Krecichwost v R

Court of Criminal Appeal (NSW)|2012-04-05|Before: Macfarlan JA, Schmidt J, Grove AJ, MacFarlan JA

Before: Woodburne DCJ File Number(s): 2009/218724

Judgment 1MACFARLAN JA: After a trial in February 2011 before a judge and jury, the appellant was convicted on indictment of the following offences: "1. On or about 1 September 2003, being a director of a company, namely Fincorp Investments Ltd, [Eric Krecichwost] did dishonestly use his position as a director with the intention of directly or indirectly gaining an advantage for himself, in that he signed a cheque in the amount of $900,000 payable to Bridgewater Developments Pty Ltd, for the purpose of enabling Bridgewater Developments Pty Ltd to pay himself or Crest Capital Pty Ltd, purportedly for 'commission and management' fees in relation to: a) The identification of property being 235 Epping Road, Wollert which was purchased by Southern Cross Investments Pty Ltd on 25 July 2003; and b) The identification of property being 220 Harvest Home Road, Wollert which was purchased by Southern Cross Investments Pty Ltd on 8 August 2003. in circumstances where Eric Krecichwost knew that neither he nor anyone associated with Crest Capital Pty Ltd had provided any such services in relation to those properties such as to justify the payment of such a fee contrary to section 184(2)(a) Corporations Act 2001 (Cth) (Law Part Code 43633). ... 2. On or about 1 September 2003, being a director of a company, namely Bridgewater Developments Pty Ltd, [Eric Krecichwost] did dishonestly use his position as a director with the intention of directly or indirectly gaining an advantage for himself, in that he signed a cheque in the amount of $825,000 payable to himself purportedly for 'commission and management fees' in relation to: c) The identification of property being 235 Epping Road, Wollert which was purchased by Southern Cross Investments Pty Ltd on 25 July 2003; and d) The identification of property being 220 Harvest Home Road, Wollert which was purchased by Southern Cross Investments Pty Ltd on 8 August 2003. in circumstances where Erick Krecichwost knew that he had not provided any such services in relation to those properties such as to justify the payment of such a fee contrary to section 184(2)(a) Corporations Act 2001 (Cth) (Law Part Code 43633). ... 3. On or about 27 October 2003, being a director of a company, namely Fincorp Investments Ltd, [Eric Krecichwost] did dishonestly use his position as a director with the intention of directly or indirectly gaining an advantage for himself and others, in that he signed a cheque in the amount of $1,980,000 payable to Prime Consulting Group Pty Ltd purportedly for services provided in relation to the identification of property being 995 Yan Yean Road, Doreen, Victoria which was purchased by Alliance Properties Pty Limited on 10 September 2003 in circumstances where Eric Krecichwost knew that neither he nor anyone associated with Prime Consulting Group Pty Ltd had provided any such services in relation to that property such as to justify the payment of such a fee contrary to section 184(2)(a) Corporations Act 2001 (Cth) (Law Part Code 43633)". 2The trial judge subsequently sentenced the appellant to imprisonment for a term of three years and six months commencing on 8 April 2011, with a non-parole period of eight months. 3Before dealing with the appellant's grounds of appeal against his convictions, it is necessary to refer to the factual circumstances that gave rise to the charges against him.

The Fincorp Group 4The Fincorp Group of companies obtained investments from the public by offering secured and unsecured notes through prospectuses issued in 2002, 2003 and 2005. The funds were raised by Fincorp Investments Ltd and lent to another company in the Group, Guardian Mortgages Pty Ltd ("Guardian"), which in turn lent the funds to other companies in the Group or to unrelated entities. Southern Cross Investments Pty Ltd ("Southern Cross"), Alliance Properties Pty Ltd ("Alliance Properties") and Bridgewater Developments Pty Ltd ("Bridgewater") were Group companies involved in the Group's business of acquiring and developing property. Bridgewater did not itself purchase any property but it provided the Group property companies with management and property development services. Capital First Investments Pty Ltd was the parent company of the property arm of the Group. The sole formally-appointed director of Bridgewater was Mr Colin McIlveen. The Crown contended at the trial that the appellant was a de facto director of Bridgewater and the appellant did not dispute that (Appellant's Written Submissions, footnote 5). Mr McIlveen was the sole director of Southern Cross. The appellant and Mr McIlveeen were the directors of Alliance Properties. The directors of Fincorp Investments and Guardian were the appellant, Mr Jacob Quigley and Mr Darryl Benn. 5The shares in the Group companies were, directly or indirectly, wholly owned by the United Investment Trust (the "Trust"), of which Trek Consulting Services Pty Ltd ("Trek Consulting") was the trustee. The appellant was the sole director of Trek Consulting and the appellant and his wife were its only shareholders. The diagram that was attached to a Statement of Facts agreed between the parties identified various members of the appellant's family, but not the appellant, as beneficiaries of the Trust. 6Mr Quigley was the Chief Accounting Officer of the Group. Mr McIlveen was engaged by the Group in 2002 or 2003 to create a portfolio of properties for it. 7PriceWaterhouseCoopers ("PWC") were the auditors of the Group and Mr Adrian Bunter was the audit manager. The shares in Crest Capital Pty Ltd ("Crest Capital"), referred to in Count 1 of the Indictment against the appellant (see [1] above), were owned by the appellant. Prime Consulting Group Pty Ltd ("Prime Consulting"), referred to in Count 3, was a company owned by the appellant's brother, Mr John Krecichwost and John's wife Angela Krecichwost. John Krecichwost was the sole director.

The $900,000 and $825,000 transactions of 1 September 2003 (Counts 1 and 2) 8Soon after their advertisement for sale in June 2003, Mr McIlveen identified adjoining properties at 235 Epping Road and 220 Harvest Home Road, Wollert, Victoria (the "Epping Properties"), as potential development acquisitions for the Fincorp Group. The properties comprised two large areas of land suitable for residential subdivision. 9Mr McIlveen gave evidence that he made inquiries to evaluate the properties and negotiated the purchases on the appellant's instructions. He said that when he commenced work with the Group, the appellant had made it clear to him that the appellant "had no experience in development and he was relying upon [Mr McIlveen] to fill that role" (Transcript 9/2/11 p 31). Mr McIlveen formed the view that the properties could be profitably developed but would not generate a profit for at least five years (Transcript 9/2/11, p 39). 10On 25 July 2003 Southern Cross purchased 235 Epping Road for $14.5 M and on 8 August 2003 it purchased 220 Harvest Home Road for $13.75 M. Mr McIlveen signed both contracts of sale on behalf of Southern Cross. 11On 1 September 2003 Fincorp Investments paid $900,000 to Bridgewater by way of a cheque signed by the appellant and Mr Quigley (see Count 1). On the same day, by cheque signed by the appellant and Mr McIlveen, Bridgewater paid $825,000 to the appellant (see Count 2). The accounting records of the Group identified the latter payment as being in satisfaction of an invoice dated 1 September 2003 for $750,000 plus $75,000 GST issued by Crest Capital to Southern Cross. This invoice purported to be for "Commission/Management Fees on Epping Road/Harvest Home Road Projects". Mr McIlveen gave evidence that he was not aware of any entitlement of Crest Capital to commission or management fees in relation to the properties and he did not recall discussing with the appellant this invoice or any payment for services of that character. Nor did he recall signing the cheque drawn by Bridgewater, although he accepted that his signature appeared on it. Mr Stephen Hay, the vendors' real estate agent, gave evidence that he had not had dealings with anyone representing Crest Capital in connection with the properties (Transcript 9/2/11, p 84). 12The appellant gave the following evidence about a conversation in late August 2003 between himself and Mr Quigley which preceded the two payments: "Q. What did you say to Jacob Quigley? A. At that point, certainly I was not on wages. I hadn't earnt any wages at all from any of the Fincorp companies or any of the property companies. We were talking about becoming employees on 1 September 2003, and I had a discussion with Jacob about the fact that I had done work for approximately two years. I'd contributed equity of $500,000 in the establishment of Fincorp, and prior to that I'd spent some close to $250,000 in the set-up of the entire Group, and that was advice, software and a number of other things. So I had a discussion with Jacob about being remunerated for that. In broad terms, we agreed on a figure of obviously - now we also discussed at the time that the properties had increased in value substantially. At that point, Jacob agreed that a payment could be made, should be made. He discussed it with John [Krecichwost], or I discussed it with John. I can't remember the circumstance. Not that I needed John's approval, but out of courtesy we did that, and I think Adrian Bunter was in the office on 28 August, doing an audit as part of the 2003 audit ... " (Transcript 10/2/11, pp 192 - 3). 13The appellant said that he and Mr Quigley discussed the possibility of the appellant receiving $750,000 and Mr Quigley later reported that he had informed Mr Bunter of his discussion with the appellant "with respect to back pay". The appellant then said, "I'd obviously done work on both the property side and on the Fincorp side, approximately two years where I hadn't been on salary or wages ... and [Mr Quigley] also said that there was significant start-up costs with respect to the incorporation of Fincorp and all that". The appellant asserted that Mr Bunter's response had been: "Take a management fee from one of the property companies" (Transcript 10/2/11, pp 193 - 4). 14The appellant later gave evidence that he believed the payment to him of $750,000 was legitimate for the following reasons: "Well, on the fact that (1) the profits of the Group - well, of the Group entirely, but also of Epping - had gone up substantially. I owned 100% of the company, and we'd sought the advice of Adrian Bunter, who was the auditor from PricewaterhouseCoopers, who was in the office in the week preceding the payment" (Transcript 11/2/11, p 3). 15The appellant said that at the time of the payment of $825,000 to him "there was no invoice prepared to correspond with the payment being made" (Transcript 11/2/11, p 5). He denied knowledge of the circumstances in which Crest Capital's invoice for $825,0000 in "commission/management fees" was brought into existence (Transcript 11/2/11, p 6). 16Note 20 to the Financial Report for Capital First Investments Pty Ltd and Controlled Entities, forming part of the Fincorp Group's 2005 prospectus, stated, by way of disclosure of related party transactions, that in the 12 months to 30 June 2004, Crest Capital "was paid spotters [sic] fees of $750,000 by wholly-owned Group companies for the identification of property deals". The appellant accepted in cross-examination that this statement was incorrect (Transcript 11/2/11, p 19). 17Mr Bunter gave evidence that another member of the PWC audit team worked on this item in the Financial Report and that he could not recall what inquiries had been made concerning it (Transcript 9/2/11, p 109). He also said that he could not recall having had a conversation with Mr Quigley concerning the spotter's fees of $750,000. When pressed, he said that he may have had such a conversation but he did not believe that he had (Transcript 10/2/11, p 139). Mr Bunter also said that in evidence he gave at the appellant's committal hearing regarding a discussion he had had with Mr Quigley concerning payment to the appellant "in arrears for work he'd done for the Group" he had mistakenly referred to August 2003 rather than October 2003 (Transcript 10/2/11, p 136).

The $1.98 M transaction of 27 October 2003 (Count 3) 18In July 2003 Mr McIlveen inspected a property in Mernda, Victoria (the "Doreen Property"). He subsequently recommended to the appellant that the Fincorp Group purchase it for development purposes. On the appellant's instructions, Mr McIlveen commenced negotiations for the purchase, however the negotiations were completed by the appellant and Mr Quigley as Mr McIlveen had to attend hospital at short notice. Contracts for purchase of the property for $22.5 M were exchanged on 10 September 2003, with Alliance Properties nominated as the purchaser. 19The appellant gave evidence that in the first or second week of October 2003, he and Mr Quigley discussed the possibility of distributing 10 per cent of what they regarded as a $20 M increase in the value of the properties in the Fincorp Group (Transcript 11/2/11, p 8). They discussed the division of the $2 M distribution in accordance with previously agreed profit shares, being 75 per cent for the appellant, 15 per cent for his brother John and 5 per cent for each of Mr Quigley and a nephew of the appellant. The appellant said that they discussed a number of options to facilitate this, including the sale of the Epping Properties on which the appellant believed that $10 M profit could be realised. However, Mr McIlveen, to whom this suggestion had also been put, regarded any sale of the Epping Properties as premature because they were likely to yield further significant profits in the future. The appellant later accepted Mr McIlveen's view (Transcript 11/2/11, p 9). 20These discussions were reflected in a document that Mr Quigley prepared and showed to the appellant (Transcript 11/2/11, p 10). The document included the following statements: "Requirements: Get money out of company for 'Comfort Zone' to shareholders and breathing space to create and operate sound corporate practices. Ethics/Opinions: Always take profits after making profit on paper ... We know that we have made a bit of profit so we need to keep some for the "company" comfort as well as give some for involved parties comfort". 21The document was attached to an email dated 15 October 2003 from an employee of the Fincorp Group to Mr Quigley requesting that Mr Quigley let her know when he had received the email so that she could delete it from her computer. Mr Quigley responded on 15 October 2003, writing "You are right to delete this". 22After the document had been provided to the appellant, Mr Quigley spoke to Mr Bunter at the appellant's request. Mr Quigley later informed the appellant that Mr Bunter "had simply advised him to take the payment as a spotter's fee" and Mr Quigley intended to send Mr Bunter an email summarising their discussion (Transcript 11/2/11, p 13). 23The subsequent email, which was seen by the appellant and dated 20 October 2003, relevantly said: "Further to discussions last week: *The Development side of the business has generated conservatively 20mil in NMV increases. *To provide some reward to involved parties (and a buffer zone in which we can setup strict payout practices) we will be withdrawing up to 2 mil in spotters fees. These fees will be invoiced by a singular vehicle from which a group of parties can draw. This entity will need to be registered for GST and SCI (Epping Land Owner) can claim the credit". 24On 27 October 2003, $1,980,000 was paid by Fincorp Finance Ltd, a Group company, to Prime Consulting, by way of a cheque signed by the appellant and Mr Quigley (see Count 3). These funds were subsequently distributed by Prime Consulting in the agreed profit shares, including a payment of $1,485,000 to the appellant. 25The appellant gave the following evidence concerning his belief in the legitimacy of the payment to Prime Consulting: "I believed it to be totally legitimate. We had - I owned 100% of the company. Again, the properties had gone up substantially in value. I was in a position and I had the authority to make a 10% profit share arrangement to Colin McIlveen, who didn't have an interest in the company and didn't own any of the shares in the company, and I seemed - it deemed to be entirely appropriate to make such a payment to myself. The profits belonged to me, they were only going to be distributed to me" (Transcript 11/2/11, p 16). 26Note 20, which appeared in the 2005 prospectus and is referred to in [16] above, contained the following statement concerning related party transactions: "During the period Prime Consulting Group Pty Ltd was paid spotters fees of $1,800,000 by wholly-owned group companies for the identification of property deals". 27In cross-examination the appellant agreed that this statement was incorrect (Transcript 11/2/11, p 20). 28Mr Bunter gave the following evidence of discussions, apparently in October 2003, relevant to the $1.98 M payment: "Q. ... Do you remember there being discussions [prior to preparation of the year end financial report] in relation to that topic? A. I remember there being discussions that if people involved in identifying property transactions that were purchased on, you know, like on a good deal for the business that had resulted in significant increases in values, that they would reward those people for those transactions, for bringing those properties to the attention of the company and help [sic] negotiate those deals. Q. Had you expressed a view about the appropriateness of taking that course? A. My consideration was more in relation to the accounting for the transactions, and making sure that they were appropriately dealt with and disclosed in the accounts, and this was a - on the face of it, a prospective thing that was going to happen in the future. Q. Did you indicate one way or the other whether that practice ought to be adopted? A. No, I mean, that's a business practice for the company and how they run their business and how they incentivise people to bring them deals" (Transcript 9/2/11, p 110). 29He said that these discussions "would have been" with Mr Quigley. In re-examination he explained both his reference to the concept of paying people "involved in a particular business" and his understanding of the term "spotter's fee": "Q. What were you intending to mean by referring to your approval to the general concept of paying people who were involved in a particular business? A. To be involved, they needed to be, for the acquisitions, actively involved in, you know, either identifying the property, helping negotiate the deal for the company, bringing that to the company's attention or the Group's attention to acquire that property. So active involvement in the business. Q. The term's [sic] 'spotter's fee' has been used from time to time. What did you understand that to mean in the context of a particular property? A. The person or business who actually went out and identified the property and actually brought that to the attention for the Group, and may have helped with acquiring that business or that property" (Transcript 10/2/11, p 142). 30I turn now to consider the appellant's grounds of appeal.

GROUND 1: THERE HAS BEEN A MISCARRIAGE OF JUSTICE IN THE TRIAL AS A RESULT OF FRESH EVIDENCE 31The fresh evidence upon which the appellant relies is that given by Mr Bunter and Mr McIlveen, after the appellant's trial, at Mr Quigley's trial. Mr Quigley was charged with an offence, concerning the payment of 27 October 2003, corresponding to that with which the appellant was charged under count 3. Mr Quigley and the appellant, directors of Fincorp Investments Ltd, both signed the cheque for $1.98 M (see [24] above). Mr Quigley, however, was acquitted on 17 May 2011. The appellant contends that these witnesses gave evidence at Mr Quigley's trial that conflicted with evidence they had given at the appellant's trial or made concessions at the later trial that they had not made at the appellant's trial.

Relevant principles of law 32The principles applicable where new or fresh evidence is relied upon were summarised in R v Abou-Chabake [2004] NSWCCA 356; 149 A Crim R 417 at [63]. In essence, even assuming that the evidence relied upon by the appellant is fresh evidence (that is, evidence not actually or constructively available to the appellant at the time of his trial), appellate intervention on that basis would only follow a conclusion of this Court that there was a significant possibility that the jury, acting reasonably, would have acquitted the appellant if this evidence had been admitted at his trial. If the evidence is not fresh in this sense, an appeal court will not intervene unless it is "of such cogency that innocence is shown to the Court's satisfaction, or the Court entertains a reasonable doubt as to guilt" (ibid). 33As the fresh evidence relied upon includes statements by two witnesses called at the appellant's trial which are alleged to contradict or at least differ from their earlier evidence at the appellant's trial, the decision in Davies v R [1937] HCA 27; 57 CLR 170 is relevant. In that case, the Court said: "A declaration by a witness that he has committed perjury cannot possibly be accepted as a ground in itself for setting aside the result of a trial in which the witness has given evidence. If the contrary were held, the whole administration of both civil and criminal justice would be undermined. The subsequent discovery that some evidence (as in this case) is said by the witness who gave it to be false, or is actually proved to be false, cannot, as a general rule, be allowed as a ground in itself for setting aside a verdict or judgment. But if the verdict is open to objection upon a ground affected by such evidence, the case is different. It would not be wise to attempt to frame a universal rule even for such cases. As the Full Court indicates in its judgment, the subsequent statement that the original evidence is false may be explainable by pressure brought to bear upon a witness or by the operation of any one of an indefinite number of motives. Each case should be treated in relation to its own facts" (at pp 183 - 4).

Mr Bunter's evidence 34The appellant first relied upon the following evidence given by Mr Bunter at Mr Quigley's trial: "Q. Mr Bunter, you recall that when you gave evidence last Wednesday and Thursday, you were asked some questions about a meeting you had with Mr Quigley on 16 October 2003. A. Yes, I do. Q. I want to ask you this question. During that meeting, did you give him advice that probably the best way to pay a draw-down of profits would be to pay it as a spotter's fee and to remunerate people for their efforts? A. No, I don't believe I gave that advice. Q. During that meeting, was it you or Mr Quigley that first used the phrase 'spotter's fee'? A. I don't recall who specifically first said that. Q. During that meeting, did you say to him, 'You can use the words 'spotter's fee'. That's a term we will use in the accounts to describe all of the work done on the property side, and the fee taken to reward you for that work.' A. I don't believe so" (Transcript 11/5/11, p 413). 35The appellant submitted that the fact that Mr Bunter "as the auditor may have raised the topic of 'spotter's fees' is consistent with the [appellant's] evidence that he (and Quigley) were acting on the advice of Bunter in that regard" (Written Submissions [52]). However I do not see any significant possibility that if Mr Bunter had given evidence in these terms at the appellant's trial, the jury, for that reason, would have acquitted the appellant. The thrust of Mr Bunter's evidence at the appellant's trial was that he was asked by Mr Quigley whether it was appropriate that payments be made to reward individuals for work that they had done in relation to specific property acquisitions by companies in the Fincorp Group (see [28] - [29] above). Even if (contrary to the belief expressed by Mr Bunter at Mr Quigley's trial) Mr Bunter was the first to use the phrase "spotter's fee" to describe a reward of that character, that would not contradict his evidence at the appellant's trial as to the nature of the advice sought from and given by him. It would not have indicated that the effect of his advice was that "spotter's fees" could be paid to make profit distributions, whether or not the recipients had done work that justified such payments. 36Secondly, the appellant relied upon the following evidence given by Mr Bunter at Mr Quigley's trial: "Q. By the way, was it someone in PWC or someone within Fincorp who actually drafted the related party note [see [16] and [26] above]? A. I don't recall. What normally happens in the accounts is often they're drafted by the company but the auditor will then assist with clarifying and detailing the makeup of it. The related party note is one of those ones that's actually quite a complex one to draft so normally some assistance is provided to that so we could have drafted that" (Transcript 4/5/11, p 175). 37Again I do not consider that if this evidence had been given at the appellant's trial that there is any significant possibility that the jury would for that reason have acquitted the appellant. The fact that the auditors might have drafted the Note, whether based upon the discussion in October 2003 between Mr Bunter and Mr Quigley or upon subsequent information, does not diminish the significance of the Note as part of accounts whose accuracy the appellant certified (Transcript 11/2/11, p 19). The appellant did not deny knowledge of the Note. 38Thirdly, the appellant relied on appeal upon evidence given by Mr Bunter at Mr Quigley's trial that he did not keep a note of his meeting with Mr Quigley in October, that it was very difficult for him to remember what was actually said at that meeting and that the first time he was asked to give an account of that meeting was five years after it had occurred. It was open to the appellant's counsel to question Mr Bunter on these topics at the appellant's trial but he chose not to do so. In these circumstances, the evidence cannot, in my view, be regarded as "fresh evidence" that was not reasonably available to the appellant at his trial. Thus, the hurdle that the appellant must surmount on appeal is high (see [32] above). As the evidence did not differ significantly from the evidence given by Mr Bunter at the appellant's trial of his difficulty recalling various matters upon which he was questioned and the inferences that could reasonably be drawn from his evidence (for example, that he did not keep notes of the relevant meeting), my view is that there is no significant possibility that if this further evidence had been adduced at the appellant's trial, that he would have been acquitted.

Mr McIlveen's evidence 39At the appellant's trial, Mr McIlveen said that he did not recall seeing the email of 20 October 2003, but that he must have received it. He was not questioned about the email in cross-examination. At Mr Quigley's trial Mr McIlveen said, "I think I must have read it because I read most of the stuff like this", and he "probably" discussed it with Mr Quigley and "would have thought" he discussed it with the appellant (Transcript 3/5/11, p 39). 40This evidence given by Mr McIlveen at Mr Quigley's trial neither conflicted with, nor materially added to, the evidence given by him at the appellant's trial. It is not surprising that if Mr McIlveen had received the email he might, as he speculated at Mr Quigley's trial, have discussed it with Mr Quigley and the appellant. The appellant's counsel had the opportunity to question Mr McIlveen about this at the appellant's trial if he had thought it was advisable. 41The appellant also submitted that Mr McIlveen's evidence at Mr Quigley's trial that he "would have thought" that he had discussed the contents of the email with the appellant and Mr Quigley was inconsistent with his evidence at the appellant's trial that he had not discussed with anyone the payment to Prime Consulting Group of a fee in relation to the acquisition of the Doreen Property (9/2/11 Transcript, pp 44 - 5). 42I do not agree that there was any such inconsistency. The email did not specifically refer to the Doreen Property and did not contain any reference to Prime Consulting Group. Moreover Mr McIlveen's evidence at Mr Quigley's trial did not suggest that he had any actual recollection of discussing the contents of the email with the appellant and Mr Quigley. In these circumstances, I do not consider that this evidence of Mr McIlveen would have assumed any particular significance if given at the appellant's trial. 43For the reasons I have given, this ground of appeal should be rejected.

GROUND 2: THE TRIAL MISCARRIED AS A RESULT OF IRRELEVANT BUT PREJUDICIAL MATERIAL BEING CONTAINED IN EXHIBIT C, THE JURY BOOK 44At the outset of the trial the Crown tendered two lever arch folders described as a jury book. The appellant submitted that this jury book contained irrelevant but prejudicial material comprising: (a) "ASIC searches in relation to each of the companies which showed that the companies had gone into external administration". (b) "Banking statements (or documentation as to expenditure) which refer[red] to transactions which were not in any way relevant ... ". 45However the jury book was tendered by consent and at no stage did the appellant take an objection to any part of it or request that the trial judge give a direction to the jury concerning it. As a result, the appellant requires leave under r 4 of the Criminal Appeal Rules to raise this ground. 46I do not consider that that leave should be granted. So far as the ASIC searches are concerned, there was in any event evidence before the jury about the appointment of administrators. No objection was taken to that evidence, nor was any direction sought about it. Further, I do not consider that the jury could reasonably have regarded any of the (irrelevant) transactions revealed by the bank statements as of any significance. The lack of objection and request for a direction confirms this to be the case. 47This ground of appeal should be rejected.

GROUND 3: THERE HAS BEEN A MISCARRIAGE OF JUSTICE AS A RESULT OF THE TRIAL PROCEEDING ON AN ERRONEOUS LEGAL BASIS AS TO WHEN A COMPANY MAY DECLARE A DIVIDEND 48The appellant submitted that the Crown case at trial was that the appellant had devised a scheme to disguise the subject payments as "spotter's fees" because the Fincorp Group companies were not entitled to declare dividends as no profit had yet been realised on the purchased properties. He submitted that this approach incorrectly assumed that a company cannot declare a dividend out of unrealised capital appreciation, with the result that the jury was left with the mistaken impression that the appellant had had an improper motive for causing the payments to be made (Written Submissions [78] - [81]). 49The first answer to this submission is that it was the appellant's beliefs that determined his motive, irrespective of whether they reflected the actual position at law. Thus, a view by the appellant that the payments could not be made by way of dividend would, even if mistaken as a matter of law, provide an explanation, or motive, for the appellant's allegedly dishonest conduct in causing the subject payments to be made purportedly for commission or fees when he knew that neither he nor any of the recipients of the payments had provided services to justify the payment of such commission or fees. 50It was in my view open to the jury to accept the Crown's submission that the reason, or at least one reason, why the payments were made was the appellant's belief that they could not lawfully be distributed by way of dividend. In his explanation of his belief in the legitimacy of the payments (see [14], [25] above), the appellant did not suggest that they were in fact payments of dividends or could equally, and lawfully, have been made by way of dividend. 51The second answer to the appellant's submission is that it is of no assistance to him to point out that the law recognises that, in some circumstances, increases in the value of fixed assets may give rise to profits distributable by way of dividend, if, as I have found, those circumstances did not exist in the present case at the time the payments were made. The reasons that these circumstances did not exist are as follows. 52First, the determination of profit involves a comparison between the state of a business at the beginning and end of a relevant financial period (In re the Spanish Prospecting Company Ltd [1911] 1 Ch 92 at 98; [1908-10] All ER Rep 573; QBE Insurance Group Ltd v Australian Securities Commission (1992) 38 FCR 270 at 284). 53The companies in the Fincorp Group prepared accounts on the basis of financial years commencing 1 July. The subject properties were acquired early in the year commencing 1 July 2003 and the subject payments were made in the months that followed, long before the conclusion of the financial year and the determination of profit. Thus, at the time of the payments there had been no determination at all of the profit for the relevant year, much less one that reflected the alleged increases in value of the properties. 54Secondly, the uncontradicted accounting evidence of Mr Bunter was that, as the relevant companies were development companies, the subject properties were accounted for as inventory (that is stock-in-trade rather than fixed assets) and that, as a matter of accounting convention, inventory is valued at the lower of cost or net realisable value. The effect of his evidence was that these properties could not have been revalued in the accounts to reflect their increase in value and to give rise to a profit distributable by way of dividend. Mr Bunter's evidence is significant as courts have repeatedly emphasised the importance of the views of the accounting profession in considering issues of this nature (Deputy Commissioner of Taxes (SA) v Executor Trustee and Agency Co of SA Ltd (Carden's Case) (1938) 63 CLR 108 at 153 - 4; QBE Insurance v Australian Securities Commission at 288 - 9; Clark v Inglis [2010] NSWCA 144; 79 ATR 447 at [39]). 55Thirdly, even leaving aside the fact that the properties were held as inventory rather than as fixed assets, none of the steps necessary to facilitate payment of a dividend out of profits arising from an increase in the value of the properties had been taken at the time the payments were made (nor were they taken at all in the relevant financial year). The steps required would have been a revaluation of the properties, a resolution of the directors to reflect the revaluation in the property companies' accounts and a transfer of the increase in value to the profit and loss account. 56Whilst unrealised capital gains may form part of a company's profits, for that to occur it is necessary that the gains reflect "a valuation made in good faith by competent valuers" (Dimbula Valley (Ceylon) Tea Co Ltd v Laurie [1961] Ch 353 at 372; and see Federal Commissioner of Taxation v Sun Alliance Investments Pty Ltd (in liq) [2005] HCA 70; 225 CLR 488 at [49]). The appellant submitted that an independent valuer might not always be required (referring to R P Austin and I M Ramsay, Ford's Principles of Corporations Law, LexisNexis Butterworths, 14th ed (2010) at 991). Even if this were so and the directors could themselves undertake a revaluation, the evidence does not suggest that this occurred in the present case. 57So far as the second step is concerned, the evidentiary references on this topic given by the appellant in his Written Submission of 10 April 2012 did not indicate that by the time of the subject payments (or at any later time) the directors of the relevant companies had resolved that the subject properties, or indeed any of the properties held by Group companies, be revalued in the accounts. The balance sheets of Southern Cross and Alliance Properties showed that the subject properties were still recorded at cost in the respective books of account at 30 June 2004, without any recognition of their alleged increased value. 58The appellant included in his list a reference to a document entitled "Business Plan: October 2003" prepared by Mr Peter Pengilley of Investment Dynamics Pty Ltd. It referred to the Group's property portfolio as having a current value of $82.27 M, as compared to its total purchase price of $62.05 M, but it is not clear from the document whether Mr Pengilley was a valuer and the terms of the document suggest that it was a draft only. In any event, as I have noted, the asset appreciation it suggests was never reflected in a resolution of the directors to revalue the properties in the books of account. The appellant also referred to various valuation reports but these were dated long after the subject payments were made, the first being dated 25 June 2004. 59Even if there had been a decision by the directors, based on proper valuations, to revalue the subject properties in the companies' books of account, any increase in value would have had to be transferred to the profit and loss account for the profits to be available for distribution by dividend (see Industrial Equity Ltd v Blackburn (1977) 2 ACLR 421 at 426). The balance sheets at 30 June 2004 indicate that this did not occur by the time of the subject payments, nor in fact prior to 30 June 2004. 60For these reasons this ground of appeal must fail. Moreover, because the ground relates to directions which the appellant did not seek at trial, the appellant is precluded, unless the Court grants leave, from relying upon this ground by rule 4 of the Criminal Appeal Rules. In light of the views I have expressed above, there is no reason why the Court should grant leave to rely upon it.

GROUND 4: THE LEARNED TRIAL JUDGE ERRED IN FAILING TO DIRECT THE JURY OF FACTORS RELEVANT TO ITS CONSIDERATION OF WHETHER THE CONDUCT WAS DISHONEST 61The appellant submitted that the trial judge erred in failing to direct the jury that the following matters were relevant to the jury's consideration of the issue of dishonesty: "(1) The profitability of the company; (2) That it was solvent at the time of the alleged offences; (3) That there was no evidence that any person or the company sustained any detriment; and (4) That the payment was authorised by the sole shareholder". 62These factors reflect those referred to in the judgment of Gleeson CJ and Heydon J in Angas Law Services Pty Ltd (in liquidation) v Carabelas [2005] HCA 23; 226 CLR 507 at [29], a case concerned with a charge against directors under s 229(4) of the Companies (South Australia) Code of making improper use of their positions to gain an advantage for themselves or others, or to cause detriment to the corporation. At Mr Quigley's trial, his counsel requested directions to the effect of those referred to in [61] above and the trial judge obliged. As no such directions were sought at the appellant's trial, the appellant requires leave under r 4 of the Criminal Appeal Rules to rely upon this ground of appeal. 63As the trial judge directed the jury, the issue of the appellant's dishonesty needed to be judged by the jury according to "the standards of ordinary, decent people" (see Peters v R [1998] HCA 7; 192 CLR 493 at [18]). Such judgment required the jury to consider the wide variety of circumstances revealed by the evidence. Unsurprisingly, the experienced counsel who appeared for the appellant addressed the jury at length in relation to the issue of dishonesty. In her Summing-Up the trial judge referred in detail to the appellant's evidence and his counsel's submissions on the topic. The appellant does not allege that her Honour's descriptions were inaccurate or deficient. 64In these circumstances it does not in my view avail the appellant to contend for the first time on appeal that there were other matters relevant to the jury's determination of whether the appellant had acted dishonestly which should have been drawn to the jury's attention. Factors that are relevant to a determination of dishonesty, and their degree of importance, vary according to the circumstances of each case. The appellant was well-represented at the trial and it is too late for him to say that reference should have been made by his counsel, and consequently by the trial judge in her Summing-Up, to factors other than those mentioned by counsel in his forceful address at the trial. 65Neither in Angas Law Services nor elsewhere is there to be found any prescription of the factual matters that must be taken into account by a finder of fact in determining whether a person has been dishonest. The fact that at Mr Quigley's trial, in the particular circumstances of that case, the trial judge, at the request of Mr Quigley's counsel, referred to factual matters different to those referred to in the Summing-Up at the appellant's trial does not indicate a deficiency in that Summing-Up. 66The appellant has not, in my view, shown any reason why leave should be granted under r 4 to rely upon this ground. I therefore hold that he is not entitled to rely upon it.

GROUND 5: THE LEARNED TRIAL JUDGE ERRED IN FAILING TO DIRECT THE JURY THAT THE RELEVANT TIME AT WHICH TO CONSIDER THE ISSUE OF DISHONESTY WAS WHEN THE CHEQUES WERE SIGNED 67As evidence of dishonesty the Crown relied heavily upon the allegedly misleading description of the payments in subsequent documents, particularly the 2005 prospectus (see [16], [26] - [27] above). The appellant submitted that in the absence of a direction to the jury that dishonesty had to be determined as at the date of the impugned payments, the jury may have wrongly assumed that proof of subsequent dishonesty was sufficient. 68In my view however it would have been obvious to the jury that it was required to focus upon the appellant's state of mind at the time the cheques were drawn, as counsels' addresses and the Summing-Up made it clear that the issue for the jury was whether the appellant's conduct in signing the cheques was dishonest. 69It was permissible for the Crown to rely upon the subsequently produced documents to cast light upon the appellant's state of mind at the time of signing the cheques. The fact that the experienced counsel appearing for the appellant did not seek any direction to ensure that there was no misunderstanding as to the way in which those documents could be used confirms that it was obvious that the jury had to consider the appellant's state of mind at the time of the relevant payments. As I cannot see any basis for granting leave to raise the point, r 4 of Criminal Appeal Rules precludes the appellant from relying upon this ground. 70In the course of his submissions on this ground, the appellant submitted that his evidence indicated a lack of connection on his part with the 2005 prospectus. However, he had signed a declaration forming part of the relevant financial report confirming the accuracy of its contents (which included Note 20 referred to in [16] and [26] above). He accepted in evidence that he had done this (Transcript 11/2/11, p 19) and did not at any point suggest that he had been unaware of the report's reference to the impugned payments. Moreover, contrary to the appellant's submission on appeal, the jury was entitled to regard his acceptance in evidence of the inaccuracy of the descriptions in the Note as reflective of his state of mind at the time of the subject payments.

GROUND 6: A MISCARRIAGE OF JUSTICE HAS OCCURRED AS A RESULT OF THE CROWN'S SUBMISSION AS TO THE FINANCIAL POSITION OF THE FINCORP COMPANIES 71The appellant submitted that there was no factual basis for the Crown's submission that, contrary to the appellant's evidence, there were no profits in the Group. 72The principal references in the appellant's evidence to profits were in the passages referred to in [12], [14], [19], [23] and [25] above and in the following evidence: "The properties had gone up significantly in value and, if we developed the properties, there was even further profits to be made. So there was substantial profits" (Transcript 11/2/11, p 14). 73In final address the Crown submitted that "there were no real profits in the Group" and the figure by which the value of the subject properties was alleged to have appreciated "was entirely a paper figure which didn't, in any way, represent a profit" (Transcript 14/2/11, p 249). 74The appellant submitted on appeal: "The Crown did not lead any evidence as to whether the individual companies themselves were not profitable and therefore could not pay a dividend. Nor was evidence led to refute the [appellant's] evidence as to the financial position of the companies. Indeed there was evidence that supported the [appellant's] evidence of the increased value of the properties" (Written Submissions [124]). 75In my view, this ground of appeal has no substance. The Crown's submissions as to the absence of profit were merely a response to the appellant's references to profits in his reasons for regarding the payments as legitimate. Those references were to profits arising out of a perceived increase in the value of the properties owned by the Group. There was no suggestion that any individual company in the Group, or the Group as a whole, had earned relevant profits arising other than from an increase in the value of the properties. In these circumstances, the Crown needed to do no more than contradict the suggestion that there were distributable profits arising out of increases in property values. For the reasons that I have given in [51] to [60] above, it did so. 76This ground of appeal, as with many of the others, relates to a point not taken at the trial. No request was made at the trial for a direction that the Crown's submission misstated the evidence as to the financial position of the Fincorp Group companies. As I discern no reason why leave should be given to raise this point for the first time on appeal, the appellant is precluded by r 4 of the Criminal Appeal Rules from doing so.

GROUND 7: THE VERDICTS CANNOT BE SUPPORTED BY THE EVIDENCE AS THE APPELLANT'S CONDUCT WAS NOT DISHONEST WITHIN THE MEANING OF THE CORPORATIONS ACT 77The appellant submitted that his conduct could not have been dishonest unless it was at least "improper" and that the High Court's decision in Angas Law Services indicated that this was not the case. 78In Angas Law Services the shareholders and directors of the company were alleged to have improperly used their positions in breach of s 229(4) of the Companies (South Australia) Code by causing the company to grant a mortgage over company property to secure a debt owed to the mortgagee by one of the directors. Gleeson CJ and Heydon J (with whom Kirby J agreed) concluded that the South Australian Full Court's finding of no impropriety had not been in error. Their Honours said also: "The unanimous informed consent of the shareholders of ALS, the solvency of ALS and Mr Carabelas, and the absence of any adverse effect on the interests of third parties, were facts relevant to the propriety of the mortgage transaction" (at [29]). 79In the Full Court, Doyle CJ (with whom Prior and Vanstone JJ agreed) had relied upon these factors in concluding that there had been no impropriety, but had specifically noted that there was no allegation that the subject transaction was dishonest or fraudulent and that the transaction had not amounted to misappropriation contrary to the interests of any other person (Angas Law Services at [25]). 80In the High Court, Gummow and Hayne JJ said that the liquidator's broad submission that the "corporators necessarily acted improperly if they so acted as to bring about the appropriation of the company's assets as their own" insufficiently allowed for the significance of the commercial context in each individual case and assumed an inflexible standard of conduct (at [66] - [67]). Their Honours said that the "best interests of the company will depend on various factors including solvency" (at [67]) and cited with approval statements of Street CJ in Kinsela v Russell Kinsela Pty Ltd (in liq) (1986) 4 NSWLR 722 at 730, including that in "a solvent company the proprietary interests of the shareholders entitle them as a general body to be regarded as the company when questions of the duty of directors arise". Their Honours said that nothing in Macleod v The Queen [2003] HCA 24; 214 CLR 230 suggested the contrary and concluded that the combination of the two factors of solvency and shareholder authorisation "indicates that the standards of propriety expected of the directors [were] not breached" (at [69]). 81In Macleod, a director who was the sole beneficial shareholder of the company was charged with fraudulently taking or applying property of the company "for his own use or benefit, or any use or purpose other than the use or purpose of such body corporate or company". The Court held that the sole shareholder's consent to his own conduct was not the consent of the company so as to negate the allegation of fraud. As said by Gleeson CJ, Gummow and Hayne JJ, the "self-interested 'consent' of the shareholder, given in furtherance of a crime committed against the company, cannot be said to represent the consent of the company" (at [30]). In this context, the word "fraudulently" was interchangeable with "dishonestly" (at [34]). 82Even assuming that the appellant in the present case was in a position equivalent to that of a sole beneficial shareholder, his consent to the subject payments, implicit in his involvement in them, did not prevent his conduct from being characterised as dishonest. In my view this conclusion is dictated by the decision in Macleod, which is directly in point. Each of the members of the Court in Angas Law Services accepted the continuing authority of Macleod. 83The decision in Angas Law Services is, in my view, distinguishable. As noted earlier, Doyle CJ's Full Court judgment, in which Gleeson CJ and Heydon and Kirby did not find error, specifically noted that the transaction in issue in that case was not alleged to have been dishonest or fraudulent. Likewise Gummow and Hayne JJ appeared to distinguish Macleod upon the basis that in that case a crime (constituted by the allegedly fraudulent transaction) was asserted to have been committed against the company (see [68]). In the present case the charges against the appellant were founded upon dishonesty, as is apparent from the form of the charges upon which the appellant was convicted (see [1] above). 84In dealing thus far with the appellant's submissions on this ground, I have assumed that he was effectively the beneficial owner of the shares in the holding companies of the Fincorp Group. However it is by no means clear that this was the case. As noted earlier (see [5] above), the owner of the shares in the ultimate holding company was a trustee controlled by the appellant. The description in the relevant trust deed of the potential beneficiaries of the trust was broad enough to include the appellant (see Recital A to the trust deed, although members of the appellant's family, other than the appellant, were identified as the beneficiaries of the trust in the diagram attached to the agreed Statement of Facts - see [5] above). However the appellant's status as "controller" and potential beneficiary under the trust deed would not necessarily, even so far as the Trust was concerned, have entitled him to apply the funds of companies in which the Trust held shares for his own benefit. As this point does not appear to have been raised at the trial and was not fully examined on appeal, it is not appropriate to comment further, other than to note that, in terms of ownership of shares in the relevant company, the appellant does not appear to have been in the position of the shareholders in Angas Law Services.

GROUND 8: THE VERDICTS ARE UNREASONABLE AND/OR NOT SUPPORTED BY THE EVIDENCE 85The appellant submitted that in light of the following alleged circumstances, the evidence did not establish that his conduct was dishonest: (1) The Group was profitable and in no danger of insolvency. (2) The transactions had the approval of the effective sole shareholder and were disclosed to and approved by the Chief Financial Officer (Mr Quigley). (3) The transactions did not disadvantage any third party. (4) The appellant sought and received advice from Mr Bunter, the company auditor, as to the appropriateness of the payments and as to how they were to be appropriately recorded. (5) The appellant was not involved in preparing any of the post-transactional documents. (6) The purpose for which the payments were made was not dishonest. The appellant referred in this connection to his counsel's submission in final address at the trial that the purpose of the $1.98 M payment was to distribute profit in accordance with a previous arrangement with the recipients. 86Even if these submissions were factually accurate, they would not in my view answer the Crown's case that, taking into account all of the circumstances established by the evidence, the appellant's conduct in giving effect to the transactions was dishonest because the payments were purportedly made as remuneration for services rendered in relation to the Epping Road and Doreen properties when the appellant knew that the recipients had not done work justifying those payments. 87It was not an answer to the Crown's case for the appellant to assert that it was fair that he receive such payments because he had been working for two years to set up and establish the Fincorp Group allegedly without adequate remuneration. An employee cannot justify his or her theft of the employer's money by asserting, or establishing, that the employee is underpaid or even that, if the employee had sought it, he or she could have obtained an increase in salary exceeding the amount stolen. The thrust of part of the justification for the payments given by the appellant was not dissimilar. 88In the circumstances of the Fincorp Group, the manner in which payments of the Group's funds to related parties were recorded in its books of account was undoubtedly important. Indeed the appellant's concern to have Mr Bunter approve the description of the payments from an accounting perspective illustrates that. 89The Fincorp Group's business was to raise money from the public for the purpose of it being on-lent and used for property development. According to the appellant's evidence, the Group had, by the end of 2003, raised some $56 M from the public. It had issued a prospectus dated 1 November 2002, expiring on 29 October 2003, and another dated 14 October 2003, expiring on 12 November 2004. It subsequently issued a further prospectus on 7 December 2004, expiring on 6 January 2006. 90Disclosure of related party transactions was required in the financial accounts contained in those prospectuses. The description given in the 2005 prospectus of the subject payments as "spotter's fees" suggested no impropriety in the payments, implying that they had been made as remuneration for work performed in relation to specific property acquisitions by the Group. An accurate description of the $1.98 M payment, for example, would have been that it was a distribution to the appellant and various members of his family of unrealised capital profits thought by the appellant to have accrued but not the subject of any formal valuations or accounting entries. Such a description would have raised immediate concerns in the minds of potential investors as to the propriety of the payment and as to the manner in which the business of the Group was being conducted. 91The evidence gave rise to a compelling inference that the appellant intended the payments to be falsely described in the accounting records of the Group. Such intended false characterisation of the payments constituted the gravamen of the charges against the appellant (see [1] above). The fact that a number of the documents relied upon by the Crown were created after the payments were made does not assist the appellant. The appellant's evidence established his concurrence to the treatment of the $750,000 (plus GST) payment as "a management fee from one of the property companies" (see [13] above). The email of 20 October 2003, seen by the appellant, was to the same effect in relation to the payment of $1.98 M, as it referred to the prospective payment of "spotter's fees" (see [23] above). Documents which were, or may have been, prepared subsequent to the payments and which described the payments in the same fashion, were capable of being used by the jury as additional evidence of the appellant's intentions at the time of the payments. 92The appellant accepted in cross-examination that the description in the 2005 prospectus of the payments as "spotter's fees" was incorrect (see [16], [26] - [27] above) and he did not in his evidence at the trial or in his submissions on the appeal assert that they were accurate. 93In these circumstances the evidence should be regarded as clearly establishing that the appellant authorised the payments to be made on a purported basis that was false. 94For the reasons given earlier, the alleged profitability and solvency of the Group, and the alleged approval of its sole shareholder, did not indicate that the appellant did not act dishonestly in authorising the subject payments (see [48] - [60], [71] - [76], [82] - [84] above). Further, Mr Quigley's approval of the transactions is of no assistance to the appellant as Mr Quigley's view of the propriety of the payments was not one upon which the appellant was entitled to rely, nor did the appellant give evidence that he did rely upon Mr Quigley's views. 95The appellant's alleged reliance upon Mr Bunter's advice was a central limb of his response to the Crown's case. However, there was nothing in Mr Bunter's evidence to suggest that Mr Bunter did more than sanction payments of remuneration to individuals who had done work in relation to particular properties that justified the payment of such remuneration. Bearing in mind the passage of years, the understandable fact that Mr Bunter's recollection of dates and details of conversations was fallible did not require his evidence on this issue to be rejected. Although not expressly put, the effect of the appellant's submissions is that Mr Bunter advised Mr Quigley and, through him, the appellant, that it was appropriate for the Group to make payments on a knowingly false basis. The appellant did not identify any benefit that Mr Bunter hoped to gain by giving such plainly unethical and dishonest advice and did not expressly put to him in cross-examination that he had done so. 96The email of 20 October 2003 does not suggest that Mr Bunter gave any such advice. It refers to the "withdrawing [of] up to $2 mil in spotters fees" (see [23] above) and does not suggest that those fees had not been earned by the proposed recipients. 97The jury had the advantage, which this Court does not, of seeing and hearing the witnesses, including Mr Bunter and the appellant, give their evidence. The jury's verdicts suggest that it accepted the evidence of Mr Bunter. Based on my view of the transcript of the oral evidence and of the documents admitted at the trial, my view is that this conclusion was entirely rational and well-founded. 98For these reasons I do not consider that Mr Bunter's advice, or any of the other matters relied upon by the appellant in relation to this ground of appeal (see [85] above), give cause for doubt about the soundness of the finding of dishonesty on the part of the appellant implicit in the jury's verdicts. 99Bearing in mind my reasons for rejecting the appellant's earlier grounds of appeal and the appellant's specific submissions on this ground of appeal, as well as my review of the evidence at the trial, my view is that it was open to the jury to be satisfied beyond reasonable doubt that the appellant was guilty of the offences of which he was convicted. I am satisfied to the same standard that the appellant was guilty of those offences (see SKA v R [2011] HCA 13; 243 CLR 400 at [11] - [14] and [20]).

ORDERS 100For the reasons I have given, the appeal should be dismissed. 101SCHMIDT J: I agree with Macfarlan JA. 102GROVE AJ: I agree with Macfarlan JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 May 2012

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