R -v- BARTLETT [No 11] [2014] WASC 349 (26 September 2014)

1 EM HEENAN J: This morning, before the jury returned, I have been sitting to hear objections by counsel for Mr Bartlett to certain evidence proposed to be called from the next witness, Mr Agostino Irdi.

2 The substance of the evidence sought to be led from Mr Irdi can be found in one of his file memoranda which he prepared and which is dated 4 February. From the context, is clear this was 4 February 2003.

3 This document, which I have had marked as exhibit 1 on the voir dire but not in the trial, was used as an aide memoire by Mr Irdi when he gave evidence at the first trial on 11 September 2013. The relevant passages of Mr Irdi's evidence in this respect can be found at pages 1,416 to 1,418 of the transcript of the previous trial.

4 Essentially, the evidence is Mr Irdi's description or record of a meeting which took place at the Parmelia Hilton Hotel in Perth on 4 February 2003. This was a meeting at the hotel suite of Mr Philip Egglishaw, the gentleman from Strachans of Jersey, who was visiting Perth at the time. The meeting was attended by Mr Egglishaw, Mr Dunn, Mr Irdi and Mr Bartlett. So far as is presently relevant, the meeting involved some discussions about the need to obtain clear audit reports for Barminco in circumstances where its auditors appear to have been hesitating about the basis upon which they should approach the audit.

5 So far as emerges from Mr Irdi's file note and his previous evidence, the controversy appears to be whether the approach to accounting for the audit should be on the basis of the Australian Accounting Standards' protocols or, as an alternative, on the basis of the tax accounting principles left undefined which were being contended for by Mr Dunn, apparently on behalf of Mr Bartlett, a proposition apparently supported by Mr Irdi.

6 The significance of the difference, so far as it appears from the sparse materials presently available, appears to be that by adopting the Australian Accounting Standards, there was a potential for a deficiency of approximately $15 million to appear in the accounts of Barminco. Alternatively, adopting tax accounting principles, the implication is that no such deficiency would emerge and, without in any way qualifying the results, that the audit would show Barminco to be solvent.

7 A little more needs to be said about the context of this discussion in order to appreciate its full significance. The context is that during late 2002, Mr Irdi, acting on behalf of Crossline Overseas Ltd, had written to Barminco advising that his client possessed Barminco's promissory notes to a total value slightly in excess of $32 million and intended to present them for payment in the immediate future. This resulted in a series of negotiations between Barminco, Mr Bartlett, accountants and lawyers on his behalf with Mr Irdi on behalf of Crossline which avoided the immediate presentation of any of the promissory notes and led to a programme by which security would be offered by Barminco or others to support the indebtedness of the $32 million rather than make immediate payment.

8 The evidence which emerged at the previous trial, and which is part of the background to this, is that this programme of securitisation was lengthy and complicated. It involved the offering of security over assets which had already been charged by Barminco or by Mr Bartlett through some other entities or personally to bankers, including Westpac and Bankwest. In order to complete the programme of securitisation the bank required new audit reports from Barminco's auditors, presumably on the basis that their security would not be impaired by this new securitisation programme.

9 This in turn led to Barminco's auditors being instructed to prepare audit reports, presumably for the use of the banks, and it is implied from what happened that the auditors had some hesitation about the manner in which they should conduct this audit and what principles should be applied. The two alternatives I have already described.

10 This would appear to have caused some anxiety by Mr Bartlett and to have delayed the securitisation programme. The meeting at the Parmelia would appear to have been a meeting which, among other things, sought further time or indulgence from Crossline to solve the problems which were delaying the securitisation programme. It led to explanations by Mr Bartlett to the meeting about the significance of the two potential choices for accounting procedures, the need for time and the impact which it might have on Barminco's accounts. That, I think, is all that needs to be said about the background and the evidence.

11 The objection is that evidence of Mr Bartlett's discussion about the apparent controversy over the manner in which the auditors might approach the task of performing this audit for the bank is not in any way relevant to the socalled false interest scheme, and that it is in some way prejudicial as suggesting or implying (a) his involvement with the auditors and knowledge by him of their methodology and concerns; and (b) insofar as it is capable, of implying some manipulation or contrivance in dealing with the accounts, and overcoming the auditors' concerns.

12 It is further submitted that the controversy over the appropriate auditing methodology and, indeed, the need for the audit, is not in any way associated with or a product of the false interest scheme, but rather the product of the issue of the promissory notes and the apparently unexpected demand from Crossline for their payment. All of those matters originated from the Appointor Arrangement, which it is acknowledged has not been suggested by the prosecution to have been illegal or part of the conspiracy which is the subject of the present indictment.

13 So much can be accepted, but the prosecution seeks to adduce this evidence on the basis that it shows an acquaintance, perhaps even a close acquaintance, by Mr Bartlett with: the financial affairs of Barminco and, by implication, other associated entities; of his realisation that different taxation approaches to the methodology for this audit could produce significantly different effects; and that it was more advantageous to have an accounting methodology utilising tax accounting than the alternative.

14 It is also foreshadowed by counsel for the prosecution that part of the concern about the solvency of Barminco and the effect of these promissory notes, insofar as that related to the readiness of the bankers to permit the grant of subsequent securities over assets already charged to them, had a sequel. It is contended that it resulted in some of the liabilities of Barminco being paid down by the repayment to Barminco of some other promissory notes relating to other transactions shortly afterwards, showing again an appreciation by Mr Bartlett of the extent of the liabilities of Barminco and the indorsers of the various promissory notes emerging from the Appointor Arrangement.

15 From all this, the prosecution submits that this is direct evidence of some degree of acquaintance, of a sophisticated nature and in detail, of Barminco's financial affairs by Mr Bartlett, indicating a fairly close and proximate knowledge by him of its affairs, at least in relation to this transaction. This, the prosecution submits, is inconsistent with one potential aspect of the case which the prosecution is seeking to refute: that Mr Bartlett was not closely involved in the financial aspects of Barminco or associated companies.

16 It also is put forward on the basis that this transaction, that is, the securitisation of the promissory notes, is relevant to an appreciation of Barminco's financial affairs at a time when the false interest transaction had created an uncalled liability for Bremerton Pty Ltd of 50% of $79.9 million on the partially paid units, and that this is circumstantial evidence pointing towards an inference that Mr Bartlett would have been aware of the full extent of the financial liabilities of the beneficiary company, Bremerton Pty Ltd, arising from the false interest transaction.

17 There are, of course, many answers and contrary contentions which might be advanced to refute the case which the prosecution seeks to make, but I consider that it is sufficiently relevant both as direct and circumstantial evidence to be admissible. I will, therefore, allow the evidence to be adduced and overrule the objection.