Federal Court of Australia Commissioner of Taxation v Rowntree [2020] FCA 1322 File number: NSD 655 of 2014 Judgment of: RARES J Date of judgment: 18 September 2020 Catchwords: TAXATION – Whether each respondent engaged in conduct that resulted in him or another entity being a promoter of a tax exploitation scheme in each of 4 tax years in contravention of s 290-50(1) of Sch 1 to the Taxation Administration Act 1953 (Cth) – where scheme involved investor paying 15% non-refundable deposit for not presently existing carbon or REDD credits that vendor had no existing source for or obligation to supply in the future – where investor under scheme claimed tax deduction of full price in year of entry into purchase contract – whether each respondent promoter of tax exploitation scheme within meaning of ss 290-60(1) and 290-65 – whether entity had substantial role in respect of marketing or promotion of tax exploitation scheme within meaning of s 290-60(1)(c) – whether investor's sole or dominant purpose for entering into scheme was to get a scheme benefit that was not reasonably arguably available at law within meaning of ss 284-15, 284-150 and 290-65 – whether schemes involved tax evasion within meaning of s 290-55(6) so that 4 year limitation period did not apply Legislation: Evidence Act 1995 (Cth), ss 50, 140 Income Tax Assessment Act 1936 (Cth) Pt IVA, ss 170, 177D, 177F, 318, 82KZL, 82KZM, 82KZMA Income Tax Assessment Act 1997 (Cth), ss 8-1, 960-100, 995-1 Partnership Act 1892 (NSW) s 50A Taxation Administration Act 1953 (Cth) Sch 1, ss 284-15, 284-150, 290-50, 290-55, 290-60, 290-65 Carbon Pollution Reduction Scheme Bill 2009 Explanatory Memorandum for the Carbon Pollution Reduction Scheme Bill 2009 [No 2] Oxford English Dictionary, online Macquarie Dictionary, online Adjunct Professor Gordon S. Cooper AM: "Promoter Penalties" (2006) 4 Journal of Tax Research 117 Diplock K, "The Courts as Legislators" in B Harvey (ed), The Lawyer and Justice (Sweet & Maxwell, 1978) Cases cited: Academy Cleaning & Security Pty Limited v Deputy Commissioner of Taxation (2017) 106 ATR 184 Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345 Chamberlain v The Queen (No 2) (1984) 153 CLR 521 Commissioner of Taxation v Bogiatto [2020] FCA 1139 Denver Chemical Manufacturing Co v Commission of Taxation (NSW) (1949) 79 CLR 296 Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 Federal Commissioner of Taxation v James Flood Pty Ltd (1953) 88 CLR 492 Federal Commissioner of Taxation v Ludekens (2013) 214 FCR 149 Federal Commissioner of Taxation v Spotless Services Ltd (1996) 186 CLR 404 Glenfield Estates Pty Ltd v Federal Commissioner of Taxation (1988) 80 ALR 671 Jones v Dunkel (1959) 101 CLR 298 Kajewski v Federal Commissioner of Taxation 52 ATR 455 Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 Magna Alloys and Research Pty Ltd v Federal Commissioner of Taxation (1980) 49 FLR 183 New Zealand Flax Investments Ltd v Federal Commissioner of Taxation (1938) 61 CLR 179 Pridecraft Pty Ltd v Federal Commissioner of Taxation (2004) 213 ALR 450 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 R v Hillier (2007) 228 CLR 619 R v Meares (1997) 37 ATR 321 Spriggs v Federal Commissioner of Taxation (2009) 239 CLR 1 Walstern Pty Ltd v Commissioner of Taxation (2003) 138 FCR 1 Division: General Division Registry: New South Wales National Practice Area: Taxation Number of paragraphs: 368 Date of hearing: 8-12 April 2019 Counsel for the Applicant: Ms K J Deards SC with Mr A d'Arville and Ms N Apkarian Solicitor for the Applicant: Australian Government Solicitor Solicitor for the First Respondent: Mr A Martin of Nicola Velcic & Associates Counsel for the Second Respondent: Mr M Higgins Solicitor for the Second Respondent: Dom Velcic & Co Solicitors Counsel for the Third Respondent: The third respondent did not appear ORDERS NSD 655 of 2014 BETWEEN: COMMISSIONER OF TAXATION Applicant AND: BRUCE ELLIOT ROWNTREE First Respondent PETER JAMES DONKIN Second Respondent RINALDO (RICK) FRANK ALFRED MANIETTA Third Respondent order made by: RARES J DATE OF ORDER: 18 September 2020 THE COURT DIRECTS THAT: 1. On or before 2 October 2020, the applicant, after conferring with the respondents, file and serve draft orders: (a) to give effect to the reasons for judgment published today; (b) providing for a time table for any further evidence and written submissions necessary for a further hearing on the issue of what penalties or relief should be ordered. THE COURT ORDERS THAT: 2. The proceeding be listed for a case management hearing on 16 October 2020. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. Introduction [1] The legislative context [6] Background [10] The contractual structure, context and implementation of the schemes [19] The 2009 tax year [22] The 2009 scheme documents [33] The 2009 year – summary [38] The 2010, 2011 and 2012 scheme documents [45] Contracts for the supply of carbon credits [50] The expert evidence about the schemes [57] The 2010 tax year [72] Dr Robson's 2010 tax year investment [98] The 2010 tax year – summary [106] The 2011 tax year [117] Dr Robson amends his tax returns [124] Mr Haralambidis decides to purchase the 2011 ERPAs [134] Mr Whitney decides to purchase the 2011 ERPAs [140] Other events in June 2011 [159] The 2011 tax year – summary [166] The 2012 tax year [173] The 2012 tax year – summary [204] Later events [211] Summary of total receipts in the 2009, 2010, 2011 and 2012 tax years [230] The conduct issue [232] Dr Rowntree's conduct [232] Dr Donkin's conduct [246] Was Mr Donkin a promoter in the 2011 and 2012 tax years? – Consideration [268] Mr Manietta's conduct [274] The tax exploitation issue [285] Dr Rowntree's and Mr Donkin's submissions [287] Was each of the 2009, 2010, 2011 and 2012 schemes a tax exploitation scheme? [301] Was the claim for a deduction in each tax year "reasonably arguable"? [336] Conclusion [352] The evasion issue [353] Conclusion [367] REASONS FOR JUDGMENT RARES J: Introduction 1 The Commissioner of Taxation claims against each of the three respondents, Dr Bruce Rowntree, a solicitor, Peter Donkin, a chartered accountant and registered taxation agent, and Rick Manietta, a financial planner, for the imposition of civil penalties under, and declarations of contraventions of, s 290-50 of Sch 1 to the Taxation Administration Act 1953 (Cth) (the TAA). 2 The Commissioner alleges that each respondent engaged in conduct that resulted in him or another entity (within the meaning of s 960-100 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) being a promoter (except for Mr Donkin in respect of the 2009 year) of tax exploitation schemes involving the sale of interests in carbon or REDD credits in each of the years of income ending 30 June 2009, 2010, 2011 and 2012 (respectively the tax years and the schemes). (REDD is an acronym for "reducing emissions from deforestation and forest degradation"). 3 Essentially (as I will explain in greater detail later in these reasons), the Commissioner alleges that the respondents promoted each of the REDD schemes to investors for the dominant purpose of enabling each investor to obtain a tax deduction, in the relevant tax year, of the full purchase price payable under an emissions reduction purchase agreement (ERPA) for a number of REDD credits on payment of a 15% deposit in circumstances where it was not reasonably arguable that any such payment or liability to pay was deductible under s 8-1 of the ITAA 1997 or at all. 4 Because the Commissioner commenced this proceeding against Dr Rowntree and Mr Manietta more than four years after 30 June 2009, the Commissioner can only recover a civil penalty against them in respect of the 2009 scheme if, by force of s 290-55(4) and (6) of Sch 1 to the TAA, that scheme involved tax evasion. 5 There are five issues in the proceeding, namely: (1) Did each respondent engage in conduct that resulted in him marketing, or otherwise encouraging the growth of, each scheme (other than Mr Donkin in respect of the 2009 year) (within the meaning of ss 290-50(1) and 290-60(1)(a)) (the conduct issue); (2) Did that respondent or an associate of his (there is no dispute that the other persons on whose conduct the Commissioner relied was an associate of the relevant respondent) receive consideration in respect of that marketing or encouragement (within the meaning of s 290-60(1)(b)) (the consideration issue); (3) Having regard to all relevant matters, is it reasonable to conclude that the relevant respondent had had a substantial role in respect of that marketing or encouragement (within the meaning of s 290-60(1)(c)) (the substantial role issue); (4) Was each of the schemes a tax exploitation scheme in that it is reasonable to conclude that an entity that (alone or with others) entered into or carried out the scheme with the sole or dominant purpose of that entity or another entity getting a scheme benefit (relevantly, a tax deduction) from the scheme (within the meaning of ss 284-150(1)(a) and 290-65(1)(a)(i)) (the tax exploitation issue); and (5) Did the 2009 scheme involve tax evasion (the evasion issue)? The legislative context 6 An "entity", as defined in s 960-100(1) of the ITAA 1997, included an individual, a body corporate and a partnership and "scheme", as defined in s 995-1(1) of the ITAA 1997, meant any arrangement, or any unilateral or other of the following namely any scheme, plan, proposal, action, course of action, course of conduct. Division 290 of Sch 1 to the TAA was headed "Promotion and implementation of schemes". The objects of Div 290 included deterring the promotion of tax avoidance and tax evasion schemes (s 290-5(a)). Relevantly, Div 290 contained the following provisions: 290-50 Civil penalties Promoter of tax exploitation scheme (1) An entity must not engage in conduct that results in that or another entity being a *promoter of a *tax exploitation scheme. … Civil penalty (3) If the Federal Court of Australia is satisfied, on application by the Commissioner, that an entity has contravened subsection (1) or (2), the Court may order the entity to pay a civil penalty to the Commonwealth. Amount of penalty (4) The maximum amount of the penalty is the greater of: (a) 5,000 penalty units (for an individual) or 25,000 penalty units (for a body corporate); and (b) twice the consideration received or receivable (directly or indirectly) by the entity and *associates of the entity in respect of the *scheme. Note: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit. 290-60 Meaning of promoter (1) An entity is a promoter of a tax *exploitation scheme if: (a) the entity markets the scheme or otherwise encourages the growth of the scheme or interest in it; and (b) the entity or an associate of the entity receives (directly or indirectly) consideration in respect of that marketing or encouragement; and (c) having regard to all relevant matters, it is reasonable to conclude that the entity has had a substantial role in respect of that marketing or encouragement. (2) However, an entity is not a promoter of a *tax exploitation scheme merely because the entity provides advice about the *scheme. (3) An employee is not to be taken to have had a substantial role in respect of that marketing or encouragement merely because the employee distributes information or material prepared by another entity. 290-1 Meaning of tax exploitation scheme (1) A *scheme is a tax exploitation scheme if, at the time of the conduct mentioned in subsection 290-50(1): (a) one of these conditions is satisfied: (i) if the scheme has been implemented-it is reasonable to conclude that an entity that (alone or with others) entered into or carried out the scheme did so with the sole or dominant purpose of that entity or another entity getting a *scheme benefit from the scheme; (ii) …; and (b) one of these conditions is satisfied: (i) if the scheme has been implemented-it is not *reasonably arguable that the scheme benefit is available at law; (ii) … (2) In deciding whether it is *reasonably arguable that a *scheme benefit would be available at law, take into account any thing that the Commissioner can do under a *taxation law. Example: The Commissioner may cancel a tax benefit obtained by a taxpayer in connection with a scheme under section 177F of the Income Tax Assessment Act 1936. 7 The definitions of "reasonably arguable" and, so far as presently relevant, "scheme benefit", for the purposes of s 290-65(1) were contained in ss 284-15 and 284-150(1)(a) as follows: 284-15 When a matter is reasonably arguable (1) A matter is reasonably arguable if it would be concluded in the circumstances, having regard to relevant authorities, that what is argued for is about as likely to be correct as incorrect, or is more likely to be correct than incorrect. … (2) To the extent that a matter involves an assumption about the way in which the Commissioner will exercise a discretion, the matter is only reasonably arguable if, had the Commissioner exercised the discretion in the way assumed, a court would be about as likely as not to decide that the exercise of the discretion was in accordance with law. (3) Without limiting subsection (1), these authorities are relevant: (a) a *taxation law; (b) material for the purposes of subsection 15AB(1) of the Acts Interpretation Act 1901; (c) a decision of a court (whether or not an Australian court), the *AAT or a Board of Review; (d) a *public ruling. … 284-150 Scheme benefits and scheme shortfall amounts (1) An entity gets a scheme benefit from a *scheme if: (a) a *tax-related liability of the entity for an accounting period is, or could reasonably be expected to be, less than it would be apart from the scheme or a part of the scheme; (emphasis in original) 8 Allsop CJ, Gilmour and Gordon JJ held in Federal Commissioner of Taxation v Ludekens (2013) 214 FCR 149 at 191 [227]-[228], 193 [237], [240] that, in a case like the present, s 290-65(1) is concerned with the purpose with which an entity entered into or carried out a scheme and s 290-50(1) requires an analysis of whether "it is reasonable to conclude" that the entity entered into or carried out the scheme at the time of the conduct complained of (being marketing or otherwise encouraging the growth of the scheme or an interest in it) with the sole or dominant purpose of it, or another entity, getting a scheme benefit from the scheme. They said (214 FCR at 191-192 [228], [231]) that a scheme benefit, relevantly, could be the obtaining of a lesser tax related liability, or a tax-related liability that could reasonably be expected to be less "than it would be apart from the scheme or a part of the scheme" and: In this context, the words "apart from the scheme or a part of the scheme" in s 284-150(1)(a) and (b) do not dictate this. In the context of assessing (through the framework of what is reasonable to conclude) the purpose of an entity, the focus is upon what the entity was proposing to do and why. The focus is not upon any hypothesised events, circumstances or decision requiring you to remove from the proposed future what was done, and positing what might have been done. (emphasis added) 9 Thus, the issue is whether, at the time of the marketing or encouraging, it may reasonably be concluded that one entity entered into or carried out the scheme with the sole or dominant purpose that that entity or another entity (who or which is not relevantly a promoter but can be an investor in the scheme) would get a tax benefit. Background 10 Dr Rowntree holds a doctorate of juridical science, wrote his thesis in international taxation, and holds degrees of bachelor of laws and master of taxation as well as a diploma of financial planning. His associates within the meaning of s 318(2)(f) of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) in the schemes were a Malaysian corporation, Voluntary Credits Ltd (which was called BR Redd Ltd prior to 17 January 2010), Voluntary Credits Pty Ltd (VCPL), Bonnell Rowntree Pty Ltd (BRPL) and Bonnell Rowntree Taxation Advisers Pty Ltd (BRTAPL). By force of s 318(2)(f) of the ITAA 1936, each of those entities was an associate of each of the others. Dr Rowntree's colleague in the latter two law practices was David Bonnell. 11 Mr Donkin's accounting practice entity, Strategic Accounting Advisers Pty Ltd, as trustee of the Strategic Accounting Advisers Trust, was his associate. 12 Both Dr Rowntree and Mr Manietta are undischarged bankrupts. 13 On 27 October 2014, Mr Manietta's solicitor filed a notice of acting in this proceeding. On 8 May 2017, Mr Manietta's debtor's petition was accepted and he became bankrupt. On 17 November 2017, I ordered that the Commissioner serve outlines of evidence of the lay witnesses and his expert's affidavit by 29 March 2018, the respondents file and serve their defences by 27 April 2018 and that service on Mr Manietta be effected by serving his trustee in bankruptcy and him at his residential address as recorded as at 17 November 2017 in the Commonwealth electoral roll. The last order was in anticipation of Mr Manietta's solicitor filing (as he did on 28 November 2017) a notice of ceasing to act. 14 The Commissioner attempted to serve his evidence and an amended statement of claim on Mr Manietta at the apartment recorded on his electoral roll address in Paddington, a suburb of Sydney, on 29 March 2018, but was unsuccessful in obtaining access to the property. The Commissioner served Mr Manietta's trustee with that evidence on that day and subsequently, the Commissioner's solicitors have sent emails to both Mr Manietta and his trustee, although only the trustee responded to acknowledge receipt. 15 On 16 July 2018, my associate emailed the parties, including Mr Manietta with the entered orders I had made at a case management hearing on 6 July 2018 which included the order fixing the hearing to commence on 8 April 2019. Mr Manietta did not appear at the hearing, including after being called outside the courtroom at the beginning of the trial. 16 In those circumstances, Mr Manietta has not filed any defence and I have made the findings of fact that affect him on the basis (as with all my other findings of fact) that I am satisfied of those facts on the balance of probabilities, having regard to the matters specified in s 140 of the Evidence Act 1995 (Cth). 17 Each of Mr Manietta and Ti Amo Strategies Pty Ltd was a partner in Ti Amo Strategies Partnership LP (Ti Amo). Those two entities had their offices in the same building as BRPL and BRTAPL in Glebe, a Sydney suburb. Ti Amo Strategies held all the issued ordinary shares in, and Mr Manietta was the sole director and secretary of, Super Smart Strategies Pty Ltd. Accordingly, each of Ti Amo, Ti Amo Strategies (by force of s 318(1)(b) and (4) of the ITAA 1936) and Super Smart (by reason of his control pursuant to s 318(1)(e)(i)(A) and (6)(b)) was an associate of Mr Manietta. 18 The Commissioner argued that Ti Amo was an associate of Super Smart because Ti Amo Strategies, first, held a majority voting interest in Super Smart (s 318(2)(d)(ii)(A)) and, secondly, was a partner of Ti Amo (s 318(2)(a)). Ti Amo Strategies held all of the issued ordinary shares in Super Smart and Anthem Rand Ltd held all of the issued G class shares (being the only other issued shares) in Super Smart. Anthem was a company limited by guarantee and Mr Manietta was its director from 16 October 2006, and, from 20 October 2009, his wife and Kirk Lloyd became its other directors. If the G class shares held any voting rights in Super Smart that could affect the composition of its board of directors or its constitution (other than in respect of class rights), I infer that Mr and Mrs Manietta controlled those shares. If, as I infer is more probable than not, only the ordinary shares in Super Smart conferred voting rights that could affect the composition of its board or its constitution, TI Amo Strategies did hold a majority voting interest in Super Smart and was a partner in Ti Amo. Accordingly, whatever voting rights may have attracted to the G class shares in Super Smart, Ti Amo was an associate of Super Smart. The contractual structure, context and implementation of the schemes 19 In essence, the Commissioner has advanced a circumstantial case of a varying nature against each of the respondents about the nature and extent of his involvement in the scheme in each of the 2009, 2010, 2011, and 2012 tax years. As with all circumstantial cases, it is important to evaluate the effect of the evidence as a whole and not piecemeal: R v Hillier (2007) 228 CLR 619 at 638 [48] per Gummow, Hayne and Crennan JJ. In such cases, it is "the united force of all the circumstances put together" that a tribunal of fact must consider in deciding whether or not an inference should be drawn: Hillier 228 CLR at 638 [48] citing Chamberlain v The Queen (No 2) (1984) 153 CLR 521 at 535 per Gibbs CJ and Mason J. I have applied this approach in drawing inferences about the respondents' conduct where there was no direct evidence as to particular acts, omissions or states of mind. 20 I admitted a summary of the contractual documents that the Commissioner prepared in accordance with s 50 of the Evidence Act. The contractual documents for each of the schemes were materially identical except for the names of the parties, the prices, the number of contract lots (defined in each 2009 ERPA as "Emissions Units equal to 5000 tonnes of sequestered carbon") the subject of the transactions, number of tonnes in a contract lot, and some minor matters. 21 The Commissioner called three investors who gave evidence at the hearing, being Dr Nicholas Robson, an anaesthetist, Peter Haralambidis, a director of freight forwarding and logistics businesses and Shannan Whitney, a real estate agency principal. Relevantly, the way in which the schemes operated in each of the tax years is reflected in the following analysis of the documents executed by Dr Robson, that were part of the 2009 scheme. I will refer below to the other participants or investors who acquired contract lots under each of the schemes generically as the investor, unless it is necessary to refer to a particular person or entity by name. One investor, Smart Dental Pty Ltd, entered into ERPAs and options in each of the 2009, 2010, 2011 and 2012 tax years. It was a client of Mr Manietta. The 2009 tax year 22 In an undated one page brief, Mr Bonnell briefed Ian Young of counsel to advise on whether the full purchase price payable under a draft contract between BR Redd and an Australian business (the purchaser) would be deductible by the purchaser in the year of income in which a contract in the form of the draft was made. On 10 March 2009, the Commonwealth Government published a draft Carbon Pollution Reduction Scheme Bill 2009 for public comment (see the Explanatory Memorandum for the Carbon Pollution Reduction Scheme Bill 2009 [No 2]) at 10). The brief referred to the Bill, noting that it was yet to be enacted, and instructed counsel that the documentation that BR Redd would provide the purchaser (presumably under a delivery notice) would enable the purchaser to register the carbon credits under the Bill. 23 On 26 May 2009, Mr Young provided a memorandum of advice in response to the undated brief in which he opined that it was "more than reasonably arguable that the full purchase price [payable under cl 3.1 of the draft] is "incurred" in the year the contract is entered into" within the meaning of the first limb of s 8-1 of the ITAA 1997. He also opined that under the second limb of s 8-1: 26. In this case, it is appropriate for a businessman, conducting his business to make the decision whether it is in the interests of his business to represent to his customers and the public generally, that his business is a clean and green business. 27. It is no more remarkable than, for example, a business including as part of its logo "proud sponsor of the Australian Olympic team". 24 As soon as Dr Rowntree and Mr Bonnell received counsel's opinion, they set about using it in what Dr Rowntree described, accurately, in the heading of an email dated 26 May 2009 that he sent to a solicitor in BRTAPL, Stephen Elias, as "Marketing Letter", together with a copy of "the stuff I usually send out" that he subsequently sent Mr Elias on 28 May 2009. The "stuff" consisted of a BR Redd brochure (that appeared to have been professionally produced) at the foot of which Dr Rowntree's name appeared next to BR Redd, an application form for an ERPA and an image of a BR Redd logo that could be added to a letterhead. The 2009 version of the marketing letter was on BRTAPL's letterhead. It stated that one way to implement energy efficiency reforms to reduce "our carbon footprint" was "to acquire carbon credits to offset the carbon emissions from our businesses". The letter explained that sourcing "appropriate carbon credits" was difficult and: For this reason we have entered into a strategic alliance with BR Redd Limited ("BR Redd"). BR Redd provides businesses with carbon credits to allow them to show their customers that doing business with them is friendly to the environment. BR Redd sources its carbon credits from projects that reduce emissions from deforestation and forest degradation in developing countries. The carbon credits purchased by BR Redd will not only ensure that carbon is sequestered in forests in Papua New Guinea, the Solomon Islands and Indonesia but will also ensure that the traditional owners of these forests will profit from the preservation of these forests. Businesses will be able to purchase carbon credits from BR Redd and promote themselves to their clients as being "green" businesses. They will also be able to discharge their obligation to conduct their business in an ethical way. The contracts which have been prepared by BR Redd provide for the sale of carbon credits through REDD schemes - REDD stands for Reducing Emissions from Deforestation and Degradation". The contract provides for a price of A$28.00 per tonne of carbon with a minimum purchase of 5,000 tonnes. The purchase price is paid in two instalments, the first on executions of the agreement of 15% (or $21,000.00 for a minimum purchase) and the balance on completion of the REDD projects. The buyer is protected in this brand new market by providing a floor for the price of the credits. If the price for the credits falls such that the buyer could [buy] similar credits for less than $23.80 per tonne then the buyer can force Carbon Strategic Pte Limited to acquire the credits from them at a price of $23.80 a tonne. Carbon Strategic is the company from whom BR Redd has contracted to acquire the credits. Under the agreement BR Redd has three years to comply with its obligations to deliver the carbon credits. Contracts which substantiate BR Redd's ability to deliver Redd Credits are available to be sighted but cannot be copied as they are commercial in confidence. BR Redd has obtained a barrister's opinion that the acquisition of these credits as part of a business strategy by the buyer is a deductible expense of the buyer to the full extent of the purchase price in the year in which the contract is executed. The contracts are not subject to GST as they are entered into in Malaysia and do not involve the provision of a taxable supply. Obviously each buyer entering into the contract should seek their own legal advice on the terms of the contract and the commercial and taxation consequences of entering into the agreement. I believe that this could be an opportunity for you to promote your business and I would like to meet up with you to discuss this. I will contact you to schedule a meeting. Additional information on BR Redd and the projects can be obtained from their website (www.brredd.com). (emphasis added) 25 By 27 May 2009, Mr Elias was using the marketing letter to contact clients. And, by 19 June 2009, Mr Elias identified to Dr Rowntree that the material he sent on behalf of BRTAPL was a "marketing kit (incl application form)" and a brochure headed "Your Choice – Your Brand – Global Impact" that bore the BR Redd logo. 26 In the meantime, in what he thought was about March or April 2009 (but I find was May 2009 based on the fact that Mr Young's opinion was dated 26 May 2009), Dr Robson, on the suggestion of his sister, consulted Michelle Dodd, of Conluceo Consulting Pty Ltd, about investing in carbon credits. She had acted in the past as a family adviser and lawyer for other members of his family. He understood that Ms Dodd had expertise in tax law. Dr Robson attended at Ms Dodd's Glebe office where she outlined the taxation implications of investing in a carbon credit project. She explained that if he paid an initial sum for the investment, he would be able to deduct "upfront" the total purchase price, and that the balance of the price was payable "further down the track". She told him that "there was a barrister's opinion about…the legitimacy of the instalment and that was underpinning the tax deductibility of it and the project more generally". The only evidence of a barrister's opinion of that description is Mr Young's of 26 May 2009. During the meeting, Dr Robson learnt of the BR Redd website and subsequently looked at it and other information about carbon abatement schemes. As he observed in evidence, this was a "very topical matter at that point in time". Dr Robson also looked at the curriculum vitae of Dr Rowntree and, possibly, Mr Bonnell either on BR Redd's or BRTAPL's websites. 27 Dr Robson considered, from his investigations, that Dr Rowntree and Mr Bonnell "were pivotal to the whole activity" in which he was interested. He decided to make his investment because: it appealed because of the environmental dimension. It also, obviously, had…a generous tax deduction associated with it. And I felt, really, in the general climate at the time that it was a reasonable thing to invest in… at a point in the future when the projects were mature then there would hopefully be a market for carbon credits and if the carbon credits could be sold for more than I had effectively paid, there would be a taxable income that would be dealt with on its merits at the time…it would generate a tax liability. (emphasis added) 28 On 4 June 2009, Mr Bonnell wrote to Dr Robson enclosing drafts for execution of an ERPA (the 2009 ERPA) and an emissions reduction put option (the 2009 option) between Dr Robson and a Singaporean company, Carbon Strategic Pte Ltd. I will describe the documents used in the 2009 scheme below at [33]–[36]. The 2009 ERPA described Dr Robson as buyer, with Voluntary Credits (then called BR Redd), as seller, for the purchase of two contract lots, in which each lot comprised "Emission Units equal to 5000 tonnes of sequestered carbon" (i.e. he agreed to purchase 10,000 emission units). The letter requested Dr Robson to pay the AUD42,000 deposit to Carbon Strategic's Hong Kong bank account. I find that Dr Robson did make that deposit. 29 On 12 June 2009, Dr Robson executed the two contracts. 30 On 29 June 2009, Mr Bonnell executed Dr Robson's 2009 ERPA, on behalf of BR Redd, and Jeffrey Flood, a director of Carbon Strategic, executed Dr Robson's 2009 option. Ms Dodd returned copies of the executed contracts to Dr Robson with a note that read "These documents are for filing with your 2008/2009 Tax Papers". Also on 29 June 2009, Smart Dental, entered into an ERPA for one contract lot. 31 On 9 July 2009, Dr Rowntree wrote a letter on BR Redd letterhead to Dr Robson congratulating him on the purchase of the REDD credits. The letter: advised Dr Robson that he was "now eligible to use the resources of [BR Redd] to assist in marketing your business" and continued: We have designed a number of logos which advertise the fact that your business is now "carbon reduced". These logos are available to be downloaded from our website. stated the following, before adding suggested wording for its recipients to include in their tender documents: Many of you have advised that your agreements to purchase REDD credits will facilitate you being awarded government contracts. We will be working towards preparing detailed materials for inclusion in government tenders which will be forwarded upon request. 32 Self-evidently, the logos and draft tender wording had no commercial relationship to Dr Robson's practice of his profession as an anaesthetist and, unsurprisingly, he never used the logos for his practice. The 2009 scheme documents 33 The 2009 ERPA consisted of five pages. It recited that the seller (BR Redd): had entered into an agreement to acquire emission units from Carbon Strategic which, in turn, had entered into contracts to develop projects in the Independent State of Papua New Guinea, Indonesia and the Solomon Islands, that would yield REDD credits sufficient to meet the seller's requirements under the 2009 ERPA; and had contracted to acquire REDD credits on Carbon Strategic completing the projects. 34 The 2009 ERPA provided that: the purchase price for one contract lot was $140,000 and was payable in two instalments; the buyer had to pay the first instalment of 15% (i.e. $21,000) on execution of the 2009 ERPA; the buyer had to pay the second instalment (being the balance of purchase price of $23.80 per tonne) within 10 banking days of receiving from the seller a delivery notice giving the buyer 20 banking days' notice of delivery. After receiving the second instalment, the seller would complete delivery; and if it had not received a delivery notice within 3 years after execution of the 2009 ERPA, the buyer could terminate that agreement but would not be entitled to repayment of any part of the purchase price paid prior to the date of termination. 35 Some of the investors in the 2009 tax year also entered into the 2009 option. For example, Dr Robson's 2009 option provided that: Carbon Strategic acknowledged that Dr Robson had paid it the option fee of 2% of the purchase price of his two contract lots in his 2009 ERPA (i.e. $5,600); in consideration of the payment of the option fee, Dr Robson could require Carbon Strategic to buy all of his contract lots for $23 per tonne (i.e. $230,000); and settlement of the exercised option would occur simultaneously with settlement of the ERPA. 36 The net effect of the 2009 ERPA and 2009 option was that an investor would pay, first, BR Redd Voluntary Credits a non-refundable deposit of 15% of the total price of the contract lot(s) it was purchasing and, secondly, Carbon Strategic a further 2% (in total $23,800 per contract lot) after which the investor would claim a tax deduction equivalent to 100% of the purchase price in the 2009 tax year. If BR Redd / Voluntary Credits gave the investor a delivery notice in the future, the investor could exercise the 2009 option requiring Carbon Strategic to acquire the investor's contract lot(s) and pay BR Redd / Voluntary Credits all but $0.80 per tonne of the second instalment. That would leave the investor with a liability of $4,000 per contract lot to pay to Voluntary Credits. 37 In addition, some investors in each of the scheme years also entered into an intellectual property license agreement with Voluntary Credits. The licence agreement provided that, in consideration of a $1 licence fee, Voluntary Credits granted the investor a non-exclusive licence to use, what the licence defined as, "the Technology referred to in Item 1", being about 12 logos featuring various configurations of the words "forest friendly carbon reduced" against a variety of backgrounds, each displaying a depiction of a frog. The 2009 year – summary 38 In the 2009 year, Voluntary Credits sold a total of 74 contract lots. Voluntary Credits received consideration totalling $720,414.92 comprised of the following: Source Amount received by Voluntary Credits Commission retained No of contract lots Ti Amo $552,994(a) $280,243.25 40 Carbon Strategic $125,432.92(b) $490,000 29 Bonnell Rowntree $41,988(c) 2 NOTES (a) Ti Amo remitted $14,000 of each $21,000 deposit and retained $7,000 as commission on each contract lot except one which it purchased for $7,000. The difference of $243.25 is likely to be due to bank fees and is not material. (b) Carbon Strategic received $609,000, being 29 deposits noted on the 2009 client list that did not have a referrer noted as Mr Manietta, Bonnell Rowntree or Mr Elias. Carbon Strategic retained $490,000. (c) No commission paid. 39 Some investors, such as Dr Robson, bought more than one contract lot. Ms Dodd sold 21 contract lots and Mr Elias sold at least three for which each received recognition as a 'referrer' in the client list that Dr Rowntree created in a spreadsheet for the 2009 tax year. Dr Rowntree also created a client list for each of the 2010 and 2012 scheme years, but there was no evidence of one for 2011. 40 The payments Voluntary Credits received from Carbon Strategic comprised $119,000, being the difference between $609,000, as the total of deposits of $21,000 for each contract lot that it had received directly from 29 investors, and a payment of $490,000 that Voluntary Credits paid as an "option fee" to Carbon Strategic as recorded in Voluntary Credits' financial statements for the year ended 31 December 2009. None of these 29 investors appeared on the 2009 client list against a record that any of Bonnell Rowntree, Mr Elias or Mr Manietta (or anyone else) was the referrer. 41 The "option fee" of $490,000 is equivalent to a commission of $7,000 for each of 70 contract lots but the Commissioner did not contend that this sum should be treated as part of the consideration that either Dr Rowntree or Mr Manietta (or their associates) received in the 2009 year, and can be put to one side. 42 The balance of $6,450.92 that Carbon Strategic paid to Voluntary Credits is not explained in the evidence. The Commissioner contended that this sum may have related to one or two contracts for persons whose names appeared in the 2009 client list as three contracts with the notation "N/A" in the running total column and which were not counted in the computer printout as part of the total. (The three N/A entries were for Ms Dodd's company, Conluceo, Mr Elias' company, EA Financial LP, and Ti Amo Strategies). Dr Rowntree argued that there was no, or no sufficient, evidence to support an inference that the $6,450.92 was part of the consideration he or Mr Manietta received directly or through his associates. 43 $6,450 is three times $2,150. The latter amount is equivalent to 10% of the deposit value of one contract lot. I infer that the $6,450.92 represented a commission or other receipt of Voluntary Credits, or an associate of Dr Rowntree, in respect of the 2009 scheme for the three contract lots that had the notation "N/A" in the "referrer" column in the 2009 client list. 44 Apart from the names of the entities associated with him or his companies relating to the 39 contract lots sold in the 2009 tax year recorded in the financial documents, including the 2009 client list, there was no direct evidence of Mr Manietta's (or his associates') conduct in that year. However, having regard to the evidence and findings that I have made in respect of the 2010, 2011 and 2012 tax years about Mr Manietta's conduct, I have inferred that this conduct must have been substantially the same in the 2009 tax year as that in which the evidence disclosed that he (and his associates) engaged in those 3 subsequent years to generate sales in 2009 of the 39 contract lots to third party investors: Hillier 228 CLR at 638 [48]. The 2010, 2011 and 2012 scheme documents 45 As I have noted, the 2010, 2011 and 2012 ERPAs, options and licence agreements were essentially similar to their 2009 counterparts. However, the pricings of the contract lots and first instalment (and consequentially, the second instalment) varied and were as follows: Year Total price for contract lot Price per tonne First instalment Option fee Option price per tonne Balance due after option per lot 2010 $140,000 (5,000 tonnes per lot) $28 $20,000 $1,000 $24 0 2011 $132,000 (6,000 tonnes per lot) $22 $19,800 $200 $18.70 0 2012 $138,000 (6,000 tonnes per lot) $23 $20,700 $100 $19.55 0 46 As appears from the table above, the number of emission units in the contract lots for the 2011 and 2012 years increased to 6,000 tonnes of sequestered carbon and the prices and option fees for the 2010, 2011 and 2012 years varied. However, unlike the position in the 2009 year, if the investor signed the relevant option in 2010, 2011 or 2012, then, if the option were ever exercised, nothing would be payable on completion. 47 Moreover, the recitals in the 2010, 2011 and 2012 ERPAs made no mention of what contracts Voluntary Credits may have had to source its ability to deliver the emission units the subject of the agreement. 48 The 2010 and 2011 ERPAs referred to the Bill and defined "Emissions Units" as having the same meaning as in each of the Bill or any regulations made under it, when it was enacted, and any international rules referred to in the Bill or any legislation of another nation providing for the registration of and trading in carbon credits. However, each still defined "contract lots" as meaning "Emissions Units equal to 5,000 [or 6,000] tonnes of sequestered carbon". Each of those ERPAs also defined: "REDD credits" without using that term in any substantive provision; and "Delivery Notice" as meaning a notice under which Voluntary Credits as seller, could give the buyer notice that it was ready to post to the buyer "The documentation that shall allow the crediting of the Buyer's Registry Account" with the number of emissions units it had agreed to buy and sufficient documentation to enable the buyer to verify compliance with the applicable rules for such registration. 49 The 2012 ERPAs changed the definition of "Applicable Rules" to mean any law passed by a sovereign nation providing for the registration of and trading in carbon credits, and removed any reference to the Bill. Contracts for the supply of carbon credits 50 There was limited evidence that BR Redd / Voluntary Credits had in place some potential sources from which it could possibly supply carbon credits in the future. One instance was a contract dated 26 March 2008 between Carbon Strategic and a Papua New Guinea company, Binamel Land Group Incorporated (the Binamel contract). A second instance was a contract dated 2 February 2009 between Carbon Strategic and the provincial governments in Indonesian West Papua (the West Papua contract). 51 The Binamel contract contained recitals that: Binamel was contracting with the authority of nine incorporated land groups which had customary rights over a total of millions of hectares in Papua New Guinea; and subject to the obtaining of all necessary permits from the government of Papua New Guinea, Carbon Strategic would provide services to Binamel that would involve all steps necessary to commercialise, and then engage in marketing, REDD projects for Binamel. 52 The Binamel contract provided that: the incorporated land groups had customary rights over more than 200,000 hectares of rainforest that, but for the Binamel contract, would be available for logging activities; and Binamel had appointed Carbon Strategic to carry out the above services in consideration of which Binamel would pay Carbon Strategic service fees, being 10% of the total amount of gross revenue generated by the trading of carbon credits. 53 The West Papua contract contained recitals that the governmental bodies represented landholders within their regions; and Carbon Strategic would be appointed as the exclusive consultant, agent and contractor to provide and arrange for defined services, namely to enable accreditation and qualification of the number of tonnes of stored carbon on the customary lands of the landholders, and would supervise and manage the trade of carbon and biodiversity credits. 54 The West Papua contract provided that: it would only operate after the defined "effective date" (being upon the grant of all Indonesian government or other approvals necessary for the West Papua contract to be legally enforceable) (There was no evidence of what those approvals were or if they ever had been granted); and Carbon Strategic was entitled to a service fee of 10% of the gross revenue generated in any such trade. 55 Both the Binamel and West Papua contracts provided that, among other services, Carbon Strategic had to identify all legislation affecting the landholder's lands, assess the potential amounts of carbon and biodiversity credits, manage, implement and commercialise each project, including building a case for the approval of REDD credits on behalf of the customary landholders to demonstrate the validity of the project for "the International Accrediting Body", facilitate scientific investigation of the available credits, project market, manage and, ultimately, commercialise and trade carbon and biodiversity credits. 56 Thus, if Carbon Strategic were able to get either of the two proposed projects to the point where it could trade carbon credits, it could have been in a position to sell those carbon credits to BR Redd / Voluntary Credits. But, there was no evidence of any contract for this to occur at all, let alone within a timeframe to enable Voluntary Credits to be in a position to serve a delivery notice on an investor under the 2009 or any later ERPA. The expert evidence about the schemes 57 Robert Fowler gave expert evidence for the Commissioner. He was highly experienced in carbon markets and their commercial operation. He began working in the carbon and greenhouse gas industry in 2002 and was a member of committees of Standards Australia during most of the period between 2003 and 2010. He worked as a methodology expert for bodies within the United Nations Framework Convention on Climate Change during 2004 to 2009, including on a registration and issuance, accreditation, appraisals and reviews of projects. He also worked as an international carbon broker acting on transactions during 2006 to 2008 that covered approximately 100 million tonnes of emissions reductions under various forms of ERPAs. He advised the Australian Government's National Greenhouse & Energy Reporting System during 2008 to 2009 on developing best practices for regulatory and compliance frameworks. He led the preparation of a report for the Australian Government in 2008 on the international carbon markets, including the development of consensus volume and price forecasts, market drivers and modelling of supply and demand in the Clean Development Mechanism. He also did work during 2010 to 2012 for the Latin American Development Bank, Morgan Stanley Australia, the Australian and Japanese Governments and the Verified Carbon Standard Committee on streamlined approaches for setting baselines and assessing additionality. He was the representative for Australia and New Zealand to the International Emissions Trading Association during 2011 to 2014. I found Mr Fowler to be a cogent and reliable witness. 58 Mr Fowler reviewed each of the ERPAs and options that Smart Dental had entered in each of the 2009, 2010, 2011 and 2012 tax years. He noted, correctly, that the 2009 ERPA and 2009 option contained several typographical errors. Mr Fowler explained that they were not documents of the sophistication, detail or clarity that professional traders in those markets at the time would have regarded as usual and necessary. While some of the minor errors were corrected in the corresponding ERPAs and options for the 2010, 2011 and 2012 tax years, the substantive deficiencies or problems in the documentation remained throughout. 59 For example, the 2010, 2011 and 2012 ERPAs provided that on completion, the investor would pay the second instalment in exchange for Voluntary Credits' promise after the funds cleared to post (from Malaysia) documentation enabling the investor to be "in effective possession and control" of the contract lot(s) acquired. 60 Mr Fowler identified the following examples of the substantive deficiencies or problems in each of the versions of the ERPAs and options. First, the contracts (the ERPA and option) were made by Australian investors with two foreign companies, one Malaysian, the other Singaporean, but neither contract had a dispute resolution clause. Thus, if the investor ever wished to enforce his, her or its rights against the other party or parties, there was no right to utilise international arbitration and neither foreign company nor the investor had submitted to the jurisdiction of the courts of the jurisdiction in which the other party to the contract was resident or located. Secondly, at the time of the entry into the 2009 ERPA and the 2009 option, the subject matter, being the REDD or carbon credits as emission units comprising the contract lots, did not exist. Hence, BR Redd / Voluntary Credits could not serve a delivery notice in the foreseeable future. Nor did the documents identify any contract (beyond vague descriptions of the projects in various countries) under which Voluntary Credits was entitled to acquire the property in the carbon credits that it had agreed to sell to the investor. 61 Thirdly, as Mr Fowler explained, the industry standard unit of measurement (including for REDD credits) was expressed in tonnes of carbon dioxide equivalent (tCO2e). One tonne of solid carbon is equivalent to 3.7 tonnes of carbon dioxide. He said that the definition in the 2009 ERPA of a "Unit", as a tonne of carbon sequestered by the projects, was not one with which he was familiar with in June 2009. There was no hint in the evidence of any market in which an investor could readily dispose of or utilise a contract lot, the subject matter of the ERPA, if the investor wanted to use the purchased emission units. 62 Mr Fowler said that, in his experience, there were two markets, a primary and secondary market. In the primary market, the carbon credits traded do not yet exist, whereas in the secondary market, they do exist as entries in a registry. 63 The primary market for carbon credits existed for a project developer or owner to contract on a forward basis, before any carbon credit was issued into an account in the scheme's registry. Mr Fowler said that transactions in the primary market related to a single project or clearly identified group of projects for carbon credits. An intending purchaser, ordinarily, would require considerable information about each proposed project, including the stage it had reached, as it might progress toward being able to deliver credits into a registry account, and the risks to which the buyer would be exposed while the project proceeded. As a project neared being able to be registered, the risk of non-delivery to a buyer diminished and, accordingly, the value or market price would rise closer to the prices in the secondary market for similar carbon credits. Mr Fowler said that "primary market transactions are characterised by a strong focus on risk management, use of milestones or conditions precedent, and alternative delivery mechanisms if the estimated volumes of carbon credits ae not realised by the project". 64 Of course, none of the scheme ERPAs reflected those considerations. Rather, they reflected prices higher than the average weighted volume prices in the secondary market, without exhibiting any substantive focus on certainty of delivery. That is not surprising, since none of the investors who bought the scheme ERPAs had any commercial, or even apparent commercial, need to acquire or hold carbon credits. This feature is also consistent with how the investors appear to have been approached to invest in the ERPAs as I will explain below. 65 Mr Fowler gave unchallenged evidence that during the period between June 2009 and June 2012: There was no Australian legislation that established a market or permitted the use of REDD credits to meet compliance obligations; There was, however, a reasonably consistent process for the creation and registration of REDD credits under the Verified Carbon Standard and the Climate Community and Biodiversity Allowance but no consistent or standardised process for the trading of those REDD credits; If an entity wished to reduce its carbon footprint, it had to receive carbon credits that it held either before its own corresponding emissions occurred or promptly after the level of those emissions was established or confirmed; The 2009 ERPA was a primary market transaction because, first, the projects with which the ERPA was associated were not then registered anywhere in the world with any scheme and, secondly, had no carbon credits that had been issued into any registry account; Moreover, such a transaction involved "a much higher level of risk of non-delivery of the credits [the subject of the ERPA] compared to a secondary market transaction"; The price of the REDD credits in the 2009 ERPA was "very high compared to both primary and secondary market carbon credit transactions in the voluntary carbon market at that time" and was inconsistent with the level of risk associated with the 2009 ERPA; The commercial value of the 2009 ERPA was undermined by the lack of detail about the projects from which the REDD credits were to be sourced, the time for any, or any terms about, delivery of those credits or the right of the investor to receive any substitute or compensation if the projects did not result in any registered or registrable carbon credits; The 2009 ERPA provided very little information about the projects whence the REDD credits under it were to be created whereas, all primary market ERPAs contained or referred to significant detail about those projects because they are the basis for the carbon credits transaction it documents; Payment prior to delivery, including of a 15% deposit, was "very unusual", although on occasion it happened in projects sponsored by development banks, agencies or national governments or where large commercial buyers sought to secure access to cheap pre-compliance emission units or where an instalment became due on achievement of a specific project milestone; and The 2010, 2011 and 2012 ERPAs contained even less information about the REDD projects than the 2009 ERPA. 66 Mr Fowler demonstrated that the prices in each of the ERPAs for the scheme years were uncommercially high. If the unit prices in them were for tonnes of carbon dioxide equivalent (tCO2e), then the average volume weighted market prices for REDD credits as compared with the equivalent ERPA prices were as follows: Year Average volume weighted market price per tCO2e ERPA prices 2009 USD2.90 AUD28.00 2010 USD5.00 AUD24.00 2011 USD12.00 AUD18.70 2012 USD7.50 – 8.00 AUD19.55 67 The 2011 ERPA price may appear to be near a market price, allowing for currency conversion rates. However, the nature of the product that Voluntary Credits was selling was speculative. That is, Voluntary Credits was offering to supply a product that did not exist at the time that any of the ERPAs were made in each scheme year and which might never exist. None of the scheme ERPAs provided any certainty as to the country in which the REDD credits might be created or sourced or registered in a governmental or industry scheme so that it would be immediately tradeable. The investor was contracting to pay a 15% non-refundable deposit, or first instalment, for a product that may never come into existence. 68 Mr Fowler opined that none of the 2009, 2010, 2011 or 2012 ERPAs was suitable for the purpose of enabling the investor to acquire carbon credits for use to retire carbon credits or to offset its carbon footprint or carbon emissions. He explained that this was because of, first, the lack of certainty on delivery timing or volume, secondly, the absence of a project development document (ie: a contract under which the carbon credits would be created), thirdly, the absence of a basis on which to assess the risk of non-delivery as against the price paid per unit, fourthly, the very high price per unit as compared with much lower risk alternative transactions that were available in the markets at the relevant times and, fifthly, the investor could not make any offsetting claims unless and until BR Redd / Voluntary Credits gave a delivery notice. 69 In addition Mr Fowler opined that the 2009 option was "very unusual" as compared with arrangements for carbon credits in June 2009. He said, correctly in my opinion, that the 2009 option was drafted as a stop-loss rather than a hedging instrument with the objective of limiting the overall expenditure of an investor to only the 15% deposit in the event that the investor received a delivery notice, thus triggering the obligation to pay the balance of the purchase price. Mr Fowler said that the effect of the investor exercising the 2009 option, would be to return the carbon credits to the vendor. However, while that was so for the 2010, 2011 and 2012 options, the 2009 option was not between the investor and the vendor (BR Redd), under the 2009 ERPA, but with Carbon Strategic. Nonetheless, the essential point that Mr Fowler made in his analysis of the effect of the 2009 option (which in my opinion, applied equally to the 2010, 2011 and 2012 options) was that, if the investor exercised it, the investor would have no carbon credits available to it but would have paid a substantial sum under the 2009 (and later ERPAs) to BR Redd / Voluntary Credits, being the 15% deposit, without achieving any reduction in its carbon footprint. 70 Mr Fowler explained that during the period between June 2009 and June 2012, persons who wanted to obtain carbon credits or carbon offsets had a variety of retail sources available, including three businesses trading under the names Climate Friendly, Australian Carbon Traders and Carbon Trade Exchange. Each of those retail sources offered simple arrangements to acquire and retire existing carbon credits from a wide variety of projects in various locations. Those businesses offered a purchaser the ability to acquire the precise number of carbon credits needed to offset the purchaser's emissions, or as much of those emissions as it wished to offset. 71 Mr Fowler reasoned that, because of the ready availability in the spot market of bespoke amounts of carbon credits in June 2009 and thereafter, from at least those Australian carbon credit trading businesses, there was no commercial need for a retail purchaser to enter into a primary market transaction of the kind offered in the 2009 (and later) ERPAs. He said that during the period between June 2009 and June 2012, businesses in the class of persons who became investors in the 2009, 2010, 2011 and 2012 ERPAs, such as small businesses and individuals, could purchase carbon credits using simple, standard form Australian Financial Markets Association contracts or through retail platforms and could take immediate delivery of whatever carbon credits that they wished or needed to acquire. The 2010 tax year 72 Dr Rowntree was not troubled by the poor drafting of the 2009 ERPA and option. His insouciance is demonstrated by the following. On 26 June 2009, David Le of Flowers Group (one of the entities marketing the 2009 scheme) forwarded to Dr Rowntree an email from Jason Wenderoth headed "Concerns" that acutely enquired about the mechanics of the 2009 ERPA and option. Mr Wenderoth wrote: Nowhere does the Purchase Agreement stipulate the relationship between REDD Credits and 'contract lots' or 'tonnes of sequestered carbon'. This makes it hard to determine what you will be entitled to down the track. It also sets up a terminological inconsistency with the Put Option, which only refers to REDD Credits and not 'contract lots' or 'tonnes of sequestered carbon'. Further, it's not clear what the nature of REDD Credits is nor how they will become 'tradeable' (eg as securities on a stock exchange?). There are several other drafting anomalies in the documents, eg 'Termination Date' is not defined in the Put Option Agreement, and the Purchase Agreement still includes references to "Emission Units'. (emphasis added) 73 Dr Rowntree responded to Mr Le later on 26 June 2009 saying that he had read Mr Wenderoth's concerns and did not think that there was any point in calling him. The Flowers Group appears to have comprised, at least, based on the sources of funds identified in the s 50 summary of documents relating to consideration received by the respondents and their associates (the consideration summary) Flowers Accounting Solutions Pty Ltd, Flowers Financial Management Pty Ltd, Flowers Financial Group Pty Ltd and SVPMA Pty Ltd. Dr Rowntree wrote that Mr Wenderoth could wait until the final version was "settled by our barristers in July/August". 74 Next, on 24 August 2009, Paul Miller of Deutsch Miller, solicitors, emailed Dr Rowntree and Mr Bonnell with drafts of, among others, a revised version of the 2009 ERPA. Mr Miller pointed out that the draft ERPA did: not specify which Projects need to be completed before BR Redd is obliged to send to the Buyer a Delivery Notice. This clause acts as a condition precedent to the Buyer receiving a Delivery Notice, which is out of its control. Please consider being more specific in relation to which Projects need to be completed as I am concerned that this clause could make the agreement void for uncertainty. (emphasis added) 75 Despite, or perhaps because of, Mr Miller's warning, the 2010, 2011 and 2012 ERPAs had no reference to any projects by reference to which Voluntary Credits (or as it was called in 2009, BR Redd) could serve a delivery notice on the purchaser. 76 Next, on 25 August 2009, Mr Manietta (on Ti Amo Strategies letterhead) wrote to an investor, The Mark Colin Co Pty Ltd, which had purchased two contract lots in the 2009 year, advising it that the "Green Frog" carbon credit logo was now available. He advised his client that by September 2009, the BR Redd website would have a downloadable marketing and media pack including a draft press release and a suggested tendering clause. This was similar to Dr Rowntree's 9 July 2009 letter to Dr Robson (see [31] above). 77 In August 2009, Dr Rowntree and Mr Bonnell participated in a workshop with IMPACT Communications Australia Pty Ltd to develop key messages for a media campaign to be conducted on behalf of BR Redd up to 31 January 2010. The campaign was to promote BR Redd in the lead up to the United Nations Climate Summit that was to take place in Copenhagen between 6 to 18 December 2009. 78 In a letter to Dr Rowntree dated 1 September 2009, IMPACT set out the activities that it would undertake in that campaign for a fee of $58,075. These activities included media training for Dr Rowntree and Mr Bonnell, the preparation of drafts of a "green kit" for clients, a media kit, interviews with Mr Flood (of Carbon Strategic, a media release, pitch/case studies and a poll to survey clients as well as weekly and monthly reporting. 79 IMPACT prepared a key messages report soon after its engagement that referred to the "Voluntary Credits Pty Ltd Communications Campaign" (even though BR Redd only changed its name on 17 January 2010). The key messages report identified that the initial "direct targets" of the campaign were "owners and managers of small to medium enterprises". The campaign would focus on Voluntary Credits' market for carbon credits and "enable [it] to utilise media coverage gained to generate more business, test the media's reaction to the REDD market and build the confidence of David Bonnell and Bruce Rowntree as media spokespeople" (emphasis added). The key messages report stated: Key Messages A 'key message' is a claim supported by a fact or example. The key messages below were developed during a workshop between IMPACT and Voluntary Credits Pty Ltd (Bruce Rowntree and David Bonnell) in August 2009. They are divided into two categories; company/ Voluntary Credits Pty Ltd messages and general REDD messages. Spokespeople should use key messages appropriate to the media wherever possible. Note, all media materials should refer to Voluntary Credits Pty Ltd as a distinct business that sits separately from the parent company, BR Advisers. This will allow spokespeople to distance themselves from the 'tax reduction' component of the REDD product. (emphasis in original) 80 Mr Manietta engaged in marketing activities during the lead up to the Copenhagen summit. On 30 September 2009, he wrote a long letter (on Ti Amo Strategies' letterhead) to Hall Chadwick, a well-known firm of accounts, suggesting an alliance between them and Super Smart. He suggested that the activities of the alliance could include, in the tax planning area, using Ti Amo Strategies' strategic alliance with BR Redd for the sale of carbon credits. Mr Manietta largely copied from Dr Rowntree's marketing letter (see [24] above) when explaining this aspect to Hall Chadwick, including using the paragraph that referred to the barrister's opinion. There is no evidence of any further contact with Hall Chadwick. 81 On 19 October 2009, one of Super Smart's employees emailed Mr Donkin with four draft letters for his comment. This followed a meeting between Mr Manietta and Mr Donkin. The draft letters were a letter of introduction for Strategic from Mr Donkin, and three letters from Mr Manietta to, first, persons who had purchased contract lots in the 2009 year, secondly, persons who had been approached to purchase contract lots in the 2009 year but had not done so and, thirdly, new prospects. As counsel for Mr Donkin noted, there was no evidence that Mr Donkin ever used Mr Manietta's draft letter of introduction to Strategic. The other three draft letters, with suitable adaptations, largely replicated Dr Rowntree's marketing letter, including the reference to the barrister's opinion. 82 Mr Bonnell visited Vietnam between 7 to 12 December 2009 to discuss with various government officials associated with national parks how they might cooperate to create REDD credits. He noted that the Vietnamese Government was "very keen to promote REDD programs" and that the issue of climate change was prominent in its thinking. Mr Bonnell concluded that those with whom he had dealt "seemed to understand the REDD concept very well" and that "no credits would be tradeable until 2013 and later". 83 On 17 January 2010, BR Redd changed its name to Voluntary Credits. 84 On 25 January 2010, Mr Manietta emailed Dr Rowntree asking him to bring "your latest marketing kit for CC's [carbon credits] with you for lunch". 85 On 29 January 2010, Dr Rowntree sent Mr Bonnell an email that stated of Mr Young, on whose opinion the marketing letter was based: Never ever let Ian young [sic] near a client. These clients/ friends are teeing me up meetings with a number of people and Ian points out all the risks and tells them that the commisioner [sic] would probably disallow the deductions and he wouldn't care about the politics in the same way as he did for psi. Clients are now wondering what the f[…] they have signed up for – and they haven't paid yet. (emphasis added) 86 This email demonstrated that Dr Rowntree knew that at least a significant number, if not all, persons within the class to whom he was marketing investment in the ERPAs were not persons about whom Mr Young had opined in his 26 May 2009 opinion as "a businessman, conducting his business" who could or would represent to the public "that his business is a clean and green business" (see [23] above). Thus Dr Rowntree knew that Mr Young did not agree with the use of his opinion as stating that, generally, regardless of the business of the particular investor, an investment in an ERPA would be "a deductible expense of the buyer to the full extent of the purchase price in the year in which the contract was executed". Despite that knowledge, Dr Rowntree persisted in using, or rather misusing, Mr Young's opinion indiscriminately in his marketing of the 2010, 2011 and 2012 ERPAs. 87 So, on 2 February 2010, Dr Rowntree emailed Mr Le and Rodney Walt attaching "the material I am sending to people at the moment", being a letter on VCPL's letterhead in substantively the same terms as the marketing letter set out at [24] above (but with Voluntary Credit's name substituted for BR Redd's and a slightly different description of the way in which the option worked). Although the letter was on VCPL's letterhead it said (without explaining that they were different companies) that "Voluntary Credits Limited" had been set up to provide businesses with carbon credits to allow them to show their customers that doing business with them is friendly to the environment. Dr Rowntree noted in the 2010 client list: "BR [Bonnell Rowntree] and Rodney [Walt] and David [he] will share profit when selling these REDD up to $28/tonne (being the difference between $28 and $5). I infer that Mr Walt was also associated with the Flowers Group which sold 34 contract lots in the 2010 tax year. At the end of the 2010 client list there was a commission structure that recorded $2250 "through Flowers" or $1125 "Not Flowers" for every contract lot that Mr Le or Mr Walt sold. 88 On 5 April 2010 Mr Bonnell wrote an email to Philippa Reid, who appeared to be a new employee of, or a consultant to, BRTAPL about what needed to be done to progress her "[t]aking on the marketing role" including training her to "sell carbon credits". He said that he and Dr Rowntree proposed a bonus scheme for her of $3500 for every contract lot that Voluntary Credits sold "attributable to your efforts." 89 On 23 April 2010 Dr Robson emailed Ms Dodd enquiring about whether he could "invest in carbon credits in the 2010 tax year, whether she was aware of any issues from the standpoint of the Commissioner and the query that his accountant had raised, as to how the deduction for the 2009 tax year was to be claimed. Ms Dodd replied later that day saying that "the full amount of the contract price is the amount deductible even thou [sic] you have only paid the initial deposit" and "should be claimed as an operating expense of your medical business" under s 8-1 of the ITAA 1997. She attached "the current materials similar to last year". 90 On 25 May 2010 Ms Reid and Mr Bonnell exchanged emails. She reported arranging the sale of 2 contract lots to one purchaser and enquired: On a random note, and please excuse my ignorance, but why is NAB [scil: National Australia Bank] able to advertise their home loans by saying "why not get a home loan with possible tax benefits?" but we can't say something like "why not offset carbon emissions with possible tax benefits?". It would make life a lot easier... 91 Mr Bonnell replied that he needed "to explain the subtleties of the NAB vs Us in person" and then added: I think you should start investigating tv advertising, for which we need an advertising agent. I have in mind the slots that are sold on Sunday morning for the business shows. We could use art and code's slide show for a 30 second spot, depending on cost. We can also look at direct marketing with an advertising agency as well. So let's see if we can find one. (emphasis added) 92 In June 2010, Dr Rowntree and his associates pursued the marketing of contract lots apace. For example, Mr Elias sent the marketing letter, a flyer and an application form to one client investor on 1 June 2010, who bought a contract lot. On 7 June 2010 Brad Turner of WL Browne & Associates emailed Dr Rowntree discussing 11 clients who might be possible investors, including WL Browne itself. Mr Turner said that one of those clients "will have some solid profits and may be able to use in multiple entities" and another had a lot of negatively geared rental properties "and may not get full benefit". As those comments suggested, the discrimen for selecting the possible investors was their anticipated tax position, rather than any concern about the way in which their business might be able to utilise carbon credits for business (as opposed to fiscal) purposes. 93 On 21 June 2010, Dr Rowntree asked Frank Curran if he had "any clients who want to do carbon credits we are just about at 30 June". Mr Curran replied "what sort of tax prospects do they really need for this to work" to which Dr Rowntree responded "140k +" (i.e. $140,000 or more). Once again, that discussion focused on the tax position of a client. As Mr Curran's query demonstrated, the client's commercial need for carbon credits (other than their perceived fiscal benefits) was not of any apparent concern. 94 Mr Manietta and, to a much lesser extent on the evidence, Mr Donkin, were busy too at this time. On 21 June 2010 Eunice Zhou of Super Smart and Mr Manietta exchanged emails with a client, Min Jin Song, about what Ms Zhou described as "the Carbon Credit package". Ms Song responded again with a keen eye focused on the fiscal consequences: was wondering if you would be able to ask Rick [Manietta] if it was definitely applicable for me that if I used the carbon credits I would have to pay minimal tax after viewing my 2010 - 2011 income estimates. I just did not want to get them unless it was of great benefit for my situation. (emphasis added) 95 Mr Manietta emailed asking her to call him that night. At 7.24pm on 21 June 2010 Ms Song emailed Mr Manietta with the completed forms concluding with her thanks "for taking care of us with such late notice". 96 On 23 June 2010 Mr Donkin emailed Mr Manietta and his colleague, Rebecca Frankham, with an application from Smart Dental for one contract lot. Ms Frankham emailed that application to Dr Rowntree about 2 hours later advising him that 5 or 6 more applications were going to be received later that day or the next. 97 On 30 June 2010, Dr Rowntree, on Voluntary Credits' letterhead, wrote to Smart Dental congratulating it on purchasing a contract lot and attaching an executed 2010 ERPA and option. The letter informed Smart Dental that it could use Voluntary Credits' "resources…to assist in marketing your business" and that Voluntary Credits would be in contact in the next month to provide a licence agreement to use "carbon reduced" logos to "advertise that your business is now 'carbon reduced'". Dr Rowntree wrote, in what might be considered as a lack of a personal touch in a letter to a suburban dental practice, that "many of you had advised that your agreement to purchase REDD Credits will facilitate you being awarded government contracts." He suggested that the letter's recipient include in its tender documents that it had entered into a contract "for the purchase of 5,000 tonnes of carbon credits…at great expense to the company resulting in an outlay of $140,000." Dr Robson's 2010 tax year investment 98 On 21 June 2010, Dr Robson paid $42,000 to acquire 2 contract lots and executed a 2010 ERPA and 2010 option. There was no evidence as to if, or how, the $1000 option fee came to be paid but I accept Dr Robson's evidence that he entered into the 2010 option. However, he did not claim a tax deduction for the 2010 tax year in respect of that payment because, as he said in evidence "I had run into problems with" the ATO about his claim for deductions in his 2009 tax return. 99 On 24 June 2010, Dr Robson's accountant had emailed the ATO with information about the income and expenses declared in his 2009 tax return. 100 On 29 June 2010, an officer of the ATO wrote an email to Dr Robson accountants, following a telephone discussion, asking for a copy of either the contract or a form showing details of his investment the subject of the claim for a deduction based on his outlay in respect of the 2009 ERPA in his 2009 tax return. 101 The ATO email referred to the need for an investor claiming a deduction of "expenditure for establishing trees" to give the Commissioner a notice in writing no later than 5 months after the end of the financial year. Dr Robson's accountant asked him and Ms Dodd to provide the information that the ATO sought. 102 On 29 June 2010 Ms Dodd responded asking about what trees the ATO had referred to and Dr Robson wrote back that he, also, had no idea, but would look at his papers. I infer that Ms Dodd and Mr Bonnell discussed how to respond and, at about 9pm on 29 June 2010, Ms Dodd emailed Dr Robson asking him not to provide his accountant or the ATO with "carbon credit contracts…until further notice" because "we need to know exactly what the tax office is referring to before we hand over any information". 103 The cat was now among the pigeons as become clear from Ms Dodd's email to Dr Robson of 1 July 2010 where she wrote: BR Redd and Bonnell Rowntree are requesting extra time before lodging any carbon credits documents with the ATO. unfortunately Bruce Rowntree is in Vietnam now completing current year investments and is not due to return to Oz until 20 July… I appreciate that this time delay is not what either you or I originally expected but the investment vendors are considering their ato defence strategy and have requested both our patience at this stage. I do apologise for this unexpected turn of events Nick but at this point it is out of my hands. (emphasis added) 104 Dr Robson responded later on 1 July 2010 saying that he presumed that Ms Dodd's confidence in "the legislative framework underpinning the investment remains strong" and that "I was certainly not expecting it to trip the switch for a tax audit". Dr Robson also said that all his tax liabilities were paid in full. Ms Dodd asked Mr Bonnell how to respond and on 2 July 2010 he advised her: You can tell Nick something like: "The deduction you have claimed for purchasing carbon credits does not rely on any specific section of the law. It is governed by ordinary principles of what is and is not deductible and when that deduction can be claimed. When you interpret these sections there is always room for the ATO to take a position that is different to the views taken by taxpayers. The delay is due to the fact that Bruce is away in Vietnam at the moment and then off for a short holiday. Vietnam is where we buy the REDD credits and he is meeting senior members of the Vietnamese government to inform them of what we are doing here in Australia to promote the REDD scheme. We need Bruce's input prior to responding to the ATO. The fact that there is a short delay will not cause you any prejudice with the ATO, especially as they rushed your response due to an officer leaving on maternity leave." (emphasis added) 105 On 3 July 2010 Ms Dodd emailed Dr Robson. She confirmed that her confidence in the deductibility of the expense was still as strong as before and then repeated substantially Mr Bonnell's draft response. The 2010 tax year – summary 106 During the 2010 tax year according to the 2010 client list there were sales of 102 contract lots. Voluntary Credits received a total of $1,402,500 comprised of the following: Source Amount received by Voluntary Credits Commission retained by Ti Amo LP and Strategic No of contract lots Voluntary Credits $196,000 (a) N/A 12 $174,750 (b) 10 Ti Amo LP $455,000 $238,000 33 (d) Flowers Group $476,000 WL Browne $56,000 Ms Dodd/Conluceo Consulting $130,750 Mr Elias $25,750 Strategic $63,000 $26,296 (c) 4 NOTES (a) this sum was agreed (b) this sum was disputed (c) this sum was admitted (d) Ti Amo bought one contract lot itself for $14,000 107 The amount of $174,750 referred to in note (b) in the above table was part of the total of $176,750 that VCPL received into its Bank of Queensland account between 1 June 2010 and 9 July 2010. It comprised two deposits of $21,000 each, and deposits of $58,000, $27,750 and $49,000. The 2010 client list recorded sales of 10 contract lots for a total of $174,750 to 10 named investors that the Commissioner could not match to other records of Voluntary Credits. Those 10 sales appeared to result in a net receipt for each sale to Voluntary Credits of: $21,000 each for 4 clients of WL Browne and to one of $4,750 for a sale to WL Browne itself as purchaser $14,000 each for two where Voluntary Credits was the referrer; $21,000 for one where Strategic was the referrer; and $18,500 each where "Grevlar" was the referrer. 108 The $2,000 difference between the deposits that VCPL received and the total of the sales prices recorded in the 2010 client list for those 10 lots suggests, first, that the deposits represented direct payments to VCPL for all 10 of those lots and, secondly, the $2,000 difference may have arisen because one or more amounts in the 2010 client list that appeared next to the receipt was understated. The Commissioner argued that the total net receipts of $174,750 recorded in the 2010 client list should be inferred to be the actual amount that VCPL received for the 10 lots for the sale of which there was no direct evidence. 109 I am satisfied that the Commissioner's argument is more likely than not to be correct. The evidence showed that different persons were paid or deducted differing amounts of commission for sales of contract lots. Thus a simple mathematical calculation using a standard commission rate (such as one third of the 15% deposit, or $7,000 out of $21,000) would not yield an answer to the problems of matching the total of $176,750 deposited into VCPL's bank account to any list of sales using just the price of $21,000 per contract lot. However, the 2010 client list is likely to be a reasonably accurate record of what lots were sold overall and the amounts received for the sales. In my opinion, in the circumstances, the total equating to $174,750 for the 10 contract lots recorded in the 2010 client lists for which there is no direct evidence of a deposit into a bank account, is more likely than not to have been received by VCPL as part of the five deposits totalling $176,750 into that account made between 1 June 2010 and 9 July 2010. 110 The 2010 client list recorded that Strategic had referred 4 purchasers of one contract lot each. Each of these entries recorded a gross payment (being the price of one contract lot) of $21,000 and a net receipt of $11,625. At the end of the 2010 client list there was a note dealing with the split of commissions and against a net receipt of $11,625 in the 'Not Flowers' [group] was a note that the commission was $7,000 and that there were also payments of the balance of $1,250 to "Tiew" and $1,125 to "Le/Walt" (being Mr Le and Mr Walt – see [87] above). I infer that each of the entries associated with Strategic in the 2010 client list involved Strategic being entitled to a commission of $7,000 (totalling $28,000) and that each of whoever 'Tiew' was, Mr Le and Mr Walt was also entitled to $2,250 or $1,125 respectively out of the total deposit and option fee for each contract lot. 111 Counsel for Mr Donkin formally admitted, during the hearing, that Strategic received $26,296 as commission in respect of its four clients recorded in the 2010 client list as having each paid Voluntary Credits $21,000 for the $20,000 deposit for a contract lot and $1,000 options fee. Mr Donkin made that admission notwithstanding the difference between the normal $7,000 commission Strategic received and the lesser total comprised of: Date Payer Amount 10 May 2020 Spirefive Holdings Ltd $11,000 28 May 2010 BRPL $2,750 29 June 2010 BRPL $5,500 8 July 2010 VCPL $7,046 112 BRLP was a limited partnership formed pursuant to s 50A(1) of the Partnership Act 1892 (NSW) of which Dr Rowntree, Mr Bonnell and Euporium Ltd were members from 16 July 2003. Euporium was a company limited by guarantee and from, at latest, 22 September 2008, Dr Rowntree, Mr Manietta and Mr Elias were its directors. 113 Spirefive was also a company limited by guarantee and Dr Rowntree was a director and secretary of it between its registration on 14 February 2006 and deregistration on 25 April 2011. Dr Rowntree's curriculum vitae indicated that Spirefive was a corporate financial planner. 114 Although Mr Donkin admitted (as I noted above at [111]) that Strategic received the whole of the $26,296 as commission in respect of sales in the 2010 tax year, he made no such admission in respect of his company's receipts in the 2011 tax year. However, the above analysis of those admitted payments is relevant to what occurred in the 2011 tax year. 115 Ti Amo's general ledger for the 2010 tax year recorded credit entries totalling $693,000 for 'Monies on behalf of Vol Creds" between 15 February 2010 and 28 June 2010. Between 20 April 2010 and 2 July 2010, Voluntary Credits' HSBC (Hong Kong and Shanghai Banking Corporation) bank statements showed that Ti Amo had made deposits of $454,982 net of three $6 fees (or a gross payment by Ti Amo of $455,000). Accordingly, Ti Amo retained $238,000 of the moneys that it had collected from its clients on behalf of Voluntary Credits. 116 The 2010 client list recorded that Mr Manietta had sold 33 contract lots which would have realised $693,000 in respect of the amount of the 15% deposit, for the 2010 ERPA and $1000 for the 2010 option (a total of $21,000 each) including one to Ti Amo. However, the 2010 client list also recorded that Ti Amo was one of the 33 purchasers. Had it retained $7,000 for each sale, Ti Amo would have remitted $14,000 more than the $455,000 that it did. I infer that Ti Amo purchased its contract lot for only $7,000. This is because Ti Amo retained $238,000 instead of $224,000. I infer that Mr Manietta agreed with Voluntary Credits that if Ti Amo paid the full deposit on the 2010 ERPA for one contract lot and the 2010 option fee, it would retain twice its normal commission. The 2011 tax year 117 The 19-25 July 2010 edition of Vietnam Investment Review contained an article headed 'Carbon market to spring into life'. It described carbon forest projects and quoted Dr Rowntree describing Voluntary Credits' involvement with a new project in Vietnam and similar projects in Indonesia and Papua New Guinea. 118 On 14 August 2010, Dr Rowntree emailed Mr Manietta asking if he should visit Mr Manietta's clients to discuss entering into a licence agreement. Mr Manietta replied "Of course! How about starting with me first?". 119 On 23 August 2010 Mr Bonnell emailed Dr Rowntree and Ms Reid saying that they needed to finalise a package for the buyers of the REDD Credits so as to start visiting them that week. He wrote that the package should include a CD or thumb drive containing, animation, frog logos "in as many formats as we can get our hands on", an explanation of about one page of what REDD Credits were "more technical than our promotional brochure" (emphasis added), a clause for use in tender documents, a draft press release, a copy of the Vietnam Investment Review article and a short report on the visit to Vietnam. Dr Rowntree replied later on 23 August 2010 saying that he also wanted to cover the licence agreement, what the 2011 ERPA would be "and the benefits for signing up now" and whether the persons to be visited had anyone they also could refer to invest. 120 The upshot of the 23 August 2010 email exchange appears to have been that BRPL or BRTAPL (collectively 'BR') engaged an advertising agency called 'not an advertising agency' (the NAA agency) called which produced a detailed marketing and media proposal dated 13 September 2010. The proposal referred to an imminent conference, the GP10 (which I infer was a 2010 conference for general practitioners to be held in Cairns and that some of the marketing material would be used at it). The proposal recorded that BR had discussed NAA agency's brief as, first, creating "communications for BR using a master-brand approach over all its offerings" and the creation of a marketing plan "based on BR's target market and marketing budget", and, secondly, creating, producing and distributing marketing communications for BR based on market research and a "consequential value proposition". The proposal recorded "Target: BR says its primary market is health professional (GPs and Dentists who own or manage practices) and accountancy firms" and that the "Route" was: The marketing challenge is that there is little BR can say when advertising to its target audience. BR needs face-to-face meetings with potential clients to present and sell their unique offerings. So [NAA agency] recommends a strategy of traditional media that delivers a message designed to interest and intrigue their audience and drives them to bonnellrowntree.com for more information and to contact BR for face-to-face meetings. (emphasis added) 121 The NAA agency proposed short and long term solutions for BR. Relevantly, it suggested that in the short term a website be created that stated that BR was a tax advisory company "with a unique offering" and promoted "the Succulent Group model". The proposal suggested showing "all four arms of the model but enable a click-there-for-more-info button only [on] the Voluntary Credits arm of the model", and the creation of a "piece to hand out at GP10, which drives prospective customers" to the website for more information. The proposal included the creation of a BR video and or YouTube clip, with Dr Rowntree as the presenter, as part of the tantalising approach that the proposal recommended. The proposal included a draft flyer for the GP10 conference for Dr Rowntree to hand out there and a draft brochure that both reflected the overall theme of its tantalising approach, employing a picture of him presented as below: 122 The proposal also suggested a direct mail package that could consist of the brochure, a CD and flyer or a "3D DM Pack", the latter being described as "a seed pack" to grow a money tree by contacting BR. The budget for production costs in the proposal was for about $60,000. 123 There was no direct evidence of whether BR acted on the proposal but, by later in 2010, VCPL or Voluntary Credits had established its or their own website that stated, misleadingly (based on Mr Fowler's evidence above), "Bruce Rowntree of the Succulent Group took the initiative to purchase REDD credits in accordance with recognised international standards, saving rainforests in Vietnam from deforestation and degradation" and had the definition: "REDD Credits is recognised as a sustainable solution". The website used a logo with VCPL's name but its presentation blurred the difference between it and the vendor of the carbon credits, namely Voluntary Credits had embedded video presentations including one with an interview with Dr Rowntree appearing on Vietnam TV news. The website promoted the purchase of carbon or REDD credits from Voluntary Credits. Dr Robson amends his tax returns 124 In the event, on 13 September 2010, Dr Robson's accountants informed the ATO that he never intended to claim any deductions that were not lawfully permitted, he wished to withdraw the claim to deduct the $280,000 from his 2009 tax return, amend that return and pay the total $3,867.42 tax that would then be owing. 125 On 24 September 2010, Dr Robson met Mr Bonnell and Ms Dodd at his offices in Glebe. Mr Bonnell promised to refund the $40,000 that Dr Robson had invested in the 2009 ERPA since he was no longer claiming a deduction for it. Dr Robson thought that the refund was "sort of a goodwill gesture" given the consequences of his interaction with the ATO. Dr Robson was very upset about the questions that the ATO had raised about the "investment". Mr Bonnell also promised that he would send Dr Robson "marketing material". 126 On 19 October 2010 Dr Robson emailed Ms Dodd reminding her of the 24 September 2010 meeting and the yet to be received promised refund. 127 On 28 October 2010, Dr Robson's patience was at an end. He emailed Ms Dodd complaining that he had heard nothing at all from Mr Bonnell and or Dr Rowntree after the 24 September 2010 meeting about dealing with the ATO and his tax position nor had he received the promised refund. He noted that Mr Bonnell had apologised in the meeting "that the product was effectively brought to market before it was properly sorted out, particularly in terms of the tax position which he referred to as the "back-end". He pointed out that he had not been told when investing that "the product was not in a position to submit in my ITR [scil: income tax return] as a credible going concern whatever the theoretical tax position may have been". He wrote that he was "feeling extremely angry about this debacle". 128 Ms Dodd replied, copying in Dr Rowntree and Mr Bonnell, sending Dr Robson the landline phone number of BRPL. Dr Rowntree emailed Ms Dodd within minutes saying, disingenuously: You do not want me responding to this email and you do not want him talking to me. It is total bullshit and I am very pissed off about this whole thing. I have tried to stay out of this because the only thing I could do is point out how poorly you explained this to him. It has not been at all marketed from us on the basis of tax - not a little- nil. I think we should refund all his fees - and you should pay half. Please get him to send in his account details ASAP - Australian details will do I will draw it down on my home loan - I want to send him his money and be done with him. (emphasis added) 129 On 28 October 2010 Dr Robson's bank account statement recorded receipt of a deposit of $41,000 with a notation "Refund BR." I infer that the source was Dr Rowntree or BR (his firm). 130 And, Mr Bonnell wrote a letter that, although the copy in evidence is undated and unsigned, I infer was sent soon after, because Dr Robson said that he recalled receiving such a letter after he received the refund. That letter, like Dr Rowntree's email, was not written without hyperbole or an eye to self-serving statements that the objective contemporaneous evidence belied. Mr Bonnell's letter began by referring to the 24 September 2010 conference and subsequent emails between Dr Robson, Ms Dodd and (although none are in evidence) Dr Rowntree. He wrote, among other matters: Unfortunately I did not follow the conference up with the action promised. We have had delays with our marketing people and this has distracted me from providing you with the logos and other promotional material as discussed in that conference. There is also no excuse for the delay in repaying that amount of your costs that I had agreed to refund. I have been assured that the CD will be ready this week and I would like to arrange a meeting with you to go through its contents… Bruce has asked me to respond to a number of matters raised in your email and I think it would be worthwhile to do so to clarify the position as well. Voluntary Credits Limited has entered into a contract with you to sell REDD credits. As you are aware these are carbon credits that are being developed under the auspices of the United Nations. There have been sales of these credits already in other parts of the world, to companies such as manufacturers. As yet there is no general market for the credits. The purchase of these credits immediately gives rise to payments to Voluntary Credits' Vietnamese partners and this immediate flow of money is encouraging the Vietnamese who control forests to prevent their deforestation and indeed to plant new forests. Both Bruce and I have been to Vietnam and visited forests from which the credits will eventually derive. Voluntary Credits has not and cannot give tax advice. It obtained the opinion of a barrister that if a business acquired these credits under the standard form contract used by Voluntary Credits then it could obtain a tax deduction if it used the acquisition of the credits to promote its business as green. Voluntary Credits has made purchasers of credits aware of this advice but has not given the advice to the individual purchaser. The standard application form states that the purchaser will obtain their own tax advice on this question. We are happy to arrange that tax advice for you, if you wish to obtain that advice in writing. We note here that Voluntary Credits has committed to running a case before the Administrative Appeals Tribunal should the ATO decide that any particular investor's purchase of these credits does not give rise to a tax deduction. Nonetheless it is important to Voluntary Credits that if purchasers wish to promote their business as a result of acquiring the credits then they should equipped to do so. That is the purpose of using the logos and other material that will be on the CD. The logos and some of the other material were developed at the same time as the contracts were negotiated by Voluntary Credits to acquire credits. The product was not launched without these elements. Unfortunately the logos weren't provided to you and that is the reason why Voluntary Credits has refunded two of your contract lots. The website of Voluntary Credits has been plagued with unforeseen problems and the logos and other material were initially on that site. Now that things have progressed this material will be provided face to face and I will take you through each item. (emphasis added) 131 It is obvious from this letter that, first, Voluntary Credits had not acquired any carbon credits at all despite the contents of the "marketing letter" that Dr Rowntree had sent Mr Elias on 26 May 2009 once he had received Mr Young's opinion (see [24]), and secondly, the logo and CD material had not been developed previously and that Dr Rowntree and Mr Bonnell were now trying to regularise the position. There was no reason, if a CD or any logos existed earlier, why Mr Bonnell would not have had them ready to hand over at the 24 September 2010 meeting which, after all, was being held in BRPL's Glebe offices to deal with Dr Robson's position so that he could respond to the queries that the ATO had raised with him. As Mr Bonnell's letter said "delays with our marketing people" had distracted him from providing the logos and other promotional material "as discussed in that conference." 132 Dr Robson did not seek either to claim a deduction or a refund for his investment in the 2010 tax year because he said "I was aware that I probably made a mistake and I was just going to wear it". He said that he had never met Dr Rowntree. 133 On 24 November 2010 Dr Rowntree exchanged emails with George Kolovos, the principal producer of Redrock media. Dr Rowntree was finalising Mr Kolovos' tax returns. Mr Kolovos asked whether he should "still execute the Carbon Credits documents, given everything that's going on?" Dr Rowntree replied "The cc [carbon credits] should have no effect on what is happening – you only need to be confident that the income for this year will be the same or bigger" (emphasis added). Mr Haralambidis decides to purchase the 2011 ERPAs 134 Mr Haralambidis and his business partner, John Ceh controlled the Cargo and Logistics Management (CALM) group of freight forwarding companies, Cargo and Logistics Management Pty Ltd, Cargo and Logistics Management Terminal Pty Ltd and Cargo and Logistics Management Victoria Pty Ltd (the CALM group). 135 In about December 2007 Mr Haralambidis first met Mr Manietta who then assisted the CALM group in refinancing its operations from one bank to another in the first half of 2008. During that period, Mr Manietta introduced Mr Donkin to Mr Haralambidis and the CALM group, as an accountant whom Mr Haralambidis understood Mr Manietta insisted that the group use as its external accountant to prepare financial documents for the refinancing. At that time Mr Donkin had not yet established Strategic. Once Mr Donkin established Strategic, the CALM group transferred its external accounting work to it. The CALM group also had its own financial controller. Mr Donkin lodged business activity statements, prepared tax returns, audited financial reports and, from time to time gave businesses advice to the CALM group. 136 On 2 March 2011, Mr Manietta wrote to Mr Haralambidis, on Ti Amo letterhead on which a green frog logo with "forest friendly carbon reduced" appeared. He proposed that the CALM group invest in a carbon emissions reduction project. The letter came with a CD, an application form, a brochure promoting Voluntary Credits and a statement in the same wording as in Ti Amo's letter except for the last paragraph. This was the first time that Mr Haralambidis had learnt of the possible investment. The letter informed him that Ti Amo was "working with partners in Asia to bring these credits to you" and that Voluntary Credits had prepared a "contract for the reader to acquire a minimum purchase of 6,000 tonnes of carbon" at a price of $22 per tonne. The last paragraph of Ti Amo's letter stated that Mr Manietta would be in contact shortly to arrange a meeting. Mr Manietta had a telephone meeting about two weeks later with Mr Haralambidis who expressed his curiosity about the proposal. Mr Manietta said that they needed to meet in his office in Glebe to discuss that, but whetted Mr Haralambidis' appetite by saying: It's going to benefit your business. It's going to be a wonderful thing for the environment and there's some tax benefits for it as well. So you need to…jump on this and come and see me as soon as you can. (emphasis added) 137 Mr Haralambidis said that in about mid-April 2011 he and Mr Ceh attended a meeting at Glebe with Mr Donkin and Mr Manietta. Mr Manietta began the meeting describing this "new opportunity", about which he was passionate, for the CALM group. Mr Manietta told those present that there would be tax benefits and other benefits for the group's business in the form of its being able to advertise the reduction of its carbon footprint. Mr Manietta said that Dr Rowntree, of whom he spoke highly and who shared offices in the same building, had presented the opportunity. In answer to Mr Haralambidis' and Mr Ceh's question as to how their businesses would benefit, Mr Manietta turned to Mr Donkin who said each of the CALM group companies would benefit based on their financial position. Mr Manietta said that "it's a no brainer. There's nothing to think about". He said that the outlay was going to be $20,000 for each company and the benefit would be a tax saving of close to $39,000. He urged the need to proceed so that all the contracts would be signed before 30 June 2011. 138 Mr Haralambidis explained his understanding of how the investment would produce tax savings for each member of the CALM group. He said that by purchasing 6000 tonnes of carbon emissions at an estimated $22 per tonne, subject to adjustment when the Australian Government established some price mechanism in the future, "we would receive a tax credit from the Australian Taxation Office" and that "our benefit…was the tax benefit for getting on this early and…being part of this". If any top up of the estimated price per tonne of $22 were necessary in the future, Mr Haralambidis understood that the group would be invoiced then. 139 Meanwhile, on 15 March 2011, Mr Donkin wrote to Smart Dental enclosing "documentation in relation to the carbon credit reduction scheme for 2011". Given that Smart Dental had been a client of Mr Manietta in 2009 (see [21]), Mr Donkin's letter suggests that by early March 2011 he and Mr Manietta were continuing their collaboration together in promoting sales of ERPAs (as had also occurred in with Smart Dental in June 2010 ([97]). Mr Whitney decides to purchase the 2011 ERPAs 140 Mr Whitney and his business partner, Ivan Bresic, conducted a real estate agency business through the Bresic Whitney group of companies, Bresic Whitney Real Estate Agents Pty Ltd, Bresic Whitney Property Management Pty Ltd and BWEA2 Pty Ltd. Mr Whitney said that he first heard of Strategic during the 2010 tax year and Bresic Whitney engaged their professional services for that tax year to about 2012 for taxation, business and financial advice as well as for Mr Bresic and Mr Whitney personally. Their dealings with Strategic were principally with Mr Donkin with whom Mr Bresic and Mr Whitney met about monthly. 141 In the early part of 2011 Mr Donkin told Mr Whitney that there was an opportunity for Bresic Whitney "to obtain some tax benefits through a scheme and suggested that he would offer a presentation via someone he knew by the name of Bruce Rowntree". 142 On 19 April 2011, Mr Whitney, Mr Bresic, Mr Donkin and Dr Rowntree met in Bresic Whitney's boardroom at Kings Cross Road. That was the first occasion on which Mr Whitney had met Dr Rowntree whom Mr Donkin told the meeting was a tax expert. Dr Rowntree spoke about carbon credits using a whiteboard to explain how the proposed investment would work. During the meeting Mr Donkin said that there were "benefits to companies like ours and that Bruce [Rowntree] was explaining to us how it worked" and that they "spoke about the tax benefits of this scheme". Until Mr Donkin raised this subject in April 2011 and it was discussed in the meeting with Dr Rowntree, Mr Whitney was not familiar with, and did not use, the expression "tax benefits". 143 During the meeting Mr Donkin provided Mr Whitney and Mr Bresic with a folder containing a CD, and the same materials as Mr Haralambidis had received with Ti Amo's letter of 2 March 2011 (see [136] above). Dr Rowntree did not stay for the whole meeting. Mr Whitney and Mr Bresic asked Mr Donkin for his advice as to how they should proceed. Later that day Mr Donkin sent them an email with a summary of the discussion and an action plan, one item of which was that each of the 3 group companies would "purchase emission reduction project of $20,000 each now". Mr Whitney gave evidence that he did not understand what the companies would obtain from the $20,000 payments. 144 Initially, in his evidence Mr Whitney said that at this meeting Dr Rowntree also discussed a possible restructure of shareholdings in Bresic Whitney Property Management and a restructure of the Bresic Whitney group. However, Mr Whitney later recalled, and I accept, that Dr Rowntree had discussed that possible restructure at a meeting in 2012 in Bresic Whitney's new offices in Liverpool Street. 145 On 20 April 2011 Mr Whitney emailed Mr Donkin and agreed to go ahead with the purchase of the 3 contract lots. 146 On 29 April 2011, Mr Whitney authorised three telegraphic transfers of $20,000 to Voluntary Credits' Malaysian bank account on behalf of each of the 3 companies in the Bresic Whitney group. He also completed 3 application forms for a 2011 ERPA for each of the companies either then or shortly beforehand and probably also then signed, together with Mr Bresic, the 2011 ERPAs, 2011 options and 2011 intellectual property licenses for each company. 147 On 3 May 2011, Charles Payne, an accounts manager of Bresic Whitney, emailed Mr Donkin, copying in Mr Whitney, and said "we have completed all the paperwork for this and I will send to you tomorrow". He asked "Can you please advise if we need to have the green logo at the bottom of emails as you have with yours?" Mr Donkin responded on 3 May 2011 saying that he would get Dr Rowntree to send a CD with the relevant attachments. Mr Whitney then replied asking if it "is critical or advisable we attach the email headers" and Mr Donkin responded later on 3 May 2011, saying: I want [it] on emails ideally and a link on your website to the voluntary credits website - this should be promoted to the outside world as a positive thing that BWEA has invested into as you are aware of your environmental impact. 148 Mr Whitney said that he had enquired about using the email headers because he did not understand why his businesses needed to do so, given the earlier discussion about the tax benefits. As he testified, "it seemed an odd thing to do given the conversation we'd had about tax" (scil: the tax benefits) and "I didn't see the connection between that and putting these on my website". And, as he said, Bresic Whitney did not use the green frog logos on its emails or put links on its website or use any of the other material provided on the CD because "I didn't feel comfortable doing it" and "I didn't see the purpose of why we would have to do that". 149 On 12 May 2011, Mr Young wrote an opinion for Conluceo, Ms Dodd's company. He noted that: Conluceo intended to enter into an ERPA and an option to acquire carbon credits "so that they may advise their customers that they are a 'green business'"; Under the ERPA, Conluceo would receive documentation that would allow such businesses to register its credits under the Carbon Pollution Reduction Scheme Bill once enacted; and He had been asked to advise only on whether ss 82KZM and 82KZMA of the ITAA 1936 would limit the full purchase price being deductible in the year of income in which Conluceo entered into the ERPA and option. 150 Mr Young repeated the substance of his 26 May 2009 opinion as to the deductibility of the full purchase price under s 8-1 ITAA 1997, before opining that it was reasonably arguable that ss 82KZL, 82KZM and 82KZMA did not preclude that result. 151 On 23 May 2011 Mr Haralambidis had a telephone discussion with Mr Manietta about concerns that CALM group's new financial controller, Danny Yu, had raised with Mr Haralambidis about how each of the group companies would account for investing in the 2011 ERPA. Mr Manietta told Mr Haralambidis that matters needed to be finalised before Mr Manietta left for overseas in about two weeks. At that time the CALM group was considering combining its 3 ABNs (Australian Business Numbers) to facilitate the lodging of tax documents. 152 On 24 May 2011 Mr Haralambidis followed up that conversation, when he wrote an email to Mr Manietta and Mr Donkin asking if the group businesses had been combined and if "the tax credit has not been taken up in this financial year, will the tax credit roll into Fin Year 11-12?". Later on 24 May 2011, Mr Donkin replied that the CALM companies would be combined for tax purposes in the 2011 tax year. He wrote that each company would: still account separately and so each entity could purchase a carbon credit and obtain the $132k deduction each. If we did three therefore overall profit falls to $104k to $204k and tax bill to between $31k and $61k…In terms of follow up payments, only follow up payment would be payable if credits are tradeable for at least what you owe so net outflow and perhaps even a profit. (emphasis added) 153 Mr Yu did some handwritten calculations on a copy of that email, that he showed Mr Haralambidis and Mr Ceh, which indicated the three CALM companies would save a combined total of $119,000 in tax if each purchased a contract lot and their combined profits were between $500,000 and $600,000. 154 Thus, for total outlay of about $60,000 the three CALM companies could expect to save twice as much (about $119,000) in tax with no further need to pay any more. Mr Haralambidis said that, based on Mr Donkin's assistance and his email the three CALM companies each bought one contract lot. Mr Haralambidis reasoned, relying on Mr Donkin's advice, that: We…could purchase more if we were making a higher profit, but that, was not the case for us… Based on the financials of what the total tax that we wouldn't be liable for and to bring it…to a comfortable level that's affordable from what were [sic] outlaying and what we're going to be paying. 155 On 2 June 2011 Michel Manietta (Mrs Manietta), Mr Manietta's wife, who was a partner in Ti Amo, emailed Mr Haralambidis enquiring about the application forms that Ti Amo had sent earlier. She reminded Mr Haralambidis of the approach of the end of the current financial year and the need for lawyers to deal with taking the contracts overseas for execution. Mr Haralambidis forwarded the email to Mr Yu who replied to Mrs Manietta later on 2 June 2011. Mr Yu advised that each CALM company would pay the 15% deposit by credit card which he expected to occur within about 10 days. 156 On 15 June 2011 Mrs Manietta emailed Mr Yu reminding him of the need to progress paying for the carbon credits. 157 On 17 June 2011 each of the three CALM companies paid $20,000 to Ti Amo by direct debit being in respect of the purchase of one contract lot each under a 2011 ERPA for the 15% deposit of $19,800 and the 2011 option for $200. Each of the three CALM companies also executed a licence agreement. 158 On 29 June 2011, Voluntary Credits executed each of a 2011 ERPA, 2011 option and licence agreement, that subsequently it returned signed to each of the three CALM companies. Other events in June 2011 159 On 14 June 2011, Mr Donkin emailed Mr Manietta with tax estimates for 2011 in respect of an orthodontist, Douglas Williment and his companies, including Williment Orthodontics Nominees Ltd of which Mr Donkin, Mr Manietta and Mr Williment were directors and Williment Orthodontics Limited Partnership. Mr Donkin asked Mr Manietta to review and then discuss the tax estimates. 160 Soon after on 14 June 2011, Mr Donkin emailed Chris Lang, whom I infer was employed by one of the Mr Williment's companies. The email's subject was "Williment 2011 Tax Planning Calcs" and attached the Williment Group Structure as at 31 March 2011, which had Strategic's logo included on each of its 3 pages, together with calculations for 6 persons or entities in that group. Mr Donkin's email told Mr Lang that Mr Manietta had suggested: that we purchase a carbon credit for both the trading trust and limited partnership which would then reduce the taxable profit in the LP [scil: Limited Partnership], where all the profit ultimately ends up to around $50k. Carbon credits for 2011 cost $20k each and create a deduction for $132k in 2011. (emphasis added). 161 On 16 June 2011, Ti Amo's internal financial records showed that it had rendered an invoice for $6,000 in respect of "carbon credits" for Mr Williment in respect of which Mr Manietta was described as the "revenue leader" and the settlement date was also 16 June 2011. 162 On about 16 June 2011, I infer that Mr Williment acted on the advice of Mr Donkin and Mr Manietta to purchase 2 contract lots through the limited partnership and trust entities. 163 On 17 June 2011, Mr Donkin emailed Tony and Marie of Australian Financial Innovations stating that he had attached "carbon credit documents for your review", being a copy of a brochure, application form and flyer. He asked that if they were proceeding, they return the signed "order form" as soon as possible. 164 On 23 June 2011, Dr Rowntree emailed Mr Manietta with a list of 50 names who had applied for 51 2011 ERPAs through Mr Manietta, Ti Amo or Super Smart. Dr Rowntree highlighted in red on the email the names of purchasers from whom he had not received the contractual documents. The red highlighting was not in evidence. The black and white version of the list included the three CALM companies and the two entities connected to Mr Williment. 165 On 29 June 2011, Dr Rowntree wrote on Voluntary Credits letterhead to Smart Dental congratulating it on deciding to acquire REDD credits and again informing it that it could use the logos and "resources" of Voluntary Credits "to assist in marketing your business". The letter, wrongly, asserted that its recipient could inform persons to whom it submitted tender documents that the purchase "resulted in an outlay of $140,000". The 2011 tax year – summary 166 During the 2011 tax year, Voluntary Credits received a total of $1,981,200 including the following: Source Amount received by Voluntary Credits Commission retained by Ti Amo LP and Strategic No of contract lots Ti Amo $770,000 (a) $330,000 55 Flowers Group $378,000 27 Strategic $671,868 $63,397 NOTES (a) Less $12 in bank fees 167 There was no client list or other record of Dr Rowntree of any of his associates that identified all persons who invested in the 2011 tax year comparable to the client lists in evidence for 2009, 2010 and 2012. This makes it necessary to infer from other material in evidence the extent of participation of each of Dr Rowntree, Mr Donkin, Mr Manietta and their associates in the 2011 tax year. 168 According to entries in its general ledger for the 2011 tax year, between 9 March 2011 and 30 June 2011, Ti Amo received $1,100,000 on behalf of "Vol Creds" which I infer was Voluntary Credits. On 1 July 2011, Voluntary Credits' HSBC bank statement recorded two deposits by Ti Amo totalling $769,988 and a commission on each deposit of $6. I am satisfied that Ti Amo paid $770,000 to Voluntary Credits from the $1,100,000 that it collected from clients in the period between 9 March 2011 and 30 June 2011. Since each 2011 ERPA for one contract lot and a corresponding 2011 option required a purchaser to pay a total of $20,000, I also infer that the $1,100,000 that Ti Amo collected in the 2011 tax year was for the acquisition of 55 contract lots. 169 On 19 August 2010 and 28 January 2011, Spirefive's Bank of Queensland bank statements contained debit entries recording on each date a payment of $2,750 to Strategic. On 4 July 2011, Strategic's NAB bank statement recorded a deposit of $57,897 together with a reference "Voluntary Credits", which I infer was the source of that deposit. 170 Mr Donkin made no admission about the characterisation of the 3 payments totalling $63,397 that Strategic received in [169] above. The question is whether any of them was in the nature of commission in respect of the sale of contract lots. The two payments of $2,750 by Spirefive on 19 August 2010 and 28 January 2011 have an apparent mathematical similarity to the $11,000 (which is 4 times $2,750) that Spirefive had paid Strategic on 10 May 2010 and the amounts of $2,750 and $5,500 that BRLP paid Strategic on 28 May 2010 and 29 June 2010 which Mr Donkin admitted were commissions referrable to the sale of contract lots in the 210 tax year. I infer that Voluntary Credits and or another associate of Dr Rowntree, including Spirefive, had an arrangement in place with Mr Donkin or Strategic to pay Strategic a commission of $2,750 in connection with sales of ERPAs and options in which Strategic had a role. The sum of $57,897 equates to 21 times $2750 plus $143, however, there is no concrete basis to draw any precise connection to the lump sum and how it was generated with that difference of $143. 171 On 7 and 16 February 2011, and 2 June 2011, Voluntary Credits' HSBC bank statement recorded receipts of $20,000 less commission of $6 with respective references to each of 3 persons who were noted as, or associated with a referral by, Strategic in the 2010 client list (namely Dr Peter Mouser, N Best Pty Ltd and Rose Campisi). As I have found above, Mr Donkin also played a significant role in promoting investment in the 2011 ERPAs and 2011 options to Bresic Whitney and the CALM group, and that Dr Rowntree was aware of both Mr Donkin's role and the utility of his promotional activity. Mr Donkin admitted that all of the $26,296 that Strategic had received comprising not only the ambiguously calculated sum of $7,046 from Voluntary Credits but also the exactly calculated multiples of $2,750 from BRLP and Spirefire were commissions for the 2010 tax year. Mr Donkin gave no explanation or any reason why Voluntary Credits paid Strategic $57,897 on 4 July 2011. 172 I infer that any evidence that Mr Donkin could have given would not have assisted his case in rebutting an inference that, consistently with what had occurred in the 2010 tax year in relation to the payments of commission to Strategic for its role in marketing the 2010 ERPA and 2010 options, the inference should be drawn that the 4 July 2011 payment was commission for Strategic's marketing of the 2011 ERPAs and 2011 options: Jones v Dunkel (1959) 101 CLR 298. That is the inference I do draw in the circumstances. There is no evidence to suggest that Strategic rendered any professional accounting services to Voluntary Credits to which the $57,897 was wholly or partly referable, so as to negate that that payment was commission. The payment of a lump sum as commission was consistent with what had occurred in the 2010 tax year and with the evidence of the substantive promotional work that Strategic, through Mr Donkin, undertook in the 2011 tax year. The 2012 tax year 173 On 15 July 2011 the talkvietnam website posted a page entitled "New REDD project is taking root…Written by VietNamNet". The page in evidence was printed on 24 September 2013. It stated that the Hanoi based Vietnam Carbon Exchange Ltd and "its partner Australian Voluntary Credits" had completed a site survey and were implementing project document designs in a national park and referred, under the depiction of a camera above the words "image coming soon", to the two companies having "successfully implemented the first REDD project" in another national park. The page quoted Dr Rowntree as saying that both projects would make the environment greener. A link to a related article headed "Carbon Credits are in vogue" appeared at the conclusion of the page and, immediately before the [Read More] link, quoted Mr Bonnell as saying that "Voluntary Credits will do its best to cultivate and pursue more carbon credit projects in Vietnam". 174 On 18 July 2011, Mr Manietta, on Ti Amo letterhead, wrote to each of the three CALM companies, noting that it then should have had copies of the documents for its emissions purchase. He wrote: This executed licence agreement provides you with the formal permission to use the Frog Logos. In terms of marketing, the Frog Logos can be used in your business documents to help promote your business as supporting the emission reduction project. In order to access the applicable logos, please refer to the CD that was enclosed in the initial Carbon Credit Introduction Pack. If you have misplaced the CD, please contact Eunice at the office for a replacement to be organised. (emphasis added) 175 Mr Haralambidis said that the CALM group did not use any of the material from the CD or the green frog logos. 176 On 25 August 2011, Michelle Silvestro, an accountant working at Strategic, sent a group email to "Accountants" with the subject "BR Redd Liability to update in 2011". She wrote: Peter has just advised that all BR Redd $119,000 liabilities from the 2008 financial year will need to be transferred to the directors [sic] loan accounts in 2011. Please ensure they are processed in the draft financials before submitting to Peter for any client affected. Similar, the 2009 liabilities will be transferred to the directors [sic] loan accounts in the 2012 financial year, and so on. (emphasis added) 177 "Peter" was Mr Donkin. On 26 August and 27 August 2011 Ms Silvestro and Mr Donkin had the email exchange below in which she asked and he replied about the proposed accounting treatment: Ms Silvestro: I was having another look over this and the first carbon credits started in 2009. Did you mean that credits started in 2009 should be written off in 2011 (rather than 2008 credits) i.e. in the third year after the credit NOT three years after the credit? Mr Donkin: 2009 credits to be written off as signed before 30 June 2009 so at 30 June 2011 [sic], they have expired. (emphasis added) 178 The exchange revealed that Mr Donkin wanted to bring about the result that all Strategic's clients who had invested in the 2009 ERPA would write off their investments. There was no suggestion in that email exchange or anywhere in the evidence that the clients might actually want to obtain the contract lots, for which they had paid deposits, by paying the very large sum that Mr Donkin was wanting to write off that formed part of the deduction from taxable income that the clients had claimed in their 2009 tax returns. 179 On 9 September 2011, Mr Manietta wrote to Mr Donkin saying: As you are no doubt aware, over the past number of years Ti Amo Strategies Partnership and our associated entity Super Smart Strategies Pty Limited has worked closely with your firm in providing services and advice for our mutual clients. I am sure you will agree that this has been very beneficial to both our organizations and to the successful outcomes for, and growth of our clients. We are keen to see this working partnership further develop and would like the opportunity to have our services referred to any of your clients who to date, have not been made aware of what we can offer including- … • Innovative ways for businesses to build their brand environmentally via Carbon Emissions Projects. I see the referral of your clients to Ti Amo and Super Smart Strategies as an opportunity for both our organizations to benefit. Collectively we will be able to provide them as we currently do with our mutual clients, a comprehensive and professional tailored service. One where we each have our specific roles, where we regularly consult and come together to ensure that our client's needs are being regularly reviewed and assessed accordingly. To progress this further, I suggest that we meet to plan a way to contact clients that you think could benefit from our services. (emphasis added) 180 There is no evidence of any response to Mr Manietta's letter but, as the passages in it that I have emphasised reveal, the letter itself recognised how both Mr Donkin and Mr Manietta, through their companies, had promoted, for their self-interested benefit, the sale of carbon credits to their mutual clients. 181 On 5 January 2012, Dr Rowntree, on Voluntary Credits' letterhead, wrote to Mr Manietta about "current environmental developments". The letter said that Voluntary Credits had a "partnership with Vietnam Carbon Exchange" to foster the development of the REDD market in Vietnam "which is now the primary focus of" Voluntary Credits. The letter spoke in glowing terms of international developments and recent legislation to introduce an Australian carbon trading scheme to commence in 2015. 182 A glaring omission from the letter was any suggestion that Voluntary Credits could then, or expected at any time in the future, issue a delivery notice under any of the 2009, 2010 or 2011 ERPAs. By this time, if no delivery notice were issued within 3 years of its execution, there was less than 6 months to go before investors under a 2009 ERPA could terminate it. If Dr Rowntree really had by then a product, consisting of a tradeable contract lot, to sell or one almost ready to sell, rather than a window to dress, it would be surprising that this letter and all the other evidence did not identify that marketable property. 183 On 20 February 2012, Mr Manietta, on Ti Amo letterhead, wrote letters to Mr Haralambidis at each of the three CALM companies enclosing copy of Dr Rowntree's 5 January 2010 letter. Mr Manietta's letter stated: With the ongoing Government focus on taxation of commercial carbon footprints and following advice from our legal team, we believe there is growing urgency to continue to look at opportunities to reduce this impact at the earliest opportunity and on an annual basis. … Not all carbon credits are the same. It is worth the effort to find out where they come from because there are some dubious credits being produced in the rush to make a profit. Others may be produced as a result of renewable energy schemes that were set up regardless of climate change considerations and these do nothing to help the environment. Voluntary Credits has concentrated on obtaining credits which have a direct relationship to nature, REDD (Reduction of missions [sic] from Deforestation & Degradation) Credits. REDD Credits are carbon credits that will be generated through the preservation of forests in developing countries. … The contract which has been prepared by Voluntary Credits provides for the sale of carbon credits through REDD schemes. The contract provides for a price of A$23.00 per tonne of carbon with a minimum purchase of 6,000 tonnes. The purchase price is paid in two instalments. The first instalment of $20,700.00 is payable on execution of the agreement and the balance on completion of the REDD projects. As the market for these credits has not started their price is uncertain. The contract gives the buyer protection against a market price that is lower than the contract price at the time of settlement. Under the agreement Voluntary Credits has three years to comply with its obligations to deliver the carbon credits. Voluntary Credits has entered into agreements which will allow it to deliver the REDD credits when they are available and is already making payments to the originator of these credits. Voluntary Credits has also obtained a barrister's opinion that the acquisition of these credits as part of a business strategy by the buyer is a deductible expense of the buyer to the full extent of the purchase price in the year in which the contract is executed. … Obviously each buyer entering into the contract should seek their own legal advice on the terms of the contract and the commercial and taxation consequences of entering into the agreement. (emphasis added) 184 Other than receiving the copy of Voluntary Credits' letter of 5 January 2012, Mr Haralambidis never received any updates or news on any projects with which Voluntary Credits was involved or their progress. 185 On 29 February 2012, Mrs Manietta emailed Dr Rowntree asking for "20 more discs for the Carbon packs asap" and he responded by having Ms Reid make arrangements to do so. 186 On 27 March 2012 Mr Donkin attended a board meeting of Scientific Motor Body Works Pty Ltd, a company associated with Michael and Gail Zammit. 187 On 30 March 2012, Mr Donkin sent his notes to the persons present at the meeting of 27 March 2012, which included "13. Carbon Credits – 4 for 2012. Paperwork to GZ". I infer that 2 of the intended recipients of the "paperwork" were the entities recorded in the 2012 client list, as M & G Zammit Pty Ltd ATF [as trustee for] Zammit Family Trust No 2 and Scientific Motor Body Works Limited Partnership, that each acquired 1 contract lot. 188 On 2 April 2012, Mr Donkin wrote to Smart Dental enclosing "documentation in relation to the carbon credit reduction scheme for 2012" and asking its principal to sign the application if it wished to participate. Smart Dental was noted in the 2012 client list as having acquired 1 contract lot. 189 On 12 April 2012 Mrs Manietta emailed Mr Donkin under the heading "Mark Colin" which I infer referred to The Mark Colin Co in the 2012 client list as having acquired 1 contract lot. Mrs Manietta wrote that she had received the contracts for signature from Dr Rowntree and asked Mr Donkin if she should send those documents to him or directly to the client. Mr Donkin responded that Mrs Manietta should send them directly to the client for signature. 190 On 26 April 2012 The Mark Colin Co executed a 2012 ERPA and 2012 option to acquire two contract lots. 191 On 27 April 2012 Mr Bonnell wrote to Mr Whitney at each of the three Bresic Whitney companies thanking him for their applications for 2012 ERPA. He enclosed two copies of a 2012 ERPA, 2012 option and licence agreement in respect of one contract lot for each company to execute. The letters required payment of $20,700 to Voluntary Credits HSBC account. Mr Bresic and Mr Whitney signed each of the documents. Mr Whitney said that he understood, based on Mr Donkin's advice "there would be some tax benefits for us as a result of doing it". Mr Donkin prepared the 2011 and 2012 tax returns for each of the Bresic Whitney companies in which each claimed a deduction of the full purchase prices of the 2011 and 2012 ERPAs and options. 192 On 28 April 2012 Mr Manietta, on Ti Amo letterhead, wrote three letters to Mr Yu at each of the three CALM companies enclosing two copies for execution of the 2012 ERPA, 2012 option and licence agreement. 193 On 10 May 2012, Mr Donkin emailed Mrs Manietta informing her that Smart Dental had told him that it had faxed "the completed order" and express posted a cheque to Ti Amo. He asked her to let him know when she had received both, Mrs Manietta replied immediately that she had received the fax. 194 Also on 10 May 2012, Mr Donkin emailed Rob Pennefather and Dr Rowntree with the marketing pack for carbon credits saying "I am sure that Bruce Rowntree, the tax lawyer and principal of Voluntary Credits would be happy to discuss with your Dad's accountant if required". 195 On 11 May 2012, Mrs Manietta emailed a copy credit card receipt to Grace Dong, the finance and office manager of Liquid Ideas Group Pty Ltd. The 2012 client list noted that Liquid Ideas had acquired two contract lots, one in its own name and the other for a trust and attributed each sale to Super Smart. Ms Dong replied seeking an invoice receipt rather than a credit card receipt "given the size of the amount" of the 15% deposit. On 15 May 2012 she asked when, and how much the next instalment would be due, so as to assist in the preparation of the cash flow forecast for the next financial year. The email chain in evidence did not disclose how he came to be included in it, but in his reply of 16 May 2012, Mr Donkin explained to Ms Dong, revealingly, the real nature of the scheme as follows: No further payment is due on the carbon credit for three years. At the end of the three years, if you cannot sell the credits for what we owe then the debt is forgiven. If the credits can be sold for more than we owe, we will sell and make a profit. So no need to factor into cashflow. (emphasis added) 196 On 12 May 2012, Dr Rowntree emailed Ms Dodd saying "getting into full steam to complete CCs" [scil: carbon credits] and reminding her of the five clients "you did last year". 197 On 14 May 2012 Ms Dodd replied to Dr Rowntree giving him updates on the five clients and suggesting that she might have one more. She asked if it were possible to get the green frog logo in a form that clients could send to printers so as to get stickers prepared. Dr Rowntree replied "Yes all on marketing desk do you want some packs sent out?" to which Ms Dodd responded that she wanted a few packs. Dr Rowntree asked Ms Reid to send five packs to Ms Dodd. 198 On 31 May 2012, each of the three CALM companies paid Ti Amo $20,700 for a 2012 ERPA and 2012 option for one contract lot and sent to Ti Amo the executed copies of those, together with the licence agreements. Mr Haralambidis understood at that time that the benefits to the three CALM companies of the 2012 ERPAs and 2012 options were the same as those for the 2011 tax year. 199 On 26 June 2012 Mr Donkin emailed Lyn Hardy, Kylie Browning and Luke Talbot of Hardy Bros Mining & Constructions Pty Ltd and Hardy Bros Equipment Pty Ltd (each of which is noted on the 2012 list as a client of BR and as having acquired 2 contract lots) about a meeting the previous day. Mr Donkin noted that he was to liaise with Dr Rowntree and Mr Bonnell about "carbon credits for 2012". Mr Bonnell responded to Mr Donkin later on 26 June 2012 thanking him, saying "sounds like you did a great job". Soon after, Dr Rowntree asked that Mr Bonnell send those clients "an email to get applications to me". 200 Later on 26 June 2012, Mr Donkin explained to Dr Rowntree and Mr Bonnell: David potential bad debt has yet to be booked into sales so true profit is still $1.8M so carbon credits certainly would help - Robert suggested up to five but can we do multiple credits in each entity given size of fleet and what they do? (emphasis added) 201 On 27 June 2012, Dr Rowntree sent Ms Hardy an email informing her that Mr Donkin had asked him to contact her concerning carbon credits for her entities. He said that if she wished to proceed she should send applications as soon as possible so that the documents could be prepared and signed. Later on 27 June 2012 Dr Rowntree sent Ms Hardy emails attaching the 2012 ERPAs and licence agreement and asked that she arrange payment to BRPL's Bank of Queensland account. 202 On 28 June 2012, Voluntary Credits executed each of the 2012 ERPA, 2012 option and licence agreements for the three CALM companies, the three Bresic Whitney companies and, I infer, all other purchasers. 203 On 12 July 2012, Ti Amo wrote to each of the three CALM companies returning one executed copy of those agreements. That letter repeated the suggestions for the recipient to use the logos on stationery, websites and in other materials to promote its "carbon reduced" commitment. The 2012 tax year – summary 204 During the 2012 tax year Voluntary Credits and BRPL received a total of $2,134,000 of which Voluntary Credits received $1,947,700, comprised of the following: Source Amount received by Voluntary Credits Commission retained No of contract lots Ti Amo $916,650 (a) $304,650 63 Strategic $310,500 $30,737(c) 17 $73,800(d) Flowers Group $174,600 (b) 12 WL Browne $147,150 (b) Ms Dodd $103,500 (b) Mr Elias $182,400 (b) Locums group $71,500(b) Bonnell Rowntree $41,400 (b) NOTES (a) In the 2012 tax year Ti Amo recorded in its general ledger receipts of $1,221,300 as "Monies on behalf of Vol Credits" and Voluntary Credits received $916,650 from Ti Amo. I infer that the difference was commission to Ti Amo. (b) Gross receipt of $20,700 per contract lot. Net commission retained of $6,150 per contract lot. (c) Paid by Voluntary Credits (d) Paid by BRPL (e) Commission paid by voluntary credits or BRPL 205 BRPL paid into Voluntary Credits' HSBC account $20,700 on 27 June 2012 and $20,700 on 5 July 2020 in respect of the bank statement noted a client name and the deduction of a $6 commission. BRPL received and retained a further $186,300 in respect of the following: No. Date Amount No of contract lots 1 8 June 2012 $20,700 1 2 8 June 2012 $20,700 1 3 20 June 2012 $20,000 1 4 21 June 2012 $700 5 26 June 2012 $20,700 1 6 28 June 2012 $82,800 4 7 29 June 2012 $20,700 1 206 Dr Rowntree did not admit that the payments numbered 2, 3, 4 and 7 in the table in [205] were in respect of the sale of contract lots. That was because, he contended, the payer did not include the purpose for each payment in the electronic funds transfer and the bank statement merely recorded payments numbered 2 and 7 as "Deposit" without any name of the payer and the two payments numbered 3 and 4 (totalling $20,700) as "Direct credit Cba R Mitchell". 207 I infer that each of those payments was made as a deposit for a contract lot. The mathematically precise correlation of the payment with the amount of the deposit for the 2012 ERPA and 2012 option coupled with the time in the financial year (June) suggest that each of those payments must have been made to acquire a contract lot. Moreover, there is no obvious reason why D Mitchell would be paying Voluntary Credits in two payments totalling $20,700, except to pay the deposit amounts for the 2012 ERPA and 2012 option on behalf of one or more entities with which he or she was associated. There was no evidence to suggest that any of those three $20,700 transactions was cancelled and Voluntary Credits paid back to the payer the deposits he, she or it had made. The 2012 client list recorded the sale of 128 contract lots in 2012 to 123 persons or entities, some, but not all, of which are readily identifiable with entries in the summaries of the bank records in evidence. Again, there is no evidence to suggest that the inclusion of the total of the three anonymous payments of $20,700 (so far as there is no identification of their source in Voluntary Credits' HSBC bank statement) in the calculation of Voluntary Credits' receipts for the 2012 tax year would reflect, incorrectly, any more than 128 sales of contract lots and 2012 options as recorded in the 2012 client list. 208 Accordingly, I am satisfied that it is more probable than not that the three "anonymous" payments should be included in the total of $2,134,000 that Voluntary Credits (and its associated entity BRPL) received in the 2012 tax year. 209 During the course of argument Mr Donkin accepted that Strategic had received a total of $104,537 in commission in respect of the 2012 tax year. That sum also accords with what the 2012 client list recorded as commission that Strategic had earned (less an immaterial $13) for its 17 sales in the 2012 tax year. 210 In the period 14 March 2012 to 29 June 2012, Ti Amo collected $1,221,300 (representing 59 contract lots and options) from its clients on behalf of Voluntary Credits, as recorded in its general ledger. It paid Voluntary Credits, as recorded in its Westpac Banking Corporation bank statements and Voluntary Credits HSBC bank statements, a total of $916,650 in respect of the same period (comprising $436,500 on 26 April 2012, $436,500 on 25 June 2012, and three sums of $14,550 between 29 June 2012 and 11 July 2012). I infer that Ti Amo retained the difference of $304,650 as commission, even though that sum is not as much as $362,850, which would be the total commission on 59 sales at $6,150 per contract lot and also does not correlate to the 63 contract lots that the 2012 client list credited to Ti Amo. However, the connection between the amounts that Ti Amo received, as its general ledger recorded, "on behalf of" Voluntary Credits, its payments to Voluntary Credits and the $304,650 that Ti Amo retained from those receipts, supports the inference that I have drawn that the retained amount was at least part of the commission Ti Amo received in the 2012 tax year. Later events 211 On 25 September 2012, the ATO issued Taxpayer Alert TA2012/6 entitled "Deduction generation from purported purchase of offshore 'emission limits' that do not exist at the time of the arrangement". 212 The Taxpayer Alert neatly described the carbon credit scheme promoted by Dr Rowntree and Mr Bonnell through Voluntary Credits including the use of a logo. It warned that, not only might the purchase price not be deductible under s 8-1 of the ITAA 1997, but the anti-avoidance provisions in Pt IVA of the ITAA 1936 might apply to all or part of the arrangement. Some of many aspects that the Taxpayer Alert noted included that: 9. There is no indication that any carbon reduction activities have commenced or will ever commence nor that any carbon reduction activities would be carried out in accordance with the Kyoto rules or other conditions prescribed by the Australian Government that must be met for resulting units to be eligible for use under the Clean Energy Act 2011. Accordingly there is nothing in the arrangement which would indicate that the offshore 'emission units' contracted for, if generated, would meet the definition of: (a) an eligible international emissions unit in the Clean Energy Act 2011 or Australian National Registry of Emissions Units Act 2011 (and therefore the definition of an eligible emissions unit in section 195-1 of the GST Act); (b) a Kyoto unit in the Australian National Registry of Emissions Units Act 2011; or (c) a registered emissions unit in section 420-10 of the ITAA 1997. 10. The quantity of the offshore 'emission units' under the purchase agreement does not relate to the participant's emissions. 11. The offshore entity does not require any assurance that the units contracted for will be used to offset the participant's carbon emissions, nor that the number of units reflects the participant's carbon emissions, in order for the participant to be entitled to use the logo. 12. The participant does not necessarily have an account with an Australian registry. 13. The participant is not necessarily a liable entity under the Clean Energy Act 2011, and may not have an obligation to offset its carbon emissions. (bold emphasis added) 213 The Taxpayer Alert concluded "The ATO is currently reviewing these arrangements but on their face they exhibit features characteristic of a tax avoidance scheme." (emphasis added) 214 Early on 27 September 2012, Mr Donkin saw what was coming when he emailed Dr Rowntree as follows: Bloody ATO! Below is a link to the Australian Taxation Office's "ATO warns on offshore emission unit schemes" page. 215 On 26 February 2013, Mr Young of counsel signed an opinion for Hardy Bros Mining & Constructions Pty Ltd, which he had been instructed was a business taxpayer in the mining industry. The advice related to the 2012 ERPA, 2012 option and licence agreement, but was substantively the same as that he gave to Conluceo on 12 May 2011 (see [149] above). 216 On 1 March 2013, Mr Donkin sent draft financial reports to Paul at the Bill Phillips group. On 4 March 2013, Paul replied asking Mr Donkin about references "in a few tax returns" to a "marketing and promotions" expense for $138,000 and that "Bill mentioned to me that there is a story in relation to this" which Paul sought to learn. Mr Donkin replied later on 4 March 2013: Bill invested into a arrangement whereby the entity receives a deduction in the first year for $138K, payable with an upfront instalment of 15% with the balance being due in three years if the balance payable is equal to the potential sale price of the carbon credit entitlement. If at the end of the three years the carbon credits are not tradable or cannot be sold for an amount equal to the debt, then the debt is forgiven and no further money is payable. (emphasis added) 217 Mr Donkin prepared the 2011 and 2012 tax returns for each of the Bresic Whitney companies in which each claimed a deduction of the full purchase prices of the 2011 and 2012 ERPAs and options. 218 Mr Whitney said that at some time after 2012 a new chief financial officer began working for Bresic Whitney and suggested that it seek advice about the claims for tax deductions in respect of the 2011 and 2012 ERPAs. I infer that this occurred soon after the 25 September 2012 Taxpayer Alert. He said that the new chief financial officer was uncomfortable about the scheme. Soon after receiving advice from PWC, Bresic Whitney ceased to retain Strategic and withdrew their claims for the deductions in the 2011 and 2012 tax years. 219 On 21 October 2014, Mr Haralambidis emailed Mr Manietta and Mr Donkin saying that the three CALM companies had received the Commissioner's amended assessments from Strategic but that neither Strategic (Mr Donkin) nor the ATO had given them any explanation about the reason for those amended assessments. He asked to be told what was happening and wrote: "If the carbon scheme is rejected by the ATO then we assume we will be getting a full refund on the two years?" 220 On 22 October 2014, Mr Donkin responded saying that the ATO had written saying that it considered that "the carbon credits are not deductible" and that if clients "unclaimed" the deductions, the ATO would not penalise them. Mr Donkin advised Mr Haralambidis that the three CALM companies should lodge amended income tax returns for the 2011 and 2012 years to remove their claims to deduct the price of the 2011 and 2012 ERPAs and options. He also advised that, after the ATO issued amended assessments based on the amended returns, the three CALM companies should lodge objections. He noted that there was a current court case challenging the ATO's views which "[t]he solicitors are quietly confident of winning". He wrote: "All clients who purchased the carbon credits are in the same position and 90% have lodged the amendments and we have then lodged the objections." Mr Donkin suggested that Mr Haralambidis sign and return the amended income tax returns, let Strategic lodge the objections, and then await the result of the court case. 221 Mr Haralambidis said that until receiving Mr Donkin's email of 22 October 2014, he was not aware that the ATO had disallowed the deductions. 222 In January 2015, the Commissioner issued amended assessments to each of the three CALM companies for the 2011 and 2012 tax years that increased its taxable income by the previously claimed deduction of the full purchase price of the 2011 or 2012 ERPA and option and correspondingly increased the amount of tax payable together with a shortfall interest charge. 223 Subsequently each of the three CALM companies lodged objections and awaited the outcome of the court challenge. Mr Manietta told Mr Haralambidis of his confidence in having the Commission's position overturned. 224 On 3 August 2017, I delivered my decision in Academy Cleaning & Security Pty Limited v Deputy Commissioner of Taxation (2017) 106 ATR 184 in which I found that no amount invested under the 2009 ERPAs or 2009 options was deductible. That was the test case to which Mr Donkin and Mr Manietta had referred to as the potential vindicator of their position. Neither man contacted Mr Haralambidis to advise him of the result. He said that the ATO had contacted the three CALM companies to negotiate a payment plan and that he then phoned Mr Donkin to find out what had happened. 225 On 1 December 2017, Mr Donkin emailed Mr Haralambidis apologising for the missing his call and summarising the, now disastrous, position. By then interest on the amount outstanding under the amended assessments had increased each of the three CALM companies' liabilities by over 50%. Mr Donkin said that "[the] debt is now due and payable. I suggest you contacted the ATO and arrange a payment plan." Mr Donkin wrote that several of his clients had contacted the ATO directly and successfully negotiated having the interest remitted. 226 Mr Haralambidis responded later on 1 December 2017 asking about how Mr Donkin's clients were handling a claim against Dr Rowntree and whether there was a class action in respect of his professional indemnity insurance, given that the three CALM companies had outlayed about $150,000 "for this scheme". 227 Mr Donkin replied later on 1 December 2017 saying he was not aware of any claims against Dr Rowntree. 228 Mr Ceh then responded on 1 December 2017 telling Mr Donkin that "basically you are saying we have been left high and dry by Manietta and Rowntree, not only did they get our monies but we need to pay the ATO as well". Mr Donkin responded that he did not agree. 229 Mr Haralambidis gave evidence that he had met Dr Rowntree prior to 2011 and 2012, but had not met with him in those years. Summary of total receipts in the 2009, 2010, 2011 and 2012 tax years 230 Based on my findings above, each of the respondents directly or indirectly through his associates received the following over the period comprising the 2009 to 2012 tax years: Dr Rowntree for the 4 tax years, through Voluntary Credits, VCPL and BRPL $6,408,911; Mr Donkin for the 2010, 2011 and 2012 tax years through Strategic $194,320; and Mr Manietta for the 4 tax years, through Ti Amo or Super Smart, $1,152,863 231 The Commissioner contends that each respondent was a "promoter" of the tax exploitation schemes in each of the relevant tax years because: each respondent and the entities that were his respective associates had marketed, or otherwise encouraged the growth of, the tax exploitation scheme in each of the respective 2009, 2010, 2011 and 2012 tax years in which the particular respondent acted (noting that Mr Donkin was not alleged to be involved in the 2009 tax year), so as to satisfy the first element of the definition of "promoter" in s 290-60(1)(a) in Sch 1 of the TAA; each respondent or one or more of his associates received "consideration in respect of marketing or encouragement" so as to satisfy the second element in s 290-60(1)(b); and in all of the relevant circumstances, it is reasonable to conclude that the relevant respondent or his associated entity had a substantial role in respect of that marketing or encouragement, so as to satisfy the third element in s 290-60(1)(c). The conduct issue Dr Rowntree's conduct 232 It was common ground that throughout the 2009, 2010, 2011 and 2012 tax years: (a) Dr Rowntree was the moving mind and will of Voluntary Credits, VCPL, BRPL and BRTAPL. He was the sole director of each of the latter three companies and a director of Voluntary Credits together with paid service providers; (b) Voluntary Credits maintained a website on the internet which made available information that marketed, encouraged or was calculated to create, interest in investment in an ERPA sold by Voluntary Credits (including when named BR Redd); and (c) Voluntary Credits (in the 2009 year as BR Redd) entered into all of the 2009, 2010, 2011 and 2012 ERPAs, and with VCPL or BRPL, received all of the consideration paid in respect of them, in some cases without any deductions and, in others, net of any commissions that Strategic, Ti Amo, or Super Smart or others retained or were paid later. (d) On about 1 September 2009, VCPL sought advice from IMPACT on a marketing communications campaign. 233 It was also common ground that throughout the same period Dr Rowntree: (a) was a solicitor and a qualified tax specialist; (b) acted as a media spokesperson for Voluntary Credits, participated in media interviews, some of which were displayed on the website, and extracts from some appeared in the various media publications in evidence and which were included in materials provided to potential purchasers of contract lots in the marketing kit (as it was comprised from time to time); (c) obtained professional media and marketing advice from, in September 2009, IMPACT and, in August 2010 the NAA agency; (d) attended meetings with potential and actual investors in contract lots and orally encouraged those persons to purchase; (e) prepared or caused others, such as Ms Reid, to prepare information brochures, power point slides, marketing materials, including the marketing kit, for others, including Mr Donkin and Mr Manietta (and associates of each of them) to use in promoting and marketing to potential investors the acquisition of contract lots; and (f) introduced to financial planners, accountants and tax agents the opportunity to offer contract lots to their actual or potential clients and to earn and be paid commission for effecting sales of contract lots, and, he provided them with information and assistance calculated to encourage the growth of, and interest in, the sale of contract lots. 234 Dr Rowntree accepted that Voluntary Credits had published information, brochures, presentations and other marketing materials to potential investors in contract lots. However, he disputed the Commissioner's contention that VCPL or BRTAPL had published any of those. 235 I reject Dr Rowntree's contention that VCPL and BRTAPL were not publishers of the material in issue. The natural and ordinary meaning of "publish" includes to make public or generally known, to propagate or disseminate, to prepare and issue copies of written or visual material for distribution to the public (Oxford English Dictionary, online), "to issue, or cause to be issued, in print or digital formats, for … distribution to the public…, to proclaim or promulgate…to make publicly or generally known." (Macquarie Dictionary, online). 236 From the outset, Dr Rowntree used BRTAPL's letterhead to send what he termed the "marketing letter" beginning on at latest 28 May 2009 (see [24] above) when he forwarded it to Mr Elias together with a BR Redd brochure and application form, describing those as a copy of "the stuff I usually send out". Mr Elias used BRTAPL's letterhead to send the marketing letter dated 27 May 2009 to the prospective purchaser (see [25] above). Indeed, Dr Rowntree sent Mr Le and Mr Walt the VCPL version of the marketing letter on 2 February 2010 as "the material I am sending to people at the moment" (see [87] above). Mr Elias used BRTAPL's email account to send marketing material to prospective purchasers on 1 June 2010 (see [92] above). That material included the marketing letter reproduced on VCPL's letterhead. And by late 2010 VCPL's website was marketing an investment in, or purchase of REDD credits from Voluntary Credits (see [123] above). 237 Those instances show that each of the BRTAPL and VCPL, as associates of Dr Rowntree, were active in the marketing and promotion of the sale of carbon credits or contract lots through Voluntary Credits. Dr Rowntree admitted that, in some of the instances VCPL and BRTAPL received monetary consideration for the sale of contract lots without deduction of any kind, including commission. But, he contended his activities were "aimed at promoting the environmental benefits of investment in REDD credits". 238 However, that characterisation of Dr Rowntree's activities is inconsistent with his own contemporaneous and, I find, accurate, description of them as "marketing". The benefits that his marketing emphasised were the immediate reduction of an investor's taxable income and a consequential tax saving that far exceeded, indeed, nearly doubled, the cost of the 15% deposit payable on entry into an ERPA (and any marginal extra expenditure on an option or licence agreement), coupled with the likelihood that the investor would never have to pay the balance of the 85% of the price of the contract lot(s) it had agreed to purchase and had deducted in the tax year of entry into the ERPA. Most of the target groups of purchasers that Dr Rowntree had identified to the NAA agency in September 2010 as the "primary market" consisted of health professionals (being general practitioners and dentists) and accounting firms (see [120] above), that had no bona fide use for carbon credits in their businesses or operations. 239 Dr Robson, a specialist medical practitioner and Bresic Whitney, as real estate agents, were not engaged in professional or commercial activities that could possibly have used carbon credits to offset any carbon dioxide that either could or did produce. And, as each of Dr Robson, Mr Whitney and Mr Haralambidis said, none of them used the green frog or other suggested material on the CD that Voluntary Credits provided them under the licence agreement. None of them saw beyond the tax benefits that they or their companies would achieve investing in contract lots. That understanding was underpinned by Dr Rowntree's expertise and their trust in others involved in promoting, for commission, investment in the ERPAs such as Mr Donkin, Mr Manietta and Ms Dodd as well as the barrister's (Mr Young's) opinion. 240 But, as the marketing advice of both IMPACT and the NAA agency emphasised, Dr Rowntree and his associates needed "to distance themselves from the 'tax reduction' component of the REDD product" ([79]). As IMPACT said, and as the NAA agency noted, the marketing challenge was "[t]hat there is little BR can say when advertising to its target audience" ([120]). 241 Shorn of the tax benefits, a commercial operation that needed to acquire carbon credits in order to offset its carbon footprint would find little, if anything, to justify it entering into an ERPA, as Mr Fowler's evidence demonstrated. The cost of a contract lot was uncommercially high, the definition of a contract lot, based on a tonne of sequestrated carbon, was not one used in the carbon credit market in 2009 and there was no evidence that Voluntary Credits had any contractual rights, at any time in any of the 2009 to 2012 tax years, to acquire any REDD or carbon credits that could be used to support the issue of a delivery notice to any purchaser of an ERPA. 242 If Dr Rowntree's activities were able to be characterised as he argued, namely as promoting the environmental and social benefits of investment in REDD credits, he did not have a realistically marketable product to sell other than by reference to the tax benefits. The tax deductibility of 100% of the price of an ERPA on payment of a non-refundable deposit of only 15% of that price was the selling point of the crudely drawn contract in which Voluntary Credits had no obligation to, and gave no guarantee that it ever would, supply the investor with any carbon credits the subject of the "sale" in the ERPAs. 243 Dr Rowntree denied, through his solicitor's submissions, that he had advised purchasers and others about the deductibility of the full purchase price. That denial is in the teeth of Dr Rowntree's emails of 29 January 2010 to Mr Bonnell ([85]) and Mr Le and Mr Walt of 2 February 2010 ([87]). There he used both his own and Mr Young's opinion to support the full deductibility of the purchase price, that was emphasised in the marketing letter that he, Dr Rowntree, signed on all forms of letterhead which he or companies of which he was a director sent (see eg [24]). Dr Rowntree met with Mr Bresic and Mr Whitney on 19 April 2011 when Mr Donkin told the meeting that Dr Rowntree was a tax expert. Dr Rowntree explained how an investment in an ERPA worked including the tax benefits involved ([142]). 244 In all the circumstances, Dr Rowntree's protestation to Ms Dodd on 28 October 2010, in response to Dr Robson's complaint that, "It has not been at all marketed from us on the basis of tax – not a little – nil" was as hollow as it was false. Dr Rowntree and his associates used Mr Young's opinion in connection with promoting the full deductibility of the price of an ERPA after payment of the 15% deposit as a feature of the payment structure of the ERPA. Mr Young's opinion was used to support a very large tax benefit to anyone who invested. Thus, Dr Rowntree answered Mr Curran's enquiry in his email of 21 June 2010 about possible clients who might invest in contract lots: "what sort of tax prospects do they really need for this to work?", saying "140K+" ([93]). That answer demonstrated Dr Rowntree's understanding that the marketability of an ERPA entered into with Voluntary Credits depended to a significant, if not decisive (from the potential investor's point of view) extent on the tax benefit that a payment of the 15% deposit would enable the investor to claim a tax deduction of 100% of the price. 245 Accordingly, I am satisfied that Dr Rowntree marketed or otherwise encouraged the growth of each scheme in the 2009, 2010, 2011 and 2012 tax years or an interest in it within the meaning of s 290-60(1)(a) in Sch 1 of the TAA by promoting the sale of interests in Voluntary Credits' ERPAs. Dr Donkin's conduct 246 It was common ground that Mr Donkin, first, had no involvement in the 2009 tax year and, secondly, in each of the 2010, 2011 and 2012 tax years: was the moving mind and will of Strategic and its sole director; was an accountant and tax agent; and met with clients and potential investors providing flyers, brochures and other material concerning investment in ERPAs to some, but not all, of them. 247 However, Mr Donkin denied that: he engaged in those admitted activities above for the purpose of encouraging the clients or potential investors to enter into the ERPAs; he had played any substantial role in relation to the marketing activities of Dr Rowntree or his associates. Rather, Mr Donkin contended, he was but one of a number of referrers; and he facilitated or assisted Mr Manietta or his associates to market investments in the ERPAs to Mr Manietta's clients. 248 Mr Donkin introduced, and Strategic received $26,296 commission for, sales of the 2010 ERPAs to four investors that realised about $63,000 for Voluntary Credits in the 2010 tax year. In the 2011 tax year Strategic received $63,397 in commission on sales of ERPAs worth about $672,000 (equivalent to over 33 sales of contract lots and options worth $20,000 each). In the 2012 tax year he introduced, and Strategic received $104,537 commission for, sales to 17 investors in the 2012 ERPAs. 249 Mr Haralambidis said that in late 2007 or early 2008, Mr Manietta had introduced Mr Donkin to the CALM group and, effectively insisted that the group use him as its accountant ([135]). I infer that, based on that evidence, both Mr Manietta and Mr Donkin saw their mutual support and promotion of one another's business as at least providing an indirect financial gain for end. By no later than October 2009, Mr Manietta was seeking to interest Mr Donkin in assisting in the sale of contract lots (see [81] above). 250 Subsequently, Mr Donkin was involved with Mr Manietta in promoting the acquisition by Smart Dental of its 2010 ERPA ([96]). This suggests that Manietta's suggested collaboration in his letter to Mr Donkin of 19 October 2009 was bearing fruit ([81]). Smart Dental was noted in the 2009 client list as a client of Mr Manietta in respect of the purchase of one contract lot. While Mr Donkin does not appear to have received commission, at least not directly, in respect of the 2010 sale of one contract lot ([96]) to Smart Dental, he dealt with Ti Amo, rather than Voluntary Credits, in processing Smart Dental's application on 23 June 2010. 251 It is safe to infer that wherever he could, Mr Manietta encouraged (with what appears to have been his forceful or persuasive enthusiasm, perhaps insistence) his clients to engage Mr Donkin as their accountant, as he had done with the CALM group. The evidence revealed some examples of their mutual clients who purchased ERPAs. Mr Manietta could rely on Mr Donkin to assist those mutual clients in implementing the objective of claiming the 100% tax deduction for an ERPA even though the client investor had paid only 15% of the purchase price in the relevant tax year, including in the 2010 tax year. So much appears from the email exchange in late August 2011 between Mr Donkin and one of Strategic's accountants, Ms Silvestro, relating to their clients writing off liabilities to BR Redd three years after entry into the 2009 ERPAs ([176]-[178] above). It is likely that in all of the circumstances disclosed in the evidence, Strategic (and Mr Donkin) had acted for those (unquantified) clients in 2009 and thereafter and given advice to them supportive of the purchase of the 2009 and, relevantly, 2010 ERPAs and the tax deductions that the purchase would enable to be made. 252 The direct evidence and circumstances of the 4 sales in the 2010 tax year and the nature of Mr Donkin's involvement in them is limited essentially to the facts that each purchaser was a client of Strategic and it received commission totalling $26,296 for introducing the purchasers to the investment. 253 However, the mere fact that Strategic received commission on the four sales with which it was associated in the 2010 tax year is not sufficient, without more, to warrant a conclusion that it or Mr Donkin marketed the scheme or encouraged its growth so as to constitute either of them a promoter within the meaning of s 290-60(1) in Sch 1 of the TAA. 254 The connection between the activities that a person undertakes, that s 290-60(1)(c) requires, is more than a one-off, or some occasional, sale or promotional effort, even if the person earns commission from a sale. Rather, the activity needs to amount to the person having a substantial role in the marketing, or encouragement of the growth, of the scheme. Mr Donkin's involvement in the 2010 sale to Smart Dental (even though Ti Amo or Super Smart received the commission for that sale) suggests that Mr Donkin had a role in the 2010 tax year that extended beyond the four sales for which Strategic received commissions. 255 Nonetheless, here, the evidence in relation to Mr Donkin's activities in the 2010 tax year is within a narrow compass and is limited to his directly benefiting, through Strategic's receipt of commissions for those four sales. He or Strategic may have also have had some possible indirect benefit from being the accountant for an unascertained number of Mr Manietta's clients who, at least in 2010, wanted to claim a tax deduction. The four sales and his involvement with Smart Dental's application, for which Mr Manietta (or his associates) received commission, linked Mr Donkin to the sale of only five out of 102 sales of contracts lots in the 2010 tax year. That represented a connection to only about 5% of the total number of investors who acquired contract lots in the 2010 tax year. Moreover, there is no evidence of the degree, if any, of Mr Donkin's involvement in Smart Dental's investment in June 2010, beyond his forwarding of its application form to Mr Manietta on 23 June 2010. 256 Having regard to the requirements of s 140(2) of the Evidence Act, all of the circumstances as a whole (Hillier 228 CLR at 638 [48]) and the relative paucity of evidence of Mr Donkin's conduct and activities during the 2010 tax year, I am not satisfied that it is reasonable to conclude that in the 2010 tax year Mr Donkin had a substantial role in respect of the marketing or encouragement of the growth of the 2010 scheme or of interest in it within the meaning of s 290-60(1)(c). 257 Accordingly, I reject the Commissioner's contention that Mr Donkin was a promoter of the 2010 scheme. 258 However, there was direct evidence of Mr Donkin's involvement in Smart Dental's, Mr Williment's, Bresic Whitney's and the CALM group's investments in the 2011 and 2012 tax years which reflected that his role was anything but that of a passive referrer during those two tax years. 259 Mr Haralambidis and the CALM group had an existing relationship with both Mr Donkin and Mr Manietta when the latter wrote to him on 2 March 2011 suggesting a meeting to discuss investment in carbon credits. At the meeting in mid-April 2011, Mr Donkin explained to Mr Haralambidis and Mr Ceh, at Mr Manietta's invitation, that each of the three CALM companies would benefit from investment in an ERPA (see [137] above). Mr Donkin gave that advice in the context of the overall discussion in the meeting that the "benefit", on which Mr Donkin could advise, was that the investment in a contract lot would give each of the profit-making CALM companies a tax saving in the 2011 tax year equivalent to about twice the cost of the 15% deposit. Mr Donkin, as the CALM group's accountant was confirming, as well founded based on his professional expertise, Mr Manietta's "no brainer" enthusiastic promotion of the tax benefits for each company from an investment in a contract lot in the 2011 tax year. 260 Mr Donkin continued to assure Mr Haralambidis of the tax benefits that each of the three CALM companies would get by purchasing a contract lot in his email of 24 May 2011 and the fact that the only possibility of the CALM group having to make further payments to Voluntary Credits would be if the carbon credits were tradeable for at least what was owing, so that there was only the upside of a possible profit (see [152]). Likewise, when explaining the tax benefits to Mr Lang, on behalf of Mr Williment in his email of 14 June 2011, Mr Donkin made a commercially compelling case to promote and encourage investment in the 2011 ERPAs ([160]). 261 Mr Donkin also had a pre-existing relationship with Bresic Whitney when he suggested, in early 2011, to Mr Whitney an opportunity for the group to obtain tax benefits, which Dr Rowntree could explain at a meeting. At the meeting on 19 April 2011, Mr Donkin told Mr Bresic and Mr Whitney that there were tax benefits to companies like theirs and Dr Rowntree was then to explain "how it worked". Mr Donkin gave the CD and marketing materials to Mr Bresic and Mr Whitney and advised them to proceed by having each of the Bresic Whitney companies purchase a contract lot for $20,000 at that time (see [143]-[144]). On 3 May 2011, subsequently to them acting on that, Mr Donkin sought to encourage use of the logo on emails and the creation on Bresic Whitney's website of a link to voluntary credits. 262 Mr Whitney's lack of enthusiasm for engaging in the promotion of Voluntary Credits on Bresic Whitney's website and emails, reflected his perception that Mr Donkin's proposed reason (of informing the outside world that Bresic Whitney had made the investments "as you are aware of your environmental impact") was specious. Mr Whitney had invested on the basis of "the conversation we'd had about tax" ([[148] above). I find that the subject matter of that conversation was the reason for Bresic Whitney's investment that both Mr Donkin and Dr Rowntree had marketed and encouraged. 263 Mr Donkin, with Mr Manietta's involvement, made a similar case to Mr Williment and Mr Lang, to induce the purchase of two contract lots and, he also sought to encourage Australian Financial Innovations to invest in a 2011 ERPA (see [160]-[163]). Although there is no evidence whether Australian Financial Innovations did so in the 2011 tax year, the 2012 client list noted Strategic (i.e. Mr Donkin) as the referrer of Australian Financial Innovations' purchase of contract lots. 264 Mr Donkin's efforts resulted or assisted in the sale of a substantial number of contract lots in the 2011 tax year for which Strategic remitted $671,868 to Voluntary Credits and received $63,397 as commission (see [166]). 265 By late August 2011, Mr Donkin understood (incorrectly) that Strategic's clients who had purchased contract lots in the 2009 tax year would be able to transfer to directors' loan accounts the liability to pay the balance of the purchase price after 30 June 2011. 266 Mr Manietta's letter to Mr Donkin of 9 September 2011 recognised the close working relationship between the two (and their companies) including in the promotion of the sale of contract lots ([179]). That collaboration and Mr Donkin's individual efforts to promote investment in, and sell, contract lots continued apace in the 2012 tax year. From about late March 2012 Mr Donkin encouraged four entities associated with the Zammit family, Smart Dental, The Mark Colin Co, each of the Bresic Whitney companies and, possibly, with Dr Rowntree's help, Mr Pennefather, to buy a contract lot each ([186]-[191], [194]). 267 In June 2012, Mr Donkin persuaded, with Dr Rowntree's (and possibly Mr Bonnell's assistance), the two Hardy Bros companies to buy two contract lots each based, I infer, on the tax benefits to them ([199]-[200]). In the 2012 tax year, Strategic received $104,537 as commission on the sale of 17 contract lots ([204]). Was Mr Donkin a promoter in the 2011 and 2012 tax years? – Consideration 268 Mr Donkin submitted that, when he advised Mr Williment and Mr Lang on 14 June 2011 about the tax consequences of acting on Mr Manietta's suggestion of investing in the contract lots, all that he did was to convey his professional advice as an accountant on what he considered were the taxation consequences of a proposed transaction in response to his client's request for that advice. Mr Donkin submitted that his involvement as a professional accountant was insufficient to make him a promoter because of s 290-60(2) in Sch 1 to the TAA. He contended that, for example, he had told Mrs Manietta on 12 April 2012 that she should send the 2012 ERPA Ti Amo had received not to him but to The Mark Colin Co directly for signature (see [189]). Mr Donkin argued that this showed that he was not promoting or encouraging the growth of the scheme. 269 I reject those arguments. In his 14 June 2011 email to Mr Williment and Mr Lang, Mr Donkin was furthering his collaboration with Mr Manietta in promoting sales of contract lots (see [160]). He had sent Mr Manietta the tax estimates for Mr Williment's entities less than 10 minutes before that email so that they both could "discuss" them. I infer that the obviously brief discussion between Mr Donkin and Mr Manietta about the tax estimates concerned whether Mr Williment would be open to encouragement to purchase contract lots and which of his two advisers should make the suggestion to best achieve a sale, which resulted in Mr Donkin doing so. Mr Donkin's advice encapsulated the sales pitch in the structuring of the 2011 scheme, namely a tax deduction of $132,000, for a cost of $20,000 and a saving of about $40,000 in tax, for which Ti Amo received commission. 270 In his letter of 9 September 2011, Mr Manietta recognised the value of his "partnership" with Mr Donkin in which each cross-referenced the other's clients with suggested investments through the acquisition of carbon credits, namely using the 2011 and 2012 ERPAs. 271 Nor was Mr Donkin's suggestion on 12 April 2012 to Mrs Manietta that she forward the 2012 ERPA to The Mark Colin Co indicative of anything other than a recognition that the client was one for whom Ti Amo would receive commission in the "partnership" and that she did not need any further permission from him at that stage, to progress the mutual client's entry into the transaction. Ti Amo's or Super Smart's receipt of the 2012 ERPA so that it could be forwarded to the mutual client for signature, reflected the reality that the client had sent in an application, no doubt on the basis of earlier advice and encouragement from both Mr Donkin and Mr Manietta. 272 In my opinion, the direct evidence during each of 2011 and 2012 tax years of Mr Donkin's role in promoting and encouraging the acquisition of contract lots to which I have referred above was substantial within the meaning of s 290-60(1)(c). In the 2011 tax year, Strategic paid Voluntary Credits over $670,000, or about 30% of the total money it received from the 2011 scheme [166]. That represented, probably, deposits for the sale of 34 contract lots (because the 15% deposit and $200 option fee in for the 2011 tax year totalled $20,000) one or more of which may have been purchased at a discount. And, Strategic received commission equal to nearly 10% of the sum it remitted to Voluntary Credits in 2011 tax year in respect of its marketing, and encouragement of the growth of the 2011 scheme. In the 2012 tax year, Strategic paid Voluntary Credits over $310,000 or about 15% of the total moneys it received from the 2012 scheme, but Strategic received about $104,000 in commission. The 2012 client list credited Strategic with the sale of 17 out of the 128 contract lots, or about 13% of the total sales. Strategic's position as a referrer was eclipsed in the 2012 tax year only by the 63 sales for which Super Smart received credit as the referrer. 273 Having regard to all of the evidence of his involvement, I am satisfied that Mr Donkin, through Strategic, was a promoter for the purposes of s 290-60(1), of each of the 2011 and 2012 tax exploitation schemes because he marketed and encouraged the growth of each scheme and interest in it, received substantial consideration, in the form of commission, in respect of that marketing and encouragement and he had a substantial role in respect of that marketing and encouragement. Mr Manietta's conduct 274 Mr Manietta was a limited partner in Ti Amo and a director of Ti Amo Strategies, the general partner in Ti Amo, and the sole director of Super Smart. He was the controlling mind of Ti Amo and Super Smart. He was also a financial planner. 275 Although there was no direct evidence of Mr Manietta's interaction in the 2009 tax year with purchasers and others to whom contract lots were offered, Ti Amo sold 39, or over 50% of all 74 contract lots sold in that year, and earned $280,243.25 commission. It also acquired a contract lot for itself at a discounted price of $7,000. That level of activity in itself supports the inference that I draw, that Mr Manietta marketed and encouraged the growth of the 2009 scheme through the sale of contract lots in the 2009 tax year. 276 In each of the 2010, 2011 and 2012 tax years, there was direct evidence of Mr Manietta's prodigious marketing activities. 277 On 30 September 2009, he proposed an alliance between Super Smart and Hall Chadwick before coming to an understanding in October 2009 with another accounting firm, Mr Donkin's Strategic (see [80]–[81]). On 25 January 2010 Mr Manietta asked Dr Rowntree to bring "your latest marketing kit" to their lunch ([84]). In June 2010 Mr Manietta caused his client, Ms Song, to understand (I infer, accurately) that if, as she emailed, "I used the carbon credits I would have to pay minimal tax" ([94]). In the 2010 tax year, Ti Amo sold 33 contract lots, or about 33% of all sales in that year (including one to itself for $14,000) realising total commissions of $238,000 ([106], [116]). 278 In the 2011 tax year, Mr Manietta introduced Mr Haralambidis to the idea of acquiring carbon lots on 2 March 2011, telling him that there were "some tax benefits" and that he needed to move quickly. As Mr Haralambidis said in his evidence in chief, at the meeting he, Mr Ceh and Mr Donkin attended in mid-April 2011 at Glebe, Mr Manietta was passionate about this new opportunity and explained why it was a "no brainer", namely because for an outlay of $20,000 each of the three CALM companies would save $39,000 in tax ([137]). Mr Donkin confirmed that "no brainer" on 24 May 2011 in his email to Mr Haralambidis and CALM's financial controller, Mr Yu after Mr Yu had raised queries about it. Mrs Manietta followed up on 2 and 15 June 2011 asking if Mr Haralambidis had the application forms she had sent and pressed for their completion and return. That led to each of the three CALM companies paying the 15% deposit for a contract lot on 17 June 2011 ([151]-[157]). 279 Mr Manietta also promoted the sale of contract lots to Mr Williment's entities and The Mark Colin Co though this "partnership" with Mr Donkin [269]. On 23 June 2011 Dr Rowntree emailed Mr Manietta with details of the then 50 persons who had acquired 51 contract lots through Ti Amo, noting those who had not yet returned the 2011 ERPA's, options and licence agreements. And by 30 June 2011, Ti Amo had earnt $330,000 in commission from the sale of 55 contract lots in the 2011 tax year ([166], [168]). 280 In the 2012 tax year, Mr Manietta wrote to the CALM companies on 18 July 2011 returning the signed contractual documents and encouraged them to use the frog logos and other materials on the CD. On 9 September 2011 Mr Manietta wrote to Mr Donkin about their "working partnership" and the furtherance of it by promoting the sale of contract lots ([179]). During the rest of the 2012 tax year, Mr Manietta contained to promote and encourage sales of contract lots. On 20 February 2012 he wrote to each of the three CALM companies, using the wording of Dr Rowntree's draft marketing letter, which again emphasised the deductibility of the full purchase price of a contract lot on payment of only the 15% deposit in the 2012 tax year ([183]). He persuaded Mr Haramlambidis that the CALM group should enter into purchases of contract lots in April 2012 ([192]). And Ti Amo or Super Smart, through Mrs Manietta worked with Mr Donkin in respect of The Mark Colin Co's acquisition of a contract lot in April 2012 ([267], [271]). 281 Similarly, Mr Donkin and Ti Amo's "partnership" can be seen at work again in dealing with Liquid Idea's finance and office manager's (Ms Dong) queries about how the "investment" worked. Obviously, Ms Dong had not been present when Mr Manietta or someone else at Ti Amo (such as his wife) explained this to the principal of Liquid Ideas, who signed the 2012 ERPAs. Ms Dong, as a finance manager, had a natural curiosity about the timing and impact on cashflow of the obligation to pay the balance of the 85% of the price, which Mr Donkin explained was of no concern in his reply of 16 May 2012 ([195]). 282 The 2012 client list credited Mr Manietta with the sale of 63 contract lots, or nearly 50% out of a total of 128 sales, in the 2012 tax year earning commission of over $300,000. 283 Mr Manietta through his associates, Ti Amo, Super Smart and his wife, marketed and encouraged the growth, and interest in, the sale of contract lots in each of the 2009, 2010, 2011 and 2012 tax years. Ti Amo sold a total of 189 contract lots (in addition to the two it purchased for itself in each of the 2009 and 2010 tax years) and received commission totalling $1,152,893.25. 284 Having regard to the scale of Ti Amo's and Mr Manietta's sales and marketing, as revealed in his prodigious activity, correspondence and Mr Haralambidis' evidence, it is reasonable to conclude that he had a substantial role in marketing and encouraging the growth of each of the 2009, 2010, 2011 and 2012 schemes, received consideration directly or indirectly and had a substantial role in respect of that growth and encouragement so as to be a promoter in each scheme year. The tax exploitation issue 285 The Commissioner alleged that there was a separate scheme, in materially similar terms, in each of the 2009, 2010, 2011 and 2012 tax years that amounted to a tax exploitation scheme within the meaning of s 290-65(1) in Sch 1 of the TAA because each of the conditions in s 290-65(1)(a)(i) and (b)(i) was satisfied. 286 I am satisfied that there was a scheme in each of the tax years that consisted of each investor and one or more of each of Dr Rowntree, Mr Donkin (except in 2009 and not in the capacity of a promoter in 2010) and Mr Manietta personally and his associates being involved in the following structures: (a) The investor entered into the form of the ERPA for the relevant tax year in which the investor agreed to purchase from Voluntary Credits (including under its name of BR Redd in the 2009 tax year) the number of contract lots (as defined for that ERPA) specified in the schedule to that ERPA as provided in cl 2.1 at the price per lot applicable in the relevant year; (b) The investor having paid Voluntary Credits a deposit of 15% of the total purchase price on execution of the ERPA (cl 3.1). The balance would be payable only if, and when, the investor received a delivery notice from Voluntary Credits; (c) If the investor did not receive a delivery notice from Voluntary Credits within 3 years after execution of the ERPA, the investor could terminate the ERPA but the deposit was not refundable; (d) Some, but not all, investors in the relevant year entered into: i. The 2009 option in the 2009 scheme with Carbon Strategic and paid it an option fee (2% of the total price) in consideration of which the investor could require Carbon Strategic to purchase the contract lots the subject of its 2009 ERPA; ii. the 2010, 2011 or 2012 options with Voluntary Credits on payment of an option fee of $1000, $200 or $100 respectively; or iii. a licence agreement. (e) No delivery notices were ever served and no investor ever paid the 85% balance of the purchase price or sought delivery of the contract lot(s) the subject of the ERPA (f) The investor would claim a tax deduction of the full purchase price payable under the ERPA in the tax year in which the investor executed it and paid the 15% deposit and the option fee, if any; (g) The price payable under each of the 2009, 2010, 2011 and 2012 ERPAs was uncommercially high, the size of a contract lot was unrelated to any business or commercial requirement of any investor (other than the obtaining of the tax benefit) and the quantity of a contract lot (having regard to market prices for a comparable quantity of carbon credits and where the quantity of the contract lot was fixed by reference to a unit of measurement) was not an ordinary trading unit or product traded in any market (see [66]-[67]) (h) There were much lower risk alternatives available to a person in the position of an investor in the primary or secondary markets and at significantly lower prices; (i) The 2009, 2010, 2011 and 2012 ERPAs were not suitable contracts to enable a retail client in the position of an investor to acquire carbon credits to use for the purpose of retiring them to offset any carbon "footprint" or carbon emissions that the investor might have had ([68]); and (j) The terms of each of the ERPAs were uncommercial because the investor had no right to any existing property or to compel Voluntary Credits, which was a Malaysian company, to serve a delivery notice and there was no international arbitration or jurisdiction clause to assist in enforcing a party's rights. Dr Rowntree's and Mr Donkin's submissions 287 Each of Dr Rowntree and Mr Donkin argued that the schemes were not tax exploitation schemes because none of them as implemented satisfied the conditions specified in s 290-60(1)(a)(i) or (b)(i). That was because, they contended, first, it was not reasonable to conclude that any investor entered into the scheme with the sole or dominant purpose that he, she or it would get a scheme benefit from it, namely a tax deduction of the full purchase price in the tax year of entering into it on payment of only the 15% deposit (and any option fee), or, secondly, it was reasonably arguable that the scheme benefit was available at law. They contended that the dominant purpose of the investors, the associates of each respondent and that respondent himself, was to create an opportunity that made carbon credits available to relatively small scale investors, which carbon credits could be retired or, where applicable, surrendered or traded or marketed. They submitted that if an investor were seeking a scheme benefit, that was a matter for the particular investor but not an inherent feature of the scheme. They argued that the taxation consequences flowing from a claim to deduct the full purchase price in the tax year in which the investor entered into the relevant ERPA (and any option) were relevantly incidental to the operation of the contracts and that there had not been any representation that those consequences necessarily resulted from entry into the ERPA (and any option). 288 Moreover, Dr Rowntree and Mr Donkin argued the fact that Mr Young of counsel had given opinions that suggested the availability of a tax deduction of the full price in the year in which the investor entered into the ERPA (and any option) made it, at the very least, "reasonably arguable" that the relevant beneficial taxation consequences would be available "in the appropriate circumstances". 289 In his written submissions, Mr Donkin contended that all of his clients who were potential or actual investors were referred to Mr Young for tax advice as required. However, there was no evidence that during any of the 2009, 2010, 2011 or 2012 tax years Mr Donkin made any such referral, or that any of his, or anyone else's clients was referred to, sought or obtained any advice from Mr Young during any of the scheme years. Therefore, that argument fails for want of any evidence to support it. 290 Dr Rowntree also argued that "fees paid to Voluntary Credits were allocated in part to pay for the expenses of creating the carbon credits". However, there was no evidence of either any such allocation of the expenses of creating any carbon credits or the actual creation of any carbon credits. Thus, this argument also needs no further consideration. There was no evidence that either of the Binamel or Papua New Guinea contracts ([50]-[55]) above had resulted in Carbon Strategic doing anything under them let alone that Voluntary Credits had incurred any expenditure to secure carbon credits in order to put itself into a position to issue a delivery notice to an investor under any of the ERPAs. 291 Dr Rowntree contended that the price paid for carbon credits was a matter for the commercial assessment of each investor. He submitted that the form of the ERPAs was a simplified and shortened version of a contract "modelled on recognisable templates" and, in addition, the options "were not inconsistent with carbon credit arrangements at the relevant time in a developing market". He argued that, in the circumstances, the prospects that registrable carbon credits would arise from advancing projects contemplated in each year's ERPAs "were not remote". 292 Dr Rowntree contended that a sufficient nexus would exist to justify an investor incurring an outgoing in carrying on business for the purpose of producing assessable income in the circumstances if the investor made a business decision that this investment would promote the business' social licence or allow it to represent to customers and the public that its business was "clean and green" or promoted the interests of people in developing economies through acquiring carbon credits or using the licence agreement's intellectual property. 293 Dr Rowntree denied that he knew, or ought to have known, that: a claim for deduction of the full purchase price was in excess of what an investor could have "incurred" given the lack of any property passing on entry into any of the ERPAs; the 2009, 2010, 2011, 2012 ERPAs had a speculative character in respect of the likelihood that any REDD or carbon credits would ever come into existence or be the subject of a delivery notice that would be sufficient to trigger a liability of the investor to pay the balance of the purchase price, and it was very likely that the Commissioner would form the view that no part of the purchase price of a contract lot under the 2009, 2010, 2011 or 2012 ERPAs was deductible under s 8-1 of the ITAA 1997 and that the Commissioner would cancel any deduction, if claimed, pursuant to Pt IVA of the ITAA 1936, in light of the factors suggesting that each ERPA was a colourable tax scheme. 294 Dr Rowntree also asserted that the Commissioner's reliance on his 29 January 2010 email comments about the qualifications that Mr Young was conveying to clients about his 26 May 2009 opinion misconstrued what he (Dr Rowntree) was saying in his email. He submitted that he had not neglected to inform himself of any relevant matters and had not marketed the 2009 scheme. 295 Dr Rowntree, somewhat surprisingly, in addressing whether what occurred in each of the four tax years was carried out with the sole or dominant purpose of an entity getting a scheme benefit from the scheme, submitted in the alternative that Mr Young's 26 May 2009 opinion did not make it reasonably arguable that, within the meaning of ss 284-15 and 290-65(1)(b)(i): the full purchase price of a 2009 ERPA would be deductible because the opinion did not address, adequately, the issues arising from the balance of the purchase price only becoming payable if and when future property, in the form of REDD or carbon credits, would come into existence and be the subject of a delivery notice given to an investor; and there was a nexus between the two obligations to pay the 15% deposit and 85% balance under cl 3.1 of the 2009 ERPA so as to support the asserted deductibility in the 2009 tax year of both those obligations. 296 Dr Rowntree's solicitor argued in final address that Mr Young's opinion also gave limited consideration to how the full purchase price or the deposit could be deductible under s 8-1(1)(b) of the ITAA 1997 and: I would add to that, very simply, that the opinion in itself doesn't consider the question of whether or not this is a capital expenditure or a business expenditure. So the opinion, I agree, offers no comfort in the circumstances. HIS HONOUR: Doesn't that just lend force to the Commissioner's argument, does it? MR MARTIN: It leads to another argument. And that's this. When one puts together…,if I could use the shorthand phrase, the sloppy drafting of the ERPAs and the problems with the nature of the opinion, one is left with considering whether or not it would be possible for any person to reasonably expect a tax benefit of any kind in accordance with these arrangements. (emphasis added) 297 Dr Rowntree's argument became somewhat surreal on this point. His solicitor contended: If it is the case, as the Commissioner argues, that under s 290-65(2)(b) [scil: s 290-65(1)(b)] [See [299] below] that the penalty provisions will not apply unless it is [not] reasonably arguable that the scheme is available at law, and the Commissioner argues in this case that it was not reasonably arguable, and, if it is found that it is not reasonably arguable, then, in accordance with s 284-150, a tax-related liability of the entity for an accounting period could not reasonably be expected to be less than it would be apart from the scheme. 298 I found myself listening at the hearing to an argument that the creators of Monty Python could have used as the basis of a sketch. I tried to articulate what I understood Dr Rowntree's solicitor to be arguing in the following exchange: HIS HONOUR: But you're saying that your client, so incompletely, prepared this scheme and sold it to give these people the thought that they might get a tax benefit, but in fact there could be no reasonable expectation that they would get the tax benefit when they went into it and therefore it couldn't be a scheme. Is that what you say? MR MARTIN: Yes. I am arguing that, your Honour. HIS HONOUR: Right. Okay. MR MARTIN: I mean, that would leave us with the, apparently unusual situation that the less effective the scheme, then the less likely that the promoter penalty regime would apply to it. (emphasis added) 299 Immediately after this exchange, Dr Rowntree's solicitor then produced an article by Adjunct Professor Gordon S. Cooper AM: "Promoter Penalties" (2006) 4 Journal of Tax Research 117 the first line of which read "He's not the messiah; he's a very naughty boy" (from Monty Python's 1979 film The Life of Brian). Professor Cooper's analysis critiqued the then new provisions in Div 290. He posited, at one point (at p124), a hypothetical argument of counsel based on s 290-65(2)(b) [scil: s 290-65(1)(b)], "that it was 'reasonably to be expected' that the scheme would reduce the tax liability but that the position taken by the scheme was 'not reasonably arguable'…might require the use of doublethink" (emphasis in the original). 300 Mr Donkin adopted Dr Rowntree's submissions on these matters so far as they affected him. Was each of the 2009, 2010, 2011 and 2012 schemes a tax exploitation scheme? 301 In Federal Commissioner of Taxation v Spotless Services Ltd (1996) 186 CLR 404 at 416, Brennan CJ, Dawson, Toohey, Gaudron, Gummow and Kirby JJ said of Pt IVA of the ITAA 1936 in terms equally applicable to the question under ss 290-65(1)(a) and 284-150(1)(a) in Sch 1 of the TAA: In its ordinary meaning, dominant indicates that purpose which was the ruling, prevailing, or most influential purpose. In the present case, if the taxpayers took steps which maximised their after-tax return and they did so in a manner indicating the presence of the "dominant purpose" to obtain a "tax benefit", then the criteria which were to be met before the Commissioner might make determinations under s 177F were satisfied. That is, those criteria would be met if the dominant purpose was to achieve a result whereby there was not included in the assessable income an amount that might reasonably be expected to have been included if the scheme was not entered into or carried out. (emphasis added) 302 In Ludekens 214 FCR at 192 [231] Allsop CJ, Gilmour and Gordon JJ held that in evaluating whether "it is reasonable to conclude" that an entity had the sole or dominant purpose of that, or another, entity getting a scheme benefit from the scheme "the focus is on what the entity was proposing to do and why". They held that this is an evaluation of what actually was in the mind of the entity (or the individual who was its controlling mind and will) as the sole or dominant purpose of its relevant conduct. This evaluation did not call for any consideration of a hypothetical or counterfactual course of, or other possible, conduct were the entity not to have acted as it, in fact, did: Ludekens 214 FCR at 192-193 [232]-[236]. 303 Thus, the question is whether it is reasonable to conclude that the entity acted as it did with the sole or dominant proscribed purpose, namely so that that entity or another entity would get a scheme benefit from the scheme: Ludekens 214 FCR at 194 [243]. As the Full Court noted, persons engaged in trade or commerce do so for the purpose of personal gain, profit or minimising any adverse financial position to which their prior activities may have actually or potentially exposed them. Often a fiscal or tax benefit will result from the decision of a person carrying on a business to expend money, and that benefit may make the decision more desirable or profitable. Thus, the mere existence of a better financial or fiscal outcome because the expenditure can be deducted from the business' assessable income does not, of itself, fall within the purpose with which s 290-65(1)(a)(i) is concerned. Rather, the enquiry is whether the purpose of entering into the transaction was solely, or predominantly, to obtain that fiscal or tax benefit. 304 In today's society most businesses need a computer and, because of the phenomenon that technological advances tend to result in significant improvements in the speed and functionality of computers (eg Moore's Law), it is also common for businesses to replace older computers with the newer, more efficient ones, sometimes as often as every second or third year. The expenditure on the computer is deductible under s 8-1 of the ITAA 1997 under ordinary circumstances. A business person can decide the timing of when to replace existing with new computers on or before 30 June in a tax year because the business is profitable and he or she can deduct the expense, so reducing the profit, or can do so in the next financial year on 1 July when the expense is equally deductible but the profitability in the forthcoming year is unknown or uncertain. No doubt, a purpose of causing the purchase of the computers on 30 June is to reduce the business' taxable income in that financial year, but, ordinarily, the dominant purpose will be to have a more up to date computer to benefit the conduct of the business. After all, almost all expenditure decisions in carrying on business involve a balancing of all of the benefits (including any in respect of taxation liabilities) against the capacity of, and impact on, among others, cashflow of the business by incurring that outgoing. 305 It was open to Dr Rowntree, who was present in Court during the hearing, to give evidence about those matters. His failure to give evidence has the consequences that, first, I can infer that his evidence would not have assisted his case: Jones v Dunkel (1959) 101 CLR 298; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 at 384-385 [63] per Heydon, Crennan and Bell JJ, and, secondly, any inference favourable to the Commissioner (as the opposing party) for which there is ground in the evidence "might more confidently be drawn when a person presumably able to put the true complexion on the facts relied on as the ground for the inference has not been called as a witness by [Dr Rowntree] and the evidence provides no sufficient explanation of his absence": Jones v Dunkel 101 CLR at 308; applied in Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345 at 412-413 [167], per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ. 306 There was no evidence that any of the projects that BR Redd / Voluntary Credits had arrangements for with Carbon Strategic or others in Vietnam or elsewhere were or were likely to be, in a position to deliver any REDD or carbon credits to Voluntary Credits within three years of the entry into any of the ERPAs, or at any later time. Until that position occurred and the resulting REDD or carbon credits were capable of being registered in a trading scheme, Voluntary Credits could not provide a delivery notice. There was no evidence that Voluntary Credits took any substantive steps to ensure that any project would be in a position to deliver a product that Voluntary Credits could use to provide a delivery notice to any investor. I am satisfied that there was no realistic possibility that it ever would. 307 In the context of each of the 2009, 2010, 2011 and 2012 scheme years, the dominant purpose of each of Dr Rowntree, Mr Donkin (except for 2009) and Mr Manietta was to market the sale of contract lots through investors entering into an ERPA in the relevant tax year so that the investor who paid the 15% deposit would get a tax deduction of the full purchase price in that year. And that was the dominant intention of each of Dr Robson, Mr Haralambidis and Mr Whitney when each accepted and acted on the advice he had received. On the whole of the evidence the obtaining of the tax benefit was the dominant purpose of each investor in each of the 2009, 2010, 2011 and 2012 tax years. 308 Each of the 2009, 2010, 2011 and 2012 ERPAs was structured to deliver what the marketing material suggested, based on the assumption of the correctness of the "barrister's opinion", namely that the investor could and would claim a tax deduction of the whole of the purchase price in the year in which the investor entered into the relevant ERPA and paid the 15% deposit. Moreover, the form of those ERPAs depended on the investor agreeing to buy the yet to be created REDD credits in contract lots which were in a fixed amount unrelated to any investors' needs of an unusual measure (namely "tonnes of sequestered carbon") that was not used commercially in June 2009 to measure carbon credits ([61]). The prices in the ERPAs were well above any market price and the ERPAs did not give the investors any right to compel delivery to them of what, supposedly, they were buying, namely REDD credits. 309 So far as the evidence revealed, none of the investors who invested in the 2009, 2010, 2011 and 2012 ERPAs had any business or commercial requirements to obtain REDD, or other forms of carbon, credits to offset any carbon profile or otherwise use in their businesses. 310 I am of opinion that the dominant purpose for which each respondent and investor entered into and carried out each scheme in the 2009, 2010, 2011 and 2012 tax years (except for Mr Donkin in the 2009 tax year) was so that each investor would get a scheme benefit from the scheme, within the meaning of s 284-150(1) of Sch 1 of the TAA. The scheme benefit was, of course, the use of the full purchase price as a deduction from the investor's taxable income for the relevant tax year in which the investor entered into the ERPA that, if allowed, would result in its tax-related liability being less than it would have been apart from the scheme. If the full purchase price were so deductible on payment of only the 15% non-refundable deposit, the economic benefit to the investor was so attractive and obvious that, in Mr Manietta's words to Mr Haralambidis and Mr Ceh, "it's a no brainer". And, based on the way in which the respondents and their associates promoted and marketed each scheme, the decision to enter the ERPA was a "no brainer". The investors had no commercial need or interest to do so apart from its overwhelming fiscal attraction. They never sought, or had any need, to obtain any REDD or carbon credits, the supposed object of their entry into the ERPA. 311 The purpose of each promoter, being relevantly here, Dr Rowntree, Mr Donkin (except in the 2009 tax year) and Mr Manietta was to make money for himself or his associates from sales of contract lots through inducing investors to enter into the relevant 2009, 2010, 2011 or 2012 ERPA and with the dominant purpose that each investor would pay only the 15% deposit and get the scheme benefit of an immediate deduction of the full purchase price of each contract lot in the tax year, worth about twice the expenditure on the deposit. 312 The ERPAs were not drafted to give the investors an enforceable right in any present property or to require delivery of the contract lot(s) for which they had paid a non-refundable 15% deposit. The commercial reality of the drafting of the ERPAs was that Voluntary Credits received the 15% non-refundable deposit without any obligation to issue a delivery notice to trigger the provision of the contract lot(s) in exchange for the balance of the purchase price. Rather, each ERPA entitled each investor to terminate it if no delivery notice were received within 3 years. And, if a delivery notice were received, an investor who had entered into an option could exercise the option without incurring any extra expense. That is how Mr Donkin explained the position to Mr Yu, the accountant to the CALM group, in his email of 24 May 2011 ([152]). 313 Moreover, as the NAA agency recorded in its proposal of 13 September 2010, "the marketing challenge is that there is little that BR can say when advertising to its target audience" (see [120] above). A bona fide vendor of REDD or carbon credits could say a great deal about the contractual proposal, including, as Mr Fowler noted, giving details of how and when the carbon credits would be created and delivered, if that was what the vendor intended. Mr Bonnell, with his tax expertise, saw an immediate red flag in Ms Reid's ingenuous question about why, if a bank could advertise a home loan that "will promise tax benefits", "we can't say something like 'why not offset carbon emissions with possible tax benefits?'" ([90]). The answer, which Mr Bonnell was not prepared to put in writing is not far to seek, being that to do so, as each of the 2009, 2010, 2011 and 2012 schemes was structured would fall foul of Div 290. The marketing material emphasised that a barrister's opinion supported the full deductibility of the price even though only a 15% deposit would be paid in the tax year in which the investor claimed on the basis of that deduction and the balance might never be payable. 314 Each of Dr Rowntree, as a solicitor and tax expert, Mr Donkin as an accountant (except in the 2009 tax year) and Mr Manietta as a financial planner, and their respective associates, in recommending that a potential investor acquire one or more contract lots and, in Dr Rowntree's case publishing the marketing material to other professional advisers, was intending to suggest the suitability and soundness of such on investment based on its obvious fiscal attractiveness. The marketing letter contained the usual cautionary words that any person entering into the proposed ERPA should seek is his, her or its own legal, taxation and commercial advice on the consequences of doing so. But as the marketing letters went on to say, "this could be an opportunity for you to promote your business" or made a similar suggestion ([24], [174]). 315 Nor is it reasonable to conclude, as Dr Rowntree and Mr Donkin argued, that his or his associates' dominant purpose was to offer relatively small scale investors an opportunity to acquire carbon credits, and to portray to the outside world, including customers or patients, that the investor was "green" or environmentally responsible. The respondents' target market consisted of small businesses, medical and dental professionals that fitted the criterion of having a taxable income of at least $140,000 (140K+), as, for example, Dr Rowntree enunciated on 21 June 2010 when responding to Mr Curran's question of "what sort of tax prospects do they really need for this to work" (emphasis added) ([93]). 316 As Mr Fowler's evidence established, all of the ERPAs' prices were uncommercially high, there were readily available alternative contracts for sources of carbon credits that were at market prices and for the quantities that an investor or business actually needed and that would provide those credits immediately (albeit that no REDD credits were available in the commercial market until late 2010). However, none of the investors came to the respondents or their associates seeking REDD or other carbon credits. Rather, the respondents and their associates marketed and promoted the ERPAs to the investors on the basis of the promised tax deductibility of the full purchase price on payment of only the 15% non-refundable deposit. 317 Accordingly, I am satisfied that the dominant purpose of each of Dr Rowntree, Mr Donkin (except in the 2009 tax year) and Mr Manietta as the controlling mind and will of each their respective associates in entering into the respective scheme in each of 2009, 2010, 2011 and 2012 was so that persons who invested in the purchase of an ERPA in that year would, or would believe that they would, get a scheme benefit from the scheme. That scheme benefit was that the investor's tax-related liability in the relevant tax year would be, or could reasonably be expected to be, less than it would be apart from the scheme, because the investor would follow the scheme by deducting the full purchase price from its assessable income even though it had only paid the 15% deposit in that tax year. 318 Neither Dr Rowntree nor Mr Donkin submitted that the analysis of the 2009 ERPA and 2009 option or the law that I made in Academy 106 ATR 184 was incorrect. Of course, the decision in that case in 2017 could not have been known in any of the earlier periods when the schemes were implemented. 319 In Academy 106 ATR 184 I found that both the full purchase price and the deposit were not deductible under s 8-1(a) of the ITAA 1997 and that the challenged assessment was not excessive based on the Commissioner's decision to disallow the investor any deduction in respect of the 2009 ERPA and 2009 option pursuant to Pt IVA of the ITAA 1936. I applied a settled course of binding authorities on the questions in issue that I will summarise below. I am satisfied that the same analysis applies to the characterisation of what a person in the position of each of Dr Rowntree, Mr Donkin and Mr Manietta, at all times while they promoted or marketed the schemes between 2009 and 2012, would have understood about the payments and claims for deduction that the schemes envisaged that the investors would make to achieve the scheme benefits. 320 The full purchase price of a contract lot was not a loss or outgoing "incurred in gaining or producing" the investor's assessable income within the meaning of s 8-1(a) of the ITAA 1997 because the investor had not completely subjected itself to its payment: Federal Commissioner of Taxation v James Flood Pty Ltd (1953) 88 CLR 492 at 507 per Dixon CJ, Webb, Fullagar, Kitto and Taylor JJ applying New Zealand Flax Investments Ltd v Federal Commissioner of Taxation (1938) 61 CLR 179 at 207 per Dixon J: cf: Academy 106 ATR at 199-201 [77]-[85]. That was because each ERPA contemplated that the 15% deposit was non-refundable but that the investor would not complete the purchase, or become liable to pay the balance of the purchase price, unless and until the receipt of a delivery notice at an unspecified future date, which might never occur. 321 The subject matter of any delivery notice that might be served was, at the time of entry into the relevant ERPA, future property that was not then, and might never, be in existence, namely REDD credits that, in 2009, Carbon Strategic might supply to BR Redd for use in a delivery notice that BR Redd or, in the following years, Voluntary Credits, might be in a position to deliver. 322 Accordingly, the source of any obligation of an investor to pay the 85% second instalment was necessarily contingent upon the coming into existence, at an uncertain future date, of future property, the fulfilment of which was uncertain. At the time of entry into each ERPA and at the end of the tax year, the investor had no right to any present property and at best an inchoate liability that may have been in the process of accrual (if by then Carbon Strategic (for the 2009 tax year) or Voluntary Credits (in the subsequent years) had commenced work under any project, of which there was no evidence) but which was subject to a variety of contingencies: James Flood 88 CLR at 507-508; Academy 106 ATR at 201 [83]-[84]. 323 No reasonable business person in the position of either an investor in any of the 2009, 2010, 2011 or 2012 ERPAs, or each of Dr Rowntree, Mr Donkin (except in 2009) and Mr Manietta or his associates, would have understood that at the time of the investor's entry into the relevant ERPA, or at the end of the tax year in which that occurred, the investor had completely subjected itself to pay the, or any part of the, second instalment: James Flood 88 CLR 506, 507-508: Academy 106 ATR at 201 [84]. 324 In addition, neither the whole nor any part of the purchase price of an ERPA was necessarily incurred in carrying on a business of any of the investors for the purpose of gaining or producing assessable income, so far as their businesses were disclosed in the evidence or the overall class of investors the target of the schemes, within the meaning of s 8-1(b) of the 1997 ITAA. 325 The test for ascertaining the business purpose of a claimed deduction is to enquire whether the relevant expenditure was "appropriate and adapted for the ends of the business carried on for the purpose of earning assessable income". While the taxpayer's purpose is subjective as to how he, she or it, judges the need to incur the expenditure, within the limits of reasonable human conduct, the outgoing in question must be, in character, objectively capable, in the circumstances, as being seen as desirable or appropriate from the point of view of the pursuit of the business being carried on for the purpose of earning assessable income: Magna Alloys and Research Pty Ltd v Federal Commissioner of Taxation (1980) 49 FLR 183 at 205, 208; Spriggs v Federal Commissioner of Taxation (2009) 239 CLR 1 at 24 [75] per French CJ, Gummow, Heydon, Crennan, Kiefel and Bell JJ; Academy 106 ATR at 203-204 [95]-[98]. 326 None of Dr Robson, Mr Whitney or Mr Haralambidis saw any need to use the frog logo or other indicia the subject of the licence agreement. The acquisition of REDD credits had nothing to do with the business of a professional anaesthetist or a real estate agency such as Bresic Whitney. While a freight forwarder, such as each of the three CALM companies, may have had a carbon profile, Mr Haralambidis did not cause the CALM companies to enter into the 2011 and 2012 ERPAs for the purpose of gaining or producing their assessable income. His dominant purpose was to reduce their assessable income and achieve for the companies the scheme benefits that Mr Donkin and Mr Manietta had explained to him and Mr Ceh would result (see [136]-[138], [151]-[156]). Likewise, the evidence as to the circumstances of the investment decisions of Mr Williment (an orthodontist), Dr Robson and Liquid Ideas and Hardy Bros all focused on the scheme benefits that each would achieve and made no mention of any other purpose of the respective business entering into the relevant ERPA(s). 327 Even if the investor (or the individual who was its controlling mind and will) considered that an investment in carbon credits could enhance the environmental credentials of the business or its marketing, for it to be claimable under s 8-1(b), it had to be reasonably capable of being seen as objectively desirable or appropriate, as a means to pursue the business ends of the business being carried on for the purpose of earning assessable income: Magna Alloys 49 FLR at 208: Academy 106 ATR at 204 [103]–[104]. 328 Here, the investment in each ERPA was not reasonably capable of being seen as desirable or appropriate as a means for each investor to pursue the business ends of the business it was carrying on for the purpose of earning assessable income, having regard to the nature of the businesses of the investors about whom there was evidence and the target market that Dr Rowntree and his associates identified to both IMPACT and the NAA agency (see [79], [120]) and the way in which Mr Donkin and Mr Manietta interacted with existing and potential clients such as Mr Whitney and Mr Haralambidis; Hillier 228 CLR at 638 [48]. 329 The scale of the investment in each ERPA (if carried through with the investor paying for the delivery of its contract lots) appeared to be out of all proportion to the nature and character of any investor's business about which there was evidence or that of the target market. That is a further reason to support the inference that I have drawn that the dominant purpose of the investor was to get the scheme benefits. 330 I characterised the relationship between the nature of the 2009 ERPA and the decision of the investor to invest in the 2009 ERPA in Academy 106 ATR at 205-206 [106]-[110]. Adapting that analysis to the four scheme years, I find that in 2009 each ERPA was in reality an investment in speculative and unspecific projects that BR Redd was pursuing in the 2009 tax year through its own asserted dealing with Carbon Strategic, in three foreign countries. In the three later tax years each ERPA was an even more speculative investment because in each of 2010, 2011 and 2012 the ERPAs did not even specify any project source and appeared to be based on a hope of generating, at an uncertain time in the future, something that might be able to be realised on the primary market as, or in, REDD or carbon credits and then converted into property that could be sold on one or more secondary markets. This commercially speculative venture had no real or sufficient connection to any investor's business as revealed in the evidence. 331 Moreover, a business person who considered that acquisition of REDD or carbon credits was desirable or appropriate in pursuing his, her or its business ends for the purpose of earning assessable income would be highly unlikely to enter into any of the 2009, 2010, 2011 and 2012 ERPAs having regard to its uncommercial terms. They lacked any enforceable obligation for BR Redd / Voluntary Credits to provide any REDD or carbon credits or even a delivery notice. Those ERPAs were at a very high price. There was ready availability of alternative sources of carbon credits (except for REDD credits until late 2010) on commercial terms, in adjustable quantities to fit the investor's needs, that could be delivered immediately at market prices as Mr Fowler's evidence demonstrated. It is hard to conceive of a businessman, seeking to earn assessable income having any intelligible or commercial requirement to invest in any of the ERPAs given that that would involve paying the immediate non-refundable 15% deposit in order to obtain a possibility that the vendor, within the next three years, might, but had no obligation to, provide a delivery notice and only in that event would the investor be able to acquire REDD or carbon credits. 332 Each investor obtained a reduction of its assessable income that generated a deduction worth about twice the amount that it paid for the 15% deposit for what, at best, was a speculative investment in which it might never be required to pay the balance of 85% of the purchase price (a circumstance that actually occurred) or receive any REDD or carbon credits despite the fact that those credits were supposed to be the reason for entering into the ERPA. It follows that the payment of the outgoing for the deposit appeared to have the dominant, if not sole, purpose of obtaining a tax advantage for the investor and was not clearly appropriate or adapted for the carrying on of its business: Spriggs 239 CLR at 24 [75]; Glenfield Estates Pty Ltd v Federal Commissioner of Taxation (1988) 80 ALR 671 at 684 per Lockhart J with whom Wilcox and French JJ agreed. 333 None of the communications with investors in evidence reveals that any investor had any interest in or had investigated what BR Redd or Voluntary Credits was to do in order to deliver contract lots to it under the ERPAs. 334 Objectively, the entry into each ERPA was the sole involvement that each investor had in relation to the purchase and sale of REDD or carbon credits. And, the entry into the ERPA did not give the investor any legal or equitable interest in any existing or future carbon credits. 335 Accordingly, I am satisfied that none of the investors had a basis to claim that the full purchase price or the non-refundable deposit, for any of the 2009, 2010, 2011 or 2012 ERPAs was a loss or outgoing that was deductible from his, her or its assessable income under s 8-1(1)(a) or (b) of the ITAA 1997. Was the claim for a deduction in each tax year "reasonably arguable"? 336 Next it is necessary to decide whether it was "reasonably arguable" that the scheme benefit would be available at law in accordance with s 290-65(1)(b)(i) in Sch 1 of the TAA. 337 The correct approach to the construction of an analogous expression in s 226C of the ITAA 1936 (in relation to the imposition of penalty under s 226K) to the concept in s 284-15 Sch 1 of the TAA of what is "reasonably arguable" is that taken by Hill J in Walstern Pty Ltd v Commissioner of Taxation (2003) 138 FCR 1 at 26-27 [108], as held by Sackville J, with whom Ryan J and Sundberg J agreed, in Pridecraft Pty Ltd v Federal Commissioner of Taxation (2004) 213 ALR 450 at 476-477 [108] (and see too Commissioner of Taxation v Bogiatto [2020] FCA 1139 at [62]-[68] per Thawley J), namely: 1. The test to be applied is objective, not subjective. This is clear from the use of the words "it would be concluded" in para(1)(b) of the section; 2. The decision-maker considering the penalty must first determine what the argument is which supports the taxpayer's claim; 3. That person will already have formed the view that the claim is wrong, otherwise the issue of penalty could not have arisen. Hence the decision-maker at this point will need to compare the taxpayer's argument with the argument which is considered to be the correct argument; 4. The decision-maker must then determine whether the taxpayer's argument, although considered wrong, is about as likely as not correct, when regard is had to "the authorities"; 5. It is not necessary that the decision-maker form the view that the taxpayer's argument in an objective sense is more likely to be right than wrong. That this is so follows from the fact that tax has already been short paid, that is to say the premise against which the question is raised for decision is that the taxpayer's argument has already been found to be wrong. Nor can it be necessary that the decision-maker form the view that it is just as likely that the taxpayer's argument is correct as the argument which the decision-maker considers to be the correct argument for the decision-maker has already formed the view that the taxpayer's argument is wrong. The standard is not as high as that. The word "about" indicates the need for balancing the two arguments, with the consequence that there must be room for it to be argued which of the two positions is correct so that on balance the taxpayer's argument can objectively be said to be one that while wrong could be argued on rational grounds to be right; 6. An argument could not be as likely as not correct if there is a failure on the part of the taxpayer to take reasonable care. Hence the argument must clearly be one where, in making it, the taxpayer has exercised reasonable care. However, mere reasonable care will not be enough for the argument of the taxpayer must be such as, objectively, to be "about as likely as not correct" when regard is to be had to the material constituting "the authorities"; and 7. Subject to what has been said the view advanced by the taxpayer must be one where objectively it would be concluded that having regard to the material included within the definition of "authority" a reasoned argument can be made which argument when contrasted with the argument which is accepted as correct is about as likely as not correct. That is to say the two arguments, namely, that which is advanced by the taxpayer and that which reflects the correct view will be finely balanced. The case must thus be one where reasonable minds could differ as to which view, that of the taxpayer or that ultimately adopted by the Commissioner was correct. There must, in other words, be room for a real and rational difference of opinion between the two views such that while the taxpayer's view is ultimately seen to be wrong it is nevertheless "about" as likely to be correct as the correct view. A question of judgment is involved. (emphasis added) 338 There was no apparent nexus or connection between the loss or outgoing of the full purchase price for an ERPA, or the 15% deposit, "in" the gaining or production of any of the investor's assessable income or "in" carrying on a business for the purpose of gaining or producing assessable income within the meaning of either limb of s 8-1 of the ITAA 1997. 339 It is not necessary to decide whether the Commissioner would have exercised his power under s 177F(1)(b) in Pt IVA of the ITAA 1936, not to allow the whole or any part of the purchase price to be deducted from an investor's assessable income in the tax year of entry into the relevant ERPA. That is because of my findings that no part of the purchase price of any of the 2009, 2010, 2011 or 2012 ERPAs was deductible under s 8-1 of the ITAA 1997. 340 However, I should state, briefly, why I would have found that it was not reasonably arguable that, had the full purchase price or deposit been deductible under s 8-1 of the ITAA 1997, nonetheless, the Commissioner would have decided, in the exercise of his discretion under s 177F(1)(b) of the ITAA 1936, that any such deduction did not comprise a tax benefit that had been, or but for s 177F would have been, obtained by the relevant investor in connection with a scheme. This issue arises, ordinarily, in a challenge by a taxpayer to an assessment where the taxpayer bears the onus of establishing that the assessment is excessive because there is no tax benefit in connection with the scheme. 341 The question is whether it is objectively discernible that, having regard to a global assessment of the matters in s 177D(2), it is reasonably arguable that the Commissioner would have determined under s 177F(1)(b) not to disallow the whole or any part of a tax benefit that the investor obtained in connection with the relevant scheme: that is, it could be concluded that none of the investors, or the respondents, who entered into or carried out the scheme or any part of it, did so for the dominant (including the objectively discernible) purpose of enabling the investor to obtain a tax benefit in connection with the scheme: see Academy 106 ATR at 207-211 [117]-[136] where I summarised the authorities and analysed the 2009 scheme under Pt IVA. 342 The consequence of each investor entering into the relevant ERPA and, hence the scheme in the relevant tax year, was the significant tax saving (of about twice the amount of the actual outlay of the 15% deposit) generated by the deduction of the full purchase price from his, her or its assessable income. There was no evidence that any of the investors considered any course of action involving the purchase of carbon credits elsewhere or the entry into any other transaction for the purpose of gaining or providing assessable income. The communications in evidence between Dr Rowntree, Mr Donkin or Mr Manietta (and their associates) with one or both of the others or with an investor focused on the tax benefit for the investor. 343 I am satisfied that the alternative postulate of what each investor would have done had he, she or it not entered into the relevant ERPA, is that the investor would not have, first, entered into any other investment or transaction and, secondly, claimed the deduction: cf Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 at 243-244 [66] per Gummow and Hayne JJ and, see too, per Gleeson CJ and McHugh J at 228 [18]. The artifice of the scheme is exposed by its achievement of the tax saving of about twice the investor's outlay in the year in which the deduction is claimed when the investor acquired no enforceable right in, or capacity to require delivery of, any carbon credits. Moreover, there was an expectation that the investor would not be required, as a matter of practical reality, to make or finance the payment of the 85% balance of the purchase price. That was because the investor could terminate the relevant ERPA if Voluntary Credits did not issue a delivery notice within three years, and some, but not all investors had the benefit of a stop loss based on the purchase of the relevant option. The price of each contract lot was not a realistic market price. 344 The inference that I draw is that none of the investors ever intended to use the REDD or carbon credits in gaining or producing assessable income or even expected to receive a delivery notice requiring the investor to pay the balance of the purchase price: Hillier 228 CLR at 638 [48]. The overwhelming objective purpose of an investor when deciding to enter into each relevant ERPA and pay the 15% non-refundable deposit was the obtaining of the substantial tax benefit, reflected in the tax deduction that the investor would claim, despite having acquired no enforceable right in, or to obtain the value of, the REDD or carbon credits. That consequence is also reflected in the facts that most investors purchased, and each of Dr Rowntree, Mr Donkin (except for the 2009 tax year) and Mr Manietta and his associates promoted the sale of, ERPAs at or near the end of each relevant tax year, together with size of the commissions that Voluntary Credits paid to associates of each of Mr Donkin and Mr Manietta for each sale by him. The total commissions represented a substantial proportion of between 10% and 33% of the deposits. 345 I also reject the argument that, in effect, each of the schemes was so badly conceived that no one in Dr Rowntree's or Mr Donkin's position could have considered that the claim to deduct the full purchase price or the deposit was "reasonably arguable". Professor Cooper's doublethinking approach cannot stand with the analysis of the Full Court in Ludekens 214 FCR at 191-195 [226]-[247], 211-212 [324]-[331]. 346 Relevantly, the Parliament enacted s 290-65(1) and (2) in Sch 1 of the TAA in order to achieve the express purpose in s 290-5(a) of deterring tax avoidance and tax evasion schemes. Lord Diplock, writing extrajudicially, said (Diplock K, "The Courts as Legislators" in B Harvey (ed), The Lawyer and Justice (Sweet & Maxwell, 1978) at 274), that "if … the Courts can identify the target of Parliamentary legislation their proper function is to see that it is hit: not merely to record that it has been missed". In Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381–382 [69]–[70] McHugh, Gummow, Kirby and Hayne JJ said: The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute (See Taylor v Public Service Board (NSW) (1976) 137 CLR 208 at 213, per Barwick CJ.). The meaning of the provision must be determined "by reference to the language of the instrument viewed as a whole" (Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 320, per Mason and Wilson JJ. See also South West Water Authority v Rumble's [1985] AC 609 at 617, per Lord Scannan, "in the context of the legislation read as a whole".). In Commissioner for Railways (NSW) v Agalianos ((1955) 92 CLR 390 at 397), Dixon CJ pointed out that "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed". Thus, the process of construction must always begin by examining the context of the provision that is being construed (Toronto Suburban Railway Co v Toronto Corporation [I915] AC 590 at 597;Minister for Lands (NSW) v Jeremias (1917) 23 CLR 322 at 332; K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309 at 312, per Gibbs CJ; at 315, per Mason J; at 321, per Deane J). A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals (Ross v The Queen (1979) 141 CLR 432 at 440, per Gibbs J).Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions (See Australian Alliance Assurance Co Ltd v Attorney-General (Q) [19161 St R Qd 135 at 161, per Cooper CJ; Minister for Resources v Dover Fisheries Pty Ltd (1993) 43 FCR 565 at 574, per Gummow J). Reconciling conflicting provisions will often require the court "to determine which is the leading provision and which the subordinate provision, and which must give way to the other" (Institute of Patent Agents v Lockwood [18941 AC 347 at 360, per Lord Herschell LC). Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme. (emphasis added) 347 Here, first, the condition in s 290-65(1)(a)(i) requires an objective evaluation of the purpose of a person or entity who or which entered into or carried out the scheme. If the Court ascertains, objectively (ie "it is reasonable to conclude") that the sole or dominant purpose was so that the person or another entity would get a tax benefit, it must then address the second condition in s 290-65(1)(b)(i) and (2), namely whether it is not reasonably arguable that the scheme benefit is available at law. 348 Once again, the section operates on the reasonable arguability of a position that is objective, not subjective. A person may, and usually will, enter into or carry out a scheme for the dominant purpose of getting a tax benefit from it, thinking that it will work as intended. The fact that an objective analysis concludes that the scheme was structured on a mistaken premise, namely that it would work, cannot entail, as Dr Rowntree and Professor Cooper argued, that because of the mistake and despite the dominant purpose, it was not a tax exploitation scheme at all, because it was doomed (or likely) to fail. 349 In my opinion, Dr Rowntree had the dominant purpose that the structure of the 2009, 2010, 2011 and 2012 ERPAs would enable each of the investors to claim the full purchase price as a deduction in the tax year in which the investor entered into it, on the basis of Mr Young's opinion. Having regard to his professed expertise, Dr Rowntree must have known that it was not reasonably open to a professional lawyer, accountant or financial planner to use Mr Young's opinion to support any investor, to whom he and his associates marketed or promoted investment in the ERPAs, claiming a tax deduction for either the full purchase price or the deposit. That is why Dr Rowntree crafted the marketing letter, and other references to Mr Young's opinion, with the qualification that any investor should seek their own legal advice about the ERPA, its commercial and tax consequences (see eg at [24] above). However, as he recognised in his 29 January 2010 email to Mr Bonnell, the last thing Dr Rowntree wanted was for an investor to heed the qualification, lest, as occurred when Mr Young himself gave investors oral advice, the manifest unsuitability of the 2009 (and later) ERPAs for the target market of professionals, like Dr Robson, with no carbon footprint would be explained to them. 350 In addition, Dr Rowntree knew, or ought to have known, that it was not reasonably arguable, within the meaning of s 284-15, for an investor to make a claim to deduct the full purchase price on entry into the relevant ERPA when the investor had paid a non-refundable 15% deposit. That deposit conferred no enforceable rights to any existing property or to obtain any REDD or carbon credits and might never do so under the ERPAs, because BR Redd / Voluntary Credits might never be in a position to acquire any that could become the subject of a delivery notice. So much appeared from Dr Rowntree's reluctance to engage with the email he received on 26 June 2009 from Mr Wenderoth that pointed out these problems (see [72]–[73]). 351 Accordingly, I am satisfied that it was not reasonably arguable that the tax benefit would be available at law. That is because, even if I were wrong in my findings that no part of the deposit or purchase price was deductible under s 8-1 of the ITAA 1997, the Commissioner would have exercised his power under s 177F(1)(b) of the ITAA 1936 not to allow any part of a deduction claimed in respect of any payment to enter into any of the ERPAs. Conclusion 352 For these reasons, I am satisfied that each of the schemes was a tax exploitation scheme. The evasion issue 353 Dr Rowntree and Mr Manietta can only be liable to a civil penalty under s 290-50 in Sch 1 of the TAA as a promoter of the 2009 scheme if it involved tax evasion within the meaning of s 290-50: see too Bogiatto [2020] FCA 1139 at [79]–[82]. That is because the Commissioner did not bring this proceeding within the four year period provided in s 290-55(4). 354 Relevantly, s 290-55(4) and (6) in Sch 1 of the TAA provided: Time limitation (4) The Commissioner must not make an application under section 290-50 in relation to an entity's involvement in a *tax exploitation scheme more than 4 years after the entity last engaged in conduct that resulted in the entity or another entity being a *promoter of the tax exploitation scheme. … (6) However, the limitation in subsection (4) or (5) does not apply to a *scheme involving tax evasion. 355 The expression "tax evasion" is not defined. The object of Div 290 in s 290-(5)(a) is "to deter the promotion of tax avoidance schemes and tax evasion schemes". The Parliament intended to distinguish between avoidance and evasion of tax. 356 Item 5 of s 170(1) of the ITAA 1936 confers an exceptional power on the Commissioner to amend a notice of assessment at any time if he is "of the opinion that there has been fraud or evasion". In Denver Chemical Manufacturing Co v Commission of Taxation (NSW) (1949) 79 CLR 296 at 313 Dixon J (with whose reasoning McTiernan and Webb JJ agreed; and see too per Williams J at 317-318) said that "evasion": means more than avoid and also more than a mere withholding of information or the mere furnishing of misleading information. It is probably safe to say that some blameworthy act or omission on the part of the taxpayer or those for whom he is responsible is contemplated. An intention to withhold information lest the commissioner should consider the taxpayer liable to a greater extent than the taxpayer is prepared to concede, is conduct which if the result is to avoid tax would justify finding evasion. In the present case the Board concluded that the appellant intentionally omitted the income from the return and that there was no credible explanation before them why he did so. They thought that the conduct of the taxpayer answered the description of an avoidance of tax by evasion. (emphasis added) 357 In Bogiatto [2020] FCA 1139 at [80], Thawley J cited what Gleeson CJ (with whom Sully and Bruce JJ agreed) in R v Meares (1997) 37 ATR 321 at 323 to emphasise the distinction between tax avoidance and tax evasion. Gleeson CJ said there: Although on occasion, it suits people for argumentative purposes, to blur the difference, or pretend that there is no difference, between tax avoidance and tax evasion, the difference between the two is simple and clear. Tax avoidance involves using, or attempting to use, lawful means to reduce tax obligations. Tax evasion involves using unlawful means to escape payment of tax. Tax avoidance is lawful and tax evasion is unlawful. Although some people may feel entitled to disregard that difference, no lawyer can treat it as unimportant or irrelevant. It is sometimes said that the difference is difficult to recognise in practice. I would suggest that in most cases there is a simple test that can be applied. If the parties to a scheme believe that its possibility of success is entirely dependent upon the authorities never finding out the true facts, it is likely to be a scheme of tax evasion, not tax avoidance. (emphasis added) 358 In Kajewski v Federal Commissioner of Taxation 52 ATR 455 at 484-485 [114], Drummond J held that if an agent of a taxpayer, such as a tax agent or accountant, engaged in fraudulent conduct that was unknown to the taxpayer, the conduct itself could provide a sufficient basis for the Commissioner to exercise his power to amend an assessment under the analogue of what is now item 5 in s 170 of the ITAA 1936. 359 Here, s 290-55(6) in Sch 1 of the TAA provides an exception to the four year limitation period in s 290-55(4), "to a scheme involving tax evasion". The exception in s 290-55(6) applies to a scheme involving tax evasion, as opposed to the entity the subject of an application under s 290-50. The ordinary and natural meaning of s 290-55(6) is that, if any part of the scheme in question involves tax evasion, the limitation period will not apply to an entity's involvement in that scheme in respect of conduct of that, or another, entity being a promoter of the scheme. 360 Dr Rowntree argued that he did nothing blameworthy in relation to the 2009 tax year so as to warrant a finding that the scheme in that year involved tax evasion. He contended that he did not withhold, or urge anyone else to withhold, any information from the Commissioner. He asserted in his written submissions that he had "facilitated" one investor to obtain a private ruling. However, there was no evidence of any private ruling or what that unnamed investor did or who he she or it was. I find that there was no application for a private ruling before 30 June 2009 or at any time in relation to any of the 2009, 2010, 2011 or 2012 schemes. In his letter to Dr Robson of October 2010, Mr Bonnell referred to Voluntary Credits' intention to run a test case in the Administrative Appeals Tribunal if the ATO disallowed an investor's claim for a deduction (see [130] above), but there is no evidence that even this occurred. The only test case concerning the deductibility of payments made under an ERPA to which the parties referred in the hearing was Academy 106 ATR 184. That proceeding was only filed in this Court in 2014. 361 Dr Rowntree's marketing dilemma, that he identified to the NAA agency ("there is little BR can say when advertising to its target audience" (see [120])) which Ms Reid had identified earlier on 25 May 2010 in her query to Mr Bonnell (see [90]), highlighted Mr Bonnell's and Dr Rowntree's consciousness that the 2009 and later year schemes were problematic. Critically, when the ATO began querying Dr Robson's 2009 tax return in June 2010, Mr Bonnell told Ms Dodd to tell Dr Robson that BR Redd and Bonnell Rowntree "are requiring extra time before lodging any carbon credits documents with the ATO" and that "the investment vendors are considering their ATO defence strategy and have requested both our patients at this stage". ([103]) 362 In other words, BR Redd, Mr Bonnell and the "investment vendors" (who included Dr Rowntree) requested Dr Robson to withhold from the ATO the contractual documents, being the 2009 ERPA and option, on which he had claimed the 100% deduction of the purchase price and his 2009 tax return. That request was based on the "investment vendors" needing time to develop "an ATO defence strategy". The evidence was bereft of any information about what was the "ATO defence strategy" of the "investment vendors". The suggestion that the "investment vendors" needed a strategy before being prepared to allow the Commissioner or the ATO to look at the terms of the 2009 ERPA and option, betrayed a consciousness that the Commissioner should not have that information "lest [he] should consider the taxpayer [or the purchaser of the investment] liable to a greater extent than the taxpayer [or each of the "investment vendors"] is prepared to concede": Denver Chemical 79 CLR at 313. As Gleeson CJ said in Meares 37 ATR at 323, if the parties to a scheme believed the possibility of success entirely depended on the authorities never finding out the true facts, "it is likely to be a scheme of tax evasion". 363 Subsequently Dr Robson received no more information of substance from the "investment vendors". Mr Bonnell's email to Ms Dodd of 2 July 2010 [104] and his letter of late October 2010, [130] obfuscated the absence of any underlying contract that could have enabled Voluntary Credits to issue a delivery notice to Dr Robson (or any other investor) under the 2009 ERPA (or any other ERPA). And, when Dr Robson met and complained to Mr Bonnell on 24 September 2010, Mr Bonnell promised to refund the amount he had paid for the 2009 ERPA and option. 364 Ultimately, Dr Rowntree's email to Ms Dodd on 28 October 2010 [128], in which he said that he personally would pay the refund out of his home loan account, is notable for its failure to say how a deduction was somehow supportable, in light of the ATO's interest in Dr Robson's by then withdrawn claims for deductions. Clearly by late October 2010, the "investment vendors" had not been able to provide any substantiation to support the 2009 scheme benefit that sought to achieve a deduction of the full purchase price of each contract lot in the 2009 tax year. The disingenuous self-righteousness in Dr Rowntree's assertion in that email, that the scheme had "not been marketed from us on the basis of tax – not a little – nil", demonstrated how conscious he was that the Commissioner would have a sound and reasonable basis to say that Dr Rowntree (and his associates), indeed, had marketed the scheme on the basis of tax, as the evidence makes pellucid. 365 In my opinion, Dr Rowntree's and the "investment vendors"' use of the asserted tax deductibility of the full purchase price of the 2009 ERPA and Mr Bonnell's request on behalf of the "investment vendors" to Dr Robson, conveyed through Ms Dodd, to withhold the 2009 ERPA and option from the ATO while the "investment vendors" considered their "ATO defence strategy" were each a blameworthy act. That conduct sought to create the consequence that the investors would claim those deductions that were not reasonably open to be claimed, and to keep the ATO in the dark, in order to assist in the avoidance of tax. BR, Mr Bonnell, BR Redd and Dr Rowntree engaged in that conduct to induce Dr Robson not to give the ATO the documents (being the 2009 ERPA and 2009 option) and other material he had to support his claim to deduct the full purchase price of the contract lots lest that would make the Commissioner aware of the 2009 scheme and cause the claim to be disallowed. I infer that was because Dr Rowntree and his associates feared that the 2009 scheme would be exposed to the Commissioner as a tax evasion scheme. That conduct was tax evasion: Kajewski 52 ATR at 484–485 [114], Meares 37 ATR at 323. 366 Accordingly, I am comfortably satisfied that the 2009 ERPA scheme, involving the marketing and promotion of sales of the 2009 ERPA and 2009 option with the asserted deductibility of the full purchase price, was a scheme involving tax evasion within the meaning of s 290-55(6). Conclusion 367 For these reasons, I am of opinion that the Commissioner has established that each of Dr Rowntree and Mr Manietta was a promoter of each of the 2009, 2010, 2011 and 2012 schemes and that Mr Donkin was a promoter of the 2011 and 2012 schemes. The Commissioner has also established that the 2009 scheme involved tax evasion as, indeed did each of the 2010, 2011 and 2012 schemes for the same reasons. Each respondent is liable to the Commissioner's claim for the imposition on him of penalties for that conduct. 368 I will direct that the Commissioner confer with the respondents and bring in draft declarations to reflect my findings and procedural directions necessary to prepare for a hearing at which the parties can address the issue of penalties. I certify that the preceding three hundred and sixty-eight (368) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rares. Associate: Dated: 18 September 2020