Robson v Robson[2009] QSC 62

SUPREME COURT OF QUEENSLAND

[1] In these proceedings the plaintiff sues his brother and sister-in-law to enforce declarations of trust which they executed over one-half of the shares in a company called Yalgold Pty Ltd (in liquidation) (“Yalgold”).  The company has been wound up and there is a substantial surplus available for distribution to its members.  The case is defended upon many grounds, but that which is presently relevant is what I have described in previous judgments as the tax fraud case.  In broad terms, the defendants say that over many years the plaintiff conducted a scheme to defraud the Commonwealth, by diverting Australian income to foreign companies and by “repatriating” at least some of it to Australia in the guise of purported loans so that the plaintiff could enjoy the income here.  They allege that part of this money found its way to Yalgold, and that the plaintiff should be refused equitable relief because he is effectively seeking to recover the fruits of his fraud.  In essence, this is the same case the subject of pleadings I struck out in August 2007[1] and again in October 2008.[2]

[2] Now there is this Further Amended Defence, which was filed on 23 February 2009 (notwithstanding my direction that it be filed last November).  The plaintiff argues that this pleading of the tax fraud case still suffers from the same defects and should be struck out.

[3] It remains the defendants’ case that the plaintiff perpetrated a so-called transfer pricing scheme through a number of overseas companies controlled by him.  This latest pleading adds more companies to the list.  It alleges one single, overarching scheme which was conducted by the plaintiff from at least 1988 until March 2000, having what this pleading describes as the first, second or third of its manifestations.  This pleading overcomes at least some of the problems of last year’s version by alleging that the scheme was in operation before the incorporation of Mine & Quarry Equipment Pty Ltd and Mine & Quarry Equipment (International) Pty Ltd, as well as after those companies were incorporated and became participants.[3]  The pleading is still said to be too general in its definition of the scheme.  But in my view it is not so much the generality of the pleading but the fact that it would raise false issues which is its present difficulty.

[4] Ultimately the defendants have to make this alleged transfer pricing scheme relevant to the relief which is claimed against them.  This means that they have to plead and prove a rational connection between the alleged conduct of the scheme on the one hand, and the execution of the declarations of trust upon which they are sued and the property of Yalgold on the other.  At the heart of their case is the allegation that funds were paid to Yalgold from the income which was diverted from Australia under the scheme.  In so far as funds were paid to Yalgold by way of purported loans, it is thereby relevant for the defendants to plead, as they do, that the payments were not in truth loans, but were paid in the guise of loans in order to conceal the scheme from any investigation by the Commissioner of Taxation.

[5] However, the pleaded case goes further by alleging the same thing about alleged repatriations of this income under the guise of purported loans by some of these foreign companies to the first defendant.  As to such allegations, I wrote in my 2007 judgment:[4]

“Nor is it clear how it is relevant to the defence of this claim to consider the validity or effect of agreements to which Yalgold was not a party, including the MQESP Loan Facility Agreement or the Pacific Ventures Loan Facility Agreement, by which other lenders agreed to lend money to the first defendant.  As it happens, the validity of those agreements appears to be in issue in proceedings brought by Hannover International Limited and MQEI against the (present) First Defendant (respectively S7342 of 2000 and S8937 of 2000).  For that reason, the defendants say that the present proceedings (if these particular pleas are not struck out) have such a connection with those other proceedings that they should be heard together.  However, the determination of those other agreements does not matter to the defence sought to be raised to this case, which is that ill‑gotten gains have flowed through to Yalgold and that the plaintiff seeks to get hold of them by the relief which is sought.”

And in my 2008 judgment, I wrote:[5]

“A major flaw in last year’s pleading was that it was pleaded so broadly that it called into question the validity and effect of many agreements and other transactions to which Yalgold was not a party.  In particular the pleading challenged the validity of loan agreements by which other companies controlled by the plaintiff had agreed to lend money to the first defendant, when the validity of those agreements although in issue in other proceedings brought against the first defendant,[6] was not relevant to these proceedings.  The same flaw exists in this pleading.  The position in that respect is no different except that it is made worse by the addition of some other transactions of this kind.  So amongst the transactions in this category are now a purported assignment by Pacific Ventures Limited (“Ventures”) to MQEI of the right to interest on advances by Ventures to the first defendant, and a purported assignment by Ventures to Credit Facilities Limited, and in turn to Hanover International Limited (“Hanover”) of loans by Ventures to the first defendant.  Again the validity of these transactions has no apparent relevance to the relief claimed in these proceedings.”

I further wrote:[7]

“…Moreover there is still the problem that the case which pleads the specific payments to Yalgold is immersed in a wider and far reaching case which impugns agreements and other transactions which have no relevant connection to Yalgold and to the relief claimed in these proceedings.”

[6] Paragraph 72 of the current pleading corresponds with paragraph 46 of the 2007 pleading,[8] with the addition of certain other transactions not involving Yalgold.  Again the allegation is that these transactions were “void, invalid and of no effect”.  Of course, the defendants contend that these transactions are invalid because they are incidents of the same transfer pricing scheme which is said to have affected Yalgold’s position.  But that connection does not make the invalidity of these other transactions material facts in the defence of the present claim.  In this respect, the present pleading remains flawed by seeking to raise false issues. 

[7] The defendants’ repeated attempts to raise these issues is understandable, because the validity of some of these agreements is in issue in proceedings brought by Hannover International Limited and Mine & Quarry Equipment (International) Pty Ltd (each under the control of the present plaintiff) against the present first defendant.[9]  But neither justifies the inclusion of the same allegations here, nor does it excuse the defendants’ refusal to abide by what I have previously held to be this flaw in their pleaded case. 

[8] There is no longer the plea that the declarations of trust were sham transactions, as there had been in the 2008 Defence.[10]  But there remain allegations that several transactions were shams, and with one possible exception, again the problem is that these raise irrelevant issues.  The possible exception is within paragraph 71(h), which pleads:

“71.In the premises contained in Part H of this pleading, the following were sham transactions, not intended by any of the parties thereto to have legal effect; namely:

…

(h)Any advances which were in fact made, purportedly as loans, by [the plaintiff] (rather than [Pacific Ventures Limited]) to Yalgold (rather than [the first defendant])”.

From the terms of this particular plea, it is not easy to identify what is alleged to have been the sham and what was the reality.  It refers to “the premises contained in Part H”, which extends over some 14 pages of this pleading.  In some places Part H is possibly relevant to this paragraph 71(h), although it is still difficult to identify exactly what is relied upon in this respect.  It must be accepted that the nature of payments to Yalgold by or at the direction of the plaintiff are of sufficient apparent relevance to justify a pleading of that matter, but the plaintiff is entitled to a clearer pleading than the present paragraph 71(h) and the broad reference to the factual premises for it.

[9] The result is that there is probably a case within paragraphs 44 to 76 of the current pleading which can be properly pleaded in response to this claim.  However, it is still immersed within a large amount of the irrelevant, and it should not be for the plaintiff to have to dissect the good from the bad.  Accordingly, paragraphs 44 to 76 of the Further Amended Defence must be struck out.

[10] This case was once listed as a commercial cause.  It was set down for a trial to commence in March 2008, but the trial had to be adjourned because both sides agreed, shortly before the commencement, that the case was not ready and each has since substantially amended its pleadings.  When the trial date was vacated, I removed the case from the Commercial List.  The plaintiff seeks to have it restored to the List.  The principal difficulty in that is that the defendants wish to have this case heard together with the other proceedings against the first defendant to which I have referred.  Consistently with these Reasons, the defendants should be able to properly plead a case which focuses upon the so-called transfer pricing scheme in so far as funds were paid to Yalgold.  If so, then the evidence relevant to that case is likely to overlap with some of the evidence relevant in the other proceedings.  And each of these cases is likely to be affected by what is found to have taken place between the present parties in their business dealings over the twelve or more years before they fell out in 2000.  One matter contributing to that is the fact that the plaintiff now relies upon declarations of trust executed in 1995 as well as that executed in 1989.  In summary, the nature of the relevant issues in the present proceeding now makes them more closely related to those in the other cases than was the position when the present case, but not the other proceedings, was placed on the Commercial List and set down for trial.

[11] I am now asked to place all three proceedings on the Commercial List.  If tried together, that trial would certainly take more than ten days.  In the circumstances none of the cases will be placed on the List.  In my view the better course is for them to be managed together in the Supervised List.

[12] The order will be that paragraphs 44 to 76 of the Further Amended Defence filed on 23 February 2009 be struck out.  I will hear the parties as to any further orders including costs.