Pratten v R

Catchwords

232 CLR 438 Baiada Poultry Pty Ltd v The Queen [2012] HCA 14246 CLR 92 BCM v The Queen [2013] HCA 4888 ALJR 101 Cesan v The Queen [2008] HCA 52236 CLR 358 Chapman v R [2013] NSWCCA 91 Cheung v The Queen [2001] HCA 67209 CLR 1 Cramp v The Queen (1999) 110 A Crim R 198 Fermanis v The State of Western Australia [2007] WASCA 8433 WAR 434 Gassy v The Queen [2008] HCA 18236 CLR 293 Handlen v The Queen [2011] HCA 51245 CLR 282 Hannes v Director of Public Prosecutions (Cth) (No 2) [2006] NSWCCA 373 KBT v The Queen [1997] HCA 54191 CLR 417 M v The Queen [1994] HCA 63181 CLR 487 MFA v The Queen [2002] HCA 53213 CLR 606 Mraz v The Queen (No 1) [1955] HCA 5993 CLR 493 Pratten v Commonwealth Director of Public Prosecutions [2013] NSWSC 594 R v Apostilides [1984] HCA 3811 VR 380 S v The Queen [1989] HCA 66168 CLR 266 SKA v The Queen [2011] HCA 13243 CLR 400 Walsh v R [2002] VSCA 98 Weiss v The Queen [2005] HCA 81

Judgment (17 paragraphs)

[1]

Background facts

Before August 2002 the appellant was a director of and, indirectly, a shareholder in an Australian insurer, Rural & General Insurance Ltd (RGIL) which insured small commercial business risks. From July 2002, due to a change in the prudential and licensing requirements for Australian insurers, RGIL ceased to underwrite new business and went into run-off (meaning that it continued in business but only to deal with claims and losses arising under insurance policies which it had issued before 1 July 2002). In August 2002 Rural & General International Insurance Ltd (RGII), which in March 2003 changed its name to CPI, was incorporated by BDO Barrett Partners (BDO Vanuatu), a Vanuatu based accounting firm. The principals or employees of that firm included Lindsay Barrett and Adrian Sinclair. The appellant described the latter as a "very good friend and business colleague" (6/166).
At the same time the appellant became a director of Rural & General Insurance Broking Ltd (RGIB), which then commenced to place commercial small business insurance with RGII/CPI from 20 August 2002 (1/184). Mr Aaron Stephenson was also a director RGIB. (He did not give evidence at the trial and it was not part of the Crown case that he was involved in any of the alleged offending). By an agency agreement made at about this time between RGIB and CPI, the latter authorised RGIB to issue cover notes and insurance contracts on its behalf (1/237). Under that agreement RGIB was entitled to a commission equal to 33 per cent of net premium income (1/279). The risks insured by CPI were reinsured and from December 2005 that reinsurance was placed through a London broker, Alsford Paige & Gemes Ltd (2/579). Don Cantwell was a broker with that company who gave evidence at the trial. He first met the appellant in 2005. The appellant told him that CPI was set up to take over the business of RGIB (9/739-740) and that he had (at least) "an interest in" CPI (9/740,790-791).
Up to June 2004 RGIB remitted premiums received for policies issued on behalf of RGII/CPI to a trust account of VITCO, a company controlled and administered by BDO Vanuatu. After June 2004, those premiums were remitted to an account of IFTCO, which was controlled and administered by another Vanuatu accounting firm, PKF Vanuatu. At the same time two companies associated with that firm, Astrolabe Ltd and Astrolabe Nominees Ltd were appointed as the directors of CPI (2/692). The principals or employees of PKF Vanuatu included Robert Agius, Iain Johns and Kelly Fawcett.
In each of the financial years ending 30 June 2002 to 30 June 2009 substantial payments were made out of the VITCO and later IFTCO accounts. Some of those payments (totalling $2,913,008 over the seven year period) were made directly into a personal bank account of the appellant conducted with the St George Bank in Sydney. The remaining payments (totalling $2,096,725 over the same period) were made to third parties and applied either in the acquisition of assets in the names of those parties or in the payment of moneys owing to them by the appellant. The evidence as to these receipts and payments was given by Ms Celona, a forensic accountant, who prepared an analysis of the VITCO and IFTCO transfers and of payments into and out of the appellant's St George Bank account. The assets acquired were a Robinson R44 helicopter, a motor vessel named "Los Lobos", four properties, a business at Stroud (a small country town north of Newcastle in New South Wales) and a Mitsubishi truck. The expenses were the school fees of the appellant's two daughters, rent on a Darling Point property in Sydney, which was occupied by the appellant, and architectural fees for a proposed residence at Port Vila in Vanuatu.
Each of the assets was purchased in the name of an entity other than the appellant. The helicopter was purchased in the name of Sonarpia Pty Ltd as trustee of the Pratten Family Trust using funds which were said by the appellant to have been lent to him by CPI (11/106). The appellant and his daughters were named as primary beneficiaries of that discretionary trust which was formed in May 2003 (2/558, 576). In 1998 the motor vessel was owned by Trop Sun Pty Ltd (6/81), a company controlled by the appellant. That company was later renamed 71 Cowper Street Holdings Pty Ltd (71 Cowper St) (6/394). It also held a 66 per cent shareholding interest in RGIB (2/513). In November 1999, the appellant and Global Nominees Ltd, a BDO Vanuatu nominee company, became registered as owners or operators of the vessel (6/80). That remained the position in 2003. In March 2005 IFTCO asserted that the owner of the vessel was Astrolabe Services Ltd, another company associated with PKF Vanuatu (6/86). In May 2011 the appellant asserted that he was the beneficial owner of the vessel (6/103).
Three real property assets, "Skallet" at Tereel Road, Ward's River (a grazing property), the Macedo Block (a 50 acre block adjoining "Skallet") at Tereel Road, Ward's River and what was referred to as the Stroud Development Block (at Mill Creek Road, Stroud), were purchased in the name of Pacific Property Investments Ltd (PPI), a Vanuatu incorporated company (6/516, 517). Before June 2004 the sole director of PPI was Global Nominees Ltd (6/523), a BDO Vanuatu nominee company. From July 2004 PPI was "administered" by PKF Vanuatu (6/531-534) and its directors were Astrolabe Ltd and Astrolabe Nominees Ltd (6/346, 538, 539). The appellant was aware of and involved in the move of his, PPI's and CPI's affairs from BDO Vanuatu to PKF Vanuatu. For example, on 20 June 2004 he sent an email to Iain Johns attaching a communication received from Lindsay Barrett regarding PPI's purchase of the Stroud Development Block which was proceeding at that time. The appellant said "I will talk to you later about how things work" (6/539A). The shareholders in PPI as at January 2006 were two Vanuatu incorporated companies, Garde Ltd and Tenir Ltd (6/549-550).
At some stage the appellant commenced a cattle farming business on the "Skallet" property. That business was named Myidaho or Myidaho Natural Beef. In September 2008 the appellant, in a finance application in relation to that business (5/39), said that he was "just starting to operate my farm enterprise as a business unit thus, I do not expect any income until later in this financial year" (5/36). Financial statements for that business prepared in September 2009 included expenses of $27,399 (2005) and $41,510 (2006). The Stroud Hardware Store business and property, and a cattle truck, were purchased in the name of 71 Cowper St. At least two of the three issued shares in that company were held by the appellant (2/513, 6/392). The evidence was that the $222,000 transferred from VITCO for the purchase of that property and business was secured by a mortgage given by 71 Cowper St in favour of PPI (wrongly described in the mortgage as Pacific Properties Pty Ltd) (6/420, 422).
The third party payments relating to particular properties, assets or expenses were spread over more than one tax year. For example, payments were made in relation to the helicopter in the financial years ending 2005, 2006 and 2008 and payments were made in relation to the "Skallet" property in the financial years ended 2003, 2005, 2006, 2007 and 2008. Details of those direct and third party payments are shown in the table attached to this judgment as Schedule 1.
The appellant's tax returns for the years ending 30 June 2003 to 30 June 2005 were prepared by John Greer of Griffiths Forrest & Greer, accountants. The returns for the following years were prepared by Stuart Berry and Megan Hamberger of Addison Partners Pty Ltd. (It was not part of the Crown case that either of these accounting firms or any of these persons was knowingly involved in any of the alleged offending.)

[2]

Introduction

Ground 1A is: "The trial judge erred in failing to direct the jury that, in respect of each count on the indictment, they must be unanimous with respect to any particular financial advantage dishonestly obtained by the appellant by deception."
The present case is not one that is said to involve duplicitous counts or in which the Crown led evidence of multiple offences which answer the description of the offences charged: as to which see the discussion in S v The Queen [1989] HCA 66; 168 CLR 266 at 284-286 (Gaudron and McHugh JJ), Walsh v R [2002] VSCA 98 at [39]-[43] (Phillips and Buchanan JJA, Ormiston JA agreeing) and Hannes v Director of Public Prosecutions (Cth) (No 2) [2006] NSWCCA 373 at [4]-[17], [89] (per Basten JA).
For each count the deception was alleged to be constituted by the appellant representing, by the lodging of the return, that the amount of income declared constituted the whole of his ordinary income for that financial year. The Crown sought to establish the fact of that intentional deception by the existence of the "disputed" payments which were said to constitute income that was knowingly not declared as income, resulting in the appellant dishonestly obtaining a financial advantage. That advantage was being assessed liable to pay an amount of tax less than the amount that would have been assessed had the non-disclosed income been declared.
The appellant says that for the jury to convict in respect of any particular count it had to be satisfied that at least one of the disputed amounts constituted income which he had dishonestly failed to declare in a tax return. If the jury was satisfied that a particular amount was knowingly not disclosed as income, it could be satisfied that there had been an intentional deception and that he had obtained a financial advantage by that deception. It followed, the appellant argued, that although the Crown relied upon the knowing non-disclosure of a number of payments to prove the elements of the offence the proof of the knowing non-disclosure of any one of those payment in a particular year entitled the jury to convict on the count for that year. Because it was open on the evidence for individual jurors to be satisfied that different disputed amounts were income, it was necessary that a direction be given that if they were not agreed that a particular amount was income knowingly not disclosed, they should put that amount out of consideration when addressing whether there was an intentional deception which resulted in a financial advantage dishonestly obtained.

[3]

The circumstances in which a unanimity direction is or may be required

As Phillips and Buchanan JJA observed at [43] in Walsh, the question of "unanimity can arise when only one offence is charged and only one offence is proved but the jury is presented through the evidence led with more than one route to determine guilt". In such a case the question is whether the jury must be directed to be unanimous, not only in the verdict, but also in the route by which that verdict is reached. An understanding of the circumstances in which such a direction is required is assisted by a review of some of the intermediate appellate Court decisions which have addressed it.
In R v Brown (1984) 79 Cr App R 115 the offence charged was that the accused fraudulently induced four persons to enter into agreements to acquire shares in a company by making misleading statements. In relation to each of the four counts the prosecution relied on the making of at least four different statements as constituting the fraudulent inducement.
The jury asked the judge two questions which were dealt with in the summing up. The second question was whether "If the individual members of the jury find him guilty of different parts of the count, is he guilty on the whole count, and is the verdict of guilty unanimous?" In answering that question, the trial judge said: "It does not matter that some of you are satisfied that one of the various statements is made out, and others of you are satisfied not about that statement being made out but that another is made out. It is sufficient if you are all agreed that there was a dishonest inducement. So if you find some of you are satisfied that representation A was made out, some of you are not satisfied about that but are satisfied that representation B was made out, then it does not matter, provided that you are all satisfied that there was the dishonest inducement made and that it operated upon the mind of the person to whom it was made and caused him to act in the way that he did."
The English Court of Appeal (Eveleigh LJ, Robert Goff LJ and Hollings J) upheld the accused's argument that in answering that question the judge misdirected the jury. Eveleigh LJ, delivering the judgment of the Court, said at 117: "Counsel for the appellant was correct in his submission that it is a fundamental principle that in arriving at their verdict the jury must be agreed that every single ingredient necessary to constitute the offence has been established. The false statement is an essential ingredient." and at 119: "In a case such as that with which we are now dealing, the following principles apply: 1. Each ingredient of the offence must be proved to the satisfaction of each and every member of the jury (subject to the majority direction). 2. However, where a number of matters are specified in the charge as together constituting one ingredient in the offence, and any one of them is capable of doing so, then it is enough to establish the ingredient that any one of them is proved; but (because of the first principle above) any such matter must be proved to the satisfaction of the whole jury. The jury should be directed accordingly, and it should be made clear to them as well that they should all be satisfied that the statement upon which they are agreed was an inducement as alleged." This statement was referred to with approval by Lord Ackner in the decision of the House of Lords in R v More [1987] 1 WLR 1578 at 1583-1584.

[4]

The elements of the offence charged

The physical elements of the offence charged are the conduct constituting the deception and the result of that conduct which is the obtaining of a financial advantage. The deception must be intentional or reckless (s 133.1). In this context, a person has intention with respect to conduct if he or she means to engage in that conduct (s 5.2(1)). The obtaining of the advantage must be dishonest (s 134.2(1)(a)) and accordingly it must be shown that the accused acted dishonestly according to the standards of ordinary people and knew that in obtaining that advantage he was acting dishonestly (s 130.3). Section 134.2(1)(a) requires that the financial advantage be obtained "by" the intentional deception which in this case was the deliberate non-disclosure of assessable income.
To make out these elements of the offences charged, the Crown had to establish for each tax year that the appellant derived income that was not disclosed in the return lodged, that he knew or believed it was income, and that his failure to declare that income resulted in him dishonestly obtaining a financial advantage from the Commonwealth, namely the issue of an assessment of taxable income that was lower than it would have been had that income been taken into account. The requirement that the financial advantage be obtained "by" the intentional deception ties the advantage to the income which is the subject of the deception.
It is in this respect that the present case differs from one where the offence charged is obtaining property or money by deception and it is alleged that there were several discrete misrepresentations each of which resulted in the obtaining of the property or money by deception. In such a case the jury must be unanimous as to at least one of the misrepresentations and that it resulted in the obtaining of the property or money. In the present case, although there is only one representation constituted by the lodging of the return for the particular tax year, the respect in which it is deceptive and results in the dishonest obtaining of a financial advantage may be proved by the knowing non-disclosure of discrete amounts of income. It is not, however, sufficient to prove an intentional deception by the non-declaration of one amount of income if the financial advantage relied upon results from the non-disclosure of another. In such a case, the financial advantage would not be "by" the intentional deception or justify a conclusion that the obtaining of that advantage was "dishonest".

[5]

The Crown case

The Crown case was that the payments, direct and third party, were ordinary income derived by the appellant from the operations of CPI. Those payments were not distributions from a trustee to a beneficiary or loans or to be treated as fringe benefit payments. Nor were they payments to the appellant as agent for a third party or in reimbursement of expenses paid on behalf of a third party. They were derived by the appellant, either as remuneration for services provided to CPI, or by way of distribution of its profits. The non-declaration of those payments was alleged to have been an intentional deception and to have involved the appellant dishonestly obtaining a financial advantage by that deception. In the Crown's opening, the jury was told that it was for them to find what the income was "that should have been included" in the returns (8/49). The jury was also told that it would be suggested by the accused that the amounts received were loans, notwithstanding that there were no loan documents or other arrangements for repayment (8/68).
In its closing address, the Crown described the fundamental issue as being whether the money paid directly to the St George bank account and to third parties was income that should have been declared by the appellant (10/1729). The appellant was said to have obtained a financial benefit if his income tax assessment was lower than it would have been "had the return included the disputed amounts" (10/1729).

[6]

The defence case

In his short opening to the jury, the appellant's counsel said that the defence case would focus on apparent differences between the various amounts said to have been income - moneys paid to third parties and used to acquire assets in their names, moneys received by the appellant on behalf of another party and moneys received by the appellant by way of loan (8/71). Those differences were said to be relevant not only to the characterisation of the payments as income but also to whether the appellant might have had an honest belief that they were not income.
The defence case was directed to raising a doubt as to whether all and any of the amounts received by the appellant or at his direction paid to third parties, or for their benefit, were income. That was the only way in which the appellant could meet the allegations made against him because the Crown case was that there would have been an intentional deception and financial advantage obtained dishonestly in any relevant year if some income for that year knowingly was not disclosed.
In his closing address, defence counsel referred to several matters about which the jury should have a "reasonable doubt" (10/1914-1916). The first was whether the Crown had established that the payments made came from CPI. The second was whether the third party payments used to purchase real property were income of the appellant. (Although this was not part of any closing submission, the premise of the Crown case was that those payments represented advances made to those third parties by the appellant from payments received from CPI. Other possibilities could have included that they were payments made from the third party's own funds held by CPI or from funds borrowed by the third party, as appeared to be the case with 71 Cowper St.)
The third was whether the payment used to purchase the helicopter in the name of the family trust ($180,000) had been borrowed by the trust from CPI. The fourth was that the fact that the trust was the owner of the motor vessel did not mean that money received by it was ordinary income of the appellant. (In fact the evidence suggested that the vessel was owned by a Vanuatu nominee company on behalf of the appellant. The possibility nevertheless remained that any moneys used by that company for that purpose were drawn from its own funds or from funds borrowed from CPI or some other entity.) The fifth was related to the second and third and was that there was some evidence that the loans from PPI to 71 Cowper St to purchase the Stroud Hardware Store property and business and from CPI to the family trust to purchase the helicopter, were repaid. The sixth was that there was also evidence that CPI had made significant loans to the appellant and that approximately $800,000 of those loans had been repaid. (That evidence was the accounts of CPI for the period ended 30 June 2009 which were dated 21 May 2012 and signed as audited by Mr Kym Butler (2/735, 734). This was well after the appellant became aware that his tax affairs were the subject of investigation on 3 December 2008, when search warrants were executed at properties owned or occupied by him.)

[7]

The summing up

The jury were given a document titled "General Written Directions" and a document titled "Tax Law Directions". Those directions were also referred to in the trial judge's summing up. The General Written Directions included the following: "4. The fundamental issues in contention, in relation to each charge: a) Was the amount, in relation to each year, income of Mr Pratten? and b) If the amount was income of Mr Pratten, did he act dishonestly when he failed to declare it? … 7. In other words, in this case, in relation to each year that is subject to a charge, you, the jury, must be satisfied: a) That there were amounts of income received by Mr Pratten that were his income and not declared; and b) He acted dishonestly in not declaring them. The second element in (b) above, involves a number of aspects: (i) Dishonesty or "dishonestly" is to be given its ordinary meaning; (ii) In order to have acted "dishonestly", Mr Pratten, in the circumstances of this case, must have: • Know the amounts were income in his hand; • Deliberately failed to declare them; and • Acted with the purpose, by deceiving the Commonwealth, of obtaining a financial advantage."
In his summing up the trial judge made similar observations as to the matters in issue. They included (1/62-64): "[63] … If the disputed amounts to which the Crown have referred were income of Mr Pratten, then it was required to be declared and, since it was not declared, there was a financial advantage. But the real issue, in that respect, depends on whether it is income. [64] The fundament issues in contention as I point out in [4] in relation to each charge is was the amount, in relation to each year, income of Mr Pratten, and secondly, if the amount was income of Mr Pratten, did he act dishonestly when he failed to declare it?" … "[69] As I say in 7, in other words, in this case, in relation to each year that is subject to a charge, you the jury must be satisfied firstly, that there were amounts of income received by Mr Pratten that were his income and not declared, and he acted dishonestly in not declaring them" … "[71] If there be, in relation to any charge, a rational basis, on the evidence that you, the jury, accept, that the disputed amounts received were not income, you must return a verdict of not guilty to that charge (and if that applies to all charges, you would return a verdict of not guilty to all charges)." … "[72] Even if, on your view, there is no rational basis for the amounts been other than income, you must return a verdict of not guilty, firstly, if there be a rational basis for the view that Mr Pratten did not know it was income at the time the income tax return was lodged, or if there be a rational basis for a view that Mr Pratten was not acting dishonestly".

[8]

Why a specific unanimity direction was required in this case

The Crown submits that the jury must have understood these directions as referring to the disputed amounts as an undifferentiated whole and as requiring that it address whether the Crown had proved guilt on that basis such that the jurors had to agree that all disputed amounts in each year were income dishonestly not declared and that their verdicts should be understood on that basis.
We are unable to accept this submission. At the very least the jury may have understood (correctly) that all that the Crown was required to establish was that any one disputed payment, or group of disputed payments having the same characteristics, was or were income which was deliberately not declared.
We have set out earlier in these reasons the direction as to unanimity which the trial judge did give. Having regard to the evidence led in the Crown case, the instruction that the jurors did not have to agree "on the same reasons" for their verdict and that they may place a different emphasis "on different aspects of the way in which the matter has been argued" may have left them believing that they did not have to be unanimous as to the basis upon which there had been an intentional deception and the obtaining of a financial advantage before returning a unanimous verdict of guilty for a particular count.
In his summing up, the trial judge referred to various of the arguments put on behalf of the defence. When doing so he drew attention to the various payments in dispute and different questions which arose in relation to the characterisation of those payments as income. For example (1/78): "[143] It is necessary that I tell you, that because what you see in evidence are payments by companies for land; payments by a Trust company for land and of itself; and without more that would not be illegal or taxable (or not in the hands of Mr Pratten in any event), because ultimately you will have to be convinced this [was] income of Mr Pratten personally, not income of the Trust, not income of one the companies, but income of Mr Pratten personally."
When addressing arguments of the defence in relation to specific disputed payments, the trial judge recognised that it was open to the jury to conclude that some only of those payments were income. The trial judge (correctly) did not direct the jurors that in that event they must find the appellant not guilty of the charge for the relevant year.

[9]

Conviction appeal: ground 2

Ground 2 is: "The trial judge erred in failing to direct a verdict of acquittal and in failing to find there could be no financial advantage by way of understatement of taxable income in a tax return in the circumstances where an amended assessment has been issued and where the General Interest Charge and Administrative Penalties are levied."
In the course of the trial, the appellant applied for a verdict by direction on each of the counts in the indictment on the basis that there could be no financial advantage by way of understatement of taxable income in circumstances where an amended assessment has been issued and the general interest charge and administrative penalties have been levied. In a judgment delivered on 28 May 2012, the trial judge rejected that application (1/128-136). This ground of appeal argues that the trial judge erred in doing so and in leaving to the jury the question whether the appellant could have obtained a financial advantage by way of understatement of his taxable income.
The appellant makes three submissions in support of this argument. First, it is said that his liability to income tax arises at the time income is derived notwithstanding that the tax is only due and payable and the subject of a debt due to the Commonwealth when a notice of assessment has issued. It follows, it is said, that there could be no financial advantage obtained by filing a false tax return if the financial advantage alleged is a reduction in the taxpayer's ultimate liability to pay tax. That argument may be put to one side because that is not the financial advantage upon which the Crown relied.
The Crown case was that the financial advantage obtained by not declaring income was the amount by which the income tax that the appellant was deemed, by the lodging of the return, to be assessed as liable to pay, was less than it would have been had that amount been declared as income.
The statutory regime provided that income tax became due and payable by the appellant 21 days after the due date for lodgement of his return or after a notice of assessment was given, whichever was the later: s 204(1) of the Income Tax Assessment Act 1936 (Cth) (ITAA36). The appellant was deemed to have received a notice of assessment of his taxable income and of the tax payable on that taxable income on the filing of each of his tax returns: s 166A of ITAA36. The amount of tax which by s 204(1) then became due and payable was the amount specified in each return. Once that tax-related liability was due and payable, the amount of the tax was a debt due to the Commonwealth and payable to the Commissioner of Taxation: Taxation Administration Act 1953 (Cth), Schedule 1, s 255-5.

[10]

Conviction appeal: ground 3

Ground 3 is: "The trial miscarried because the Assessments were admitted into evidence: a) when they were not relevant and therefore inadmissible; …"
The assessments referred to are the notices of amended assessment issued by the Commissioner of Taxation on 4 August 2010 or 1 December 2010 relating to the relevant tax years (1/435-467). By those amended assessments, the Commissioner amended his assessment of the appellant's taxable income for each relevant year and his assessment of the amount of tax payable for that year. The appellant asserts that the evidence of those assessments was not admissible because it was not relevant to any issue in the trial.
The Crown contends that this ground should be rejected for three reasons. First, the evidence had limited relevance and the basis upon which it was admitted was such that it would have had little, if any, impact on the jury's deliberations. Secondly, the directions given to the jury were such that it cannot sensibly be argued that there was any prejudice to the appellant resulting from the admission of the evidence on a limited basis. Thirdly, the Crown says that leave under r 4 of the Criminal Appeal Rules should be refused because the admission of those assessments in evidence on that limited basis followed a considered forensic decision by the appellant's counsel to withdraw an objection made earlier in the trial.
The tender of the amended assessments was subject to objection in the course of a voir dire conducted on 14 March 2012, which was before the trial commenced. The ruling on the objection to that evidence was deferred until a Crown witness from the Australian Taxation Office, Mr Barns, was called to give evidence (1/44). More than two months later, on 21 May 2012, the amended assessments were sought to be tendered through Mr Barns (10/1512). Those assessments were the documents behind Tabs 18 and 19 of what became Ex P 150 (1/437-468). The assessments were admitted into evidence without objection subject to an order under s 136 of the Evidence Act 1995 (NSW) limiting the use to which they could be put to proving that the assessments had been made and issued (10/1519).
That agreement emerged on that day following an earlier discussion, in the absence of the jury (9/1273-1276). In that context, counsel for the appellant observed that if the amended or default assessments were admitted on a limited basis or subject to a direction warning the jury not to use them for all purposes then a subsidiary question arising in connection with the efficacy of a notice issued under s 264 of ITAA36 was likely to "fall away" (9/1276).

[11]

Conviction appeal: ground 4

Ground 4 is: "Insofar as the alleged financial advantage was grounded in taxable income, the trial miscarried by reason of the trial judge failing to direct the jury to be satisfied beyond reasonable doubt that deductions in connection with each item of allegedly undisclosed income did not exceed the relevant item of alleged income"
The essence of the appellant's argument is that the trial judge did not direct the jury as to the need to be satisfied beyond reasonable doubt that the appellant did not have deductions that were associated with any disputed amount or amounts of income and that those deductions had to be taken into account when considering whether there was a financial advantage obtained and, if so, whether that advantage was obtained dishonestly.
The Crown submits that the trial judge's directions were adequate and contends that except in relation to amounts held to be income associated with the helicopter and motor vessel, the defence made no real attempt to establish that there may have been allowable and unclaimed deductions for expenses which could have exceeded the amounts held to be income.
In our view, the closing submissions of the parties and the directions given by the trial judge were sufficient to make clear to the jury that when addressing questions of financial advantage and dishonesty, it was necessary to take into account not only the income which had not been disclosed but also whether there were any deductions associated with that income.
The trial judge directed the jury in relation to the relevance of deductions both in the Tax Law Directions and in the course of the summing up. The former included the following (1/110): "Taxable income. 22. Taxable income is calculated by determining the assessable income minus all allowable deductions and offsets. Deductions 23. A taxpayer may deduct from their assessable income any 'loss or outgoing' to the extent that it is incurred in gaining or producing their assessable income, or if it is necessarily incurred in carrying on a business or for the purpose of producing assessable income. 24. A taxpayer may be able to claim, as a deduction, any tax losses arising from prior income years. 25. Where assessable income exceeds deductions, the balance is taxable income."
These directions were repeated in the summing up (1/71-72): "110 Paragraph 22 of WD2 basically repeats what has earlier been put in a little solilogy, namely, that taxable income is calculated by taking assessable income and subtracting all allowable deductions and offsets. 111 At paragraph 23 of WD2, I state that a taxpayer may deduct from their assessable income any loss or outgoing to the extent that it is incurred in gaining or producing their assessable income, of if it is necessarily incurred in carrying on a business or for the purpose of producing assessable income. 112 A taxpayer may be able to claim as a deduction any losses arising from prior income years. And lastly, on that sub-heading 'Where assessable income exceeds deductions' and this is quite obvious, 'the balance is taxable income.'"

[12]

Conviction appeal: ground 7

Ground 7 is that the verdicts resulted in a miscarriage of justice, or are unreasonable, or cannot be supported by the evidence.
This ground requires that the Court address "whether it thinks that upon the whole of the evidence it was open to the jury to be satisfied beyond reasonable doubt that the accused was guilty": M v The Queen [1994] HCA 63; 181 CLR 487 at 493; MFA v The Queen [2002] HCA 53; 213 CLR 606 at [25], [58]; SKA v The Queen [2011] HCA 13; 243 CLR 400 at [11], [12]. That involves the Court making "an independent assessment of the evidence, both as to its sufficiency and its quality": SKA at [14]; and disclosing in its reasons its assessment of the capacity of the evidence to support the verdicts: BCM v The Queen [2013] HCA 48; 88 ALJR 101 at [31]. It is not enough for this Court to consider only whether there is evidence to support the verdicts or whether there was evidence on which a jury could convict. We must determine whether notwithstanding that there is evidence upon which a jury might convict, "none the less it would be dangerous in all the circumstances to allow the verdict of guilty to stand": M at 492-493.
Taking account of our earlier discussion as to the need for a specific unanimity direction, we must make our own assessment of whether it was open to the jury to be satisfied beyond reasonable doubt that in each relevant tax year the appellant knowingly did not disclose some income and thereby obtained a financial advantage.
The first matter about which the jury had to be satisfied beyond reasonable doubt was that the appellant had an interest in CPI which entitled him to a share of its profits. The appellant was a major shareholder (indirectly) of RGIL, an Australian insurer. In 2002 RGIL ceased to issue insurance. At the same time an insurer with a very similar name, RGII, was incorporated in Vanuatu and the appellant and Mr Stephenson established RGIB. That broker then entered into an agency agreement with RGII/CPI. The premiums from the business RGIB introduced to CPI were paid initially into an account of VITCO, and later into an account of IFTCO. In 2005 Mr Cantwell, based on information provided to him by the appellant (9/729-730), put together an information memorandum to be used to place CPI's reinsurance program in the London market for the 2005/2006 underwriting year. That memorandum included the following statement (7/68): "Rural and General was a licensed Australian insurance company until 2002 when it was unable to meet the new standards set down by regulators (APRA) for Australian insurance companies; as a small niche market insurer, it decided to go into solvent run-off like many other similar companies in Australia. The management and shareholders of Rural and General obtained underwriting support from the Vanuatu Insurance industry and set up Commercial Pacific Insurance Ltd."

[13]

The real issue for the jury was not whether these payments made out of the VITCO and IFTCO accounts were funds of CPI. It was whether those funds were paid to the appellant or at his direction by way of loan, or to him as agent or recipient for another party, or by way of distribution of trust funds to him, or by way of reimbursement to him of expenses paid on another party's behalf.
Accounts of CPI for the years ended 31 December 2003, 31 December 2004, 31 December 2005 and 31 December 2006 and for the further period ended 30 June 2009 were in evidence. They disclosed that CPI made significant profits in those years and for that period and that those profits were available for distribution. Those accounts also showed CPI having made unsecured loans. The accounts for the period ended 30 June 2009 identified the borrowers as including the appellant ($2,559,427) and PPI ($826,760). The profits and loans shown in those accounts were (2/691-743): Year/Period ended Annual retained profits Accumulated retained profits Loans at period end 31/12/03 701,444 701,444 797,110 31/12/04 622,745 1,324,189 853,577 31/12/05 856,837 2,181,026 1,561,657 31/12/06 1,833,780 4,014,806 4,464,000 30/06/09 1,743,828 5,758,634 6,361,126

[14]

The accounts for the year ended 31 December 2004 are dated and signed in August 2005, as audited by Mr Kym Butler. Those for the year ended 31 December 2005 appear to have been audited in June 2008. The accounts for the period ended 31 December 2006 are signed and dated as audited in June 2008 and those for the period ended 30 June 2009 are signed and dated as audited in May 2012. The audit opinions for the periods ending 31 December 2005, 31 December 2006 and 30 June 2009 are qualified. Each contains a note that CPI did not provide details in relation to debts due from RGIB and commissions payable to it (2/714, 724, 735). The accounts for the period ended 30 June 2009 also record that well after the balance date, namely in January 2011, the appellant sold two shares in 71 Cowper St to CPI for $876,456 "to reduce the existing Unsecured Loan" (2/743).
The evidence was that in the period between January 2005 and June 2008, when PKF Vanuatu was "administering" the affairs of CPI and PPI, the appellant would make requests for payments from IFTCO either into his personal account or to a third party in payment of an expense or to enable an asset acquisition to proceed. Those requests took several forms. Some merely requested that Mr Johns "arrange payment of the following invoices by TT" (2/516, 520) or made a similar request of Mr Agius (2/517, 518). In others requests were made to "borrow" funds (2/521, 533, 535) or that funds be "advanced" (2/522, 524). Some requests by the appellant were made for "assistance in financing" purchases (2/530). A request made in August 2007 referred to a "confirmation that the loans are available" and made payment requests, some for "standard debts" and others in respect of "property settlements" (2/538). The "standard debts" included rent on the Darling Point property and fees paid to two private schools in Sydney (2/538). Payments of those expenses were made in the tax years ended 2005 through to 2009 and the amounts of the relevant payments are shown in Schedule 1 to this judgment.
There were other references in the evidence to moneys being advanced by way of loan from CPI to the appellant. For example, the telephone intercept recordings include a conversation on 3 December 2008 between the appellant and Mr Agius. That conversation was shortly after the search warrants had been executed on that day (2/492): "Appellant: … I said well hang on a second um that's not quite how it works um money goes off overseas to an insurance company not a brokerage the brokerage puts the money into an insurance company the insurance company then pays claims has expenses and then after all that there may be a profit depending on what the I-B-N-R is and then after that um after that I may take a loan from time to time and that's about it for which I you know may or may not pay interest on and I've got to pay it back one day so hello."

[15]

Conviction appeal: ground 8

Ground 8 is: "The verdict is unreasonable or cannot be supported by the evidence by reason of the inability on the evidence to exclude rational hypotheses consistent with innocence in respect of the financial advantage and by reason of the failure to call a material witness."
This ground raises two bases on which it is said that the verdicts are unreasonable or cannot be supported by the evidence. The first, directed to the question of financial advantage, was not developed in the appellant's written or oral submissions under this ground. To the extent that it was relevant to ground 7, we have addressed it in that context. The second argument is that there was a miscarriage of justice because of the Crown's failure to call Mr Kym Butler as a witness in its case. It will be recalled that Mr Butler audited the financial statements of CPI.
It is for the Crown prosecutor to determine the witnesses that the Crown will call in proof of guilt, subject at all times to the overriding principle that the Crown case must be presented according to the procedures and standards of a fair trial so as to accord fairness to the accused: see Whitehorn v The Queen [1983] HCA 42; 152 CLR 657 at 664 where Deane J observed: "Whether or not their names appear on the back of the indictment or information, all witnesses whose testimony is necessary for the presentation of the whole picture, to the extent that it can be presented by admissible and available evidence, should be called by the Crown unless valid reason exists for refraining from calling a particular witness or witnesses, such as that the interests of justice would be prejudiced rather than served by the calling of an unduly large number of witnesses to establish a particular point."
The Crown's failure to call a witness who was able to give relevant and admissible evidence concerning the central facts and events upon which the prosecution is based may be productive of such unfairness that, when viewed objectively in the context of the trial as a whole, results in a substantial miscarriage of justice: R v Apostilides [1984] HCA 38; 154 CLR 363 at 575, 577-578 (per curiam). Consideration of the questions whether a witness should have been called and whether the failure to call that witness has occasioned a miscarriage of justice can be determined only by reference to what is shown to be the significance of the witness' evidence to the issues at trial, the witness' credibility and reliability and any explanation of the Crown for not calling the witness: Whitehorn at 666.

[16]

Orders

We make the following orders: 1. Appeal against conviction is allowed. 2. The appellant's convictions are quashed. 3. There be a new trial of the appellant.

[17]

Amendments 22 April 2016 - Publication restriction removed. 27 April 2016 - Printable version of Schedule 1 added 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: 27 April 2016

The counts were in the same form. Count 1 charged: " TIMOTHY CHARLES PRATTEN Between about 17 August 2005 and 27 August 2005 at Sydney in the State of New South Wales did, by a deception, dishonestly obtain a financial advantage from the Commonwealth, by causing to be lodged with the Australian Taxation Office his personal income tax return for the financial year ended 30 June 2003 in which he failed to disclose all income derived by him during the financial year ending 30 June 2003."
In each of the seven tax years payments were made into the appellant's personal bank account, or at his direction to third parties, from trust accounts controlled by two Vanuatu accounting firms. Those were accounts of Vanuatu International Trust Co (VITCO) and International Finance Trust Company Ltd (IFTCO). Those payments were referred to in the trial as the "disputed payments", the dispute being whether they were income derived by the appellant and believed by him to be income.
A significant question in the conviction and sentencing appeals is whether in order to convict the appellant on each count the jury could have understood that they did not need to be satisfied that each and every disputed amount received or paid in that year was, and was believed by the appellant to be, income. The jury were not directed that they did not need to be so satisfied or that if they were not so satisfied they could convict the appellant provided that they were satisfied unanimously that a particular amount or amounts constituted income which was knowingly not disclosed. Nor was the jury directed that if they were not satisfied that all of the disputed payments in any particular year were income, they must find the appellant not guilty of the count for that year.
Neither the Crown nor the defence asked the trial judge to give any specific direction in relation to these matters. Because the offences charged were against a law of the Commonwealth, the following direction was given as to the need for unanimity as to any verdict: "39. Under the system of law that applies to Commonwealth offences with which you are dealing, your verdict, whether it be guilty or not guilt, must be unanimous. That does not mean each one of you must agree on the same reasons for your verdict. You may or may not. You may place a different emphasis on different parts of the evidence or even on different aspects of the way in which the matter has been argued. 40. Whatever paths you take to come to the ultimate conclusion, the final decision of either guilty or not guilty in relation to each charge must be the decision of all you unanimously before it can become your verdict."
The appellant argues that having regard to the way in which the trial was conducted and the summing up, the jury are likely to have understood (correctly) that they did not need to be satisfied that all of the disputed payments in any year were income in order to convict of the charge for that year. This gave rise to a risk that individual jurors may have concluded that the appellant was guilty on the basis of the knowing non-declaration for that year of different amounts of income. That being so, a direction should have been given which made clear that in order to convict of the charge for any year the jury had to be unanimous in their findings as to the particular amount or amounts of income which were knowingly not declared and the subject of the financial advantage obtained. In the absence of such a direction, it was contended that the appellant had not had a trial in which the elements of the offence had been explained correctly to the jury (see Mraz v The Queen (No 1) [1955] HCA 59; 93 CLR 493 at 514 (Fullagar J)).

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