Plaintiff v Firstnamed Defendant

1 The second defendant John Anthony Maiolo was indicted/presented in the County Court on 16 counts of falsifying an account contrary to the provisions of s 83(1)(a) of the Crimes Act 1958 (Vic). He was also charged with a breach of s 184(2)(a) of the Corporations Act 2001 (Cth); it being alleged that he dishonestly used his position as a director to gain an advantage for himself.

2 After extensive pre-trial argument, a verdict of not guilty was entered by the trial judge in relation to 14 of the 16 Crimes Act counts, leaving two counts outstanding. Her Honour then determined that she should permanently stay the two remaining Crimes Act counts as being invalid by reason of s 109 of the Commonwealth Constitution.[1] On a secondary basis, her Honour also concluded that the two Crimes Act counts were foredoomed to failure and should, in any event, be stayed on this basis.

3 The trial of the charges took place prior to the enactment of the Criminal Procedure Act 2009.[2] Accordingly, the only course open to the Director of Public Prosecutions ("the Director") was to seek judicial review in the form of certiorari of her Honour's ruling. The Director's primary contention is that her Honour was in error in characterising the relevant piece of Federal legislation the Corporations Law as covering the field and thereby creating a s 109 inconsistency. The Director also argues that her Honour, in determining that the two counts were foredoomed to fail, misdirected herself as to the necessary elements of the charges pursuant to s 83(1)(a) of the Crimes Act. The Director contends that both errors constitute either jurisdictional error or error on the face of the record and that her Honour's ruling should be quashed.

4 Mr Maiolo was the contradictor of the Director's application. The County Court made a submitting appearance.

5 For reasons which I will try to explain, I accept the arguments of the Director and will quash the order made by her Honour relating to the stay of the two counts under the Crimes Act.

6 For the purpose of this application, it is only necessary to recite some of what is a complex factual situation.

7 Residential Foundation Systems Australia ("RFS Australia") was incorporated on 23 May 2000 and, was involved in making concrete slabs with a number of linked companies,[3] under the conglomerate name of "RFS Group of Companies".

8 Mr Maiolo and his co-accused, Mr Evan Drakos, were directors of each of the RFS companies.

9 Between 1996 and 2001, it is alleged that Mr Maiolo, Mr Drakos and an employee of RFS Australia, Liane Warwick, had betting accounts with IASBET, a bookmaker in Darwin.

10 Cheques written on the RFS Australia cheque book were drawn in favour of IASbet. The prosecution contends that those payments were recorded in the accounts of RFS Australia as relating to the acquisition of a licence and patent.

11 The financial statements for the year ended 30 June 2001 for the RFS Group of Companies were compiled by Mr Nicholas Akakios, the principal of Nicholas Akakios & Co. The balance sheet of RFS Australia is contained within those statements, which contains the following entry relating to an intangible asset: "Haratan Pty Ltd - Kalmetron Patent - $3,439,791.94".

12 Nicholas Akakios & Co also prepared financial statements for RFS Australia for the period 1 July 2001 to 31 December 2001. The balance sheet as at 31 December 2001 recorded as an intangible asset: "Haratan Pty Ltd - Kalmetron Patent - $4,836,307.51".

13 Mr Akakios is to give evidence at the trial. In a statement dated 29 October 2003, he says that "All financial reports were prepared on instructions from Maiolo. These instructions were normally verbal".[4]

14 On 18 March 2009, for reasons I shall explain later, her Honour entered a verdict of not guilty on counts 1 to 14 inclusive against Mr Maiolo pursuant to s 391 of the Crimes Act.

15 This left Mr Maiolo facing three remaining counts, two under s 83(1)(a) of the Crimes Act (Counts 15 and 16) and one under s 184(2)(a) of the Corporations Act (Cth) (Count 17). Those counts read as follows:[5]

Count 15 And the said DIRECTOR OF PUBLIC PROSECUTIONS of the State of Victoria FURTHER PRESENTS that between a date unknown and 3 April 2002 at Melbourne in the State of Victoria John Anthony MAIOLO dishonestly and with a view to gain for himself or another falsified an account or record made or required for an accounting purpose, namely the entry relating to "Intangible Assets - Haratan Pty Ltd - Kalmatron Patent - $3,439,791.94" in the document entitled "Balance Sheet as at 30 June 2001" in the Financial Statements for the year ended 30 June 32001 for Residential Foundation Systems (RFS Australia) Pty Ltd, contrary to Section 83 of the Crimes Act 1958.

Count 16 And the said DIRECTOR OF PUBLIC PROSECUTIONS of the State of Victoria FURTHER PRESENTS that between a date unknown and 3 April 2002 at Melbourne in the State of Victoria John Anthony MAIOLO dishonestly and with a view to gain for himself or another falsified an account or record made or required for an accounting purpose, namely the entry relating to "Intangible Assets - Haratan Pty Ltd - Kalmatron Patent - $4,836,307.51" and "Licence & Patent Costs - $2,010,462.25" in the document entitled "Balance Sheet as at 31 December 2001" in the Financial Statements for the period 1 July 2001 to 31 December 2001 for Residential Foundation Systems (RFS Australia) Pty Ltd, contrary to Section 83 of the Crimes Act 1958.

Count 17 And the DIRECTOR OF PUBLIC PROSECUTIONS of the Commonwealth of Australia INFORMS THE COURT AND CHARGES that on or about 8 May 2002 at Melbourne in the State of Victoria John Anthony MAIOLO did contravene paragraph 184(2)(a) of the Corporations Act 2001, in that, being a director of Residential Foundation Systems (RFS Australia) Pty Ltd, he dishonestly used his position as a director of the said company with the intention of directly or indirectly gaining an advantage for himself or someone else, in that he entered into a Deed of Settlement with IASbet.com Pty Ltd whereby the said company name became jointly and severally responsible for payment of the sum of $494,098.24 owed to IASbet.com Pty Ltd by John Anthony Maiolo as if it were a debt of the said company.

The provisions of the Crimes Act and the Corporations Act

16 Section 83 of the Crimes Act is headed "False accounting" and provides:

(1) Where a person dishonestly, with a view to gain for himself or another or with intent to cause loss to another-

(a) destroys, defaces, conceals or falsifies any account or any record or document made or required for any accounting purpose; or

(b) in furnishing information for any purpose produces or makes use of any account, or any such record or document as aforesaid, which to his knowledge is or may be misleading, false or deceptive in a material particular-

he is guilty of an indictable offence and liable to level 5 imprisonment (10 years maximum).

(2) For purposes of this section a person who makes or concurs in making in an account or other document an entry which is or may be misleading, false or deceptive in a material particular, or who omits or concurs in omitting a material particular from an account or other document, is to be treated as falsifying the account or document.

It is also relevant to note the provisions of s 83A of the Crimes Act which relate to the falsification of documents and make it an offence for a person to "make a false document with the intention that he or she ... shall use it to induce another person to accept it as genuine".

17 Section 184(2) of Corporations Act 2001 (Cth) which reads as follows:

A director, other officer or employee of a corporation commits an offence if they use their position dishonestly:

(a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation;...

18 It is fair to describe the procedural history of this case as tortured, at times, due to the shifting position of the prosecution.

19 It was accepted by counsel for the Director that her Honour's summary of the procedural history contained in her reasons was correct. It is not necessary to repeat it in detail. I will summarise the relevant aspects.

20 Mr Maiolo was originally the subject of a 27 count indictment/presentment (the term used for a combination of Federal and State charges) filed in May 2008. A second indictment/presentment was filed over the first indictment/presentment on 15 December 2008. There were numerous mentions and fixing of trial dates during 2008 and early 2009. On 4 March 2009, the trial date of 10 March was confirmed for the seventh time.

21 On 11 March, after hearing argument, a third indictment/presentment was filed over containing 17 counts against Mr Maiolo.[6]

22 On that day during discussion with her Honour the prosecutor identified a tax advantage as the motive connected with counts 1 to 14 which related to entries of expenses recorded in the books of account. However in relation to counts 15 and 16 he appears to have suggested that the motive for the two allegedly false entries was to inflate the value of the company for the purpose of sale to potential investors.

23 On 16 March 2009, the prosecution filed and tendered (for identification) its summary as required by s 6 of the Crimes (Criminal Trials) Act 1991. I shall return to this document later. Counsel for Mr Maiolo filed a response.[7]

24 On 17 March 2009, counsel for Mr Maiolo made an application to stay all of the counts on the indictment/presentment.

25 On 18 March, the Prosecutor told the Court that he would lead no evidence on Counts 1 and 14; her Honour recorded not guilty verdicts on these Counts.[8] However, debate continued on the 18th and 19th concerning the stay of Counts 15 and 16. Two arguments were put by counsel for Mr Maiolo - the applicability of R v MacPherson[9] (a covering the field s 109 inconsistency case decided by the Queensland Court of Appeal and concerned with the Tax Administration Act) which had initially been raised by he Honour and a contention based on the fact that the prosecution could not produce "the original" of the balance sheets which provided the foundation of Counts 15 and 16. Counsel for Mr Maiolo said that this means that these counts were foredoomed.

26 At her Honour's request, the prosecution filed written submissions concerning Counts 15 and 16 on the resumed hearing date of 23 March 2009.[10] There was then further argument concerning the s 109 inconsistency point. Her Honour ultimately ordered, pursuant to s 78B of the Judiciary Act 1903 that notice be given to the State and Commonwealth Attorneys-General. In discussion, her Honour summarised the reference in the following terms:

The Commonwealth has laid a joint indictment/presentment. The accused is, or was at the relevant time, a director of a company. It is alleged that in his capacity as a director, he falsifies a document or record required for an accounting purpose. There was evidence that the only purpose for the creation of the specific document the subject of the charge was for a taxation purpose. The Court was referred to McPherson's case. It has been argued that s 109 of the Constitution applies, rendering the State charge of false accounting inapplicable. There are a number of Commonwealth charges that may cover the field, including the Tax Administration Act, Commonwealth Crimes Act, the Criminal Code Act and Corporations Act.[11]

27 On 8 April 2009, there was a further mention and her Honour was advised that none of the Attorneys-General or Solicitors-General proposed to intervene. Her Honour then adjourned the matter pending her ruling on Mr Maiolo's application for a stay.

28 On the morning of 10 August 2009, her Honour ordered that Counts 15 and 16 be stayed. Her Honour was persuaded that s 109 inconsistency had been demonstrated in relation to Counts 15 and 16 and also that the prosecution case was foredoomed to failure. Her Honour, however, refused the application by counsel for Mr Maiolo to stay count 17 - the Corporations Act 2001 (Cth) charge.

29 In the afternoon of 10 August, her Honour was asked by the prosecutor to adjourn the trial, which was ready to proceed, to enable the Crown to seek relief in this Court. In the course of refusing the adjournment, her Honour gave further reasons explaining her ruling.

30 Ultimately, however, her Honour adjourned the trial, which now awaits determination of this application.

Should the counts have been stayed on the basis of s 109 inconsistency?

When a law of the State is inconsistent with the law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid.

32 The law recognises two types of inconsistency to which s 109 may apply.[12] The first is "covering the field" inconsistency in which the Federal enactment can be regarded as exhaustively regulating conduct in a particular field or activity. The test was formulated by Dixon J in The State of Victoria v The Commonwealth:[13]

When a State law, if valid, would alter, impair or detract from the operation of a law of the Commonwealth Parliament, then to that extent it is invalid. Moreover, if it appears from the terms, the nature or the subject matter of a Federal enactment that it was intended as a complete statement of the law governing a particular matter or set of rights and duties, then for a State law to regulate or apply to the same matter or relation is regarded as a detraction from the full operation of the Commonwealth law and so as inconsistent.[14]

33 The second area of inconsistency - direct inconsistency, arises where "one law requires what the other forbids"[15] or, to put it in another way, as the High Court has, where there is a "direct collision" between the State law and the Federal law.[16] It is not necessary to dwell further on this aspect of the interpretation of s 109 as it is clear that her Honour reached her conclusion on the basis of "covering the field" inconsistency.

34 It is convenient now to turn to her Honour's reasoning on this issue.

35 In her ruling of the morning of 10 August 2009, her Honour initially referred to MacPherson and then said as follows:[17]

The Crown argues MacPherson's Case can be distinguished, although it conceded, in the case of Count 15, the document was prepared to lodge with the Australian Taxation Office. Mr Porceddu argued a dual purpose was to deceive the liquidator in effect. If that is the case, then other Commonwealth laws would potentially cover the field. In particular, there is a very comprehensive legislative framework for bankruptcy matters. It must not be overlooked that there is also a comprehensive legislative scheme for corporations. In this case, if the allegations are true they would constitute breaches under the Corporations Law, in particular s 184, sub-section (2)(a): see Spedley Securities Ltd in liquidation and Greater Pacific Investments Pty Ltd in liquidation & Ors, 1992, 30 NSW Law Reports 185. I shall come back to Spedley's case in a moment but that case confirms the obligation of directors to keep honest and true company records: see also Potential breaches of taxation and bankruptcy law.

In my judgment, MacPherson's Case, although not binding, ought be followed. As Starke J said in R v Parsons [1983] VicRp 109; [1983] 2 VR 499:

... I have not the slightest doubt that, where a Commonwealth statute has been construed by the ultimate appellate court within any State or Territory, that construction should, as a matter of ordinary practice, be accepted and applied by the courts of other States and Territories so long as it is permitted to stand unchanged either by the court of origin or by the High Court. The risk of differing interpretations amongst the States is thus negated and, in practical terms, a uniform application of Commonwealth laws throughout Australia is assured.

... it would be highly undesirable for one State ... Court to place a different interpretation upon a Commonwealth statute from that placed upon it by the Full Court of another State ...

(See page 506)

Consistent with the decision in MacPherson, I have come to the view that the Crown case as has been put has inevitably brought the State law into conflict with the Commonwealth law and the Commonwealth law prevails. To this extent, the false accounting charges are invalid. If I am wrong, I would in any event have found the Crown case is foredoomed to failure for the reasons previously identified. The right to permanently stay proceedings when the Crown case is foredoomed to failure is well-established. I need not repeat all of the relevant authorities. (emphasis added)

36 That afternoon, her Honour expanded on her reasons. She was at the time dealing with the application by the prosecution to adjourn the trial[18]:

The Crown has been fully aware of the reasons that the stay has been sought, and that the stay was sought in relation to the state charges on at least two bases. First, on the basis that the state charges were constitutionally invalid. And second, that the state counts were foredoomed to failure. The primary basis of my ruling granting the stay in relation to Counts 15 and 16 relates to the constitutional point. The Crown is not taken by surprise in relation to the authorities relied upon since I think I brought the case of McPherson to everybody's attention in March of this year. The case and its applicability was addressed by all counsel, and particularly by the Crown in the additional written submissions. The Crown has argued in those additional submissions that McPherson's case can be distinguished because in the present case there were a number of purposes for the creation of the relevant documents.

For reasons given today, I rejected the Crown's arguments. As far as my ruling is concerned, the case of McPherson applies because the conduct said to form Counts 15 and 16 would also constitute conduct offending against Corporations Law, namely s 184 of the Corporations Law, dishonest use of position as a director, (indistinct) failing to keep honest and true records. Furthermore, insofar as the conduct was said to constitute a misrepresentation to the liquidator, or any attempt to transfer assets of the company prior to liquidation, there is a Commonwealth scheme in relation to such matters under bankruptcy law. If I did not make myself clear in my reasons earlier, that is the reason why there is a conflict between the Commonwealth law and the state law that enlivens the relevance of s 109 of the Constitution and the applicability of McPherson's case. (emphasis added)

37 Given her Honour's reliance upon MacPherson, it is necessary to say something about that decision. The appellant was charged with 24 counts of fraudulent false accounting contrary to the Queensland Criminal Code. The Crown alleged that he made false entries in cheque books belonging to his employer with intent to defraud. It is of significance that the jury, pursuant to s 624 of the Criminal Code,[19] returned a special verdict to that effect that the false entries were not made with intent to defraud the appellant's employer, but with intent to defraud the Commissioner of Taxation.

The argument of the appellant was that, given the finding of the jury, the State charge was unsustainable as the Taxation Administration Act covered the field, namely in respect of conduct contrary to taxation legislation. Fitzgerald P and Davies JA (with whom Pincus JA agreed) concluded, after an analysis of the provisions of the Act and the decision of the High Court in R v Loewenthal; Ex parte Blacklock,[20] as to the purpose of the Act:

Its plain intention is to provide common rules, operating throughout Australia, which it considers appropriate to proscribe and punish conduct inimical to the implementation and enforcement of the tax legislation. It is an exhaustive statement on such matters to or from which 'the legislation of a State can neither add or subtract'.[21]

In the course of their judgment, their Honours also referred to statements of principle of the High Court relevant to s 109 covering the field inconsistency. McWaters v Day,[22] in which the Court said:

Equally, a difference between the rules of conduct prescribed by Commonwealth and State laws might give rise to such inconsistency. But the mere fact that such differences exist is insufficient to establish an inconsistency in the relevant sense. It is necessary to inquire whether the Commonwealth statute, in prescribing the rule to be observed, evinces an intention to cover the subject-matter to the exclusion of any other law.[23]

In McWaters, the Court referred to what had been said earlier by Dixon J in Ex parte McLean:[24]

The inconsistency does not lie in the mere co-existence of two laws which are susceptible of simultaneous obedience. It depends upon the intention of the paramount Legislature to express by its enactment, completely, exhaustively or exclusively what shall be the law governing the particular conduct or matter to which its attention is directed. (emphasis added)

38 Mr Thomson, who appeared for Mr Maiolo both at the trial and on this hearing, submitted that her Honour's reasons should be understood to involve a conclusion that two Federal statutes covered the field namely the Corporations Law and the Taxation Administration Act. He contended that her Honour's reference to MacPherson should be interpreted as implicitly meaning that her Honour was referring to the Taxation Administration Act as well as the Corporations Law "as covering the field".

39 I do not accept this submission. As I read the initial reasons, her Honour accepted the contention that the entries may, at least at a preliminary stage, be regarded as having a dual purpose as argued by the prosecutor, namely, lodgement with the ATO and deception of the liquidator. Notwithstanding her Honour's references to MacPherson and questioning of counsel in the course of discussion, as to whether Mr Maiolo's purpose was to minimise tax liability her ruling is, I think clear - and indeed it constitutes the record.[25] Her Honour identified a comprehensive legislative scheme for corporations and a specific provision of the Corporations Law, s 184(2)(a). As I read her Honour's reference to MacPherson, it was on the point of general principle in relation to covering the field inconsistency. In any event, her Honour made it clear in her further reasons provided in the afternoon that the relevant provision which resulted in covering the field inconsistency was that of the Corporations Law and again identified s 184.

40 Although her Honour also referred to the legislative framework for bankruptcy matters in both her rulings, counsel for Mr Maiolo did not contend that her Honour's ruling depended upon a conclusion that bankruptcy law covered the field in relation to the alleged conduct of Mr Maiolo involving the falsification of accounts. Nor was any such submission ever made to her Honour in the course of argument.

41 The reference by her Honour to a specific provision of the Corporations Law rather than the whole of the statute does not overly assist in clarifying her Honour's approach, such reference being more likely to involve the second limb of s 109 - direct inconsistency.[26] Nevertheless, I think that her Honour's reasons can only be reasonably understood as involving a conclusion that the Corporations Law covered the field in relation to the conduct allegedly engaged in by Mr Maiolo. Accordingly the point to be determined is whether s 83 of the Crimes Act 1958 can operate consistently with the provisions of the Corporations Law which has its genesis in the Corporations Act 1989 (Cth) and the Corporations (Victoria) Act 1990 (Vic).

42 I respectfully suggest that there are difficulties in accepting her Honour's conclusion on this point.

43 It is by no means clear that the Corporations Law was applicable to Mr Maiolo's conduct at the time that the relevant entries in the balance sheet were made by Mr Akakios (and this is particularly so with the entry the subject of Count 16).[27] The Corporations Law was repealed and replaced on 15 July 2001 by the Corporations Act 2001 (Cth). The charges laid under Counts 15 and 16 do not identify with any precision the date upon which the respective entries were made, although, I think, it could be reasonably inferred that the entry (or the instructions for the entry) in relation to Count 16 (relating to the half-year ended 30 December 2001) could only have been made or given after the introduction of the Corporations Act 2001 (Cth). Unfortunately no argument was addressed to her Honour by either the prosecution or defence counsel as to the application of the two different schemes. The question of the applicability of the Corporations Law or the Corporations Act (2001) (Cth) to the charges was not considered by her Honour. Moreover, whichever Act applied, it was necessary to examine each of those schemes in detail to determine whether the Federal Parliament intended to cover the field "exhaustively or exclusively" in relation to the conduct of a director allegedly making false entries in a company's accounts.

44 Her Honour did not examine in any detail either piece of legislation. Indeed, as I have noted, the only reference by her Honour to the provisions of the Corporations Law is to a specific provision: s 184(2)(a) - a director's offence, which formed the basis for Count 17. I have already referred to what was said by the High Court in McWaters and McLean:- It is necessary to examine closely the language used by Parliament to determine its intent in relation to the conduct which founds the State charges.

45 In both Loo and IG Index, the history of the Corporations Law and the transition to the Corporations Act 2001 (Cth) is set out in some detail.

In Loo Winneke P said as follows of the history of the legislative schemes:

Part 1.1A of the Corporations Act (and specifically ss.5E, 5F and 5G) is the end product of co-operative measures, taken over many years, between the Commonwealth and State and Territory legislatures to prevent provisions of (inter alia) State legislation being rendered invalid as a consequence of inconsistent operation with the Corporations legislation of the Commonwealth. Thus when, in 1990, the States agreed to adopt and apply the Corporations Act 1989 (Cth) as their own Corporations Law (the "National Scheme legislation"), the authors of the scheme attempted to reduce the risk that a State would inadvertently pass a law implicitly repealing a provision of the Corporations law, by introducing a rule of statutory interpretation in the State's own applicable legislation. In Victoria, that "rule" was to be found in s.5 of the Corporations (Victoria) Act 1990 which provided, so far as relevant:

(1) An Act enacted ... after the commencement of this section is not to be interpreted as amending or repealing, or otherwise altering the effect or operation of this Act or the applicable provisions of Victoria.

(2) Sub-section (1) does not affect the interpretation of an Act ... so far as that Act provides expressly for that Act ... to have effect despite a specified provision, or despite any provision, of this Act or the applicable provisions of Victoria ...[28].

46 In fact the Corporations Act 1989 (Cth), (which provides for the Corporations Law) which her Honour concluded covered the field, had only a limited operation in its own right. Section 3 of the Act provided "the object of this Act (other than Part A) is to make a law for the Government of the Australian Capital Territory in relation to corporations, securities, the futures industry and some other matters". Section 5 then provided that s 82 of the Act applied the law for the Australian Capital Territory - that section contained the entire text of the Corporations Law which, in effect, acted as a template to be adopted as the Corporations Law by individual states such as occurred in Victoria by s 7 of the Corporations (Victoria) Act 1990.

47 The Corporations Act 1989 (Cth) by reason of Part 8 extended the operation beyond that of the ACT in a most unusual way. That part created a statutory regime that permitted investigations and prosecutions of offences against the Corporations Law. However it did not by its terms treat Corporations Law offences, as offences against the federal law, rather the Corporations Law in each state, by (e.g. s 26(a) of the Corporations (Victoria) Act 1990)was to be administered and enforced on a national basis "in the same way as if those laws constitute a single law of a Commonwealth". As the High Court said in R v Hughes in relation to the West Australian Corporations Act and s 29(2) of the Corporations Law (WA):

This indicates that the State legislature is not purporting to dictate to the Commonwealth Parliament what are Commonwealth laws. Rather it is requiring certain of the laws of Western Australia to be treated as if they were Commonwealth laws for the purposes of Western Australian laws[29] (emphasis added)

48 It follows, in my view, (and putting aside the question of whether the Corporations Law was applicable to the charges against Mr Maiolo) that it could not be concluded that the Corporations Act (1989) (Cth) or the Corporations Law was intended to cover the field, exhaustively or exclusively, in regulating the conduct of directors in relation to the financial affairs of a company. This conclusion is reinforced by the provisions of the Victorian legislation, the Corporations Act (Victoria) 1990. As I have said, by s 7 it adopted the Corporations Law as being the law of Victoria. The effect of s 5 is described by Winneke P in Loo. Section 6 provided that "except as otherwise provided in this Act, nothing in this Act or the applicable provisions of Victoria affects the operation after the commencement of this section of an Act enacted before that commencement...". The applicable provisions included the Corporations Law. Section 83 of the Crimes Act was enacted prior to the commencement of the Corporations (Victoria) Act 1990. Notwithstanding that these are State legislative provisions, it is apparent that in this complex federal/state arrangement, the mutual intent of both legislatures was that the federal provisions would not circumscribe the operation of relevant State laws.

49 Insofar as the Corporations Act 2001 (Cth) is concerned, Part 1.1A deals with the concurrent operation of Federal and State legislation as follows:

The Corporations legislation is not intended to exclude or limit the concurrent operation of any law of a State or territory.

Section 5E(2) then provides:

Without limiting subsection (1), the Corporations legislation is not intended to exclude or limit the concurrent operation of a law or a State or Territory that ... (a) imposes additional obligations or liabilities (whether criminal or civil) on ... a director.

Section 5E(5) then acknowledges that a single act or omission may be an offence against the Corporations legislation and an offence under the law of a State or Territory. The section deals with that situation not by invalidating the State law, but by providing that if a person is convicted of one of those offences, the person is not liable to be convicted of the other.

50 In Re Credit Tribunal; Ex parte General Motors Acceptance Corporation,[30] Mason J said:

... a Commonwealth law may provide that it is not intended to make exhaustive or exclusive provision with respect to the subject with which it deals, thereby enabling State laws, not inconsistent with Commonwealth law, to have an operation. Here again the Commonwealth law does not of its own force give State law a valid operation. All that it does is to make it clear that the Commonwealth law is not intended to cover the field, thereby leaving room for the operation of such State laws as do not conflict with Commonwealth law.

In Loo Winneke P concluded, after an analysis of the provisions of Part 1.1:

It is clear that these provisions are designed to regulate the interaction between the Corporations legislation and State acts with a view to limiting the scope for conflict between them. Section 5E(1) declares that the Corporations Act is not intended to exclude or limit the concurrent operation of any law of a State; whilst stipulating in subs (4) that the section does not apply to a law of a State if there is "direct inconsistency" between the Corporations legislation and that law. It has, thus, been noted by courts and commentators that the Commonwealth law contains its own declaration that it is not intended to be "a complete statement of the law governing a particular matter or set of rights and duties", to use the words of Dixon J's formulation in Victoria v The Commonwealth18.; on the contrary State laws may also regulate matters rights and duties provided that they do not do so in a way which involves "direct inconsistency". It is, accordingly, apparent that Pt 1.1A has rendered the "cover the field" test of "s 109 inconsistency" irrelevant; and the only question is whether there is "direct inconsistency19.(emphasis added)

Indirect inconsistency arises when the intention of Parliament in enacting the federal law was that it should 'cover the field' with respect to its subject matter. Part 1.1A operates to render this aspect of inconsistency irrelevant in relation to the Corporations Act.[31]

51 It is patent, therefore that the Corporations Act 2001 (Cth) was not intended by the Federal Parliament to cover the field in relation to directors' conduct.

52 For these reasons, I am satisfied that her Honour was in error in concluding that s 109 inconsistency existed between the provisions of s 83 of the Crimes Act and the provisions of Corporations Law.

53 On 16 March 2009 the prosecution filed, pursuant to s 6 of the Crimes (Criminal Trials) Act 1999 a summary of the prosecution opening. It asserted that between 1996 and 2001 five betting accounts were opened with IASbet.com, three of which were in the name of Mr Maiolo, one in the name of the co-accused Mr Drakos and one in the name of an RFS employee, Liane Warwick.

54 In the prosecution opening it was said in relation to the false accounting counts generally:-

The way in which was done is simple. The evidence will be that Mr Maiolo or Mr Drakos used the RFS Australia cheque book to write cheques to IASbet, for gambling purposes. However when it came to recording the payment to IASbet in the accounting records of RFS Australia, Mr Maiolo, or a person under the instruction of Mr Maiolo, recorded the payment as either -

(a)...

(b)...

(c) intangible assets Haratan Pty Ltd - Kalmetron patent;

(d) intangible assets Haratan Pty Ltd - Kalmetron patent.

(e) ...

The prosecution says that this is the (sic) false.

In relation to counts 15 and 16 the prosecution case was spelt out clearly in relation to the falsification of the entries[32] - Mr Akakios, the accountant, prepared the balance sheet and the information provided for the entries came from Mr Maiolo relating to the Kalmetron patent. He told Mr Akakios that he had all the documentation to support the entries.

55 The prosecution case on counts 15 and 16, depends upon the evidence of Mr Peldan, the liquidator, and Mr Akakios. Mr Peldan, it was said, would state that no patent or licence in relation to Kalmetron could be located. According to Mr Peldan this had two consequences - the true nature of the payment was disguised and the true nature of the company's financial position was misstated in relation to the asserted asset. As I have said Mr Akakios' evidence, as summarised in the opening, and consistent with his statements, was to the effect that he was instructed by Mr Maiolo as to the quantum of the licence and patent in respect to both the 30 June 2001 (count 15) and 30 December 2001 (count 16) balance sheet entries.

56 The defence response asserted that the prosecution could not prove that Mr Maiolo made or concurred in the relevant entries. It asserted that RFS Australia paid for the rights to Kalmetron which were properly described as licence and patent purchases. It went on to say that RFS Australia owed $5 million to one Mark Peters for the Kalmetron licence agreement and that this was offset by Mr Maiolo covering losing bets made with IASbet on behalf of Peters. It was said, accordingly, that this use of funds was a legitimate company purpose that nowhere was it asserted that the prosecution case on counts 15 and 16 failed owing to its inability to produce the original financial statement.

57 In the course of subsequent pre-trial argument the prosecutor tendered documents purporting to be the 30 June 2001 balance sheet of RFS Australia and 30 December 2001 balance sheet, each of which included the reference to the Kalmetron patent.[33] For some inexplicable reason the prosecutor originally argued that these copy documents were, in fact, "originals". When written submissions were filed on 23 March 2009,[34] the prosecutor conceded that each financial statement (i.e. the relevant part being the page of the balance sheet)[35] was a photocopy of the original financial statement. The prosecutor also relied upon an additional statement (unsigned) of Mr Akakios, the accountant, asserting that each was a true copy of the document that was prepared by him - in relation to count 15 for the purpose of lodging a tax return for the Australian Tax Office and in relation to count 16 for a purpose that he could not recall.

58 In the reasons delivered in the morning of 10 August her Honour emphasised the apparent inability of the prosecution to identify the "originals" of the two balance sheet entries and the nature of the prosecution case:-

1. 38. It is vital in a case such as this where the Crown relies upon the making of a false document, to identify the precise document that the Crown alleges has been falsified. This is because a document may first be created (the original) and then reproduced on many subsequent occasions and by different persons for different purposes. Each such reproduction may be a document in its own right for the purposes of section 83. To rely on more than one document per charge may render the charge bad for duplicity. Alternatively, any guilty verdict may be uncertain since it would not be known which document or documents were found to constitute the offence. It is particularly significant in this case because of the way the count was pleaded.

It is to be noted that whilst counts 15 and 16 asserted that Mr Maiolo falsified the accounts it was clear from the prosecution opening[36] that the prosecution relied not upon Mr Maiolo physically making the entry but rather the alleged instructions given by Mr Maiolo to Mr Akakios - as I have already mentioned. This was all the more apparent once the additional statement of Mr Akakios was provided.

59 Her Honour then noted that the charge was laid under s 83(1)a, of the Crimes Act and went on to say in relation to count 15:

1. 46. However, the Crown does not which act of the accused was an act of falsification. It is important to bear in mind that the charge is laid and pleaded in accordance with sub-section(a) and not sub-section(b). Moreover, there is no evidence whatsoever that the accused had knowledge of this particular document or was party to the making of the document. Despite the prosecutor being on notice about this, no application was made to amend the form of Count 15.
2. 47. The Crown case is that Mr Peldan, the liquidator, requested a copy of the relevant financial record and that Mr Akakios, without reference to Mr Maiolo, produced the photocopy which is Exhibit 15.1. There is no evidence that the accused is connected to or was aware of the existence of that specific photocopy document. The argument before me proceeded on the basis of Exhibit 15.1. However, very late in the proceedings, in reply, the Crown yet again changed its position despite the earlier assurance that the case was now in final form: see written submission regarding Counts 15 and 16. The Crown now relies on the photocopy as the best evidence of the falsification that occurred in the original financial statement. However, the Crown submits that this document was prepared by Mr Akakios for the purposes of lodging a taxation return with the Australian Taxation Office: see paragraph 6 of written submissions.

In relation to Count 16, her Honour again noted the change in the position taken by the prosecution as to what the particular exhibit disclosed. Her Honour then went on to say:

1. 56. The Crown also concedes Exhibit 16.1 was produced by Mr Akakios, the accountant, and not the accused. Mr Akakios prepared the document and then made a photocopy of the original. The photocopy becoming Exhibit 16.1, for his own file. There is no suggestion that Mr Maiolo was ever consulted about production of the photocopy or the use of the photocopy once it was made by Mr Akakios. Nor is there any suggestion that he knew of its existence.
2. 57. At the close of the defence arguments, and in reply, despite the earlier assurance of the Crown about the finality of the form of the Crown case, the Crown changed its position on this document as well and now seeks to rely on Exhibit 16.1 as the best evidence of the original document which it argues was falsified by the accused: see written submissions regarding Counts 15 and 16 filed on behalf of the prosecution. Compare also Summary of Prosecution Opening, pages 96 to 103, paragraphs 270 through to 283. The two documents, that is the original and the photocopy were created for different purposes. Again, this charge seems to follow the wording of sub-paragraph(a) of s 83(1) and not sub-paragraph(b). The charge alleges that the accused falsified the document, not that he furnished information knowing it be false, misleading or deceptive. No application has been made to amend the form of this count."

Finally her Honour concluded after dealing with the s 109 invalidity point:

If I am wrong [on the s 109 point] I would in any event have found the Crown cases foredoomed to failure for the reasons previously identified. The right to permanently stay proceedings when the Crown case is foredoomed to failure is well established. I need not repeat all of the relevant authority.

60 I have extracted large portions of her Honour's ruling, as I think it necessary to identify exactly what it was that convinced her Honour that the two counts were foredoomed to fail. As I follow her Honour's reasons she was satisfied that the inability of the prosecution to adduce evidence of the original of the two balance sheets entries meant that each of the counts could not be made out. This appears to be based upon her Honour's perception that the prosecution case turned on proving that Mr Maiolo himself falsified the entries. Her Honour also appears to have taken the view that the prosecution could only prove on Mr Akakios' evidence that the entries were made for taxation purposes.

61 The principles relevant to the stay of proceedings on the basis that they could be "clearly seen to be foredoomed to fail" were described by the High Court in Walton v Gardiner[37] and later by the Court of Appeal in R v Smith.[38] In Smith Brooking J said:

Time and again it has been said that it is only in exceptional circumstances that a proceeding, civil or criminal, will be stayed on the ground that it constitutes an abuse of process...it is because the power to grant a permanent stay is in essence a power to refuse to exercise jurisdiction that the power is exercisable only in exceptional cases or, as was said by Mason CJ, Wilson and Dawson JJ in Attorney General (NSW) v Watson ('sparingly and with the utmost caution') (citations omitted)[39]

It is not a use of the process of the courts for a purpose alien to the administration of justice under law (Williams v Spautz to make an unsuccessful claim if all that can be said is that the claim failed because the plaintiff or prosecution did not make out a case to answer. Process is not abused merely because it is employed without success. The very function of the courts is to hear and determine claims, sound and unsound, and to filter out those which are unsound, not (save in extreme cases, where a stay or other summary order may be appropriate) by declining to deal with them in the usual way, but by hearing and determining them. ... Time and again it has been said that it is only in exceptional circumstances that a proceeding, civil or criminal, will be stayed on the ground that it constitutes an abuse of process...(citations omitted)

I know of no previous case, reported or unreported, in which it has even been argued by an applicant, let alone judicially determined, that a civil or criminal proceeding should be stayed as an abuse of process because it will not be possible for the plaintiff or prosecution to prove some fact essential to the judgment sought.

To my mind, however, the no case test simpliciter is not the appropriate one for a case such as the present. It is evident from the expressions used in the passages quoted above from Walton v Gardiner that, for a successful stay application of the kind before us, the case must be not merely incapable of success but 'clearly foredoomed to fail'; or in the words of Brennan J the vice is the institution of proceedings 'which will inevitably and manifestly fail'. ... It is sufficient that I refer to the dictum of Dixon J in Cox v Journeaux (No.2) at 720;

'The inherent jurisdiction of the Court to stay an action as vexatious is to be exercised only when the action is clearly without foundation and when to allow it to proceed would impose a hardship upon the defendants which may be avoided without risk of injustice to the plaintiff ...[40]

62 Accordingly the question to be answered is whether this was such an exceptional case on the material before the Court that her Honour could be satisfied that it would "inevitably and manifestly" fail.

63 I respectfully disagree with her Honour's conclusion on this issue.

64 Notwithstanding the somewhat shifting nature of the prosecution's case, it was never narrowed to assert that Mr Maiolo had made the entries himself the subject of counts 15 and 16; to the contrary, given Mr Akakios' evidence, it was clear that its case had to be (as it was put in the opening), that Mr Maiolo instructed Mr Akakios to make the entries and that when such instructions were given, Mr Maiolo knew that the entries were false. As Lord Ulverstone said of a charge under the Falsification of Accounts 1875 in R v Oliphant[41]

It was said on behalf of the defendant that the fact that entries in the book were made by the defendant's employer prevented the case from coming within the statute; but the case of R v Butt is sufficient authority to shew that the argument cannot be seriously pressed; it is only necessary to refer to the judgment of Lord Coleridge CJ in that case to shew that an omission from an entry made by an innocent person under the direction of another is an omission by that other within the meaning of the statute[42]

It was not necessary for the prosecution to establish that the entries were actually made by Mr Maiolo as her Honour appears to have thought was necessary.

65 Nor, in my view, was it necessary for the prosecution to be able to provide the "originals" of the two balance sheet entries. Its case turned on the instruction to make the entries. Her Honour was understandably dissatisfied with the shifting nature taken by the prosecution in relation to the status of each of the two tendered exhibits. Notwithstanding this, by the time her Honour came to deal with the stay application the prosecution's position was clear: Mr Akakios would give evidence that he was instructed to make the entries in the form contained in the two exhibits.

66 On the basis of Mr Akakios' evidence, the exhibits were evidence of the entries made in the balance sheets upon the instructions of Mr Maiolo. In those circumstances it was open to the prosecution to argue that it could rely upon the exhibits, even if copies, as being admissible secondary evidence of the allegedly false entries - as it postulated in the submissions filed on 23 March 2009. [43]

67 Indeed her Honour's insistence upon the production of the "original" highlights another problem with this approach. The actual entries, it could be reasonably inferred, are made digitally and then one, two, or perhaps fifty sets of accounts are produced (or printed) for various persons or purposes. It is by no means clear what constitutes the original (is it the first produced by the printer? Or is it a signed version?) and what constitutes a copy. But what was apparent is that there was at least prima facie evidence of such entries in relation to the respective balance sheets as evidenced by the exhibits and the evidence of Mr Akakios as to his role. This was not a case where the allegation was one of forgery, nor could any question of duplicity of counts arise as there was only one relevant entry in each of the two balance sheets.

68 Finally, there is the question of Mr Maiolo's intent which appears to have played a part in her Honour's decision. It is true that in Mr Akakios' statement he said that the balance sheet for the year ended 30 June 2001 was prepared for income tax purposes. However this evidence, as counsel for the Director submitted, was irrelevant to the fundamental question - what was the intention of Mr Maiolo in giving the instructions to Mr Akakios. Although the prosecution case, was at times not altogether clear, this was somewhat understandable in relation to counts 15 and 16 as there were a number of possible alternatives: disguising the betting activities which utilised the company's funds, misrepresenting the size of the company's assets so as to deceive a potential purchaser or, and I suspect this is the least likely, endeavouring to obtain a taxation benefit. Unlike the position in MacPherson, where at the conclusion of the trial the special jury verdict enabled a conclusion to be drawn as to the intention of the accused here it was impossible to say with any certainty what the true position was. Ultimately it will be for the jury to determine whether any of these motives can be established or whether Mr Maiolo's version as set out in the defence response reflects the true position.

69 It may be that the prosecution should have been required to particularise both counts with more precision. However the filed opening and Mr Akakios' subsequent statement made the prosecution's position clear at the time of her Honour's determination. For the reasons I have set out the counts could not be said to be inevitably and manifestly doomed to failure.

70 Counsel for Mr Maiolo did not, in either his written or oral submissions, press the proposition that I should refuse the order sought by the Director on the basis that it would amount to fragmentation of Mr Maiolo's trial.

71 There is a well established principle that criminal proceedings should not be fragmented by other courts hearing applications relevant to the conduct of the trial by or against one or more of the participants in the criminal trial, except in exceptional or extraordinary circumstances.[44]

72 However, there are exceptions to this principle. The points determined by her Honour occurred prior to the empanelment of the jury. Each required the application of the legal principle. As the Appeal division of this Court made clear in Rozenes v Beljajev,[45] there is a significant difference between interfering with the decision of a trial judge at a preliminary stage as opposed to during the course of a trial.[46] Subsequently, the Full Court of the Federal Court in Flanagan v Commissioner of the Australian Federal Police[47] held that questions of law brought forward at an appropriate time may be viewed as an exception to the fragmentation principle and may be entertained on application for judicial review.

73 Given the issues dealt with by her Honour and the stage at which the trial had reached, this application is an appropriate exception to the fragmentation rule.

74 I am satisfied that her Honour was in error in staying counts 15 and 16. The fragmentation principle is not applicable in the circumstances of this application.

75 The Director is entitled to an order in the nature of certiorari quashing the order of the County Court on 10 August 2009 permanently staying the trial of Mr Maiolo on counts 15 and 16.

76 The Director does not seek costs and, subject to hearing from counsel for Mr Maiolo, there should be no order for costs.

[1] Commonwealth of Australia Constitution Act.

[2] Section 295 of the Criminal Procedure Act would now enable the Director to seek leave to appeal to the Court of Appeal against her Honour's decision.

[3] Residential Foundation Systems Pty Ltd, Residential Foundation Systems (NSW) Pty Ltd and Residential Foundation Systems (Vic) Pty Ltd.

[5] In the charges the spelling of Kalmetron is slightly inconsistent with the form of the entries in the balance sheet.

[9] [1996] 1 Qd R 656 ("MacPherson").

[10] Exhibit B on the application T 363.

[12] See Bow Ye Investments Pty Ltd v Director of Public Prosecutions [2009] VSCA 149; (2009) 72 ACSR 400, [70]-[75] ("Bow Ye")

[13] [1937] HCA 82; (1937) 58 CLR 618, 630.

[14] See also Loo v Director of Public Prosecutions [2005] VSCA 161; (2005) 12 VR 665, ("Loo") [5]; Bow Ye [70]-[73].

[15] Telstra Corp Limited v Worthing [1999] HCA 12; (1999) 197 CLR 61, [27] ("Telstra").

[16] Telstra [27]. See also IG Index PLC v New South Wales [2006] VSC 108; (2006) 198 FLR 132, [40] ("IG Index") and the authorities referred to by Bongiorno J.

[19] S 624 permits a Court to require a jury to return a verdict on a special issue.

[20] [1974] HCA 36; (1974) 131 CLR 338.

[22] [1989] HCA 59; (1989) 168 CLR 289.

[24] [1930] HCA 12; (1930) 43 CLR 472, 483. See also Clyde Engineering Co Ltd v Cowburn [1926] HCA 6; (1926) 37 CLR 466, 489; Victoria v The Commonwealth [1937] HCA 82; (1937) 58 CLR 618, Wenn v Attorney-General (Vic) [1948] HCA 13; (1948) 77 CLR 84.

[25] Section 10 Administrative Law Act.

[29] 202 CLR 535 [23]. See also Byrnes v R [1999] HCA 38; (1999) 199 CLR 1, Bond v R (2000) 201 CLR 213.

[30] [1977] HCA 34; (1976) 137 CLR 545, 563.

[32] [266]-[267] and [277]-[281] of the opening.

[33] Marked as 15.1 and 16.1 respectively and bearing bar code.

[37] (1992) 177 CLR 378, 393, see also Jago v District Court (NSW) [1989] HCA 46; (1989) 168 CLR 23.

[38] [1995] VicRp 2; [1995] 1 VR 10.

[39] [1995] VicRp 2; [1995] 1 VR 10, 14.

[40] See also Molyneux v Victorian Civil & Administration Tribunal & Anor [2007] VSC 89; (2007) 15 VR 531, 45-52.

[41] [1905] 2 KB 67.

[43] See Mack v Lenton (1993) 32 NSWLR 259, Sugden v St Leonards (1876) 1 PD 154.

[44] See Sankey v Whitlam (1978) 142 CLR 1, 25-26, 82-83; Elliott v Seymour [1993] HCA 70; (1993) 68 ALJR 173, 175; Beljajev v Director of Public Prosecutions [1991] HCA 16; (1991) 173 CLR 28, 31-32, Flanagan v Commissioner of the Australian Federal Police (1996) 60 FCR 149.

[45] [1995] VicRp 34; [1995] 1 VR 533.

[46] [1995] VicRp 34; [1995] 1 VR 533, 571.

[47] (1996) 60 FCR 149, 188.