R v Agius; R v Abibadra; R v Jandagi; R v Zerafa - [2011] NSWSC 1388 - NSWSC 2011 case summary — Zoe

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R v Agius; R v Abibadra; R v Jandagi; R v Zerafa

[2011] NSWSC 1388

Supreme Court of NSW|2011-11-08|Before: Simpson J, Mr P

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Source facts

Court

Supreme Court of NSW

Decision date

2011-11-08

Before

Simpson J, Mr P

Source

Original judgment source is linked above.

Judgment (3 paragraphs)

[1]

Judgment 1The four accused are charged with two counts of conspiracy: the first, to defraud the Commonwealth; the second to dishonestly cause a loss to the Commonwealth. The circumstances in which they are charged with two offences (which despite slight difference in language, are essentially the same) are set out in Agius v R, Abibadra v R, Jandagi v R, Zerafa v R [2011] NSWSC 367; on appeal, [2011] NSWCCA 119. 2On the indictment it is alleged that the first offence was committed between about 1 January 1997 and about 23 May 2001, and the second between about 24 May 2001 and about 10 April 2008. I was told during the course of interlocutory matters that it is expected that the end date of the second charge will be altered to 24 October 2006. 3The trial is expected to commence on 5 March 2012, with an estimated duration of in excess of three months. A very large amount of documentary material proposed to be tendered in the Crown case has been served, together with extensive witness statements. The parties have engaged in discussion and negotiation concerning the evidence, but, in respect of some matters, objections have been notified on behalf of the accused but have not been the subject of agreement. Accordingly, the parties have, pursuant to s 192A of the Evidence Act 1995 (Cth), sought pre-trial rulings. This judgment is concerned with those evidentiary matters. 4Although I have some familiarity with the general nature of the Crown case, I have not to date been provided with the material in its entirety. Such rulings as I have given, and am about to give, have been made in that context: accordingly, I made it clear that, in general, these rulings will be available for reconsideration as the evidence emerges, and as the picture becomes clearer. What follows are my views on the admissibility of certain items of evidence in the light of my present understanding of the Crown case, and represent the rulings I propose to make in the absence of altered circumstances. 5Of course, it is always possible that witnesses will give evidence not precisely in accordance with their statements and that, too, should it occur, may call for reconsideration. 6Before I turn to the issues for present determination, it is necessary to set out, as briefly as possible, the background as contended for by the Crown. I emphasise that what follows is an account of the Crown case as I understand it, and does not and cannot represent any findings of fact.

[2]

Background 7At relevant times three of the accused, Ms Carol Abibadra, Ms Deborah Jandagi, and Mr Kevin Zerafa, were accountants who worked, either as employees or partners, in a firm of accountants (Owen T Daniel & Co - hereafter "OTD"), the principal of which was Mr Owen Trevor Daniel. Mr Daniel, who is named in the indictment as an alleged co-conspirator, is dead. It will be convenient to refer to Ms Abibadra, Ms Jandagi and Mr Zerafa collectively as "the OTD accused". 8Mr Agius is resident in Vanuatu, and is involved in a number of companies registered in that country. He was an acquaintance, or associate, of Mr Daniel. 9An arrangement ("the Scheme") was devised by Mr Agius, or at least promoted by him, pursuant to which client companies of OTD were invited to "minimise" ("evade") tax. The arrangement involved companies controlled by Mr Agius invoicing the OTD client companies for "consultancy services", the invoices being paid by the OTD client companies, and recorded and claimed for taxation purposes, as deductible expenses. No consultancy services were, or were intended to be, provided. The invoices were false. The claims for deduction were fraudulent. The Scheme involved money paid by the OTD client companies being returned to them (subject to a deduction for "management"), but entered in their records as loans. Again, this was false. The "loans" were never intended to be repaid, and represented a return of the funds provided in so-called payment of the false invoices. (There were many more steps involved in the Scheme than is contained in the above sketch, which merely purports to establish an outline of the Scheme. Nor was it always the case that the false deductible expenses were attributed to consultancy services; on at least one occasion, a fabricated insurance policy was created.) 10As I presently understand the Crown case, it is that Mr Agius maintained overall supervision and management of the scheme - and his companies collected the "management fees". 11The evidence to be adduced by the Crown falls into a number of categories. It includes a large amount of documentary material, being financial and banking records identifying the chains of payments, and email and other communications. It will also include oral evidence from various directors or executives of the OTD client companies (many, if not all or most, of whom have been charged, pleaded guilty, and sentenced). 12Against that background I deal now with those documents to which specific objection has been taken. Many more objections were notified than those which follow. The parties have sensibly resolved many issues among themselves; others were resolved in the course of argument; in some cases, I delivered ex tempore rulings. The following items are those that remained, after argument, for determination. The company name which heads each of the following items is the name of the OTD client company to which the evidence relates.

Australian Safety Specialists Pty Limited ("ASS"). 13The principals of ASS were David Waller and Philip Waller. They began participating in the Scheme in about April 1998. 14The single document in relation to ASS to which objection is now taken on behalf of Mr Agius (but not on behalf of the OTD accused) is the print of a chain of four emails of 6 and 7 October 2004, between an employee of OTD (Ms Georgina Kalache, who has not provided a statement, but who the Crown anticipates calling as a witness), Ms Jandagi and Mr Zerafa. Each email bears the subject line: "Returned your call Debbie: Ken Matwejev on [mobile phone number] ... he would like to talk to you". In the second email of this chain, sent by Ms Jandagi to Mr Zerafa and Ms Kalache, Ms Jandagi refers to a client (unnamed, but it may be assumed to have been Mr Matwejev) asking about setting up an offshore company, and proposes a meeting with "Robert". (There is no dispute that "Robert" is Mr Agius.) In the next email, Mr Zerafa asks Ms Kalache to "keep a list of clients which want to see Robert next time he is here." He provided three names of individuals and one of a company to be included on the list. Against that are handwritten eight or nine names, one of which is crossed out. It is not known who handwrote the names, or when. One of the names is "Phil Waller", another is "Toni Hili". Mr Hili was also, on the Crown case, involved in companies that participated in the scheme, and was prosecuted. Other names are of individuals who do not feature in the Crown case. That, as I understand it, was the basis of the objection taken on behalf of Mr Agius. The objection was expressed in the following way, as recorded in the transcript of argument: "We don't know whose writing it is? More importantly, there are an assembly of names about which we know very little. There is a reference to an appointment. Unless one assumes that everything Mr Agius said and did was criminally inclined or pursuant to a conspiracy, one has to look at the documents assuming, with respect, his innocence. The Crown seems to be turning this on its head. For all we know, there is no evidence to the contrary, these visits were or the visits contemplated here were for entirely innocent purposes." The objection was characterised as one of relevance. 15I am satisfied that the document is relevant and has probative value, and that the inclusion of the names of individuals that are not expected to feature in the evidence is unlikely to cause any prejudice. Certainly the reference to Mr Waller and Mr Hili is of significance. If it were to appear that the inclusion of other names was the occasion of prejudice, consideration could be given to excising those names, although that suggestion was not embraced by senior counsel. 16I will admit this document.
Gladesville Bridge Marina Pty Limited 17The directors of Gladesville Bridge Marina were Mr Philip and Ms Eva Southcombe. Mr and Ms Southcombe became involved in the Scheme in about March 1998. The documents to which objection is taken on behalf of all accused are copies of two newspaper articles, published on, respectively, 15 February 2003, under the heading "Tax Office Eyes Dodgy Vanuatu Tax Schemes", and 13 June 2005, under the heading "Big End of Town Caught in Tax Raids". 18The first article commences: "Australian authorities are targeting a swag of tax avoidance schemes operating in Vanuatu, the Tax Commissioner, Michael Carmody, revealed yesterday, as Labor accused the Federal Government of inaction in the face of a proliferation of offshore tax havens". It went on to say: "In Vanuatu's case, about half of the $295 million that left Australia last financial year for the South Pacific island state came from small business taxpayers. About 2,000 Australian residents were involved in the schemes, Mr Carmody said. This is an area where we have some concerns with promoters of schemes,' he said. One of the Vanuatu scams was a so-called debit-credit card scheme." 19The second article had a subheading: "$300 m offshore schemes exposed" This article referred to "raids" on multiple homes and offices in four states of Australia, some in Sydney. It then quoted the then Minister for Justice describing the offshore operations the subject of the "raids" as "a massive attempt to evade tax". The Minister was then quoted as saying: "The Crime Commission said in some cases deductions were claimed for payment for fictitious expenses and services, while in others, income derived overseas was not accounted for in Australia. The Tax Office said the income was secretly returned to Australia disguised as a loan, an inheritance, a gift, or through credit and debit cards." Later in the article, it was claimed that two of the "Sydneysiders" involved in the investigation were: " ... a prominent lawyer and an accountant. The lawyer works at a large law firm and the accountant has his own practice." 20The objections to these articles are said to be based on "relevance, hearsay and unfair prejudice". The last is a reference to s 137 of the Evidence Act . 21It is clear that each article contains some material that is significantly prejudicial to the accused. It is equally clear that, on their own, they could not remotely be considered to be admissible. 22However, the Crown contends that they become admissible when regard is had to other evidence. It does not suggest that they ought to be accepted as evidence of the truth of what is asserted therein. The other evidence that, on the Crown case, makes them admissible is the evidence of Ms Eva Southcombe. In her statement Ms Southcombe states that she saw the first article and was concerned that it might be a reference to the Scheme in which she was involved. She telephoned Ms Jandagi, who assured her that the article had nothing to do with Mr Agius or his company. 23When Ms Southcombe saw the second article, she was again concerned that it referred to the Scheme in which she and her husband were involved. She emailed the article to Mr Agius (apparently without comment). He replied on the same day in the following terms: "Thanks Eva I believe you are doing the right thing paying back the loan. Kind regards Rob" Ms Southcombe also says that she subsequently had a conversation with Mr Agius in which he said: " ... this has got nothing to do with us. What we are doing is not related to this at all. You certainly don't need to worry about it." 24The Crown submits that the articles are made admissible by the responses of Ms Jandagi and Mr Agius, when the articles were brought to their attention. 25I accept that, in that context, they have some probative value, although the weight they can or will carry I am not in a position at this stage to ascertain. I also accept, as I pointed out in argument, that the articles are capable of conveying significant prejudice. It would be possible to ameliorate that prejudice by agreement between the parties to a form of words that would explain to the jury that Ms Southcombe raised with Ms Jandagi and with Mr Agius the existence of newspaper articles concerning tax avoidance or evasion schemes in Vanuatu (and elsewhere), in such a form as to enable the jury to understand the responses made in each case. While senior counsel for the OTD accused was willing to entertain that suggestion, senior counsel for Mr Agius was not. It is not a compromise that I can impose upon an unwilling party, and it is, therefore, necessary to rule on the objection. 26I am satisfied that in the overall context of the Crown case, the responses are of sufficient importance to warrant their admission, and that they can only be explained by the jury being made aware of what was the subject of the communication in each case by Ms Southcombe. I am also satisfied that the jury will be able to be directed and to understand that the articles are not evidence of the truth of what is contained in them, but that they are merely admitted to enable them to consider the responses made. In the circumstances I will admit those articles. It remains open to the parties to agree on a means of explaining the responses that does not involve the tender of the articles themselves. 27I add, for completeness, that the Crown tendered a further article, dated 18 June 2005, under the headline "Top Names in Tax Haven Client Lists". While that article also is apparently about tax avoidance (or evasion) and an investigation of the kind that led to the present proceedings, it appears to be remote from the issues now under consideration. Further, although Ms Southcombe said that she emailed that article, too, to Mr Agius, there is no evidence of any response by him. I accordingly rejected the third article.

Hunter Civil and Hire Limited ("HCH") 28HCH was formed in August or September 1999 in circumstances that need not be explored or explained. Mr Geoffrey Daley was, at one point the sole director, and later one of three directors. HCH became involved with OTD and was introduced to the scheme in July 2000. Mr Zerafa was the accountant who managed its affairs. 29In 2001 an associated company (Hydro-Magda Pty Limited) purported to take out a "key man" insurance policy with a company called Southern Hemisphere Insurances Limited, registered in Vanuatu. Although a "Certificate of Cover" was issued, there was in fact no policy, and three payments, each of $200,000, were returned to Hydro-Magda. 30The only document to which objection is taken is a letter dated 25 June 2002, on the letterhead of Southern Hemisphere Insurances Limited, addressed to Hydro-Magda, purporting to confirm receipt of "the delayed payment" of $200,000 as the first premium instalment. 31The handwritten notation on the letter reads: " Paid Then (?) Policy Cancelled" 32The objection is that the source of the handwriting cannot be identified and the circumstances, and the time, in which it came to be placed on the document are unknown. 33The notation is substantially in accordance with the evidence anticipated to be led from Mr Daley. The Crown submits that the letter, including the handwritten notation, is admissible because it can be established that it was among documents seized from the offices of OTD, and it is therefore admissible as an exception to the hearsay rule ( Evidence Act s 59) pursuant to s 69 as a business record. 34In my opinion, in the absence of any indication as to the circumstances in which, and by whom, the notation was inserted, the provisions of s 69 are not met. Fundamental to s 69 is that the representation made or recorded in the business record is made or recorded for the purposes of the business. 35Moreover, subs (2) provides that the hearsay rule does not apply to a relevant document if the representation was made by a person who had or might reasonably be supposed to have had personal knowledge of the fact asserted, or on the basis of information directly or indirectly supplied by such a person. In my opinion those conditions are not met and the notation is not admissible.

Evidence derived from telecommunication intercepts . 36The evidence here in question is recordings and transcripts taken of conversations between Mr Agius and other individuals (not the OTD accused) in 2007. As I have indicated, the Crown proposes to amend the draft indictment by specifying, as the end date of the conspiracy, 24 October 2006. This was the date on which search warrants were executed on the offices of OTD. 37Accordingly, objection is taken on behalf of the OTD accused. The Crown presses the evidence on the basis that it is admissible, pursuant to s 87(1)(c) of the Evidence Act as evidence disclosing the existence, nature and scope of the conspiracy alleged. 38Section 87(1)(c) appears under the heading "Submissions made with Authority" and is in the following terms: "87(1) For the purpose of determining whether a previous representation made by a person is also taken to be an admission by a party, the court is to admit the representation if it is reasonably open to find that: (a) ...; or (b) ..., or (c) the representation was made by the person in furtherance of a common purpose (whether lawful or not) that the person had with the party or one or more persons including the party." 39The provision is said to be a statutory enactment of the common law "co-conspirator's rule": see Ahern v The Queen [1988] HCA 39; 165 CLR 87 at 94-95, 100, 104; R v Chai (1992) 27 NSWLR 153 at 191; R v Masters (1992) 26 NSWLR 465-6, all cited in Regina (C'weath) v Baladjam [No 19] [2008] NSWSC 1441 per Whealy J (as his Honour then was). 40The Crown proposes to use this section to admit various representations made by Mr Agius as admissions by one or more of the OTD accused. To apply it specifically to the circumstances, the provision could be restated as follows: "For the purpose of determining whether a previous representation made by [Mr Agius] is also taken to be an admission by [one or more of the OTD accused] the court is to admit the representation if it is reasonably open to find that: ... (c) the representation was made by [Mr Agius] in furtherance of a common purpose (whether lawful or not) that [Mr Agius] had with [one or more of the OTD accused] or one or more persons including [one or more of the OTD accused]." 41I have concluded that reliance on Baladjam by the Crown is misconceived. In Baladjam , Whealy J had under consideration the question of the admissibility of evidence of individuals said to have been party to the same conspiracy, although not on trial in the same proceedings. The question was whether representations made by them could be admitted against those who were on trial. What distinguishes that case from this is that those representations were made in the course of the conspiracy and during its alleged currency. Whealy J held that, in those circumstances, it was not necessary that the representation be found to have been made in furtherance of the common purpose. 42That is not this case. All of the representations attributed to Mr Agius derived from the telephone intercepts are representations that post date, by a considerable time, the end date of the alleged conspiracy. They could not be held to have been made "in furtherance of a common purpose" that Mr Agius had with any of the OTD accused. 43That evidence will not be admitted against the OTD accused.

Evidence of conduct of any accused after 23 May 2001 in relation to count 1 in the indictment. 44As I have indicated above, count 1 alleges conspiracy to defraud between 1 January 1997 and 23 May 2001; count 2 will allege conspiracy dishonestly to cause loss or a risk of loss to the Commonwealth between 24 May 2001 and 24 October 2006. 45The proposition advanced on behalf of all accused in this respect is that, the offence alleged in count 1 having come to an end on 23 May 2001, any evidence of their conduct subsequent to that date is not admissible to substantiate that count. 46The argument harks back to the argument that was resolved against all accused in the Court of Criminal Appeal decision to which I have earlier referred, Agius & Ors v R [2001] NSWCCA 119. (Special leave to appeal refused by the High Court on 15 June 2011, [2011] HCA Trans 171.) 47The circumstances can be briefly recapitulated. The Crown alleges that all accused took part in a single conspiracy, that commenced on or about 1 January 1997 and came to an end on or about 24 October 2006. The only reason that two counts are prosecuted is that, on 24 May 2001, the legislation governing conduct of the kind alleged changed. Prior to that date the relevant provisions were s 86(1) and s 29D of the Crimes Act 1914 (Cth). From that date, the relevant legislation was s 135.4(5) of the Criminal Code 1995. The same conduct was criminalised by two different, but consecutive, statutes. It is a necessary consequence of the outcome of the previous proceedings that all of the evidence relevant to one count will be admissible in relation to the other count. 48Although the argument as to admissibility was put in relation to all accused, the oral argument focussed upon the position of Mr Zerafa. It was submitted that evidence of conduct or events after 2001 could not fairly be used against him because of his age. He was born in 1975 and was 22 years of age at the date of the commencement of what is alleged to have been the conspiracy; evidence of conduct that occurred four or five years later could not be used to throw light upon his conduct or state of mind at that young age. 49Despite my urging, there was no identification of any particular piece of evidence that could be shown to operate unfairly against Mr Zerafa in this way. 50Even if the point ultimately turned out to be a good one (about which I have grave reservations) it is, I have concluded, premature to decide it. It was not submitted that any of the evidence would be inadmissible in the trial that will take place. The argument concerns what use the jury will be permitted to make of any particular aspect of the evidence. That is a matter much better determined when the evidence is complete and the entire mosaic can be seen. If there is any evidence that would operate unfairly against Mr Zerafa, or against any other accused, for the reason given (or for any other reason) appropriate directions will be given to the jury. 51The more general point, that the evidence in respect of the two charges ought to be delineated by reference to the date of the conduct the subject of the evidence, cannot be accepted. As I have said, what is alleged is a single conspiracy, and there is no reason to make the delineation proposed.