FEDERAL COURT OF AUSTRALIA Australian Prudential Regulation Authority v Holloway [2000] FCA 579 SUPERANNUATION – alleged contravention of s 85 of Superannuation Industry (Supervision) Act 1993 (Cth) – years of income prior to 1998-99 – whether there can be a contravention of s 85 concerning market value ratio of in-house assets of regulated superannuation fund for years of income prior to 1998-99 – s 83 of Act prohibits acquisition of in-house assets of a fund if a certain market value ratio results from that acquisition – whether s 83 concerning acquisition of assets applies to years of income prior to 1998-99. SUPERANNUATION – alleged contravention of s 85 of Superannuation Industry (Supervision) Act 1993 (Cth) – artificial reduction in market value ratio of in-house assets of regulated superannuation fund – ss 76-80 impose restrictions on historical cost ratio of in-house assets of fund for years of income 1994-95 to 1997-98 – whether scheme to avoid provisions of the Act concerning historical cost ratio of in-house assets of fund may contravene s 85. SUPERANNUATION – alleged contravention of s 85 of Superannuation Industry (Supervision) Act 1993 (Cth) – in-house asset – investment by regulated superannuation fund in units in unit trust where investments by unit trust controlled by trustees of superannuation fund and directors of employer-sponsor unit trust lends monies from such investment to employer-sponsor – whether investment in units in unit trust an "in-house asset" of superannuation fund – whether investment in units a loan to or an investment in employer-sponsor within s 71(1). SUPERANNUATION – alleged contravention of s 85 of Superannuation Industry (Supervision) Act 1993 (Cth) – in-house asset – investment by regulated superannuation fund in units in unit trust where investments by unit trust controlled by trustees of superannuation fund and directors of employer-sponsor – unit trust lends monies from such investment to employer-sponsor – whether investment in units an "in-house asset" of superannuation fund – whether investment in units result of agreement for purpose of achieving result that loan to or investment in employer-sponsor would be made – whether "in-house asset" by operation of s 71(2)(c). SUPERANNUATION – alleged contravention of s 85 of Superannuation Industry (Supervision) Act 1993 (Cth) – meaning of "scheme" in s 85(4) – whether requirement for mutual obligations – whether requirement for proscribed intention on part of two or more persons to contravene s 85(1) – whether necessary to show intention to artificially reduce market value ratio of in-house assets of fund or whether sufficient to show intention to carry out or cause to be carried out acts which had that effect – whether necessary intention established. SUPERANNUATION – alleged contravention of s 85 of Superannuation Industry (Supervision) Act 1993 (Cth) – investment by regulated superannuation fund in units in unit trust pursuant to agreement for purpose of achieving result that money so invested would be paid to employer-sponsor to reduce indebtedness of unit trust to employer sponsor – whether loan to or investment in employer-sponsor – whether investment by superannuation fund an "in-house asset" of superannuation fund in those circumstances. Acts Interpretation Act 1901 (Cth) s 13 and s 48 Australian Prudential Regulation Authority Act 1998 (Cth) Pt 8 and Pt 21 Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 (Cth) Foreign Acquisitions and Takeovers Act 1975 (Cth) Income Tax Assessment Act 1936 (Cth) ss 26AAB, 38A, 121C, 177A Occupational Superannuation Standards Act 1987 (Cth) Superannuation Entities (Taxation) Act 1987 (Cth) s 7(1) Superannuation Industry (Supervision) Act 1993 (Cth) ss 2(4), 66, 70, 71, 74, 75, 76-80, 81, 82, 83, 85, 193, 196(3)(4), 194, 199(1), 221, 285, Div 2 and Div 3 of Pt 8 Trade Practices Act 1974 (Cth) s 45 Occupational Superannuation Standards Regulations regs 16A(1), 16A(8), 16A(17), 16B Securities Industry Act 1970 (NSW) s 70 Briginshaw v Briginshaw (1938) 60 CLR 336 applied Trevisan (Trustees of the Forli Pty Ltd Superannuation Fund) v Federal Commissioner of Taxation (1991) 29 FCR 157 applied Silk Bros Pty Ltd v State Electricity Commission (Vic) (1943) 67 CLR 1 applied Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 applied Bevanere Pty Ltd v Lubidineuse (1985) 59 ALR 334 applied Chalmers v Thompson (1913) 30 WN (NSW) 161 distinguished K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309 distinguished Oyston v Blaker [1996] 2 All ER 106 applied Inglis v Robertson [1898] AC 616 applied Knight v Lambrick Contractors Ltd [1957] 1 QB 562 referred to Elliott v Grey [1960] 1 QB 367 referred to Qualter Hall & Co Ltd v Board of Trade [1961] 3 WLR 825 referred to Fisher v Raven [1964] AC 210 referred to Tolley v Giddings [1964] 2 QB 354 referred to Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 referred to The Wik Peoples v The State of Queensland (1996) 187 CLR 1 referred to Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 applied Charles v Federal Commissioner of Taxation (1954) 90 CLR 598 referred to Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) 24 FLR 286 referred to Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 2) (1979) 40 FLR 83 referred to Morphett Arms Hotel Pty Ltd v Trade Practices Commission (1980) 30 ALR 80 referred to News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 referred to Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206 applied R v The Associated Northern Collieries Ltd (1912) 14 CLR 387 at 400 referred to McGraw-Hinds (Aust) Pty Ltd v Smith (1979) 24 ALR 175 at 178 referred to Accident Towing and Advisory Committee v Combined Motor Industries Pty Ltd [1987] VR 529 referred to Commonwealth v Baume (1905) 2 CLR 405 applied Victorian Chamber of Manufacturers v Commonwealth (1943) 67 CLR 335 applied Federal Commissioner of Taxation v Peabody (1994) 181 CLR 359 cited CPH Property Pty Ltd v Federal Commissioner of Taxation (1998) 98 ATC 4983 cited Grollo Nominees Pty Ltd v Commissioner of Taxation (1997) 73 FCR 452 cited Peabody v Federal Commissioner of Taxation (1993) 40 FCR 531 cited Canwest Global Communications Corporation v Treasurer of the Commonwealth of Australia (1997) 147 ALR 509 cited Commissioner for Taxation v Spotless Services Pty Ltd (1996) 186 CLR 404 applied North v Marra Developments Ltd (1981) 148 CLR 42 considered Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd (1998) 28 ACSR 58 cited Australian Securities Commission v Nomura International PLC (1999) 89 FCR 301 considered Bishop v Smyrna & Cassaba Railway Co [1895] 2 Ch 265 referred to Bond v Barrow Haematite Steel Co [1902] 1 Ch 353 referred to Re Spanish Prospecting Co Ltd [1911] 1 Ch 92 referred to Apand Pty Ltd v Kettle Chip Co Pty Ltd (1999) 162 ALR 505 referred to Lees & Leech Pty Ltd v Commissioner of Taxation (1997) 73 FCR 136 referred to AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY v ANTHONY PHILIP HOLLOWAY and HOLLOWAY & CO PTY LTD (ACN 008 074 306) SG 111 of 1998 MANSFIELD J 12 MAY 2000 ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SG 111 OF 1998 BETWEEN: AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY Applicant AND: ANTHONY PHILIP HOLLOWAY First Respondent HOLLOWAY & CO PTY LTD (ACN 008 074 306) Second Respondent JUDGE: MANSFIELD J DATE: 12 MAY 2000 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 These reasons are lengthy. To facilitate understanding of the reasons, and for ease of reference to particular topics, they are divided into the following sections: A. Introduction (i) The parties and the impugned conduct pars 2 - 12 (ii) The general nature of the transactions pars13 - 16 (iii) The structure of Part 8 of the Act pars 17 - 20 (iv) Observations about the witnesses pars 21 - 30 (v) The grounds of defence pars 31 - 34 B. Can the impugned conduct contravene s 85? (i) The operation of ss 76-80 pars 35 - 41 (ii) The operation of s 83 pars 42 - 71 C. The All Sweat transaction – findings pars 72 - 85 D. Was the investment by All Sweat SBF in Bino an in-house asset in the circumstances? (i) The contentions pars 86 - 89 (ii) The operation of s 71(1) pars 90 - 100 (iii) The operation of s 71(2) pars 101 - 107 E. Was there a contravention of s 85(1) by the All Sweat transaction? (i) The construction of s 85 pars 108 - 118 (ii) The nature of the scheme alleged pars 119 - 127 (iii) The findings about the scheme pars 128 - 139 (iv) The findings about the intention of Mr Holloway pars 140 - 160 F. The other transactions – s 71(1) (i) The Dalgleish transaction – findings pars 161 - 173 (ii) The three Pishas transactions – findings pars 174 - 190 (iii) The two Fyreguard transactions – findings pars 191 - 228 (iv) The six Anaequip transactions – findings pars 229 - 286 (v) The two Hyde Park transactions – findings pars 287 - 314 (vi) The Holloway & Co transaction – findings pars 315 - 325 (vii) The Andrew Holloway transaction – findings pars 326 - 336 (viii) The Longlat transaction – findings pars 337 - 356 (ix) The Pride Consultants transaction – findings pars 357 - 374 (x) The two Statewide transactions – findings pars 375 - 398 (xi) The two Driving Centre transactions – findings pars 399 - 423 (xii) The three Eden transactions – findings pars 424 - 446 (xiii) The two Kino transactions – findings pars 447 - 466 (xiv) The two Transport Drivers transactions – findings pars 467 - 494 (xv) The Saw Works transaction – findings pars 495 - 510 (xvi) The Unley Glass transaction – findings pars 511 - 529 G. Section 85 and the other transactions pars 530 - 547 H. Conclusions pars 548 - 550 A. Introduction (i) The parties and the impugned conduct 2 The Superannuation Industry (Supervision) Act 1993 (Cth) ("the Act") has the object of making provision for the prudent management of certain superannuation funds and other funds and trusts, and for their supervision by the Australian Prudential Regulatory Authority ("APRA") and the Australian Securities Investment Commission ("ASIC"). As the Act states, those funds and trusts are subject to regulation but, in exchange, they may become eligible for concessional taxation treatment. This case concerns regulated superannuation funds under the Act. 3 APRA is established under the Australian Prudential Regulation Authority Act 1998 (Cth). It has responsibility for the general administration of much of the Act including Pts 8 and 21 of the Act which are particularly relevant for present purposes. That responsibility devolved upon it following the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 (Cth). 4 The respondent Anthony Phillip Holloway ("Mr Holloway") is a practising accountant. He is a "principal" in Holloway & Co Pty Ltd ("Holloway & Co"), the accounting firm through which he conducted his practice, as well as being a director and shareholder of that company. Holloway & Co was registered on 30 June 1988. Its directors at material times have been Mr Holloway and Catherine Mary Holloway ("Ms Holloway"). I refer to Mr Holloway and to Holloway & Co together in these reasons as "the respondents". 5 Mr Holloway and Holloway & Co are each alleged by APRA to have breached s 85 of the Act. It provides: "(1) A person must not enter into, commence to carry out, or carry out, a scheme if the person entered into, commenced to carry out, or carried out the scheme or any part of the scheme with the intention that: (a) the scheme would result, or be likely to result, in an artificial reduction in the market value ratio of the fund's in-house assets; and (b) that artificial reduction would avoid the application of any provision of this Part to the fund. (2) Subsection (1) is a civil penalty provision as defined by section 193, and Part 21 therefore provides for civil and criminal consequences of contravening, or being involved in a contravention of, that subsection. (3) A contravention of subsection (1) does not affect the validity of a transaction. (4) In this section: scheme means: (a) any agreement, arrangement, understanding, promise or undertaking: (i) whether express or implied; or (ii) whether or not enforceable, or intended to be enforceable, by legal proceedings; and (b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise." 6 The scheme or schemes alleged concern arrangements between the respondents and Super Benefit Pty Ltd ("Super Benefit") or its directors including Berndt Glaser ("Mr Glaser") for the establishment for the clients of the respondents by Super Benefit or by Glaser and Associates (an entity of Mr Glaser) of a regulated superannuation fund and a unit trust, with Super Benefit as the nominal trustee but with the affairs of the unit trust being determined by the respondents and their clients. The carrying out of the scheme, apart from the establishment of those entities, involves the respondents procuring the movement of funds from an employer company (being an employer-sponsor as defined under the Act) to a superannuation fund regulated under the Act, and in turn by the superannuation fund to a unit trust, and then by the unit trust back to the employer-sponsor. In due course, the Annual Return to the Insurance and Superannuation Commission would be prepared by, and submitted by, Holloway & Co which would declare that the in-house assets of the superannuation fund would be declared as nil. It is convenient to record at this point that in respect of each of the transactions referred to hereunder, it is clear that Holloway & Co in due course did prepare and lodge a return to the Insurance and Superannuation Commission for each of the superannuation funds in question declaring the total assets of the fund and the in-house assets of the fund. Each such return, as relevant to the transactions the subject of this proceeding, declared the in-house assets to be "nil". Those returns were each signed by the trustees of the relevant fund, but it was not alleged by APRA that any of them intended to present incorrect or misleading information on those returns. It will be necessary to refer in detail to the transactions. I note that Mr Glaser worked also as an accountant and tax agent through Glaser and Associates Pty Ltd ("Glaser Associates") at material times. APRA accepts that it is not a sufficient agreement arrangement understanding promise or undertaking for the purposes of subs (4)(a) of s 85 that the only parties to that arrangement are the respondents. 7 By way of alternative, APRA alleges that the scheme or schemes concern arrangements between the respondents on the one part and the trustees of the various regulated superannuation funds on the other to effect the movement of funds broadly in the manner described. It should be noted also that it is not alleged that the various trustees of the regulated superannuation funds in respect of which evidence has been adduced in these proceedings had the intention to which s 85(1)(a) and (b) of the Act refers. It is alleged only that the respondents had that intention. 8 Each transaction is a little different. There are thirty-two transactions in all. It is alleged that the respondents carried out each of those transactions as part of the carrying out of a scheme with the intention specifically referred to in s 85(1)(a) and (b) of the Act. It was a foundational fact for the purposes of APRA's claim that each superannuation fund had acquired an in-house asset in contravention of a provision of Div 2 or Div 3 of Pt 8 of the Act. Although s 85(1)(a) is expressed in terms of an intention which would, or would be likely to, result in a certain consequence, APRA in its amended statement of claim and in submissions has accepted in this case that it must in fact show the acquisition of an in-house asset in contravention of a provision of the Act by the superannuation fund concerned. The amended applications seek declarations that there were artificial reductions in the market value ratio of the in-house assets of the nineteen superannuation funds by each of the thirty-two transactions in question. It is not part of APRA's case in this matter to argue that there may have been an infringement of s 85 by the respondents without there having been the acquisition of an in-house asset by a superannuation fund contrary to another provision of the Act. 9 Section 85 is a civil penalty provision: s 193. Mr Holloway, as a person alleged to be involved in the contravention of s 85(1) is taken to have contravened that provision himself if the contravention is made out: s 194. On the application, the Court is to apply the rules of evidence and procedure that it applies in a hearing and determination in civil matters: s 199(1). The parties accept that the onus of proof on APRA is therefore the civil onus, that is on the balance of probabilities. It is nevertheless appropriate that the Court have regard to the nature of the allegations and their seriousness, and the consequences of those allegations: Briginshaw v Briginshaw (1938) 60 CLR 336 esp per Dixon J at 362-363. 10 If the Court is satisfied that the respondents have contravened s 85(1), then s 196(2) of the Act provides: "The Court is to declare that the person has, by a specified act or omission, contravened that provision in relation to a specified superannuation entity, but need not so declare if such a declaration is already in force under Division 4". There is no declaration in force under Div 4. The Court is also empowered by s 196(3) and (4) to order that the respondents pay to the Commonwealth a monetary penalty, but only if it is satisfied that the contravention is a serious one. 11 Section 221 also applies to these proceedings. Section 221(2) provides: "If, in eligible proceedings against a person, it appears to the Court that the person has, or may have, contravened a civil penalty provision but that: (a) the person has acted honestly; and (b) having regard to all the circumstances of the case, the person ought fairly to be excused for the contravention; the Court may relieve the person either wholly or partly from a liability to which the person would otherwise be subject, or that might otherwise be imposed on the person, because of the contravention." 12 The respondents have not pleaded reliance upon s 221(2) in their defence nor sought to do so in submissions. Having regard to the state of mind which APRA must prove against them under s 85(1)(a) and (b), if that state of mind is proved, there would appear to be little room for s 221(2) to operate. (ii) The general nature of the transactions 13 The thirty-two transactions which are particularised as involving contraventions by the respondents of s 85 of the Act are in some respects different. The overall theme (as represented by the most simple of those alleged transactions) is an uncomplicated one. 14 On the advice of the respondents, an employer-sponsor established both a superannuation fund and a unit trust. The superannuation fund became a regulated superannuation fund so as to gain the benefit of the taxation concessions available. The employer-sponsor would then pay an amount by way of superannuation payment to the superannuation fund. The directors of the employer-sponsor would be the trustees of the superannuation fund. They would also, in a practical sense, control investments of the unit trust. The payment by the employer-sponsor would represent a taxation deduction for the purposes of determining the taxable income of the employer-sponsor, and so represent a deduction from the taxable earnings which would otherwise be payable generally at the corporate rate. The superannuation fund would receive that payment by way of income and pay taxation on it at the concessional rate of fifteen cents in the dollar. That rate was much less than the corporate rate. It would also benefit by the concessional taxation rate in respect of other earnings by the superannuation fund upon that capital sum as invested. The superannuation fund was unable to borrow, or "gear" its investments. 15 The superannuation fund would then invest the amounts so received in units in the unit trust. The unit trust was generally established with an independent trustee, Super Benefit, but (it is alleged) Super Benefit was to delegate the investment making decisions of the unit trust to the directors of the employer-sponsor/trustees of the superannuation fund. That would enable the unit trust through its trustee (but practically speaking through the same persons) to borrow monies to invest in real estate or other investments, so as potentially to increase the earnings of the superannuation fund to be received as dividends distributed to unit holders. It also of course carried the risk, which the superannuation fund itself was not able to undertake, of exposing the assets of the superannuation fund to the exigencies of such borrowings. None of that is alleged to be in contravention of the Act. 16 However, it was also contemplated that the unit trust would then be able to use the monies available to it through the superannuation fund's subscription for units to lend those monies back to the employer-sponsor. This was in fact done. The lending would be on a commercial basis. Instead of interest being paid to a commercial lending institution, interest would be paid to the unit trust and in turn passed back to the superannuation fund by way of dividend on the units. The unit trust would also be able to use those funds to purchase plant and equipment, which it could then lease to the employer-sponsor. So long as those activities did not infringe the Act, there would be no difficulty. They would not infringe the Act, unless, in the case of a regulated superannuation fund, the provisions of Pt 8 of the Act were infringed. (iii) The structure of Part 8 of the Act 17 Part 8 of the Act controls the extent to which "in-house" asset rules apply to regulated superannuation funds. The objective is to restrict the extent to which superannuation funds may "reinvest" in the employer-sponsor so that those monies which attract a taxation concession are invested in a way which does not put them at risk. 18 It will be necessary to refer in some detail to the provisions in Pt 8 of the Act in due course. At this point it is convenient to note that there are various stages of evolution of the legislative control of in-house asset percentages or ratios of a regulated superannuation fund. Sections 76-80 control the "historical cost ratio" of a superannuation fund's in-house assets. The term "in-house assets" is defined in s 71 of the Act. Section 74 defines the historical costs ratio to be the percentage which the cost of the in-house assets of a superannuation fund bears to the total cost of the assets of the fund. The permitted historical cost ratio was, effectively, 10 per cent for the years of income for 1994-95 to 1997-98. Thereafter, instead of controlling the in-house asset ratio by reference to historical cost of assets, ss 81 and 82 control the in-house asset ratio by reference to the market value of assets at the end of the year of income. The "market value ratio" is defined in s 75 to be the percentage which the market value of the in-house assets of a superannuation fund bears to the total market value of the assets of the fund. The permitted market value ratio for the years of income 1998-99 and 1999-2000 is 10 per cent and thereafter is 5 per cent. 19 There is another provision which featured large in the present proceedings, namely s 83 of the Act. It provides: "(1) This section applies to a regulated superannuation fund. (2) If the market value ratio of the fund's in-house assets exceeds 5%, the trustee of the fund must not acquire an in-house asset. (3) If the market value ratio of the fund's in-house assets does not exceed 5%, the trustee of the fund must not acquire an in-house asset if the acquisition would result in the market value ratio of the funds in-house assets exceeding 5%." 20 That section is in Div 3 of Pt 8 of the Act, containing also ss 81 and 82, and headed "Market value ratio of fund's in-house assets". It is significant because the proscription contained in s 85(1) of the Act expressly relates to an intention for the scheme to result in an artificial reduction in the market value ratio of the in-house assets of a regulated superannuation fund. But for s 83, the concept of market value ratio of in-house assets did not apply until the 1998-99 year of income. The transactions alleged by APRA concern the 1994-95, 1995-96 and 1996-97 years of income. It is contended by APRA that s 85 nevertheless operated in respect of those earlier years of income, at least back to the 1994-95 year of income, in part by reason of s 83. In other words APRA contended that s 83 was one provision of Pt 8 of the Act the application of which was intended to be avoided by Mr Holloway and Holloway & Co contrary to s 85. (iv) Observations about the witnesses 21 Evidence was given by a number of persons who were directors of employer-sponsors and trustees of superannuation funds, and persons who were also involved in decision making on behalf of unit trusts, about the setting up of the particular superannuation fund with which they were involved and the setting up of the particular unit trust with which they were involved and the respective operations of the superannuation fund and the unit trust. They gave evidence as to who was involved in the investment decisions made by each of those entities, and about the circumstances in which the transactions occurred which are said by APRA to underlie the contraventions of s 85 of the Act. 22 Each impressed me as an honest witness, endeavouring reliably to describe those events. It is not necessary separately to address their reliability as witnesses, except in a few limited respects. The thorough and painstaking documentary trail, established by APRA's investigations, confirmed the detailed nature of the transactions. Although there was some cross-examination of those witnesses on behalf Mr Holloway and Holloway & Co to test their reliability, they did not submit that I should reject any of those witnesses as untruthful or as mistaken in any significant respect. Mr Holloway gave evidence. He dealt only a little with the particular transactions. I have borne in mind the cross-examination of those witnesses, where any aspects of their evidence were tested, and any evidence of Mr Holloway in relation to the particular transactions. I have also borne in mind the final submissions in reaching my findings of fact about those matters. Although I may not have addressed each issue of conflict in detail, I have had regard to all the evidence in reaching my findings in respect of the transactions. 23 Certain of the communications between Mr Holloway and those persons, or of dealings with them, may touch upon the assessment of Mr Holloway's reliability as a witness. His credibility is one of the critical issues of the defence. It will be necessary to make findings about his evidence for that reason. 24 Evidence was also given by other officers of the Insurance and Superannuation Commission and of the Australian Federal Police. In some cases, affidavits were tendered without cross-examination. This evidence was to show what occurred on the execution of certain search warrants. I accept that evidence. It was not challenged by the respondents. Ultimately, the matter of main significance from that evidence was that, on 24 March 1997 whilst a search warrant was being executed at the premises of Holloway & Co, there was then seen a copy letter from Holloway & Co to Anaequip Pty Ltd dated 8 February 1995. I find that copy letter was then seen at the Holloway & Co premises. It was copied at the time of the search. The original letter obtained from Anaequip Pty Ltd is also in evidence. Its contents, and the allegation that it was absent from the Holloway & Co files at a later stage, was contended by APRA to be relevant to Mr Holloway's state of mind at material times. I shall refer to its content later in these reasons. 25 Mr Glaser gave evidence. So too did Trevor Parker ("Mr Parker") an accountant who was a director of Super Benefit from 1993. Peter Lombardi ("Mr Lombardi") also became a director of Super Benefit on 27 September 1995. He did not give evidence, but the transcript of his examinations conducted under s 296 of the Act was tendered. For reasons which appear in that section of this judgment, under the heading "Was there a contravention of s 85(1) by the All Sweat transaction", I accept Mr Glaser was generally speaking a reliable witness. I also find that Mr Parker was a truthful witness, and that his evidence was reliable. He became a director of Super Benefit when one of his clients authorised the establishment of a superannuation fund and a unit trust similar to those established for clients of Holloway & Co. Super Benefit was the trustee of that unit trust. He felt it desirable to take on that directorship to look after that client's interests. He largely left the day to day running of Super Benefit to Mr Glaser. He was called upon to sign documents in his capacity as a director of Super Benefit from time to time, and had limited contact with certain clients of Mr Holloway in that manner. He gave his evidence in a straightforward and impressive way. Mr Lombardi completed his studies in 1992, and from November 1994 worked as an accountant for Glaser Associates. In 1995, when Mr Parker started to work more from other premises, his availability to sign documents for Super Benefit as required diminished. Mr Glaser therefore asked Mr Lombardi to become a director of Super Benefit so he could be available to sign documents for Super Benefit, and he agreed. He had relatively few dealings with Mr Holloway, although he too had some contract with clients of Holloway & Co also in relation to "their" unit trusts. I see no reason to reject any of that evidence presented through the tender of the transcript of his examinations. 26 The principal witness for APRA was Renate Tonks ("Ms Tonks"). She is the Assistant Manager of the Adelaide Office of APRA. Since 12 June 1997, she has been the officer principally charged with the conduct of the investigations into the respondents' conduct. She obtained a Certificate in Superannuation Management from Macquarie University in 1990, an Associate Diploma in Accounting from the South Australian Technical and Further Education College in 1993, and a Diploma in Superannuation Management from Macquarie University in 1998. 27 Ms Tonks described the course of the investigation, including the fact that the copy letter of 8 February 1995 from Holloway & Co to Anaequip Pty Ltd was produced by Mr Holloway in response to a notice under s 255 of the Act in early 1997. She also gave evidence that on 31 March 1998 and 1 April 1998 many files then held by Holloway & Co were inspected and copied by APRA officers with the consent of Mr Holloway. She was unable then to locate the copy letter from Holloway & Co to Anaequip of 8 February 1995. She also suggested that, generally, Mr Holloway was not very responsive to inquiries made or steps taken in the course of the investigation, and that that fact was relevant to the assessment of his credit. I am not prepared to take that step. The compliance or non-compliance by Mr Holloway with requirements of the investigation, whether voluntary or compulsory, was not directly in issue. Non compliance with a requirement made under the Act constitutes an offence: s 285. To accept the submission involves accepting such non-compliance when it is but a peripheral issue. I think in the circumstances that it would be unfair to do so. Mr Holloway has not been called upon to answer that allegation in the context of s 285, which creates the offence of intentionally or recklessly refusing or failing to comply with a requirement of an authorised person under the Act. I have not heard all the evidence which might be led on these questions. 28 I am also not prepared to use the apparent absence from the premises of Holloway & Co of the copy letter of 8 February 1995 from Holloway & Co to Anaequip Pty Ltd as impinging upon Mr Holloway's credit. Section 286 makes it an offence punishable by imprisonment to conceal or destroy a record relating to a matter being investigated with intent to delay or obstruct the investigation. That is, in essence, what APRA wants me to find about that copy letter. I am not prepared to make that finding, when the issue arises only indirectly in the current proceedings. Mr Holloway disputed that he had removed or concealed that letter. There would seem to be little point in him doing so, when he could readily have realised the investigation might well seek information from the trustees of the funds or the employer-sponsors. It is, of course, very difficult to prove the fact that the letter was not located in the files of Holloway & Co in any event. It could have been misfiled by Mr Holloway's staff, or indeed by the officer of APRA who first copied it, although there is no particular reason to think that occurred. On the state of the evidence, I would not find in any event that Mr Holloway endeavoured to conceal that letter. Other than those matters, the course of the investigation was not of particular moment. I do not need to refer to it further. 29 I accept Ms Tonks as a reliable and honest witness. The manner of the presentation of her evidence, its content, and the fact that the respondents in cross-examination did not really challenge her evidence all lead me to that conclusion. She obviously pursued her inquiries with great commitment. As I indicate later in these reasons, I have found that the calculations she made about the market value ratio and the historical cost ratio of the in-house assets of the funds are not directly applicable in the circumstances, although their accuracy as a matter of arithmetic is not challenged by the respondents. I have found that her assembly of material in relation to each transaction provides a reliable and helpful basis for considering whether a provision of the Act has been avoided or sought to have been avoided, contrary to s 85(1) of the Act. 30 APRA also called Christopher Malkin ("Mr Malkin") to give evidence. He was an independent accountant engaged by APRA. His evidence consisted largely of general and individual reports he had prepared all dated 3 February 1999 about the nineteen superannuation funds under consideration. His evidence related to the value and cost of the assets and the in-house assets of the superannuation funds, their market value and historical cost ratios, whether the Annual Returns to the Insurance and Superannuation Commission were accurate, the existence and nature of the alleged in-house assets of the funds, and whether there was "from an accounting perspective" an artificial reduction in the market value ratio of the in-house assets of the funds. Upon reflection, I am not sure that it was correct to admit as much of his written reports as I did. It emerged that the foundation for much of his reports was either the views or practices of those practising in the area of giving superannuation advice, about how the Act is intended to operate, or his own views on that matter. Also, much of his evidence simply confirmed Ms Tonks' calculations of in-house asset ratios. For reasons set out later in this judgment, I have not found those calculations to be directly applicable. In the event, I have not placed any real weight upon his evidence. (v) The grounds of defence 31 There were three aspects to the defence. No distinction was drawn between the positions of Holloway & Co and of Mr Holloway. It is not necessary in those circumstances for me to do so. They contended: (1) Section 85 applies only with respect to schemes to avoid the application of the market value ratio of the in-house assets of the superannuation fund. The allegation that the respondents contravened s 85 in respect of the financial years 1994-95, 1995-96, and 1996-97 years of income is misconceived. For those years of income, ss 76 and 80 impose the relevant cost ratios, namely historical cost ratios, with respect to regulated superannuation funds. They are the only years to which the alleged transactions relate. Sections 81 and 82 introduce market value ratios for in-house assets for regulated superannuation funds, but only for the years of income 1998-99 and thereafter. The respondents dispute that s 83 may apply to periods prior to 1 July 1998, that is prior to the time when the market value ratio for in-house asset limits applied under s 81 and later s 82. They contend that s 83 is intended to apply to the transition from the 10 per cent restriction on the market value ratio for in-house assets applying for the years of income 1998-99 and 1999-2000 under s 81 to the 5 per cent restriction thereafter under s 82. Consequently, they contend that there has been no contravention as alleged. (2) Neither the loan by a unit trust to an employer-sponsor of funds available to the unit trust by a regulated superannuation fund acquiring units in the unit trust, nor the investment by a regulated superannuation fund in units in a unit trust, are loans to, or investments in, a standard employer-sponsor under the definition of "in-house asset" in s 71. The respondents contend that they were not in-house assets of the superannuation fund. Consequently, the in-house asset rules were not breached in any event. The definition of in-house assets is contained in s 71 of the Act. It provides (so far as the parties have identified as relevant): "(1) For the purposes of this Part, an in-house asset of a superannuation fund is an asset of the fund that is a loan to, or an investment in, a standard employer-sponsor, or an associate of a standard employer-sponsor, of the fund, … (2) If: (a) apart from this subsection, an asset of a fund consists of a loan, or an investment, other than an in-house asset; and (b) the loan or investment was made as the result of entering into or carrying out an agreement; and (c) any of the persons who entered into or carried out the agreement did so for the purpose, or purposes that included the purpose, of achieving the result that a loan or investment would be made to or in, or to or in an associate of, a standard employer-sponsor of the fund; then: (d) the asset is taken, for the purposes of this Part to be a loan to, or an investment in, the standard employer-sponsor, or the associate of the employer-sponsor, as this case requires and (e) …" An associate of an employer-sponsor is defined in s 70 of the Act by reference to the definition of associate in s 26AAB(14) of the Income Tax Assessment Act 1936 (Cth). It is said that the monies paid by the employer-sponsor to the superannuation fund in each case were invested in the unit trust for units in the unit trust. That is the relevant investment of the superannuation fund. It did not represent an in-house asset under s 71. Reliance was placed upon the decision in Trevisan (Trustees of the Forli Pty Ltd Superannuation Fund) v Federal Commissioner of Taxation (1991) 29 FCR 157 ("Trevisan"). (3) Section 85 requires, for its contravention, that the respondents entered into, commenced to carry out, or carried out, the schemes with the intention that (a) the schemes would result, or be likely to result, in an artificial reduction in the market value ratio of the particular fund's in-house assets, and (b) that artificial reduction would avoid the application of any provision of Pt 8 of the Act to the fund. APRA originally identified those provisions of Pt 8 of the Act the application of which had been avoided as ss 76, 80 and 83, but it became clear in final submissions that it was mainly s 83 which was relied upon, as s 76 and s 80 relate to the historical cost ratio rather than to the market value ratio. There were three legs to this element of the defence. First, it was submitted that Mr Holloway did not have the requisite intention. Next, it was contended, as a matter of fact, that any scheme which existed was not one, even if carried out with the intention of Mr Holloway as alleged by APRA, would, or was likely to, result in, the consequence to which s 85(1) refers. Finally, it was submitted that, for such a scheme to be established, Mr Glaser must also have had the intention to bring about the result to which s 85(1) refers and that he is not shown to have had that intention. Mr Holloway gave evidence. He accepted that he, and he alone, was the mind of Holloway & Co. His evidence was that he did not think that the transactions in which he or officers working under him played a part were improper. His intention, in giving the advice which he gave, was to put in place a superannuation fund to better secure the future of his clients, and to put in place a unit trust which (whether wisely or unwisely) would enable the superannuation fund's assets to be invested in units in that unit trust, so that they could be used to support borrowing to increase the potential investment (and risk), and in the belief that the unit trust could advance monies to the employer-sponsor without contravening any provision of the Act. He did not believe that the structure led to the creation of in-house assets. Put simply, the respondents contended that APRA had not established the intention required by s 85(1). 32 The respondents did not dispute that, on the assumption that the transactions did concern in-house assets of the superannuation funds, in each instance the calculations made by APRA through Ms Tonks, as to the percentages which those assumed in-house assets bore to the gross assets of the superannuation fund in each instance were correct. 33 As indicated, I generally accept Ms Tonks' evidence about the nature of the thirty-two transactions in issue. In the case of each individual transaction I have recorded my findings separately based upon her evidence, and the other material proved in evidence. I have not found it necessary to discuss her methodology in any detail. As appears, I have found in some instances that the documentary evidence discloses a transaction a little different from that which she described. In most instances, that difference is not material. In addition, because I have formed the view that the only provision of Pt 8 of the Act which is directly relevant to consideration of s 85(1)(b) in respect of the particular transactions in question is s 83 of the Act, it has been necessary to make findings about the market value of the assets of the nineteen superannuation funds under consideration at the time of the investments which are claimed to constitute in-house assets. Ms Tonks' calculations were made only at 30 June in each year, that is at the end of the year of income. I have not, therefore, directly adopted her calculations as to the historical cost ratio of in-house assets as at those dates. 34 I have dealt at some length with a number of the transactions to explain my findings and the process of reaching my conclusions. There are variations in each transaction which require individual consideration. There are also aspects of certain transactions which are of some significance in the overall assessment of Mr Holloway's credit. I have discussed them in more detail in relation to each transaction. The first transaction alleged concerned All Sweat & Co Pty Ltd Superannuation Benefit Fund ("the All Sweat transaction"). It is in the group of transactions where three payments illustrate the most typical of the transactions alleged, namely on the same day a payment in the same amount from the employer-sponsor to the superannuation fund, from the superannuation fund to the unit trust, and from the unit trust back to the employer-sponsor. Before referring to that transaction in detail, it is convenient to refer to the first ground of the defence. B. Can the impugned conduct contravene s 85? (i) The operation of ss 76-80 35 As counsel for the respondents rightly contended, s 85 prohibits persons from entering into, commencing or carrying out a scheme (as defined) with the intention that the scheme would result, or be likely to result, in an artificial reduction in the market value ratio of the in-house assets of a regulated superannuation fund, and that that artificial reduction would avoid the application of any provision of Pt 8 of the Act to the fund. Its focus is upon a scheme which may artificially reduce the market value ratio of the in-house assets. It does not relate to the historical cost ratio of the in-house assets of a superannuation fund. 36 APRA nevertheless contends that s 85 may apply, even if s 83 does not operate with respect to transactions prior to 1 July 1998, in the following way. Section 85 is not expressly limited in time as to its operation. Although s 85(1)(a) refers to an intention to artificially reduce the market value ratio of the in-house assets of a superannuation fund, s 85(1)(b) applies to that artificial reduction if it would avoid the application of any provision of Pt 8 to the fund. The expression "any provision" encompasses the provisions in Div 2 dealing with historical cost ratio, as well as the provisions in Div 3 dealing with market value ratio (including s 83), and the provisions in Div 4. That contention is said to be fortified firstly because the definition of the market value ratio of the in-house assets of a fund in s 75 of the Act was in force from the commencement of the Act on 1 December 1993. It is also fortified because, APRA submits, otherwise there has been "a blanket amnesty" for persons intending to achieve artificial reductions of the in-house assets of regulated superannuation funds until 30 June 1998. 37 The contention, if correct, would mean that a scheme which was carried out: (a) with the intention that it would result in an artificial reduction of the market value ratio of a fund's in-house assets, at a time when there was no provision of the Act which prescribed a maximum market value ratio other than (arguably) s 83; and (b) with the intention that that artificial reduction would avoid the application of a provision of the Act which prescribed a maximum historical cost ratio for a scheme's assets would amount to a contravention of s 85(1) of the Act. 38 Subparagraph (b) of s 85(1), by the use of the word "that", makes it clear that it is the artificial reduction in the market value ratio of a fund's in-house assets which is to constitute the avoidance of the application of a provision of Pt 8 to the fund. The word "that" is used to introduce a defining relative clause in s 85(1)(b). 39 APRA nevertheless contends that, in circumstances where the market value of the fund's in-house assets corresponds with the cost of those assets and where the market value of all the assets of the fund happens to correspond with the cost of those assets, there is no difficulty in treating the artificial reduction in the market value of the fund's in-house assets as also being an artificial reduction in the historical cost of those in-house assets, so that the second element of the intention in s 85(1)(b) can operate in respect of Div 2, ss 76–80, of the Act. 40 I do not accept that contention. In my view, the focus in s 85(1)(b) of the Act is upon the intention to avoid the application of a provision of the Act to a fund by the artificial reduction in the market value ratio of the fund's in-house assets, that is upon the intention referred to in s 85(1)(a). I consider that that is the clear effect of the two elements of the intention expressed in s 85(1). The use of the word "that" at the start of s 85(1)(b) emphasises that intention. The consequence of APRA's contention, if correct, would be to expose persons to contravention of s 85 in respect of the avoidance of ss 76–80 dealing with historical cost ratio depending upon the nature of the assets in the fund, in particular (as APRA acknowledged) upon the coincidence of historical cost and market value at a particular moment in time. Historical cost and market value do not necessarily coincide; they are different concepts. I do not consider that it was intended by the legislature to expose persons to having contravened s 85 in respect of the avoidance of ss 76–80 by the accidental coincidence of two different concepts for valuation of the assets of a fund. Moreover, as ss 81–83 indicate, the market value ratios prescribed are to be satisfied at the end of a financial year or at the time of the acquisition of an asset. Sections 76–80 prescribe historical cost ratios to be satisfied at all times during the financial year. The legislature has clearly recognised the significance of the change from the readily identified historical cost of the assets of a fund to the more realistic, but more elusive, concept of the market value of those assets. That is why Div 3 ss 81–83 specify a particular point in time at which the market value is to be determined. Given that recognition, if the legislature had intended s 85 to operate so as to implicate through s 85(1)(b) the intention to avoid the application of the provisions of ss 76–80 concerning historical cost ratios when, in s 85(1)(a) it has identified the relevant intention as relating to market value ratios, it could and would clearly have expressed that intention. 41 Accordingly, in respect of all the transactions under consideration, I do not consider that the respondents carried out a scheme within the meaning of s 85(1) of the Act with the intention that the scheme would result in, or be likely to result in, an artificial reduction in the market value ratio of the in-house assets of any of those funds, so that that artificial reduction would avoid the application of the provisions of ss 76-80 of Pt 8 of the Act. (ii) The operation of s 83 42 There remains the question whether there can be a contravention of s 85 if the artificial reduction of the market value ratio of the in-house assets of a regulated superannuation fund operated in the years of income 1994-95 to 1996-97. In other words, the question is whether s 83 of the Act applied during those years of income. 43 APRA contended that s 83 applies in respect of the whole of the period from the commencement of Pt 8, including during the 1994-95, 1995-96 and 1996-97 years of income (the years during which the transactions under consideration occurred). It therefore applies to the acquisition of any in-house asset by a fund during that period. It imposes the maximum market value ratio of 5 per cent upon funds in respect of the acquisition of an asset by a fund over that whole period, so s 85 then operates in respect of each of the transactions. The respondents contend that s 83 only operates, upon its proper construction, in and after the 1998-99 financial year. They place reliance upon the fact that s 81 is in Div 3 of Pt 8 of the Act, upon the heading to Div 3, and that s 83 follows sections which also deal with market value ratios and which operate only in relation to the 1998-99 year of income and thereafter. 44 As noted earlier, Div 2 of Pt 8 (containing ss 76–80) prescribes historical cost ratio limits for in-house assets for the years of income between 1994-95 and 1997-98. Section 83 is in Div 3 of Pt 8 (containing ss 81–82). Sections 81 and 82 prescribe market value ratio limits for in-house assets for the years of income from 1998-99 onwards. Section 81 prescribes the maximum market value ratio for in-house assets of a fund for the years of income 1998-99 and 1999-2000 as 10 per cent and s 82 prescribes the maximum market value ratio for in-house assets of a fund for the years thereafter as 5 per cent. Each operates with respect to the end of each year of income, rather than continuously through the year of income or at other points of time during the years of income. 45 Division 4 of Pt 8 (s 84) obliges the trustee of a fund to take all reasonable steps to ensure that Divs 2 and 3 are complied with. It provides that the failure to do so is a civil penalty provision as defined in s 193, so as to attract consequences for its contravention. Division 5 of Pt 8 (s 85) is concerned with schemes intended to contravene any provision of Pt 8 of the Act, although I have found that the reference in s 85(1)(a) to market value ratio and the absence of any reference in s 85(1) to historical cost ratios has the consequence that it will only have effect with respect to schemes which are intended to contravene a provision of Pt 8 which imposes market value ratio limits upon a fund. 46 Section 13 of the Acts Interpretation Act 1901 (Cth) may be relevant. It directs that the headings of Parts and Divisions (but not of sections) of an Act are deemed to be part of the Act. 47 In Silk Bros Pty Ltd v State Electricity Commission (Vic) (1943) 67 CLR 1 Latham CJ said at 16: "The headings in a statute or in Regulations can be taken into consideration in determining the meaning of a provision where that provision is ambiguous, and may sometimes be of service in determining the scope of a provision …" 48 A provision which is unambiguous will not (necessarily) be read down by a heading which might otherwise suggest a more limited meaning: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 225; Bevanere Pty Ltd v Lubidineuse (1985) 59 ALR 334 at 341; Pearce and Geddes in Statutory Interpretation in Australia (4ed, 1996, Butterworths, at 120) state: "The other context in which problems occur is where a section expressed in general terms is included in a Part headed in a way that could limit its operation and it is clear that other sections in that Part fall within the description contained in the heading. This causes greater difficulty as prima facie it would appear that the general section should be confined by its context." 49 In each of Chalmers v Thompson (1913) 30 WN (NSW) 161 and K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309 ("K & S Lake City Freighters"), the heading did not limit the scope of the particular provisions because of the legislative history of the section and the context of the Act. 50 In considering the significance of a heading, as K & S Lake City Freighters shows, it is appropriate to have regard to the fact that the heading's function is to serve as a brief guide to the provisions which fall within it: see Henry LJ in Oyston v Blaker [1996] 2 All ER 106 at 114; Bennion, Statutory Interpretation, 3ed, Butterworths 1997, at 574, s 255. The heading is necessarily brief, and may therefore be inaccurate or incomplete. It may survive despite amendment to the sections in the course of the passage of the Bill. 51 The section in the group of sections under a heading must be read in connection with the words of the heading and interpreted in the light of them: Inglis v Robertson [1898] AC 616, 630. See also Knight v Lambrick Contractors Ltd [1957] 1 QB 562 at 566; Elliott v Grey [1960] 1 QB 367 at 372; Qualter Hall & Co Ltd v Board of Trade [1961] 3 WLR 825 at 832, 835; Fisher v Raven [1964] AC 210; Tolley v Giddings [1964] 2 QB 354 at 358. 52 APRA contends that, despite s 83 being in Div 3 of Pt 8 of the Act, it is intended to operate in respect of all in-house assets acquired after the commencement of the Act. It relies upon the apparently unlimited wording of s 83, and upon s 2(4) of the Act. Section 2(4) provides that "The remaining provisions [of the Act, including Pt 8] commence on 1 December 1993, but do not apply to a fund, scheme or trust in relation to a year of income of the fund scheme or trust earlier than the 1994-95 year of income." 53 Section 83(1) provides that the section applies to a regulated superannuation fund. It is not limited in time. In conjunction with s 2(4), it is contended that it is clear that s 83 therefore applies from 1 December 1993 in respect of all years of income from the 1994-95 of income. 54 I do not consider that s 2(4) is of special significance. It is clear s 83 commenced its operation on 1 December 1993. But that does not indicate whether the scope of its operation extends to the years of income from 1994-95. Section 69 of the Act, which is the first provision in Pt 8, describes the object of Pt 8 as "to set out rules about the level of the in-house assets of regulated superannuation funds." The difficult question is whether those rules, as embodied in s 83, apply to the years of income before the 1998-99 year of income. 55 Neither the Second Reading Speech by the Parliamentary Secretary to the Treasurer on the Superannuation Industry (Supervision) Bill 1993 ("the Bill"), nor the Explanatory Memorandum of the Treasurer are of any particular assistance in resolving that question. They each make clear that the Bill was part of a package of seven cognate bills, which together were intended substantially to increase the level of prudential protection provided to the superannuation industry, including the protection of the rights of superannuation fund members. The Explanatory Memorandum referred to cl 78 of the Bill (which appears to have become s 83 of the Act) as follows: "This clause provides that, if at any time the market value of a regulated superannuation fund's in-house assets exceeds 5 per cent of all of its assets, the fund is prohibited from any acquisitions of in-house assets. Further, where the market value does not exceed 5 per cent, any acquisition that would take the market value over 5 per cent is prohibited." 56 It does not expressly refer to the ambiguity which the respondents claim to exist, namely whether it was intended to apply in respect of the years of income prior to the imposition of year end market value ratio limits on the in-house assets of a fund. 57 Of great significance, in my judgment, are the provisions of the Occupational Superannuation Standards Act 1987 (Cth) ("the OSS Act"). It was, at least in part, the legislative predecessor of the Act. Its purpose also was to provide operating standards for certain superannuation funds. It too was part of a legislative package which included the Superannuation Entities (Taxation) Act 1987 (Cth) ("the SET Act"). Under the SET Act, the Occupational Superannuation Standards Regulations ("the OSS Regulations") were made by Statutory Rules 1987, No 322 and amended from time to time. The OSS Regulations were amended by the Superannuation Industry (Supervision) (Transitional Provisions) Regulations (1993, No 352 and amended by 1995, No 157) and the Superannuation Industry (Supervision) Regulations (1994, No 57 and amended by 1995, No 159) under the Act. The significance of that complicated history is that, by Statutory Rules 1990, No 150 and No 185, there was added to the OSS Regulations reg 16A. Regulation 16A appears to have been the first occasion upon which in-house asset ratios were prescribed for superannuation funds. For the purposes of s 7(1) of the SET Act [which made available certain taxation concessions to certain superannuation funds], reg 16A(17) defined the applicable standard (other than for public superannuation funds as defined) as being the cost of all in-house assets of the fund at not more than 10 per cent for the cost of all the assets of the fund. That standard applied to any fund established after 12 March 1985 (there were somewhat different standards applying to funds which were established before 12 March 1985 up to the years of income commencing 1 July 1995). By amendment (Statutory Rules 1993, No 14) reg 16B was added. It provided: "(1) For the purposes of subsection 7(1) of the Act, the standard in subregulation (2) is prescribed in relation to the investment of the assets of a superannuation fund. (2) Investment of the assets of a fund in an in-house asset must not be made if: (a) the market value of in-house assets of the fund already exceeds 5% of the market value of all assets of the fund; or (b) in consequence of the investment, the market value of in-house assets of the fund would exceed 5% of the market value of all assets of the fund." 58 There were also then introduced provisions in the OSS Regulations which, so far as relevant, reflect the structure of Pt 8 of the Act: there is a definition of "in-house asset" in reg 16A(1), and an extended definition to encompass assets held by associates in reg 16A(8). There is no predecessor of s 85. 59 There are no provisions in the OSS Regulations which mirror the effect of ss 81–82 of the Act. That is, the OSS Regulations prescribe by reg 16A(17) an in-house asset ratio limit by reference to the cost of the assets. They do not prescribe an in-house asset ratio limit by reference to the market value of those assets. Regulation 16B was therefore introduced, clearly, to apply an additional in-house asset ratio control by reference to the market value of the assets of the fund, to operate from its commencement on gazettal: Acts Interpretation Act 1901 (Cth) s 48. The gazettal occurred on 29 January 1993. The legislature clearly intended that that prescription would operate as an additional and independent control on the ratio of in-house assets of the fund from that time. 60 In light of that prescription, there seems little reason to think that the legislature nevertheless intended s 83 to operate only from 1 July 1999. The words of s 83 are unrestricted in point of time. It is only the place in the Act which suggests a contrary conclusion. Further, despite the argument of the respondents to the contrary, the heading to Div 3 "Market value ratio of fund's in-house assets" does not point to a legislative intent that all the provisions in Div 3 should operate only from the time when s 81 starts to apply, that is from the 1998-99 year of income. 61 In Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 at 613 Gummow J said that the "… fundamental object of statutory construction … is the ascertainment of the legislative intention by reference to considerations including the existing state of the law, other statutes in pari materia, and the mischief which one may discern the statute was intended to remedy." See also per Gummow J in The Wik Peoples v The State of Queensland (1996) 187 CLR 1 at 171. 62 The process of construction must always begin by examining the content of the provision that is being construed: McHugh, Gummow, Kirby and Hayne JJ in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381. 63 In K & S Lake City Freighters, the question was whether s 133 of the Motor Vehicles Act 1959 (SA) applied to a contract for the carriage of goods. Section 133 provided that any contract whereby a person contracts in advance out of the right to claim damages for negligence of any other person in driving a motor vehicle was, to that extent, void. It was unrestricted in its terms. It was, however, in a Part of that Act headed "Third Party Insurance" which had as its principal purpose the effectuation of a scheme to ensure that the entitlement to damages in respect of death or personal injury caused by or arising out of the use of a motor vehicle was properly exercisable. It was argued that that context meant that the apparently unrestricted words in s 133 should be read down to refer only to contracts concerning liability for death or bodily injury. 64 Gibbs CJ said at 312: "The words of any statutory provision must be first read in the context provided by the statute as a whole [references omitted] but 'if, when so read, the meaning of the section is literally clear and unambiguous, nothing remains but to give effect to the unqualified words' [references omitted]". 65 Mason J disagreed in the result, but said on the matter of principle at 315: "Problems of legal interpretation are not solved satisfactorily by ritual incantations which emphasize the clarity of meaning which words have when viewed in isolation, divorced from their context. The modern approach to interpretation insists that the context be considered in the first instance, especially in the case of general words, and not merely at some later stage when ambiguity might be thought to arise." 66 Brennan J said at 319: "In choosing between a primary, broader meaning of words in a section and a secondary, narrower meaning that corresponds with the subject-matter dealt with in surrounding sections, it is relevant to consider whether the particular section has an operation independent of the operation of the surrounding sections or whether the operation of the particular section affects or is affected by the operation of the surrounding sections." 67 Dawson J at 325 also agreed with Gibbs CJ and Deane J. His Honour found that there was nothing "sufficiently compelling to require a departure from the plain meaning of the words used in s 133". At 321 Deane J acknowledged that the words of s 133 must be read in their context in the Act, but then found that the provisions of the section were plain on their face. 68 There is nothing within the words of s 83 to indicate that its operation is dependent upon interaction with, or the practical commencement of the operation of, some other sections (other than Div 1: the definitions). They are complete on their face. There is no suggestion of ambiguity in the words. There is no language in the section which would warrant confining its plain words. The section goes beyond, but does not contradict, the purpose of the other provisions of Div 3: ss 81–82. It does not bring about a result that would be inconvenient, improbable or unjust. The words are clear and unambiguous. The heading to Div 3 does not indicate the limited operation contended for. Section 83 sits comfortably within that Division because it deals with market value ratios, albeit that ss 81–82 operate only in respect of particular years of income. The predecessor to s 83 (or its contemporaneous co-provision in the OSS Regulations: reg 16B) was introduced only shortly before the Act. There is no reason to think that the considerations which gave rise to reg 16B of the OSS Regulations were not equally applicable to the control of regulated superannuation funds under Pt 8 of the Act including s 83. 69 For those reasons, I conclude that s 83 applied to the years of income 1994-95, 1995-96 and 1996-97 notwithstanding that it follows ss 81 and 82 in Div 3 of the Act, and that those sections impose restrictions on the market value ratio of assets at the end of the years of income commencing with the 1998-99 year of income. 70 Accordingly, subject to considering the particular circumstances of each of the alleged transactions, I reject the first ground of defence of the applicants. 71 The second general ground of the respondents' defence is that the investment by a superannuation fund in units in a unit trust, even where the unit trust then advances the funds so subscribed to the employer-sponsor, cannot constitute an in-house asset of the fund. In my view, it is more convenient to consider that contention by reference to a particular transaction. I shall use the All Sweat transaction. C. The All Sweat transaction - findings 72 All Sweat & Co Pty Ltd ("All Sweat") was registered on 17 March 1995. Its directors at material times were Truc Cong Ho ("Mr Ho"), Hien Nguyen Ho ("Mrs Ho") and Jacqueline Dawn Swanson ("Ms Swanson"). 73 On 16 March 1995, the All Sweat & Co Pty Ltd Superannuation Benefit Fund ("All Sweat SBF") was established. Its trustees were Mr Ho and Mrs Ho. It became a regulated superannuation benefit fund under the Act from that date. 74 On 16 March 1995 the Bino Private Property Unit Trust ("Bino") was established. Its trustee was Super Benefit. 75 On 30 June 1995 All Sweat drew a cheque on its bank for $40,000 payable to All Sweat SBF and paid that amount to All Sweat SBF. At the same time, All Sweat SBF drew a cheque for $40,000 to subscribe for 40,000 $1 units in Bino. It is not clear when those units were in fact issued. At the same time Bino drew a cheque for $40,000 payable to All Sweat and paid that amount to All Sweat. It was recorded as, and was, a loan by Bino to All Sweat. 76 Mr Ho and Mrs Ho ran the All Sweat business of garment manufacturers. They had been clients of Holloway & Co since 1989, and Mr Holloway attended to their accounting affairs. In about early March 1995, they asked Mr Holloway to establish a corporate entity to run that business rather than for it to continue to operate as a partnership. They were moved to that action, at least in part, by their obligation to pay provisional tax. 77 At that interview with Mr Ho and Mrs Ho, I find that Mr Holloway recommended that they establish a superannuation fund. He may have also mentioned setting up a unit trust. It is unclear whether they then accepted that advice. Mr Ho's evidence was that he did not then instruct Mr Holloway to proceed beyond arranging for the establishment of All Sweat. There may have been some misunderstanding on his part, or a lack of full appreciation on his part, of what was proposed by Mr Holloway. Soon after that interview, it is clear that Mr Holloway by telephone suggested setting up both a superannuation fund and a unit trust. He explained the relative taxation rates applicable to All Sweat and to monies paid by All Sweat into a superannuation fund. He also explained that a unit trust could own the assets used by All Sweat in its business and lease them to All Sweat. He was instructed to proceed. Mr Holloway then arranged for the registration of All Sweat, and the establishment of All Sweat SBF and Bino. 78 At a further interview in late March 1995, Mr Holloway explained in more detail the entities established for Mr Ho and Mrs Ho, and the way in which he contemplated that they would interact. He advised Mr Ho to establish bank accounts in the name of All Sweat SBF and Bino and to produce to his bank the two trust deeds for those entities. Mr Ho attended his bank at Greenacres to do so. The bank manager, Mr Peremiczko, confirmed in a telephone conversation with Mr Holloway what was intended to be done. On Mr Holloway's advice, Mr Peremiczko completed the appropriate forms describing Mr Ho and Mrs Ho as trustees of Bino, and as alternate signatories on its account. Mr Peremiczko did not himself read the trust deed for Bino which clearly indicated the trustee was Super Benefit. Neither Super Benefit nor Mr Glaser were mentioned to him. 79 The three cheques for $40,000 all drawn on 30 June 1995 were prompted by Mr Holloway. He rang Mr Ho about that date and told him to write the three cheques on the one day, and the sequence of those cheques: payment by All Sweat to All Sweat SBF, payment by All Sweat SBF to Bino, and payment by Bino to All Sweat. Mr Ho said that All Sweat did not have $40,000, but Mr Holloway told him that if all the cheques were presented in sequence on the same day there would not be a problem. Mr Ho did not then fully understand the reason for the proposed transactions. He was concerned about All Sweat writing a cheque without sufficient funds. He attended his bank and spoke to Mr Peremiczko about his concern. Mr Peremiczko then spoke to Mr Holloway by telephone. He accepted Mr Holloway's advice to proceed, and then assisted Mr Ho in effecting the three payments (including completing the appropriate deposit and payment records). Immediately before those payments, All Sweat had a credit balance of only $5,712 in its bank account. 80 Mr Ho remained uneasy about the transactions. He had another meeting with Mr Holloway to get him to explain further the purpose of the entities and of the three payments. Ms Swanson, to whom Mr Ho was proposing to issue some shares in All Sweat, was also present. Her evidence accorded with that of Mr Ho. The meeting took place soon after 30 June 1995. As the discussion took place, Mr Ho progressively drew a representation of what he understood he was being told, and progressively confirmed its accuracy with Mr Holloway. Mr Holloway explained the entities, and that the benefits of the structure included that Mr Ho and Mrs Ho would not be liable for the debts of All Sweat, and that if Bino owned the plant and equipment used in the business of All Sweat, that plant and equipment would not be an asset of All Sweat available to All Sweat's creditors in the event that it failed. He also explained that the tax rate on All Sweat's profits would be likely to be 39 per cent but, in respect of contributions by All Sweat to All Sweat SBF the effective tax rate would be 15 per cent. He also explained that the structure enabled Mr Ho and Mrs Ho to start planning to support themselves for their retirement. 81 At that meeting, Mr Holloway also explained that the payment of $40,000 to All Sweat SBF which was then made available to Bino would enable Bino to purchase the plant and equipment used in the business (which had an estimated value of $40,000) from Mr Ho and Mrs Ho and could be leased to All Sweat. All Sweat would then pay lease payments of $500 per month and Bino would "pay a dividend" to All Sweat SBF for the long term benefit of Mr Ho and Mrs Ho. 82 I accept Mr Ho's evidence that he was told by Mr Holloway that the trustees of Bino were Mr Ho and Mrs Ho. Mr Holloway also told them about Super Benefit, and its directors Mr Glaser, Mr Lombardi and Mr Parker. That was the first time Mr Ho had heard of Super Benefit. Mr Ho's notes of the meeting record it as an entity at "arm's length" some how relating to Bino. It was to "keep an eye on" Bino. He was not told by Mr Holloway, either in a technical or simplified way, of any rules about "in-house asset rules" concerning All Sweat SBF or any rules restricting All Sweat SBF from advancing funds to All Sweat. He had not then met any of the directors of Super Benefit. He met Mr Glaser some time later. 83 The evidence does not disclose the existence of any minutes of Bino to buy and lease the plant and equipment. It does not show the issue of any units to All Sweat SBF at about that time. Mr Holloway accepted that his records may have been deficient, and that he did not check that Mr Glaser or Super Benefit had issued any unit certificates. On 1 June 1996 Super Benefit resolved to issue 40,000 units in Bino to All Sweat SBF. 84 Holloway & Co prepared the financial accounts of All Sweat, All Sweat SBF and Bino for the financial year ended 30 June 1995. All Sweat had a small operating loss, after payment of $41,141.40 for superannuation and paying wages (presumably to Mr Ho and Mrs Ho) was taken into account. Its deferred liabilities on its balance sheet include $40,000 as "Loan-Trusts". All Sweat SBF had income from the payment of the $40,000 only, and that asset was represented by "Investments (At Cost)". The balance sheet of Bino shows unit holders funds of $40,100 (the $100 is the settlement sum), and its assets as including a loan to All Sweat of $40,000. That latter fact emerges only from the 30 June 1996 balance sheet containing figures for the previous year, as the 30 June 1995 balance sheet was not in evidence. In fact, Bino's bank account was not formally opened until 3 July 1995. The $40,000 is recorded as deposited from "Super Fund" and then paid "to personal account" on that day. Given the evidence of Mr Peremiczko, which I accept, those payments were each made on 30 June 1995. The respondents did not contend that I should find otherwise. 85 Section 76(2) of the Act requires that, at all times to 30 June 1995 while All Sweat SBF was in existence, the historical cost ratio of its in-house assets must not exceed 10 per cent. Section 74 determines how the historical cost ratio is to be assessed. In this instance, the only real asset of All Sweat SBF to 30 June 1995 was the payment of $40,000 from All Sweat, and its only investment was in units in Bino. There is no suggestion that those units were worth less than $40,000. Provided that the investment in units in Bino was an in-house asset, the application of s 74 therefore means that the historical cost ratio of All Sweat SBF's in-house assets at 30 June 1995 was 100 per cent. For the same reasons, in the particular circumstances, as at 30 June 1995 the market value ratio of the All Sweat SBF in-house assets determined under s 75 of the Act was also 100 per cent. That is because I find that the value of the in-house assets of All Sweat SBF, that is the units in Bino (or monies subscribed for units in Bino), were of the same value as all the assets of All Sweat SBF at that date. D. Was the investment by All Sweat SBF in Bino an in-house asset in the circumstances? (i) The contentions 86 The provisions of s 71 are set out above. APRA contends that the subscription of $40,000 by All Sweat SBF for units in Bino on 30 June 1995 fell within s 71(1) of the Act as "… a loan to, or an investment in, a standard employer-sponsor, or an associate of a standard employer-sponsor, of the fund …" 87 APRA alternatively submitted that that investment fell within the extended definition of an in-house asset under s 71(2) of the Act. It was contended that the investment was made as the result of entering into or carrying out an agreement, in circumstances where s 71(2)(c) applied, so that the investment is taken to be a loan to or an investment in All Sweat for the purposes of Pt 8 of the Act. Section 71(2)(c) applies if, or requires that, "any of the persons who entered into or carried out the agreement did so for the purposes, or for purposes that included the purpose, of achieving the result that a loan or investment would be made to or in, or to or in an associate of, a standard employer-sponsor of the fund;" 88 In the course of final submissions, I invited APRA to make further written submissions on the proper operation of s 71 of the Act in the circumstances of the transactions under review. Counsel for the respondents was then given the opportunity to make a further written submission in reply. In reply, the respondents submitted that APRA's submissions in response to that invitation (which were very detailed) should be ignored because they "attempt to develop a new case which has not been pleaded or put". As I understand that submission, the respondents complain that APRA's case initially was that the unit trusts established at the direction of Mr Holloway were really no more than mere conduits or shams, whereas it is now sought to be argued that the unit trusts were "owned" by the directors of the employer-sponsors so as to enliven s 71(2) of the Act. 89 I do not consider that the significance of the unit trusts, as now formulated in detail by APRA, is a new case or one which it would be unfair to the respondents for me to consider. No particular unfairness was identified in that reply. It was not submitted that the course of evidence would have been different, or that any evidence admitted would not have been admitted. It was not suggested that the respondents would have led any additional evidence, or would have cross-examined any witness differently. The need for APRA to establish that investments made by superannuation funds were "in-house assets" was always recognised as an issue which it had to confront. Indeed, counsel for the respondents at a relatively early stage of the proceedings indicated that one point raised by way of defence, based upon Trevisan, was that the investment by a superannuation fund to a unit trust by the subscription for units in the unit trust, and not an "in-house asset" as defined. (ii) The operation of s 71(1) 90 Trevisan concerned s 121C of the Income Tax Assessment Act 1936 (Cth) ("the ITAA"), introduced by the Taxation Laws Amendment Act (No 2) 1985 (Cth). Section 121C set out rules imposing a taxation detriment on certain superannuation funds which lent money to the employers who had set them up, or which otherwise invested in those employers. It was, apparently, a forerunner of the scheme under Pt 8 of the Act by which only certain superannuation funds are eligible for concessional taxation treatment. It too had the object of protecting the benefit for members of superannuation funds by encouraging the restriction of investments in sponsoring employers. 91 The facts in Trevisan bear a close resemblance to those in the case of All Sweat. The company in issue, Forli Pty Ltd ("Forli"), was a trading company, but trading as trustee of a family trust. The directors of Forli were trustees of the Forli Superannuation Fund. There was also in existence the Forli Property Trust, a unit trust in which all the units were held by the Forli Superannuation Fund, and of which Forli was the trustee. The issue was whether the units held by the Forli Superannuation Fund in the Forli Property Trust were "in-house assets of the fund" within the meaning of s 121C(5) of the ITAA. The relevant expression of the definition of "in-house assets" in s 121C(1) is almost on all fours with s 71(1) of the Act. It posed the question whether the acquisition of the units was "an investment in an employer-sponsor of the fund or an associate of an employer-sponsor of the fund". 92 Burchett J had little difficulty in holding that the acquisition of units in the property trust was not an investment in the employer-sponsor. The fact that Forli was trustee of the Forli Property Trust as well as trustee of the employer-sponsor family trust (a circumstance which does not arise in respect of any of the transactions alleged in this proceeding) did not affect that conclusion. It was clear that the acquisition of units in the Forli Property Trust was an investment in the property of the property trust, and not in the company Forli which happened to be its trustee: see Charles v Federal Commissioner of Taxation (1954) 90 CLR 598 at 609. 93 His Honour then considered whether there was an investment in an associate of the employer-sponsor. "Associate" had the same meaning as in s 26AAB of the ITAA. It was sought to argue that the association existed because Forli was trustee both of the unit trust and the family trust which was the employer-sponsor. Burchett J said (at 163): "But the associate so identified is Forli Pty Ltd. That company is the trustee. An acquisition of units in the trust is, on the authority of Charles (supra), an investment in the real estate and other property the subject of the trust of the deed; it is not an investment in Forli Pty Ltd, simply because the company happens to be the trustee for the time being." 94 His reasons emphasise the clear distinction between the trustee and the trust. Perhaps prophetically, Burchett J added (at 165): "Even if the respondent's argument had been free of the difficulties to which I have referred, it would still have entailed reading into the Act words which are not there. Unless something more is inserted, one cannot say that the acquisition of units in a unit trust is an investment in the company which is, for the time being, the trustee of that trust." 95 Although not apparently expressly directed to circumstances where the trustee of a unit trust is itself somehow associated with an employer-sponsor, s 71(2) now does provide additional wording to extend the reach of the definition of "in-house assets". 96 Trevisan clearly supports the respondents' contention that s 71(1) does not render the subscription by All Sweat SBF for units in Bino as a loan to, or an investment in, All Sweat. In my judgment that is clearly correct. Its investment is in the property and assets of Bino, held by its trustee Super Benefit. 97 APRA nevertheless contends that, because Mr Ho and Mrs Ho opened and operated the bank account of Bino in their name as trustees of Bino without the involvement of Super Benefit as trustee for Bino, the payment by All Sweat SBF to Bino and then from Bino to All Sweat amounted to a loan to, or an investment in, All Sweat by All Sweat SBF. It is clear that Super Benefit, and Mr Glaser, in fact had a very limited role in relation to Bino. In a practical sense, in this transaction (as in many of the transactions under consideration), the affairs of Bino were conducted by Mr Ho and Mrs Ho essentially at the direction or upon the advice of Mr Holloway. In those circumstances, APRA contends that the loan of $40,000 by Bino to All Sweat was an asset of All Sweat SBF that is a loan to All Sweat under s 71(1) of the Act. A further alternative contention of APRA was that Bino was a sham, designed merely as a screen or contrivance to facilitate the flow of assets of All Sweat SBF to All Sweat whilst apparently preserving the taxation concessions available to regulated superannuation funds. 98 I do not accept those submissions. My findings about the All Sweat transaction indicate the circumstances in which Bino and All Sweat SBF were established, and the purposes for which they were established. I accept the evidence, including that of Mr Holloway, that the purposes for the establishment of Bino included the legitimate commercial purpose of isolating ownership of the assets used in the business of All Sweat from its business activities, and to provide a means by which expenses incurred by All Sweat could in some respects be incurred to an entity in which Mr Ho, and Mrs Ho had an interest, albeit indirectly through All Sweat SBF. There was also no reason why Mr Ho and Mrs Ho could not separately subscribe for units in Bino, or lend funds to Bino, to increase its available resources to invest in income earning activities. In certain of the other transactions under consideration, that is what occurred. There was also no reason why Bino could not invest in assets remote from the affairs of All Sweat, although I find that that course was not in the immediate contemplation of Mr Ho and Mrs Ho. That also occurred in certain of the other transactions under consideration. It was part of the overall plan of Mr Holloway that the establishment of Bino, and the other unit trusts under consideration, would enable Bino and the other unit trusts to borrow funds to invest, that is to leverage upon the funds of All Sweat SBF to increase the potential returns to All Sweat SBF and to the other superannuation funds. That could not be done directly by the superannuation funds. The fact that the role of Super Benefit as trustee of All Sweat was, in effect, a nominal one in practice does not lead to the conclusion that Bino was merely a sham to conceal the intent simply to channel funds from All Sweat SBF to All Sweat after enjoyment of the available taxation concessions. 99 Once it is accepted that the establishment of Bino, and its operations, were real transactions then, in my judgment, the proper characterisation of the payment by All Sweat SBF to Bino must be as an investment in the property and assets of Bino and not as a payment (whether by way of loan or investment) by All Sweat SBF to All Sweat. The fact that the operators of the Bino bank account, and in a practical sense the persons who decided upon the investment of its assets (albeit on the advice of Mr Holloway), were Mr Ho and Mrs Ho does not alter that conclusion. Mr Ho and Mrs Ho were also the directors of All Sweat, but All Sweat was a separate legal entity. Trevisan illustrates the importance of recognising the true nature of the investment of All Sweat SBF, and of distinguishing an investment in the trustee of a unit trust from an investment in the trust itself. 100 Accordingly, I reject APRA's claim that the investment of All Sweat SBF in Bino was an in-house asset by the operation of s 71(1) of the Act. APRA did not seek to argue that Bino was an associate of All Sweat, so as to invoke the alternative formulation in s 71(1). (iii) The operation of s 71(2) 101 APRA's alternative contention was that s 71(2) applied to that investment. The effect of my decision about s 71(1) is that the investment by All Sweat SBF in units in Bino is not an in-house asset apart from the operation of s 71(2): see s 71(2)(a). APRA contended then that the investment by All Sweat SBF in units in Bino was made as the result of entering into or carrying out an agreement between All Sweat SBF and Bino for the purpose of achieving the result that a loan or investment would be made to or in All Sweat: s 71(2)(b) and (c). 102 The application of those provisions to the circumstances requires to be addressed separately in the light of the evidence concerning each transaction under consideration. In the case of the All Sweat transaction, in my judgment, the outcome is clear. When directed or advised by Mr Holloway to undertake the three payments, Mr Ho was cautious about doing so. There were insufficient funds in All Sweat to pay $40,000 to All Sweat SBF. He was prepared to make that payment only upon being assured that there would be no shortfall of funds in All Sweat. He consulted his bank manager to ensure it was safe to undertake the transaction. The investment by All Sweat SBF in Bino would not have been made unless Mr Ho was confident that Bino would promptly advance the amount of that investment to All Sweat. In my view, those circumstances indicate that All Sweat SBF, through its trustees, made its investment in Bino as the result of entering into and carrying out an agreement with Bino for the purpose of achieving the result that Bino would lend the $40,000 invested by All Sweat SBF to All Sweat. The evidence satisfies me that, under the informal arrangements which existed for the day to day management of Bino's affairs, Mr Ho and Mrs Ho had the power to make such an agreement on behalf of Bino. The agreement was, of course, a quite informal one but it was nevertheless one made without which Mr Ho and Mrs Ho on behalf of both All Sweat and All Sweat SBF would not have undertaken the transaction. 103 I do not consider that an agreement, for the purposes of s 71(2), requires any measure of formality. It would subvert the intention of s 71(2) to require any such measure of formality, as the section is clearly designed to operate in circumstances where, through an agreement of an intermediary, a regulated superannuation fund makes a loan or investment which is not itself an in-house asset under s 71(1) but that loan or investment is made on the basis that a loan or investment would then be made to the employer-sponsor of the fund. The result that s 71(2)(c) refers to is not necessarily confined to a loan or investment from the funds available by the loan or investment of the superannuation fund itself. The broad scope of operation of s 71(2), in my view, confirms that the agreement to which it refers need not be one formally made. 104 Accordingly, I find that the investment of $40,000 by All Sweat SBF in Bino is an asset of All Sweat SBF which, for the purposes of Pt 8 of the Act, is taken to be a loan to or an investment in All Sweat. It is therefore an in-house asset of All Sweat SBF. 105 I have found above that at 30 June 1995 the market value ratio of the in-house assets of All Sweat SBF under s 75, as a result of the All Sweat transaction undertaken on 30 June 1995, was 100 per cent. 106 Immediately before All Sweat SBF acquired the units in Bino, the market value (and the historical cost) of its in-house assets was zero. It had for an instant funds of $40,000 from All Sweat. The effect of it acquiring the asset represented by its units in Bino was, as I have found in the particular circumstances, to result in All Sweat SBF having in-house assets with a market value (and an historical cost) of $40,000 and the market value ratio of its in-house assets increased from 0 per cent to 100 per cent. The acquisition of the units in Bino therefore in fact contravened s 83(3) of the Act. 107 It remains to consider whether, in the light of that finding, the respondents contravened s 85 of the Act. As noted earlier, the answer to that question depends in large measure upon the reliability of Mr Holloway's evidence. E. Was there a contravention of s 85(1) by the All Sweat transaction? (i) The construction of s 85 108 The definition of "scheme" in s 85(4) of the Act is not an easy one to comprehend. It has two elements. The first, s 85(4)(a), involves an "agreement, arrangement, understanding, promise or undertaking". That is obviously an expression designed to accommodate a range of formal and less formal commitments, and encompasses commitments which are not legally enforceable: see s 85(4)(a)(ii). The elements, as expressed, bear resemblance to the expression "contract arrangement or understanding" used in s 45 of the Trade Practices Act 1974 (Cth) ("the TPA"). Cases decided concerning that expression may provide a helpful guide to what is meant by s 85(4)(a): see for example Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) 24 FLR 286; Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 2) (1979) 40 FLR 83 and on appeal Morphett Arms Hotel Pty Ltd v Trade Practices Commission (1980) 30 ALR 80; News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410. In this section of my reasons I shall use the term 'arrangement' to encompass the expression 'agreement, arrangement, understanding, promise or undertaking' simply for brevity. As appears, the decision does not turn upon any difference in the meaning of those words. 109 APRA acknowledges that the first element necessarily involves at least one other party. That element does not indicate the nature of the arrangement which is to exist, or anything about its purposes. It will generally involve two or more people arranging for the taking of a particular course of conduct on the part of one or other of them, or perhaps both of them. In cases under the TPA, there has been some discussion as to whether the concept requires some form of mutual obligation, but the additional words in s 85(4)(a) of 'promise' and 'undertaking' seem to make it clear that only one party to the arrangement need be under an obligation to act in a certain way or to refrain from acting in a certain way to fall within its scope: cp Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206. 110 As APRA contended, the finding as to the existence of an arrangement may be inferred from circumstantial evidence, including evidence of the opportunity for parties to reach an arrangement, evidence of conduct concurrent in time, character or result, and evidence of the consequences of that conduct upon the actor and upon others: see R v The Associated Northern Collieries Ltd (1912) 14 CLR 387 at 400. 111 In the present case, as there is reasonably clear evidence about the arrangements which existed between Holloway & Co and Mr Holloway on the one hand, and Super Benefit and Mr Glaser, and alternatively the trustees of the nineteen superannuation funds on the other, it is not necessary to consider further the subtleties of s 85(4)(a). The respondents' defence, as appears elsewhere in these reasons, is not founded upon that part of the definition of "scheme". They accept that an arrangement existed between the respondents and Super Benefit or Mr Glaser, and also that a series of arrangements existed between them and the clients who became trustees of the superannuation funds. 112 The second element of s 85(4) creates an additional element that must exist to constitute a scheme. It contains within the definition the word being defined. Section 85(4)(b) requires a "scheme" to involve "any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise." The word "scheme" in s 85(4)(b) is clearly not used consistently with the use of that word as defined: cp McGraw-Hinds (Aust) Pty Ltd v Smith (1979) 24 ALR 175 at 178; Accident Towing and Advisory Committee v Combined Motor Industries Pty Ltd [1987] VR 529 at 540. Despite the use of the word "scheme" in that subclause, the concluding words indicate that there does not need to be an element of mutuality in the step or steps contemplated or taken to constitute a "scheme, plan, proposal, action, course of action or course of conduct". 113 It is, furthermore, difficult to conceive of any boundaries fixed by that series of words. They encompass prospective acts as well as historical or contemporaneous acts. They encompass the taking of a single act, or a series of acts. They intersect and overlap in their meaning. It is difficult to see how each of those words can be given a separate and meaningful ambit of operation: cp Griffith CJ in Commonwealth v Baume (1905) 2 CLR 405 at 414. The introductory word "any" is apparently intended to indicate that each of those words should be given as wide a meaning as possible: Victorian Chamber of Manufacturers v Commonwealth (1943) 67 CLR 335 at 346 per Williams J. 114 However, it is not necessary in this case to address those matters in any detail. There has been no detailed argument on s 85(4)(b); the focus of the parties has been upon the terms of s 85(1) of the Act. I will therefore consider s 85(4) generally as it applies to the facts and circumstances of each transaction as I find them to be, to determine whether there was a "scheme" in respect of any of the transactions as alleged. 115 The finding of the true nature of the scheme, in respect of each transaction under consideration is relevant because, as s 85(1) states, it must be the intention of a person who entered into the scheme or carried it out to achieve the result referred to in s 85(1). If the carrying out of the scheme could not achieve that result, then it may be that a totally misconceived intention that it might do so does not satisfy s 85(1). The respondents did not argue that that was the case in the present circumstances. 116 The respondents submit that it is not a sufficient intention to be caught in the web of s 85(1) if, they alone intended to achieve that result. They stress that s 85(1) requires that they entered into or carried out the scheme or part of it "with the intention that" the scheme itself would, or would be likely to, have that result. They contended that, on the evidence, any scheme which existed between the respondents and Super Benefit or Mr Glaser was not one which involved the step of the unit trust making a loan to, or an investment in, an employer-sponsor at all. Mr Glaser's evidence, they submit, further establishes that the arrangement with Holloway & Co to establish what Mr Holloway was wanting to call "the Glaser system" was, in Mr Glaser's mind, nothing to do with avoiding the application of any provision of Pt 8 of the Act. The respondents therefore contend that, irrespective of the intention of Mr Holloway, no contravention of s 85(1) is made out. They also contend that Mr Holloway, in any event, did not have the intention to which s 85(1)(a) and (b) refers. 117 The definition of "scheme" in s 85(4) of the Act appears also in s 66 of the Act. It is largely replicated in many other Commonwealth enactments defining "scheme" or "arrangement", including the Foreign Acquisitions and Takeovers Act 1975, s 38A and the ITAA variously including s 177A in Pt IVA. In other legislation the definition of "scheme" contains the same two elements as expressed in s 85(4)(a) and (b) but they are expressed as alternatives rather than as cumulative elements. There has been some discussion of the term "scheme" in s 177A of the ITAA: see eg Federal Commissioner of Taxation v Peabody (1994) 181 CLR 359 at 383 ("Peabody"); CPH Property Pty Ltd v Federal Commissioner of Taxation (1998) 98 ATC 4983 at 4998; Grollo Nominees Pty Ltd v Commissioner of Taxation (1997) 73 FCR 452 at 499-501, although generally speaking cases concerning Pt IVA of the ITAA have been concerned more with other aspects of Pt IVA of that Act. As the High Court in Peabody at 375 pointed out, the introduction of Pt IVA into the ITAA in 1981 was to provide a general anti-avoidance measure to replace s 260 of that Act. See also Hill J in Peabody v Federal Commissioner of Taxation (1993) 40 FCR 531 at 538-539. His Honour in Canwest Global Communications Corporation v Treasurer of the Commonwealth of Australia (1997) 147 ALR 509 at 534 suggested that Pt IVA of the ITAA may have been the genesis for some of the subsequent statutory definitions of "scheme". 118 I reject the submission that it is necessary for the other party or parties to the arrangement to have the intention to which s 85(1) refers for there to be a scheme which may fall within the net of s 85(1), provided of course the other elements of s 85(1) are established. In Commissioner for Taxation v Spotless Services Pty Ltd (1996) 186 CLR 404 at 415, in the joint judgment of Brennan CJ, Dawson, Toohey, Gaudron, Gummow and Kirby JJ, their Honours stressed at 415 that it was important to apply such definitions as in s 85(4) according to their terms. Section 85(4) does not require the arrangement to be entered into with a particular proscribed purpose or intention on the part of its participants. Indeed, it contemplates the possibility of a party to the arrangement having an additional and independent plan of action in mind, or that a party to the arrangement may take some additional step independently of the arrangement and beyond that contemplated by the arrangement. It is the totality of the two elements which constitute the "scheme" to which s 85(1) then refers, and not just the arrangement itself. Then s 85(1) directs its prohibition at a person who entered into or carried out that scheme with the intention referred to. The intention is that of the actor, not of all the persons who made the arrangement. The character of the scheme is relevant only in the sense that it was entered into or carried out by that person with the intention referred to. (ii) The nature of the scheme alleged 119 The amended statement of claim is an extremely lengthy and turgid document. The entitlement to plead alternatives has been taken a very long distance: cp Peabody at 381. The allegations about the All Sweat transaction alone run into some nineteen pages, and encompass myriad alternatives. That is typical of the allegations concerning each of the transactions. In part that may be the consequence of the definition of "scheme" in s 85. It is difficult to isolate the real gist of the allegations. I endeavour to do so in the precis which follows. 120 It is alleged that the scheme under which the All Sweat transaction occurred was one carried out between 16 March 1995 and December 1996. The date 16 March 1995 is when All Sweat SBF and Bino were established. The scheme was carried out "by unilaterally coming to an understanding" or by entering into an agreement or arrangement or understanding with Super Benefit or with Mr Glaser, or with Mr Ho and Mrs Ho as trustees of the Sweat SBF. That agreement or arrangement or understanding was "in respect of the establishment of the structure with Super Benefit purporting to act as the arm's length trustee of the unit trust so as to avoid the application of the in-house asset rules in order to implement the agreement or arrangement or understanding by a unilateral or other scheme, actions, course of action or course of conduct, so as to avoid the application of ss 76 or 83 of this Act to All Sweat SBF." 121 The arrangement which was carried out by Mr Holloway was partly oral and partly in writing. It was made in conversations between Mr Holloway and Mr Ho and Mrs Ho, in which Mr Holloway gave them advice. That part of the amended statement of claim does not provide any particulars of conversations between Mr Holloway and Mr Glaser. The general effect of the advice of Mr Holloway to Mr Ho and to Mrs Ho, it is alleged, was · to establish the superannuation fund and the unit trust; · to appoint Super Benefit as trustee of the unit trust; · to retain Holloway & Co as accountants and adviser to the superannuation fund and the unit trust; · to establish the bank account of the unit trust with the trustees of the superannuation fund as its signatories; and · that those persons would make investment decisions for each of the superannuation fund and the unit trust. It is alleged then that the All Sweat transaction took place on Mr Holloway's advice, and that thereafter Mr Ho and Mrs Ho signed the financial accounts of All Sweat, and of All Sweat SBF, and authorised the Annual Return to the Insurance and Superannuation Commission, for the year of income 1994-95. The agreement or arrangement is alleged to have been partly in writing (as distinct from being evidenced by documents) consisting of written records of Holloway & Co including financial books records correspondence and the like of each of All Sweat, All Sweat SBF and Bino. The agreement or arrangement is also said to have constituted the written banking records and the records of Super Benefit. 122 The statement of claim then alleges that the All Sweat transaction occurred on the advice and recommendation of Mr Holloway to Mr Ho and Mrs Ho so that s 76 of the Act, and either s 83(2) or s 83(3) of the Act was contravened. 123 The intention ascribed to the respondents in carrying out the scheme was that it "would result" or "was likely to result" in an artificial reduction of the market value ratio of the All Sweat SBF in-house assets, within the meaning of s 85(1)(a) so as to thereby avoid the application of ss 76 and 83 of the Act to All Sweat SBF within the meaning of s 85(1)(b) of the Act. That intention itself is said to be "partly oral and partly in writing", and apart from matters already referred to, the Annual Return to the Insurance and Superannuation Commission prepared and submitted by Holloway & Co recording the in-house assets of All Sweat SBF for the 1994-95 year of income as "nil" is said to be part of the written intention. 124 There are detailed allegations then that the investment by All Sweat SBF of $40,000 for units in Bino on 30 June 1995 was an in-house asset of All Sweat SBF. It is claimed that that investment was made as the result of an agreement entered into on about 16 March 1995 between · Mr Holloway and Mr Ho and Mrs Ho, · Mr Holloway and Super Benefit · Mr Holloway and Mr Ho and Mrs Ho and Super Benefit and was carried out during the period between 16 March 1995 and December 1996. 125 It is then alleged that the fulfilment of the wider arrangement, of which the implementation of the All Sweat transaction was a part, was a scheme "entered into during 1993, 1994 and/or 1995 between Holloway and/or Super Benefit and/or its officer and agent, Glaser and/or thereafter entered on or about 16 March 1995 between Holloway and/or the trustees of [All Sweat SBF] and/or Super Benefit and/or its officer and agent, Glaser;" and was carried out by Mr Holloway during 16 March 1995 and December 1996. The pleading appears to have turned full circle to allege again the "arrangement" element of the scheme, for the purposes of s 85(4)(a). It is alleged that this arrangement was that the scheme was to result in a loan to or an investment in Bino for the purpose, or for purposes which included the purpose, that a loan to or investment in All Sweat would be made which would infringe ss 76 or 83 of the Act. 126 So far as I can discern from the pleading and the submissions, the case now put by APRA is that: (1) in 1993 or thereabouts, the respondents entered into an arrangement with Mr Glaser for the establishment of a superannuation fund and a unit trust for clients of Holloway & Co, with Super Benefit to be the trustee of the unit trusts, but so that the trustees of the superannuation fund would effectively manage and control the affairs of the unit trust, and (2) it was part of that arrangement that the unit trust could and would be used as the conduit for superannuation contributions back to the employer-sponsor, or alternatively Mr Holloway then or later formed the plan to use the unit trust for that purpose, and in either event the unit trust was used for that purpose by the All Sweat transaction. 127 In the alternative, they have also put that: (1) in March 1995, the respondents entered into an arrangement with Mr Ho and Mrs Ho to the like effect, and (2) it was part of that arrangement that Bino could and would be used as the conduit for superannuation contributions back to All Sweat, or alternatively Mr Holloway then or later formed the plan to use Bino for that purpose, and that Bino was in fact used for that purpose by the All Sweat transaction. (iii) The findings about the scheme 128 In the years preceding 1993, Mr Glaser had learned of the possibility of establishing a structure involving a superannuation fund, and a unit trust, with the unit trust having an "arm's length trustee" but really being run by the trustees of the superannuation fund. The benefit of that structure was that the assets of the superannuation fund could be invested in units in the unit trust, and the unit trust through its trustee was able to borrow or leverage those funds so as to increase the potential earnings for the superannuation fund. The trustees of the superannuation fund effectively controlled the investments of the unit trusts, and were less restricted in the form of investments which could be made. The taxation advantages available for contribution to the superannuation fund, and for earnings of the superannuation fund, were preserved. Mr Glaser had used that structure for certain clients of Glaser Associates. 129 In 1992 and 1993, Mr Glaser met Mr Holloway and explained to him that structure and its benefits. They had several meetings discussing those matters. In 1993, the Act was proposed to be introduced. At one of those meetings, in about May 1993, Mr Holloway attended with Mr Parker. The discussion was quite detailed. It concerned the benefits of using the unit trust with an arm's length trustee to enable the superannuation find indirectly to borrow against its assets and to have the opportunity to undertake a greater diversity of investments. Mr Parker described the meeting as Mr Glaser marketing the idea to Mr Holloway. It was discussed that the superannuation fund could not invest its assets in the employer-sponsor. At the time the OSS Regulations limited any such investment. The Act, then proposed to come into force, also limited any such investment. 130 Mr Glaser was presented as a witness by APRA. The transcript of his examinations conducted under Pt 25 Div 5 of the Act were adopted by him as accurate. The respondents did not seriously challenge his reliability as a witness; his cross-examination was quite short. The parties each sought to derive from his evidence some support for their respective positions in their final submissions. He was quite frank about the role which he fulfilled as a director of Super Benefit, and on his behalf the limited supervision he provided in that capacity where Super Benefit was trustee of a superannuation fund. He was also frank about the inadequacies in Super Benefit fulfilling its role as trustee, even in day to day matters such as the issue of unit certificates. He effectively left formal administrative matters to Mr Holloway, and the day to day management of the affairs of the unit trusts and their investment decisions to the trustees of the superannuation fund. Whether that be appropriate conduct on his part, his ready acknowledgment of that approach also gave me confidence in generally accepting his evidence. 131 Both Mr Glaser and Mr Parker were certain that no one suggested during the meetings in 1992 or 1993 that the superannuation fund could channel its assets into the employer-sponsor through the unit trust. That topic was simply not discussed. I accept Mr Parker's evidence on that topic in respect of the two meetings he attended. I also accept Mr Glaser's evidence on that topic. He said he was aware that it would not be lawful for a superannuation fund to channel its funds to the employer-sponsor through a unit trust. The unit trust provided a "low cost ability to give the superannuation funds a better ability to return income to their investors". 132 The culmination of the discussions at that stage is reflected in a letter from Glaser Associates to Holloway & Co dated 12 May 1993. It included: "Our business is predominantly assisting practitioners to help their clients to restructure their business portfolios. In essence we set up superannuation funds as [sic] an internal nature or more descriptively known as self-managed funds. Our ultimate objective is to assist clients in the ability to use their investment power to set up such vehicles such as private property unit trusts through which they can acquire real estate, or other reasonable investments to ultimately benefit the beneficiaries of those superannuation funds. The market we tend to find most appealing is the small to medial [sic, medium] business where the directors are also the shareholders and owners. For reasons of simplicity we encourage our clients to maintain separate superannuation funds for the staff at arms length, so that they can be administered by third party and of course do the normal reporting back to the members. The directors in most instances are of good business sense and would prefer control of their own destiny. For this reason the self managed funds with the private property unit trusts are a more sensible alternative. The initial objective of course is to ensure that there is a medium available for this to occur. To this end we have available to clients the services of a company called Super Benefit Pty Ltd which acts as a professional trustee. Of course there are other professional trustees available or in fact some accounting practises tend to formulate a company in their own right, which then acts as trustee for the relevant clients within their practice. However, the option is at your discretion and we charge $150.00 per annum per client to act only in the capacity of trustee." Later in that letter, reference is made to whether a superannuation fund should invest in items such as artwork, motor vehicles or rare furniture. In that context there appears the following: "In the option that we discussed where you use a private property unit trust as an interposing entity, it tends to remove the explanation of the necessary investment items from the superannuation funds auditors." APRA suggested that the reference to the "interposing entity" was a reference to the unit trust being interposed between the superannuation fund and the employer-sponsor. I do not think that it is. In its context, it is discussing the fact that the investment in such items through the unit trust makes the unwisdom of any such investments less transparent to the auditors of the superannuation fund. That letter was written after one of the meetings which Mr Parker attended. To accept APRA's contention would involve a finding being made in the face of his evidence, as well as that of Mr Glaser. I accept Mr Glaser's evidence that the reference to the "interposing entity" was not to its role between the superannuation fund and the employer-sponsor. 133 I find that, as a result of those discussions, in about March 1995 and in the following months, an arrangement was made between Holloway & Co and Glaser Associates for Glaser Associates to establish, at the request and for the clients of Holloway & Co, a superannuation fund and a unit trust. It was part of that arrangement that the trustees of the superannuation fund would be the directors of the employer-sponsor, and generally speaking that Super Benefit would be the trustee of the unit trust. It was also part of that arrangement that Super Benefit, as trustee of the unit trust, would effectively leave the running of the affairs of the unit trust to the trustees of the superannuation fund, and effectively act as a rubber stamp for their decisions where required. Super Benefit's role was to keep the register of units issued, to issue unit certificates (both of which functions it performed desultorily), obtain a tax file number, sign documents as required by the trustees of the superannuation fund, and to sign the income tax return to be prepared by Holloway & Co. In fact, that is about the limit of what Super Benefit did as trustee of the unit trusts. Each of Mr Glaser and Mr Parker, and later Mr Lombardi, signed cheques for superannuation funds of which Super Benefit was trustee and where they were cheque signatories without any real regard to the appropriateness of the expenditure proposed. Mr Glaser signed the front page of the taxation returns for the unit trusts without even having available the balance of those returns; he simply relied on Mr Holloway. In a few instances, he was asked to provide some assistance to or give some advice to the trustees of a superannuation fund, and he did so. 134 It was not part of the arrangement that the unit trust would be used to channel monies from the superannuation fund to the employer-sponsor. 135 I have found that that arrangement initially was with Glaser Associates rather than with Super Benefit. Although the arrangement was not pleaded precisely in that way, I do not think there is any unfairness to the respondents by making that finding. It is consistent with the general thrust of their case. After each unit trust was established with Super Benefit as trustee (except in the case of the two Hyde Park transactions), Super Benefit acted in accordance with the arrangement in all respects. Glaser Associates and Super Benefit were under the practical control of Mr Glaser. 136 In light of the findings about their transactions, I also find that in about March 1995, a separate arrangement was made between Holloway & Co and Mr Holloway on the one hand and Mr Ho and Mrs Ho on the other for Holloway & Co to arrange for the establishment of All Sweat SBF and Bino, and in this instance also All Sweat itself. An "arm's length" trustee, namely Super Benefit, was to be the trustee of Bino. The general effect of the arrangement was to the same effect as the arrangement between Holloway & Co and Glaser Associates, in particular that Mr Ho and Mrs Ho would control the affairs of Bino. At that time, it was not part of the arrangement that All Sweat would make superannuation contributions to All Sweat SBF, which would in turn invest those contributions in Bino, and which would in turn loan the money subscribed for units to All Sweat. The possibility of such a sequence of payments may have been raised by Mr Holloway in discussions, but was not then understood by either Mr Ho and Mrs Ho. 137 I also find that, in about March 1995 or soon thereafter Mr Holloway had in mind the plan (I use a word in s 85(4)(b) deliberately) that it would be both possible for, and helpful to, his clients for All Sweat to make superannuation contributions to All Sweat SBF, and that All Sweat SBF would invest those contributions on units in Bino, and that Bino would lend the monies so subscribed for units back to All Sweat at commercial rates. 138 In the case of All Sweat SBF, that was to occur towards the end of the financial year. Mr Holloway's evidence, and his conduct, confirmed that he had that plan. Subsequently, on or shortly before 30 June 1995, he carried out that plan by giving Mr Ho instructions to make the series of three payments of $40,000 referred to above. 139 That plan of Mr Holloway and of Holloway & Co, together with the arrangements with Glaser Associates and Super Benefit, or with Mr Ho and Mrs Ho, each constituted a "scheme" under s 85(4) of the Act. That part of it involving the series of payments on 30 June 1995 was then carried out by the respondents by giving to Mr Ho the instructions to arrange the series of payments of $40,000 referred to above. (iv) The findings about the intention of Mr Holloway 140 Mr Holloway is an experienced accountant, having worked first in the United Kingdom and from 1967 in Australia. He became a registered tax agent in 1973, and has run his own practice through Holloway & Co from about 1975. He is a Fellow of the Tax and Management Accounting Association, and a member of the Chartered Institute of Secretaries. He accepted that both Andrew Holloway ("Mr Andrew Holloway") and Simon Rex Dalgleish ("Mr Dalgleish") worked under his supervision at material times; neither gave advice unsupervised in the years of income to which these proceedings relate. The clients of Holloway & Co were generally small to medium sized family companies, partnerships and individuals. Mr Holloway gave general accounting advice and provided a range of accounting services to the clients. 141 Mr Holloway's evidence about his discussions with Mr Glaser and later Mr Parker in 1992 and 1993 was essentially consistent with their evidence. It was discussed that a unit trust could, for example, acquire the plant and equipment required for the business of an employer-sponsor and lease that plant and equipment to the employer-sponsor on commercial terms. Mr Holloway did not claim to have been told by Mr Glaser that the unit trust could be used as a conduit for monies from the superannuation fund to the employer-sponsor. He apprehended the benefits of the structure proposed by Mr Glaser principally to be · the capacity of the trustees of the superannuation fund to control its investments through their control of the unit trust · being able to borrow to leverage its investments · being able to invest more widely then may have been available if the investments were directly by the superannuation fund. Those benefits were available whilst maintaining the taxation concessions applicable to contributions to, and earnings by, the superannuation fund. He also appreciated that, in respect of certain of his clients, the unit trust would be able to acquire assets by the issue of units to persons other than the superannuation fund, or by advancing loans by such persons (eg the directors of the employer-sponsor). It would also be able to enter into commercial arrangements with the employer-sponsor, such as the lease of plant and equipment. Its ownership of assets used in the business of the employer-sponsor would or might protect those assets from creditors of the business of the employer-sponsor. It might also, in certain cases, be beneficial for the employer-sponsor's business expenses to some degree to be payable to the unit trust rather than to an outside third party. 142 Having been persuaded of the advantages of the structure proposed by Glaser Associates, Mr Holloway invited a number of his clients to have such a structure established. I accept his evidence that his principal motivation was to ensure that they planned for their future in a sensible way. As appears below, in some instances it was the directors of the employer-sponsor who first raised concerns about a superannuation fund as they were dissatisfied with the performance of the public funds into which their employer had made contributions. In the case of others, Mr Holloway first broached the issue. In the case of Mr Ho and Mrs Ho, the advice was given when they raised the question of transferring their partnership business into a corporate entity to avoid the need to pay provisional tax. The registration of All Sweat also made it easier to enable Ms Swanson to be given an interest in the business. 143 Between the financial years 1992-1993 and 1996-1997, Mr Holloway gave advice which led to the establishment of fifty-eight superannuation funds which became regulated superannuation funds, and with a unit trust into which it was proposed to invest the funds available in the superannuation funds. The first was the Holloway SBF (as defined below). The evidence indicates that about half of those funds made no loan to the employer-sponsor and in a few instances the employer-sponsor in fact advanced funds to the unit trust. Ms Tonks, when cross-examined about that information, indicated that certain other transactions were investigated beyond those which were the subject of these proceedings but that the evidence to establish the true nature of the transactions was not fully available. 144 Mr Holloway did not dispute the evidence that he advised Mr Ho to make the series of payments of $40,000 on 30 June 1995. That advice was given as part of the end-of-year "audit" which he attempted to provide to all his clients. 145 In North v Marra Developments Ltd (1981) 148 CLR 42 ("Marra Developments"), the High Court had to consider s 70 of the Securities Industry Act 1970 (NSW). It relevantly prohibited creating, or causing to create, or doing anything which was calculated to create, "a false or misleading appearance with respect to the market for, or the price of, any securities". Mason J delivered the principal judgment. His Honour said at 58-59: "It seems to me that the object of the section is to protect the market for securities against activities which will result in artificial or managed manipulation. The section seeks to ensure that the market reflects the forces of genuine supply and demand. By "genuine supply and demand" I exclude buyers and sellers whose transactions are undertaken for the sole or primary purpose of setting or maintaining the market price. It is in the interests of the community that the market for securities should be real and genuine, free from manipulation. The section is a legislative measure designed to ensure such a market and it should be interpreted accordingly." Thus, his Honour concluded, real or genuine transactions which operate according to their terms may create a false or misleading impression as to the market or the price. The absence of revelation of their true character leads them to be seen as transactions reflecting genuine supply and demand and as having as such an impact upon the market. Similar views were applied by the New South Wales Court of Appeal in Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd (1998) 28 ACSR 58 ("Fame Decorator Agencies"), a case arising under s 998(1) of the Corporations Law: see per Gleeson CJ at 62-63. 146 Australian Securities Commission v Nomura International PLC (1999) 89 FCR 301 ("Nomura") concerned in part s 998(1) of the Corporations Law. Sackville J at 390-391 pointed out that s 998(1) is the current counterpart of s 70 of the Securities Industry Act 1970 (NSW), considered in Marra Developments, except that it removes the phrase "cause to be created" and substitutes "intended or likely to be created" for "calculated to create". His Honour at 394 indicated that he proceeded on the basis of the submission by counsel for Nomura International PLC that "intended" referred to the alleged contravener's "sole or dominant purpose" or "central object". It appears that that submission relied upon the fact that s 998(1) of the Corporations Law creates a criminal offence. It was not necessary to consider whether that submission was correct. 147 I also do not find it necessary to explore that question. Counsel for APRA and for the respondents both submitted that I should treat the word "intention" as having its ordinary meaning. Neither submitted that it was necessary to refine that expression by reference to expressions such as 'sole or dominant purpose' or 'central purpose'. The existence of the necessary intention on the part of the respondents was treated simply as a matter of fact. APRA accepted that if Mr Holloway believed, as he said in evidence, that it did not avoid a provision of the Act for the All Sweat SBF transaction to take place then the necessary intention referred to in s 85(1) would not be made out. The onus of establishing the intention to which s 85(1) refers rests upon APRA. 148 APRA contended that the intention to which s 85(1)(a) refers is satisfied if the respondents intended to carry out the scheme or part of the scheme, and the scheme then had the result or likely result that it would result in an artificial reduction in the market value ratio of the funds in-house assets. It submitted that it was not necessary to show the intention to artificially reduce that market value ratio. I do not accept that submission. The two elements of intention in s 85(1) are closely related. If, as APRA accepts, it must establish that the respondents in carrying out the scheme intended, by an artificial reduction in the market value ratio of the fund's in-house assets, to avoid the application of a provision of Pt 8, then it seems to me that it is also necessary to understand that some artificial reduction in that ratio was being achieved or was likely to be achieved. Absent the intention to achieve that result, it is difficult to see how it could be intended that that artificial reduction would avoid the application of a provision of Pt 8. 149 Accordingly, I proceed upon the basis that APRA must establish that Mr Holloway, in carrying out the scheme or schemes which I have found to have existed, intended thereby · to achieve the result of an artificial reduction in the market value ratio of the in-house assets of All Sweat SBF, and · thereby to avoid the application of a provision of the Act, relevantly in a practical sense s 83. 150 Mr Holloway knew that a regulated superannuation fund was restricted in its ability to invest in, or lend monies to, the employer-sponsor. He had been told that by Mr Glaser. He had in turn told that to several of the persons who became trustees of the superannuation funds under review. He asserted, in evidence, that it was the interposition of the separate "legal identity" in the nature of the unit trust which resulted in that which was not permitted directly becoming permitted. He understood that direct investment in, or loans to, an employer-sponsor were restricted by the OSS regulations. He said he knew of the Act in a general way, including in 1993 when it was soon to come into force, but did not apply his mind to how it might impact upon the various transactions now under consideration. He asserted in evidence, and it was contended on his behalf in submissions, that he did not have the intention referred to in s 85(1) because he believed that loans to an employer-sponsor from a unit trust, where the available funds were from subscription for units by a regulated superannuation fund, did not amount to an in-house asset of the superannuation fund. He said he had not read, or thought about, s 71 of the Act. 151 I do not accept Mr Holloway's evidence that he believed, by the superannuation fund investing in units in the unit trust and the unit trust then making a loan of the monies so invested in the employer-sponsor as part of the one transaction, that there was not then any in-house asset of the superannuation fund. He is obviously an intelligent man. He was giving professional advice in a complex area. I find it hard to accept, as he said at certain points in his evidence, that he did not really think about whether the investment by a superannuation fund in a unit trust of monies then earmarked for lending to the employer-sponsor might be an in-house asset of the fund. I also find it hard to accept, in light of the area in which he was giving advice, that he did not really think about whether the Act might operate in those circumstances to treat the investment in units in the unit trust as an in-house asset of the fund. It is, to my mind, extraordinary that it did not occur to him that he was arranging for something to be done indirectly which he knew could not be done directly without considering whether the Act might prohibit such a transaction. That is a matter which must have come to his mind, at least in those instances where the proposed "circle of funds" (an expression used by Mr Holloway in a letter to Fyreguard Pty Ltd of 28 March 1996) took place after the trustees of the superannuation fund indicated that the employer-sponsor did not have the funds to make the payment to the superannuation fund. The All Sweat transaction is one such example. The element of artifice must then have occurred to Mr Holloway. It is also extraordinary that, although he said he knew in a vague way of some prohibition or restriction upon a superannuation fund investing in, or lending to, an employer-sponsor, he did not take the trouble to check the provisions of the Act or to discuss that issue with anyone. I do not believe his evidence that he was unaware of the concept of "in-house assets". Each of the Annual Returns to the Insurance and Superannuation Commission which were submitted by Holloway & Co for the nineteen superannuation funds, and for the other regulated superannuation funds for which Holloway & Co were accountants, specifically required an answer to the question as to the value of the in-house assets of the fund. Mr Holloway personally prepared many of those returns. That claimed level of ignorance is in contrast with his knowledge of other aspects of legislation relating to regulated superannuation funds, namely the levels of contributions available to employer-sponsors to attract the taxation concessions, and the inability of superannuation funds to borrow monies. It is also in contrast with his general insistence on the need for an arms-length trustee, a matter to which almost all of the witnesses who were trustees of superannuation funds referred. In the case of the two Hyde Park transactions (as defined below), the discussions with Malcolm Keith Kitto ("Mr Kitto") illustrate how firmly Mr Holloway urged that Super Benefit be the trustee. If there was no concept, in Mr Holloway's mind, of in-house assets, those matters invited some coherent explanations from Mr Holloway. In my view, none was forthcoming. 152 I also formed the view, in the course of Mr Holloway's evidence, that he was somewhat inconsistent in his answers about his knowledge of the Act and of concepts under the Act. In his evidence-in-chief he indicated that the transactions in question did not contravene the Act because of the interposition of the unit trust, so that on the balance sheet of a superannuation fund no asset would appear as an investment in, or a loan to, the employer-sponsor. The significance of having no such asset on the superannuation fund's balance sheet was then a matter of moment. In his cross-examination, as noted, at one point he denied knowledge of the concept of "in-house asset". If that be true, it would not matter to him if such an asset appeared on the fund's balance sheet. The significance which, at times, he placed on the unit trust as a separate legal identity is not explained if he knew nothing of in-house assets or restrictions on the level of in-house assets of superannuation funds. At times he explained that the interposed unit trust was significant, and at another stage in his cross-examination he said that he did not think about whether investments in the unit trust of funds then earmarked for lending to the employer-sponsor were assets of the superannuation funds permitted by the Act. He also said at one point that he knew the former legislative regime (the OSS Regulations) imposed some restrictions on the level of assets held by a superannuation fund in an employer-sponsor, but did not think about whether the transactions under consideration might infringe those provisions. He was, he said, simply unaware that the Act might impose some such restriction, but he also said that he did think about "in-house assets" when completing Annual Returns to the Insurance and Superannuation Commission, and answered those questions for his clients without having regard to the provisions of the Act. 153 The evidence of Mr Parker was that the introduction of the Act was a "hot topic" in 1993. I accept that evidence. The Act is a significant enactment, of special interest to those involved in giving advice on matters to which it related. In October 1994, the Insurance and Superannuation Commission published one of its Circulars. Its topic was "In-House Assets". It referred specifically to s 71(2) and 85 of the Act in the following terms: "22. Under the OSS Regulations, there were a number of provisions designed to prevent avoidance of the in-house asset provisions. These included the regulation of indirect loans to, or investments in, persons where the transaction was part of an agreement to avoid the application of the in-house asset rule and the 'financial link' provisions. 23. These have been replaced in the SIS Act by provisions in sections 71(2) and 71(4), and by an anti-avoidance provision in section 85 which prohibits schemes designed to reduce the market value in-house asset ratio of a fund's in-house assets. 24. Under section 71(2), certain assets which are not otherwise in-house assets are taken to be in-house assets. This provision applies where the loan or investment is made as the result of an agreement which was entered into or carried out for the purpose of achieving the result that a loan or investment would be made to or in a standard employer sponsor or an associate of the standard employer sponsor." It also explained the operation of s 83, which it described as being a mirror of reg 16B of the OSS Regulations. Mr Holloway was not, so far as I can see, questioned about that document either in his evidence-in-chief or in cross-examination, but it tends to confirm that the Act, and including Pt 8, were regarded as matters of general significance at the time of these transactions. In my view, that consideration confirms my conclusion rejecting Mr Holloway as a reliable witness as to his state of mind when these transactions were undertaken. 154 His evidence also does not lie easily with other evidence which I have accepted. Alan William Stacey ("Mr Stacey") a trustee of the Driving Centre SBF (as defined later in these reasons) gave evidence that he and his wife were told by Mr Holloway that there were requirements for regulated superannuation funds to comply with the Act, and that Holloway & Co "would look after all of that". According to Mr Kitto the insistence of Mr Holloway to Mr Kitto as a trustee of the Hype Park SBF (as later defined) that Super Benefit should be trustee of the unit trust Hypa (as later defined) in November 1995 was reinforced by Mr Holloway quoting or referring to some sections of the Act. Mr Holloway gave a positive assurance to Mr Ho that what was being proposed was legal. Similar positive advice was given by Mr Holloway to Emanuel Pishas ("Mr Pishas") in the presence of Mr Dalgleish. Mr Holloway also implicitly instructed Mr Dalgleish to complete the Annual Returns for clients' regulated superannuation funds to the Insurance and Superannuation Commission with the entry "0" for the value of in-house assets. Those matters to some degree all indicate, in my view, that Mr Holloway had some acquaintance with the Act because he referred to it or because his comments could not sensibly have been made without having had his attention drawn to it. They therefore also add to the general impression which I formed when Mr Holloway was giving evidence that I could not really rely on his claim that he had no real knowledge of the provisions of Pt 8 of the Act and I could not accept that he believed, at all times material to the transactions in question, that investment in or loans to an employer-sponsor by a unit trust of funds available to that unit trust from a regulated superannuation fund, where the trustees of the fund were also in practical control of the affairs of the unit trust, might not be in contravention of a provision of Pt 8 of the Act. 155 In reaching that conclusion, I have taken into account the evidence of Mr Glaser that, when the investigation into the transactions the subject of these proceedings first arose, Mr Glaser first learned of extensive "loan backs" to employer-sponsors by unit trusts of which Super Benefit was trustee. He confronted Mr Holloway about those transactions. He was told by Mr Holloway that Mr Holloway believed that, by the interposition of the unit trust with an arm's length trustee, they were outside the range of the Act. I have treated that evidence as being capable of rebutting any inference that Mr Holloway made up that explanation for arranging for the transactions (in so far as I find them to have been in contravention of s 83 of the Act) only at some later point. It might also be evidence of his state of mind at that time. My overall consideration of the evidence has, however, led me to a different conclusion. 156 APRA submitted that Mr Holloway's response to its investigation from time to time, including (it asserted) by attempting at one point to conceal the copy letter from Holloway & Co to Anaequip Pty Ltd of 8 February 1995, reflected adversely on his credit as a witness. For reasons given earlier, I am not prepared to use that evidence for that purpose in this matter. It has not influenced my finding as to Mr Holloway's state of mind at material times. 157 For those reasons, as I have indicated, I do not accept Mr Holloway's evidence about his state of mind or his state of knowledge at the time when the subject transactions, including the All Sweat transaction, were undertaken. 158 The word "likely" was taken by Sackville J in Nomura as meaning more probably than not. No submission was made by the respondents that I should give it some other meaning. I accordingly adopt that meaning. 159 In light of the foregoing, I find upon the whole of the evidence that Holloway & Co, and in his capacity as the active director of Holloway & Co in its business Mr Holloway, carried out part of the schemes which constitute the All Sweat transaction by procuring the All Sweat transaction. I also find that Holloway & Co and Mr Holloway intended by that conduct that the scheme would result, or be likely to result, in an artificial reduction in the market value ratio of the All Sweat SBF in-house assets. The intention was that the All Sweat transaction would result in the superannuation contributions from All-Sweat being lent back to All Sweat. That plainly could not be done in the circumstances by All Sweat SBF directly lending the $40,000 to All Sweat. The result was achieved through the All Sweat transaction. Its purpose was to reduce the market value ratio of All Sweat SBF's in-house assets, which would otherwise have been 100 per cent by the direct loan of those funds from All Sweat SBF. The All Sweat transaction was structured so as to enable All Sweat SBF to show no assets represented in the All Sweat SBF balance sheet as in-house assets. I have found that, by reason of s 71(2) of the Act, its investment in Bino was an in-house asset in the circumstances. The reduction was artificial in the sense that it created a false or misleading impression as to the true nature of the investment, and so of the market value ratio of All Sweat SBF's in-house assets: cp Marra Developments at 59 per Mason J; Fame Decorator Agencies per Gleeson CJ at 62-63. I also find that the carrying out of the part of the scheme constituted by the All Sweat transactions by the conduct of Holloway & Co and Mr Holloway in processing the All Sweat transaction was intended to result in that artificial reduction avoiding the application of a provision of Pt 8 of the Act. That intention existed because it was understood by the respondents that in reality the transaction would or was likely to contravene a provision of the Act, namely s 83, but its particular structure was in fact intended by them to enable that consequence to be avoided. I do not think it is necessary to find, and I do not find, that the respondents specifically were aware of the precise terms of s 83. I am not persuaded that they had that level of awareness, although they may well have done so. But I am satisfied that they were aware of the general effect of Pt 8 of the Act, and that the reduction intended would mean that a provision of Pt 8 of the Act would not apply whereas I have found that s 83 in fact did apply. 160 Consequently, in my judgment, the respondents have contravened s 85(1) of the Act by their role in relation to the All Sweat transaction. F. The other transactions (i) The Dalgleish transaction - findings 161 On 22 May 1996, Dalgleish Super Benefit Fund ("Dalgleish SBF") was established. Its trustees were Mr Dalgleish and Jodi Ann Dalgleish ("Mrs Dalgleish"). It was a regulated superannuation benefit fund under the Act from that date. 162 On 22 May 1996 Life Enjoyment Private Property Unit Trust ("Life Enjoyment") was established. Its trustee was Super Benefit. 163 Mr Dalgleish is a nephew of Mr Holloway. He was employed by Holloway & Co as an accountant between 1991 and March 1999. Until 1996, he was essentially being trained, and did various work under supervision. In 1996 he graduated as an accountant and became a member of the National Institute of Accountants. He resigned from his employment with Holloway & Co to commence his own accounting practice in March 1999. 164 In about May 1996, Mr Holloway told Mr Dalgleish that Holloway & Co at that point had failed to make the compulsory superannuation payments to which he was entitled, and that Holloway & Co did not have the cash available at that time to do so. Mr Holloway suggested the establishment of Dalgleish SBF and Life Enjoyment. Mr Holloway also suggested that the superannuation contributions would be made, but immediately re-lent to Holloway & Co through Life Enjoyment, and that that loan would be repaid with interest at some later time. Mr Dalgleish suggested the name Life Enjoyment for the unit trust. Mr Dalgleish knew no better. He agreed to that proposal. Mr Holloway on 15 May 1996 instructed Mr Glaser to "arrange another Glaser system", and he duly did so. He explained to Mr Dalgleish that Super Benefit was the trustee of Life Enjoyment. However, he also directed Mr Dalgleish to establish bank accounts for both Dalgleish SBF and Life Enjoyment with Mr Dalgleish and his wife as co-signatories. Mr Dalgleish duly did so, although Mr Glaser had to sign the authority so appointing them. In fact, the signatories to the Life Enjoyment bank account were Mr Dalgleish, Mrs Dalgleish (each described as trustees) and Mr Glaser and Mr Lombardi. 165 On 28 June 1996 $4,829.08 was paid by Holloway & Co to Dalgleish SBF. It represented Mr Dalgleish' accrued superannuation entitlement. Dalgleish SBF in turn, by its first cheque, paid $4,829.08 to Life Enjoyment. That sum was then lent by Life Enjoyment to Holloway & Co, again on the same day. Life Enjoyment's records show it also issued units worth $4,829.08 to Dalgleish SBF. The financial accounts of each of those three entities reflect and record those transactions. The loan to Holloway & Co was repaid during the 1996-97 year of income. 166 On 28 June 1996, Super Benefit issued Dalgleish SBF 4,829.08 units in Life Enjoyment. Mr Glaser also signed a minute of a meeting of Super Benefit as its trustee dated 28 June 1996 that $4,800 be advanced to Holloway & Co "for the purposes of applying the investment with international monetary market". I accept that Mr Dalgleish did not see that document, nor know of its contents at the time. He thought the advance was simply a loan to Holloway & Co. Mr Glaser was not questioned about that minute in his evidence. 167 The sum of $4,829.08 was determined by Mr Holloway. He said it was the amount of compulsory superannuation contribution owing to Mr Dalgleish by Holloway & Co. He requested Mr Dalgleish to write the two cheques in that amount from Dalgleish SBF to Life Enjoyment and from Life Enjoyment to Holloway & Co. On 23 February 1998, Mr Holloway wrote to the Insurance and Superannuation Commission to advise that all loans from Life Enjoyment to Holloway & Co had been progressively repaid during the 1996-97 financial year, and fully so by 1 June 1997. Mr Holloway also confirmed that the loan arrangement was entirely verbal, and that no loan documents existed. 168 Mr Dalgleish subsequently lent monies to Life Enjoyment himself for investment purposes. He arranged the investments, and got Mr Glaser to sign the necessary documents. In large measure, if not entirely, those investments were made on Mr Holloway's advice. They did not, apart from the transaction in question, involve investments made by Dalgleish SBF. 169 The financial statements of the Dalgleish SBF to 30 June 1996 show its assets of $4,829.08 were represented by "Shares in Listed Companies", and were sourced from employer contributions. The notes identify those shares as an investment in Life Enjoyment. That information corresponded with the Life Enjoyment accounts: the capital included $4,829.08 for units issued, and $4,829.08 lent to Holloway & Co. The accounts of Holloway & Co also recognise a deferred liability to Life Enjoyment of $4,829.08. It is recorded as repaid by 30 June 1997 in that year's accounts. 170 I am satisfied on the evidence that the investment by Dalgleish SBF in Life Enjoyment was an in-house asset of Dalgleish SBF. For the same reasons as apply in respect of the All Sweat transaction, I do not consider that the Dalgleish SBF investment in Life Enjoyment was caught by s 71(1). However, again for the same reasons as I applied in respect of the All Sweat transaction, I consider that it was caught by s 71(2) of the Act. The Dalgleish transaction was undertaken at the direction of Mr Holloway, and had as its object that the $4,829.08 would be returned to Holloway & Co by way of loan from Life Enjoyment. I am satisfied that Mr Dalgleish acquiesced in that objective because he knew no better. Nevertheless, he was the person who made the payments from Dalgleish SBF to Life Enjoyment, and from Life Enjoyment to Holloway & Co. He was the active mind of both of those entities, albeit really implementing what he understood to be the wishes of Mr Holloway. 171 On the evidence, at the time of those payments, the assets of the Dalgleish SBF were represented entirely by its investment in units in Life Enjoyment. I find that the nature of those assets was such that, at the time of the Dalgleish transaction, the market value of those assets was the same as their cost. Consequently, the acquisition of units in Life Enjoyment by the Dalgleish SBF for the purpose of the $4,829.08 being lent to Holloway & Co involved the acquisition of an in-house asset which resulted in the market value ratio of the Dalgleish SBF in-house assets being 100 per cent. In my judgment, s 83(3) of the Act was thereby contravened. 172 As with all the transactions under consideration, I will consider the application of s 85 of the Act in the light of those findings later in these reasons. 173 I note that the Insurance and Superannuation Commission 1995-96 Annual Return for Dalgleish prepared and submitted by Holloway & Co showed its total assets at 30 June 1996 to be $4,829 and its in-house assets as nil. (ii) The three Pishas transactions - findings 174 E Pishas & Sons Pty Ltd ("Pishas & Sons") was registered on 6 March 1989. Its directors at material times were Mr Pishas and Angelique Pishas ("Ms Pishas"). 175 Pishas & Sons operates a petrol service station on land owned by it. Pishas & Sons and Mr Pishas became clients of Holloway & Co in about 1994. They were introduced through Mr Dalgleish. He did the accounting work for Pishas & Sons on behalf of Holloway & Co. 176 In June 1996, Mr Pishas met Mr Dalgleish and Mr Holloway to discuss superannuation. He held a superannuation policy with a large public company, and was dissatisfied with its rate of return, having regard to its management fees. Mr Holloway suggested that he establish a superannuation fund and unit trust. Mr Pishas was told by Mr Dalgleish in Mr Holloway's presence, or by Mr Holloway, at that meeting that he would have control over the superannuation fund investments, that it could invest in the unit trust, that he would have control over the unit trust investments, and that the unit trust could make loans to, and invest in, Pishas & Sons. Mr Dalgleish also told Mr Pishas at that meeting that Pishas & Sons could claim tax deductions for contributions to the proposed superannuation fund, as well as for interest paid to the proposed unit trust on loans made by it to Pishas & Sons. Mr Holloway explained that Super Benefits' role was to be the corporate trustee of the proposed Angelou Trust, but that its role was restricted to signing tax returns and documents involving the transfer of land or shares. Mr Holloway assured Mr Pishas that there was nothing wrong with investing the proposed Pishas SBF funds in Pishas & Sons provided it was done through the proposed Angelou Trust and provided the arrangement was on commercial terms. Following that meeting, at which Mr Pishas acted on the advice given, Pishas SBF and the Angelou Trust were established at the direction of Mr Holloway. 177 On 1 June 1996, Pishas & Sons Pty Ltd Super Benefit Fund ("Pishas SBF") was established. Its trustees were Mr Pishas and Ms Pishas. At the instigation of Holloway & Co Pishas SBF elected to become a regulated superannuation fund by notice given on 17 June 1996. Mr Holloway was the nominated contact. 178 On 1 June 1996 the Michael Angelou Private Property Unit Trust ("Angelou Trust") was established. Its trustee was Super Benefit. 179 Despite Super Benefit being trustee of the Angelou Trust, Mr Pishas opened bank accounts for both Pishas & Sons SBF and Angelou Trust, and he and his wife were the sole signatories to those accounts. He made all the cheque payments for Angelou Trust without recourse to Super Benefit. He arranged through Mr Dalgleish for the benefits of his superannuation policy to be paid to Pishas & Sons SBF. Also, on Mr Dalgleish' advice, Mr Pishas caused payments by Pishas & Sons to be made to Pishas SBF for superannuation contributions to be made from time to time, for Pishas SBF to invest in the Angelou Trust, and for the Angelou Trust to lend monies to Pishas & Sons. The three payments by the Angelou Trust to Pishas & Sons referred to below, of $32,000 on 23 July 1996, $5,500 on 2 December 1996, and $30,000 on 25 June 1997, were each made on Mr Dalgleish' advice. Mr Pishas had no dealings with Super Benefit, or with Mr Glaser concerning those payments. He paid Super Benefit $170 for its "Annual Trustee Fee" for the Angelou Trust for the 1996-97 year of income. He was told by Mr Dalgleish at one point that Super Benefit made sure that the investments of the Angelou Trust were "arm's length dealings", but in fact he never had any contact with Mr Glaser or anyone else from Super Benefit. He understood Super Benefit was a form of regulator, that acted to ensure that Angelou Trust acted legally. 180 There are three transactions concerning Pishas SBF. 181 On 21 June 1996, Pishas & Sons paid to Pishas SBF $31,000. Pishas SBF on 21 June 1996 paid $30,000 for units in Angelou Trust. The further sum of $1,840 was also paid to Pishas SBF on 30 June 1996, and there was a further payment of $2,400 on that date which was reversed. I suspect the payments so made (that is, $1,000 of the $31,000 and the $1,840) represented the superannuation entitlement of Ms Pishas to that date. On 30 June 1996, Super Benefit is recorded as having issued Pishas SBF 30,000 $1 units in Angelou Trust. The accounts of Pishas SBF to 30 June 1996 confirm that the payment of $30,000 by Pishas SBF was for units in Angelou Trust. On 23 July 1996, Pishas SBF paid to Angelou Trust a further sum of $3,000, and on the same day Angelou Trust paid to Pishas & Sons $32,000 by way of loan. I infer that between 21 June 1996 and 23 July 1996, the monies paid by Pishas SBF to Angelou Trust remained in its bank account. 182 The second transaction is alleged to have taken place over a considerable period. On 24 October 1996 Pishas & Sons paid $5,000 to Pishas SBF. On 2 December 1996 Pishas SBF paid $4,500 to Angelou Trust to subscribe for units in that trust. On 29 May 1997 Pishas SBF paid $1,000 to Angelou Trust to subscribe for units in that trust. APRA alleges that the two payments of $4,500 and $1,000 should be treated together. On 2 December 1996, Angelou Trust paid $5,500 to Pishas & Sons. It was by way of loan. APRA claims that those several payments should be treated as one "transaction" taking place, although there is no exact correspondence concerning the amount or timing of the several payments. There is no evidence directly explaining the sequence or timing of those several payments. 183 The third transaction is much less complex. On 29 May 1997, Pishas & Sons paid $2,000 and on 25 June 1997 Pishas & Sons paid $30,000 to Pishas SBF. Pishas SBF paid $30,000 to Angelou Trust on 25 June 1997 for units in Angelou Trust. Also, on 25 June 1997, Angelou Trust paid $30,000 to Pishas & Sons by way of loan. APRA has included as part of this transaction the payment by Pishas & Sons to Pishas SBF of $2,000 on 29 May 1997, but there is no evidence to suggest that payment was related. There is otherwise a correspondence in amount, and a close correspondence in time, in relation to the three payments of $30,000. 184 The financial records of Pishas & Sons show that it is indebted to Angelou Trust in the sum of $64,438.40 at 30 June 1997. The trial balances show that that figure has been reached having regard to loans from Angelou Trust of $67,500 (made up of the three payments of $32,000 on 23 July 1996, $5,500 on 2 December 1996 and $30,000 on 26 June 1997) but after reconciling monies advanced by Pishas & Sons to Angelou Trust to purchase certain plant and equipment. Those records therefore are consistent with the primary records. 185 For reasons already given, I am not satisfied that s 71(1) of the Act operates to render the investments by Pishas SBF in Angelou Trust of $30,000 on 21 June 1996 an in-house asset. My impression of Mr Pishas was that he was readily prepared to take the advice of Holloway & Co. He did not really apply an independent mind to what he was advised to do, although he stipulated at the initial interview that he wanted to be able to reinvest superannuation contributions back into Pishas & Sons. Mr Holloway was present on that occasion, and he and Mr Dalgleish agreed that that was achievable. Subsequently, when the actual payments were made to which I have made references, I find that it was Mr Dalgleish who advised Mr Pishas about the making of those payments. I find that at the times that the investments of $30,000 on 21 June 1996 and of $30,000 on 25 June 1997 were made, Mr Pishas had in mind that Angelou Trust would reinvest the monies received from Pishas SBF in Pishas & Sons by way of loan, and that Mr Dalgleish told him that it was proper to make those payments in that way. That accords with Mr Holloway's evidence that, in the case of Pishas SBF and in respect only of three other superannuation funds, he did not give the advice to make the particular payments nor directly supervise or oversee their taking place. In those circumstances I find that: (1) the investment by Pishas SBF of $30,000 for units in Angelou Trust on 21 June 1996 and of $3,000 on 23 July 1996, and (2) the investment by Pishas SBF of $30,000 for units in Angelou Trust on 25 June 1997 were each investments made as the result of entering into or carrying out an agreement between Pishas SBF and Angelou Trust, through Mr Pishas in each instance, for the purpose of achieving the result that a loan would be made to Pishas & Sons as the employer-sponsor. I note that, for reasons which do not emerge in the evidence, the payment of $30,000 on 21 June 1996 did not immediately lead to the loan to Pishas & Sons of $32,000. That occurred on 23 July 1996. Notwithstanding that delay, I am satisfied that the investment in Angelou Trust on 21 June 1996 was for that purpose. Accordingly, I find that each of those investments in Angelou Trust was an in-house asset of Pishas SBF by reason of s 71(2) of the Act. 186 I am not satisfied that the payments of $4,500 on 2 December 1996 and of $1,000 on 29 May 1997 were, either together or separately, payments made pursuant to an agreement for such a purpose. The evidence does not explain why payments made several months apart should be treated in that way. It does not explain why, if such were the plan, the $4,500 was not advanced to Pishas & Sons sooner. Unlike the other two transactions, the payments did not take place around a particular end of year period. The circumstances of the payments themselves do not persuade me of the existence of a plan necessary to attract s 71(2) of the Act. Accordingly, I am not satisfied that those two payments, either together or separately, constitute in-house assets of Pishas SBF. 187 The returns to the Insurance and Superannuation Commission submitted by Pishas SBF for each of the years 1995-96 and 1996-97, as prepared and audited by Holloway & Co declared it to have no 'in-house assets'. 188 The two investments in units in Angelou Trust by Pishas SBF which I have found to have been in-house assets were addressed by Ms Tonks. She concluded that at 30 June 1996, Pishas SBF had no in-house assets because the payments from Pishas SBF to Angelou Trust of $32,000 did not occur until 23 July 1996. She also concluded that, at 30 June 1997, both the historical cost ratio and the market value ratio of the Pishas SBF in-house assets was in the order of 92.3 per cent. For reasons which I have given, I do not think that those calculations are immediately relevant. The relevant issue in each instance is whether the subscription for units in Angelou Trust involved the acquisition of an in-house asset resulting in the market value ratio of the Pishas SBF in-house assets exceeding 5 per cent contrary to s 83(3) of the Act, or if the market value ratio of its in-house assets exceeded 5 per cent, whether there was a further acquisition of in-house assets, contrary to s 83(2) of the Act. 189 In respect of the transaction involving the acquisition of $30,000 and $3,000 worth of units in Angelou Trust on 21 June and 23 July 1996, I find that before that transaction Pishas SBF had no in-house assets. The nature of the investment, and of the assets then held by Angelou Trust, satisfies me that it is appropriate to treat the cost of that investment when it occurred as more or less equal to its market value. It clearly involved a contravention of s 82(3) of the Act. The picture is a little more complicated in respect of the acquisition of $30,000 worth of units in Angelou Trust on 25 June 1997. It is necessary to infer that the values of assets recorded in the financial statements to 30 June 1997 (which I assume are on an historical cost basis) are reasonably indicative of the market value of those assets. The nature of those assets, in particular the loans to Pishas & Sons, satisfies me that at 25 June 1997, the market value ratio of the Pishas SBF in-house assets was well in excess of 5 per cent. There is nothing to indicate that the market value of the Angelou Trust assets were less than their cost, or that its then loans to Pishas & Sons were not likely to be fully recoverable. The Pishas SBF assets were, effectively, all represented by its interest in the assets of the Angelou Trust. Accordingly, I am satisfied that the acquisition of the further $30,000 units in Angelou Trust on 25 June 1997 was the acquisition of an in-house asset contrary to s 83(2) of the Act. 190 Again, I shall defer consideration of the consequences of those findings in respect of the alleged contravention of s 85 by the respondents. (iii) The two Fyreguard transactions - findings 191 Fyreguard Pty Ltd ("Fyreguard") was registered on 5 July 1983. On 3 February 1998, it changed its name to Rayjen Fire Protection Pty Ltd. Its directors at material times were Jennifer Linda Porter ("Ms Porter") and Raymond Porter ("Mr Porter"). 192 On 14 June 1994, Fyreguard Pty Ltd Super Benefit Fund ("Fyreguard SBF") was established. Its trustees were Ms Porter and Mr Porter. It was a regulated superannuation benefit fund under the Act from that date. 193 On 14 June 1994 The Jenray Private Property Unit Trust ("Jenray") was established. Its trustee was Super Benefit. It elected to become a regulated superannuation fund forthwith. 194 The bank account of Jenray was not opened until 13 March 1996 in the name of Super Benefit as trustee. Its signatories included Mr Glaser, Mr Lombardi, Mr Porter and Ms Porter. 195 Mr Porter thought that only he and his wife were the signatories to the Jenray bank account. He made all the decisions concerning its investments. He did not recall Mr Glaser and Mr Lombardi being signatories. At a practical level, he operated that account. 196 Mr Holloway, on 27 September 1994, wrote to Fyreguard advising that the funds received on rollovers could be transferred upon their receipt by Fyreguard SBF to Jenray "for your investment purposes." 197 Mr Porter gave evidence. He was obviously an astute businessman, and he was an honest witness. He was the managing director of Fyreguard. Fyreguard SBF was set up as he wished to have greater control of the superannuation investments made on his behalf. He did so in consultation with Mr Holloway, who was the company accountant (presumably through Holloway & Co). Mr Holloway suggested the establishment of Jenray because it could be used as a vehicle to borrow money for investment leverage, whereas Fyreguard SBF could not do so. Mr Porter said that Mr Holloway did not suggest at the time that the proposed unit trust could invest in Fyreguard. He was aware that the trustee of Jenray would be Super Benefit, but nevertheless was told that he and his wife would make the investment decisions. He thought they were to be the sole signatories of the Jenray bank account. His intention was to invest the superannuation funds in shares, but (as he said) he was too busy to arrange that, and the rolled over funds sat in the bank for some time. 198 On 31 October 1994, The National Mutual Life Association of Australia paid to Fyreguard $52,223.99. That payment was paid into Fyreguard SBF, as the rollover of superannuation funds for Mr Porter. On 1 November 1994, MLC Superannuation sent to Fyreguard SBF $28,055.66 representing superannuation funds held for Ms Porter rolled into Fyreguard SBF. That sum was deposited into Fyreguard SBF on 29 November 1994. The Fyreguard SBF financial statements for 30 June 1995 show $80,279.95 transferred from other funds, and contributions of $5,000, for that financial year. That sum of $80,279.95 is the sum of the payments of $28,055.66 and $52,223.99. As noted, those funds simply sat within Fyreguard SBF for some time. At 30 June 1995, Fyreguard SBF had total members funds of $88,016.64 then held almost entirely in a bank account. It was made up of the two payments, further contributions received of $5,000 and profit of $2,736.69 (interest). 199 APRA alleges two transactions by Fyreguard SBF which contravened s 83, and for which the conduct of the respondents contravened s 85. The first was the investment by Fyreguard SBF in units in Jenray for $53,000 on 13 March 1996, followed by the provision of $52,713 to Fyreguard on 14 March 1996. The second was the investment by Fyreguard SBF in units in Jenray for $25,000 on 17 June 1996, followed by the provision of $23,000 to Fyreguard on 22 July 1996. The first of those transactions, APRA submitted, involved the use of the superannuation funds of Mr Porter rolled into Fyreguard SBF from another fund, and the second involved the use of the superannuation funds of Ms Porter rolled into Fyreguard SBF from another fund. 200 I think the facts are much less clear cut than that. 201 On 13 March 1996 Fyreguard SBF paid Jenray $53,000. That reduced the funds then held in Fyreguard SBF to $15,086.07. On 14 March 1996 Jenray paid $52,713 to Fyreguard. The deposit of $53,000 was the first entry in the Jenray bank account. It is not clear what had happened to the other $20,000 approximately of the funds held by Fyreguard SBF at 30 June 1995. 202 On 17 June 1996 Fyreguard SBF paid Super Benefit as trustee for Jenray $25,000. There had been a further deposit of $19,961.50 on 12 April 1996 without which that payment could not have been made. The payment reduced the funds in Fyreguard SBF to $10,232.33. 203 The Fyreguard financial statements to 30 June 1996 show significant deferred liabilities apparently to other entities within the Fyreguard group or its associates (used loosely). They include $29,713 owing to Jenray. There was no amount shown as owing to Jenray for the year ended 30 June 1995. The journal entries show that loan was made in two instalments of $24,741 and $5,072 with a repayment of $100. Fyreguard made superannuation contributions to 30 June 1996 of $16,008 and to 30 June 1995 of $9,644. 204 The Fyreguard SBF financial statements to 30 June 1996 show its total assets as $100,562.54 including $78,826 units in Jenray at cost. They show the total contributions received from Fyreguard to be $13,500. The journal entries show the units were in two tranches of $78,000 and $826. The journal entries also show a loan to R & J Porter of $20,000 with $19,961.50 repaid or credited, leaving a balance owing by them of $38.50. 205 The Jenray financial statements at 30 June 1996 show its capital comprised of $78,826.80 units issued, represented by cash, trading stock on hand, and the loan to Fyreguard of $29,713. The $826.80 was the operating profit after tax and the undistributed income. The journal entries show that there was an advance to Fyreguard of $52,713 and a repayment of $23,000, leaving the closing balance of $29,713. 206 The Fyreguard SBF financial statements to 30 June 1997 record $13,500 contributions received in the year to 30 June 1996. The loan to R & J Porter of $38.50 has been repaid. Investments in units in Jenray has increased from $78,826 to $82,819.37. The total assets are $104,876.86. That represents a further $3,993.37 for units, and the journal shows that was by conversion of distributions received from Jenray. 207 The Jenray financial statements show a loan of $10,000 owing by Jenray to Fyreguard, rather than a loan to Fyreguard from Jenray. It also invested in shares of $30,000 during the year. Its other assets include cash at bank, trading stock in hand (unchanged from previous year at $46,971) and a small amount for plant and equipment. 208 The Fyreguard accounts to 30 June 1997 do not appear to record the asset of $10,000 owing by Jenray, but show for the previous year a loan owing to Jenray of $25,000. The trial balance notes show the opening amount owing to Jenray of $29,713, a further advance to Fyreguard of $36,244 and two separate repayments of those amounts to produce a nil balance at 30 June 1997. 209 APRA relies also on some typed notes, apparently to record the basis of the transactions of Jenray. It notes: · $53,000 on 13 March 1996 "Loan (Invest)" from Fyreguard SBF "to fund export order to Promat Belgium" · $52,713 on 14 March 1996 "Loan (Invest)" to Fyreguard Pty Ltd to fund export order to Promat Belgium" · $24,571.85 on 17 June 1996 received from Fyreguard for $23,000 repayment plus interest · $25,000 on 17 June 1996 received from Fyreguard for repayment · $46,971 paid on 17 June 1996 to Industrial Galvanisers for paint and "this was to be sold to Fyreguard at a profit for the Magistrates Court job" · $25,000 paid to Fyreguard on 22 July 1996. 210 A typewritten sheet within the records also is relied upon by APRA. It seems to offer a reconciliation of payments and receipts. It shows the three deposits into Fyreguard SBF on 31 October 1994, 30 November 1994 and 15 August 1995 of $5,000. It notes $20,000 "lent" to "LP and VP" on 17 October 1995 and $53,000 "Loan (Invest) in" Super Benefit on 13 March 1996. It notes $19,961.50 repaid on 12 March 1996 from "LP and VP". It shows a "Loan (Invest) to" Super Benefit of $25,000 on 17 June 1996, and payments of $5,000 from "Fyreguard Qld" to "RP & JLP" on 28 June 1996 and of $3,500 from Fyreguard. 211 The Jenray bank statement shows deposits of $24,571.85 and $25,000 on 17 June 1996 and a payment of $46,971 also on 17 June 1996. It further shows a deposit of $25,000 on 22 July 1996 and a payment of $23,000 on the same date. That payment was made to Fyreguard. The balance of its account is a few thousand dollars only. 212 Upon that material, APRA alleges that the "round robin" of cheques was: 29 November 1994 $28,055.96 to Fyreguard SBF from MLC 17 June 1996 $25,000 to Jenray 22 July 1996 $23,000 to Fyreguard and further 31 October 1994 $52,223.99 to Fyreguard SBF from National Mutual Ltd 13 March 1996 $53,000 to Jenray 14 March 1996 $52,713 to Fyreguard. 213 Mr Porter described three or four investments that had been made by Jenray. 214 One was a loan to his son to help finance the purchase of a house. The second was in respect of the transaction with a customer of Fyreguard for paint products, which required financing, so Jenray "bought the debt" by lending Fyreguard some $57,000 at commercial interest rates, and for a short term. The other investments have been arm's length sharemarket investments. 215 Mr Porter said that the $57,000 transaction was recorded as an investment, and that the real nature of the transaction was that Jenray bought the paint products and then invoiced Fyreguard for them and sold the paint to Fyreguard. After addressing the cheques themselves, he recalled Jenray on 14 March 1996 paying Fyreguard $52,713 to buy the debt for the overseas export order, using funds of $53,000 received the day before from Fyreguard SBF. Having decided upon that funding process, Mr Porter said that he checked with Mr Holloway to get confirmation that he was allowed to do so, and got his confirmation "as long as it was a business transaction". Later in his evidence he was unsure whether that occurred, or whether Mr Holloway's advice was at a more general level that Jenray should only undertake commercial transactions. 216 His recollection of the occasion that Fyreguard SBF paid Jenray $25,000 and Jenray paid Fyreguard $23,000 on 17 June 1996 and 22 July 1996 respectively was less clear. He stated that it "would have been in conjunction with the purchase of paint". Mr Porter did not recall if he spoke to Mr Holloway about that transaction before implementing it, as it was a clear cut commercial transaction. He said the unit trust could purchase material from another company and sell it. He did not relate his decision in any way to the earlier advice of Mr Holloway of March 1996. Thus, one transaction involved Fyreguard buying paint and on-selling it at a profit. It did not have the cash to do so. Accordingly, Jenray bought the paint and took a mark up in selling it to Fyreguard. Fyreguard then sold the paint on at a profit. Jenray actually held some of the paint in stock for some six months or so before selling it on to Fyreguard. 217 Mr Porter described the two transactions as "the export order and the paint". 218 The transactions are confusing. There is documentary evidence that on 29 May 1996, an offer was made by Industrial Galvanisers Corporation Pty Ltd to Fyreguard to purchase certain paint for $46,971. Payment was debited on 17 June 1996, following deposits into Fyreguard of $24,571.85 and $25,000. Mr Porter said the $25,000 was borrowed from a friend interstate. Mr Porter prepared various sheets to reconcile the Jenray/Fyreguard transactions, and he provided those sheets to Mr Holloway. 219 In his oral evidence, Mr Porter said that Mr Holloway told him that Jenray could not itself invest into Fyreguard. He described the export transaction as the debt the company was owed by the Belgium company was bought by the unit trust. He believed he was acting lawfully at all times. 220 Mr Holloway did not inform Mr Porter of the in-house asset rules under the Act. However he knew from his general knowledge that Jenray was not allowed to invest moneys back into Fyreguard. He did not consult Mr Holloway about its investments, nor of his investment decisions, except when its records were examined for the purposes of year end accounts. 221 Mr Porter was told by Mr Holloway that Mr Glaser was to be a director of Super Benefit, the trustee of Jenray, as "we had to be at arm's length", but he did not deal with Mr Glaser and made and implemented all decisions for Jenray. He did not really think about why or how Mr Glaser's presence as a director of Super Benefit would make the transaction legal, or how despite its role he effectively ran Jenray. His interest was in having control of Jenray and Mr Holloway assured him that he would do so. There was also in evidence an unexecuted document, to be signed by Mr Glaser for Super Benefit, appointing Mr Porter and Ms Porter to manage the day to day affairs of Jenray. 222 Fyreguard SBF lodged Annual Returns with the Insurance and Superannuation Commission. The Annual Return for the 1995-96 year of income disclosed its total assets as $100,562. The Annual Return for the 1996-97 year of income declared its total assets to be $104,876. In each instance, the in-house asset value was said to be zero. Those returns were audited by, and submitted through, Holloway & Co. 223 A unit certificate of Super Benefit for Jenray shows that 25,000 units were issued to Fyreguard SBF on 17 June 1996. A similar certificate shows that 53,000 units were issued on 13 March 1996. A further certificate shows that 826 units were issued on 30 June 1996. I am cautious about placing much weight on such certificates, as I suspect many were in fact issued long after the event. The issuing of certificates was an administrative matter. It does not suggest that, at the time of the particular investments the investments were other than what they were intended to be, namely subscriptions for units in unit trusts. Accordingly, the timing of the issue of certificates generally does not really much matter. 224 I find that what Mr Holloway described as a lack of timely attention to detail in procuring the issue of unit certificates in the various unit trusts following the several superannuation funds investing in units was endemic. Mr Dalgleish said that until late 1997, when APRA first began to inquire into the transactions, there was no system by which Holloway & Co informed Mr Glaser or Super Benefit of the payment of monies into the various unit trusts or the investment of monies, including to employer-sponsors by way of loans, from the various unit trusts. Mr Glaser at one point sought that information so he could issue the unit certificates as trustee. Mr Glaser did not explain in detail when the various unit certificates were dated. I have no confidence that the various unit certificates were in fact issued on the date shown on their faces. I think it is much more likely that they were issued later, and then dated by reference to the date upon which monies were paid into the various unit trusts for units. 225 That is confirmed by Mr Dalgleish' evidence that, in May 1998, on Mr Holloway's instruction, he prepared a reconciliation of monies paid by the several superannuation funds to the respective unit trusts for Mr Glaser, so that the paperwork could be completed. 226 In respect of the Fyreguard transactions, I do not consider it necessary to determine the extent to which the application of funds by Fyreguard SBF to Jenray in the circumstances constituted in-house assets of Fyreguard SBF. Nor do I consider it necessary to determine whether, either at the times Fyreguard subscribed for units in Jenray or at the times Jenray advanced funds to Fyreguard, the acquisition of the units in Jenray by Fyreguard SBF was in contravention of s 83 of the Act. It is evident from the above findings and the evidence referred to that, in this instance, there is some difficulty in finding what was the market value of the assets of Fyreguard SBF at material times. That is in part because it is not clear that all its assets were represented by its units in Jenray, and in part because it is not clear that the market value of those units was the same as their cost. Jenray had other investments from time to time which were not valued. 227 In the case of the Fyreguard transactions, I am satisfied that they were undertaken without any real role on the part of the respondents. As I have found, Mr Porter was an astute and able businessman. He made the investment decisions for Fyreguard SBF and Jenray, and it was not a particular part of his plans when Fyreguard SBF and Jenray were established in consultation with Mr Holloway that the superannuation funds to be deposited into, or to be made by Fyreguard to Fyreguard SBF would be used either directly or through Jenray for the support of Fyreguard. The two particular transactions were not undertaken on Mr Holloway's advice. I am not prepared to find, on the evidence, that he was aware of their detail before they were undertaken or that he approved them in advance of them being undertaken. In Mr Porter's evidence, he did in some respects indicate that Mr Holloway was consulted on the proposed transactions. In other parts of his evidence, he was less confident that that had occurred. I formed the impression that Mr Porter was not at all clear upon those matters. At one point in his evidence, Mr Porter said that at an early stage the discussion was that it was not proposed to put money back into Fyreguard through Fyreguard SBF, and that he was told by Mr Holloway that "we" could not invest money back into Fyreguard. Mr Holloway also was cross-examined about these transactions. He sought the reconciliation document referred to above in an endeavour to understand the transactions, and to complete the accounts. At that time there was a prospect of the business of Fyreguard being sold, and he wanted to "clean up" the accounts by eliminating unnecessary intercompany entries. His letter to Fyreguard of 28 March 1996 indicates some advice he gave in that regard. I do not think that that letter clearly indicates that he was in any real sense a party to, or privy to, the two transactions or that he counselled or procured them. I formed the view at the time he was cross-examined on those materials that he did not have any clear understanding of the two transactions about which he was being questioned. 228 In respect of the two Fyreguard transactions, I am not satisfied that either Mr Holloway or Holloway & Co were involved in any scheme with the intention referred to in s 85(1)(a) and (b). If the relevant scheme be the establishment of Fyreguard SBF and Jenray, so that those entities could be used as the vehicle to return superannuation funds to Fyreguard in contravention of s 83 of the Act, again in the particular circumstances I am not satisfied that either Mr Holloway or Holloway & Co at that time had the intention referred to in s 85(1)(a) and (b). Accordingly, in respect of the Fyreguard transactions, I do not find that the respondents have contravened s 85 of the Act. (iv) The six Anaequip transactions - findings 229 Anaequip Pty Ltd ("Anaequip") was registered on 27 August 1990. Its directors at material times were Kenneth Jon Whalley ("Mr Whalley"), Peter John Herreen ("Mr Herreen"), Michael Bernard Reynolds ("Mr Reynolds") (each commenced as a director from 18 August 1993) and William Feeney ("Mr Feeney") (commenced directorship 25 February 1994). Mr Herreen and Mr Feeney each gave evidence. 230 Australian Health was registered on 16 April 1993. Initially its directors were Mr Reynolds and Mr Whalley. They are still directors. Mr Herreen became a director on 28 July 1993 and Mr Feeney on 25 February 1994. It has 40,006 issued shares. Apart from the two subscribing shareholders, Mr Reynolds, Mr Whalley, Mr Herreen and Mr Feeney each holds 10,001 shares. 231 Lone Ace was registered on 26 June 1996, with Mr Feeney and Mr Herreen as its directors and each holds 1 of the 2 issued shares. It is described as a service company. 232 On 9 May 1994, the Feeney Group Pty Ltd Super Benefit Fund ("Feeney SBF") was established. Its trustees were Mr Feeney and Judy Ann Ronksley. It was a regulated superannuation benefit fund under the Act from that date. 233 On 14 June 1994 the Herney Private Property Unit Trust ("Herney") was established. Its trustee was Super Benefit. On 29 October 1996 Super Benefit (through Mr Glaser and Mr Lombardi) as trustee for Herney authorised Mr Herreen and Mr Feeney jointly to operate that account. 234 On 9 May 1994, Herreen Group Pty Ltd Super Benefit Fund ("Herreen SBF") was established. Its trustees were Mr Herreen and Bernadette Ann Herreen. It was a regulated superannuation benefit fund under the Act from that date. 235 Herney, with Super Benefit as trustee, also became the unit trust through which Herreen SBF made certain investments. 236 Each of Feeney SBF and Herreen SBF elected to become regulated superannuation funds, through Holloway & Co, by notices dated 27 March 1995 and 24 March 1995 respectively. 237 Anaequip is a medical equipment supply servicing and installation company. Australian Health is in the same sort of business. Lone Ace is a service company used to administer Anaequip. 238 Anaequip was taken over by Mr Herreen and others in about August 1993. Australian Health acquired the shares in Anaequip. Mr Herreen had left the employment of CIG Health Care in about June 1993 and had placed the amount standing to his credit in its superannuation fund into a public company superannuation policy. Early in 1994 Mr Feeney also left similar employment and took up an interest in Anaequip. 239 Each of Mr Herreen and Mr Feeney then attended a meeting with Mr Holloway to discuss, amongst other things, their superannuation arrangements. Mr Herreen had been recommended to Mr Holloway by a friend. Mr Holloway became the accountant to Anaequip at about that time. Mr Holloway explained to them the proposed structure involving a superannuation fund and a unit trust, and the taxation considerations touching upon such a structure, with the superannuation fund then investing in units in the unit trust, and the unit trust making a range of investments. He explained that the unit trust could own the assets used in the business, and lease them at a commercial rate to Anaequip, so that to a degree it operated so as to avoid Anaequip financing its assets by bank borrowing. He also told them that Super Benefit would be the arm's length trustee of the proposed unit trust. Mr Herreen did not otherwise have much recollection of that early discussion. He was very cautious to ensure he did not overstate the position, and was scrupulous in that regard. He impressed me with his care not to go beyond what he was sure of. Mr Holloway did say that Herney could purchase plant and equipment to be used in the business of Anaequip, and that it could then lease that plant and equipment to Anaequip at commercial rates. Mr Holloway also explained the benefit of Herney in that it could borrow to leverage investments whereas the superannuation funds could not do so. 240 Mr Feeney's evidence confirmed in large measure the evidence of Mr Herreen about the meeting. However, unlike Mr Herreen, Mr Feeney recalled Mr Holloway explaining that the proposed unit trust could be used as an investment vehicle for a superannuation fund, and could also make loans to Anaequip for working capital. At a later meeting in May 1994, Mr Holloway reaffirmed that advice. He told Mr Herreen and Mr Feeney that Herney could be used in that way because it was at arm's length from Herreen SBF and Feeney SBF. At the same time, he told Mr Herreen and Mr Feeney that they should open a bank account for Herney. 241 I accept Mr Feeney's evidence about those two occasions. It was not challenged in cross-examination, although it also emerged that, as with other clients, Mr Holloway explained further the ability of the unit trust borrowing to leverage its investments whilst a superannuation fund could not do so, and about the role of the superannuation funds in ultimately providing security upon retirement. 242 Mr Herreen then instructed Mr Holloway to proceed to establish Herreen SBF and Mr Feeney instructed Mr Holloway to establish Feeney SBF. Together, they instructed him to establish Herney. 243 Soon after that Mr Herreen met Mr Glaser. He was introduced by Mr Holloway as the arm's length trustee of Herney. It is not clear whether the role of Super Benefit was discussed beyond that. 244 At a practical level, Mr Herreen spoke to Mr Glaser about twice each year, coincidentally rather than by arrangement, and also when documents were required to be signed for Herney by Super Benefit. Mr Glaser was not asked to give advice about, nor did he comment upon, the investment decisions taken with respect to funds available in Herney. Mr Glaser became a signatory to the bank account of Herney, but Mr Herreen did not recall with any accuracy how that came about. 245 At that early stage, discussion also centred in part around the value of Anaequip's business and of Mr Herreen's and Mr Feeney's superannuation entitlements. They thought the business was worth about $140,000 and that Mr Feeney's superannuation fund was valued at about $70,000 and Mr Herreen's fund at about $14,000. The difference of $56,000 was an amount which Mr Herreen agreed to make up, so that the contributions of himself and Mr Feeney to the purchase of Anaequip were equal. 246 The Annual Returns of Feeney SBF to the Insurance and Superannuation Commission, through Holloway & Co, for the 1994-95 year of income show total assets of $109,575 and in-house assets as nil, and for the 1995-96 year of income show total assets of $164,750 and in-house assets as nil. The Annual Returns for the Herreen SBF for the 1995-96 year of income shows total assets of $168,937 and in-house assets as nil. 247 There are six transactions involving Herreen SBF and Feeney SBF in respect of which APRA alleges that the respondents have contravened s 85 of the Act. They are (1) the payment by Feeney SBF of $51,000 to Herney on 13 February 1995 and the payment by Herney to Australian Health of $107,000 the same day; (2) the payment by Herreen SBF of $56,000 to Herney on 13 February 1995 and the payment by Herney to Australian Health of $107,000 the same day (the $107,000 represents the total of the two payments made to Herney on 13 February 1995); (3) the payment by Feeney SBF of $52,000 to Herney on 28 June 1996 and the payment by Herney to Anaequip of $116,000 the same day; (4) the payment by Herreen of $64,000 to Herney on 28 June 1996 and the payment by Herney to Anaequip of $116,000 the same day (the $116,000 represents the total of the two payments made to Herney on 28 June 1996); (5) the payment by Feeney SBF of $50,000 to Herney on 27 June 1997 and the payment of $100,000 to Lone Ace; (6) the payment by Herreen SBF of $50,000 to Herney on 27 June 1997 and the payment of $100,000 to Lone Ace (the $100,000 represents the total of the two payments made by Herney to Lone Ace on 27 June 1997). 248 On 23 May 1994, CIG Employees Superannuation Fund paid to Feeney SBF $79,820.35 being the benefit then standing to the credit of Mr Feeney. The bank statement records the first entry for Feeney SBF as that payment on 29 June 1994. There was a payment made from that account of $19,000 on 5 August 1994, but otherwise the account remained almost static for a period. The credit balance at 5 September 1994 was $61,972.79. 249 On 13 February 1995, Anaequip paid to Herreen SBF $56,000 as a superannuation contribution. Also, on 13 February 1995, Herreen SBF paid to Herney the sum of $56,000. That sum, plus $51,000 received from Feeney SBF, making a total of $107,000 was received by Herney on that date. Feeney SBF paid $51,000 to Herney on the same day from the funds still available in its account. 250 On 13 February 1995, the total of $107,000 was paid to Australian Health. 251 Those payments were made on the instructions of Mr Holloway. His letter from Holloway & Co dated 8 February 1995 to Mr Herreen provided those instructions as requested about how the $56,000 was to be applied. I conclude from the evidence that Mr Herreen borrowed $56,000, which was then lent to Anaequip to enable Anaequip to pay that sum to Herreen SBF. The letter said that the payment to Australian Health would be part payment for the Anaequip shares held by Australian Health, and the balance a loan to Australian Health. It said: "Peter the effect of this will be:- 1. To leave your borrowings in a position of being repaid by the company. 2. To transfer one quarter of the shares in Anaequip Pty. Ltd. from Australian Health Care Pty. Ltd. to be held beneficially for your retirement by the Unit Trust. 3. Decrease the vulnerability of Anaequip Pty. Ltd. in the event of difficulties with Australian Health Care Pty. Ltd. 4. Reduce the risk to Anaequip Pty. Ltd. should the events with Peter Jacobson get more difficult. 5. Reduce tax on profits in Anaequip Pty. Ltd. to 15c per dollar on profits surplus to immediate needs. This is provided that other income is generated into the unit trust from other sources for example hire of equipment or rent on premises. 6. To enable the HERNEY & MIKKEN Private Property Unit Trusts to purchase the equipment currently held by Anaequip Pty. Ltd. and Australian Health Care Pty. Ltd. and rent it back to the respective companies. When all funds are in place in Australian Health Care Pty. Ltd. the loan from National Australia Bank can be repaid. In addition the securities held over Ken Glover and Mike Reynolds properties can be discharged." 252 A similar letter was sent to Mr Feeney, except of course it did not deal with the first step as his rollover funds were already in Feeney SBF. It also did not, and did not need to, make point 1 quoted above. 253 The reference to Mr Jacobson and Mr Glover is a reference to other persons who were also directors of Anaequip and of Australian Health for a time until 22 December 1993 and 25 February 1994 respectively. They were the subscribing shareholders of Australian Health. I assume their ongoing cooperation was necessary to enable the control of Anaequip to be secured. 254 On 9 February 1995, Holloway & Co (Mr Holloway) also wrote to the directors of Anaequip to explain that the receipt by Australian Health of $107,000 from Herney (and of the further sum of $69,000 from Mikken Private Property Unit Trust) was to be applied to repay a bank debt of Australian Health of $139,628 and to reduce its overdraft by $39,267 leaving a shortfall of $2,895 to be "covered from" Australian Health funds or an inter-company loan. He also explained that the total funds transferred to Australian Health were, as to $20,975 for payment for the shares, and as to $155,015 a loan to Australian Health. 255 He added: "In respect of funds provided to cover documentary letters of credit those can also be treated as loans from the respective Unit Trusts. I understand these amounts total $66,000.00. I will effect the necessary documentation for you by journal entry when financial statements are prepared." 256 It also appears from Mr Holloway's letters to Mr Feeney and Mr Herreen that each had contributed $14,000 towards a "documentary letter of credit" to finance the transaction. 257 In earlier correspondence, on 2 December 1994, Mr Holloway had given some advice about the operations of the Australian Health/Anaequip group. It was operating in both Adelaide and Sydney. There seems to have been some perceived problems by reason of having two separate centres of operations. The then bank borrowing was $139,000 plus $40,000 overdraft. That letter contemplated Mr Feeney, Mr Herreen and Mr Reynolds would each contribute $75,000 and Mr Whalley $25,000, and after allowing for the letters of credit already provided for $66,000, there would be $184,000 funds for Australian Health. There would (he thought) be a need for further working capital for any expansion, as that funding would barely pay off the bank. He also suggested a separate entity Australian Health Care (NSW) Pty Ltd be established, so it could operate in New South Wales as a subsidiary of Australian Health. 258 Accordingly, I find that the two payments by Herreen SBF of $56,000 and by Feeney SBF of $51,000 to Herney were to contribute to funds to be provided to enable the buyout of Australian Health, and to pay off its bank debt, by each of those four persons. The funds were to come through unit trusts, and in the case of Mr Herreen the source of those funds was privately financed, but lent to Anaequip to enable it to make a contribution of superannuation to Herreen SBF and then to Herney. Mr Holloway was clearly aware of, and in fact orchestrated, the particular payments. I accept Mr Feeney's evidence that Mr Holloway decided upon the respective amounts of the payments. At a meeting in late February 1995, Mr Holloway told Mr Feeney that the purpose of the transactions was to minimise tax. 259 The Herreen SBF financial accounts to 30 June 1995 show total assets of $101,635.18 made up of $85,500 units at cost plus $14,000 lent to Herney, and sundry debtors. They show contributions received during the year of $25,000. 260 The Feeney SBF accounts to 30 June 1995 show total assets of $109,575.58 made up of $83,330 units at cost, plus $19,000 lent to Herney, and sundry debtors. Employer contributions during the year as $25,000. 261 The Herney accounts to 30 June 1995 show total assets of $204,770.28 and net assets of $168,190.28. The liabilities are "Sundry Creditors" of $33,000 (the total of $14,000 and $19,000) and loans by Mr Herreen of $1,180 and by Mr Feeney of $2,400. They record capital contributions as $168,830. The assets representing those unit holders funds are shown as Bank cash 3,875.28 Plant – equipment 10,895.00 Shares at cost 64,022.00 Loan – Anaequip 50,000.00 Loan – Australian Health 75,978.00 262 Super Benefit has issued units certificate dated 30 June 1995 to Herreen SBF for 85,500 units and to Feeney SBF for 83,330 units. 263 Thus I find the primary payments alleged by APRA are established. There was a movement of funds from Mr Herreen into Anaequip of $56,000, from Anaequip to Herreen SBF of $56,000, from Herreen SBF to Herney of $56,000 and from Herney of $56,000 to Australian Health. There was also a movement of $51,000 from Feeney SBF to Herney, then to Australian Health. Those transactions occurred on 13 February 1995. 264 For reasons given earlier, I am not satisfied that either the investment by Herreen SBF of $56,000 for units in Herney, or the investment by Feeney SBF of $51,000 for units in Herney, was a loan to or an investment in either Anaequip or Australian Health within the scope of s 71(1) of the Act. 265 APRA, in respect of each of those payments, submits that they are nevertheless caught by s 71(2) because each was an investment in Herney as the result of entering into or carrying out an agreement for the purpose, or for purposes that included the purpose, of achieving the result that a loan or investment would be made to or in Australian Health. It also contends that Australian Health was an associate of Anaequip, the employer-sponsor. The findings above indicate that I am satisfied that the two payments were made in carrying out an agreement for purposes which included having those payments resulting in a loan to and an investment in Australian Health. Each of Mr Herreen and Mr Feeney undertook or arranged those payments for their respective superannuation funds pursuant to an agreement with Herney (which I find for the purposes of these transactions was represented by their collective minds) to make the payments then to Australian Health. They did so under the direction of Mr Holloway. The monies then applied to Australian Health were applied in part by way of loan, and in part by way of investment to acquire its shares. 266 I am also satisfied that Australian Health was an associate of Anaequip. Section 70 of the Act relevantly defines an associate of an employer-sponsor to be a person who is an associate of the employer-sponsor within the meaning of s 26AAB(14) of the Income Tax Assessment Act 1936 and who is a body corporate which has a controlling interest in, or directs the operations of, the employer-sponsor. The respondents did not contend that Australian Health did not fall within the scope of s 70. In that circumstance, it is sufficient to record that I am satisfied, upon the application of s 70, that Australian Health was an associate of Anaequip. 267 Consequently, I am satisfied that each of those two investments constituted in-house assets of Herreen SBF and Feeney SBF respectively. 268 It is difficult to determine confidently that in the particular circumstances there was a breach of s 83 in the making of either of those two investments. Ms Tonks' calculations were made only at the end of the financial year to 30 June 1995. The issue under s 83 requires the focus to be upon the market value of the assets of each of Herreen SBF and Feeney SBF at 13 February 1995. There is no direct evidence of that value as at that date. I have referred above to the information in the financial statements at 30 June 1995. 269 I find, on the evidence, that the market value ratio of the in-house assets of either fund at that time, and immediately before the two investments was less than 5 per cent. I do so on the basis that the evidence suggests that the two payments were made at the initial stage of implementing the financing of the acquisition of Anaequip and of Australian Health. Consequently, I am not satisfied that there was any breach of s 83(2) of the Act. However, in each case, having regard to my finding about the total value of the assets of each of the two funds at 30 June 1995, it is apparent that the acquisition of an in-house asset at a cost of $56,000 (in the case of Herreen SBF) and of $51,000 (in the case of Feeney SBF) was one which involved the acquisition of an in-house asset which resulted in the market value ratio of each fund's in-house assets exceeding 5 per cent. I am satisfied that, at the time of the investments, the cost of the units acquired in Herney is a reasonable indicator of their value. The market value of the assets of Herreen SBF and of Feeney SBF was likely to have been close to its cost (or the amount of the contributions) at 30 June 1995 and, if anything, would be about the same or less than that figure at 13 February 1995. Whatever variations might be made, it is unrealistic to think that the market value of the two investments of $56,000 and $51,000 at 13 February 1995 was not greater than 5 per cent of the then market value of the assets of each of those funds. 270 In my judgment, therefore, in respect of each of those payments, there was a contravention of s 83(3) of the Act. I observe that counsel for the respondents did not address in any detail the proper application of s 83(2) or (3), but acknowledged in general that the analysis done by Ms Tonks at the end of years of income in all instances (not just regarding the Anaequip transaction) were not challenged. 271 On 28 June 1996, Anaequip paid $52,000 to Feeney SBF and $64,000 to Herreen SBF. On the same date, Feeney SBF paid $52,000 to Herney and Herreen SBF paid $64,000 to Herney. Further, on 28 June 1996 Herney paid $116,000 to Anaequip. 272 The financial statements of Anaequip at 30 June 1996 include as liabilities loans from Herney of $151,000. It made superannuation contributions of $128,352.78 during the year. The loans from Herney, according to the ledger, includes two advances of $116,000 and $50,000 and other minor adjustments. 273 The Herreen SBF accounts show employer contributions received to 30 June 1996 of $64,790. Its total assets were $168,937.13, including units in Herney at cost of $163,500 and some banking and sundry debtors. There are, in the trial balance, two entries for units in Herney of $99,500 and $64,000. There is no reference to a loan to Herney. 274 The Feeney SBF accounts show employer contributions of $50,250 in that year. Its total assets were $164,750.84, including $83,330 units in Herney, cash at bank, and a loan to Herney of $19,000. 275 The Herney accounts show $317,830 units issued. Its investments include loans to Anaequip of $151,000, a loan to Australian Health of $75,978, and shares at cost of $64,022. The units were shown as issued in three tranches of 168,830, 116,000 and 33,000 each. The loan to Anaequip is made up of two amounts of $50,000 and $116,000. There is also recorded loans from the Herreen Group of $14,000, and from the Feeney Group of $19,000, totalling $33,000, against which $33,000 credit is claimed for units issued. The shares at cost are not identified. 276 The series of payments from Anaequip to Herreen SBF and to Feeney SBF, from those entities to Herney, and from Herney to Anaequip all on 28 June 1996 was done by Mr Herreen and Mr Feeney. They did so on Mr Holloway's instruction. Mr Holloway initiated the advice to make that series of payments. Because Anaequip's bank was not the same bank as that of the two funds and Herney, Mr Herreen had to make special contact with one of the banks to ensure all payments were processed in sequence and on the same day. That problem led to Mr Herreen and Mr Feeney opening new accounts for the two funds and for Herney at Anaequip's bank in October 1996. They became the signatories to that account on behalf of Herney. 277 I find, for the same reasons as previously expressed in respect of other transactions, that the acquisition of units in Herney by Herreen SBF on 28 June 1996 for $64,000 and by Feeney SBF on 28 June 1996 for $52,000 were each in-house assets of those two funds under s 71(2) of the Act. 278 The reference to the assets of each of those funds at 30 June 1996 shows the difficulty of determining precisely the market value of those assets at 28 or 30 June 1996. However, having regard to the nature and cost of the assets of each of those funds at 30 June 1995, I am satisfied that in each case the market value ratio of each of the fund's in-house assets immediately before the two investments exceeded 5 per cent. Consequently, s 83(2) was contravened when the two investments were made. 279 On 27 June 1997, Lone Ace paid to Feeney SBF $50,000 and also to Herreen SBF $50,000. 280 On the same day Feeney SBF paid to Herney $50,000 and Herreen SBF paid to Herney $50,000. 281 On the same day, Herney paid to Lone Ace $100,000. The bank statements confirm those money movements. 282 The Feeney SBF financial accounts to 30 June 1997 and the Herreen SBF accounts are not in evidence. Accounting working papers of the Feeney SBF appear to refer to the transactions concerning it. 283 The Herney financial accounts to 30 June 1997 show $317,830 units issued (none during 1996-97). Its total assets were $320,040.47 and its net assets were $316,460.47. There has been no recorded change from the accounts to 30 June 1996, so they must be wrong. The money at the bank, the plant and equipment not depreciated further and the investments including loans to Anaequip and to Australian Health are unchanged. 284 It is necessary briefly to explain the role of Lone Ace. It was registered on the advice of Mr Holloway as a service company to provide administrative services on behalf of Anaequip. It is clearly an associate of Anaequip for the purposes of Pt 8 of the Act: see s 70. 285 The series of payments on 27 June 1997 was again undertaken by Mr Feeney and Mr Herreen at the instigation of, and under the direction of, Mr Holloway. Again for reasons previously given, I find that the acquisition of Herreen SBF of $50,000 units in Herney on 27 June 1997 and by Feeney SBF of $50,000 units in Herney on 27 June 1997 was the acquisition of an in-house asset in each instance, by virtue of s 71(2) of the Act. 286 I further find, for reasons given in respect of the investments by those funds on 28 June 1996, that immediately before 27 June 1997 the market value ratio of the in-house assets of each of the funds exceeded 5 per cent. There are no financial statements of the funds at 30 June 1997 in evidence, but having regard to my findings about the nature of the earlier investments of each of the funds in Herney, the assets of each of the funds would have had to have increased very dramatically after 30 June 1996 or the value of those investments in Herney would have had to have fallen very dramatically if the market value of those investments was not at 27 June 1997 considerably greater than 5 per cent of the market value of the assets of each of the funds at that date. There is no evidence which remotely points to either of those two theoretical possibilities. For reasons mentioned, I do not think that the financial statements of Herney at 30 June 1997, which were in evidence, are of any assistance. On the basis of those findings, in my judgment, each of those investments on 27 June 1997 contravened s 83(2) of the Act. (v) The two Hyde Park transactions 287 Hyde Park Newsagency Pty Ltd ("Hyde Park") was registered on 27 November 1995. Its directors at material times were Gaye Elizabeth Kitto ("Ms Kitto") and Mr Kitto. 288 On 27 November 1995, Hyde Park Newsagency Pty Ltd Super Benefit Fund ("Hyde Park SBF") was established. Its trustees were Ms Kitto and Mr Kitto. It was a regulated superannuation benefit fund under the Act from that date. 289 On 27 November 1995 the Hypa Private Property Unit Trust ("Hypa") was established. Its trustees also were Ms Kitto and Mr Kitto. That is unlike all the other unit trusts under consideration where Super Benefit was the nominated trustee. 290 Hyde Park's business is that of a wholesale and retail newsagent. 291 On 15 November 1995, Mr Kitto and Ms Kitto met Mr Holloway for professional accounting advice. They had been referred to him by a neighbour. At that time, they operated in partnership a news delivery business. 292 Mr Holloway advised them to establish a structure involving a company, a superannuation fund and a unit trust. They accepted that advice. They transferred all their accounting work to him. He arranged for the registration of Hyde Park, and for the establishment of Hyde Park SBF and Hypa. 293 At that meeting, Mr Holloway explained to them that the structure could involve the "strategy" of monies passing from the employer company by way of superannuation contributions to the superannuation fund, to the property trust as investments by the superannuation fund, and that the property trust could then lend the money back to the employer company. Mr Holloway also explained that such transactions would have to be at "arm's length", so that an outside party would have to be trustee of the property trust. He said that a Mr Bernie Glaser would act as the trustee. He referred to provisions of some legislation in that context, but Mr Kitto who gave evidence could not recall any detail of what was said on that topic. However, I accept that Mr Holloway did refer to some provisions of legislation in the context of the discussion. Mr Kitto struck me as a scrupulously honest and careful person. 294 On 29 November 1995, Mr Kitto and Ms Kitto had a further meeting with Mr Holloway. They were at the time negotiating to purchase an investment property ("the Parkside property"). Mr Holloway said that the Parkside property should be bought by Hypa and that it would therefore have to be registered in the name of Super Benefit. Mr Kitto refused to accede to that. He did not know of Super Benefit or Mr Glaser. He was adamant that the Parkside property be registered in the name of Mr Kitto and Ms Kitto. There was a long discussion between Mr Kitto and Mr Holloway on the topic. His statement (which he adopted as part of his evidence) reads: "I recall that Holloway said that if our names were on title of the Parkside property then there would, "… be a loss of an arms length entity". I also recall Holloway said words to the effect that, "… Super Benefit is a necessary part of the circle" and that, "… without Super Benefit – it breaks down the chain". He said that he was not happy about this. I said, "I don't care. It's this way or not at all". I explained the reason for my reluctance and said words to the effect that, "What happens if Glaser dies or does something tricky?". Holloway said, "Malcolm, my Christian beliefs would not let me allow that to happen." Holloway suggested that I lodge a caveat over the Parkside property. He also suggested that I come with him to meet Glaser. I said that I would not want any other person as trustee of the Parkside property." 295 Mr Kitto proposed, in the course of that discussion, that he and Ms Kitto be trustees of their property trust, so that the Parkside property would be registered in their names, and that they might then resign as trustees and Mr Glaser be appointed as trustee of Hypa. Mr Holloway again stressed to Mr Kitto that the trustee of the proposed property trust be at "arm's length", and again referred to some sections in legislation, and the need to be "bona fide" under the criteria. Mr Kitto did not recall the detail. However, he insisted that the Parkside property be registered in the names of himself and Ms Kitto, and that Mr Glaser could be appointed trustee only after that registration. Mr Holloway said that that could be done, that is the trustee could be changed, quite simply and at small cost. He was then instructed to proceed. 296 The Parkside property was purchased by Hypa, through Mr Kitto and Ms Kitto as trustees. They then contacted Mr Holloway to arrange, as contemplated, to have Mr Glaser (really, Super Benefit) appointed as trustee of Hypa in their stead. No action was taken by Mr Holloway or Holloway & Co to do so at any time thereafter. They have never had any dealings with Super Benefit or with Mr Glaser. Hypa received an account from Super Benefit for its "Annual Trustee Fee in respect to 96/97" on about 8 May 1997, but Mr Kitto contacted Mr Holloway and was told not to pay it. 297 In December 1995, on the request of Mr Holloway, Mr Kitto arranged to open bank accounts for Hyde Park SBF and Hypa with himself and Ms Kitto as signatories. 298 Mr Holloway had suggested at one of those meetings a "tax planning" meeting towards the end of each financial year. In May 1996, Mr Kitto had a meeting with Mr Holloway for that purpose. Mr Holloway requested that a series of payments be made prior to 30 June 1996 from Hyde Park to Hyde Park SBF to Hypa to Hyde Park. Mr Kitto on about 28 June 1996 telephoned Mr Holloway to confirm the details of what he was to do. Mr Holloway told him to · pay $40,000 from Hyde Park to Hyde Park SBF · pay $40,000 from Hyde Park SBF to Hypa, and · pay $30,000 from Hypa to Hyde Park. 299 He said that it was desirable to leave some money in the property trust. Mr Kitto said that Hyde Park did not have $40,000 available for that purpose. Mr Holloway told him that "It doesn't matter because it goes back straight away." 300 Mr Kitto then implemented those payments, except that he paid $38,000 from Hypa back into Hyde Park because Hyde Park was not in a position to increase its overdraft by the $10,000 difference which would have flowed from a repayment of $30,000 only. 301 I find that the payment by Hyde Park SBF to Hypa of $40,000 was for units in Hypa. I also find that the payment by Hypa to Hyde Park of $38,000 was by way of loan. 302 On about 6 August 1996, Mr Kitto and Ms Kitto received provisional tax refunds totalling $19,176. Mr Dalgleish had informed him that that payment was about to be received, and after Mr Kitto said that he wished to use that money to reduce a fully drawn advance from a bank, Mr Dalgleish advised him to "… pay the refund into the Company, then pay it from the Company into the Super Fund, then pay it from the Super Fund into the Property Trust, then pay it from the property Trust back into the Company, and then pay it from the Company to [the bank] to reduce the fully drawn advance." 303 I accept Mr Dalgleish' evidence that he gave that advice on the explicit direction of Mr Holloway. 304 Mr Kitto made that sequence of payments on that advice on 6 August 1996. 305 On 6 August 1996 Hyde Park paid $19,176 to Hyde Park SBF. On the same date Hyde Park SBF paid to Hypa $19,176 to subscribe for units in Hypa. Also, on 6 August 1996, Hypa paid by cheque the same sum of $19,176 to Hyde Park. It also was by way of loan. 306 Mr Kitto has confirmed that Mr Holloway and Mr Dalgleish at no time advised them about in-house assets rules, or of restrictions on loans by Hyde Park SBF to Hyde Park either directly or indirectly. 307 The financial accounts and trial balances of the three entities show superannuation contributions for the 1995-96 year of income of $44,604.04 including the $40,000 paid on 28 June 1996. At 30 June 1996, Hyde Park was indebted to Hypa for $29,639.00, made up of the loan of $38,000 less repayments or credits of $8,360.40. There had been, according to the accounts, 43,000 units in Hypa issued to Hyde Park SBF as Hyde Park SBF had made an earlier subscription of $3,000 for units on 23 May 1996 as well as the payment of $40,000 on 28 June 1996. 308 The financial accounts for the 1996-97 year of income show superannuation contributions of $38,486.08, and the issue of 67,176 units. That is made up of the previous units of 43,000 and 24,176 units issued during 1996-97 in respect of payments of $19,176 and $5,000. They also show that the debt of Hyde Park to Hypa of $31,448.90, was made up of the opening balance of $29,639.60 plus the $19,176 less repayments or credits totalling $17,366.70. 309 Hyde Park SBF lodged Insurance and Superannuation Commission Annual Returns through Holloway & Co for the years of income 1995-96 and 1996-97. They show respectively its total assets at $43,094 and in-house assets of $0, and its total assets at $67,246 and in-house assets of $0. 310 Ms Tonks has calculated at 30 June 1996 the Hyde Park SBF in-house assets (the $38,000) to be 88.2 per cent of its total assets of $43,094. If the outstanding loans to Hyde Park of $29,640 are taken into account to determine the percentage of the assets of Hyde Park SBF invested in Hypa represented against all its assets, then that sum is 68.8 per cent of the total assets. In respect of the 1996-97 year of income, the sum of $19,176 represents 28.5 per cent of the total assets of Hyde Park SBF of $67,247. I do not consider that that form of calculation is directly applicable to the present circumstances. 311 In my judgment, each of the investments by Hyde Park SBF in Hypa by the subscription of $40,000 for units on 28 June 1996 and by the subscription of $19,176 for units on 6 August 1996 was the acquisition of an in-house asset by Hyde Park SBF. My reasons for that conclusion are the same as expressed in respect of other transactions, based upon s 71(2) of the Act and the clear plan that the two investments were part of an agreed process for the sums (or in this case, $38,000 of the $40,000 paid on 28 June 1996) being returned to Hyde Park. But for that step being assured, the investments would not have been made. 312 I am also satisfied in this instance that the acquisition of $40,000 worth of units in Hypa was in contravention of s 83(2) of the Act. The gross assets of Hyde Park SBF were represented only by investments in Hypa. There had been an investment of $3,000 for units on 23 May 1996, and I find on the basis of the nature of Hypa and those in control of it that those units by 28 June 1996 were worth about that sum. That then was the only asset of Hyde Park SBF. The receipt of $40,000, and its immediate investment in Hypa therefore amounted to acquiring an in-house asset when the market value ratio of the in-house assets already exceeded 5 per cent. If it is appropriate to treat the $40,000 in Hyde Park SBF as cash, so that only about $5,000 of total assets of $43,000 were in-house assets, the in-house market value ratio was of the order of 11 per cent. 313 For similar reasons I find that the acquisition of $19,176 worth of units in Hypa on 6 August 1996 when virtually all of Hyde Park SBF assets were already in-house assets contravened s 83(2) of the Act. The gross assets of Hyde Park SBF at 30 June 1997 indicate that its assets at 6 August 1996 could not have constituted much more, if anything more, than its units in Hypa. 314 As with other transactions, I defer consideration of the application of s 85 of the Act until later in these reasons. (vi) The Holloway & Co transaction - findings 315 On 22 June 1993, Holloway & Co Super Benefit Fund ("Holloway SBF") was established. Its trustees were Mr Holloway and Ms Holloway. It was a regulated superannuation benefit fund under the Act from 15 May 1995. 316 On 15 August 1995 the Katon Private Property Unit Trust ("Katon") was established. Its trustee was Super Benefit. The signatories to Katon were either Mr Holloway, Ms Holloway, or one of them with either Mr Glaser and Mr Parker. Katon was, as Mr Holloway described, first established to acquire the premises in which the Holloway & Co business was then operating. Its then landlord proposed to sell the premises. The purchase of the premises was financed by Katon, through Super Benefit, borrowing about $100,000 from a bank and the balance of $36,000 was procured by Holloway SBF investing that sum for units in Katon. The sum of $36,000 was available by Mr Holloway and Ms Holloway first personally borrowing that sum, then lending it to Holloway & Co, and Holloway & Co then making superannuation contributions to Holloway SBF in that amount. Once the property was acquired in 1995, Holloway & Co paid rent to Katon for its use at a commercial rate. Subsequently, from 1998, part of the premises were leased to Advantage Business Strategies Pty Ltd, another company with which Mr Holloway was associated. 317 On 28 June 1996, Holloway & Co paid $130,000 to Holloway SBF. In turn, on the same date, Holloway SBF paid to Katon that sum of $130,000 to subscribe for 130,000 $1 units in Katon. It is not clear that those units were then issued. Also, on 28 June 1996, Katon paid $130,000 to Holloway & Co. It was by way of loan. The primary documents, including bank statements, cheque butts and deposit records confirm those three transactions. 318 The financial statements of Holloway & Co at 30 June 1996 showed its deferred liabilities included a loan from Katon of $128,482. They show no superannuation contribution expense of $130,000, but only of $48,296.73. The draft financial statement at 30 June 1997 shows the loan from Katon to then stand at $118,082. 319 The Holloway SBF accounts to 30 June 1996 show total assets of $250,047.22 including shares in listed companies at cost of $248,800 (which I find includes investments in Katon), an increase from $88,800 the previous year. Its operating statement shows contributions received during the year of $33,660 only. That was its only income. It is not clear from the accounts how its total assets increased from $88,800 at 30 June 1995 to $250,047.22 at 30 June 1996. The trial balance throws some light on that. It shows two items for undeducted member contributions each of $65,000. The listed shares at cost shows $88,800 brought forward from the previous period, plus two journal entries of $30,000 and $130,000, making a total of $248,800. Other records suggest that the $30,000 came from superannuation contributions received. 320 The Katon financial statements show an opening balance of $86,464.64 and capital contributions of $155,000 less loss of $8,629.96 to produce total unit holders funds of $232,834.68. They are shown to be represented by land and buildings, plant and equipment, and "Investments at cost 67,757.25 Loans 128,482.00" as part of its total assets of $348,350.20. 321 It is not clear from those records how the figure of $128,482 was arrived at. 322 Ms Tonks' calculation is that the in-house asset ratio of the Holloway SBF at 30 June 1996 was 52 per cent. That is calculated by reference to the asserted return to Holloway & Co of $130,000 during that year as a percentage of the gross assets of Holloway SBF of $250,047. 323 Given the coincidence of amount and timing of the payment by way of loan from Katon to Holloway & Co on 28 June 1996, I have no difficulty in concluding that the payment of $130,000 by Holloway SBF for units in Katon on that date was for an in-house asset. In my judgment, for reasons which apply with equal force to this investment as they do to certain of the earlier transactions, s 71(2) applies. 324 I am satisfied also that that investment contravened s 83(3) of the Act. The gross assets of Holloway SBF at 30 June 1996 were shown as $250,047. I find that those assets included the $130,000 in-house asset investment in Katon, and that that asset had a market value of about $130,000 at that time. Immediately before the receipt of that sum by Holloway SBF, its assets were therefore about $120,000. The precise nature of those assets is unclear. However, they included earlier investments in Katon. The evidence does not indicate clearly whether any of those assets should be treated as in-house assets. That part of its assets represented by units in Katon to assist Katon in buying the premises from which the Holloway & Co business operated does not fall within that description. Similarly, there is no evidence in the Holloway & Co accounts to suggest that it was significantly indebted to Katon prior to 28 June 1996. Accordingly, I am satisfied that immediately prior to the investment by Holloway SBF in Katon on 28 June 1996 the market value ratio of Holloway SBF in-house assets did not exceed 5 per cent, and that given the market value of the asset then acquired, the acquisition did then result in the market value ratio of Holloway SBF in-house assets exceeding 5 per cent. 325 The consequences of those findings, in terms of s 85 of the Act, remain to be addressed. (vii) The Andrew Holloway transaction - findings 326 On 20 June 1996, Holloway & Co No 2 Super Benefit Fund ("Holloway No 2 SBF") was established. Its trustee was Mr Andrew Holloway. It was a regulated superannuation benefit fund under the Act from 25 June 1996. 327 On 20 June 1996 Lotus Property Unit Trust ("Lotus") was established. Its trustee was Super Benefit. The signatories of its bank account were any one of Mr Andrew Holloway, Mr Glaser and Mr Lombardi. 328 Mr Andrew Holloway was employed by Holloway & Co at material times. Mr Andrew Holloway is a young man. He completed school in 1988 and started work as a bookkeeper at Holloway & Co in January 1990. He studied accounting whilst doing that work, and completed that course during 1998. Whilst working for Holloway & Co, he worked under the supervision of Mr Holloway. He established the Holloway No 2 SBF and Lotus on the advice of Mr Holloway, but he does not recall the nature of that advice. He was aware of the existence of Super Benefit and of Mr Glaser, and that Super Benefit was trustee of Lotus and of other unit trusts. He understood its role was to ensure the unit trusts were operated correctly. Lotus since 1 July 1996 has been the vehicle for a range of investments, mainly shares. Mr Andrew Holloway discussed on occasions his intention to buy or sell shares with Mr Glaser, sometimes in advance of the sale or purchase. The investment decisions, however, were ultimately made by Mr Andrew Holloway. 329 On 28 June 1996, Holloway & Co paid $9,000 to Holloway No 2 SBF. On the same date, Holloway No 2 SBF paid that amount of $9,000 to Lotus. It was to subscribe for 9,000 units in Lotus. It is not clear that those units were then issued. On 1 July 1996 Lotus paid $9,000 to Holloway & Co by way of loan. That loan has since been repaid. 330 It is clear from the bank statement that the $9,000 was debited to the Holloway & Co bank account on 28 June 1996. The same amount was credited to that account on the same day. The bank statement of Lotus shows the deposit of $9,000 and the withdrawal of $9,000 only on 1 July 1996, although Holloway No 2 SBF bank statement shows the deposit of $9,000 from Holloway & Co on 28 June 1996, and its withdrawal on 28 June 1996. The primary bank records, including deposit slips, disclose that the entire transaction took place on 28 June 1996, and that the slight discrepancy in dates is due to the wrong account number being used for Lotus. I am satisfied on all the evidence, including that of Mr Andrew Holloway, that the transaction did occur as alleged on 28 June 1996. 331 The financial statements of Holloway No 2 SBF confirm that it received $9,000 employer contributions in the year ended 30 June 1996, and invested those contributions in "units issued at cost". The Holloway & Co accounts to 30 June 1996 record a debt of $9,000 owing to Lotus. I have remarked in respect of the Holloway & Co transaction the difficulty in reconciling the superannuation expense of $48,296.73 (according to those accounts) with the evidence that it contributed $9,000 to Holloway No 2 SBF, $130,000 to Holloway SBF and $4,829.08 to Life Enjoyment in that year. 332 By certificate signed by Super Benefit, Lotus on 30 June 1996 issued 9,000 units to Holloway No 2 SBF. 333 The Holloway No 2 SBF 1995-96 Annual Return to the Insurance and Superannuation Commission, lodged by Holloway & Co, stated the total assets of the Holloway No 2 SBF to be $9,000 and its in-house assets as nil. 334 The particular payments took place in circumstances in which I am cautious about making any findings. Mr Andrew Holloway was circumspect about the way he answered questions, and did not really disclose much about how or why the particular payments were made. Many of his answers were non-committal or asserted a lack of memory. I find on Mr Andrew Holloway's evidence that they were undertaken after discussions between Mr Holloway and Mr Andrew Holloway, and that Mr Andrew Holloway did not principally direct the drawing of the cheques although he was aware of the three transactions. He signed the cheque by which Holloway No 2 SBF paid $9,000 to Lotus. He did not recall who signed the cheque to pay $9,000 from Lotus to Holloway & Co, or the deposit records. He accepted that it was his decision to purchase units in Lotus on behalf of Holloway No 2 SBF. He declined to indicate whether that was done on advice. Mr Holloway's evidence did not really fill in many of the gaps. 335 It is tempting to fill in the gaps about why and how the Andrew Holloway transaction occurred, based upon the limited findings that I have been able to make. I must, however, bear in mind the nature of these proceedings and that the onus of proof lies upon APRA in relation to its allegations. Even with that caution, I find that the investment of $9,000 by Holloway No 2 SBF in units in Lotus was an in-house asset of Holloway No 2 SBF, based upon s 71(2) of the Act. I am able to infer with confidence, in terms of s 71(2), from the timing and amount of the payments, that the investment was made as the result of Holloway No 2 SBF and Lotus, through their guiding mind, as the result of carrying out an agreement for purposes that included the purpose of achieving the result that a loan of $9,000 would then be made by Lotus to Holloway & Co. I find that that guiding mind was that of Mr Andrew Holloway. The extent to which he was implementing the wishes or directions of Mr Holloway in doing so is, however, really speculative. I do not feel confident that he did so under the direction or supervision of Mr Holloway, although there is reason to suspect that that was the case. That lack of confidence may be of significance when considering whether the respondents infringed s 85 in respect of this transaction. 336 I find that, by the investment of $9,000 for units in Lotus, Holloway No 2 SBF infringed s 83(3) of the Act. Before the investment, on the evidence, it had no in-house assets. After the investment, all its assets were in-house assets. The market value of its in-house assets, whether that market value was exactly or only roughly equal to their cost, increased above 5 per cent, and in fact to 100 per cent, by the transaction. (viii) The Longlat transaction - findings 337 Longlat Enterprises Pty Ltd ("Longlat") was registered on 22 July 1994. Its directors at material times were Mark Christopher Benbow ("Mr Benbow") and Jennifer Mary Benbow ("Ms Benbow"). 338 In July 1994, Mr Benbow and Ms Benbow consulted Mr Holloway for professional accounting advice. They had been referred to him by a friend. The meeting was a lengthy one. They explained their financial position and their objectives to him. Mr Holloway then explained the structure he proposed for them involving a company, a superannuation fund and a unit trust. He said he could arrange for that structure to be established. He explained the taxation benefit of the company profits or available cash funds being paid to the superannuation fund, where they would attract a lesser taxation rate. He also explained that the superannuation fund could transfer funds to the unit trust, which could then invest that money. He said that they could manage the investment of moneys held by the unit trust, but would have to do so wisely. There were, he said, likely to be occasions when the company would make payments direct to the unit trust. 339 At that meeting, Mr Holloway referred to Mr Glaser. He said he would arrange for Mr Benbow and Ms Benbow to meet Mr Glaser. Mr Benbow was told that Mr Glaser or Super Benefit would be the "arm's length trustee" of the unit trust. They did not really discuss what it meant for Super Benefit or Mr Glaser to be trustee of the unit trust. Mr Benbow confirmed that the principal decision makers for the unit trust were to be Mr Benbow and Ms Benbow. Mr Benbow thought Mr Glaser's role was to ensure that the unit trust's operations were legal and were commercially sound. 340 They instructed Mr Holloway to proceed to establish that structure for them. 341 On 22 July 1994, Longlat Enterprises Pty Ltd Super Benefit Fund ("Longlat SBF") was established. Its trustees were Mr Benbow and Ms Benbow. It was a regulated superannuation benefit fund under the Act from that date. Also, on 22 July 1994 the Maje Private Property Unit Trust ("Maje") was established. Its trustee was Super Benefit. In addition, of course, Longlat was registered. 342 After the structure was established, Mr Holloway told Mr Benbow to open bank accounts for Longlat SBF and for Maje as well as for Longlat. The bank account for Maje was opened with Mr Benbow, Ms Benbow, Mr Glaser and Mr Parker as signatories but so that either Mr Benbow or Ms Benbow must be a co-signatory on any cheque. The cheque books for Maje are in the name 'Super Benefit Pty Ltd ATF The Maje Private Property Unit Trust'. Thereafter, when cheques were required to be signed by Maje, Mr Benbow would call at the office of Super Benefit to obtain Mr Glaser's signature. 343 During the twelve months or so from July 1994, Mr Benbow arranged payments by Longlat to Longlat SBF, or by Longlat to Maje, as advised by Mr Holloway. He consulted Mr Holloway from time to time for that advice. He did not act without it. 344 Mr Benbow retired from his employment as a geologist on 30 June 1994. Thereafter, he started work as a consultant geologist through Longlat. He received from his former employer a redundancy payment, and had an accrued superannuation entitlement. On Mr Holloway's advice, he paid those two amounts into Longlat SBF. He also arranged for payments to be made by Longlat SBF to Maje. Longlat SBF invested its available funds in Maje. 345 Mr Holloway, both in July 1994 and on subsequent occasions, advised Mr Benbow and Ms Benbow to invest the moneys in Maje into real estate. 346 Mr Benbow and Ms Benbow also met Mr Glaser in August 1994. He suggested they confer with him at least once each year to discuss Super Benefit's role as trustee of Maje. In fact, they met Mr Glaser several times each year, and sought his advice about potential real estate investments. Maje, through Mr Benbow and Ms Benbow, did purchase two properties in 1996 and 1997 at Kapunda in South Australia's mid-north and they also transferred their former family home at Mount Barker to Maje in 1996. Those transactions were each decided upon by Mr Benbow and Ms Benbow. The two properties at Kapunda are operated as investment properties under their direct management and control. They arranged the finance to purchase the two properties at Kapunda. Super Benefit is the registered owner of those properties as trustee of Maje. When the first of those properties was purchased, Mr Benbow arranged for a caveat to be placed on the title to protect the Benbow's "interest" in that property. 347 In late June 1996, Mr Benbow telephoned Mr Holloway. He was concerned that Longlat had not made lease payments to Maje for the lease of a four wheel drive vehicle and some camera equipment which it had provided to Longlat. On that occasion, he was advised by Mr Holloway that before the end of the financial year he should arrange a round of cheques of $25,000 from Longlat to Longlat SBF, of $25,000 from Longlat SBF to Maje, and of $24,500 from Maje to Longlat. No evidence was given as to why the third payment in that sequence was in a different amount. Mr Holloway was not asked about that. Mr Benbow duly arranged those payments. He left the Maje cheque at Super Benefit for Mr Glaser to sign, and collected it duly signed later the same day. He then banked all the cheques on the same day, namely 24 June 1996. The Maje cheque for $24,500 was payable to "Longlat Enterprises P/L" or bearer. Longlat's deposit book records the payment into its account of that sum on 24 June 1996. It was in fact credited to its account only on 4 July 1996, although the evidence is clear that it was paid in to Longlat's account on 24 June 1996. 348 That series of transactions is largely consistent with the financial statements of the three entities. 349 The financial statements of Longlat SBF at 30 June 1996 show its income during that year was essentially the employer contribution of $25,000. Its total assets of $133,831.41 comprised $133,825.59 being "units at cost", clearly units in Maje and a small balance in a bank account. The value of its units in Maje had increased from 30 June 1995 by $26,058. Journal entries indicate that that is made up of the payment of $25,000 and a further amount of $1,058 (apparently a distribution from Maje converted to units). 350 The balance sheet of Maje at 30 June 1996 shows an outstanding debt owed to Longlat of $7,834.35. It had current assets of $38,579.72 and current liabilities (including that debt) of $93,206.54. It had fixed assets of $187,423.71, and net assets of $132,796.89. It had issued units to the value of $133,825.59. Its income account showed the distribution of $1,058 to beneficiaries, the same amount as its net profit. It is not clear how the $7,834.35 reconciles with the payment of $24,500. Maje had no loan to or from Longlat at 30 June 1995. In the next financial year, it is recorded as having received advances from Longlat of $3,379.95 and $16,000, and as having made a payment to Longlat of $11,545.60 to produce that balance (according to its trial balance). That "payment" appears as "equipment-hire received" $11,545.60. The $7,834.35 is the balance owing by Maje after balancing those three amounts. It does not appear how, if at all, its accounts reflect the payment by Maje to Longlat of $24,500 on 24 June 1996. 351 Longlat's financial statements to 30 June 1996 confirmed the superannuation contribution of $25,000 and the indebtedness of Maje of $7,834.35. 352 The Maje balance sheet at 30 June 1996 also shows a debt owing to 'Mark and Jennifer Benbow' of $10,605.23. That figure is reached, according to the journal entries, by a payment to Mr and Ms Benbow of $24,500 and then payments by them of $10,269.33, $24,556 (for adjustment of accumulated depreciation) and $279.90 (for light and power for the office). Those materials suggest the payment of $24,500 by Maje to Longlat, which is clearly established on the evidence, may have been treated by some book entry after it was made as a payment to Mr & Mrs Benbow. It may be that the journal entry recording a payment by Maje to Mr & Mrs Benbow is an unrelated payment, although it is then curious that the Maje payment to Longlat cannot readily be traced to its balance sheet. As noted, the material does not show how the Maje liability to Longlat at 30 June 1996 was determined. At all events, I am satisfied on the evidence that Longlat paid Longlat SBF $25,000 on 24 June 1986, that Longlat SBF then paid Maje $25,000 and that Maje paid Longlat $24,500 on the same day. It remains to consider the consequences of the material referred to. 353 Longlat SBF lodged, through Holloway & Co, Annual Returns to the Insurance and Superannuation Commission for the 1994-95 year of income showing its assets at 30 June 1995 to be $107,767 and its in-house assets as nil, and for the 1995-96 year of income showing its assets at $133,831 and its in-house assets as nil. 354 The circumstances and timing and amounts of the payments made on 24 June 1996 indicate, in my judgment, that the investment by Longlat SBF of $25,000 for units in Maje on that date constituted an in-house asset of Longlat SBF, by virtue of s 71(2) of the Act. I find that that particular investment was made as the result of Longlat SBF and Maje, each through Mr Benbow and on the advice or direction of Mr Holloway carrying out an agreement for purposes that included achieving a loan or investment to or in Longlat of $24,500. The situation is not so clear cut as in the case of some other transactions, as there is no evidence that Longlat needed the redeposit of its superannuation contribution to Longlat SBF to maintain ready liquidity. However, there is no other apparent reason for the transaction, which delivered significant taxation advantages. To put it another way, I am satisfied that the superannuation contribution of $25,000 to Longlat SBF would not have been made at that time unless it was part of the "package" that those funds would substantially reflow to Longlat. 355 However, I do not find that s 83(2) or s 83(3) was contravened by that payment. The assets of Longlat SBF before that investment were its earlier investments in Maje. Their market value would depend upon the market value of the assets of Maje. As appears above, Maje had been operating for some time. I do not know sufficient about the nature of or the market value of its assets to be able to make any finding that the investment in question resulted in the market value ratio of its in-house assets exceeding 5 per cent. 356 Accordingly, I reject APRA's claims against the respondents in respect of the transaction. (ix) The Pride Consultants transaction - findings 357 Robert Pride Consultants Pty Ltd ("Pride Consultants") was registered on 14 July 1988. Its directors at material times were Robert Glen Pride ("Mr Pride") and Denise Fay Pride ("Ms Pride"). 358 On 31 October 1995, Robert Pride Consultants Pty Ltd Super Benefit Fund ("Pride Consultants SBF") was established. Its trustees were Mr Pride and Ms Pride. It was a regulated superannuation benefit fund under the Act from that date. 359 On 31 October 1995 the Denrob Property Unit Trust ("Denrob") was established. Its trustee was Super Benefit. 360 Mr Pride and Pride Consultants (consultants in the field of project management) were clients of Mr Holloway from 1988. It was on his advice that Pride Consultants was established. It was not very active until June 1995, as Mr Pride was employed elsewhere. When Pride Consultants was established, on Mr Holloway's advice there was also established the Robert Pride Family Trust, with Pride Consultants as its trustee. It appears that thereafter, when it became active, Pride Consultants acted as trustee of The Robert Pride Family Trust, as the employer. It was, I assume, a discretionary family trust. 361 Mr Pride worked full time as a consultant through Pride Consultants from July 1995. He had a public company superannuation fund, but was dissatisfied with its performance. In October 1995, he conferred with Mr Holloway on the matter of superannuation. Mr Holloway suggested a structure involving the establishment of a superannuation fund and a unit trust. He showed Mr Pride how Pride Consultants could make contributions to the superannuation fund, and how the superannuation fund could invest those contributions in the unit trust. He then explained that the unit trust would be the investment entity, investing in such things as property acquisition and development, shares, and in the purchase of capital equipment from Pride Consultants which it could then lease back to Pride Consultants. He explained that the unit trust could borrow monies to leverage investments whereas the superannuation fund could not do so. 362 Mr Pride instructed Mr Holloway to establish those entities. He had not then heard of Super Benefit or of Mr Glaser. When he saw the trust deed for Denrob, he noticed Super Benefit was trustee. He assumed that Super Benefit was "my entity" and did not understand that anyone else was involved. 363 In accordance with Mr Holloway's later direction, Mr Pride in June 1996 then established bank accounts for Pride Consultants SBF, and in the name of Super Benefit as trustee for Denrob. Mr Pride and Ms Pride were the only signatories to those accounts. They were described as the operators of the account, but the application to open the account was under the seal of Super Benefit and was signed by Mr Glaser and Mr Lombardi as directors. Mr Pride could not recall how that came about. I conclude that Mr Holloway did explain to him that Super Benefit was an independent entity as trustee of Denrob, but indicated that at a practical level Mr Pride could run Denrob. 364 After 30 June 1996, Denrob, on the decision of Mr Pride, acquired certain shares. Mr Pride got Mr Glaser to affix the Super Benefit seal to the applications for those shares. It was a formal process, in the sense that Mr Glaser did not inquire into the nature of, or the reason for, the transaction. Where the common seal was not necessary for share dealings and bank transactions, Mr Pride signed the documents for Super Benefit as trustee of Denrob. He did not consult Mr Glaser at any time about those transactions. 365 On 19 June 1996, Mr Pride arranged the payment of $15,000 from Pride Consultants to Denrob, then the payment of $14,500 from Denrob to Pride Consultants SBF, and then the payment of $14,000 from Pride Consultants SBF to Pride Consultants. The sequence of payments was the reverse of the sequence which applied with the other transactions. I accept that he made those payments on what he understood was the advice of Mr Holloway. He had no reason to make them unprompted by Mr Holloway. I find that he misunderstood the instructions given to him by Mr Holloway. Consistently with Mr Holloway's evidence of his typical advice, he told Mr Pride to pay the cheques in the reverse order: to Pride Consultants SBF, to Denrob, and to Pride Consultants. The payment by Pride Consultants was to subscribe for units in Denrob. It is unclear whether those units were then issued. The payment by Pride Consultants SBF to Pride Consultants was by way of loan. 366 There is no evidence to explain why the payments were in different amounts. 367 When Mr Pride became aware, in mid 1997, that the Insurance and Superannuation Commission was investigating the Pride Consultants SBF, he asked Mr Holloway why that might be so. Mr Holloway explained to him that it was about loans made to Pride Consultants, as there was a limit on such loans of a percentage. He initially said that he was given the figure of 30–40 per cent of the total assets of the Pride Consultants SBF, but in cross-examination he was not sure of the percentage. Mr Pride had not earlier heard of any such rule. 368 The financial statements of Pride Consultants to 30 June 1996 show a liability to Denrob of $14,000 as a current liability, and superannuation payments incurred of $19,000. The financial statements of Denrob show that it has a loan to "The Pride Family Trust" of $14,000 as one of its assets. Pride Consultants runs its business as trustee for The Pride Family Trust. Those financial statements do not accurately reflect the nature of the transaction, but wrongly treat it as having occurred as if there were a flow of funds from Pride Consultants to Pride Consultants SBF to Denrob to Pride Consultants. 369 The banking records in evidence show: · Pride Family Trust (Pride Consultants) transferred $15,000 and received $14,000 on 19 June 1996. · Denrob received $15,000 and transferred $14,500 on 19 June 1996. · Pride Consultants SBF received $14,500 and transferred $14,000 on 19 June 1996. They confirm the sequence of payments as I have found it to have been. 370 The financial statements of Pride Consultants SBF show its total assets at 30 June 1996 to be $25,491.83 including $15,000 units at cost. They also show income of $6,491.83 transferred from other funds, and $19,000 contributions from the employer. It is unclear whether they erroneously treat the payment of $15,000 by Pride Consultants to Denrob on 19 June 1996 as a payment to Pride Consultants SBF. The composition of the $19,000 contributions is not detailed. The transaction, as I find it was intended by Mr Holloway, involved $14,500 being paid for units in Denrob. I am unable to find how the $15,000 subscription for units was arrived at. 371 There is a unit certificate issued by Super Benefit (signed by Mr Glaser) dated 30 June 1996 for the issue of $15,000 units in Denrob issued to Pride Consultants SBF. For reasons given earlier, I place no weight upon that certificate as evidence of the nature of the transaction. 372 The 1995-96 Annual Return to the Insurance and Superannuation Commission for Pride Consultants SBF, lodged by Holloway & Co, declared its total assets to be $25,491 and its in-house assets as nil. In this instance, the loan by Pride Consultants SBF to Pride Consultants was an in-house asset of Pride Consultants under s 71(1) of the Act. It was simply a loan to an employer-sponsor. It is unclear what the assets of Pride Consultants were prior to that loan, but the financial statements (even though I have found that they may be erroneous) indicate that its assets were not great. It is unclear whether it had any in-house assets prior to 19 June 1996, so it is unclear whether s 83(2) or s 83(3) were contravened by the acquisition of the in-house asset on 19 June 1996. It is likely that one of those provisions was contravened. 373 In this instance, it is convenient to deal with s 85 of the Act. I do not think that the allegations of APRA in its statement of claim are made out. It is alleged that the scheme referred to in s 85 involved the loan to or investment in Denrob by Pride Consultants with the intention of that money then being advanced to Pride Consultants SBF and then to Pride Consultants. The in-house asset is said to be made pursuant to the scheme established in 1995 and carried out between 1995 and 1998. Although probably by a misunderstanding by Mr Pride of Mr Holloway's instructions, I do not think that the particular sequence of payments was made in accordance with the general scheme as alleged. I am not satisfied that Mr Holloway at any time intended that payments should be made by an employer-sponsor to a unit trust then to a superannuation fund then back to the employer-sponsor. The alternative claim is that, in this instance, there was an agreement to which the respondents were parties for the purchase of units in Denrob by Pride Consultants which constituted a loan to or an investment in Denrob by Pride Consultants SBF. I have found that the transaction did not occur in that way. I am also not satisfied in this instance that, at the time Pride Consultants and Denrob were established, there was then in place a scheme for the return of its superannuation contributions to Pride Consultants through Denrob or (as arose in the particular circumstances) the return of monies it invested in Denrob through Pride Consultants SBF. The findings above in relation to why Pride Consultants SBF and Denrob were established indicate that there was then an existing business which was proposed to be expanded by Mr Pride, and that the supporting structures of the unit trust and the superannuation fund were to be used in ways which did not contravene provisions of the Act. 374 Accordingly, in this instance, I am not satisfied that APRA has established a contravention of s 85 by the respondents. (x) The two Statewide transactions - findings 375 Statewide Computer Transport Pty Ltd ("Statewide") was registered on 1 September 1989. Its directors at material times were David Edward Pike ("Mr Pike") and Kerry Ann Pike ("Ms Pike"). 376 On 20 June 1994, Statewide Computer Transport Pty Ltd Super Benefit Fund ("Statewide SBF") was established. Its trustees were Mr Pike and Ms Pike. It was a regulated superannuation benefit fund under the Act from 31 March 1995. 377 On 20 June 1994 the Kade Private Property Unit Trust ("Kade") was established. Its trustee was Super Benefit. 378 Statewide has been operating as a transport business for many years. It was established on the advice of the solicitor to Mr Pike and Ms Pike. At the same time, also on that advice, they held in their own names the assets of the transport business, and leased them to Statewide. It was intended to insulate those assets from creditors of the business in the event that it failed. At that time, and thereafter, Mr Holloway was and remained their accountant as well as accountant to Statewide. 379 In mid 1994, as they were concerned about securing their personal assets from the failure of Statewide, they discussed the matter with Mr Holloway. As directors of Statewide, they had provided substantial guarantees for its borrowings. They raised with Mr Holloway the possibility of setting up a trust to help achieve that objective. 380 Mr Holloway advised them to establish Statewide SBF and Kade. He explained that, if Kade owned the assets used in the business of Statewide and leased those assets to Statewide, the assets would be protected from creditors of Statewide if it were to fail, and that Statewide could properly claim the lease payments as taxation deductions. He also explained the proposed use of (what became) Statewide SBF: Statewide at the end of each financial year would make a tax deductible contribution to Statewide SBF, then Statewide SBF would invest that sum in units in Kade, and Kade would purchase the assets used in the business of Statewide with that sum and lease the assets back to Statewide. He explained the different taxation rates applicable to Statewide and to Statewide SBF. He explained also how that process, over time, would enable them to build their assets for the future. At that meeting, Mr Holloway also said that Statewide SBF could not invest contributions directly with Statewide, but could invest them in a trust such as Kade which could then invest them in, or lend them to, Statewide. He also explained that Kade could borrow monies for the purpose of gearing investments whereas Statewide SBF could not do so. 381 Ms Pike and Mr Pike instructed Mr Holloway to proceed to establish Statewide SBF and Kade. Ms Pike thought at the time that Super Benefit was some form of regulatory authority. 382 Mr Holloway did not, at that meeting, refer to Super Benefit as trustee of the proposed unit trust, or to Mr Glaser. He said nothing to indicate that Mr Pike and Ms Pike would not have the role of deciding for Kade what investments it would make. At some point, about this time, he said that Mr Glaser at Super Benefit would draw up the trust deeds, but did not say Super Benefit was to be the trustee. 383 When the two entities had been established, Mr Holloway advised Ms Pike to set up bank accounts for them. She established an account for Statewide SBF on 29 June 1994, but did not establish an account for Kade until 28 June 1995. Ms Pike and Mr Pike were signatories on each account. They described themselves as trustees of Kade because they believed that they were its trustees. 384 On 17 June 1996 Ms Pike arranged payment of $20,000 from Statewide SBF to Kade. 385 On 25 June 1996, Ms Pike arranged: · payment of $20,000 from Statewide to Statewide SBF · payment of $10,000 from Statewide SBF to Kade · payment of $11,000 from Kade to Statewide. 386 On 28 June 1996, Ms Price arranged: · payment of $20,000 from Statewide to Statewide SBF · payment of $17,000 from Statewide SBF to Kade, and · payment of $18,000 from Kade to Statewide. 387 Each of the payments by Kade to Statewide of $11,000 and $18,000 was intended to be, and was recorded as, a loan to Statewide. 388 In operating the affairs of Kade, Ms Pike has had no dealings with Super Benefit or Mr Glaser. She has paid its annual account. She was not told by Mr Holloway about any restrictions on loans-backs from a superannuation fund to the employer making the contributions at any material time, or about any in-house asset rules. She did see the Super Benefit name on the Kade trust deed as trustee, but placed no significance on that at the time. Its significance became more apparent in October 1996, when the family home was also transferred to Kade by Ms Pike and Mr Pike, and the existing mortgage was discharged and replaced by a fresh mortgage which Super Benefit had formally to grant to the financier. Mr Holloway did tell Ms Pike at the meeting in June 1994 that a superannuation fund could not invest directly in Statewide, but if the fund invested in a trust, the trust could in turn invest in Statewide. 389 Ms Pike impressed me as a very able person. She did not require detailed instructions to undertake the two series of transactions. I accept her evidence that the structure and sequence of the series of payments at the end of the financial year was, to a degree, proposed by Mr Holloway. There is no evidence that he specifically told her to make the payments of the precise amounts referred to above as and when she did. There is also no evidence explaining precisely why they are not in the same amounts. Ms Pike does not say in her evidence that she was told by Mr Holloway to make the particular payments set out above, nor indeed that she was told by Mr Holloway to make any particular loans to Statewide. Her evidence was that Mr Holloway gave her general advice that before the end of each financial year Statewide should make superannuation contributions to Statewide SBF, and that Statewide SBF should then make investments of the funds available in Kade. She does not say that Mr Holloway told her then that Kade should pay those funds to Statewide. 390 The financial records of the three entities confirm those transactions, and the financial accounts of Kade confirm Statewide was indebted to it at 30 June 1996 for $29,000 (made up of $18,000 and $11,000) although Statewide's balance sheet at that date suggests the indebtedness is $25,000 (a note suggests $4,000 was in fact against part of an outstanding indebtedness of Kade to Statewide for the purchase of some plant and equipment). 391 The financial accounts of Statewide show superannuation contributions of $57,404.24 during that year. The financial accounts of Statewide SBF show superannuation payments received of $51,974.84 made up of $46,000 employer contributions and $5,974.84 rolled into the fund from another fund. 392 Unit certificates were issued by Super Benefit to Statewide SBF for 20,000, 10,000 and 17,000 in Kade on 17 June 1996, 25 June 1996 and 28 June 1996. I place no weight upon those certificates. 393 The 1995-96 Annual Return of Statewide SBF to the Insurance and Superannuation Commission, provided by Holloway & Co, disclosed the assets of the fund to be $209,961 and the in-house assets to be nil. 394 APRA has treated that series of payments as involving the following two transactions: (1) the payment of $20,000 by Statewide to Statewide SBF on 25 June 1996 "followed" by the payments by Statewide SBF to Kade of $20,000 on 17 June 1996 and of $10,000 on 25 June 1996, and "followed" by the payment by Kade to Statewide of $11,000 on 25 June 1996; and (2) the payment of $20,000 by Statewide to Statewide SBF on 28 June 1996 followed by the payment by Statewide SBF to Kade of $17,000 on 28 June 1996 and then the payment by Kade to Statewide of $18,000 also on 28 June 1996. 395 There is no evidence that Ms Pike or anyone else, including Mr Holloway intended the monies to be treated separately in that way. There is an element of artificiality in doing so, as the payment by Statewide SBF to Kade on 17 June 1996 of $20,000 for units in Kade pre-dated the end of year making of superannuation contributions by Statewide. I suspect the two contributions each of $20,000 represent the entitlements of Ms Pike and Mr Pike, but there is no evidence to that effect. 396 In my judgment, each of the investments by Statewide SBF of $10,000 and $17,000 for units in Kade was an in-house asset of Statewide SBF, by reason of s 71(2) of the Act. Despite the paucity of evidence on the topic, the coincidence of the total of those two payments with the total of the monies lent to Statewide on 25 and 28 June 1996 and the absence of any evidence which could suggest any other reason for the two loans to Statewide, and the fact that Ms Pike arranged all of those payments, leads to that conclusion. I am satisfied that each investment was made as the result of carrying out an agreement between Statewide SBF and Kade (in each instance made through Ms Pike) for purposes that included achieving the result that the two loans would be made to Statewide. 397 The market value of the assets of Statewide SBF is not clear. Its assets include significant bank funds and units in Kade. As it had the capacity on 17 June 1996 to invest a further $20,000 in units in Kade, I infer that its bank funds prior to the two challenged investments were greater than the $59,273 at 30 June 1996. The market value of its units in Kade, which at 30 June 1996 were shown as having cost $150,687, is unclear. I infer that those units were some $29,000 less immediately before the two transactions. The market value will depend upon the value of Kade's assets. Its balance sheet at 30 June 1996 provides a basis for assessing the costs of those assets. However, as those assets are not all readily treated as having a market value about equal to their cost, or their depreciated value, and that those assets are substantial, I am unable to be satisfied that either s 83(2) or s 83(3) of the Act was contravened by either of the two investments. It would involve mere speculation to do so. 398 Accordingly, I am not satisfied that APRA has established its claim against the respondents in respect of this transaction. (xi) The two Driving Centre transactions - findings 399 Commercial Driving Centre Pty Ltd ("Driving Centre") was registered on 5 July 1991. Its directors at material times were Mr Stacey and Jeanette Ann Stacey ("Ms Stacey"). 400 On 26 June 1996, The Commercial Driving Centre Pty Ltd Super Benefit Fund ("Driving Centre SBF") was established. Its trustees were Mr Stacey and Ms Stacey. It was a regulated superannuation benefit fund under the Act from that date. 401 On 26 June 1996 the Marrlth Property Unit Trust ("Marrlth") was established. Its trustee was Super Benefit. 402 Driving Centre's business is that of driving instructors. Both Mr Stacey and Ms Stacey work in the business. Mr Holloway had been their accountant since about 1984. It was on his advice that they commenced the Driving Centre. From about 1995, their accounting work which was done by Holloway & Co was increasingly carried out by Mr Dalgleish. 403 Mr Holloway advised them to establish Driving Centre SBF and Marrlth in mid 1996. They had previously been urged by him to start financial planning for their retirement, and at the time had a modest capital sum available from a legacy. He explained to them that the capital sum could be paid to Driving Centre, and then paid by Driving Centre into the (proposed) Driving Centre SBF and in turn to the (proposed) Marrlth and in turn lent back to Driving Centre. They also discussed at that time the payment into the superannuation fund of monies likely to be available to Mr Stacey from the maturing in July 1997 of a superannuation policy in his name held with a public assurance company. 404 Mr Holloway did not mention Super Benefit or Mr Glaser. He led them to understand that they would control the investment decisions of each of the proposed new entities. 405 They instructed him to proceed to have Driving Centre SBF and Marrlth established. When the documentation was prepared, a further meeting took place. Mr Holloway instructed Mr Stacey and Ms Stacey to open bank accounts for each entity. He said that the name of the Marrlth account should be "Super Benefit Pty Ltd ATF the Marrlth Private Property Unit Trust". He did not otherwise refer to Super Benefit or to Mr Glaser, and he did not indicate that Mr Stacey or Ms Stacey could not be signatories of the Marrlth bank account. 406 Mr Stacey then opened bank accounts in the names of Driving Centre SBF and 'Super Benefit Pty Ltd ATF the Marrlth Private Property Unit Trust'. He and Ms Stacey were signatories of each account. 407 From time to time thereafter either Mr Holloway or Mr Dalgleish by telephone gave instructions to Mr Stacey or to Ms Stacey to undertake certain financial instructions. I accept Mr Dalgleish' evidence that any instructions he gave were at the explicit direction of Mr Holloway. 408 Just before 30 June 1996, Mr Dalgleish telephoned Driving Centre. He spoke to Ms Stacey. He told her that she and Mr Stacey had to find $40,000 to pay into Driving Centre, and that there were then to be a series of three cheques for $40,000 in sequence from Driving Centre to Driving Centre SBF, from Driving Centre SBF to Marrlth, and from Marrlth to Driving Centre. He said that the payments should all be made on the same day, and before the end of the financial year. 409 Ms Stacey said that they did not have access to $40,000 to effect those transactions. Mr Dalgleish told her to proceed, and that the cheques cancel each other out. Mr Stacey confirmed the details of the instruction with Mr Dalgleish by telephone before proceeding. They duly made the three payments in sequence on 28 June 1996. The payment of $40,000 by Driving Centre SBF to Marrlth was for units in Marrlth. The payment of $40,000 by Marrlth to Driving Centre was a loan to Driving Centre. 410 Both Mr Stacey and Ms Stacey held superannuation funds with a public fund. In April 1997, Mr Dalgleish suggested that they transfer those funds into the Driving Centre SBF, and, upon their agreement, he assisted in preparing the necessary documentation. The transfers of those funds into Driving Centre SBF took place on 10 April 1997. It appears that the amount transferred was $23,266.96. 411 Mr Dalgleish then requested that Driving Centre SBF invest $8,000 of its funds into Marrlth, and that Marrlth lend that sum of $8,000 to Driving Centre. On 21 April 1997, they met that request. Driving Centre SBF paid Marrlth $8,000 and Marrlth paid Driving Centre $8,000 in turn. 412 Shortly before 30 June 1997, Mr Dalgleish again requested Mr Stacey and Ms Stacey to undertake a further series of transactions. He told them they required $34,000. As it happened, Driving Centre had just received $19,000 for the sale of a truck, and Mr Stacey and Ms Stacey used credit card facilities to make up the balance of $15,000. Mr Stacey checked with Mr Dalgleish the series of transactions he was directing. Neither he nor Ms Stacey understood the reason for the directions. He was told to pay $34,000 into Driving Centre SBF, and then to pay that amount from Driving Centre SBF into Marrlth, and then pay that amount back into Driving Centre. Driving Centre was to place the $34,000 on a short term deposit. They were not told, and did not find out, how the sum of $34,000 was fixed. The evidence does not show that. Although evidence was led of that transaction, it was not a transaction which APRA alleged in its Amended Statement of Claim. I therefore regard it as providing possibly relevant evidence of the two transactions alleged, but in the event I have not had regard to that evidence. 413 Neither Mr Stacey nor Ms Stacey have had any dealings with Super Benefit other than paying its annual fee. They paid that fee of $170 per year without understanding what Super Benefit did. At no material time have they met Mr Glaser or other directors of Super Benefit. 414 At no time were Mr Stacey or Ms Stacey advised by Mr Holloway or by Mr Dalgleish about any restrictions on Driving Centre SBF being limited in its investment of its funds so as to be eligible for taxation concessions. Mr Holloway had earlier, when he proposed the structure to them, explained the taxation concessions available to Driving Centre SBF generally, and that it could not borrow funds. 415 A file note of Holloway & Co of 26 June 1996 records that Driving Centre SBF and Marrlth were to be set up and bank accounts opened before 30 June 1996 "and funds to be moved through the [accounts] in the order of $40,000 to be confirmed and advised to client 27/6/96". 416 The financial accounts of both Driving Centre SBF and Marrlth at 30 June 1996 record the investment of $40,000 for units in Marrlth. On 28 June 1996 Super Benefit as trustee for Marrlth issued a unit certificate for those units to Driving Centre SBF. The financial accounts of Marrlth and Driving Centre as at that date each also confirm that Marrlth had lent $40,000 to Driving Centre. Driving Centre's financial accounts show the superannuation contribution for that year to have been only $27,992.82, although it clearly received the $40,000. 417 The second transaction is also a simple one. The evidence shows that the rollovers from the public funds into Driving Centre SBF occurred on 10 April 1997 (Mr Stacey) for $23,266.96 and on 26 May 1997 (Ms Stacey) for $13,459.32. On 21 April 1997, Driving Centre SBF paid Marrlth $8,000 and on the same day Marrlth paid Driving Centre $8,000. That is recorded in their respective accounts as a loan, so the total indebtedness of Driving Centre to Marrlth at 30 June 1997 is shown as $47,830 (made up of $40,000 carried forward from 30 June 1996 plus the $8,000 less an unexplained credit adjustment of $170). 418 The Driving Centre SBF balance sheet at 30 June 1997 shows that it has $109,787.31 invested in units in Marrlth, including $40,000 carried forward from the previous year. The Driving Centre Profit and Loss Statement to 30 June 1997 shows superannuation contributions of $40,518.39 for that year. Its operating statement includes revenue by transfers from other funds of $36,726.28 and contributions from employer of $37,837.35. 419 The returns to the Insurance and Superannuation Commission prepared by Holloway & Co for Driving Centre SBF for each of the years of income 1995-96 and 1996-97 show the total assets of Driving Centre SBF to be $40,000 and the in-house assets as $0. The figures were not altered in the latter return to reflect any transactions occurring after 30 June 1996. They are therefore not figures upon which I can place any weight. 420 By a parity of reasoning with that which I applied in respect of other transactions, I find that each of the investments of Driving Centre SBF in Marrlth of $40,000 on 28 June 1996 and of $8,000 on 21 April 1997 constituted in-house assets of Driving Centre SBF, under s 71(2) of the Act. 421 I also find that the investment by Driving Centre SBF of $40,000 for units in Marrlth on 28 June 1996 contravened s 83(3) of the Act. That was the first investment by Driving Centre SBF. Whatever the market value of its assets, and the market value was equal to or very close to the cost of the investment, the investment led to Driving Centre SBF market value ratio of its in-house assets exceeding 5 per cent. 422 I further find that the investment by Driving Centre SBF of $8,000 for units in Marrlth on 21 April 1997 contravened s 83(2) of the Act. Unless there were very significant further inflow of funds into Driving Centre SBF between 30 June 1996 and 21 April 1997, so that the units acquired on 28 June 1996 as an in-house asset no longer represented 5 per cent or more of the assets of Driving Centre SBF, the acquisition of a further in-house asset contravened s 83(2) of the Act. The Driving Centre SBF accounts to 30 June 1997 provide a sufficient picture to be satisfied that no such inflow occurred, so that the in-house ratio of the market value of the assets was still greater (and probably still much greater) than 5 per cent at the time. 423 It will be necessary to consider the consequences of those findings to s 85 of the Act later in these reasons. (xii) The three Eden transactions - findings 424 Eden Comfort Conditioning Pty Ltd ("Eden") was registered on 3 May 1991. Its directors at material times were Christopher Trevor Lorimar ("Mr Lorimar") and Mauro Sergio De Gioia ("Mr De Gioia"). Eden supplies and installs space heating systems. 425 On 24 June 1996, The Eden Comfort Conditioning Pty Ltd Super Benefit Fund ("Eden SBF") was established. Its trustees were Mr Lorimar and Mr De Gioia. It was a regulated superannuation benefit fund under the Act from that date. 426 On 24 June 1996 the Macris Property Unit Trust ("Macris") was established. Its trustee was Super Benefit. 427 Mr Lorimar gave evidence. He was an astute person, perhaps more aware of the details of the superannuation transactions than some of the other witnesses who were directors of employer-sponsors under the Act. He and his "partner", Mr De Gioia, had Eden SBF and Macris established to have greater control of their superannuation investments. Mr Lorimar was dissatisfied with the investment performance of certain superannuation policies he had obtained. He and Mr De Gioia thought that managing their own superannuation fund investments could lead to better returns. Mr Lorimar was aware of the taxation benefits of Eden making contributions to Eden SBF to the applicable maximum. He was also aware that Eden SBF could not borrow to leverage its investments, but that by investing in units in Macris, and by controlling the investment decisions of Macris, leveraging investments could be achieved. 428 In June 1996, he and Mr De Gioia consulted with Mr Holloway before establishing that structure. They had been referred to Mr Holloway by a friend. Mr Holloway explained or confirmed the matters referred to in the preceding paragraph. It was discussed that Macris would invest mainly in real estate. It was also discussed that Eden also planned to make a superannuation contribution of $35,000 before 30 June 1996. Having conferred with Mr Holloway, and having authorised the establishment of Eden SBF and of Macris, that payment was made to Eden SBF pursuant to that intention. 429 At that meeting Mr Lorimar learnt of Super Benefit and of Mr Glaser, when Mr Holloway told them that the proposed unit trust had to be seen to be at arm's length from the proposed superannuation fund, and that Mr Glaser would need to be involved to ensure that that was what occurred. Mr Lorimar understood Mr Glaser would be a co-director of the unit trust. 430 Mr Glaser subsequently became a co-signatory of the cheques for Macris, but did not play any active part in its investment decisions. They were made by Mr Lorimar and Mr De Gioia. Mr Glaser did ask about the purpose of particular cheques of Macris before signing them. 431 At that meeting, Mr Holloway advised Mr Lorimar and Mr Di Gioia that one investment Macris could make was the advance of funds by way of loan to Eden, provided it got a commercial rate of interest. Mr Lorimar had told Mr Holloway that they were interested in investing in another company, and asked whether monies available in the unit trust could be used directly for that investment or could be lent to them or to Eden so that they, or Eden, could invest in that company. They explained that one alternative was to borrow the monies needed to make that investment. 432 Mr Lorimar arranged to open the bank accounts of Eden SBF with himself and Mr Di Gioia as signatories, and of the account entitled 'Super Benefit Pty Ltd ATF The Macris Private Property Unit Trust'. That latter application bore the seal of Super Benefit and was countersigned by Mr Glaser and Mr Lorimar as directors. They were the signatories to the account. 433 On 28 June 1996 Eden paid $35,000 superannuation contributions to Eden SBF. It appears that Eden SBF bank account was opened on that day. On 4 July 1996, Eden SBF paid $34,500 to Macris (debited on 6 July 1996). Despite the date of that payment, the Eden SBF financial statements at 30 June 1996 show it had $34,500 invested in units at cost (clearly in Macris) at that date. The contribution of $35,000 was its sole income for the year. The bank statement of Macris shows the $34,500 received on 4 July 1996 and a debit of $34,000 on 6 July 1996. By cheque also dated 4 July 1996, signed by Mr Lorimar and Mr Glaser, Macris paid to Eden $34,000. That payment was by way of loan. The Macris financial accounts as at 30 June 1996 also show that $34,500 units were issued by that date. They show the current assets to be $34,495 cash at bank ($5 was paid for the cheque book), so at that date there was no loan recorded to Eden. 434 On 3 February 1997 Eden paid $4,000 superannuation contribution to Eden SBF, by cheque dated 31 January 1997. On 27 March 1997, Eden SBF paid $4,000 to Macris. The balance of its account before that first receipt was $476.94 and after that payment was $472.41 and there were no other transactions of any significance recorded in its bank statement between those dates. On 27 March 1997, Macris (cheque signed by Mr Lorimar and Mr Glaser) paid Eden $6,000. That was debited to the Macris account on 1 April 1992. Its credit balance before that payment was $6,472.92. On 3 February 1997, Eden had also paid to Macris $2,040 (a handwritten note suggests that was for "interest"). I assume that that payment together with the $4,000 cheque produced the credit level at 27 March 1997. Again, the payment by Eden SBF to Macris of $4,000 was for units in Macris, and the payment by Macris to Eden of $6,000 was by way of loan. 435 On 30 June 1997, Eden paid to Eden SBF $10,400. On the same day, Eden SBF paid to Macris $10,000. On the same day, by cheque signed by Mr Lorimar and Mr Glaser, Macris paid Eden $12,000. It was received by Eden and credited to its account on that day, although not debited to Macris account until 1 July 1997. The working papers for the Macris accounts to 30 June 1997, note that cheque was unpresented at 30 June 1997, but to be taken into account as a debit at that date. The payment by Eden SBF to Macris was for units in Macris, and by Macris to Eden was by way of a loan. 436 On 30 June 1997 Eden also paid to Macris $2,220 for "interest". 437 The financial statements of Eden SBF at 30 June 1997 show it had $52,668.48 units at cost (an increase of $17,668.48 during the year) and total assets of $53,858.94. Its income for the year included $20,000 employer contributions. 438 The Macris financial statements at 30 June 1997 confirm that number of units issued. The ledger indicates that those units were issued for three payments of $4,000, $14,100 and $68.48. There was a distribution of $68.48, presumably converted into units. It had then total assets of $52,668.48, comprising a small amount in the bank and $52,000 on loan to Eden. The ledger shows that was made up of three advances of $34,000, $12,000 and $6,000. It had a net profit of $68.48, being the difference between interest received of $4,274.35 and interest paid of $4,100.01 and bank charges. The majority of that interest income, namely $4,260, came from monies or deposit with a bank. 439 Mr Lorimar's evidence suggests that he decided upon the amount of the several payments referred to. He explained the payment of $6,000 and its timing (compared to $4,000) as made up from the $2,040 (interest on money borrowed paid on 3 February) plus the $4,000, and that it was his oversight that the investment of the $6,000 was not made until 1 April 1997. He assumed the interest of $2,040 was at 12 per cent on the $34,000 (it represents, as a matter of arithmetic, interest on $34,000 at 12 per cent for six months). He and Mr Di Gioia decided up on Macris lending money to Eden, as an appropriate investment for Macris. He had the "impression" from the first meeting with Mr Holloway that that is what they could do. He was not then (or later) told of any in-house asset rules. 440 Eden SBF lodged Annual Returns with the Insurance and Superannuation Commission. They were audited by Holloway & Co. The 1996-97 Annual Return showed its total assets as $53,858 and its in-house assets as nil. The 1995-96 Annual Return showed its total assets as $34,995 and its in-house assets as nil. 441 In light of Mr Lorimar's evidence that any timing differences in the payments were really only from inattention on his part, I am satisfied by the same reasoning as applied in respect of other transactions that each of the three investments by Eden SBF in Macris was an in-house asset of Eden SBF under s 71(2) of the Act. I find that each of · the payment by Eden SBF to Macris of $34,500 on or about 4 July 1997 for units, · the payment by Eden SBF to Macris of $4,000 on 27 March 1997 for units, and · the payment by Eden SBF to Macris of $10,000 on 30 June 1997 for units were made as the result of Eden SBF and Macris (in each instance through Mr Lorimar) carrying out an agreement for purposes that included achieving the result that Macris would make loans to Eden of $34,000, $6,000, and $12,000 respectively. 442 At the time of the investment on about 4 July 1997, both Eden SBF and Macris had only just been formed. The investment was the first transaction of any substance for either of them. I am satisfied that, in contravention of s 83(3) of the Act, the acquisition of that investment resulted in the market value ratio of the in-house assets of Eden SBF exceeding 5 per cent. 443 Having regard to the assets held by both Eden SBF and Macris at 30 June 1997, I find that s 83(2) of the Act was contravened by each of the two subsequent investments by Eden SBF on 27 March 1997 and 30 June 1997. Effectively, all the assets of Eden SBF were represented by its units in Macris, and nearly all of the assets of Macris were represented by its loans to Eden. There are no assets which indicate that the market value of any assets of Macris SBF were much, if any, different from their nominal value. Consequently, at each of 27 March 1997 and 30 June 1997, the market value ratio of the in-house assets of Eden SBF exceeded 5 per cent and the further acquisition of in-house assets contravened s 83(2) of the Act. 444 In the case of these transactions, I am not satisfied that it was Mr Holloway's plan either when Eden SBF and Macris were established, or subsequently, that Macris would be used as a conduit for superannuation contributions from Eden being passed back to Eden. The meeting in June 1996 involved proposals for Macris which Mr Lorimar and Mr De Gioia explained were more extensive than would have been available by Eden SBF investing its assets in Macris, and Macris then using those assets. Although Mr Lorimar's evidence was that Mr Holloway had adverted to the prospect of Eden SBF investing funds in Macris, and Macris then lending those funds back to Eden, I am not persuaded that that was the case. As noted, later in his evidence he described that account as being an "impression" only of part of that meeting. There is no evidence which directly suggests that Mr Holloway played any role in causing the three Eden transactions to occur. Whilst I am confident that Mr Lorimar had no intention to avoid the application of any provision of the Act by those transactions, I think that he was the person who decided upon their timing and the amounts involved. These transactions were one of the few in which Mr Holloway positively asserted that he played no role, and in this respect I accept his evidence. 445 Consequently, I am not prepared to find that Mr Holloway or Holloway & Co played a part in these three transactions so as to enliven s 85(1) of the Act. I am also not prepared to find that either Mr Holloway or Holloway & Co procured Eden SBF to make the three investments in Macris with the intention that, by any of the transactions, the market value ratio of the in-house assets of Eden SBF would be, or be likely to be, artificially reduced or that thereby the application of a provision of Pt 8 of the Act would be avoided. 446 In my judgment, APRA has not established a contravention of s 85 of the Act by the respondents in relation to the three Eden transactions. (xiii) The two Kino transactions – findings 447 Kino Film Co Pty Ltd ("Kino") was registered on 8 January 1992. Its directors at material times were Kerry Margaret Heysen ("Ms Heysen") and Robert Scott Hicks ("Mr Hicks"). 448 On 6 March 1995, The Kino Film Co Pty Ltd Super Benefit Fund ("Kino SBF") was established. Its trustees were Ms Heysen and Mr Hicks. It was a regulated superannuation benefit fund under the Act from that date. 449 On 6 March 1995 the Onik Property Unit Trust ("Onik") was established. Its trustee was Super Benefit. 450 The annual return of Kino SBF to the Insurance and Superannuation Commission for 1994-95 recorded its total assets as $69,941 and that it had no in-house assets. Its annual return for 1995-96 recorded its total assets as $152,540 and that it had no in-house assets. 451 On 22 June 1995, Ms Heysen arranged the following payments: $45,000 from Kino to Kino SBF $45,000 from Kino SBF to Onik, for units in Onik $18,006 from Onik to Kino $26,994 from Onik to Ms Heysen and Mr Hicks. The latter two payments total $45,000. 452 On 13 July 1995, $18,006 was deposited by Kino to the credit of Onik, described as "repayment of short term loan". 453 In the next financial year, the following payments were made on 20 June 1996: Kino paid Kino SBF $55,000 Kino SBF paid Onik $55,000 Onik paid Kino $44,000. 454 The Kino SBF financial statements to 30 June 1995 show contributions received during the year of $70,000, and after sundry expenses, a net profit of $69,441.20. There was an earlier payment by Kino to Kino SBF of $25,000 on 9 May 1995, and a payment by Kino SBF to ONIK on 10 May 1995 of $23,880, and a further payment by Onik to Mr Hicks of $23,880 on 10 May 1995. No special point is made of those three payments. Its assets are shown as represented by investments of $68,880 and a small bank deposit. At 30 June 1996, its financial statements showed total investments as $148,020, being for units in Onik. The superannuation contributions received during that year were $93,140. The unit certificate dated 30 June 1995 of Super Benefit to Kino SBF was for 68,880 units in Onik. That number is, I infer, the total of 23,880 and 45,000. Subsequently, a unit certificate dated 30 June 1996 was issued by Super Benefit to Kino SBF for a further 79,140 units in Onik. 455 The Onik financial statements to 30 June 1995 indicate that it acquired assets for $42,139 in May 1995, which it apparently hired out. After depreciation, it made a small loss. Its capital was made up of $68,880 for units issued to Kino SBF. After that small loss, the capital was represented by · loan to Ms Heysen and Mr Hicks $ 3,020 · loan to Kino $19,726 · plant and equipment, depreciated to $39,795 and sundry investments and liabilities. Its net assets were $68,011.57. At 30 June 1996 its net assets were $139,663.28 including a loan to Kino of $44,955, plant and equipment depreciated to $31,036, and investments of $52,495. It had a small debt of $310 to Ms Heysen and Mr Hicks. It had issued 148,020 units. It is unclear what those investments were. 456 The Kino financial statements to 30 June 1995 showed a small overall deficit of $2,306.12, including a deferred liability to Ms Heysen and Mr Hicks of $5,137.55 and to Onik for $19,726. Its operating expenses included $70,000 superannuation payments. For the year ending 30 June 1996, Kino's financial statements show as deferred assets a loan to Ms Heysen and Mr Hicks of $20,341.43 and as deferred liabilities a loan from Onik of $44,955. Its superannuation contributions for the year are shown as $89,915. 457 There are no trial balances or journal entries to explain the amounts in relation to the payments. 458 Mr Holloway arranged for the establishment of the Kino SBF and Onik on instructions given by Ms Heysen and Mr Hicks, and following advice from Mr Holloway. He had been their accountant for some years prior to 1995. The evidence is not clear enough for any detailed findings to be made about the nature of that advice. I find, on the basis of Ms Heysen's evidence, that the payments made on 22 June 1995 and those made on 20 June 1996 were made by Ms Heysen on the instruction and advice of Mr Holloway. I am satisfied that she did not make any of those payments on her own initiative, and that she did not decide on the amount of those payments. There is no evidence to explain satisfactorily the reason for the breakup of the two payments made to Kino by Onik and to Ms Heysen and Mr Hicks on 22 June 1995, or why the payment to Kino by Onik on 20 June 1996 was for $44,000. Mrs Heysen in her evidence also said that "we" (it is unclear whether she meant Kino or herself and Mr Hicks personally) had lent substantial sums to Onik when it became established, and that she may have regarded payments by Onik to Kino as repaying such sums. I also find that, on Mr Holloway's advice, Ms Heysen opened bank accounts in the name of Kino SBF and Onik and that she and Mr Hicks became signatories to those accounts. She was able to operate those accounts, and in particular the Onik account, without reference to Super Benefit or Mr Glaser. Her custom was to seek Mr Holloway's advice and approval in respect of any significant transaction. 459 In my judgment, the acquisition of units in Onik by Kino SBF on 22 June 1995 constituted an in-house asset of Kino SBF under s 71(2) of the Act. I am satisfied that that investment was made by Kino SBF to Onik when each had agreed, through Ms Heysen, to that investment for purposes which included achieving the result of a loan to Kino of $18,006. I am not satisfied that the payment to Ms Heysen and Mr Hicks of $26,994 was a "loan or an investment". I suspect it was largely, if not entirely, a repayment of a loan made by them to Onik at an earlier stage. The word "loan" is not defined in s 10 of the Act. I do not see how that word, in its ordinary usage, can encompass the repayment of a loan. The term "investment" is defined to mean any mode of application of money for the purpose of gaining interest income or profit. Again, I do not think that the retirement of debt (if that is what it was) falls within that description. I note that the Onik accounts to 30 June 1995 show as an asset a loan of $3,020 to Ms Heysen and Mr Hicks. I am not prepared to regard that loan as related to the payment to them of $26,994 on 22 June 1995. It is different in amount. There is no evidence which explains that figure. It may have arisen after 22 June 1995, or have existed independently of the payment of $26,994. 460 In view of my conclusion that the character of the payment of $26,994 to Ms Heysen and to Mr Hicks is not shown to be a loan to them or an investment by Onik, I do not need to consider whether Ms Heysen and Mr Hicks are associates of Kino for the purposes of s 71(2)(c) as defined in s 70 of the Act. 461 However, notwithstanding that a significant proportion of the investment of $45,000 in units in Onik was applied to the payment of $26,994 to Ms Heysen and Mr Hicks, and $18,006 of that investment was lent to Kino, I think that the investment itself is an in-house asset of Kino SBF. Section 71(2) provides that the investment in Onik is an in-house asset if it was made · as the result of entering into or carrying out an agreement, and · any person who entered into or carried out the agreement did so for the purpose, or a purpose, of achieving a particular result. 462 The result is "that a loan or investment would be made to or in …" the employer-sponsor. It does not require that the loan to or investment in the employer-sponsor be in the same amount as the loan or investment of the superannuation fund under review. It would provide a very ready means of avoiding the consequences of Pt 8 of the Act if that were the case. The result referred to is one introduced by the indefinite article. That means of expression does not tie the amount of the loan to or investment in the employer-sponsor to the amount of the investment. It requires only that the loan to or investment in the employer-sponsor be the purpose, or one of the purposes, for one of the parties to the agreement which led to the investment being made. 463 The investment by Kino SBF of $55,000 on 26 June 1996 for units in Onik was also one which, in my judgment, was an in-house asset of Kino SBF under s 71(2) of the Act. My reasons for that conclusion are the same as my reasons for concluding that the earlier investment on 22 June 1995 was an in-house asset of Kino SBF. 464 As the investment by Kino SBF of $45,000 in Onik on 22 June 1995 was made just before the end of the financial year, its end of year accounts provide a starting point for considering whether that investment contravened s 83 of the Act. APRA has not claimed in these proceedings that the investment by Kino SBF of $23,880 for units in Onik on 10 May 1995 was an in-house asset of Kino SBF. I shall proceed on the basis that it was not. I am satisfied, having regard to the assets of Kino SBF at 30 June 1995, that its units in Onik from that investment and from the subject investment on 22 June 1995 were its only substantial assets. I am also satisfied that the market value of its 23,880 units in Onik immediately before the subject transaction was not much different from their cost; Onik appears to have acquired some plant and equipment soon after it was established, but such assets are very unlikely to have dramatically appreciated in value by 22 June 1995. Consequently, when the investment of $45,000 was made on 22 June 1995, I find that the market value ratio of Kino SBF in-house assets moved from zero to a level in excess of 5 per cent. Even if it is appropriate to treat its assets immediately before the investment as including the $45,000 for an instant held by it upon its receipt from Kino, the same conclusion would follow. Accordingly I find that investment contravened s 83(3) of the Act. If, contrary to my assumption, the investment of $23,880 for units in Onik on 10 May 1995 was an in-house asset, then the in-house assets of Kino SBF already exceeded 5 per cent, so that the investment now under consideration contravened s 82(2) of the Act. 465 The investment of $55,000 by Kino SBF in Onik on 26 June 1996 was also at a time when the financial accounts to 30 June 1996 present some picture as to its assets. The assets comprise, almost entirely, units in Onik. Onik's assets at 30 June 1996, so far as they are disclosed, are set out above. Its income for the year was $6,720 for equipment hire, and it made a small loss after the depreciation expense on its plant and equipment. Its net assets of $139,633 represent a value of slightly under $1 per unit. Its assets also include cash at bank, and the loan to Kino. I am unable to find with any precision the market value of the Kino SBF units in Onik. I find, given the mix of Onik's assets and their nature that their market value would not be dramatically greater than their historical cost less depreciation. It is highly unlikely that the investments at cost, whatever their nature, would have a market value so different from their cost as to distort the value of Kino SBF units in Onik in any way which affects the application of s 83 to the circumstances. In any event, the effect of this transaction was to increase the Kino SBF in-house assets (then represented by at least 45,000 units of the units in Onik) by a further 55,000 units. The issued units at 30 June 1996 were 148,020 in number. Thus, before the issue of 55,000 units as part of the particular transaction under consideration, and following the acquisition of an in-house investment in Onik on 22 June 1995, some 45,000 or almost half of the issued units in Onik were held by Kino SBF as in-house assets. That meant that the market value ratio of its in-house assets before 26 June 1995 exceeded 5 per cent, whatever that market value may have been. The acquisition of a further in-house asset on 26 June 1996 therefore contravened s 83(2) of the Act. 466 There remains, as with other transactions, the question of the application of s 85 of the Act in the light of these findings. (xiv) The two Transport Drivers transactions – findings 467 Transport Drivers Pool Pty Ltd ("Transport Driver") was registered on 10 August 1982. Its directors at material times were Beverley Ann Gregory ("Ms Gregory"), Stevan Richmond Gregory ("Mr Gregory"), Peter Richard Reimann ("Mr Reimann"), Dianne Patricia Reimann ("Ms Reimann"), Darren Phillip Johns ("Mr Johns") and Penelope Jane Keen. 468 On 26 June 1995, Transport Drivers Pool Pty Ltd Super Benefit Fund ("Transport Drivers SBF") and separately Transport Drivers Pool No 2 Pty Ltd Super Benefit Fund ("Transport Drivers No 2 SBF") were established. The trustees were Mr Gregory, Mr Reimann and Mr Johns in each case. Each was a regulated superannuation benefit fund under the Act from that date. 469 On 26 June 1995 the Best Peda Private Property Unit Trust ("Best Peda") was established. Its trustee was Super Benefit. 470 Mr Gregory, Mr Reimann and Mr Johns each had separate businesses in the transport industry, and had joined together to carry out a large job. At the end of that job, they had some valuable heavy machinery which they owned, and they wished to continue their joint association. In about March 1995, they consulted Mr Holloway for that purpose. 471 Mr Holloway advised them to establish a unit trust to own the heavy machinery, and to lease that machinery to provide income for superannuation funds which would take units in the unit trust. Mr Holloway had been Mr Gregory's accountant for some years, and was aware that he "had a company". He suggested the structure involving an employer company, a superannuation fund, and a unit trust. At that meeting, according to Mr Gregory, Mr Holloway told them that they could not control the assets of both the superannuation fund and the unit trust, and that Mr Glaser was a person who could "manage the unit trust". However, Mr Gregory also gave evidence that they were told that the three men also could not control the superannuation fund, and that it had to be distanced from or 'at arm's length' from them. APRA submitted that his evidence discloses a level of awareness on the part of Mr Holloway which is inconsistent with Mr Holloway's evidence, and so impinges upon Mr Holloway's credit. I have carefully considered that submission. I do think that Mr Gregory's evidence is sufficiently clear about that discussion to place any real weight upon it as showing a detailed awareness by Mr Holloway of the provisions of the Act, and it did not assist me in my assessment of Mr Holloway's credibility. 472 At a subsequent meeting between those persons, in April 1995, Mr Holloway was instructed to establish Transport Drivers SBF and Transport Drivers No 2 SBF. Mr Holloway had told them it was necessary to establish two superannuation funds, because of restrictions on the number of members of each fund. He was also instructed to establish Best Peda. They were duly established on 26 June 1995. Each of Mr Gregory, Mr Reimann and Mr Johns became trustees of each of Transport Drivers SBF and Transport Drivers No 2 SBF. 473 Shortly after those funds and the trust were established, Mr Holloway telephoned Mr Gregory and instructed him to establish bank accounts for Transport Drivers SBF, Transport Drivers No 2 SBF, and Best Peda. He did so. He and his wife became the signatories of the account of Best Peda, and they disclosed (as was the case) that the trustee was Super Benefit. 474 Mr Holloway also asked Mr Gregory to arrange the transfer of two payments of $59,000 from Transport Driver to each of Transport Drivers SBF and Transport Drivers No 2 SBF, the transfer of each of those amounts from the two superannuation funds to Best Peda, and the transfer of the total of $118,000 from Best Peda to Transport Drivers. He was told to ensure that those payments were all made on the same day, and before 30 June 1995 being the end of the financial year. Mr Gregory told Mr Holloway that Transport Drivers did not have sufficient available funds to make those payments. He was told that it was not necessary to have the funds available, as "its all going around in a circle" and "would sort itself out". 475 On 28 June 1995, Mr Gregory duly arranged for · $59,000 to be paid by Transport Drivers to Transport Drivers SBF · $59,000 to be paid by Transport Drivers to Transport Drivers No 2 SBF · $59,000 to be paid by Transport Drivers SBF to Best Peda · $59,000 to be paid by Transport Drivers No 2 SBF to Best Peda · $59,000 to be paid by Best Peda to Transport Drivers · $59,000 (a separate payment) to be paid by Best Peda to Transport Drivers. There were separate cheques for each of those payments. Each of the payments to Best Peda was for units in Best Peda, and each of the payments to Transport Drivers was by way of a loan. Those payments reflect the two transactions which, APRA alleges, involved a contravention of s 85 of the Act by the respondent. Unit certificates issued by Super Benefit to Transport Drivers SBF and to Transport Drivers No 2 SBF were in respect of 51,150 units and 50,150 units respectively, and dated 30 June 1995. 476 Transport Drivers traded under the name Gawler Transport. It hired out heavy machinery, owed by Best Peda and leased by Best Peda to it. There was no practice, according to the evidence, of recording the leasing arrangements between Best Peda and Transport Drivers. Mr Gregory did not think that any lease payments were made. Since its establishment, Best Peda had acquired additional heavy machinery and had also sold certain heavy machinery. All decisions about selling or buying assets, or its leasing of its assets to Transport Drivers, were made by Mr Gregory, Mr Reimann and Mr Johns. At no time was Mr Glaser or Super Benefit consulted on such matters. Nor did they have any involvement in the running of the business. Mr Gregory has never met him or had any dealings with him. 477 The financial statements of Transport Drivers SBF to 30 June 1995 and Transport Drivers No 2 SBF show that its only asset in each case was $59,000 in contributions from Transport Drivers, and that asset in each case was applied to acquisition units in Best Peda. 478 The financial statements of Best Peda to 30 June 1995 show that it had issued 118,000 units during the year, and had net assets of $112,775 represented by the depreciated value of its heavy vehicles of $187,435 less a current liability by way of loan from Transport Drivers of $74,660. There had been a small trading loss of $5,225 consequent upon equipment hire (presumably to Transport Drivers) of $4,640 less depreciation of $9,865. A journal entry of Transport Drivers records equipment hire payable to Best Peda of $2,320 per month. The trial balance indicates that the figure of $74,660 represents the net amount owing of an advance of $79,300 after offsetting that liability of $4,640 (two months' rental). The depreciation schedule shows 15 vehicles, all of some age, acquired in May 1995 for $197,300. 479 There appear to be two different sets of financial statements of Transport Drivers to 30 June 1995. One shows a net trading loss of $35,370.80. The expenses include depreciation and lease of equipment (but no details), and income as including profit on sale of fixed assets of $16,075 (again with no details). The superannuation expense is only $1,861.68. The net assets of $17,473.89 are represented by depreciated plant and equipment worth $23,660 less $6,186.11 owing to creditors. It does not show any asset representing a loan to Best Peda of $74,660. 480 The other set of financial accounts shows a much larger income, and expenses, and a net trading loss of $27,425.57. Many expense items are different. It includes a superannuation expense of $122,613.04. The trial balance suggests it is made up of two amounts of $1,861.68 and $120,751.36. The balance sheet shows total shareholders funds are $25,419.12, arrived at after including as an asset $74,660 lent to Best Peda and deferred liabilities each of $15,000 apparently for sums advanced by Mr Gregory, Mr Johns and Mr Reimann. Curiously, in the material before the Court, that set of accounts signed by the directors is dated 15 June 1995. The trial balance records those loans to have been made in that financial year. 481 Journal entries for "Gawler Transport/Coleman" indicate debit entry 'Loan – Best Peda PPUT' of $116,500 and credit entry for "M/V", presumably the heavy equipment, for $116,500. There are also separate debit entries for loan to Best Peda of $80,000 and $79,300 with the corresponding credit entries being $80,000 for sales for plant and equipment not yet paid for, and $79,300 loan by Best Peda. There are two superannuation payments, each of $59,000 recorded. 482 There is in evidence a further set of financial statements of "Gawler Transport – Coleman Account" to 30 June 1995 with net assets of $7,945.23 including a load to Best Peda of $74,660 and liabilities of $15,000 each to Mr Gregory, Mr Reimann and Mr Johns. The net profit of $7,945.23 includes a superannuation expense of $120,751.36. 483 As best I can determine, the $74,660 liability of Best Peda to Transport Drivers at 30 June 1995 is arrived at in the following way: Monies "advanced" to or owing by Best Peda for heavy vehicles, and for plant and equipment, transferred to it 116,500 80,800 197,300 Less repayment (2 amounts of $59,000) 118,000 79,300 Less credit for 2 monthly lease payments due 4,640 74,660 Those matters were not explained in any detail in the evidence. The two payments of $59,000, I find, were in reduction of the Best Peda indebtedness to Transport Drivers arising from it acquiring the plant and heavy vehicles, rather than by way of loan to it. That finding that Best Peda acquired from Transport Drivers its plant and its heavy vehicles is consistent with the accounts of Best Peda which show "Motor Vehicles $197,300" as a fixed asset. 484 The cross-examination was limited to demonstrating that the written down value of the heavy machinery, or its depreciated value, was not a reliable guide to its market value. No evidence was led about whether the transfer value of $199,300 for the motor vehicles or heavy machinery represented its then market value, or simply its then written down value in the accounts of Transport Drivers. Neither of the Transport Drivers accounts show previous years figures, from which one would expect to see the then written down value of the motor vehicles or heavy machinery. 485 In the case of each superannuation fund, the Annual Return to the Insurance and Superannuation Commission is for the 1995-96 year of income. The Transport Drivers SBF return showed total assets of $50,150 and no in-house assets. The Transport Drivers No 2 SBF return showed the same. I speculate that there has been a use of the form of return for 1995-96 rather than 1994-95 in error, and that that information relates to the 1994-95 year of income. I do not think that it makes much difference. I am prepared to find that, in respect of the 1994-95 year of income, the return showed the in-house assets of each of the funds as nil. 486 In my judgment, neither of the investments of $59,000 on 25 June 1995 by Transport Drivers SBF and by Transport Drivers No 2 SBF in Best Peda was an in-house asset of the respective funds. In each case, I find that the investment was made as the result of Transport Drivers SBF in one instance and Transport Drivers No 2 SBF in the other carrying out an agreement with Best Peda (each entity through the mind of Mr Gregory) for purposes that included the purpose of achieving the result that the amount of the investment would be applied to Transport Drivers. However, I have found above that the application of those funds was to reduce the existing indebtedness of Best Peda to Transport Drivers. That indebtedness arose when Best Peda acquired assets from Transport Drivers. There is nothing to indicate that that transaction was not a bona fide one. The evidence explains the circumstances in which it came to occur. 487 The next question is whether that intention was to achieve a loan to or investment in Transport Drivers. As noted earlier in these reasons, the term "loan" is not defined in the Act. It has a well recognised meaning. The repayment of a loan or indebtedness is not itself the making of a loan. The term "investment" is defined in s 10 as follows: "investment means any mode of application of money for the purpose of gaining interest, income or profit." 488 It may have been a consequence of the significant reduction in its indebtedness to Transport Drivers that Best Peda was better able to operate profitably. If its indebtedness to Transport Drivers attracted an obligation to pay interest (there is no direct evidence to that effect), the reduction of the indebtedness by $118,000 would reduce the interest liability. The leasing fees earned by Best Peda would therefore not be reduced to the same extent by the interest liability, and its profit would be potentially greater. Even if that be the case, I am doubtful that the reduction of existing indebtedness in these circumstances constitutes an investment, as defined. This matter was not argued before me and so the views I express are tentative only. They are not critical to my decision, which is made on a finding of fact set out below. The definition refers to the purpose of the investment. In my opinion, that invites attention to what the asserted investment was designed to achieve directly, rather than indirectly or consequentially. The purpose of the application of the $118,000 was not to gain interest; it was (on the assumption that the indebtedness carried an interest obligation) to reduce the interest liability of Best Peda. It was not to gain income; the income of Best Peda came from the leasing of its heavy machinery and motor vehicles. Nor, in my view, was it to gain profit. 489 The expression "profit" is capable of more than one meaning: Bishop v Smyrna & Cassaba Railway Co [1895] 2 Ch 265 at 269, 270; Bond v Barrow Haematite Steel Co [1902] 1 Ch 353 at 364-366; Re Spanish Prospecting Co Ltd [1911] 1 Ch 92 at 96-102; Apand Pty Ltd v Kettle Chip Co Pty Ltd (1999) 162 ALR 505. It will derive its meaning from the context in which it appears. Part 8 of the Act has the object of setting out rules about the level of in-house assets of regulated superannuation funds. It seeks to limit that level, no doubt to preserve the security which superannuation funds are intended to provide against being exposed to the vagaries of the business of the persons whose security is being provided for. The particular investments, involving the purpose of reducing the indebtedness of Best Peda to Transport Drivers, would not in fact involve any increment to the level of exposure of the funds' assets to the prospects of Transport Drivers. If the monies invested in Best Peda were applied in some way other than debt reduction, its net assets would have remained the same but its exposure to Transport Drivers would have been greater. The debt reduction did not affect its net assets, and it reduced its exposure to Transport Industries. It is hard to see why s 71(2) was intended to prohibit the achieving of that result. 490 In determining the purpose of a payment, regard may be had to the matrix of circumstances surrounding it: Lees & Leech Pty Ltd v Commissioner of Taxation (1997) 73 FCR 136 at 146 per Hill J. His Honour refers to a number of cases supporting that proposition. It is also speculative as to whether the debt reduction would, in reality, gain profit for Best Peda. To reach any view on that matter, it would be necessary to make findings about what Best Peda might otherwise have done with the $118,000 and the extent to which it might have gained profit from those activities. That finding would need to be compared to the interest relief from the debt reduction, to determine whether the purpose of the debt reduction was to gain profit. The debt reduction should not be treated in isolation from the use to which the funds available from the investment might be applied in determining whether a purpose of the agreement was an investment for the purpose of gaining profit. The nature of that inquiry will be a complex, if not an almost impossible, one. Sensible commercial decisions may involve debt reduction even though the potential net profit gain may be less than that associated with some different application of the funds available. For those reasons, I have formed the tentative view that in the present circumstances the intended debt reduction of Best Peda's indebtedness to Transport Drivers was not to achieve the result that a loan or investment (as defined) was to be made in or to Transport Drivers. 491 In any event, I do not find that the indebtedness of Best Peda to Transport Drivers did carry an obligation to pay interest. In the financial accounts of Best Peda, and of Transport Drivers (either version), to 30 June 1995 there is no item of expense or income respectively for interest on that indebtedness, even though the indebtedness is itself recognised. The two payments to Best Peda by the two superannuation funds, then intended to be applied by Best Peda in reduction of its indebtedness, were not for the purpose of gaining income because they made no difference to the income earning potential of Best Peda. I am not prepared to find that Mr Gregory had any different understanding of those matters. The consequence is that the reduction of indebtedness did not have the purpose of gaining income or profit. 492 I am not persuaded, therefore, that a purpose of the two investments of $59,000 in Best Peda was to achieve the result that a loan or investment would be made to Transport Drivers. Section 71(2) of the Act has not been enlivened by the two investments of Transport Drivers SBF and Transport Drivers No 2 SBF in Best Peda. 493 In each instance, the investment was the only investment of each of the funds during the year. If I am wrong in my conclusion that the investments were not in-house assets of Transport Drivers SBF and Transport Drivers No 2 SBF, clearly the investments each would contravene s 83(3) of the Act. The market value ratio of the in-house assets of each fund moved from nil to 100 per cent by the investments, whatever the market value of the units in Best Peda. 494 In this instance, I find that the respondents did not contravene s 85 by the two investments in Best Peda referred to because they did not result in an artificial reduction in the market value ratios of either funds' in-house assets. The market value ratio of the funds' in-house assets was not affected by the two investments. (xv) The Saw Works transaction – findings 495 Queenstown Saw Works Pty Ltd ("Saw Works") was registered on 2 May 1966. Its directors at material times were Mary Manhire ("Ms Manhire"), Andrew John Freebairn ("Mr Freebairn"), Paul Manhire ("Mr Manhire") and Ms Pike. Ms Pike is a sister of Mr Manhire. 496 On 26 June 1996, The Sawman Pty Ltd Super Benefit Fund ("Sawman SBF") was established. Its trustees were Mr Manhire and Ms Pike. It was a regulated superannuation benefit fund under the Act from 28 June 1996. 497 On 17 June 1996 the Murman Property Unit Trust ("Murman") was established. Its trustee was Super Benefit. 498 Ms Pike gave evidence that, on the advice of Mr Holloway, Sawman SBF has only ever invested in units in Murman, and Murman applied its available funds to acquire plant and equipment from Saw Works. 499 Saw Works has operated as a saw works since 1966. In July 1994, it bought a rival business. In March 1995, Ms Pike's father retired as the manager of Saw Works, and Mr Manhire commenced to run it. Soon after July 1994, Ms Pike suggested to Mr Manhire that they should establish a structure involving a unit trust and a superannuation fund, as had been set up on Mr Holloway's advice in relation to Statewide. She explained to Mr Manhire what Mr Holloway had told her, including the taxation benefits, and that assets were then more insulated from the reach of the creditors of Saw Works if it were to fail. 500 Consequently, in about March 1995, Ms Pike together with Mr Manhire and Mr Freebairn had a meeting with Mr Holloway. Mr Holloway gave, in effect, the same advice as he had given to Ms Pike in respect of Statewide. Again, he did not suggest that Super Benefit would control the assets of the proposed trust, or that anyone other than the directors of Saw Works would do so. 501 They instructed Mr Holloway to proceed. He caused the establishment of Sawman SBF and of Murman. He then contacted Ms Pike on about 28 June 1995, and told her to set up bank accounts for each of those entities with Mr Manhire and Ms Pike as signatories. She did so. 502 On 27 June 1996, Ms Pike on Mr Holloway's advice and direction arranged the following: · payment of $44,000 from Saw Works to Sawman SBF, · payment of $36,000 from Sawman SBF to Murman, and · payment of $35,000 from Murman to Saw Works. 503 Those payments were in turn superannuation contributions, payment for the subscription of units in Murman, and (it is asserted) a loan to Saw Works. Ms Pike recorded them in the cash books of the three entities in that way. Her evidence does not confirm that the payment of $35,000 from Murman to Saw Works was a loan. She said it was a payment towards the payment of assets purchased by Murman from Saw Works with the intention (as occurred) that they be leased back to Saw Works. 504 In conducting the affairs of Murman, Ms Pike has had no dealings with Mr Glaser or with Super Benefit, other than paying its annual account. 505 On its Annual Return to the Insurance and Superannuation Commission for 1995-96, Sawman SBF declared its assets at 30 June 1996 to be $139,947 and its in-house assets as nil. 506 The financial accounts of Murman record its then indebtedness to Saw Works as $23,445. The trial balance and ledgers disclose that that sum is the balance owing to Saw Works by Murman of the sum of $157,078 which was the amount for which, during the year, Murman purchased Saw Works' plant and equipment. There were earlier payments to Saw Works by Murman of $7,045 and $91,587 (both for equipment hire) as well as the sum of $35,000. That suggests that the $35,000 was paid to reduce an existing indebtedness of Murman to Saw Works. 507 Sawman SBF financial statements to 30 June 1996 show total assets at $139,948 made up of "Shares in Listed Companies $131,947.80" and a bank deposit of $8,000. The notes indicate that the shares in listed companies are really units at cost in Murman. The Murman balance sheet shows only 36,000 units issued, but there are two unit certificates issued by Super Benefit to Sawman for 36,000 units on 28 June 1996 and for 99,947.80 units on 30 June 1996. The latter tranche of units is not explained in the evidence. 508 In my view, the investment by Sawman SBF of $36,000 for units in Murman on 28 June 1996 was made as the result of Sawman SBF and Murman, both through Ms Pike, carrying out an agreement for purposes that included achieving the result that $35,000 would be paid to Saw Works. I find that, shortly before 30 June 1996, Saw Works had sold its plant and equipment to Murman for $157,978 and that Murman did not immediately pay that sum but remained substantially indebted to Saw Works. I further find that the $35,000 to be paid by Murman to Saw Works was to be applied in reduction of its indebtedness to Saw Works. For reasons which I have expressed at some length in relation to the Transport Drivers transactions, the consequence of that finding is that the payment by Sawman SBF to Murman and the payment of $35,000 by Murman to Saw Works were not to achieve the result that a "loan or investment would be made to or in" Saw Works. I do not therefore consider that the investment by Sawman SBF in Murman was an in-house asset of Sawman SBF under s 71(2) of the Act. 509 There is, further, no evidence that the indebtedness of Murman to Saw Works included an obligation to pay interest. I do not take much significance from the absence of interest as an expense in the Murman accounts to 30 June 1996 because the period of time involved is only short, but it is some indication that no interest was payable. There was no other evidence on the topic. I am not satisfied in the circumstances that that indebtedness bore an obligation to pay interest. Consequently, I am not satisfied that the reduction of the indebtedness had the purpose of gaining income or profit. It is not shown that it would make any difference to the income or profit of Murman, or that of Sawman SBF. For that additional reason, I am not persuaded that the investment by Sawman SBF of $36,000 in Murman on 28 June 1996 was an in-house asset of Sawman SBF under s 71(2) of the Act. If I am wrong about that conclusion, I would find that the investment by Sawman SBF of $36,000 in Murman did contravene s 83(3) of the Act. Its investment was its first investment. Whatever the market value of the units in Murman, the effect of the investment (on the assumption that it was an in-house asset) was to lift the market value ratio of its in-house assets from nil to a figure well exceeding 5 per cent, effectively 100 per cent. 510 In the light of these findings, APRA has not established that the Sawman transaction involved a contravention of s 85 of the Act by the respondents. (xvi) The Unley Glass transaction - findings 511 Unley Glass Pty Ltd ("Unley Glass") was registered on 21 June 1990. Its directors at material times were Stephen Vincent McPherson ("Mr McPherson") and Jane Maria Ann McPherson ("Ms McPherson"). 512 On 14 November 1994, Unley Glass Pty Ltd Super Benefit Fund ("Unley Glass SBF") was established. Its trustees were Mr McPherson and Ms McPherson. It was a regulated superannuation benefit fund under the Act from 22 March 1995. 513 On 14 November 1994 the Jast Private Property Unit Trust ("Jast") was established. Its trustee was Super Benefit. 514 The evidence-in-chief of Ms McPherson was largely given through tendering her examination conducted by an officer of APRA on 22 July 1998 under Div 5 of Pt 25 of the Act. Other evidence was also tendered in that way. The examination of Ms McPherson indicates that she did not have a very good memory of detailed events. My findings below take account of that fact. Mr McPherson also gave evidence. 515 Mr Holloway had been the accountant to Unley Glass for some years. In 1994, in the course of a regular annual meeting, Mr Holloway advised Ms McPherson and Mr McPherson to establish Unley Glass SBF and Jast. Mr McPherson thought Mr Glaser was present on that occasion, but in my view he was mistaken about that. There was a later meeting at which both Mr Holloway and Mr Glaser were present in August 1995. Mr Holloway explained in 1994 that Unley Glass could make contributions to Unley Glass SBF which could then invest in Jast. Jast would then be able to purchase shares and property by way of investments. Mr Holloway said that the McPhersons could then decide on its investments. Neither of the McPhersons recalled the discussion at that meeting in any detail. The taxation rates applicable to monies received by the proposed superannuation fund compared to those applicable if those monies stayed in Unley Glass as taxable profits was also explained. They were told that investments through the proposed unit trust would not be in their name, but in the name of someone else. Ms McPherson was unhappy about that. She also recalls Super Benefit being mentioned at that meeting. 516 Ms McPherson also recalled that she expressed concerns about Super Benefit owning Jast's assets as trustee. Mr Holloway said that Ms McPherson's concerns about that could be met by putting a caveat on any title so that the property could not be sold without her approval. That procedure was adopted when later, in August 1995, Jast acquired an investment property. I find that that part of the conversation occurred in August 1995, rather than in 1994. At that time, Ms McPherson and Mr McPherson had decided upon buying a property. Its acquisition was negotiated by Ms McPherson and Mr McPherson. The cheques for deposit and for payment were signed by one or other of them. Shortly before its acquisition, Ms McPherson met with Mr Holloway because she was worried that the legal ownership would not be in the McPherson's name. Mr Glaser attended. She does not recall much of that meeting. Mr Glaser then wrote to her, apparently to allay her concerns. The letter of 28 August 1995 read, in part, "I believe that in general terms while you may feel hesitation, the two protecting factors for you will always be that; (1) You can place onto the property a caveat which will allow you direct involvement in any change to the title and (2) By being involved in the management of the property trust, you will have an active role which will involve you with dealing with the bank and of course they in turn will no doubt commit to you any movement that is occurring. Further, you do have the right to as indicated remove the trustees at any point in time should you decide to do so. You will no doubt appreciate that the structure has been set up so that it will serve you and that it will be flexible enough to allow for any future adjustments and or additions should they become warranted. The ultimate decision is always in your hands and I trust that this will alleviate in some way your concerns." 517 On 4 September 1995, Mr Parker and Mr Glaser authorised Mr McPherson and Ms McPherson to be signatories to the bank account entitled 'Super Benefit Pty Ltd ATF The Jast Private Property Unit Trust'. The account was opened on that day. That was a fixed interest loan account, established to partly finance the purchase of the property. 518 The relevant transaction the subject of APRA's allegations occurred in June 1995. 519 In late June 1995, Ms McPherson was told by Mr Holloway to arrange a series of payments each of $20,000 from Unley Glass to Unley Glass SBF, then to Jast, and then back to Unley Glass. Ms McPherson queried whether Unley Glass could do that as it did not have $20,000 available, but Mr Holloway told her to proceed. 520 She arranged those sequence of payments. On 29 June 1995, she signed a cheque for Unley Glass paying $20,000 to Unley Glass SBF. Unley Glass SBF by bank cheque then paid $20,000 to the Holloway & Co Trust Account on account of Jast (as Jast did not then have a bank account) and Holloway & Co Trust Account paid Unley Glass $20,000 on account of Jast. It was deposited into the Unley Glass account on that day. On 30 June 1995, Ms McPherson deposited into the Unley Glass account the $20,000 cheque from Holloway & Co trust account drawn in favour of Unley Glass. 521 The annual return of Unley Glass SBF to Insurance and Superannuation Commission for 1994-95, lodged by Holloway & Co, showed the total assets of Unley Glass SBF to be $54,954 and its in-house assets as nil. For the 1995-96 year of income those figures were $131,525 and nil respectively. 522 The financial statements of Unley Glass SBF at 30 June 1995 show its total assets as $54,954 made up of: cash at bank $18,129 listed shares at cost $ 4,919 unlisted shares at cost $ 8,094 loan $23,812. Its income was $12,407 for the year, made up of interest of $501 and "other income" of $11,906. There are no notes to those accounts. The trial balance indicates that the unlisted shares at cost were purchased for $20,000. I find that was for 20,000 units in Jast, but there is a credit entry of $11,906 to produce the net figure of $8,094. There is then a loan of $11,906. So far as I can determine, the loan of $23,812 is made up of the $11,906 notionally distributed by Jast to Unley Glass SBF being Jast's profit for the year but with the money lent back to Jast, and $11,906 of the $20,000 paid for units in Jast of which only $8,094 has been applied for that purpose and the balance held as a loan. That was presumably a misunderstanding of the purpose for paying the $20,000. 523 The Jast financial statements show its profit for the year ended 30 June 1996 was $11,906. That has nominally been distributed to Unley Glass SBF, as appears above but is recorded as undistributed income in Jast's accounts. They also record that $20,000 units have been issued. The accounts of Jast do not reconcile with the accounts of Unley Glass SBF in those respects. Consequently, Jast is recorded as having no loan liabilities to Unley Glass SBF, although its trial balance records a loan from Unley Glass SBF of $11,906. It has assets recorded at $31,906 made up of fixed assets $16,478 loan to Unley Glass $16,228. 524 The loan to Unley Glass is shown by the trial balance to reflect three advances of $7,440, $7,440 and $20,000 (which I find was the payment by Jast to Unley Glass on 29 June 1996) and a repayment of $18,252. The advances of $7,440 each are for equipment hire not yet paid by Unley Glass. 525 The Unley Glass financial statements to 30 June 1996 record that indebtedness of $16,228 to Jast. It made superannuation contributions of $38,181. 526 Consistently with my reservations about the usefulness of unit certificates issued by Super Benefit generally, it has issued two unit certificates to Unley Glass SBF. Each records the date of issue as 13 June 1995, before any subscription for units. One certificate is for 20,000 units; the other is for 40,919.40 units (in words) or 4,919.40 (in figures). The unit register suggests the correct figure is 4,919.40 units. That number corresponds with the "listed shares at cost" of Unley Glass SBF in its balance sheet. 527 I find, on the basis of all the evidence, that Unley Glass SBF made an investment of $20,000 for units in Jast on 29 June 1995. The fact that the payments to Jast passed into the Holloway & Co Trust Account rather than an account in the name of Jast is of no significance. Holloway & Co Trust Account clearly received and held that money for Jast, and applied it according to Jast's wishes. I also find that that investment was made as the result of carrying out an agreement between Unley Glass SBF and Jast, each made through Ms McPherson, for purposes that included achieving the payment of $20,000 by Jast to Unley Glass. No doubt Ms McPherson did so on the basis of Mr Holloway's advice. As Unley Glass did not have the funds available to make the contribution of $20,000, this is one of the instances where it is clear that the whole series of payments would not have occurred unless it were clear that the $20,000 would be returned to Unley Glass. In my judgment, that payment to Unley Glass was, at least in part, a loan to Unley Glass. I am prepared to find that at least one, and probably both, of the amounts of $7,440 due for equipment hire had accrued prior to 29 June 1995. Even in that event, whenever the payment of $18,252 was made by Unley Glass to Jast, there was nevertheless necessarily some part of the $20,000 which was to constitute a loan to Unley Glass. If either of those lease or hire payments accrued after 29 June 1995, there would still be some element of loan in the payment of $20,000. Consequently, I find that the investment by Unley Glass SBF of $20,000 for units in Jast on 29 June 1995 was an in-house asset of Unley Glass SBF, by virtue of s 71(2) of the Act. 528 Although I have reservations about the reliability of the financial statements of each of Unley Glass SBF and Jast, for the reasons expressed above, I am satisfied that that investment by Unley Glass SBF in units in Jast on 29 June 1995 contravened s 83 of the Act. The only one of its assets at 30 June 1996 which would have a market value much different from their cost would be the "Listed Shares at cost" of $4,919.40. If they were in fact units in Jast, and if those units were acquired prior to 29 June 1996, then at the time of the subject investment those units would not have been greatly different in market value than their cost. If that were the case, there is further no evidence to suggest that the investment by which such units were procured was an in-house asset of Unley Glass SBF. If those assets were truly shares in listed public companies, then they would have had to have had a dramatically different market value for the subject investment not to result in the market value ratio of the Unley Glass SBF in-house assets exceeding 5 per cent. I am satisfied that, whatever the nature of those assets, and whether they were acquired prior to or after 29 June 1995, the subject investment contravened s 83(3) of the Act. 529 It will therefore be necessary to consider whether, in the light of those findings, the respondents have contravened s 85 of the Act in respect of this transaction. G. Section 85 and the other transactions 530 The findings above, other than those concerning the All Sweat transaction with which I have dealt, require consideration of the application of s 85 of the Act to the following transactions: · the Dalgleish transaction · the Pishas transactions (two of the three) · the six Anaequip transactions · the two Hyde Park transactions · the Holloway & Co transaction · the Andrew Holloway transaction · the two Driving Centre transactions · the two Kino transactions · the Unley Glass transaction. 531 The allegations as to the nature of the "scheme" in each instance are largely parallel to those concerning the All Sweat transaction. Upon the evidence and findings to which I have already referred, I conclude in respect of each of the superannuation funds to which those transactions relate other than the two Hyde Park transactions that there was an arrangement between Holloway & Co and Mr Holloway of the one part and Glaser Associates of the other part made in 1993 or thereabouts for the establishment of a superannuation fund and a unit trust for clients of Holloway & Co, with Super Benefit to be the trustee of the unit trust but so that the trustees of the superannuation fund would effectively manage and control the affairs of the unit trust. I do not consider that it was part of that arrangement that the unit trust could and would be used as a conduit for superannuation contributions back to the employer-sponsor; I have found Mr Glaser did not have such a plan. 532 In the case of each of those transactions, I also find that, at about the time the instructions were given by the clients of Holloway & Co for the establishment of the superannuation fund and the unit trust in each case, an arrangement was entered into between Holloway & Co and Mr Holloway of the one part and the proposed trustees of the superannuation fund of the other part for the establishment of a superannuation fund and a unit trust, with Super Benefit as trustee of the unit trust but so that the trustees of the superannuation fund would effectively manage and control the affairs of the unit trust. I do not consider that it was part of any of those arrangements that the unit trust would be used principally or solely for the purpose of the funds invested by the superannuation fund being in turn invested in, or lent to, the employer-sponsor although that possibility was one course of action which was in the minds of the parties to each of those arrangements. In the case of each of the proposed trustees, their state of mind was that such an investment, or loan, would not be improper under the Act, based upon the advice of Mr Holloway. 533 In the case of the Dalgleish transaction, the six Anaequip transactions, the Holloway & Co transaction, the two Driving Centre transactions, the two Kino transactions, and the Unley Glass transaction, I also find that Mr Holloway, at about the time that the respective superannuation funds and units trusts were established or soon thereafter, formed or had in mind the plan that it would be possible for, and helpful to, his clients for the superannuation contributions available to the superannuation funds made by the employer-sponsor or contributions otherwise available to the funds to be invested in the respective unit trusts for units, with the intent that those invested funds would then be lent back to the employer-sponsor. 534 That plan of Mr Holloway and of Holloway & Co, together with the arrangements with Glaser Associates and Super Benefit, or with the arrangements of the proposed trustees of the respective superannuation funds, each constituted a "scheme" under s 85(4) of the Act. That part of those schemes involving a series of payments in respect of those thirteen transactions was then carried out by the respondents by giving to the trustees of the respective superannuation funds the instructions to undertake those series of payments. In each case, the transactions were undertaken at Mr Holloway's direction. They would not have occurred but for that direction. The Dalgleish transaction, the two Driving Centre transactions, and the Unley Glass transactions each occurred when it was clear that the monies the subject of the transactions would be returned to the employer-sponsor because it did not in fact have funds available to initiate the "circle of cheques". 535 In the case of the two Pishas transactions, involving investments by Pishas SBF in Angelou Trust of $3,000 and $30,000 on 30 June and 23 July 1996 respectively and of $30,000 on 25 June 1997, the evidence is that the transactions were directed by Mr Dalgleish and not Mr Holloway. Mr Holloway identified these transactions as ones in which he played no immediate part. He was present at the meeting when it was discussed that superannuation contributions made to Pishas SBF would be invested in Angelou Trust and then onlent to Pishas. I find that at about that time he formed the plan that that course of action could be used for Pishas SBF in due course. I find further that that plan, together with the arrangement with Glaser Associates and Super Benefit, or together with the arrangement with Mr Pishas and Ms Pishas, constituted a "scheme" under s 85(4) of the Act. 536 Mr Dalgleish gave evidence that, generally speaking, he gave directions such as those provided to Mr Pishas to carry out the Pishas transactions only under the supervision and control of Mr Holloway. Mr Holloway did not gainsay that evidence. There is, however, no evidence that Mr Dalgleish sought from Mr Holloway his explicit instructions to direct the undertaking of the Pishas transactions. I am not satisfied that he did so. Mr Dalgleish did not say that he spoke to Mr Holloway in about June 1996 or June 1997 to decide whether to direct that those transactions take place. Mr Dalgleish may well have given those directions on his understanding of Mr Holloway's earlier comments at the earlier meeting when the establishment of Pishas SBF and Angelou Trust was discussed. I am therefore not prepared to find that Mr Holloway carried out the scheme or part of the scheme consisting of the Pishas transactions. 537 Section 85(1) however operates more extensively than that. It also prohibits a person from entering into a scheme if that person did so with the intention to which s 85(1)(a) and (b) refer. I am satisfied that Mr Holloway entered into the scheme referred to above with the intention that, at about the end of each financial year, transactions such as the two Pishas transactions now under consideration would take place. It follows, given the role of Mr Holloway in Holloway & Co, that Holloway & Co also entered into that scheme with that intention. 538 The Andrew Holloway transaction presents somewhat different problems of proof for APRA. Having considered the evidence of Mr Andrew Holloway carefully, I am not prepared to find that Holloway No 2 SBF or Lotus were established upon the advice of Mr Holloway, or that the Andrew Holloway transaction took place at his behest or upon his advice, either explicitly or upon some understanding of Mr Andrew Holloway of what was to happen. That may well have been the case. However, as I observed earlier, I did not find Mr Andrew Holloway's evidence very helpful; it was vague in significant respects. He was unable to recall events which he might have been expected to recall. He was unable to identify signatures on documents, such as cheques, which might have thrown light on how and why the Andrew Holloway transaction took place. He did describe how Lotus was used for other investments on his behalf, clearly independently of Mr Holloway and Holloway & Co. He also described a not inconsiderable degree of contract with Mr Glaser at material times without the involvement of Mr Holloway. Mr Holloway's evidence did not indicate any role in the establishment of Holloway No 2 SBF or Lotus. I am not prepared to make findings adverse to Mr Holloway because he was settlor of the Holloway No 2 SBF trust deed, or because of the nature of the Andrew Holloway transaction, or because Holloway & Co was the signatory to the Holloway No 2 SBF accounts or to its return to the Insurance and Superannuation Commission. 539 I have also considered whether, even if Mr Holloway himself was not involved, Holloway & Co through Mr Andrew Holloway may have been party to a scheme under s 85(4) involving the plan on the part of Holloway & Co to use Holloway No 2 SBF and Lotus as the means of returning to Holloway & Co the superannuation contributions it made to Holloway No 2 SBF on behalf of Mr Andrew Holloway. I am not prepared to make that finding. The evidence is consistent with Mr Andrew Holloway taking the opportunity whilst in the employment of Holloway & Co of making that sort of decision on his own behalf, perhaps emulating what he had seen occur in respect of other superannuation funds of clients of Holloway & Co. 540 Accordingly, I do not consider that a contravention of s 85(1) of the Act by the respondents has been established by virtue of, or in relation to, the Andrew Holloway transaction. 541 The two Hyde Park transactions also require separate consideration because Mr Kitto refused to have Super Benefit appointed as trustee of Hypa. On the evidence, I find that Hyde Park SBF and Hypa were established pursuant to an arrangement made between Holloway & Co and Mr Holloway of the one part and Mr Kitto and Ms Kitto of the other, whereby Holloway & Co would procure Glaser Associates to establish those entities, so that Mr Kitto and Ms Kitto would be trustees of both Hyde Park SBF and Hypa. Although it was not the primary intention of the parties to that arrangement to use Hypa as a channel for superannuation contributions made by Hyde Park to Hyde Park SBF being returned to Hyde Park by way of loan, that possibility was within the contemplation of Mr Holloway and Mr Kitto at the time. In the case of Mr Kitto, he did not intend thereby to contravene or avoid the application of any provision of Pt 8 of the Act. 542 At about that time, or soon thereafter, I find that Mr Holloway did form the plan (as he had for other clients) that superannuation contributions by Hyde Park could be made to Hyde Park SBF, that Hyde Park SBF could then invest those contributions or other monies available to it by the rollover of monies from other funds in Hypa, and that Hypa could lend those monies back to Hyde Park. That plan, together with the arrangement with Mr Kitto and Ms Kitto, constituted a "scheme" within the meaning of s 85(4) of the Act. 543 That scheme was then carried out, or part of that scheme was then carried out, by Holloway & Co through Mr Holloway by directing the two Hyde Park transactions. I accept Mr Kitto's evidence that it was Mr Holloway who gave those directions. In the case of the transaction involving Hyde Park SBF investing $40,000 in Hypa on 28 June 1996, it is clear that Hyde Park did not have the cash resources to make the superannuation contribution and would not have done so if it was not assured of the immediate repayment of most of those contributions by way of loan. Mr Kitto described that he departed from Mr Holloway's instructions to the extent of Hypa lending $38,000 rather than $30,000 to Hyde Park of the investment by Hyde Park SBF to ensure Hyde Park's continuing liquidity. 544 There are then seventeen transactions, in addition to the All Sweat transaction, which APRA has established as involving the respondents entering into or carrying out a scheme, or part of a scheme, within s 85(4) of the Act. When considering the All Sweat transaction, I explained why I rejected Mr Holloway's evidence that he believed that his role in procuring the All Sweat transaction did not involve any contravention of any provision of the Act. I also indicated why I made the finding that Mr Holloway and Holloway & Co did have the intention in entering into or carrying out the scheme or part of it that (a) the scheme would result, or be likely to result, in an artificial reduction in the market value ratio of the in-house assets of Pishas SBF, and (b) that artificial reduction would avoid the application of a provision of Pt 8 of the Act. 545 Mr Holloway's evidence did not identify any particular considerations peculiar to one or more of the seventeen transactions which requires a separate detailed consideration of the reliability of his evidence in relation to one or more of them. Nor did his evidence, or the submissions, indicate particular considerations peculiar to one or more of the seventeen transactions which requires a separate detailed consideration of whether APRA has established in relation to each of them, and the conduct about which I have made findings concerning each of them, the intention to which s 85(1)(a) and (b) refers. 546 I have considered those matters separately in relation to each of the seventeen transactions. In relation to each of them, for the same general reasons as I made findings in respect of the All Sweat transaction, I find that Holloway & Co and Mr Holloway in entering into or carrying out the several schemes of which the particular seventeen transactions were part intended that (a) the scheme would result, or be likely to result, in an artificial reduction of the market value ratio of the in-house assets of the particular superannuation funds, and (b) that artificial reduction would avoid the application of a provision of Pt 8 of the Act. In respect of those seventeen transactions, s 83 was the particular provision in Pt 8 of the Act the application of which was avoided by the artificial reduction. 547 Accordingly, I find that in respect of those seventeen transactions, as well as the All Sweat transaction, the respondents contravened s 85(1) of the Act. Conclusions 548 The application sought extensive declarations and orders. I think it is more appropriate at this point simply to publish my reasons for decision, which record my findings. I then propose to give the parties an opportunity to be heard as to what orders should be made in the light of those findings. It is also appropriate to give the parties the opportunity of adducing evidence and making submissions on APRA's claim for a monetary penalty. 549 At this point, therefore, by way of summary, I record my findings that Holloway & Co and Mr Holloway have each contravened s 85(1) of the Act by entering into or carrying out a scheme in relation to the regulated superannuation funds set out below in respect of the investments by those funds in the unit trusts set out below upon the dates set out below: Fund Unit Trust Date All Sweat SBF Bino 30 June 1995 Dalgleish SBF Life Enjoyment 28 June 1996 Pishas SBF Angelou Trust 30 June and 23 July 1996 Pishas SBF Angelou Trust 25 June 1997 Feeney SBF Herney 13 February 1994 Herreen SBF Herney 13 February 1994 Feeney SBF Herney 28 June 1996 Herreen SBF Herney 28 June 1996 Feeney SBF Herney 27 June 1997 Herreen SBF Herney 27 June 1997 Hyde Park SBF Hypa 28 June 1996 Hyde Park SBF Hypa 6 August 1996 Holloway SBF Katon 28 June 1996 Driving Centre SBF Marrlth 30 June 1996 Driving Centre SBF Marrlth 21 April 1997 Kino SBF Onik 22 June 1995 Kino SBF Onik 20 June 1996 Unley Glass SBF Jast 29 June 1995 550 As indicated, I will hear the parties as to what orders should now be made and as to the future course of these proceedings. I certify that the preceding five hundred and fifty (550) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. Associate: Dated: 12 May 2000 Counsel for the Applicant: S Maharaj and R Chrzaszcz Solicitors for the Applicant: Gretsas Chrzaszcz Counsel for the Respondents: M Hoile Solicitors for the Respondents: Hume Taylor & Co Dates of Hearing: 12, 13, 14, 27, 28, 29, 30 April 1999, 3, 4, 5, 6, 11, 12 May 1999, 23, 24, 25 June 1999, 31 August 1999 Date of Judgment: 12 May 2000