proposed joint purchase of the motor cruiser, to which I have referred in pars [181] and [182] above, as demonstrating the appellant’s involvement in the conspiracy.

In relation to the Billbury invoices, senior counsel for the Crown pointed out that it was not suggested to either of the Southcombes that they concealed or destroyed any records.

Referring to the emphasis placed by the appellant on the evidence relating to GBM and Anscott, senior counsel for the Crown submitted that even if those submissions were accepted, there remained unchallenged evidence which would have made conviction by the jury inevitable.

The relevant provisions the subject of the first count are s 29D and s 86(1) of the Crimes Act, as they stood at the time of the alleged conspiracy the subject of that count. These provisions provided as follows:

The formulation of the second count took account of the fact that following the repeal of s 86(1) and (2), from 24 May 2001, the offence of conspiracy to defraud the Commonwealth was contained exclusively in s 135.4 of the Criminal Code. That provision, so far as relevant, at the time of the alleged conspiracy, was in the following terms:

In R v LK [2010] HCA 17; 241 CLR 177 (LK), the High Court, dealing with s 11.5 of the Criminal Code, stated, at [72]-[107], that it imported the common law offence of conspiracy, subject to express statutory modification. The plurality in that case outlined the elements of the offence there being considered, which were in terms equally applicable to the offence under s 86(1) of the Crimes Act and s 135.4(5) of the Criminal Code:

It follows that for the offence under s 86(1) to be made out, the Crown was required to prove an agreement between the accused and one or more parties to commit the offence in s 29D, and in the case of the second count, an agreement to commit the offence in s 135.4(5). In LK, the plurality summarised the position in the following terms:

These comments are equally applicable to the offence under s 135.4(5) of the Criminal Code.

As was made clear in Agius v The Queen [2013] HCA 27; 248 CLR 601 at [42]-[44] (Agius Conspiracy Judgment), the relevant offence is a continuing offence and in order to prove that the requisite ‘state of affairs’ is established, it is only necessary for the Crown to prove that the accused and at least one other person said to be a party to the conspiracy were participants in an agreement to commit the offence.

In Gerakiteys v R [1984] HCA 8; 153 CLR 317, the High Court upheld a decision to quash the conviction of an accused for conspiring with H and divers others to defraud divers insurance companies. In the Court of Criminal Appeal, Street CJ, with whom Nagle CJ at CL agreed, determined that the evidence was not sufficient to indicate that all of the nine persons alleged to be part of the conspiracy, other than the appellant and H, had been jointly involved with each other. Rather, the court found that the evidence pointed to separate conspiracies. The High Court agreed. Gibbs CJ, with whom Wilson J agreed, stated (at 320) that the jury could not have found that any of the claimants were guilty of the conspiracy alleged because the evidence did not show that any claimant had a common purpose with the appellant and H to defraud divers insurance companies. Rather, their Honours found that each claimant had the purpose of defrauding his own insurer. Brennan J, who reached the same conclusion, made the following remarks (at 327):

In the court below, the appellant submitted, consistently with Gerakiteys, that there was no single overriding conspiracy, but rather a series of separate conspiracies (to which he was not a party).

The trial judge, in declining to direct an acquittal, rejected this argument. Her Honour pointed out that the argument based on Gerakiteys may have been available if the Crown had pleaded that the various directors of the Australian companies were co-conspirators, but this was not done: R v Agius, R v Abibadra, R v Jandagi, R v Zerafa (Supreme Court (NSW), Simpson J, undated, unrep) at [17].

The critical question is whether the accused and one or more of the co-conspirators, Mr Daniel and Mr Zerafa, were parties to an agreement, during the period that the conspiracy was alleged to have taken place, of the nature of that alleged by the Crown.

I have set out, in summary form, the manner in which the agreement was particularised in par [8] above. The agreement alleged was to defraud the Commonwealth of revenue by dishonestly concealing the true taxable income of the clients of OTD.

I have set out, in par [9] above, the means by which the fraud was alleged to have been affected. It consisted of Mr Daniel and/or one of the other OTD accountants concealing from, and failing to declare to, the ATO, the true taxable incomes of corporate and individual clients of OTD by implementing a scheme promoted by, and/or on behalf of, Mr Agius. The steps by which the scheme was alleged to have been implemented, and the conspiracy effected, are set out in par [15] above.

It is important to distinguish between the making and the formation of the agreement and its performance and implementation. In Saffron v The Queen (1988) 17 NSWLR 395 at 421, Hope JA, with whom Clarke JA and Hunt AJA relevantly agreed, referred to the speech of Lord Pearson in Director of Public Prosecutions v Doot (1973) AC 807 at 827, where his Lordship stated that a conspiratorial agreement has three stages, “(1) making or formation (2) performance or implementation (3) discharge or termination”. His Lordship stated that “When the conspiratorial agreement has been made, the offence of conspiracy is complete”. Although for the purpose of offences under the Criminal Code, the offence is not complete until an overt act is performed (s 135.4(9)(c)), the statement otherwise reflects the position in this country: See Agius Conspiracy Judgment at [30]-[31].

As Hope JA pointed out in Saffron at 419-420, what the Crown generally seeks to prove are:

In the present case, there was in my opinion sufficient evidence upon which the jury could conclude that the conspiracy alleged, as distinct from separate conspiracies, existed: See Doney v The Queen [1990] HCA 51; 171 CLR 207 at 212.

I have set out the evidence as it emerged at the trial in some detail above. The agreed statement of facts in each case reveals a flow of funds out of the taxpayer’s operating business to overseas companies in respect of which claims for false deductions were made. They also show, in all cases, money flowing back to the Australian companies and their directors as loans, in respect of which false claims for interest were also made on a number of occasions. Even when claims for interest were not made, the monies returned were not declared by the directors as income.

The overseas companies utilised in respect of each of the Australian companies were on many occasions common to more than one of them. Thus, Billbury was involved in the transactions concerning ASS, GBM, Tara and Jiess, Uniton was involved in the transactions concerning ASS, GBM, HCH, Hydro-Magda and Daley Labour, Edgecumbe Finance was involved in transactions concerning all of the taxpayers except Tara and Security Life was involved in transactions concerning GBM, Tara and Bemawell. Further, on three occasions, sham insurance arrangements were created, in respect of which tax deductions were claimed. In all cases, payments were made to IFTC.

The flow of funds, by itself, pointed to a single scheme to facilitate the making of false claims for deductions, albeit the overseas vehicles used were not identical in all cases. Further, the evidence overwhelmingly pointed to the involvement of the appellant. This is supported by the evidence of each of the directors of the Australian companies, which I have set out above.

In the case of ASS, P Waller gave evidence that Mr Agius explained the scheme, the involvement of Moore Stephens, Billbury and Uniton and drew a diagram to illustrate the flow of funds (par [61]). P Waller also said that the appellant told him that he had agreed to purchase Lime Street (par [68]). He identified a signature on the certificate of cover for the insurance that had been purportedly taken out with Lime Street as that of Mr Agius (par [79]).

In relation to GBM, Ms Southcombe gave evidence that the tax scheme was explained to her by Mr Agius and Mr Daniel, although she did not understand it (pars [157]-[161]). She referred to the fact that at a subsequent meeting with Mr Agius and Mr Daniel, a diagram was drawn explaining the scheme to her (par [168]). She stated that she wrote emails to Mr Agius requesting Billbury invoices (par [175]). She gave evidence of Mr Agius’ involvement in the sham purchase of a boat to facilitate the return of funds paid to Edgecumbe in purported discharge of the loan obligation. She also gave evidence on the involvement of Mr Isbester.

So far as Tara was concerned, Ms McKenna stated that the nature of the scheme was explained to her by Mr Daniel. However, she stated that she was told that Mr Agius was involved and ran the scheme out of Vanuatu (par [300]). It was not contended that this evidence was inadmissible against the appellant. Importantly, in July 1999, Mr Agius was asked to set up an offshore company and loan facility on her behalf (par [305]).

In relation to Kylood and Hilisa, although Mr Hilli and Mr Jones stated that they were introduced to the scheme by Mr Daniel, the involvement of Mr Agius is demonstrated by the letter he wrote on behalf of IFTC and Edgecumbe Finance on 7 May 2007, demanding payment of the Edgecumbe loan (par [409]).

So far as Bemawell was concerned, Mr O’Rourke gave evidence that Mr Agius was present at the meeting at which the scheme was presented to him as a scheme in which he could send money overseas and reduce tax (par [484]). Mr O’Rourke said that during the meeting, Mr Agius drew a diagram outlining the scheme (par [486]). He said that the period of cover for the Lime Street insurance was determined by Mr Agius and Mr Agius explained to him that the loan from Edgecumbe Finance was the means by which money would be returned to Australia (pars [496], [498]).

Mr O’Rourke gave evidence that the certificate of cover for the Lime Street insurance policy in favour of Bemawell for the year ending 30 June 2003 for $500,000 was signed by Mr Agius and the certificate of cover purportedly increasing the amount covered to $1 million was received under the cover of an IFTC letter signed by Mr Agius (pars [496], [497], [502]).

Mr O’Rourke also gave evidence that Mr Agius described the letter of demand that he had received from Edgecumbe Finance as just the formal letter to make the loan appear legitimate (par [511]).

Ms Peril also gave evidence of an email from Mr Agius concerning the fee to be charged to Bemawell in connection with the scheme (par [701]).

In relation to Mr Daley and his associated companies, Mr Daley acknowledged that he was first introduced to offshore trading as a means of tax minimisation by Mr Daniel (par [572]). However, in a subsequent meeting on 14 August 2001, he said that he was introduced to Mr Agius, who explained the scheme and the role of Edgecumbe Finance (par [596]). He identified the signature on the certificate of cover for Southern Hemisphere insurance as that of Mr Agius and acknowledged that the policy was a non-existent policy, even though $200,000 was paid for it (pars [597], [600]). Mr Daley also gave evidence of his discussion with Mr Agius as to the manner in which the scheme would be closed down (par [611]). Similar evidence was given by Mr Shute.

In relation to Anscott, Ms Leimroth gave evidence that the appellant was present at the meeting at which the scheme was explained to her as a tax scheme which would be beneficial (par [661]).

Ms Jandagi gave evidence that Mr Agius was introduced to her as a tax specialist (par [854]). In cross-examination, she said that it was clear to her that Mr Agius was coming to the OTD office to see Mr Daniel and clients (par [887]).

In addition, as the Crown pointed out, Mr Agius was a signatory on the various bank accounts with the Auckland branch of the ANZ Bank used in connection with the scheme.

Further, a considerable number of other documents were executed by Mr Agius in connection with the scheme, including IFTC invoices and fund transfer authorisations.

This summary of significant parts of the evidence demonstrates, in my opinion, that there was evidence on which the jury could find that the alleged conspiracy was entered into by Mr Agius. The jury could infer that Mr Agius, and at least Mr Daniel, entered into, and during the conspiracy period participated, in the relevant scheme. The jury could infer that the scheme consisted of an agreement whereby clients of OTD would be invited to participate in a tax minimisation scheme involving making false claims for expenses in respect of payments to offshore companies controlled by Mr Agius, the monies being returned by way of purported loans, which were in fact shams, and making false claims in respect of interest allegedly due.

The fact that the scheme was implemented in a somewhat different fashion for each taxpayer does not mean that there was no evidence of a single conspiracy of the nature of that particularised. In making a submission to the contrary, the appellant, with respect, conflated entry into and participation in the agreement with its implementation. The former is the physical act which gave rise to the offence.

The other factual matters raised by the appellant in his submissions on Grounds 1-3 seem to primarily contend that the verdict was unreasonable. I will deal with those arguments when I deal with Ground 3.

However, for the reasons set out above, Ground 1 of the grounds of appeal has not been made out.

No detailed submissions were made on this ground. In my opinion, it has not been made out.

For the offence the subject of the charges to be established, it was necessary for the Crown to first prove beyond reasonable doubt that an agreement of the nature of that alleged had been entered into. The agreement alleged is the agreement I have set out in par [8], namely, to defraud the Commissioner of revenue by dishonestly concealing the true taxable income of corporate and individual clients of OTD by a scheme promoted by or on behalf of Mr Agius.

The second element which it was necessary for the Crown to prove was that the appellant and at least one other party to the agreement intended that the offence particularised as the object of the conspiracy be committed. In the case of Count 1, the requisite intent was to defraud the Commonwealth. In the case of the second count, the requisite intent was to dishonestly cause a loss or a risk of loss to the Commonwealth. It was also necessary for the Crown to prove beyond reasonable doubt that the appellant knew, or believed that, the loss would occur or there was a substantial risk of it occurring.

The direction which it is suggested should have been given in this ground of appeal misstates the agreement which was said to be the subject of the conspiracy. It was not an agreement that the Australian companies would file false tax returns, but rather, that the taxable incomes of the Australian companies would be dishonestly concealed by the scheme promoted by the appellant.

Although it is correct that it was necessary for the appellant to intend for the Commonwealth to be defrauded and to believe that that would occur or that there was a risk that it would occur, the agreement that the Crown was required to prove was the one particularised, not the one asserted in Ground 2. There was thus no requirement for the direction the subject of this ground to be given. Indeed, it would have been erroneous to do so.

It follows that this ground of appeal has not been made out.

The principles governing the question of whether a verdict should be set aside as unreasonable are well established. In SKA v The Queen [2011] HCA 13; 243 CLR 400 at [11]-[14], the High Court stated that the approach to be adopted was that laid down by it in M v The Queen [1994] HCA 63; 181 CLR 487 at 492-494. The Court is required to make its own independent assessment of the evidence. If, after taking into account the primary responsibility of the jury in determining the question of guilt or innocence and the benefit of the jury of having seen and heard the witness, the Court is left in doubt as to the reasonableness of the verdict, the doubt in most cases is a doubt that the jury should have experienced.

For a verdict to be unreasonable, it is not enough that a review of the evidence shows only that it was possible for the jury to have reached a different outcome. As was stated by Hayne J in Libke v The Queen [2007] HCA 30; 230 CLR 559 at [113], Gleeson CJ and Heydon J agreeing, for the verdict to be set aside as unreasonable, the jury must have had, as distinct from might have had, a reasonable doubt.

It is unnecessary to set out the evidence again or to repeat the summary which I have set out in dealing with Ground 1. In my opinion, the evidence discloses an extremely strong case against the appellant. So far as the agreement the subject of the conspiracy is concerned, its existence can be inferred from the promotion by Mr Agius, in company with Mr Daniel, of the scheme as a tax minimisation scheme and the steps carried out by him to establish the structure used overseas. It is also demonstrated by his participation during the course of the scheme, for example, his involvement with Edgecumbe Finance in the making of the so-called loans, the sham insurance policies and his involvement in repatriation of the money to Ms Southcombe after she purportedly repaid the Edgecumbe loan.

The evidence further demonstrates that the scheme was set up to enable false claims to be made. Indeed, that appeared to be its only object. In these circumstances, it is difficult to see how a jury could have concluded anything other than that Mr Agius intended that the scheme would be used to dishonestly cause loss to the Commonwealth and believed that that would occur.

It does not seem to me to be of particular significance that the taxpayers who participated in the scheme were trusted clients of Mr Daniel. No doubt some would not have participated in the scheme had he not invited them to do so. That does not alter the fact that the evidence led to the conclusion that the scheme that they were entering into was a scheme promoted by or on behalf of Mr Agius.

The appellant placed particular reliance on the fact that the 1997 tax return for GBM made a false claim for $328,000 prior to the time that Ms Southcombe met the appellant. While that may be so, the $328,000 described in the GBM accounts as accrued management expenses were purportedly paid the following year through the mechanism set up by the scheme. The fact does not affect the conclusion that the appellant and Mr Daniel were participating in the scheme which dishonestly concealed the taxable income of GBM.

The appellant also relied upon the fact that the scheme diagrams which were drawn differed from case to case. However, as I have pointed out, the fact that the agreement may have been implemented in a different fashion from case to case does not deny either its existence or its object.

The appellant placed considerable reliance on the difference in the evidence of Ms Southcombe concerning the Billbury invoices at the trial and at the Isbester trial, submitting that there was reasonable doubt that she received the invoices from Mr Agius. However, if there was such a doubt, it does not alter the fact that, as envisaged by the scheme, the monies were paid offshore and returned as loans. Further, it must be remembered that, at least in relation to the invoices for interest on the Edgecumbe Finance loan, Mr Agius said in an email of 15 March 2004 that he was arranging invoices “as we speak” (par [875]). In addition, the jury had the advantage of seeing Ms Southcombe in the witness box and were entitled to accept her evidence.

In any event, even if the jury had entertained a reasonable doubt regarding the evidence of Ms Southcombe, there was unchallenged evidence from other taxpayers which established the Crown case.

Finally, the appellant’s reliance on the fact that the GBM accounts and the Anscott accounts showed loan liabilities which Ms Southcombe and Ms Leimroth were unable to explain does not alter the position. Each of Ms Southcombe and Ms Leimroth denied that the liabilities were incurred as a result of a tax minimisation scheme. The jury was entitled to accept this evidence, particularly when there was no evidence to the contrary. Further, even if Ms Southcombe and Ms Leimroth had been involved in a prior scheme, it would not impact on the fact that in subsequent years, they took advantage of the scheme promoted by Mr Agius.

I have dealt with the other matters raised by the appellant on this ground in dealing with Ground 1. In my opinion, the verdict was not unreasonable and Ground 3 has not been made out.

These grounds, which the appellant submitted were appropriate to be dealt with together, were as follows:

The appellant referred to his submission at the trial seeking a ruling pursuant to s 165 of the Evidence Act 1995 (NSW) in respect to the evidence of the Southcombes. He relied in particular on the evidence of Ms Southcombe concerning the Moore Stephens brochure, her evidence that Ms Jandagi worked out the $328,000 claim for management expenses, her inability to explain the $210,588 loan account in GBM’s books and the fact that she claimed that she had a meeting with the appellant on 16 March 1998, when in fact he was not in Sydney at that time.

The appellant submitted that this submission was supported by what was said by this Court in Brown v The Queen [2006] NSWCCA 69.

In relation to Ground 5, the appellant submitted that the direction complained of effectively directed the jury that each accused was engaged in a criminal conspiracy with each of the directors. It was submitted that this direction was prejudicial and may “have had the effect of foreclosing the jury’s decision to convict”. The appellant submitted that the direction could not be justified by s 165 of the Evidence Act.

At the hearing, senior counsel for the appellant relied in particular on s 165(2) of the Evidence Act. He acknowledged that a general warning was given, but said that the specific matter submitted to the trial judge relating to the credibility of the witness should have been referred to. He accepted that it was not necessary to give a warning in respect of matters readily apparent to a jury and that it was a matter of discretion, but submitted that in the present case, the warning should have been given.

The Crown repeated the submissions it made in respect of Ground 3, submitting that it was incorrect to say that Ms Southcombe’s evidence was “highly unsatisfactory”.

The Crown pointed out that the trial judge did direct the jury “that the evidence of the company director witnesses may be unreliable because they were criminally concerned in the events giving rise to the proceedings”. Further, in regard to Ms Southcombe, the trial judge warned the jury that her mental health may have affected her perception and memory of events, stating in the summing-up that it was an important issue that, at the time, she was in a dire psychiatric condition. It was pointed out that her Honour told the jury that there were factual disputes identified by the appellant which could mean Ms Southcombe’s evidence was unreliable. Her Honour identified them as including the date of the first meeting with the appellant and the time the appellant gave her the Moore Stephens brochure.

The Crown submitted that little turned on the fact that Ms Southcombe may have been mistaken as to the time that she received the brochure and that there was no dispute that the appellant met Ms Southcombe in 1998.

The Crown also submitted that the part of the summing-up extracted in Ground 5 of the grounds of appeal had to be read in context. It was pointed out that her Honour introduced the charge concerning the unreliability of the company directors as something important and stressed their dishonesty.

Section 165 of the Evidence Act, so far as relevant, provides as follows:

In that context, the trial judge gave the following warning and made the following remarks in the summing up:

The general warning to which I have referred above seems to be more than adequate to deal with the matters referred to in s 165(1)(d). Further, the judge made specific reference to Ms Southcombe’s ill health as possibly affecting her perception of events and her recollection of those events.

The other matters raised by the appellant in his submissions were clearly in issue and, in my opinion, it was open to the trial judge to conclude that it was not necessary to indicate that Ms Southcombe’s evidence was unreliable because of those matters. Any such direction would assume that her evidence on those matters was unreliable, something very much in issue in the proceedings and a matter for the jury to determine. As this Court pointed out in R v Fowler [2003] NSWCCA 321; 151 A Crim R 166 at [184], the purpose of the section is to ensure the jury’s attention is drawn to any fact that might adversely affect the weight to be given to evidence before them. The Court stated that a warning was required if, without it, the jury might not be aware of a particular fact which affected the reliability of the evidence. It seems to me that in the circumstances of the present case, the warning given by the trial judge and the other remarks made by her Honour were sufficient to direct the jury’s attention to factors which may affect the reliability of Ms Southcombe’s evidence.

Further, as the Crown correctly pointed out, the present case bears no resemblance to what was considered by this Court in Brown, where there was total non-compliance with the provisions of s 165.

It follows that this ground of appeal has not been made out.

The Crown contended that the direction complained of was required by s 165(1)(d) of the Evidence Act. It submitted that the direction was factually correct and in conformity with s 165. It pointed out that the appellant’s case was that he had nothing to do with the enterprise.

By contrast to Ground 4, this ground seems to suggest that a warning under s 165 should not have been given. The warning suggested that the evidence may be unreliable because of the directors’ involvement in the tax fraud which it was alleged that the appellant conspired to bring about. The directors had admitted involvement in that fraud and the direction was necessary to ensure that the jury was made aware that their evidence inculpating the accused at the trial was treated with caution.

This ground has not been made out.

This ground was as follows:

Once again, the appellant relied on submissions made to the primary judge. It was submitted at the trial that the proposed direction was an indirect comment on the appellant’s decision not to give evidence and suggested some moral virtue on behalf of the other accused in their decision to do so. The appellant submitted at the trial that the following direction was appropriate:

The appellant’s written submissions on the appeal repeated the submission and contended that the appellant was entitled to “an undiluted direction pursuant to s 20(2) [of the Evidence Act] and Azzopardi v The Queen (2001) 205 CLR 50”.

The Crown submitted that the direction about the co-accused giving evidence did not compliment them for doing so. It submitted that the direction about the appellant not giving evidence was a standard direction which had to be given. The Crown submitted that it would have been artificial to put the direction in a different part of the summing-up.

The Crown also submitted that the part of the direction complained of had to be read in context. It was submitted that, if read as a whole, the direction complied with all matters identified in Azzopardi v The Queen [2001] HCA 25; 205 CLR 50. It was submitted that the direction was not given to serve the purpose of “telling the jury that the appellant kept out of the witness box because of a foreboding based on a consciousness of guilt”.

It is necessary to place those parts of the direction relied upon in support of this ground in context. Her Honour’s direction on the matter was as follows:

The direction simply stated the fact that the appellant’s co-accused did not give evidence. It did not compliment them for doing so. Further, there was no suggestion, express or implied, that the appellant’s failure to give evidence was because he believed that he was guilty of the offence charged. The direction was to the contrary.

In Azzopardi, at [50], the plurality suggested that the direction which should be given on an accused’s failure to give evidence was in the following terms:

The direction given by the trial judge conformed to this direction.

Further, it does not seem to me that the juxtaposition of this direction with the statement that the co-accused gave evidence adversely affected the force of the direction, much less suggested that the appellant failed to give evidence because he was, or believed he was, guilty of the offence charged.

This ground of appeal has not been made out.

This ground was as follows:

I have set out the evidence concerning these two entries and the submission made in relation to them in respect of Ground 3 above (see pars [926]-[927]). The appellant submitted that “the jury could not reasonably conclude that the most likely explanation in each case was an honest loan account”. It was submitted that a more likely hypothesis was that the entries were the subject of an earlier separate conspiracy, different from the one charged.

The Crown pointed out that each of Ms Southcombe and Ms Jandagi were unable to say how the liability in the books of GBM arose. It was submitted that this was not surprising, having regard to the lapse of time between 1997 and 2012, when the evidence was given. It was pointed out that Ms Southcombe denied that she had been involved in a previous tax minimisation scheme. In these circumstances, the Crown submitted that there was no basis for the direction sought in respect of the GBM loan.

The Crown submitted that the position in regard to Ms Leimroth was similar. Ms Leimroth said that she could not recall what the $205,000 Anscott liability related to, making it clear that she relied on her accountants. She also denied involvement in a previous tax scheme.

This ground can be dealt with shortly.

There was not the slightest evidence that either Ms Southcombe, Ms Leimroth or their respective companies had been involved in a previous tax minimisation scheme. In these circumstances, it would have been inappropriate for the trial judge to have given the direction sought.

This ground of appeal is not made out.

Ground 8 was as follows:

The appellant primarily relied on the submissions made on behalf of Mr Zerafa at the trial. In these submissions, the following direction relevant to this ground was suggested:

The submission, relying on Peters v The Queen [1998] HCA 7; 192 CLR 493 and Macleod v The Queen [2003] HCA 24; 214 CLR 230, emphasised the requirement that the jury be directed in terms that require the trial judge to first identify the knowledge and intent said to render the relevant conduct dishonest.

The appellant submitted that he was entitled to such a direction and (at least by implication) that such a direction was not given.

The trial judge identified to the jury the following issues for determination:

The Crown stated that it had been agreed that the appellant had nothing to do with the preparation and lodgement of the tax returns. It stated that it was submitted to the jury that this was only part of the whole of the dishonest means and that the appellant had been engaged in dishonest conduct, including being the effective provider of invoices and insurance documents to back-up the false accounts and, in particular, pitching the scheme to clients.

In that context, the Crown referred to the manner in which the trial judge prefaced the summing-up of the Crown case:

The Crown submitted that this direction satisfied any requirement arising out of Peters or Macleod.

In Peters, Toohey and Gaudron JJ made the following remarks:

These comments were approved by the plurality in Macleod at [37] and by McHugh J at [99]. McHugh J added the following comments:

However, it should be noted that in Peters, in dealing with the charge to the jury on the offence of conspiracy, Toohey and Gaudron JJ stated:

That comment must be qualified, having regard to the provisions of s 135.4(5)(a) of the Criminal Code, which provides that the relevant conspiracy is to dishonestly cause loss or a risk of loss.

In her summing-up, the trial judge explained the three issues in the issues for determination document supplied to the jury in the following terms:

That portion of the summing-up, particularly the last paragraph, identified, in my opinion, the requisite knowledge or belief said to render the agreement dishonest. In a subsequent portion of the summing-up, referred to in par [1053], her Honour sought to encapsulate the facts on which the jury had to decide if the appellant had the requisite dishonest belief or intent, namely, that the clients were making claims for deductions that were not incurred. These claims which prejudiced or imperilled the legal rights of the Commonwealth were dishonest by ordinary standards (c/f Peters at [33]).

In these circumstances, the direction satisfied the requirements contained in Peters and Macleod.

It follows that this ground has not been made out.

Ground 9 was as follows:

The appellant again relied on submissions made at the trial in support of this ground. In those submissions, the appellant submitted that the direction in question was unnecessary and prejudicial to him because he was identified as a partner of Moore Stephens and therefore may be seen as procuring the Moore Stephens arrangement or being a party to it in Vanuatu.

The Crown referred to a body of evidence linking Mr Agius and Moore Stephens with the arrangement. It was submitted that in addition to the evidence of the company directors, there was a large body of documentary evidence directly linking the appellant with the scheme, with Moore Stephens Vanuatu and with the overseas operation of the scheme. It was submitted that it would have been inappropriate to omit reference to Moore Stephens’ involvement, the appellant’s association with that firm and the overseas operational components effected through them. The Crown submitted that in the circumstances, the direction was not unnecessary or prejudicial.

The direction was not unnecessary or prejudicial. As the Crown pointed out, there was a large body of evidence linking Moore Stephens with the scheme. Mr Agius was a partner of that firm, a brochure was produced showing that and, to the extent that Mr Agius was not involved directly, a significant part of the ongoing operation of the scheme was carried out through employees of Moore Stephens, including Ms Kelly Fawcett.

The reference to Moore Stephens must be read in the context of the first issue identified by the judge for the jury’s determination. The jury were directed that they had to be satisfied beyond reasonable doubt that the accused was a party to the agreement to have OTD’s clients participate in the scheme. The direction did not proceed on the assumption that, as the scheme originated from Moore Stephens, Mr Agius was a party to the agreement alleged.

In these circumstances, the direction was not unnecessary or prejudicial and this ground has not been made out.

It is not necessary to consider the application of the proviso to s 6(1) of the Criminal Appeal Act 1912 (NSW), having regard to the conclusion which I have reached. However, had any of Grounds 2 or 4-9 been made out, I would have been inclined to apply the proviso. Having regard to the facts which I have set out above, this case was a particularly strong one and any error of the nature of that alleged in Grounds 2 or 4-9 did not cause a miscarriage of justice. However, it is unnecessary to pursue the matter further.

In the result, the appeal against conviction should be dismissed.

In R v Agius; R v Zerafa [2012] NSWSC 978 (Sentencing Judgment), the sentencing judge sentenced the appellant to a term of imprisonment of 4 years and 5 months on the first count, commencing on 31 July 2012 and ending on 30 December 2016. On the second count, her Honour imposed a term of imprisonment of 4 years and 6 months, commencing on 31 December 2016 and expiring on 30 June 2021. Her Honour fixed a single non-parole period of 6 years and 8 months, expiring on 30 March 2019.

It should be noted that the maximum penalty on the first count was imprisonment for a term of 20 years. On the second count, the maximum penalty was 10 years imprisonment. Her Honour, following R v Ronen [2006] NSWCCA 123; 161 A Crim R 300 at [73]-[74], stated that the reduction in the maximum penalty indicated a change in the attitude of the legislature to the offending in question and operated to reduce the impact of the maximum penalty (on the first count) accordingly: Sentencing Judgment at [78].

The sentencing judge concluded that the offences were within the worst category of offences. Her Honour found, consistently with the verdicts of the jury, that the scheme was fraudulent, stating that at its heart were “fraudulent claims by Australian companies for income tax deductions”: Sentencing Judgment at [18]. She concluded that, as designed, the scheme involved the provision to Australian companies of invoices for specified services, usually identified as management and consultancy services, which were never provided by the invoicing company. She noted that the return of the money, which in reality was money of the companies, took place without it being declared for income tax purposes, which was the secondary fraud, or loss to the Commonwealth.

Her Honour, however, concluded that the implementation of the scheme was haphazard and inept, pointing out that in some cases, invoices were not provided at all and in other cases, only after requests by directors. Her Honour also noted that on some occasions, the invoices did not correspond with the payments made.

Her Honour described the most elaborate part of the scheme as the documentation which provided evidence that the money returned to the directors constituted loans. She referred to the Edgecumbe Finance facility letters as giving the appearance of a genuine commercial transaction. She also referred to what she called the letters of comfort or letters of forgiveness, which were palpably false.

Her Honour also referred to the invoices purportedly for interest on loans said to have been drawn down. She also referred to the insurance aspects of the scheme, noting in particular that the communications in relation to that aspect were directly with Mr Agius.

Her Honour noted that the amount of money sent to New Zealand and claimed as deductible expenses resulted in substantial revenue loss. She pointed to the fact that, in the case of ASS, the tax evaded was $1.27 million and in respect of the other companies, ranged from just under $100,000 to $654,000. She pointed out that the nature and circumstances of the offending included the period over which it was perpetrated.

Her Honour stated that there was uncontradicted evidence that Mr Agius actively presented and promoted the scheme to clients of OTD through his association with Mr Daniel, who selected clients that he considered suitable for participation. She referred to the fact that on a number of occasions, Mr Agius outlined the scheme with the assistance of diagrams.

Her Honour stated that she was “satisfied beyond reasonable doubt that the implementation of the arrangements was at all times under the direct control and supervision of Mr Agius”: Sentencing Judgment at [43]. She noted that he was a signatory on the New Zealand bank accounts, whilst acknowledging that the evidence did not go so far as to show that he had control over them.

Her Honour stated that she was also satisfied beyond reasonable doubt that the appellant received financial benefit from his involvement.

Her Honour also noted that Mr Agius was involved, to a very significant degree, in seeking to perpetuate and protect the conspiracy after the ATO’s interest had become apparent. She referred to the letters of demand from Edgecumbe Finance, accepting that the appellant had told directors of two companies that those letters could be ignored. She stated that she was also satisfied that Mr Agius was significantly involved in returning funds to directors of GBM, pointing to the sham boat purchase and the return of funds through Mr Isbester. Her Honour concluded as follows:

In considering the appropriate sentence, her Honour stated that it was “hardly necessary to say that offences such as these call for sentences containing a strong element of general deterrence”: Sentencing Judgment at [63]. She stated, however, that the need for personal deterrence was limited, having regard to the appellant’s age, his criminality, the need for a significant punitive element in the sentence and the fact that he would have little further opportunity for engaging in the type of criminal conduct in question. She stated that the most important sentencing considerations were general deterrence and the need to impose adequate punishment.

In dealing with the injury, loss or damage resulting from the offences, a matter required to be taken into account by virtue of s 16A(e) of the Crimes Act, her Honour made the following remarks:

Her Honour dealt with the personal circumstances of the appellant. She referred to the character evidence tendered on his behalf, noting his generous contribution to Vanuatan society and that he was regarded as a man of integrity, a perception she said was simply false. In these circumstances, she said that she gave the character evidence little weight.

Her Honour referred to the fact that the appellant was reported to have suffered a stroke in 2009, although stating that he appeared to suffer minimal after effects. She referred to the fact that medical evidence showed he suffered from sleep apnoea, degenerative changes in his right knee and was finding prison conditions difficult to adjust to and stressful. However, her Honour said that what was reported was to be expected of a middle aged, middle class man, facing the reality of an extended period of incarceration for the first time. Her Honour’s conclusion was in the following terms:

As I indicated, in considering the change in the maximum penalty, her Honour adopted the approach in Ronen.

In support of his application for leave to appeal against his sentence, the appellant relied on four grounds of appeal. However, as will appear, one of these grounds was abandoned during the hearing of the appeal.

In support of this ground, the appellant pointed out that the trial judge found that the appellant was the promoter of the scheme, which originated in Vanuatu and “involved the payment of money by Australian companies in response to false invoices … and fraudulent claims of those amounts as deductible business expenses, and the return to the directors personally of the money, masquerading as loans”.

The appellant submitted that there was evidence, which was open for the sentencing judge to accept, that the scheme was actively promoted by Mr Daniel and Mr Zerafa, more than it was by the appellant. He pointed to the fact that all of the participants were clients of OTD and that Mr Daniel and Mr Zerafa were their trusted advisers.

The appellant also submitted that it was open for her Honour to accept that the services of Moore Stephens and PKF Vanuatu were used by Mr Daniel and Mr Zerafa to cover a pre-existing tax scheme and therefore, the appellant’s role, and the resulting objective seriousness of his role, was less.

In this regard, the appellant stated that it was open for the sentencing judge to conclude, on the balance of probabilities, that the scheme originated with the recording of false journal entries for expenses, payments were made to cover these expenses and sometimes, invoices were subsequently presented. The appellant submitted that in these circumstances, his role was substantially less than that of Mr Daniel and Mr Zerafa.

The appellant also submitted that rather than being involved for a period of ten years, his involvement commenced in March 1998 and ended on 23 October 2006.

At the hearing, counsel for the appellant submitted that the role of the appellant was more akin to covering up the scheme, rather than being the initiator. As with the conviction appeal, particular reliance was placed on the entry of $328,000 in GBM’s books as accrued management expenses and claims for this amount as a deduction, prior to Ms Southcombe meeting Mr Agius and prior to the making of overseas payments by GBM.

Counsel for the appellant also submitted that the primary role played by the OTD accountants in the scheme was demonstrated by the fact that, in the case of Hilisa, the amount to be paid overseas was resolved in a conversation between Mr Hili and an OTD bookkeeper, Ms Lynda Meek (see par [415] above).

The Crown submitted that her Honour’s finding that Mr Daniel actively promoted the scheme did not exclude the fact that the appellant was also a promoter of the scheme.

The Crown submitted that the fact that the scheme was implemented in a haphazard and inept way did not reduce the appellant’s culpability.

The Crown submitted that the evidence did not establish a pre-existing fraudulent practice by OTD. It submitted that her Honour was correct in finding that although the appellant was only briefly involved in the endeavour to deceive the ATO, he was involved, to a significant degree, in perpetuating and protecting the conspiracy after the ATO’s interest had become apparent.

The Crown submitted that the sentencing judge did not find that the invoices were at the heart of the scheme, rather, her Honour found that fraudulent claims for income tax deductions said to be for business expenses were.

The Crown also pointed out that the scheme was first presented to Kylood in early 1997 and it could be inferred that the appellant’s involvement also commenced at that time. In any event, it was submitted that it was immaterial whether the appellant’s involvement extended over eight or 10 years.

In Cheung v The Queen [2001] HCA 67; 209 CLR 1 at [14], the plurality quoted the decision of this Court in R v Isaacs (1997) 41 NSWLR 374 at 378, stating that there was “no general requirement that a sentencing judge must sentence an offender upon the basis of the view of the facts … most favourable to the offender”. This is subject to the constraints that the findings are not inconsistent with the jury’s verdict and must be made beyond reasonable doubt.

It was not suggested that the findings made by the sentencing judge were inconsistent with the jury’s verdict. Further, in my opinion, it was open to her Honour to make a finding that Mr Agius promoted the scheme. Indeed, the evidence overwhelmingly pointed to this being the case. I have set out the evidence relating to each transaction in detail and summarised the evidence when dealing with Grounds 1 and 3 of the grounds of appeal. That evidence demonstrates that Mr Agius promoted the scheme along with Mr Daniel and, to a considerably lesser extent, Mr Zerafa. Further, it shows that he took a key role in the day-to-day implementation of the scheme and provided a means by which the fraud could be committed.

I have dealt with the argument concerning the pre-existing tax scheme and the claim for the $328,000 in the 1997 GBM tax return above. At the risk of repetition, there was no evidence of a pre-existing tax scheme and the $328,000 was paid to Uniton and returned to GBM through the mechanics of the scheme. Further, the submission pays no regard to the many other transactions utilised in the scheme.

The primary judge was correct in concluding that the scheme was crude and carried out in a haphazard and inept manner. This does not alter the degree of the appellant’s culpability. Further, his culpability was not lessened by the fact that his involvement in the scheme may have extended for eight years rather than 10.

In these circumstances, her Honour was correct in concluding that the appellant’s offence came very close to the worst type of offence of this nature. This ground of appeal has not been made out.

The sentencing judge sentenced Mr Zerafa to 500 hours community service work on the first count. On the second count, her Honour sentenced Mr Zerafa to imprisonment for 3 years, commencing on 23 August 2012 and expiring on 22 August 2015, but ordered that he be released forthwith on entering into a recognisance to be of good behaviour for three years.

Following a Crown appeal, Mr Zerafa was sentenced to imprisonment for 3 years and 6 months, commencing on 23 August 2012 and expiring on 22 February 2016, with a non-parole period of 2 years and 3 months, expiring on 22 November 2014: R v Zerafa [2013] NSWCCA 222 (Zerafa Sentencing Appeal).

The appellant submitted that there was a marked disparity between Mr Zerafa’s sentence and the sentence imposed on him, which could not be explained by differences in her Honour’s finding as to their respective involvement in the scheme.

The appellant pointed to the following findings of fact made by the sentencing judge in respect of Mr Zerafa. First, he knowingly gave untrue evidence. Second, his offending period was seven years. Third, communication with Moore Stephens and PKF Vanuatu went through him or Mr Daniel. Fourth, Mr Zerafa’s involvement began at an early stage and he had a working knowledge of the scheme by mid-1999. Fifth, he was involved with a number of Australian taxpayers in the preparation of fraudulent tax returns. Sixth, although he was under the influence of Mr Daniel, he could advise clients independently without Mr Daniel. Seventh, he was involved in preparing at least two company directors for audit meetings. Eighth, he received no direct financial benefit or reward from the scheme.

Having regard to these findings, the appellant submitted that there was no justifiable reason to take the good character of Mr Zerafa into account but not that of Mr Agius.

The appellant pointed to the finding of the sentencing judge that Mr Agius received a benefit from the scheme, although modest. He submitted that it could be inferred that as Mr Zerafa was entitled to 25% profit, as a partner of the firm, he too received a similar modest benefit.

The appellant also submitted that the finding that the delay of six years between the execution of the search warrants in 2006 and the trial caused Mr Zerafa considerable stress and anxiety, was equally applicable to the appellant. This was particularly so given that he was not an Australian citizen, was separated from his family and community and could not continue working, as his business was in Vanuatu.

Ground 12 of the grounds of appeal, which contended that the sentencing judge did not properly take into account the appellant’s bail conditions, ultimately was not pressed as a separate ground, but it was submitted that the bail conditions were relevant to the issue of parity. The appellant pointed out that although he was on bail, the conditions included forfeiture of his passport and reporting conditions.

In relation to this ground, the appellant pointed to the fact that the sentencing judge found that those conditions were not onerous, but took into account the stress imposed on Mr Zerafa and his family whilst awaiting trial.

The Crown submitted that the sentence imposed by this Court on Mr Zerafa was of primary significance. It was submitted that a number of factors led to this Court imposing a sentence which it regarded to be at the bottom of the range. These factors were that, first, the 500 hours of community service had been completed and second, the 13 months of his suspended sentence had passed without incident. The Court also considered that Mr Zerafa’s offending was not in the category of the worst type.

In relation to the fact that Mr Zerafa’s good character was taken into account, whilst the appellant’s was not, the Crown pointed to the reasons that the sentencing judge gave for adopting this approach. In her remarks on sentence, her Honour pointed to the fact that Mr Zerafa was introduced to a morally poisonous environment and he engaged in the conspiracy under the malign influence of Mr Daniel.

The Crown submitted that the finding by the sentencing judge that Mr Zerafa received no financial benefit needed to be balanced by the conclusion of Hoeben CJ at CL in this Court, that there was an indirect benefit to him: Zerafa Sentencing Appeal at [86].

In considering this issue, it is important to have regard to the conclusions reached by the Court of Criminal Appeal in the Zerafa Sentencing Appeal.

In that case, Hoeben CJ at CL, with whom Latham J agreed, emphasised the need for general deterrence for offences of this nature: at [37]. His Honour acknowledged that “the circumstances leading to the respondent’s involvement in the scheme, the continuing baleful influence of Mr Daniel and the respondent’s intervention in 2004 to prevent new clients entering the scheme were important matters for her Honour to take into account”: at [87]. However, his Honour also stated that they did not account for his continuing involvement until 2006, when he was in his 30s, or his efforts to mislead the investigators. His Honour accepted that the delay was relevant to his sentencing, but stated that the extra-curial punishment resulting from him being struck off the roll of chartered accountants was only of limited effect, being a risk that Mr Zerafa chose to take: at [91]-[92]. He stated that even if the effect of the respondent’s incarceration on his family was taken into account in sentencing, it would not significantly affect the outcome, not being exceptional hardship: at [97].

Importantly, although concluding that the sentencing judge failed to give sufficient weight to general deterrence and the need to impose adequate punishment and that she overvalued Mr Zerafa’s personal circumstances, Hoeben CJ at CL held that Mr Zerafa’s offending was not in the worst category: at [98]. In resentencing, his Honour also took into account the need for restraint on a Crown appeal and described the sentences imposed as towards the bottom end of the range.

In Green v The Queen; Quinn v The Queen [2011] HCA 49; 244 CLR 462 at [31], the plurality, quoting Gibbs CJ in Lowe v The Queen [1984] HCA 46; 154 CLR 606 at 610, emphasised that the reason a court interferes on this ground is that it considers that “the disparity is such as to give rise to a justifiable sense of grievance”, assessed by objective criteria. They emphasised that the court would refrain from intervening when the disparity is justified by a difference between co-offenders’ criminal history, general character and the part each played in the relevant criminal conduct.

In the present case, the ultimate sentence imposed on Mr Zerafa does not give rise to such a justifiable sense of grievance. Critically, Mr Agius’ offending was in the worst class of case, while Mr Zerafa’s was not. Mr Agius’ role in promoting and implementing the scheme, as I have described above, was of far greater significance than the role played by Mr Zerafa. Although the Court of Criminal Appeal discounted, to some extent, the influence of Mr Daniel on Mr Zerafa, as they pointed out, it remained an important matter for the sentencing judge to take into account. It was in this context that the sentencing judge took into account the previous good character of Mr Zerafa.

Further, it is relevant in this regard to recognise that the Court in resentencing Mr Zerafa imposed a sentence which it considered to be “towards the bottom of the range”.

So far as the other matters raised by the appellant are concerned, the Court of Criminal Appeal referred to the question of delay in the context of resentencing. As I indicated, Hoeben CJ at CL stated that the effect on Mr Zerafa’s family was not a matter which would significantly affect the outcome.

In these circumstances, the difference in the sentences was justified. This ground of appeal is not made out.

The appellant submitted that the matters raised in relation to the previous grounds demonstrated that the sentence was manifestly excessive.

The appellant also submitted that the appellant’s lack of receipt of any significant financial benefit from the scheme demonstrated manifest excess.

The appellant sought to contrast the financial benefit of $189,000, received by him and his associated entities, with sentences imposed for fraud involving much greater levels of personal gain. He pointed to the cases of: DPP v Goldberg [2001] VSCA 107; 184 ALR 387 (Goldberg), involving, he submitted, a personal gain of $20 million and a sentence of 7 years, with a non-parole period of 4 years and 6 months; Ronen, involving a gain of $15-20 million dollars, in respect of which partly concurrent sentences of 8 years and 6 months and a non-parole period of 5 years and 6 months were imposed; and Chen v R [2009] NSWCCA 66, a case involving conspiracy to deal with around $118 million, in which a sentence of 6 years, with a non-parole period of 3 years and 7 months, was imposed.

The appellant also submitted that manifest excess was demonstrated by the sentence given to scheme participants, pointing to the sentence given to each of the Wallers of 2 years and 7 months, with a recognizance after 16 months, in circumstances where the fraud was said to amount to $1,229,160.48.

Senior counsel for the appellant also submitted that the total accumulation of the sentence demonstrated manifest excess.

The Crown submitted that the question of financial benefit to the appellant was not as relevant as the amount in which the Commonwealth revenue was defrauded. It also pointed out that the relevance of the sentences given to scheme participants was limited as they were only involved in their own scheme.

However, the Crown did point to the sentence imposed by this Court on Mr Hili and Mr Jones in R v Jones; R v Hili [2010] NSWCCA 108; 79 NSWLR 143. In that case, a sentence of 3 years imprisonment was imposed on both taxpayers, after a discount of 50% for an early plea and assistance. The Crown submitted that their offending was at a much lower level.

The Crown pointed out that the sentencing judge correctly recognised that it was necessary to impose an appropriate sentence in respect of each offence before considering questions such as accumulation or concurrence and totality. The Crown pointed to the view expressed by her Honour that the overarching question was one of totality. Thus, whether the appellant was sentenced for two offences committed over a confined period, the second wholly consecutive on the first, or a simple continuing conspiracy over the whole period, the result would be the same.

The approach to be taken in considering whether a sentence is manifestly excessive (or inadequate) or is unreasonable or plainly unjust, was summarised by the High Court in Hili v The Queen; Jones v The Queen [2010] HCA 45; 242 CLR 520 (Hili; Jones) at [59] in the following terms:

In the present case, it does not seem to me that the sentence was manifestly excessive. The offence continued over at least eight years, providing a mechanism by which eight companies and their directors were able to defraud the revenue of significant amounts of tax. The seriousness of offences of this nature has been emphasised by the courts: Hili; Jones at [63]; R v Ruha [2010] QCA 10; 198 A Crim R 430 at [45]. The corrosive effect on society of such offences has also been emphasised: See the remarks of the sentencing judge, referred to in par [1083]; R v Huston [2011] QCA 350; 219 A Crim R 209 at [57]-[58]; Zerafa Sentencing Appeal at [83].

As I indicated, the judge was correct in finding that the offence fell into the worst class of offences of this nature. Having regard to the need for punishment and general deterrence, it does not seem to me that the sentence imposed was manifestly excessive.

However, it is necessary to deal with the cases which the appellant submitted demonstrated that the sentence was manifestly excessive. In Hili; Jones, at [53], the plurality pointed out that, “in seeking consistency, sentencing judges must have regard to what has been done in other cases”. However, in stating that care must be taken in the use of such cases, the Court repeated the warning given by Simpson J in Director of Public Prosecutions (Cth) v De La Rosa [2010] NSWCCA 194; 79 NSWLR 1 at [303]-[305], that the history of the range of sentences does not establish the correct range or the upper and lower limits of the range. In Hili; Jones, the plurality referred to Simpson J’s comments that such cases can and should provide guidance to sentencing judges in appellate courts and stand as a yardstick against which to measure a proposed sentence. However, quoting Simpson J, they stated that “it is only by examination of the whole of the circumstances that have given rise to the sentence that ‘unifying principles’ may be discerned”: Hili; Jones at [53]-[55].

The cases referred to by the appellant demonstrate the importance of that warning. Goldberg was a Crown appeal from a sentence imposed following the respondent’s guilty plea to one count of conspiracy to defraud the Commonwealth. Contrary to the submission of the appellant, the personal gain obtained by Mr Goldberg was not $20 million (the amount of defrauded), but rather $800,000: at [30]. The Court held that it was proper to take into account the guilty plea as a significant factor: at [39]. Further, the Court recognised a need for moderation on a Crown appeal: at [53].

Ronen was a case involving a 72 year old woman in bad health who was suffering from osteoporosis, lower back pain and osteoarthritis of both knees. She also had conjunctivitis and bilateral cataracts: at [15]. Although the appellant had made a significant personal gain, she had settled her dispute with the Commissioner. The settlement included the payment of penalty tax of $7,180,508. The Court held that that was a form of punishment which had to be taken into account in considering the appropriate sentence: at [50]-[52].

Chen involved an appeal against a sentence imposed as a result of a plea of guilty. In dismissing the appeal, it was noted that the appellant came to Australia in 1990 and became an Australian citizen in 2001. He was involved in manual labour until 2000: at [13]. Although the conspiracy was substantial, the appellant was described as being at the “mid level in the organisational hierarchy of the conspiracy”: at [34]. The sentencing judge indicated that were it not for the plea, he would have imposed a sentence of 8 years.

The difference between these cases and the present case demonstrates that they provide no support for the contention that the sentence imposed was manifestly excessive.

Finally, I do not consider that the sentencing judge gave inadequate consideration to the question of totality. As she pointed out, the result would have been the same had the appellant been sentenced to a single conspiracy covering the whole period.

In these circumstances, this ground is not made out.

I would make the following orders:

R A HULME J: I agree with the orders proposed by Bathurst CJ for the reasons his Honour has provided. My own assessment of the evidence at trial leads me to join in the assessment of the case against the appellant as “extremely strong”.

BELLEW J: I have had the advantage of reading in draft the judgment of Bathurst CJ and have undertaken an analysis of the evidence. I agree with the orders proposed by his Honour for the reasons he has set out.