DISTRICT COURT OF QUEENSLAND

The Proceedings

1. [1]
   These are proceedings under the Commonwealth Proceeds of Crime Act (2002) (the Act).  Mr Steven Hart has been charged with five counts of defrauding the Commonwealth under s 29D of the Crimes Act 1914 and one count of organised fraud under s 83 of the Proceeds of Crimes Act 1987.

2. [2]
   On 8 May 2003 the Director of Public Prosecutions applied to this Court by way of an ex parte application for restraining orders against the property of all of the above respondents.  On that occasion, it was enough for the Court to find that there were reasonable grounds, set out in the affidavit of a Federal Police officer, to suspect that certain property was under the effective control of Mr Hart.  The application was made under s 17 of the Act:

“ ‘ Restraining orders – people convicted of or charged with indictable offences
When a restraining order must be made

(1) A court with proceeds jurisdiction must order that:
 (a)  property must not be disposed of or otherwise dealt with by any person; or

(b) property must not be disposed of or otherwise dealt with by any person except in the manner and circumstances specified in the order;

if:

3. (c)
   the DPP applies for the order; and … [affidavit requirements are met]

Property that a restraining order may cover

(2) The order must specify, as property that must not be disposed of or otherwise dealt with, the property specified in the application for the order, to the extent that the court is satisfied that there are reasonable grounds to suspect that that property is any one or more of the following:

 (a) all or specified property of the suspect;

 (b) all property of the suspect other than specified property;

(c) specified property of another person (whether or not that other person’s identity is known) that is subject to the effective control of the suspect;

(d) specified property of another person (whether or not that other person’s identity is known) that is proceeds of the offence or an instrument of the offence.’ ”

3. [3]
   Section 29 of the Act allows the Court to exclude property from a restraining order.  Some of the respondents made such an application to this Court.  The judge who heard the application held that there was no power to vary the original order at this stage of proceedings, before the criminal charges have been tried.

4. [4]
   Those respondents then appealed to the Court of Appeal. The appeal was allowed. It was held that applications could be made at this stage of proceedings to exclude property from the restraining order. Mr Hart was the only person to be charged with offences. The property of the other entities could be restrained only if it was under the effective control of Mr Hart. It was held that the appellants could apply to this Court, at this stage of proceedings, to exclude their property from the restraining order if satisfied that Mr Hart did not effectively control that property.

5. [5]
   The present applications are brought by the second respondent (“Flying Fighters”) the fourth respondent (“Nemesis”) the sixth respondent (“Yak 3”) and the seventh respondent (“Bubbling Springs”).

6. [6]
   Mr Hart, Merrell Associates Ltd, and Merrell Associates (Australia) Pty Ltd have not applied to set aside the orders against them.

7. [7]
   Mrs Laura Hart, the eighth respondent, was an applicant who sought to set aside the order against her, and that application has been resolved by a consent order.

Excluding Property

8. [8]
   The Proceeds of Crime Act says this:

“29. Court may exclude property from a restraining order:

1. The court to which an application for a restraining order … was made … may exclude the property from the order … if the court is satisfied that (certain specified reasons) exist.

4. However, the court must not exclude property from a restraining order … unless it is also satisfied that … a pecuniary penalty order could not be made against:

 (a) the person who owns the property, or

2. (b)
   if the property is not owned by the suspect but is under his or her effective control – the suspect”.

9. [9]
   In passing, the President observed that the restraining order was interlocutory in nature because further applications of a related sort could be made under the Act at a later time to finally determine the rights of the parties. McPherson JA agreed with her reasons (Cth DPP v Hart & Ors [2003] QCA 495).

10. [10]
    Other decisions have reached the view that such proceedings are interlocutory. See DPP (ACT) v Hiep Huu Le & Ors (1998) 86 FCR 33 (in the judgment, under the heading “Procedure and Evidence as to Proof that there are reasonable grounds for a Police Officer’s Belief”).

11. [11]
    In these proceedings, the only issue is that of effective control. The applicants here are Flying Fighters, Nemesis, Yak 3 and Bubbling Springs. If their property is not under the effective control of Mr Hart, then it should be released from the restraining order.

12. [12]
    At the beginning of the proceedings, it was held that the present applicants bore the onus of proving that their property was not under Mr Hart’s effective control. As these reasons will make clear, that onus makes no difference to the final result. The reasons for holding that the onus of proof is on the applicants are set out as an appendix to this judgment.

13. [13]
    It should be explained that the DPP, shortly after the restraining order was made, entered the business premises of the Brisbane respondents and carried out an extensive search, and carried documents away for copying. The order also provided for the compulsory examination of the directors of the respondents. The documents and information so obtained provided much of the foundation for the case against the applicants here.

Effective control

14. [14]
    The Proceeds of Crime Act explains the meaning of “effective control” in s 337:

“337. Meaning of effective control

1. (1)
   Property may be subject to the effective control of a person whether or not the person has:

1. (a)
   a legal or equitable estate or interest in the property; or

2. (b)
   a right, power or privilege in connection with the property.

2. (2)
   Property that is held on trust for the ultimate benefit of a person is taken to be under the effective control of the person.

3. (3)
   However, if a person is one of 2 or more beneficiaries under a discretionary trust, the following undivided proportion of the trust property is taken to be under the effective control of the person:

 ________1__________

 Number of beneficiaries

4. (4)
   If property is initially owned by a person and, within 6 years either before or after an application for a restraining order or a confiscation order is made, disposed of to another person without sufficient consideration, then the property is taken still to be under the effective control of the first person.

5. (5)
   In determining whether or not property is subject to the effective control of a person, regard may be had to:

15. [15]
    That definition is not exhaustive. The concept of effective control has been considered in a number of decisions.

16. [16]
    In DPP v Tat Sang Loo (2002) 130 A Crim R 452, control of a trust was considered.  It dealt with s 70 of the Confiscation Act 1997 (Victoria).  The issue was whether the defendant was in effective control of property on the date the restraining order was made.  It was found that Loo was in effective control of the trust property at the time.  He had substantial practical control over the trust affairs, the trust was constituted at his direction, he was guardian and appointor of the trust, sole director and shareholder of the corporate trustee, a specified beneficiary of the trust, the trust property was not encumbered, acquisition of property by the trust was at his instance, and funding of acquisitions had been orchestrated by him.  As Ashley J put it:

“All in all, the Victorian legislation suggests, and the authorities dealing with like legislation show, that effective control means control which is practically effective, even though it is not supported by any proprietary interest or legally enforceable power; control de facto, not necessarily – though it might also be – control de jure.  Such control is not denied by the existence of trust arrangements which in ordinary circumstances would yield the trustee a bare legal interest in property.”

17. [17]
    See also the decision in Connell v Lavender (1991) 7 WAR 9, where it was pointed out that control connoted something less than ownership.  As Rowland J put the matter:

“The question remains, what is meant by ‘property subject to the effective control’ of a person?

The ordinary meaning of ‘control’ is the power of directing and regulating: SOED.  Where control is a transitive verb it means to exercise restraint or direction over or to command, dominate, regulate or hold in check.  The relevant meanings given in the Macquarie Dictionary are the same.  This suggests that control with respect to property is a question of fact.  Does in fact a person have the power to regulate possession, use or disposition of the property in question?  The power to give or refuse consent to a proposed course of action is to ‘control’.

…

“In my opinion, the ordinary meaning of “control” is de facto control or control in fact. … in my opinion, “effective control” in the context of the statute means de facto control.  The expression contemplates control that is practically effective, in the sense that the person concerned has in fact the capacity to control the possession, use, or disposition of the property …”.

18. [18]
    In R v J Walsh Nominees Pty Ltd (1989) 43 A Crim R 266 the Supreme Court of Western Australia had to consider the meaning of “effective control” in relation to an application made under s 28(3) of the former POCA 1987. 

“… effective control means that degree of control which results in Walsh in being able to treat those properties as his own at the date on which an order under s 28(3) must be made.  However, because of s 9A of the Act, that ability is not to be judged by legal co-ercive power. 

I am satisfied that at the present time and circumstances in which these properties were acquired out of Walsh’s earnings and have always in practical terms been under his complete control, he has such influence over his wife as enables him to treat these properties as his own and to engineer every step available to him to preserve them for himself once this application has been disposed of.”

19. [19]
    The court found that the properties registered in company names remained in the effective control of Walsh, notwithstanding his efforts to disassociate himself from the company, including the resignation of directorships, transfer of company shares, and renunciation of offices held under a trust deed. Despite the fact that he was in prison, and that steps had been taken to divest him of property in favour of his wife and sister, the properties were being preserved for his benefit. They had been acquired out of his earnings and had always, in practical terms, been under his complete control.

20. [20]
    In Gray v Official Trustee in Bankruptcy (1991) 29 FCR 166, the applicant’s son was suspected of drug dealing.  A substantial sum of money was found in the applicant’s house.   A son lived in the house with the father.  The issue is whether or not the money was held under the effective control of the son.  The judge’s task was to consider the meaning of the words “effective control” in relation to s 243F(2A) of the Customs Act 1901.  Heerey J said that the expression was not a term of art, and should be given a wide scope unrestricted of any requirement to show a traditional, legal or equitable interest in the property.  He thought that the expression “effective control” was one that was readily comprehensible, and that no purpose would be served by paraphrasing or redefining it. 

21. [21]
    In Logan Park Investments Pty Ltd v Director of Public Prosecutions (Cth) (1994) 122 FLR 1, the question of control was considered by the New South Wales Court of Appeal.  After references to Gray v Official Trustee and Connell v Lavender the court stated that:

“control means de facto control, that is control which is practically effective even though it is not supported by any proprietary interest or legally enforceable power. 

22. [22]
    The court noted that the legislation could be given practical effect if the effective control were considered as at the date the restraining order was made.

23. [23]
    In Queensland, Mullins J of the Supreme Court had to consider comparable Queensland legislation in DPP v Ricciardo [2003] QSC 061.  She followed and applied the decision in Tat Sang Loo.  There were various signs of effective control.  Essentially, it was shown that the trust that owned the property the subject of the restraint, was set up after the suspect had been convicted, and the persons who were apparently in control of the corporate trustee were shown, when cross-examined, to have no real idea as to the affairs of the trustee. 

24. [24]
    So, the consistent line of authority shows that there will be effective control where the person concerned has the capacity to control the possession, use or disposition of property. That is a question of fact, not constrained by legal or equitable interests.

The Property

25. [25]
    The issue is the effective control of property. What property? There are different submissions about that. For the DPP, it was submitted that the property which might be the subject of effective control included both the physical object, and the legal rights which may attach to that physical object. On the other hand, it was submitted for the applicants that the term “property” was not meant to refer to a tangible, physical thing, but was rather meant to refer to the bundle of legal rights which constituted the legal notion of property.

26. [26]
    As the DPP asserts that Mr Hart is in effective control of property, the first logical step is to identify the property. Before the restraining order can be maintained, it was submitted, it must be shown that Mr Hart is in “effective control” of the full beneficial interest in that piece of physical property.

27. [27]
    In support of that submission, reference is made to the definitions of “property” and “interest” in s 338 of the Act, the discussion of the meaning of “property” in Yanner v Eaton (1999) 201 CLR 351, ss 102, 103, 104 and 141 of the Act and to some of the decided cases on the subject of effective control.

28. [28]
    An instructive starting point is the decision of the High Court of Australia in Yanner v Eaton (1999) 201 CLR 351.  The Queensland Fauna Act was concerned about property in wild animals.  At 365, Gleeson CJ, Gaudron, Kirby and Hain JJ discussed the meaning of “property” in the Act:

“The word ‘property’ is often used to refer to something that belongs to another.  But in the Fauna Act, as elsewhere in the law, property does not refer to a thing.  It is a description of a legal relationship with a thing.  It refers to a degree of power that is recognised in law as power permissibly exercised over the thing.  The concept of “property” may be elusive.  Usually it is treated as a bundle of rights but even this may have its limits as an analytical tool or accurate description … an extensive frame of reference is created by the notion that ‘property’ consists primarily in control over access.  Much of our false thinking about property stems from the residual perception that ‘property’ is itself a thing or a source rather than a legally endorsed concentration of power over things and resources.  (Referring to a learned article).

… ‘Property’ is a term that can be and is, applied to many different kinds of relationship with a subject matter. …. because it is a comprehensive term it can be used to describe all or any of very many different kinds of relationship between a person and a subject matter. …”

29. [29]
    Gummow J discussed the meaning of “property” at length:

“Property is used in the law in various senses to describe a range of legal and equitable estates and interest, corporeal and incorporeal.  Distinct corporeal and incorporeal property rights in relation to the one object may exist concurrently and be held by different parties.  Ownership may be divorced from possession.  At common law, wrongful possession of land might give rise to an estate in fee simple with the rightful owner having but a right of re-entry.  Property need not necessarily be susceptible of transfer.  A common law debt, albeit not assignable, was nonetheless property.  Equity brings particular sophistications to the subject.  The degree of protection afforded by equity to confidential information makes it appropriate to describe it as having a proprietary character, but that is not because property is the basis upon which protection is given:  rather this is because of the effect of that protection.  Hohfeld identified the term ‘property’ as a striking example of the inherent ambiguity and looseness in legal terminology.  The risk of confusion is increased when, without further definition, statutory or constitutional rights and liabilities are so expressed as to turn upon the existence of “property”.  The content of the term then becomes a question of statutory or constitutional interpretation.

Finkelstein J recently pointed out that, to Hohfeld, property comprised legal relations not things, and those sets of legal relations need not be absolute or fixed.  Hohfeld said of ‘property’,

‘Sometimes it is employed to indicate the physical object to which various legal rights, privileges, etc, related; then again – with far greater discrimination and accuracy – the word is used to denote the legal interest (or aggregate of legal relations) appertaining to such physical object.  Frequently there is a rapid and fallacious shift from the one meaning to the other.  At times, also, the term is used in such a ‘blended’ sense as to convey no definite meaning whatever.’

‘Property’ is used in the latter sense in s 7(1), that is, as an aggregate of legal relations between the ‘Crown; and ‘fauna’.  In order to determine the content of these legal relations, it is necessary to consider:  first, the manner in which ‘property’ is vested in the Crown; secondly, the Crown’s immunity under s 7(2) from such liability as would otherwise have arisen from the vesting of property; thirdly, the qualification contained in s 7(1); and, fourthly, the meaning of the term ‘Crown’.”

30. [30]
    The dictionary to the present Act defines both “property” and “interest”.

“Property” means real or personal property of every description whether situated in Australia or elsewhere and whether tangible or intangible, and includes an interest in any such real or personal property.

“Interest” in relation to property or a thing means:

1. (a)
   a legal or equitable estate or interest in the property or thing; or

2. (b)
   a right, power or privilege in connection with the property or thing; whether present or future and whether vested or contingent.”

31. [31]
    It is helpful to note some of the basic ideas that are mentioned. The definition refers to real or personal property. They are the two great classes to which lawyers have traditionally assigned all aspects of property. At the most basic level, land and interests in land are real property while things and interests in those things are personal property.

32. [32]
    The property may be tangible or intangible. In relation to an asset, it describes something that is being capable of being possessed or realised; having the form of real property or chattels (The Macquarie Dictionary).

33. [33]
    So, the statutory definitions mean that “property” may be referring either to an actual thing, or to some interest in that thing.

34. [34]
    Sections 102 and 103 of the Act refer to an interest in property. For example – “an order under this section may be made if … the applicant’s interest in the property is not subject to the effective control of the person whose conviction caused the forfeiture … (102(2)(b)). Section 141 refers to a situation where “the court is satisfied that particular property is subject to the effective control of a person … .”

35. [35]
    Section 337, defining “effective control” clearly enough refers to legal or equitable interest in property. It also refers to rights, powers or privileges in connection with property, in which case the property could be tangible or intangible.

36. [36]
    It is clear, therefore, that the intention of the Act is to give a very wide meaning to the concept of property. It may be a tangible thing, or intangible. The reference may be to the physical object or the legal rights which attach to the physical object. The rights may be legal or equitable, real or personal.

37. [37]
    It is no doubt right to say, as the applicants contend, that in each case the DPP must identify the property, or interest in property, that Mr Hart is said to effectively control. There appeared to be no practical difficulty about that, in this case. The distinctions mentioned above were not repeated in any submission, to the effect that the exact property in question was not sufficiently identified.

The Hart Family

38. [38]
    Mr Hart did not give evidence. His involvement has to be understood from the evidence of others, from company records, and from correspondence. He was available to give evidence, if required. He assisted in the preparation of the applicants’ affidavits. The inference must be that anything that he could have said would not have assisted the applicants.

39. [39]
    Any formal qualifications were not mentioned. By the late 90’s he had become experienced in giving financial advice to others. That included advice about tax planning. He was quite familiar with complex financial negotiations. His business include Harts Financial Services, which assisted in arranging finance for clients either in small or very large amounts. He was able to negotiate large commercial loans for clients. Another business showed that he also acted as an insurance broker.

40. [40]
    His business interests included building or buying and selling rental houses. He was a close friend and associate of Mr Kim Rolph-Smith, the principal of Brookfield Agencies, a long-established real estate business in the western suburbs of Brisbane. He would have been familiar with real estate transactions, and their financing. He acted as a tax agent, and was experienced in the preparation of tax returns.

41. [41]
    It is clear that Mr Hart is a man of energy, imagination and determination. In 1998 he was the driving force behind the public float of Harts Australasia, which created a considerable accounting business throughout Australia. It had over 300 employees. For reasons not explained here it failed in 2001, causing investors and the Hart interests substantial losses. In October 2001 he ceased to be a director of the family companies. On 22 April 2002 he became bankrupt.

42. [42]
    Mr Hart’s passion is aircraft and flying. He, or a company under his control, has bought and sold aircraft and built up a considerable collection. His main interest is in “war birds” – that is, planes built for military purposes. In 1999 he wrote to the manager of the Archerfield Airport Corporation (AAC), saying, in part:

“You are aware that I wish to have a privately owned museum for aircraft.  At present I own (six aircraft).  You know that I have a passion for aviation and want to show the public at large the beauty of old planes and the joy of seeing them fly.  I will continue to keep buying the same type of aircraft as above and to restore them to flying condition. … that idea I have is to have a working museum  …”.

Mr Hart was an experienced pilot, and capable of performing advanced aerobatics.

43. [43]
    It seems that he is a man who concentrates on the big picture. He is not someone to “dot the I’s and cross the T’s”. Not surprisingly, he often relies on others to look after his office and do the paperwork. He is not slow to transfer money and property between the many Hart companies as occasion requires, to change the names of the companies, to look for tax-effective ways to carry out transactions and to be alert for new opportunities and deals.

44. [44]
    He is a man who commands the loyalty and support of those close to him. The evidence here shows that in difficult times he has been able to rely on Miss Peterson, Mrs Laura Hart, Mr Arnot, Dr Ambler and Dr Fleming in various ways. The present question is this – to what extent is their evidence coloured by that support, and what impact does it have on the probability of his exercising effective control over the Hart companies?

45. [45]
    Miss Shirley Petersen left school after completing year 10 and worked in several jobs before concentrating on office work. She did a receptionist and secretarial course and has for about 20 years been the office administrator for the Hart group of companies. She does the book work for any staff members and looks after debtors and creditors. She is in charge of the data entry into the computer system. She attends to the BAS returns, the profit and loss records and the balance sheets. She has no accounting or other formal qualifications. Having first been responsible for the day-to-day affairs of one company, she is now involved in 17 companies.

46. [46]
    She is now a middle-aged woman. In her 2001 tax return, she described herself as a secretary. However, she would be better described as an office administrator. She has performed that role in Mr Hart’s office for many years. She still does so.

47. [47]
    She began a personal relationship with Mr Hart in about 1974. They are the parents of two children, Tamara (now 28) and Troy (now 25). They lived together for a time, but never married. She has remained close to him as a friend, employee, and supporter. She is paid for her office work and for being a director of some of the Hart companies.

48. [48]
    Miss Petersen is a determined and capable woman who played, and does play, a significant practical role in Mr Hart’s business affairs. She is quite capable of attending to the day-to-day business of the companies with which she is connected.

49. [49]
    Mrs Laura Hart is now 42 years old. She married Mr Hart in 1991. She also left school having completed year 10. She first became the director of one of the Hart companies in 1981. She has worked as Mr Hart’s personal assistant for many years. Her 2001 tax return accurately describes her occupation as such. His office usually had an employed receptionist, but a shortage of money meant that Mrs Hart filled that role for a time after the difficulties around October 2001. It should be explained that Mr Hart occupied a city office up until the failure of Hart’s Australasia. He then moved his office to one of the airport buildings at Archerfield. It was there that Mrs Hart acted as a receptionist for a time. She is still acting as his personal assistant. She appears to be a quieter and more reserved person than Miss Petersen.

50. [50]
    At work, Miss Petersen has the senior role. In her affidavit, Mrs Hart says that most of the business of Nemesis, Yak 3 and Bubbling Springs is managed by Miss Petersen, and that she assists with paperwork and other matters as they arise. That appears to be an accurate statement.

51. [51]
    Troy Hart is a pilot, and often flies one of the planes from the museum. Tamara works in a related accounting business. There are close and supportive relationships between Mr Hart’s somewhat extended family. Miss Petersen, Mr and Mrs Hart, and their children go for at least one holiday together each year.

52. [52]
    Each of the four applicants here is the trustee of a discretionary trust. The beneficiaries, both specified and general, are set out on Exhibit 25, the flow chart. The beneficiaries include relatives of Miss Petersen, Mr Hart’s parents, and his children. All beneficiaries are linked to him by personal or family relationships.

53. [53]
    In her affidavit, Miss Petersen describes the companies in the group as the “The Hart family group of companies.” That is an accurate description.

54. [54]
    The arrangement of Mr Hart’s office reflects the above positions. That is, he has a reasonably large office where he sits behind a desk in the traditional way. Miss Petersen and Mrs Hart sit at desks or workstations outside, in the general office area. Some of those arrangements were shown on the video taken at the time of the search conducted by the Federal officers. The video also shows Mr Hart taking charge in a trying situation while he was the subject of the search, and the focus of the investigating officer. He was the dominant person within the office, and gave instructions to Miss Petersen.

The Applicant Companies

55. [55]
    1. Flying Fighters Pty Ltd

This company was previously called Hart’s Flying Fighters Pty Ltd, and Unlimited Aerobatics Pty Ltd before that.  It owns subsidiaries, Flying Fighters Maintenance and Restoration Pty Ltd, and Flying Fighters Adventures Pty Ltd.  Its directors are Miss Petersen, Mrs Hart, and Mr Nigel Arnot.  The shares are owned by Miss Petersen and Mrs Hart.  Mr Hart was never a director.  As its name indicates, its principal business has been the ownership and maintenance of the aircraft.

2. Nemesis Australia Pty Ltd.

Nemesis was previously known as Steve Hart Family Holdings Pty Ltd and before that Caper Hill Holdings Pty Ltd.  Its directors are Miss Petersen, and Mrs Hart.  Mr Hart was a director until his retirement on 1 October 2001.  The shares are owned by Miss Petersen and Mrs Hart.

3. Bubbling Springs Pty Ltd

This was formerly known as Bubbling Springs Olive Grove Pty Ltd, before then Steve Hart Family Holdings No 2 Pty Ltd, and before then Hart Holdings No 2 Pty Ltd, and before then Traywinds Pty Ltd.  The directors are Miss Petersen, Mrs Hart, and Dr D V Fleming.  Mr Hart had been a director, but retired on 1 October 2001.  The shares are owned by Miss Petersen and Mrs Hart.

4. Yak 3 Investments Pty Ltd

Yak 3 Investments was formerly known as Steve Hart Family Holdings No 3 Pty Ltd, before then Hart Holdings No 3 Pty Ltd, and before then Wildpark Pty Ltd.  The directors are Miss Petersen and Mrs Hart.  The shares are owned by Miss Petersen and Mrs Hart.

56. [56]
    The registered office at each company is at 400 Wirraway Avenue, Archerfield. That is Mr Hart’s office.

57. [57]
    Mr Hart resigned as a director of Nemesis, Bubbling Springs and Yak 3 Investments in October 2001.

The Applicants’ Assertions

58. [58]
    The key witnesses for the companies, in asserting that there is no effective control by Mr Hart, were Miss Petersen, Mrs Hart, and Mr Arnot. It is necessary to note the evidence they gave in their affidavits about Mr Hart’s role. The first affidavit by each of them was prepared and sworn before they were examined on oath. The later affidavits were longer, and dealt with matters that had been raised during the examinations, and emerged from the search. It was submitted that their earlier affidavits were not frank and honest. That could be so. However, it is better to assume that the shortness of the affidavits was due to their solicitors having to deal with limited materials. The bulk of the material relied on by the DPP only became available after the compulsory examination and the search. An enlarged response was not surprising.

59. [59]
    Mr Arnot’s first affidavit was sworn at a time when he was a director of Flying Fighters. The basic effect of his first affidavit can be captured in his words:

“I am the managing director of Flying Fighters.  … Mr Hart is not in effective control of Flying Fighters or Bubbling Springs.  The day-to-day business of Flying Fighters is managed by myself.  The day-to-day business of Bubbling Springs is managed by Shirley Petersen, Laura Hart and myself.

I hold a private pilot’s licence.  I manage the business of Flying Fighters, Flying Fighters Maintenance and Restoration and Flying Fighters Adventures including organising air shows and ensuring pilots are appropriately qualified and experienced.  I conduct the business at 400 Wirraway Avenue, Archerfield.  I run a fairly large maintenance operation, specialising in maintenance of aircraft restoration.  There are seven full time employees apart from myself, all under my direction.

I make all the day-to-day decisions in relation to the business of Flying Fighters.  If any question about funds, or payment of accounts arise, for example if I need to make sure if we have sufficient funds in the account, I will go and speak to Shirley Petersen.  … .

Mr Hart is involved in the business of Flying Fighters purely from a flying point of view.  When we require a pilot that is endorsed on a particular aeroplane I might ask him if he is available to fly that particular aircraft. … I might ask him advice from a financial point of view from time to time, in terms what he would do if he were in my situation.

Mr Hart no longer has any involvement in the business of Bubbling Springs.  He used to take an active role when he was a director, although it was in the background.  I now make all of the decisions and if I have any problems I run them past Shirley Petersen. … ”.

60. [60]
    Miss Petersen’s first affidavit can be condensed in this fashion:

“Mr Hart is not in effective control of any of the four companies.  The day-to-day business of Flying Fighters is managed by Nigel Arnot.  If there are any major decisions to be made, he comes and speaks with Laura Hart and/or myself about them.  Mr Hart’s only involvement is either when Nigel Arnot asks him to fly planes or on open days … Nemesis acts as the service company for the other three companies.  Its only asset is a house at Sunnybank Hills, rented for $170 a week.  I conduct the management of that house.  Nemesis used to conduct other investment business, but no longer does.  Mr Hart is employed by Nemesis. 

The only assets of Yak 3 Investment are the lease of 400 Wirraway Avenue, Archerfield and the house at 1 Samara Street, Sunnybank.  I live there, and pay rent to the company.  Laura Hart and myself handle (the business of Nemesis).  Mr Hart has no involvement in the affairs of Nemesis.

The only business of Bubbling Springs is the ownership of a farm property at Doonan’s Road, an ownership of a rental property at 27 Samara Street, Sunnybank.  I manage everything to do with the rental property and if I am not present and someone needs something done they would ask Laura Hart.  The day-to-day business of the farm is managed by myself, Laura Hart and Nigel Arnot. … Mr Hart does not have any involvement in the running of the farm, and hasn’t had since shortly after it was purchased.  Since about November 2001, all that has been happening on the farm is that we are running some cattle and growing a small amount of lucerne.  Any questions about the farm are directed to Nigel Arnot or myself. 

In a later affidavit, (Exhibit 22B) Miss Petersen dealt with Mr Hart’s position this way:

“Spider Tracks Pty Ltd is now the service company for (the applicant companies).  … I act as the financial director of every company or trust for which I am a director.  It is not unusual for the other directors to refer to me in the paying of accounts and the raising of funds. 

Mr Hart is now paid by Spider Tracks not Nemesis as was the case prior to early July 2002.  He is employed by Nemesis, to provide consulting services to any company within the family group, or on behalf of any company within that group.  … the duties of Mr Hart are many and varied.  He acts as our chief negotiator in relation to the buying and selling of assets, in some instances he also negotiates borrowings on our behalf.  He will also attend meetings for us where we need his experience and expertise.  He also advises other clients of our various companies in relation to all the before-mentioned as well.  .. He acts as a financial consultant to us and I will regularly ask his opinion on our trading position on all companies that I am a director of.  This function he also performs on behalf of clients of companies I am involved with and for which those companies receive payment.  He assists in the base preparation of our BAS returns and income tax returns as he was a former tax agent.  He flys the aircraft of Flying Fighters at air shows, open days and other times when we require him to do so.

While we often ask Mr Hart his opinions and advice, we don’t always take it.  At no time does he make the final decision nor is he in effective control of any company of which I am a director or in effective control of any asset legally owned by any company of which I am a director.”

“Prior to October 2001 (and the collapse of the Hart’s accounting group) Mr Hart was paid a wage by Nemesis.  The payment was for being a director of various companies and for providing consulting services for any of the companies within the family group.  From time to time this may have included giving advice or conducting negotiations on behalf of various companies in the family group.

We (being from time to time, various companies within the family group of which I was a director) often used Mr Hart as our ‘front person’ to conduct various negotiations on behalf of an individual company.  There are two main reasons for this.  The first is that he is good at it.  The second is that, in my experience, many people in business do not like dealing with females.  A lot of times this is borne out by the fact that people will, even though they deal with myself or Laura and we tell them to direct information to us, we will still address their correspondence to or care of Mr Hart.  Even though we may often use Mr Hart as our front person, the various directors from time to time always make the decisions. … ”

61. [61]
    In her first affidavit (Ex 37A, sworn on 7 July 2003) Mrs Laura Hart said this about her husband:

“Mr Hart is not in effective control of Flying Fighters, Nemesis, Yak 3 or Bubbling Springs. 

The day-to-day business of Flying Fighters is managed by Nigel Arnot, the managing director of that company.  … if he has any major decisions to make, or any problems arise, he will come and see either myself or Shirley Petersen, or both of us.  Apart from air shows and adventure flights, when required, Mr Hart does not have any involvement in the activities of Flying Fighters.

Mr Hart is paid a salary by Nemesis to act as a consultant to various entities in the group and also other outside entities.  For the last 18 months a lot of his time has been taken up with preparing for court cases.  He certainly does not have anything to do with managing the assets of Nemesis.

Yak 3 Investments owns a house at 1 Samara Street and also owns the premises from which the Flying Fighters business is rented – the hanger.  Shirley Petersen lives at 1 Samara Street.  She pays rent to the company for this.  In relation to the hanger, Shirley is in charge of paying the bills and making sure the rent is paid.  Mr Hart does not take any part in the business of Yak 3 Investments.

In general, most of the business of Nemesis, Yak 3 Investments and Bubbling Springs is managed by Shirley.  However I assist with paperwork and other matters as they arise.

The day-to-day business of Bubbling Springs is managed by myself, Shirley Petersen and Nigel Arnot.  There has been very little activity - - - when the Doonans Road property was first purchased, Mr Hart, myself and Mark Ransom went to look at the property.  A decision to buy it was made jointly by Shirley, Steve Hart and myself.  … Mr Hart does not have anything to do with the running of the property any more.”

62. [62]
    So, the contentions of the applicants can be summarised this way – Mr Hart was never in effective control of Flying Fighters, as he was never a director. With respect to the other three companies, he ceased to have any effective control after October 2001. He may now be a negotiator, financial adviser, front man, friend and husband, but he does not make any final decision for the companies. It is convenient for the companies to have him represent them – many business people prefer to deal with men, rather than women, according to Miss Petersen.

63. [63]
    On the other hand, the DPP says that he always was in effective control of those four companies, and remains so.

64. [64]
    Where does the truth lie? It can only be reached by looking at the ways in which Mr Hart and the other directors have actually behaved in relation to each of the applicants.

Flying Fighters

65. [65]
    Flying Fighters owns a number of aircraft and a Mercedes Benz motor car. The company structure is interesting because, even though the aeroplanes are Mr Hart’s passion, he was never a director of the company. Miss Peterson and Mrs Hart were directors from early 1995, while Mr Nigel Arnot became a director on 14 December 2000. Mr Hart’s role in Flying Fighters has not changed from June 1999 – at least up until May 2003, according to Mr Arnot. It is necessary to outline the nature of his involvement.

66. [66]
    Miss Peterson and Mrs Hart are not pilots, and have no close personal interest in aircraft. Mr Arnot is an experienced pilot and maintenance engineer. He is also familiar with the buying and selling of aircraft. Sometimes, he does that on his own account. He is the managing director of the company. He presently conducts the business at 400 Wirriway Avenue, Archerfield, where there is a fairly large maintenance operation, specialising in maintenance and aircraft restoration. There are seven full time employees, all under his direction.

67. [67]
    He and Mr Hart are close friends. Mr Arnot’s abilities and interests are in flying, maintaining, and buying and selling aircraft. He did not take a close interest in the financial records of the company, and its commercial transactions. He was sometimes lost, when it came to the financial side of the company which he did not understand. He was aware of the company borrowing money, but did not know that Merrell Associates Ltd held a charge over the aircraft. He did not know that Flying Fighters was the trustee of a discretionary trust. He did not know that the company had borrowed money from Dr Fleming, and had given him a charge over its Sea Fury aircraft. He did not know that Dr Ambler lent the company $228,000, so that it could buy another plane, the T-28. Miss Petersen and Mrs Hart did not consult him, and it was clear that the arrangement was made between Mr Hart and Dr Ambler. (Dr Ambler and Dr Fleming were friends of Mr Hart).

68. [68]
    There was a good deal of evidence about Mr Arnot’s working relationship with Mr Hart when they were dealing with aircraft. In 1999-2000 (before Mr Arnot became a director of the company), a Sea Fury aircraft was bought from a New Zealand vendor. Mr Hart negotiated the sale. Mr Arnot says that he had acted as a consultant to do that, having been paid a retainer. Flying Fighters (at the time called Unlimited Aerobatics Pty Ltd) was the purchaser. Mr Hart signed the purchase agreement dated 14 March 2000. On 7 November 2000 he signed an application in connection with the aircraft’s registration. Then, on 21 May 2001, again in connection with registration, he signed a letter describing himself as a director of the company. Mr Arnot had been a director since 14 December 2000.

69. [69]
    The purchase of the aircraft was financed by an arrangement with Dr Fleming, who lent $280,000. He was another flying enthusiast and a friend of Mr Hart. His loan was secured by a charge dated 20 September 2001. Mr Steve Hart signed on behalf of Flying Fighters, “in accordance with its constitution by its duly authorised officer”.

70. [70]
    On 21 May 2001, a letter from Flying Fighters to the New Zealand registration authority was signed by Mr Hart, who described himself as a director of the company.

71. [71]
    On 25 May 2001 Mr Arnot sent a fax to Mr Hart in connection with the aircraft’s registration. By that time, Mr Steve Hart’s name was painted on the aircraft. Mr Arnot said to him:

“…Flora may have told you but just in case I thought I should let you know that the Fury is now off the NZ register and the application has been made to CASA for Australian registration.  I took it upon myself to apply for the following reg number – VH – SHF (steve hart fury) …”

(Several of the planes have registration numbers which include Mr Hart’s initials – VH  SHR, VH  SHI and VH SHT.)

72. [72]
    Mr Hart signed a solicitor’s trust account authorities on behalf of Flying Fighters, directing that money borrowed by the company be applied to pay solicitors’ fees incurred by him and other family companies. Mr Arnot did not know he had done that.

73. [73]
    The evidence showed a variety of contact between Mr Hart and Mr Arnot. In relation to the Sea Fury’s appearance at a New Zealand air show in 2000, he wrote to a Gavin Johnston in New Zealand on 23 December, 1999, saying:

“My apologies for taking so long in getting back to you.  As explained to you the other day I needed to confirm that the deal with the Sea Fury had gone through.  This is confirmed and then the next snag I encountered was trying to contact Steve (Hart) and finalise costings for the Fury at Wanaka 2000.  …”

74. [74]
    At about the same time, Mr Arnot was negotiating the purchase of the Yak 50. He wrote to the vendor:

“My apologies for taking so long to get back to you regarding the Yak 50.  Trying to make sure that Steve (Hart) was aware and happy with the deal took some organising because as you are no doubt aware Steve is very hard to nail down.”

75. [75]
    On 10 July 2000 he wrote to Mr Hart, in connection with potential deals in Russia. The contact there was a man called Nichiloi. Mr Arnot wrote:

“Hi Steve a couple of things:

Nichiloi has asked me to discuss with you if you are keen on a couple of deals in Russia.  There is money to be made on these deals. … if you are happy with this deal then we need to secure these items with a deposit.  The amount required is US$30,000 sent to the following bank …  if this is too much at the moment no problems, I said to Nichiloi that I would mention it to you.

On a separate note I sent a fax to Shirley (Petersen) on the 15^th of last month requesting that the final payment on the L-39 be made.  …  As I have explained to Shirley several times now I am coming under considerable pressure to finalise.  Please arrange as soon as possible.”

76. [76]
    On 16 December 2002, Mr Arnot wrote to Mr Hart about various matters. He reports about several repairs to aircraft. In relation to a Stearman aircraft, he said:

“Funds for the parts, how are we going in that department?   It would be very good to be able to have these parts sent early in the New Year”. 

77. [77]
    With regard to the Yak 3 engine, he said:

“… is now completed and test run.  But as you could imagine wondering when payment would be made.  In our previous conversation re payment you did say that it would be looked after by the middle of the month which I related to Bud.  The amount owing is US$27,243.45.

Sorry to ruin your Monday but these are issues we need to finalise prior to Christmas.”

78. [78]
    Two days later, he again contacted Mr Hart with regard to various financial concerns.

79. [79]
    Then, in January 2003, Mr Arnot decided to lend $300,000 to Flying Fighters. He borrowed the money from the National Australia Bank. The Sea Fury was security, and the money was repaid to him. He discussed the arrangement with Mr Hart, Mrs Hart, and Miss Petersen.

80. [80]
    Mr Hart expressed his gratitude in this way:

“Big Nige

I wanted to say this yesterday but I am not good saying things to you at times. Your offer to lend the money for a period means an enormous amount to me.  I would have had to stand people down after Christmas for a period of between 6 to 8 weeks until the money came in.  The Yak engine, the Cap repairs and the T-28 engine have really set me back.  While we are slowing having our cash flow improve these large amounts unscheduled were a symbol of my bad luck at the time.  This year will be a great one.  Thank you for the help and I will be in your debt.  The only thing I am good at is making money and I will make the same commitment to you as I have to Dan and John, if you’re interested. That is I will help you turn your $300,000 into $3,000,000 over the next 3 to 5 years.  All low risk and I am slowly getting my head back to do it.  Once again thank you from the bottom of my heart.

Cheers

Steve.”

81. [81]
    Mr Arnot made a revealing comment, to the effect that Mr Hart had influence over Miss Petersen. If he wanted her to do something he would go and see Mr Hart. To get the bills paid, he spoke to Mr Hart as a last resort. Also revealing was his description of Mr Hart’s office. He had a big desk in a big office, while Miss Petersen and Mrs Hart were at work stations outside that room.

82. [82]
    Merrill Associates Limited was a financier with close business links to the Hart companies. On 30 September 2002, Mr Hart wrote to Mr Michael Horne of Merrill Associates in these terms:

“Dear Michael

Flying Fighters Pty Ltd (for which you have a charge over) today sold the Chipmunk VH-SHX for $80,000.  This money is needed to overhaul the Alison engine in the Yak 3 fighter, one that you also have a charge over.  The cost is $100,000 Aussie dollars to overhaul and this will increase the value.  Could you please release the charge to allow the sale and the overhaul for the engine to go ahead.  If you approve could you please contact Geoff Klooger (the solicitor for the Hart companies) and instruct him to draw the release and sign it under your power of attorney which he holds. If there is a problem could you please contact me ASAP.  I believe that the value increase of the Yak 3 is more than the $80,000 we received for the Chipmunk.”

83. [83]
    Flying Fighters agreed to buy an aircraft called a T-28. When Mr Hart got into financial difficulties, there was a shortage of funds to pay for the aircraft. He approached his friend, Dr Ambler, and it was agreed that Dr Ambler would advance the total sum of $228,000 to enable the purchase of the plane to be completed. He did that, without documentation. The plane was delivered. However, Mr Hart’s financial position was such that the money could not be repaid. Dr Ambler realised that he would only receive a very small percentage back, if he were to prove in the bankruptcy. He chose not to prove, rather than to wreck a friendship which was continuing. Mr Hart’s role as his financial adviser continues.

84. [84]
    Mr Arnot’s loan was not the first financial assistance given to Mr Hart, or to Flying Fighters. When the NAB appointed a receiver, it took control of various assets of Nemesis, including paintings and a Mercedes motor vehicle. Dr Daniel Fleming was requested by Mr Hart, in about September 2001, to lend $400,000 to Flying Fighters. One formal request was signed by Mr Hart. The idea was that he would the “front man” for Flying Fighters. He would use the money to buy the assets from the receiver. This was done. An arrangement was made with the receiver to exchange the assets in return for a price of $350,000. When the money was paid, the assets were given, not to Dr Fleming, but to Flying Fighters, or to Mr Hart. Mr Hart drove the vehicle. The solicitor, Mr Challen, gave effect to the transaction. There does not seem to have been anything improper about it. What it does do, is demonstrate Mr Hart’s ability to rely on close friends with money when he got into financial difficulties. (Dr Fleming was astute enough to arrange security over the Sea Fury aircraft). Mr Hart was a guarantor of the loan to Dr Fleming.

85. [85]
    Mr Challen prepared the legal documentation. It had to be executed by Flying Fighters. On 20 September 2001 Mrs Hart did not arrive at the solicitor’s office on time, so Mr Hart signed twice for the company. He had no authority to do that. Miss Petersen attempted to explain why he did have authority, but her evidence was confused, and unimpressive and should not be accepted.

86. [86]
    The debt to Dr Fleming was also the foundation of the arrangement whereby he was given an interest in the Brandon Road development – see below.

87. [87]
    On the whole of the evidence, it became clear that Mr Arnot has been in the habit of consulting Mr Hart about significant matters, and deferring to his decisions about those matters. Mr Arnot attempted to distance Mr Hart from a controlling role in the company. He insisted that the use of the expression “my aircraft” or “Mr Hart’s aircraft”, merely was an accepted way in the industry of referring to the person who was in charge of a plane at a particular time. He also said that his skills were in the area of aircraft maintenance, and not in the use of the English language, so that he could have given the false impression about Mr Hart’s actual role in Flying Fighters, because of inaccurate use of words.

88. [88]
    Mr Arnot demeaned himself by disowning his own use of ordinary language. The explanation is that he meant exactly what he said, to the effect that Mr Hart was always the man in charge of Flying Fighters, particularly when it came to financial matters, and the sale and purchase of aircraft. He did regard the aircraft as his own, as he said to Mr Kent of the AAC. That is why Mr Arnot referred to “Mr Hart’s planes”.

89. [89]
    At times, Mr Arnot looked a most uncomfortable witness. He was determined to protect Mr Hart, but was hard pressed to do so during a cross-examination on many documents that revealed Mr Hart’s very dominant role in the affairs of Flying Fighters.

Nemesis Australia Pty Ltd.

90. [90]
    Three properties are registered in the name of Nemesis – 88 Brandon Road, Runcorn, 6 Merriwa Street, Sunnybank Hills and the lease of Hangar 607 from the Archerfield Airport Corporation.

91. [91]
    Changes to the name and governance of this company were made when Mr Hart ran into difficulties in late 2001. On 1 October 2001 it changed its name from Steve Hart Family Holdings Pty Ltd to Nemesis Australia Pty Ltd. Mr Hart resigned as a director. He had occupied that position since April 1981. Then, on 1 December 2003, Mr Arnot also resigned. Miss Peterson and Mrs Hart remain as the two directors. They also hold all the shares in the company. Beneficiaries are various members of the Hart family.

92. [92]
    The transactions involving the company’s property are of interest to the extent that they show the actions of those who do, or can, control the company.

93. [93]
    Mr Hart had met an architect, Mr Kevin Smith, in connection with the design of hangar 400 at Archerfield. In early December 2001 he approached Mr Smith about a proposed property development at 88 Brandon Road. He asked him to do a fee estimate for the design of units on the site. Mr Smith sent some information to Mr Hart. Mr Hart then contacted him and asked him to proceed with the project. That was mid-December 2001.

94. [94]
    In the following months he contacted Mr Hart two or three times about further information. On 5 September 2002 he received a message from Mrs Hart which said “Steve says go ahead”.

95. [95]
    On 4 October 2002, he faxed a number of documents to Brandon Road Developments Pty Ltd (the company name given to him by Mr Hart, as the developer). He sent the facsimile to “Attention Laura Hart”. He enclosed a draft fee agreement. However, he did not receive any further response.

96. [96]
    Dr Ambler and Dr Fleming were both medical practitioners who had a strong interest in flying. They became good friends of Mr Hart. Their friendship extended to a willingness to lend money to him, or to one of the Hart companies.

97. [97]
    Nemesis did not have funds to develop the land. In about April 2002 Mr Hart proposed and negotiated a deal, whereby Dr Ambler and Dr Fleming would each receive a one-third share in the Brandon Road Property project in satisfaction of their loans. There were some meetings about that proposal. Mr Hart attended the meetings. Miss Petersen and Mrs Hart were present some times. The solicitors for the various parties became involved. In the end, the arrangement did not proceed. Nemesis is still the registered proprietor of Brandon Road.

98. [98]
    The documentation that was not put into effect is of no particular interest. It does show Mr Hart’s readiness to use different corporate entities for different projects, and to move assets and liabilities among the Hart group of companies, when that seems a convenient thing to do. In one document there is a reference to land being owned by Sea Fury Enterprises Pty Ltd, though that should be accepted as a simple mistake. A joint venture agreement was signed, but did not proceed.

99. [99]
    In November 2002, a solicitor for the Hart interests, Mr Klooger, wrote to Nemesis enclosing the proposed contract of sale to Brandon Road Developments. The letter was sent to the attention of Steve Hart, and begins “Dear Steve”. It was expected that Nemesis would execute the agreement.

100. [100]
     Before October 2001, Mr Hart had started negotiations about refinancing with McLaughlins or Equityloan, both financiers. Those negotiations continued after he stood down as a director of the company. There is no record of any authority to do that.

101. [101]
     In November 2002, Mr Hart sent an email to a financier, saying:

“I will have the Brandon Road property refinanced prior to the 15^th … I hope to have 4 of the houses also refinanced prior to the 15^th”

(6 Merriwa Street was one of those properties).”

102. [102]
     Dr Fleming received a letter from Nemesis, signed by Miss Petersen as a director, setting out the agreement about the proposed Brandon Road transaction. It is dated 17 April 2002.

103. [103]
     The property of 6 Merriwa Street, Sunnybank Hills is occupied by Mr Hart’s son, Troy. He pays a commercial rent and there is nothing unusual about that arrangement. Miss Peterson and Mrs Hart both refer to the re-financing, in December 2002, saying that Mr Hart had no input into the negotiations or settlement of that re-finance. However, it seems that Mr Hart was the driving force behind the re-financing arrangement. Indeed, he was attempting to raise finance on behalf of Nemesis in February 2003. He spoke to the solicitor for Merrill Associates, Mr Klooger, in an attempt to do that. His role was to negotiate, if possible, a loan of $500,000. Mr Hart gave Mr Klooger the details he would require to prepare documentation on behalf of Merrill Associates. Mr Hart was responsible for negotiating the potential loan on behalf of Nemesis.

104. [104]
     In 1991 Nemesis became the lessee of hangar 607, from the AAC. The lease was signed by Mr Hart on 26 October 1991, when he was a director.

Yak 3 Investments Pty Ltd

105. [105]
     Miss Petersen and Mrs Hart are the directors of the company, having been appointed in 1986. Mr Hart was a director up until 1993, when he resigned. Miss Peterson and Miss Hart are the shareholders, and the company is the trustee of a discretionary trust, and the beneficiaries include Miss Peterson and her children.

106. [106]
     Dr Ambler was appointed a director in October 2001. Mr Hart had asked him to lend money. He wished to protect his position as a substantial lender to the company. He was not paid anything for work as a director, and he took no interest in the day to day affairs of the company. He resigned in late January 2004, because he felt that there was no longer any need to keep a close eye on what was going on. Unfortunately for him, he is still a guarantor. He remains a client of Mr Hart, and pays for financial services. He is a close friend of Mr and Mrs Hart. He is a friend of Miss Petersen, and other members of the Hart family.

107. [107]
     The company used to be called Steve Hart Family Holdings No 3 Pty Ltd. It changed its name on 1 October 2001, as part of the efforts to distance the companies from Mr Hart’s difficulties.

108. [108]
     A fixed and floating charge over the assets was registered on 12 February 2002, in favour of Merrell Associates Limited.

109. [109]
     Both Mr Arnot and Mr Hart played a role in the construction of the Archerfield hangar, on Lot 4000. Mr Hart was involved in negotiations for the lease. He dealt with Mr Richard Kent, the manager of the Amberley Aircraft Corporation.

110. [110]
     On 24 March 1999 Mr Hart wrote to the AAC on the letterhead of Flying Fighters, saying:

“Dear Mr Kent

Reference is made to the long and protracted negotiations conducted between you and the writer for a site at Archerfield on behalf of (Flying Fighters).  You are aware that the initial site was the old Mobil lease.  This company was under the belief that an agreement was entered into with the FAC prior to the sale to the present owners.  This did not eventuate.  However, the writer has since discussed other options with you due to the before mentioned.  You have requested a written proposal.  Please find two options that Flying Fighters would like to put forward …

The specs of the building are as above.  As I have builder clients and therefore believe that I will have the hangar built for a lot less than normal costs, with this option, I will be in charge of the building of the hangar.  The rent would be agreed between the parties at a percentage of the costs plus the land rent.

You are aware that I wish to have a privately owned museum for aircraft.  At present I own the following aircraft. (Mentioning 6 different aircraft).

You know that I have a passion for aviation and want to show the public at large the beauty of old planes and the joy of seeing them flying.  I will continue to keep buying the same type of aircraft as above and then to restore them to flying condition.

…  Could you please let me know what your thoughts are so that we can commence to move forward as enough time has gone by.  For your information, I have been approached by another airfield to set up this operation on good terms.  I would however much prefer Archerfield.  Richard, I await your response.”

111. [111]
     Mr Steve Hart took the dominant role in the negotiations with Mr Kent, the manager of AAC. He negotiated the term of the lease and the extent of the taxiway, which was on common property. The correspondence went directly to him. Mr Kent observed that the main negotiator and team leader was Mr Hart. On most occasions Mrs Hart or Mr Arnot accompanied Mr Hart. On those occasions Mr Kent understood from their conversations that Mr Hart was in charge. When significant issues arose, Mr Arnot referred to a need to speak to Mr Hart before making a decision. Most of the conversations between Mr Kent and Mr Arnot were about operational matters. Mr Hart selected the builder, Mr Leitch, and had one meeting with him, in May 2000. Mr Hart gave him the figure that he wished to spend on the hangar. After that, the builder dealt with Mr Arnot. The contract was signed by Miss Petersen and Mrs Hart. Miss Petersen dealt with the progress claims, so Mr Leitch saw her when financial difficulties arose because of Mr Hart’s bankruptcy.

112. [112]
     Architects, Modini and Smith, were retained by the AAC. They sent their plans to Mr Hart on 16 December 1999, to obtain any amendments that he might have required.

113. [113]
     Mr Hart responded to Mr Smith’s invitation to review the plans. He drew a revised sketch of some arrangements about the stairs. He sent that back to Mr Smith, with a request that the architect phone him. The revised sketch was incorporated in the architect’s plans. From then on, Mr Smith dealt with Mr Arnot. Mr Arnot, in turn, made some revision to the plans.

114. [114]
     By 23 February 2001, Mr Arnot was describing himself, appropriately, as the managing director of the company. On that date he wrote to Mr Kent about the building of the new hangar. He spoke about two invoices issued to the company. As he put it:

“… these are the two of Mr Hart’s aircraft … if you will recall our many conversations prior to finalising the lease of the museum site it was agreed by Mr Bird that any of Mr Hart’s aircraft that were outside his hangar on the tarmac that we lease would not be subject to Gait charges.  Could you please rectify this situation and arrange a credit for the two invoices …”

Bubbling Springs Pty Ltd

115. [115]
     This company has previously been called Traywinds Pty Ltd, then Hart Holdings No 2 Pty Ltd, then Steve Hart Holdings No 2 Pty Ltd, then Bubbling Springs Olive Grove Pty Ltd, and now Bubbling Springs Pty Ltd. Its directors are now Miss Peterson, Mrs Hart, and Dr Fleming. Mr Arnot was a director from 14 December 2000 to 8 December 2003, when he resigned. Mr Hart was a director until 1 October 2001, when he resigned. It is the trustee of the Bubbling Springs Discretionary Trust. The beneficiaries are members of the Hart family, and Miss Peterson. The shares are held equally by Miss Peterson and Mrs Hart.

116. [116]
     The property which is subject to this application is this:

• proceeds from the sale of the townhouse at 28 Crestwood Place, Moggill;
• a house at 27 Samara Street, Sunnybank; and
• several lots at Doonans Road, Grandchester.

117. [117]
     The Crestwood Place property was registered in the name of Bubbling Springs. It has been sold since the restraining order was obtained. The net proceeds of sale are held by the Official Trustee. Bubbling Springs say that the proceeds of sale belong to Dr Ambler. He also says that. The DPP challenges those claims, and submits that the proceeds of sale should remain subject to the restraining order.

118. [118]
     Mr Hart and Dr Ambler became friends through their mutual involvement in aerobatic flying. Mr Hart also became his financial adviser. On behalf of Dr Ambler, Mr Hart selected land in Brentwood Place with a view to Dr Ambler building a house on it for sale. That was done. The land was bought directly by Dr Ambler

119. [119]
     Unlike Brentwood Place, the Crestwood Place house was already owned by Bubbling Springs. Subject to a charge in favour of Merrell Associates. That had been negotiated by Mr Hart.

120. [120]
     Dr Ambler agreed to buy the land and build a house on it. Usually, a purchaser would become the owner of the land and then engage the builder. However, in this case, a scheme was devised to minimise stamp duty. Bubbling Springs executed a declaration of trust saying that it would transfer the land to whoever Dr Ambler nominated. That scheme also explains why the building contract was in the name of Bubbling Springs, and not in Dr Ambler’s name. The payments to the builder are recorded as being made by Bubbling Springs.

121. [121]
     However, Dr Ambler said that he made all the necessary payments and that he inspected the house before making each progress payment. There is no reason to doubt his evidence. In due course the sale of the completed house was settled, at a price more than Dr Ambler had expected to receive. There had been some competition between prospective buyers.

122. [122]
     Miss Peterson explained that Mr Hart’s role with respect to the Crestwood Place land was an example of his acting as chief negotiator in relation to the buying and selling of assets. Mr Hart negotiated the purchase of the land, arranged the contract with the builder, picked all the colours and the accessories of the house, ensured that the builder performed on time, and kept a watch on the building process.

123. [123]
     The building contract was entered into on 19 April 2002, with Civic Steel Homes Pty Ltd. The address given to the builder was “C/- S Hart.” Receipts were issued to Bubbling Springs, rather than Dr Ambler. The appointment of the estate agent, Mr Rolph-Smith, was signed by Miss Petersen.

124. [124]
     Dr Ambler’s evidence includes substantial documentary proof of what he says. That is, that he paid for the land, the building of the house, and its fitting out. There is no reason to doubt that evidence. There is no reason to think that the transaction was somehow a sham, or that Dr Ambler was a “front man” for Mr Hart’s interests. The proceeds of sale belong to Dr Ambler (or, more precisely, the company of which he is a principal, Bearcat Enterprises Pty Ltd).

125. [125]
     Two observations may be made about this transaction. First, at about the same time, in 2002 and 2003, Dr Ambler was paying Mr Hart a general administration fee of $1,000 a month. It was paid to Business Management Unlimited, which seems to have been a name under which Mr Hart then carried on such a business. Secondly, questions were raised about the validity of the trust arrangements, as the declaration of trust was only stamped at about the time of Dr Ambler’s examination. However, it was probably the result of carelessness rather than being any sign of a sham transaction. As Dr Ambler observed, while agreeing that Mr Hart was an experienced and astute man of business, “he was not a man to dot his “i’s and cross his t’s”. The arrangement about the house was between people who trusted each other, and did not trouble about such things as formal authority to act for another.

126. [126]
     Apart from the administration fee, Mr Hart’s aim was to raise funds on behalf of Nemesis. He did that, by selling it to Dr Ambler for $80,000. That money was paid. While the stamp duty arrangement was probably Mr Klooger’s initiative, the whole transaction was supervised by Mr Hart.

127. [127]
     On 27 November 2002, Mr Hart was not a director of the company. Ostensibly on behalf of Unlimited Business Consultants (Qld) Pty Ltd he approached a financier about rolling over some loans. He referred to a development at Moggill, and said that he would have the Brandon Road property re-financed prior to the 15^th.  He went on “I hope to have 4 of the houses also refinanced prior to the 15^th …”.  The four houses included 27 Samara Street. 

128. [128]
     Mr Arnot and Dr Fleming were directors of Bubbling Springs in March 2002. However, neither was advised of the transfer of the Crestwood Place property to Dr Ambler. Nobody discussed the transaction with them.

129. [129]
     In her affidavit of 7 July 2003 (Exhibit 22A) Miss Peterson gives her description of the Doonan Road property:

“The only business of Bubbling Springs is the ownership of a farm property at Doonans Road, and the ownership of a rental property at 27 Samara Street, Sunnybank.  I manage everything to do with the rental property, and if I am not present and someone needs something done they would ask Laura Hart.

The day to day business of the farm is managed by myself, Laura Hart and Nigel Arnot.  The farm was purchased for the purpose of growing olives in May 2000.  It was originally envisaged Mark Ramsden would manage the day to day activities on the farm as farm manager.  However, there hasn’t been a lot happening on the farm.  Therefore, most of the management is done by either Nigel Arnot or myself.  Laura Hart, Steve Hart and Mark Ramsden originally found the farm, and came back and discussed it with me.  The decision to purchase it was made jointly by Steve Hart, Laura Hart and myself.  Since about November 2001 all that has been happening on the farm is that we are running some cattle (approximately 150-200 head) and growing a small amount of lucerne.  Mark Ramsden rents the house on the farm, and is paid by (Nemesis) to look after the cattle and the day to day running of the place, along with another farm hand.  Any questions either of these people have about the farm are directed to Nigel Arnot or myself. 

(Mr Hart) does not have any involvement in the running of the farm, and hasn’t had since shortly after it was purchased.

After the farm was purchased, I organised the house and shed on the property to be renovated and started the building of the airstrip.  Nigel Arnot organised the completion of the airstrip and the building of two dams on the property, and the renovation of the sheds and office.”

130. [130]
     At the hearing, a good deal of attention was paid to the role which Mr Hart played, after his retirement as a director in October 2001, in the affairs of Bubbling Springs. Attention was paid, in particular, to meetings the company held with the Ipswich City Council.

131. [131]
     Contact was first made with the Council in 2000 because of the company’s plans to establish a substantial olive grove on the property. The property also had a grass airstrip. Mr Hart and Mr Arnot were very interested in the prospect of using the property for aerobatic flying. Substantial work was done on enlarging the grass airstrip into a much larger airstrip. The earthworks were extensive. Miss Bell, the planning officer of the Council, protested that it was illegal, and that a proper application had to be made to Council. She had become alarmed when Mr Hart said something to her, along the lines that he had 17 aircraft and that the strip would be only subject to private use. The number of aircraft pointed to a level of operations beyond private use – at least to her mind.

132. [132]
     The reference to 17 aircraft, and the circumstances in which it was made, cannot lead to a conclusion that Mr Hart necessarily meant that he personally owned the aircraft. They may have been aircraft at his disposal or belonging to those in an aerobatic club. Otherwise, it is clear that the observation made on behalf of the DPP is true – that Mr Hart was a significant figure at the meetings in 2000, and appeared to be in charge, on behalf of the Bubbling Springs interests. At the time he was still a director of the company. Apart from obtaining approval for a commercial development, he also had a strong personal interest in the possibility of aerobatic flying from the property.

133. [133]
     After the meetings with Miss Bell, Bubbling Springs applied to the Ipswich City Council to use the land for aerobatic purposes. On 12 December 2001, approval was given for the aerodrome to be constructed, but the application with regard to “airsports” was refused. That led to an appeal to the Planning and Environment Court. A “without prejudice” meeting was arranged between Bubbling Springs, the Council, and an objector, Powerlink (some power lines crossed the property).

134. [134]
     The meeting was held on 4 April 2002. Mr Hart did most of the talking and negotiating on behalf of Bubbling Springs. He came to an agreement with Powerlink. He was no longer a director.

135. [135]
     In November 2000, Bubbling Springs had engaged town planners, TSM Resources Pty Ltd, with respect to two applications. They involved material changes of use to the property, with respect to the construction of the airstrip and with respect to the clearing of vegetation. Their agreement was recorded in a Terms of Engagement, and was signed by Mr Hart on behalf of Bubbling Springs. At first, TSM Resources dealt with Jason Johns and later with Mr Hart and Mr Arnot. Mr Arnot was the principal contact for the projects, but he generally did not give immediate answers, preferring instead to defer to others before coming back with a reply.

136. [136]
     Mr JMB Venn, on behalf of the planners, attended the meeting on 4 April 2002. Mr Hart and Mr Arnot were there on behalf of Bubbling Springs. Several others were present. Mr Venn observed that Mr Hart did all of the talking for Bubbling Springs, even though he noted that the original application had been signed by Miss Petersen and Mrs Hart. The meeting was after his resignation.

137. [137]
     Present at the meeting was a solicitor, Mr Michael Connor, who had been retained on behalf of Bubbling Springs. He was experienced in planning matters. On 17 March 2003, Mr Connor had written to Bubbling Springs, with his letter being marked for the “attention of Steve Hart”. He enclosed a copy of a drawing, in connection with the aerobatic proposal. He asked for confirmation that the drawing was acceptable, so that his firm could forward it to the solicitors for Powerlink.

138. [138]
     Mr Hart approved the drawing. Mrs Hart relayed his decision to Mr Connor. She told Mr Connor that her husband had approved the drawing.

139. [139]
     There were some difficulties between Bubbling Springs and the town planners, TSM Resources, over the payment of their account. It got to the stage where Harrison Greigson (the successor to TSM Resources) had engaged debt collectors, who telephoned Mr Hart, or his office. On 15 December 2002 he sent an email to Mr Arnot:

“Big Nob

The debt collectors for Harrison Greigson have phoned again.  Did you contact the people.  Could you let me know please.

Cheers

Steve”.

140. [140]
     The next day Mr Arnot responded to Mr Hart, to the effect that he had spoken at length again with Mr Venn, and that a certain arrangement had been made, and that the debt collectors had been stood down. Mr Venn spoke to Miss Petersen but it was about his invoices, rather than the project.

141. [141]
     The events which caused Mr Hart’s resignation as director also created a need for re-financing, because of the withdrawal of financial support by the National Australia Bank.

142. [142]
     On 21 December 2001, Mr Hart wrote to McLaughlins Financial Services, with regard to re-financing Bubbling Springs and Yak 3 Investments:

“I personally would like to thank you for the opportunity that you have given by refinancing the facility that was previously with the National Australia Bank.

I understand at the moment that I am not the most ‘bankable’ person in Queensland, but can assure you of my ongoing gratitude.

May you have a very merry Christmas and may the year 2002 being every wish and happiness that you desire.”

143. [143]
     Even though Dr Fleming was a director of the company, (until October 2001) he was not aware of the negotiations with the Ipswich City Council about the application for the airstrip. Likewise, Mr Arnot was not aware of an option given to Dr Fleming over the Grandchester land. Mr Arnot was also unaware of the transaction with Dr Ambler, with regard to 28 Crestwood Place.

144. [144]
     The above event shows that Mr Hart was the dominant decision maker in the company, and its chief representative.

Merrell Associates Limited

145. [145]
     The restraining order is made against property of Merrell Associates Limited. It includes three aircraft, and fixed and floating charges dated 30 October 1998 and 20 September 2001, over the assets of Flying Fighters and Nemesis Australia, respectively.

146. [146]
     Merrell Associates is not an applicant in these proceedings. None of the four applicants is concerned with Merrell’s property or the control that Merrell may have over their property. None of the applicants relies upon anything to do with Merrell, in making out their cases that Mr Hart is not in effective control of their property.

147. [147]
     Rather, it is the DPP who has attempted to raise an issue about Mr Hart being in effective control of Merrell Associates.

148. [148]
     The written submissions on behalf of the DPP ask that a finding be made, to the effect that Mr Hart is in effective control of that company. The reason for the submission is in paragraph 81:

“Through control of (Merrell Associates) Mr Hart is in a position to ensure that the property, the subject of these applications, cannot be sold without his consent and to direct how the net proceeds from any sale are to be applied.”

149. [149]
     The interests of Merrell Associates were not represented at the hearing. Its solicitor, Mr Klooger, had been compulsorily examined under the earlier order of this court. There was a suggestion that the DPP might call Mr Klooger, however, he was not called by any party here.

150. [150]
     It is not appropriate to make a positive finding, one way or another, about the extent of control which Mr Hart may exercise over Merrell Associates. It is sufficient to say, for present purposes, that Mr Hart had, and perhaps still has, a close commercial relationship with the financier. So much appears from the matters set out in paragraphs 70-80 of the submissions on behalf of the DPP. That close commercial relationship is common ground – see paras 80-88 of the written submissions on behalf of the applicants.

Some Further Facts

151. [151]
     Some further examples can be given to show Mr Hart’s attitude (or the attitude of his advisers) to property owned by the different entities in the Hart family group of companies.

152. [152]
     Writing on behalf of Nemesis, on 13 December 2000, Miss Petersen asked Mr Klooger, the solicitor:

“As per your telephone conversation with Steve Hart would you transfer the following as requested

Nemesis to Flying Fighters – hangar site 607 Archerfield Airport

Bubbling Springs to Yak 3 Investments property at 27 Samara Street, Sunnybank

Yak 3 Investments to Flying Fighters hangar 101 Archerfield Airport

Yak 3 Investments to Flying Fighters hangar 400 Archerfield Airport”

153. [153]
     On 9 March 2001, Mr Klooger wrote to the solicitors for the Archerfield Air Corporation. He referred to the leases at sites 101 and 400:

“We refer to the above lease and we advise that Mr Hart is currently reorganising his affairs and wishes to assign the lease from Yak 3 Investments to Flying Fighters … .  We also advise that Nemesis wishes to assign its rights in site 607 to Flying Fighters and we should be pleased if you would process this request as well”.  (emphasis added)

154. [154]
     On 29 May 2001 Mr Hart wrote to the National Australia Bank on behalf of Nemesis. The bank was seeking payment of substantial amounts owed to it. Mr Hart’s letter said this:

“Further to your letter of 28 May and our meeting of today’s date I confirm herewith the proposal that was outlined verbally to (the NAB). 

The proposal is as follows:

1. (1)
   (Nemesis) is to pay the bank the sum of $396,000 on 31 May 2001, which are proceeds from the sale of property partly owned by Yak 3 Investments

2. (2)
   (Nemesis) is to pay to the bank the sum of $396,000 on 30^th June 2001, which are proceeds from the sale of property partly owned by Yak 3 Investments

3. (3)
   …

4. (4)
   (Nemesis) will provide security over the following properties

1. (i)
   1 Samara Street, Sunnybank

2. (ii)
   27 Samara Street, Sunnybank

3. (iii)
   Lot 111 Crestwood Place, Moggill

4. (iv)
   3324 Moggill Road, Moggill.

This property is owned jointly by an associated entity of Nemesis and another.   …”

155. [155]
     In an effort to refinance substantial borrowings, on 4 September 2001 Mr Hart wrote to McLaughlin’s Financial Services Limited, on the letterhead of Sea Fury Investments Pty Ltd, another of the family companies. He outlined the borrowings that he required, and the security that would be offered. He enclosed a document entitled “Statement of Position – Steven Irvine Hart and Related Entities – As at 4.12.00”. The one page list of assets and liabilities shows net assets of about $5,500,000. Apart from the reference to “related entities” there is no mention of the actual owners of the assets. However, the references to various aircraft, artworks, motor vehicles, aircraft hangars, the Gatton property, and the Samara Street properties, reveal that the assets of the applicants in this case are included.

156. [156]
     Those examples show that Mr Hart regarded all of the assets of the Hart companies as being at his disposal. The assets of one would be available to secure the obligations of another. The assets could be readily transferred from one company to another. All of the companies and their assets could be described as “his affairs”, by his solicitor.

Other Witnesses

157. [157]
     Mr P.R. Clarke-Wellsmore has dealt with Miss Petersen and Mrs Hart since May 2002, in connection with Yak 3 Investments and Bubbling Springs. He has found them both to be well informed about those companies’ affairs. They gave him prepared material about the companies’ financial positions. There is no reason to doubt his careful evidence.

158. [158]
     Mr Rolph-Smith, a real estate agent, gave rather confused evidence about Dr Ambler and 28 Crestwood Place. His evidence tended to confirm Dr Ambler’s evidence, that he was the owner of the land and house.

159. [159]
     Lisa Bundesen, an accountant, said that the documents showed that Mr Hart had no control over the four applicants. However, she relied on the written records, and had not attempted to take into account the personalities and relationships explored here.

Conclusions

160. [160]
     All of the evidence has to be considered as a whole, and not kept in compartments, confined to each applicant. As well as the documentary evidence, the evidence of family and personal relationships is vital in this case. The dynamics of the Hart family are reflected in much of the evidence mentioned above.

161. [161]
     Miss Petersen and Mrs Hart say that they are effectively in control of the applicants. However, they could not produce one documentary record such as a notice of meeting, to support that assertion. In truth, they are Mr Hart’s administrative staff and give effect to his directions. While they are capable of conducting many of the day to day affairs of the companies, they take their directions from him, on any occasion which is significant, or when he chooses to intervene.

162. [162]
     Mr Hart was never a director of Flying Fighters, but has always been the dominant and controlling figure within the company. His resignation as director of the other three applicants has made no difference to his role as the controlling figure in each of those companies. His resignation as director was a formal one, and has had no practical consequences.

163. [163]
     Miss Petersen and Mrs Hart’s protests about their roles as directors at the present time are unconvincing. It is not possible to accept their assertions that they are in control of the applicants. Those assertions are unbelievable. They are contradicted time and again by the facts set out above. As witnesses, they were influenced by a desire to protect the interests of Mr Hart, and the four applicant companies, in which they have significant personal interests.

164. [164]
     Mr Arnot defers to Mr Hart in any matter of substance, and will continue to do so. Dr Ambler and Dr Fleming will not play any effective role, in restraining Mr Hart.

165. [165]
     It is true, as counsel for the applicants submitted, that:

1. (a)
   The corporate structures of the applicants were set up well before Mr Hart was charged with any offence. They were functioning as business entities before he was charged.  They held substantial assets well before then.
2. (b)
   There is no suggestion that any funds controlled by Mr Hart have found their way to any of the applicants.
3. (c)
   There is no suggestion of any improper transfer of assets as between the applicants and Mr Hart, at any relevant time.  There is no suggestion of any alteration in the business or strategic affairs of any of the applicants since Mr Hart was charged.
4. (d)
   It is true that the present directors of the applicants have a working knowledge of the day to day affairs of the applicants.  Among the directors, Mr Arnot’s interests are, naturally enough, focused on the aeroplanes.

166. [166]
     Those observations have been taken into account. Indeed, the key finding here is that nothing has changed, in particular, the dominant role of Mr Hart. All that happened was his formal resignation as a director from three of the four applicants. He continues to treat the companies’ property as his own. He remains in effective control of Flying Fighters, Nemesis, Bubbling Springs and Yak 3 Investments.

167. [167]
     It follows that the applications must be dismissed. The parties may wish to prepare a draft order. Some though may need to be given to the findings about the position of Bearcat Enterprises Pty Ltd.

168. [168]
     (The following order was made:

1. (a)
   Order that the applications by the second, fourth, sixth and seventh Respondents be dismissed (except that the application by the seventh Respondent is allowed in part and the proceeds of sale of 28 Crestwood Place are excluded from the restraining order).

2. (b)
   Order that the costs of and incidental to the four applications (with the exception of the costs of the issue relating to 28 Crestwood Place and Dr Ambler) be assessed on the standard basis and paid by the second, fourth, sixth and seventh respondents to the Commonwealth Director of Public Prosecutions.

3. (c)
   Order that the costs of the issues relating to 28 Crestwood Place and Dr Ambler be assessed on the standard basis and paid by the Commonwealth Directory of Public Prosecutions to the seventh Respondent.)

APPENDIX

THE BURDEN OF PROOF

HIS HONOUR:  … In this case restraining orders have been made on 8 May 2003.  Mr Hart has, it seems, been charged with several offences.  It is agreed here that there is the possibility that a pecuniary penalty may be imposed upon him in the future if he is found to have benefited from the offences charged.  Restraining orders and pecuniary penalty orders may be made against the property of others, which has happened in this case, provide – and this is the issue here – Mr Hart “has effective control” over that property.  The restraining orders were made on the basis of a sworn suspicion that Mr Hart effectively controlled various property owned by others.

Section 29 enables application to be made to the Court so that property the subject of a restraining order may be excluded from that order.  The application may be made at any time, including the time before any trial of the substantive allegations.  So much was noted by the Court of Appeal in an earlier appeal in this matter.  See Commonwealth DPP v Hart & Others (2003) QCA 495.

In this case, those whose property is affected – there are four parties – have satisfied the earlier requirements of section 29(2), that is to say, none of those things can be proved by the Crown.  But attention is focused here on subsection 4 of section 29 which speaks of a possibility of a pecuniary penalty being ordered.  Once again the property of another, which may be potentially taken to satisfy a pecuniary penalty order is said to be the subject of effective control by Mr Hart.

The question here is this:  is the burden of proof on the Director or upon the applicants here to prove that within the meaning of section 29(4) that their property is not at the present time under the effective control of Mr Hart?

Counsel for the Director says that subsection 4 is one of several cumulative hurdles set out in section 29 and that the burden of proof with all those matters is on the applicants.  He points to section 317 of the Proceeds of Crime Act 2002 dealing with the onus and standard of proof.  The section simply says this:

“1. The applicant in any proceedings under this Act bears the onus of proving the matters necessary to establish the grounds for making the order applied for.

2. … any question of fact to be decided by a Court on an application under this Act is to be decided on the balance of probabilities.”

On the other hand it is submitted on behalf of the applicants here that section 29(4) is truly an exception to the usual scheme of things in the earlier parts of section 29.  By applying the conventional approach to such matters, it is said that the burden of proof is on the Director rather than on the applicants.

Both counsel understandably have referred to the decision of the High Court of Australia in Vines v Djordjevitch (1955) 91 CLR 512.  There is a discussion there of the distinction between a proviso and an exception in deciding where the burden of proving facts might lie.  In the context of the controversy here the following observations of the High Court at 519 are appropriate:

“All the cases say that if there be an exception in the enacting clause it must be negatived but if there be a separate proviso, it need not … the intrinsic character of the provision that the proviso makes and its real effect cannot be put out of consideration in determining where the burden of proof lies … it may be sufficiently clear that the whole amounts to a statement of a complete factual situation which must be found to exist before anybody obtains a right or incurs a liability under the provision.  In other words, it may embody the principle which the legislature seeks to apply generally.  On the other hand, it may be the purpose of the enactment to lay down some principle of liability which it means to apply generally and then to provide for some special grounds of excuse, justification or exculpation, justification, excuse, ground of defeasance or exclusion which assumes the existence of general or primary grounds from which the liability or right arises but denies the right or liability in a particular case by reason of additional or special facts, then it is evident that such an enactment supplies considerations of substance for placing the burden of proof on the party seeking to rely upon  the additional or special matter …”

In the present case reference has been made already to section 29 and to section 317.  Attention perhaps might also be paid to section 17 under which the restraining order was made and its references to the possibility of the effective control of property, section 30, section 31.  Section 32 says that an application like this must not be heard by the Court until the Director has been given a reasonable opportunity to conduct an examination of an applicant.  See also section 42 with regard to applications to revoke restraining orders, and section 102 which deals with the recovery of forfeited property even after an order for forfeiture has been made by the Court with, once again, the role of effective control in section 102(2) and finally section 141.

Having looked at the scheme of the Act, which is revealed there, in my opinion it is clear enough that there is to be no different burden of proof throughout the whole of section 29.  It is true, as submitted for the applicants, that there is a change of language in subsection 4, but the same section does go on to say that the Court must be “also satisfied” about another matter.

In my opinion they are cumulative requirements.  The burden does not shift from the applicants.