The 20-year fight for $4.3 Billion
in damages enters its final round
For 20 years, the most complicated litigation case in Australian history
has unfolded in true David versus Goliath style, a high-stakes hybrid game of
court-room Chess and real-life Mortal Kombat that has caused great emotional, financial and physical pain.
It’s a story of a seemingly never-ending battle being funded by
Australian taxpayers, with The Commonwealth of Australia having so far racked
up an estimated $18 million in legal costs in hit-and-miss strategy to kill
off litigants Allan Endresz and Peter Cain. But the two men recently smashed their legally shackles to come out swinging, and
from next month their claim for $4.3 Billion in damages against the
Commonwealth will reach fever pitch in the Australia's highest court (See: https://drive.google.com/file/d/1wu1hEHL68-_RzECpwUN6oJo83_Xi3_0p/view?usp=sharing)
It was back on April 5, 2000, back when Bill Clinton was US President and
Sydney hadn’t yet staged the Olympics, when the $4.3 Billion damages claim was
first filed. And to think that the reason this saga all began was because of an
unrelated person, a government contractor, whose fraudulent actions in 1999 led
to him being sentenced to a seven-year jail term …
See original documentary report released in 2011: https://drive.google.com/file/d/1ZKwSBJAU29Ku0DKqsDOs4EpCx_8NWwg5/view?usp=sharing
In the beginning…
On 29 January 1999, the Commonwealth of Australia (Commonwealth) commenced civil proceedings
in the ACT Supreme Court (ACT Court)
against Davis Samuel Pty Ltd (Davis
Samuel), CTC Resources N.L (CTC),
Allan Endresz (Endresz), Peter Cain
(Cain), Dawn and Jozsef Endresz (Parents), William Forge (Forge) and a number of other parties
(collectively the Defendants) in
circumstances where the Commonwealth alleged that its own contractor, Callform
Pty Ltd and its principal director, Mr David Muir (Muir), effected fund transfers (unauthorised by parliament) to CTC
and Davis Samuel of $6 million and $2.725 million respectively (Unauthorised Transfers).
In early January 1999, Ernst & Young issued a scathing
confidential report on the Commonwealth’s payment systems and processes. The
report uncovered systematic security breaches, business incompetence and the farcical
mismanagement of taxpayers funds within the Commonwealth’s financial, administrative
and IT departments (
Departments).
Significantly, the Commonwealth withheld this crucial report from the Defendants
(See:
https://drive.google.com/file/d/1gJET2aHD2RQULHoXibjcuRjCEMu5PXnR/view?usp=sharing)
On 5 June 2001, Muir was found guilty by a jury of defrauding
the Commonwealth with the Unauthorised Transfers and was sentenced on 25 September
2001 to 7 years in prison with a non-parole period of 3 ½ years. He served his
time.
On 11 July 2001, criminal charges were laid against Endresz
and Cain alleging that they breached the Secret Commissions Act 1905 (Secret Commission Charges).
On 23 March 2002, further charges were laid alleging that they
were knowingly concerned in the Unauthorised Transfers contrary to the Crimes
Act 1914 (Fraud Charges).
On 11 September 2003, Endresz and Cain were acquitted of the
Fraud Charges. Chief Justice Higgins was satisfied that there was not a shred
of evidence capable of supporting the allegations that either Endresz or Cain
knew of or were complicit in any way in the Unauthorised Transfers. Accordingly,
His Honour withdrew the charges from the jury at the conclusion of the Crown
case, observing to the Prosecutor, Mr Richard Maidment:
“You’ve really got
nothing….Absolutely nothing. You’ve got no statements from anyone that the two
accused or either of the accused knew that Muir was engaged in a frolic of his
own”
“The investments were
not frivolous or hopeless. They were capable of returning considerable
profits.”
On 12 October 2004, the Secret Commission Charges were also dismissed.
Chief Justice Higgins withdrew the case from the jury even before the Crown was
even permitted to open.
Although exonerated from any involvement with Muir’s frolic, the
Defendants suffered irreparable losses from the repercussions of the criminal
proceedings and the scandalous revelations about the Commonwealth’s incompetence,
flawed governance procedures, defective fraud controls and systemic breaches of
regulations within its Departments.
Commonwealth concocts a new legal strategy
In subsequent civil proceedings, the Commonwealth
categorically refused to accept any responsibility for Muir’s unchecked frolic.
Instead, it concocted a new legal strategy to divert attention from its own
shortcomings by freezing the Defendants’ assets, taking financial advantage of
unrepresented litigants and hoodwinking the media into destroying the
Defendants’ reputations and viable businesses.
With deep pockets, a bevy of lawyers and no accountability to taxpayers,
the Commonwealth enlisted the services of the Australian Federal Police (AFP) (to conduct phone wire taps and
property raids) and the Australian Securities & Investments Commission (ASIC) to divert the media’s attention
and foil CTC’s $4.3 Billion damages claim (lodged April 5, 2000) in the ACT
Court. By flouting its statutory duties and obligations as a “model litigant”,
the Commonwealth deprived the Defendants of a level playing field for over 20
years. Until now…
Commonwealth unleashes its lap dogs
On 26 April 2001, ASIC brought proceedings before Foster AJ in
the NSW Supreme Court against Endresz, his Parents and Forge (CTC Board) alleging
that transactions undertaken by the CTC Board contravened the related party (civil)
provisions of the Corporations Act.
Although fully conversant with the nature of the transactions,
ASIC denied the CTC Board any opportunity to seek relief from liability of the
purported contraventions under section 1317S of the Corporations Act pending
consideration by CTC Shareholders (non-related) at the next AGM.
On 28 August 2002, Foster AJ handed down Judgment in favor of
ASIC and held that the CTC Board contravened the related party provisions. He imposed
director banning orders, pecuniary penalties and made cost orders against the CTC
Board.
On 26 June 2003, before a new board, CTC’s shareholders (none-related)
unanimously (99.64%) approved and ratified each and every transaction found by
Foster AJ to have contravened the related party provisions.
In these proceedings, ASIC openly nailed its colours to the Commonwealth’s
mast. It treated all 1398 CTC shareholders with utter contempt and simply discarded
shareholder rights to further the Commonwealth’s cause. Despite this early
success, neither ASIC nor the Commonwealth were able to deliver a fatal blow to
CTC’s $4.3 Billion damages claim.
To this day, Endresz remains the only person in Australian
corporate history banned as a director for contravening related party
provisions of the Corporations Act despite receiving the unequivocal and
unanimous approval of all transactions from CTC shareholders.
ASIC overplays its bankruptcy card
On 3 November 2011, costs ordered totalling $464,895.91 were
entered in ASIC’s favour against the CTC Board in the Local Court of New South
Wales and the District Court of New South Wales. An additional costs order of
$5,450.87 was also entered against Endresz.
On 23 December 2011, ASIC issued bankruptcy notices. Creditor’s
petitions were heard by Pagone J in the Federal Court on 30 June 2014 and 16
July 2014. The CTC Board were
unrepresented.
On 29 July 2014, Pagone J found in favour of ASIC and bankrupted
each of the estates of the CTC Board (Pagone
Judgment).
CTC Board ecstatic with its win against ASIC
On 19 August 2014 the CTC Board filed notices of appeal to set
aside the judgment and bankruptcy sequestration orders made by Pagone J (Pagone Appeal).
On 9 February 2015, the Full Federal Court, comprising Gordon,
(now on the High Court Bench), Edmonds and Beach JJ, heard the Pagone Appeal.
The CTC Board were unrepresented. ASIC was represented by Mr
Philip Crutchfield QC with Mr Sam Rosewarne.
On 19 February 2015 the Full Federal Court entered judgment in
favour of the CTC Board and set aside the Pagone Judgment and bankruptcy orders
(see:
Endresz v Australian Securities and Investments Commission (No 2) [2015] FCAFC
33) (February Judgment).
The February Judgment represented a significant turning point.
Not only was the playing field levelled, but the CTC Board sent a cautionary message
to ASIC and the Commonwealth that unrepresented litigants could actually defy
the odds and defeat a well-resourced government legal team.
During the course of the Pagone Appeal, it became apparent that
ASIC (and the Commonwealth) had ulterior motives. Actual recovery of the $464,895.91
debt was of little concern to ASIC. Instead, ASIC remained fixated on
bankrupting the CTC Board to help the Commonwealth jettison the $4.3 Billion
damages claim.
Under section 116 of the Bankruptcy Act 1966, bankrupts are denied
access to the courts without the consent of an Official Trustee. Had ASIC won
the Pagone Appeal, then all legal rights of the CTC Board would have vested
solely with a Commonwealth appointed trustee.
During the Pagone Appeal, Endresz (as an unrepresented litigant)
respected the performance of opposing counsel, Mr Philip Crutchfield QC, and
made a mental note to engage his services should the opportunity arise in the
future.
Defendants deprived of legal representation
On 10 June 2008, the civil hearing between the Commonwealth
and the unrepresented Defendants commenced before Refshauge J in the ACT Court.
On 1 August 2013 Refshauge J delivered judgement in favour of
the Commonwealth. The CTC Board were found joint and severally liable to the
Commonwealth on equitable claims. (see: Commonwealth of Australia v Davis Samuel Pty Ltd
& Ors (No 7) [2013] ACTSC 146).(Refshauge Judgement).
On 21 November 2014 final orders were made by Refshauge J. The CTC Board were ordered to pay the
Commonwealth equitable compensation and interest totalling $62,697,587.28 ($62m Equitable Debt) as follows:
(1) Allan Endresz –
$18,633,178.47;
(2) Dawn Endresz –
$12,715,615.17;
(3) Jozsef Endresz
– $18,633,178.47; and
(4) William Forge –
$12,715,615.17,
(see: Commonwealth of Australia v Davis Samuel Pty Limited (No 8) [2014]
ACTSC 312).(Final Orders).
On 23 December 2014 Endresz
filed an appeal against the Refshauge Judgment and Final Orders (Refshauge Appeal).
On 26 February 2016 Endresz
filed an application to set aside the Refshauge Judgment and Final Orders, ex debito justitiae, in the inherent
jurisdiction of the ACT Court (Ex Debito Application).
On 30 June 2016 Burns
J dismissed the Refshauge Appeal for want of prosecution. However, with the Ex
Debito Application yet to be heard, Endresz intentionally allowed the Refshauge
Appeal to lapse. (see: Davis Samuel Pty Ltd v
Commonwealth of Australia [2016] ACTCA 22).
On 13 January 2017
Refshauge ACJ dismissed the Ex Debito Application (see: Commonwealth
of Australia v Davis Samuel Pty Limited (No 11) [2017] ACTSC 2).
Commonwealth anxious to bankrupt
the CTC Board
On 16 August 2016 the Commonwealth served the CTC
Board with bankruptcy notices founded on the $62m Equitable Debt. The CTC Board
were unsuccessful in their attempts to have these bankruptcy notices set aside.
On 12 April 2017 the Commonwealth filed creditor’s
petitions in the Federal Circuit Court of Australia (FCCA) to bankrupt
the estates of the CTC Board.
Despite ASIC’s abysmal failure in the Pagone Appeal,
the Commonwealth rolled the dice in a last ditch effort to derail the $4.3
Billion damages claim. Recovery of the $62m Equitable Debt was never on the
Commonwealth’s agenda. The Commonwealth categorically knew (from earlier
evidence provided by the CTC Board) that the $62m Equitable Debt would never be
paid. Instead, the Commonwealth was prepared to rack up over $18 million in
legal fees in an attempt to distract and mislead the media and public about Muir’s
frolic and to bury the $4.3 Billion damages claim.
On 11 April 2018 the creditor’s petitions expired
due to the Commonwealth’s incompetence.
On 18 April 2018 the CTC Board filed an application
before Neville J in the FCCA seeking summary dismissal of the creditor’s
petitions.
On 18 May 2018, Neville J dismissed the CTC Board’s
application and varied his earlier order of 6 February 2018 to extend the
expiration date of the creditor’s petitions by invoking the “slip rule” under the FCCA rules.
On 21 June 2018, Neville J made orders transferring the
proceedings from the FCCA to the Federal Court before Flick J for hearing.
On 8 March 2019 Flick J delivered judgment in favour
of the Commonwealth and published reasons (see: Commonwealth of Australia v Endresz [2019] FCA
301) (Flick Judgment).
On 15 March 2019 Flick J made orders to bankrupt
(for the second time) the estates of the CTC Board.
Spoiler
alert! Commonwealth’s bankruptcy nosedives
On 5 April 2019 the CTC Board filed notices of
appeal against the bankruptcy orders made by Flick J (Flick Appeal).
On 12 August 2019, the Full Federal Court,
comprising Rares, Markovic and Charlesworth JJ, heard the Flick Appeal.
This time, Mr Philip Crutchfield QC with Mr Jesse
Rudd SC represented the CTC Board. After being approached by Endresz, Mr Philip
Crutchfield QC, a person with detailed knowledge of the particulars of this
matter, ditched ASIC and the Commonwealth to join forces with Endresz to form a
formidable legal team.
On 15 November 2019, the Full Federal Court entered
judgment in favour of the CTC Board and set aside the Flick J judgment and the Commonwealth’s
bankruptcy orders (see Endresz v Commonwealth of Australia [2019] FCACA
197 (15 November 2019) (Rares Judgment).
$4.3
Billion damages claim back with a vengeance
The Rares Judgment was a pivotal moment in the 20
year legal melee between the Commonwealth and the CTC Board. With the immediate
threat of bankruptcy stalled (albeit temporarily), the largest damages claim in
Australian legal history was back with a vengeance.
Ready, set,
go! High Court here we come
The matters adjudicated in the Full Federal Court
were matters in which the Commonwealth was a party and so involved the exercise
of federal jurisdiction under s 75(iii) of the Constitution of the Commonwealth
of Australia (Constitution).
The judicial controversies in both the Refshauge
Judgment and Rares Judgment include Constitutional questions of whether;
a)
the Refshauge Judgment was a “nullity” according
to the principles stated in Renowden v McMullin (1970) 123 CLR 584
whereby
the granted equitable claims impermissibly
exceeded the areas marked out by the originating application by purporting to
introduce new and independent equitable causes of action and remedies not
covered by the common law claims specified in the originating application. It follows
that the fundamental irregularities affecting the originating application either
rendered the Refshauge Judgment a nullity and or deprived the Court of authority
to make orders; and
b)
the Commonwealth’s equitable causes of action
were beyond the powers of s 83 of the Constitution where the transactions were made
without Parliamentary authority, illegal and void according to the principles
stated in Auckland Harbour Board v The King [1924] AC 318. It follows
that those principles only invoked common law restitution and precluded liability
in equity under the second limb of Barnes v Addy [1874] LR 9 Ch App 244
because the CTC Board were not, and could never have been, acting as the agents
of trustees in transactions in where neither the Commonwealth nor Muir had any
legal power and control over property in breach of s 83 of the Constitution.
The proposition that s
64 of the Judiciary Act (Cth) could
overrule the principles established in Auckland Harbour was rejected by
Refshauge J in the Refshauge Judgment [at 1752] ‘the effect of s 64 is not seen by the courts as overriding all
constitutional properties that inhere in the Commonwealth’ but was found by
the Full Federal Court in the Rares Judgment [at 134] to permit liability in
equity under s 83 of the Constitution. Therein lies the Constitutional
conflict.
By
answering the two questions above, the High Court will finally determine the
fate of the $4.3 Billion damages claim.
