Deputy Commissioner of Taxation v Luckhardt [2005] QDC 163

DISTRICT COURT OF QUEENSLAND CITATION: Deputy Commissioner of Taxation v Luckhardt [2005] QDC 163 PARTIES: DEPUTY COMMISSIONER OF TAXATION Plaintiff v GEORGE PAUL LUCKHARDT Defendant and LAWRENCE PICKERING Third Party FILE NO/S: BD227/2003 DIVISION: PROCEEDING: Trial ORIGINATING COURT: District Court, Brisbane DELIVERED ON: 16 June 2005 DELIVERED AT: Brisbane HEARING DATE: 21, 22 March 2005 JUDGE: McGill DCJ ORDER: Judgment that the third party pay the defendant $137,597.40. Unless another order is appropriate, the third party to pay the defendant’s costs of and incidental to the action including the third party proceeding to be assessed. CATCHWORDS: CONTRACT – Indemnity – oral – whether made. COUNSEL: A Jamieson for the defendant T Entriken for the third party SOLICITORS: Zerrin Jameson solicitor for the defendant The third party was not represented. [1] On 14 December 1999 the company, Hamlyn Crest Corporation Pty Ltd (“Hamlyn Crest”), was registered as an Australian proprietary company. 1 It had a paid up capital of two dollars, with both shares held beneficially by the defendant, who was also the sole director and secretary. On 11 October 2002 an application for the winding up of the company was filed in the Supreme Court of Queensland. On 21 October 2002 the company was placed in administration, and on 15 November 1 This information about the company comes from Exhibit 6. -- 1 of 13 -- 2 2002 liquidators were appointed following a special resolution that the company be wound up voluntarily. [2] On 28 January 2003 the Deputy Commissioner of Taxation commenced a proceeding in this court against the defendant seeking to recover from him director’s penalties payable as a director of Hamlyn Crest because money payable by it in respect of group tax obligations had not been paid. By a third party notice and statement of claim filed 15 April 2003 the defendant claimed an indemnity from the third party, in respect of his obligations to the plaintiff, under an oral contract for indemnity. The third party defended that claim. On 24 June 2003 the defendant consented to judgment for the plaintiff against him, which was given by a registrar on 1 July 2003, for $136,750.20, the amount of its claim together with some interest, and costs of $847.20. The action is proceeding in respect of the third party claim.2 [3] The defendant’s case was that he was asked by the third party to be the director of Hamlyn Crest as the nominee of the third party, because the third party wanted to conceal his association with the company, and that he agreed to do so on the basis that the third party promised to indemnify him for any liability incurred as a result of his being a director. The third party denied that there was any such agreement, and said that his only involvement with Hamlyn Crest was that he had done some promotional work for it, for which he received remuneration from a company in Hong Kong, Highland Investments Ltd, which supplied Hamlyn Crest with product. [4] The business carried on by Hamlyn Crest was the ancient trade of parting fools from their money. The defendant put in evidence two promotional video tapes3 used by Hamlyn Crest, one starring the third party, which explained what it was the company was offering for sale. It was a computer program which it was claimed was able to predict the outcome of horse races. A person using the program was required to enter certain information about each horse in the race, and other relevant information about the race, which information was said to be readily available from the newspapers, and the computer would then determine which horse would win. It did not go so far as to claim 100 percent reliability, but did claim that one could easily make a comfortable living from the profits of betting on horse races using this program. It was not submitted by either party, and it is not obvious to me, that this business was actually illegal, although it occurs to me that it may have brought Hamlyn Crest within paragraph (o) of the definition of vagrant in the Vagrants Gaming and Other Offences Act 1931, which was then in force.4 Nevertheless, it is not a business which reflects any credit on anyone associated with it. [5] There is no reliable evidence as to the earnings from the business, but there was evidence that at the relevant time it was employing up to 50 marketing people,5 and perhaps a computer programmer or two, and that the third party has been able to live very comfortably, the defendant says on the proceeds of this business and related businesses in other countries. The third party on the other hand said that 2 The terminology on a number of the documents on the file is incorrect; the parties to what was tried before me are the defendant and the third party. 3 Exhibits 2 and 3. 4 See R v “The Colonel” et al (21.5.30, Wool J, unreported) – in Herbert AP “Wigs at Work”, p.49. 5 Defendant p.18; Evans p.138. -- 2 of 13 -- 3 various things were paid for by a Hong Kong company which was associated with such businesses overseas, because of publicity work he had done for that company; otherwise his principal source of income was from winnings at golf.6 If the Hong Kong company was able to afford to be so generous in respect of mere publicity work, that suggests that the business overall is very lucrative. It is astonishing that there are so many people in the world so gullible. The defendant’s evidence [6] The defendant said that he first met the third party in the early 1980’s, at a golf course on the Gold Coast, where he was occasionally a participant in a group who played regularly on a Friday afternoon: p.5. Whether or not as a result of this, at some point the third party became acquainted with the defendant’s daughter, who began to live with the third party in 1992, at Main Beach: p.5; p.29. He was subsequently told by his daughter that the third party was in the business of “gambling schemes”: p.6. On one occasion he visited an office on the Gold Coast which he understood was the third party’s office. In about 1995 his daughter and the third party were in England for a time, and subsequently went to live in Vanuatu. He said that while they were in Vanuatu, on an occasion in 1999, after he had spoken on the telephone to his daughter, the third party came on the line and told him he was looking for a director for one of his companies. The defendant said that he was reluctant to become involved initially, and said he would give it some consideration: p.7. He was told originally he would have to do nothing. He said that he asked the third party “what if something goes wrong?” The third party replied: “Well, you can resign at any time. If anything does go wrong, you know, I’ll completely indemnify you.” He asked the third party: “What does that mean”, and the third party replied: “any liabilities, anything you could cut short on I will – I will pick up the tab on that.” He repeated that “you could resign at any time.” The defendant said he discussed it with his daughter at various times, and, basically because of the relationship between the third party and his daughter he said he would become a director of the company. He said that initially there was no payment involved, because there was nothing for him to do, just his name on some documents. [7] The defendant said that documents were brought to him by Wayne Evans whom he described as the third party’s business manager; he signed them, and Wayne attended to whatever had to be done. Mr Evans, who was called for the third party, could not definitely recollect this, but said under cross-examination that it was possible that he took the documents to the defendant: p.145. He then said at p.146 that the documentation that he possibly could have taken to the defendant was that relating to the lease of some premises at Creek Street by Hamlyn Crest, not the formation of the company. It is possible that he may have misunderstood what he was being asked in the earlier questions. [8] The defendant said he went to Vanuatu on 17 December 1999: p.7. He was there for eight days; he did not give evidence that anything of any significance happened in relation to Hamlyn Crest during that visit.7 This was after the company was registered and therefore after any documents he signed for that purpose were signed. 6 Third party p.114. 7 His daughter said that he came to Vanuatu specifically to talk to the third party about this: p.51. -- 3 of 13 -- 4 [9] In October 2000 the defendant’s daughter, who was then expecting a child, returned to Australia and lived for a time with the defendant in a particular property which they leased, although they said the third party paid the rent. A son, Baxter, was born on 31 December 2000. Subsequently the third party also moved to the Gold Coast, and lived with the defendant, his daughter, and her son at a different property, which was more opulent: p.8. [10] The defendant said that in early 2000 he was presented with some more documents by Mr Evans for him to sign: p.8. Apart from that, and perhaps some other signing of documents,8 he said he had nothing to do with Hamlyn Crest until early 2001, when he said that the third party asked him to be a personnel director for the business, and it was agreed that he would take on that position for $1,000 gross per week: p.12. This was a full time job, and he worked in premises in Orchid Avenue at Surfers Paradise. What he actually did was interview prospective telemarketers,9 who if suitable were employed and handed over to other people for training.10 He said that the third party was at the business every day, there was Mr Evans whom he described as “a general manager”, and a secretary for the third party who looked after his requirements: p.13. [11] In early January 2002 the business featured on one of the more colourful television current affairs programs. As a result operations virtually stopped, and he said that the premises where the telemarketing was carried on were abandoned: p.15. In April 2002 the payments to the defendant from Hamlyn Crest stopped: p.16. He said that the business was subsequently taken over by a different company, Soft Holdings Limited, with which he was not involved, although at one stage he said some money which was to be paid to the third party was deposited into his bank account by a Hong Kong company; he withdrew the money and gave it to the third party: p.15. He subsequently interviewed people for telemarketing for the new company, using a hotel for the interviews: p.16. It appears that he was never actually employed by the new company. In May 2002 his daughter and the third party separated. Subsequently the third party married an Englishwoman who had been working as a telemarketer for Hamlyn Crest. The third party’s evidence [12] The third party said that in the early 1990’s he and two others became involved in a computer software business which went through a range of things from horse racing, dog racing, to the stock exchange: p.90. The business was located in Bundall originally, and there was another office in Orchid Avenue: p.91. He agreed that he went to London with the defendant’s daughter who was then his de facto partner, he said for some 14 months, to set up a company there, dealing in stock exchange software and also a racing program: p.92. He was for a time a director but then he ceased to be. His involvement was not at the administrative level but in artwork and promotion. He said he now has no interest in the business in London: p.94. That operation was highly successful: p.93. In 1996 he spent 8 His daughter said Mr Evans brought papers over for him to sign “often”: p.40. That may not be reliable. 9 Curiously, using a pseudonym: p.27. 10 See also Manicaros p.58. He was not involved in dismissing any: p.19. That was the function of Mr Evans, and two supervisors, whom he had not hired: p.28. -- 4 of 13 -- 5 three months in Hong Kong where he set up another company, with which he had no formal position, which he said was unsuccessful. In 1997 he spent some time in Cape Town where a company was set up on behalf of him and the other two, which he said did very well, although it no longer exists: p.94. In late 1997 or 1998 he moved to Vanuatu, he said for a reason associated with superannuation: p.95. [13] The third party said (p.96) that the defendant’s daughter was always asking him to “do something for dad.” He said he told her that he had nothing in business for him, but he was trying to start a tourist business in Vanuatu, and he said he spoke to the defendant and asked him to come over and have a look, and talk to him about that business. The defendant did come over,11 but he did not want to be involved in a tourist business in Vanuatu, he did not want to live there,12 and after a week he went back to Australia. He said at the time he and the defendant were good friends. [14] The third party denied that he had any conversation with the defendant along the lines given in the defendant’s evidence: p.102. He said (p.103) that “they’re not words I’d have used and I certainly did not make those comments.” He said that at some time, he could not recall when, he said to the defendant that he was pretty sure Highland Investments would supply the product if he (the defendant) took up the company: p.97. Highland Investments is a Hong Kong company which the third party said collated computer programs from around the world and supplied them to various companies around the world: p.91. He had provided services to the companies that Highland Investments dealt with, for which he received payment and benefits from Highland. He also described himself as acting as a conduit to non-Chinese speaking interests, since Highland Investments was a Chinese company. He said he had no formal position in that company. [15] His agreement with Highland Investments gave him what he described as a possible percentage of an increase in profitability of the companies that that company dealt with, by way of remuneration: p.97. Hamlyn Crest obtained its software from Highland Investments, and he received remuneration from Highland Investments for the promotional work he did for Hamlyn Crest: p.101. He said he had no input other than to assist with the design work and brochures and things: p.101. [16] The third party said he was not involved in the establishment of Hamlyn Crest, and he had no contact with that company. He was not at any stage employed by Hamlyn Crest and never received income from it: p.100. He said he visited the premises of the company from time to time, but never went to where the real office was; he did a few brochures, design work, letterheads and so on. Other evidence [17] Evidence was also given for the defendant by his daughter, by the third party’s wife (from whom he is now separated) and by her father. None of them was able to give evidence which touched directly on the existence of the oral agreement for the indemnity, but their evidence was relevant to surrounding circumstances, and also to matters involving the credit of the defendant and the third party. Given that the 11 The third party paid for the ticket: p.96. 12 The defendant’s daughter confirmed that he did not like Vanuatu: p.51. -- 5 of 13 -- 6 action turns on the question of whether or not there was an oral agreement in certain terms between the parties, which is in dispute, and which depends on the credit of each of the parties, this is a case which in my opinion justifies some relaxation of the collateral evidence rule. Unfortunately that involved raising a number of collateral issues, about the third party in particular. [18] The defendant’s daughter said that in the course of living with the third party she spoke to him about his businesses frequently. They were software companies selling racing programs: p.29. She said that the third party was always the owner of all the companies, from the beginning, with his son and another man: p.30. In relation to the earlier period, that was consistent with the evidence of the third party. She said that in 1995 she went to England, soon after the third party went, and stayed there about two or three months while he set up a company there:13 p.33. She said she subsequently went to Hong Kong in 1996 with the third party. 14 She said the business that was set up in Hong Kong was owned by the third party and the other man p.37. Subsequently in 1997 they went to South Africa and a business was set up there as well. She then returned to Australia in late 1997. At that time there was a business running in Australia, at 50 Cavill Avenue, doing the same thing. She visited the premises about three times; the other man was running it. In 1998 she and the third party moved to Vanuatu. [19] She said that while living in Vanuatu she was aware that the third party and the other man who had been involved in the business had decided to part company: p.39. Subsequently the third party was looking for someone to be a director of the company (presumably used to run the business) and they were discussing various names, and her father’s name came up. She subsequently spoke to her father about it. She said that the defendant needed reassurance from her and that she told him it would be fine, that she was sure the third party would not do anything silly: p.40. She said she reassured him, from what she was told by the third party, that everything would be okay. She said she asked the third party whether the defendant was going to be in trouble and the third party said something like, “no, don’t be silly.” She was aware that the defendant had agreed to do it, but did not make clear whether this was because of something she was told by him, or by the third party, or indeed by both.15 [20] She said that in December 2000 the third party came to live with her and the defendant on the Gold Coast. It seemed to her that the defendant and the third party were good friends: p.41. She said that in 2001 she wanted a new car, and selected a Mercedes Benz 4WD; the third party agreed to the purchase, and the funds for it came from overseas: p.42. She said that after the television story on the business the business was closed down, and not long after that she and the third party separated. She found out about his new office at Southport on one occasion when she had to drop her son off there, presumably for access, and she saw faces that were familiar to her from the premises previously occupied by Hamlyn Crest: p.43. 13 Comstrad Ltd: p.45. It operated the same business: p.43. 14 She took a photograph of him at the office of the business that was set up there: Exhibit 4. 15 She said she recalled a specific occasion when the third party in Vanuatu spoke to her father by telephone. -- 6 of 13 -- 7 [21] The third party’s wife gave evidence by telephone from England. She said that she started work for Hamlyn Crest in September 2001 as a telemarketer, as a result of which she met the third party: p.82. She was initially interviewed by the defendant when she was recruited into the company. She had no other dealings with the defendant. She said that in May 2002 she began to reside with the third party, initially in an apartment in Orchid Avenue and then on 14th floor of Crown Towers: p.83. The lease in the latter premises was put in her name, because the third party said he wanted to avoid Australian authorities. She said the rent was paid by the third party, via his Hong Kong account, Highland. She did not ever pay any of the rent. By the time she moved to Crown Towers she said the third party’s company had changed its name to W Rudd Ltd. She stopped work in August 2003 just before she had a child: p.86. She said Hamlyn Crest was his company; that he had told her that he owned it: p.82. She said that ultimately she left the third party and she is now living with her parents in England. [22] Her father also gave evidence by telephone from England. He said he had been to Australia three times and seen the third party on each occasion: p.70. He denied that he had ever paid any of the rent for the apartment at Crown Towers. In January or February 2003 he visited the third party at an office block at Southport, where the third party introduced him to Mr Evans as his business manager and showed him the sales room with 15 or 20 computer terminals and screens: p.71. The third party gave him a presentation on his computer gaming package. He said that while he was there he had a demonstration on three or four races at various race tracks around Australia during which a lot of money was lost. He said the third party described it as his business and his system which he developed and designed.16 [23] The remaining witness for the defendant was Mr Manicaros, currently a real estate agent, who was employed by Hamlyn Crest in 2001 as a telemarketer: p.56. He said there was an office in Orchid Avenue where there were 10 or 20 people or more employed. He was initially interviewed and recruited by the defendant, and passed on to other people to give training on the presentation, but he could not remember who the other people were: p.58. [24] The other witness for the third party was Mr Evans who said he was a director of a company, Keyfact Pty Ltd, which trained telephone sales people, primarily for companies that offer betting software: p.131. He said that his company had provided services to Hamlyn Crest. He had been working for another company, Halverson West and Associates, managing their sales team under a contract with his company. It operated from premises in Creek Street in Brisbane. He had been providing services there from around 1999 or 2000. The director of that company was his brother-in-law, who was living in New Zealand, and was going to get out of the business: p.132. Subsequently the company Hamlyn Crest took over the lease and the office furniture, and his company continued to provide its services to Hamlyn Crest until that lease ran out: p.133. He said he never saw the third party at the Creek Street premises. He did not give evidence that he ever saw the defendant there.17 16 The third party told him the company names of Soft Holdings, Rudd Pty Ltd and Highland Investments: pp.74-5, p.89. 17 See Evans p.143, although to say he had not seen him was wrong: he had taken the defendant some documents to sign before that. -- 7 of 13 -- 8 [25] When the lease expired on the premises in Creek Street, Hamlyn Crest moved its business to the Gold Coast: p.134. It operated from premises at Orchid Avenue at Surfers Paradise, where initially it had part of a floor, although the area was subsequently expanded: p.136. He said that he knew the defendant and he saw him at the Hamlyn Crest premises from time to time, occupying an office which had been taken over by the company from another tenant. He personally worked in the building on the Gold Coast, building up the sales team. He said that initially he rarely saw the defendant at Orchid Avenue, and he only became involved when the sales team expanded: p.137. He said that in his experience the directors of companies that his company had worked for do not tend to get too involved until the sales team is functioning fully and they are making money. 18 He said the defendant was heavily involved in the recruiting of staff. He said the administration of the company was in Orchid Avenue, and the sales team was around the corner in a different building: p.137. He said that there were up to 50 sales people employed during the day, with a smaller team of up to 20 selling products to the UK at night: p.138. [26] Mr Evans also saw the third party at the premises from time to time;19 he knew the third party was in a relationship with the defendant’s daughter, and he assumed that the third party was providing advice on marketing matters: p.138. He did not see the third party engaged in any work in the business, and the third party did not at any time give him any directions or orders. He said that after the exposure on television the business dropped off considerably, although it did not cease immediately: p.139. He said his company’s fees were not paid, and he terminated its contract with Hamlyn Crest, of which it became a creditor: p.140. He said his company subsequently provided similar services to a similar business operated by a company, Soft Holdings Limited, at Marine Parade at Southport. He dealt with a Mr Andrew Sung on behalf of that company. He said his company’s payments for its services came by international transfer from Hong Kong: p.141. Credibility of the third party [27] The trial turns on findings of credibility, and it is convenient to deal first with the credibility of the third party. There are a number of matters which I think tell against the reliability of the third party’s evidence. The first of these is the date of incorporation of Hamlyn Crest. The third party’s version has the defendant coming to Vanuatu with a view to becoming involved in a business over there, but then deciding not to do so. The inference is that the defendant’s involvement in Hamlyn Crest arose after this. But the defendant’s evidence was that he went to Vanuatu on 17 December 1999, which is three days after the incorporation of the company, and therefore after the time when the defendant must have signed any documents which needed to be signed for that purpose. It must therefore have been after the time when either he made the arrangement with Mr Evans’ brother-in-law in New Zealand to take over the business, or he made the agreement with the third party to act as director of the company. The defendant was not cross-examined on the dates on which he was in Vanuatu, and there was no evidence from the third party of any 18 But at the time Hamlyn Crest took over the operation at Creek Street it was fully functioning, with 40-50 sales people, plus some administration people: p.133. 19 He admitted that the third party was a friend; he had visited him twice while he was living in Vanuatu: p.141. -- 8 of 13 -- 9 different date. It seems to me that the timing of the trip to Vanuatu just after the incorporation of Hamlyn Crest is inconsistent with the version given by the third party. [28] The next matter that strikes me as odd about the third party’s version is that it really did not account for the defendant’s obtaining the business at all. Mr Evans said he was not involved in the process by which the business which had been run by his brother-in-law came to be run by Hamlyn Crest, and the third party, who had an established association with businesses of this nature, did not suggest any involvement other than an indication of a willingness for the Hong Kong company, Highland Investments to provide product. The third party’s version simply does not account for the acquisition of the business by the defendant, notwithstanding the admitted association with the business that the third party had, because of his relationship with Highland Investments which provided product both to Halverson West and Hamlyn Crest. [29] The next matter is that the third party admitted that in 2004 he told the Child Support Agency that the rent on his unit was paid with the assistance of his father- in-law: p.117. That was not true. He lives in a unit at Crown Towers on the Gold Coast where the rent of $1,100 per week is paid by Highland Investments: p.115. Both his wife and her father denied that the father had ever paid any of the rent on the apartment, and I have no difficulty in accepting that evidence. The third party sought to explain this remark with the suggestion that there was at some time an arrangement with the father-in-law under which he would come to live on the Gold Coast and share the rent. I do not regard that as a plausible justification for making such a statement in those terms to the Child Support Agency given the facts as they were, and consider that this tells against the credit of the third party. [30] The third party also admitted that he had sworn in an affidavit filed in proceedings in the Family Court that his wife had found it necessary to relocate to the United Kingdom to escape the violence of the defendant’s daughter, and the behaviour of a child psychologist: p.127. He admitted that he drafted that affidavit and that those were his words. His wife said on the other hand that she left because of domestic violence: p.83. One of the matters relied on by the defendant was a similarity of the accounts given by his daughter and the third party’s wife as to the third party’s involvement in the businesses. In relation to that, the third party made the point that each of them had reason to be hostile towards him, since evidently both are involved in litigation with him in relation to children they have by him. 20 No doubt the third party is now not on good terms with either of these discarded women but, given that the wife had effectively replaced the defendant’s daughter in his affections, an alliance between them to give false evidence in support of the defendant’s claim seemed to me to be somewhat unlikely. If the statement in the defendant’s affidavit were true, it would be particularly unlikely that the explanation for the similarity between their evidence is that they were putting their heads together to give a false account of the third party’s involvement in these businesses, an account which the third party denied. Indeed, I think if the affidavit were true it 20 The defendant’s daughter said that the third party had commenced several proceedings against her in the Family Court concerning their son (p.52), and there was evidence that proceedings had been taken by the third party in a court in England with a view to forcing his wife to return their child to Australia: p.128. -- 9 of 13 -- 10 is unlikely that the third party’s wife would have been prepared even to tell the truth if it would have assisted the defendant. On the whole, I think the third party’s statement in his Family Court affidavit was not true, and that is a matter which adversely affects the reliability of his evidence. [31] The third party appeared to be trying to minimise his involvement with the company in England, but he signed a reference for the defendant’s daughter dated 11 August 1995 as managing director of it: Exhibit 5 and see p.43. This seems to be inconsistent with his statement that he was never involved in any of those companies on an administrative level: p.92. [32] Finally, there is the consideration that much was made by the defendant of the proposition that the third party is someone who does not want to have his name attached to anything, such as property or valuable possessions, or businesses which he runs, which would be consistent with his having arranged for the defendant to be the nominee of a company which was in substance to be operating the third party’s business. There was evidence from various sources about this. The defendant said that the third party had said to him that he had his name on nothing: p.11. His daughter said that the third party did not have anything in his name (p.41), and did not want his name on the lease when he needed somewhere to live in Australia: p.42. There was evidence that the premises in which he was living with the defendant’s daughter were leased in the name of his previous wife, and subsequently in the name of the daughter. Subsequently premises were leased in the name of his wife. After he returned to Australia he purchased a vehicle, a Rolls Royce, using funds supplied by Highland Investments, which was registered in the name of the defendant. He has recently purchased a replacement vehicle, a Mercedes Benz 500SL, which he said was paid for by Highland Investments: p.116. He was not able to tell me who owned it, but the effect of his evidence was that he did not. He has had more or less since 1998 in his possession a helicopter which he uses more or less at will for his own pleasure, which he said was owned by a Mr Bernie Wu: p.99. 21 [33] When it was put to the third party that he did not want his name on anything he denied that, and said that when he returned to Australia from Vanuatu he was not in the position to do things in his own name because he had no established presence in the country: p.118. That is not a particularly plausible explanation; even then I think it likely that his name would have been known,22 and the things that he was trying to do were not the sort of things which would have particularly required a commercial presence. But he has now been living in Australia for some time. If he now has things, property, bank accounts, etc in his own name, it would have been very easy to falsify this allegation simply by producing appropriate documentation. But there was no evidence from the third party which contradicts the proposition made in the defendant’s case that he is someone who is adverse to having anything in his own name. If that were not true it would have been very easy for him to falsify it by producing the necessary documentation, but that was not done. 21 He was said by others to be in the habit of describing this as his helicopter: defendant, p.9, p.11; defendant’s daughter, p.38, p.39; third party’s wife, p.85; her father, p.73. 22 He achieved some notoriety in the 1970’s as the very clever political cartoonist in the Australian. -- 10 of 13 -- 11 [34] His evidence about his lack of association with these companies also was not credible. On his own account his early involvement with the sale of betting programs was in a business which was run by himself, his son and another man. He spoke of the company being set up in South Africa as being set up “on behalf of our, you know, the three of us …” (p.94) which suggests that he was still one of the owners of the business at that stage. As I mentioned earlier, it seems surprising that, if his only involvement with these businesses was as someone who provided some artwork and publicity material, that he would have been so consistently and so generously rewarded by Highland Investments. 23 The whole account in my opinion is thoroughly implausible, and seems to be an attempt by the third party to distance himself from these businesses. [35] At times the third party struck me as evasive in the witness box. Overall, I was not impressed with the credibility of the third party, and I am not prepared to accept his evidence unless it is either supported by other credible evidence or contemporaneous documentation, or is otherwise inherently credible. The defendant’s credibility [36] It was submitted on behalf of the third party that there were inconsistencies between the defendant’s evidence and what was said in the pleading. Paragraph 5 of the pleading24 referred to the agreement for the indemnity being confirmed orally on many occasions thereafter up to and including the years 2002 and 2003. But there was no evidence of that from the defendant. Further the defendant was cross- examined on the basis that particulars have been provided of his case that the relevant conversations had taken place on the Gold Coast, rather than by telephone to the third party in Vanuatu: p.21.25 The defendant however denied that he had ever given instructions to that effect to his solicitor, and there may have been an error by the solicitor. [37] The defendant was also cross-examined about his having consented to the judgment in favour of the plaintiff, being asked (p.26): “Did you give instructions to your solicitor to accept that you were liable for that debt against the Deputy Commissioner of Taxation? --- I did not feel that I was liable to that debt because of previous situations. [Question]: Did you consent to – or did you accept that you were – you were liable for that debt to the Deputy Commissioner of Taxation in discussions with the Deputy Commissioner? --- No.” There was certainly a consent judgment signed in favour of the plaintiff against the defendant, and indeed it seems to me that on the face of it since the defendant was a director of the company at the relevant time it would have been properly signed. These answers seem a little curious, but it may be that the first answer was not really responsive to the question asked, and the second answer was taken as directed to discussions that he had himself with the Tax Office, which may well not have occurred. Perhaps the matter is not as clear as it might have been. 23 It is also odd that he would have been arranging for tax advice for Soft Holdings Ltd: p.120. 24 The third party’s statement of claim, incorrectly and confusingly, refers to the third party as “the defendant” and the defendant as “the plaintiff.” 25 Re-examination at p.28 did not clarify the situation. -- 11 of 13 -- 12 [38] Apart from that there was one aspect of the defendant’s evidence which troubled me, in that at first it seemed to me that his account of the relevant telephone conversation with the third party was a little artificial. Initially it struck me as a little odd that someone like the third party would use the term “indemnify” when speaking with the defendant. That term, although not really a matter of legal jargon, is certainly a term which has a technical legal meaning, and it struck me as a term which I would expect many people in the community would not naturally use. But when the third party was cross-examined about this conversation, and particularly about the part where the defendant had said he went on to ask for an explanation of what “indemnify” means, the third party replied (p.129): “He’d know what indemnify means the same as any other decent, honest, intelligent person would know what indemnify means. [Question]: Well, you knew what it [meant], did you? --- Well, of course I did. So would George.” In the light of that evidence, there is no reason to doubt that the term is one with which the third party was familiar, and it is therefore plausible that he might have used it. That dissipates the air of artificiality about the conversation in the version given by the defendant. [39] There was also the evidence of the defendant’s daughter, which I am inclined to accept, that at a time when the third party was looking for someone to act as the nominee of the company operating the business in Australia, she suggested her father, and he agreed with that. Although she was not able to verify the conversation during which there was the agreement to indemnify, her account was consistent with there having been a conversation in the course of which the third party asked the defendant to be in such a position. Her evidence was also consistent with the defendant’s evidence that he was reluctant to become involved. In such circumstances, it would be plausible that there would be an offer of an indemnity to induce him to lend his name in this way. [40] I recognise that both the defendant’s daughter and the third party’s wife have a motive for being hostile to the third party, but my overall impression from their evidence was that they were essentially telling the truth. I certainly thought the defendant’s daughter was an impressive and reliable witness and accept her evidence. The third party’s wife and her father both seemed surprisingly reluctant to speak about proceedings which were apparently going on at the same time as the trial in England, and which, in the light of the third party’s evidence, were going badly for them, proceedings by the third party with a view to having the child of the marriage returned to Australia. Nevertheless, their evidence, so far as it went, was I thought generally reliable. Their evidence really only goes to support the proposition that the business was and remained the business of the third party, although it was later conducted in different premises and with a different company name. In the light of all of the evidence, I am prepared to accept that that was correct. [41] I also cannot accept that the defendant would purchase the business which then came to be operated by Hamlyn Crest but then not have anything to do with it while it was operating from the premises in Creek Street, if it was simply his business which he had brought from Mr Evans’ brother-in-law in New Zealand. The explanation that directors do not get involved until the company is fully functioning does not make sense, because the business was fully functioning in Creek Street, with up to 50 people working there: p.133. It was only when the business moved to the Gold Coast, when no doubt many of the staff did not make the move with it, and -- 12 of 13 -- 13 it became necessary to employ more people, that the defendant actually took on some role in the business. That in my opinion is much more consistent with the defendant’s account than the third party’s case. Generally speaking I did not find Mr Evans’ evidence credible. Conclusion [42] Although I do not accept the evidence of the third party, it does not automatically follow that I accept the evidence of the defendant, although I certainly prefer the evidence of the defendant and the defendant’s witnesses to the evidence of the third party. In general, I am prepared to accept the evidence of the defendant. I do not have any difficulty in accepting that the defendant was asked to be in effect a nominal director of a nominal company which was to be the façade for the third party’s business, but it does not necessarily follow that the third party agreed to indemnify him in respect of any liabilities incurred as a result. However, the existence of an indemnity is plausible in the circumstances. The defendant had some business experience,26 and it would be understandable that, if he were reluctant to become involved in this way in the third party’s business, the promise of the indemnity would be made in order to lure him in. [43] His involvement in the business is consistent with the relationship through his daughter with the third party, and the fact that he has been left with this liability is consistent with the fact that the relationship broke down not long after Hamlyn Crest ceased to be used as the vehicle for the business. It was not suggested that the defendant had been required to meet any expenses or liability in connection with the business himself prior to that time. In all the circumstances therefore I am prepared to accept the defendant’s evidence that there was an oral promise by the third party to indemnify him in respect of any personal liability if he agreed to be the sole director of the company ostensibly carrying on the third party’s business. The defendant provided the consideration for that promise, and accordingly is entitled to enforce it. [44] Whether there was such an agreement was the only issue at the trial. Accordingly the defendant is entitled to indemnity in respect of the amount of the judgment in favour of the plaintiff, including the costs. I therefore give judgment that the third party pay the defendant $137,597.40. Unless another order is appropriate, I will order the third party to pay the defendant’s costs of and incidental to the action including the third party proceeding to be assessed. 26 See his daughter, p.48. -- 13 of 13 --