R v Chalabian

Judgment

JOHNSON J: The Accused, Sevag Chalabian, is standing trial before a jury upon an indictment charging money laundering under s.400.3(1) Criminal Code (Cth).
At the conclusion of the evidence and before closing addresses, the Court has heard submissions concerning directions to be given to the jury in the circumstances of the trial. Many areas upon which counsel addressed have culminated in agreement concerning appropriate directions. However, there are two areas where the decision of the Court is required concerning an application for directions.
These areas are: 1. an application by the Accused for directions to be given to the jury with respect to certain persons who were not called by the Crown to give evidence in the trial: Mahmood v Western Australia (2008) 232 CLR 397; [2008] HCA 1 ("Mahmood") at [27]; and 2. an application by the Accused for a warning under s.165 Evidence Act 1995 concerning the evidence of Ashley Mills.
On 31 March 2022, I ruled that a s.165 warning would not be given concerning the evidence of Mr Mills with reasons to be provided for this ruling at a later time (T1553). This judgment contains those reasons.

Application for a s.165 Direction Concerning the Evidence of Ashley Mills

Initially, application was made by the Accused for a s.165 direction with respect to each of the "straw directors" who have given evidence in the Crown case at trial, being Alexander Nappa, Angelo Coppola, Ben Alaban, Anthony Palumberi and Ashley Mills. A short summary of the role of the "straw directors" in the trial may be found in R v Chalabian (No. 3) [2022] NSWSC 77 at [12]; [19]; R v Chalabian (No. 8) [2022] NSWSC 304.
On 29 March 2022, the defence application for a s.165 direction was confined to Ashley Mills (MFI50). Mr Mills was the last of the straw directors to give evidence at the trial (T1277-1305; T1341-1416).
Section 165 Evidence Act 1995 provides as follows: "165 Unreliable evidence (1) This section applies to evidence of a kind that may be unreliable, including the following kinds of evidence - (a) evidence in relation to which Part 3.2 (hearsay evidence) or 3.4 (admissions) applies, (b) identification evidence, (c) evidence the reliability of which may be affected by age, ill health (whether physical or mental), injury or the like, (d) evidence given in a criminal proceeding by a witness, being a witness who might reasonably be supposed to have been criminally concerned in the events giving rise to the proceeding, (e) evidence given in a criminal proceeding by a witness who is a prison informer, (f) oral evidence of questioning by an investigating official of a defendant that is questioning recorded in writing that has not been signed, or otherwise acknowledged in writing, by the defendant, (g) in a proceeding against the estate of a deceased person - evidence adduced by or on behalf of a person seeking relief in the proceeding that is evidence about a matter about which the deceased person could have given evidence if he or she were alive. (2) If there is a jury and a party so requests, the judge is to - (a) warn the jury that the evidence may be unreliable, and (b) inform the jury of matters that may cause it to be unreliable, and (c) warn the jury of the need for caution in determining whether to accept the evidence and the weight to be given to it. (3) The judge need not comply with subsection (2) if there are good reasons for not doing so. (4) It is not necessary that a particular form of words be used in giving the warning or information. (5) This section does not affect any other power of the judge to give a warning to, or to inform, the jury. (6) Subsection (2) does not permit a judge to warn or inform a jury in proceedings before it in which a child gives evidence that the reliability of the child's evidence may be affected by the age of the child. Any such warning or information may be given only in accordance with section 165A (2) and (3)." Submissions for Accused
Mr Williams, counsel for the Accused, submitted that the evidence of Mr Mills was of a kind that may be unreliable in that it was evidence given in a criminal proceeding by a witness who might reasonably be supposed to have been criminally concerned in the events giving rise to the proceeding: s.165(1)(d) Evidence Act 1995.
In circumstances where the Accused made application under s.165, it was submitted that the Court should give directions to the jury under s.165(2). It was submitted for the Accused that there were no "good reasons" for not giving such a direction, so that s.165(3) ought not be invoked to decline to give the direction.
The direction sought for the Accused was as follows (MFI50, paragraph 16): "1. The Crown relies upon the evidence of Ashley Mills. 2. It is apparent that Ashley Mills was criminally involved in the events alleged in these proceedings. It appears that he was involved in an arrangement that was too good to be true, in that he regularly received cash payments from "James" (really Daniel Rostankoski) in return for being listed as a director of a company, but without having to exercise any of the real obligations of such a director. He took money to give a false appearance about the management of a company. 3. The law requires me to give you certain warnings and directions concerning this evidence. They are given in every case in which the Crown relies upon the evidence of a witness who was, or might have been, involved in the alleged crime. They are not given in this case because of any view which I have formed concerning the evidence of Ashley Mills. 4. The need to give such directions arises because the courts have, over the years, a great deal of experience concerning the reliability of evidence given by a witness who was, or might have been, involved in the alleged crime. That experience has shown that the evidence given by such a witness may be unreliable. I do not intend to suggest, however, that such evidence is always unreliable. 5. My purpose in giving you these directions is only to warn you that the evidence of such a witness may be unreliable and for that reason, you must approach that evidence with considerable caution in the way in which I will outline shortly. 6. There are many reasons why the evidence of such a person may be unreliable. Possible reasons are: a. It is only natural, you may think, that a witness who was, or might have been, involved in the alleged crime, may want to shift the blame from himself or herself onto others, and to justify his or her own conduct. In the process, the witness may construct untruthful stories, which tend to play down his or her own part in the crime and play up the part of others in the crime, even going so far as to blame quite innocent people. b. Persons who are, or might have been, involved in an alleged crime may make false claims as to the involvement of others out of motives of revenge or a feeling of dislike or hostility. c. There may be other reasons or motives why false evidence has been given by such a witness. It is not for the accused to establish what they might be. Remember that the Crown has to prove the essential aspects of its case and the accused does not have to prove anything. d. Experience has shown that once such a witness has given a version to the police which incriminates an accused, he or she may feel locked into that version, even if it contained inaccuracies or even if it were substantially untrue. 7. When assessing the evidence of Ashley Mills, you must remember the warnings and directions I have just given to you. 8. It is submitted that Ashley Mills falls within the terms of s.165(1)(d). It is submitted that s.165(2) obliges the Court to give a direction as to the unreliability of Ashley Mills, absent good reason not to do so. There is no such good reason."
It was submitted for the Accused that the crimes that Mr Mills was most likely involved in would be offences under s.184 Corporations Act 2001 (Cth) which provides as follows: "184 Good faith, use of position and use of information - criminal offences Good faith--directors and other officers (1) A director or other officer of a corporation commits an offence if they: (a) are reckless; or (b) are dishonest; and fail to exercise their powers and discharge their duties: (c) in good faith in the best interests of the corporation; or (d) for a proper purpose. Use of position--directors, other officers and employees (2) 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; or (b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation. (2A) To avoid doubt, it is not a defence in a proceeding for an offence against subsection (2) that the director, other officer or employee of the corporation uses their position dishonestly: (a) with the intention of directly or indirectly gaining an advantage for the corporation; or (b) with the result that the corporation directly or indirectly gained an advantage. Use of information--directors, other officers and employees (3) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation commits an offence if they use the information dishonestly: (a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or (b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation. (4) To avoid doubt, it is not a defence in a proceeding for an offence against subsection (3) that the person uses the information dishonestly: (a) with the intention of directly or indirectly gaining an advantage for the corporation; or (b) with the result that the corporation directly or indirectly gained an advantage."
Section 184 creates criminal offences, unlike ss.180-183 Corporations Act 2001 (Cth) which give rise to civil obligations only. The maximum penalty for an offence under s.184 is imprisonment for 15 years.
Mr Williams noted that the Court had granted a certificate under s.128 Evidence Act 1995 for Mr Mills upon the basis that evidence he would give at the trial may have a tendency to incriminate him or expose him to a civil penalty. In issuing a s.128 certificate to Mr Mills, I had in mind possible offences of the type contained in s.184 Corporations Act 2001 (Cth).
The issue of a s.128 certificate to a witness may be relevant to the question whether a s.165 direction should be given concerning that witness, although it remains necessary to consider all factors which bear upon the s.165 application to determine whether the direction is appropriate with respect to the particular witness.
By reference to the proposed direction sought for the Accused, it was submitted that it is not for the Accused to demonstrate what the reasons for a witness' inaccuracy or untruthfulness may be. The fact that the witness is criminally concerned in the events alleged is, it was submitted, an important contextual matter with a significance known to the Courts.
Of particular relevance with respect to Mr Mills, it was submitted that the need for him to stick to the version given in his police statement was of significance. It was submitted that he had not been charged with any offence relating to this conduct and should be treated as a witness anxious to adhere to his statement and perhaps avoid the risk of being prosecuted. As these are matters that might not be thought to be generally known to jurors, it was submitted that this Court should explain them to the jury: Kanaan and Ors v R [2006] NSWCCA 109 at [182].
It was submitted for the Accused that Mr Mills was, in effect, receiving money for nothing. He was asked to sign documents which he said that he had not read and did not understand. Mr Mills said that he had engaged in these ventures after meeting a stranger known to him only as "James" (Mr Rostankovski) in locations around Sydney, as well as meeting with "James" and the Accused for the purpose of signing documents.
Mr Williams submitted that there were three areas of dispute arising from the evidence of Mr Mills: 1. whether Mr Mills signed each of the documents which are said to bear his signature in the form of Deeds and authorities; 2. whether the Accused explained to Mr Mills the nature and contents of the Deeds and authorities; and 3. whether a second meeting had in fact taken place at the Accused's office in the presence of "James", the Accused, Mr Alaban and Ms Yeoland. Submissions for the Crown
The Crown opposed the giving of a s.165 direction with respect to Mr Mills.
The Crown submitted that Mr Mills had not been charged with any offence arising out of the Plutus tax fraud or conspiracy. Whilst it was well open to conclude that the actions of Mr Mills contributed to the commission by others of the Plutus fraud offences because of the assistance he had given to Mr Rostankovski, the Crown submitted that there is no evidence in this trial that Mr Mills knowingly participated in the fraud.
It was submitted that Mr Mills did not admit to taking part in a criminal enterprise in order to evade tax, nor was it put to him that he did so or that his conduct in signing documents was fraudulent or dishonest. Nor was it put to Mr Mills in cross-examination that he had knowledge of the blackmail scheme or the Plutus fraud with the company associated with Mr Mills being utilised for the purpose of those offences.
Even if Mr Mills might reasonably be supposed to have been criminally involved in offending of some kind, the Crown submitted that the evidence did not indicate that he was criminally involved in the offence with which the Accused is charged. The Crown submitted that the proper characterisation of the role of Mr Mills in that offence is that he was taken advantage of in order to further the money laundering enterprise.
The Crown submitted that Mr Mills gave unchallenged evidence that he opened bank accounts and signed documents at the request of "James" (Mr Rostankovski) in exchange for cash, in the context of Mr Mills struggling with drug or gambling issues (T1278).
Insofar as the evidence of Mr Mills is contentious and concerned the Accused, the Crown submitted that the issues in dispute are whether he was a genuine client of the Accused (including whether he received legal advice and signed the Deeds and authorities or made informed decisions to sign them) and whether he authorised distributions from the Accused's trust account.
The Crown case is that the Accused, Mr Hausman and Mr Rostankovski used the "straw directors" (including Mr Mills) as "clients" in order to create a paper trail that would ostensibly legitimise the movement of the proceeds of crime from Plutus Payroll to Mr Hausman and Mr Rostankovski via the Accused's trust account.
The Crown submitted that those factual issues, which are relevant to the issue whether the Accused believed the "straw directors" were true clients who authorised him to disburse trust money, are for the jury to decide. A s.165 direction would assume Mr Mills' evidence on those matters was unreliable, something that is in issue in the proceedings and a matter for the jury to determine. The existence of a dispute about aspects of the evidence of Mr Mills is not sufficient to warrant a s.165 warning: R v Serratore (1999) 48 NSWLR 101; [1999] NSWCCA 377 at [139]. It was submitted that those matters did not involve consideration of particular issues which would be well understood by lawyers, but may not be so well understood, or familiar to, lay persons.
The Crown submitted that the questions put to Mr Mills in cross-examination did not suggest that he was lying or seeking to implicate the Accused. Rather, the tenor of the cross-examination was that he was mistaken on some issues (as to signatures or recollection of meetings with the Accused), but was giving accurate and reliable evidence on other aspects. These circumstances did not require a special warning to be given about the evidence of Mr Mills.
In circumstances where a s.128 certificate had been granted to Mr Mills so that his evidence could not be used against him in other proceedings (except for giving false evidence), it was said that the type of warning sought by the Accused was not appropriate in this case. It was submitted that Mr Mills was not seeking to preserve a discount on sentence already granted in his evidence so that a direction concerning "sticking to his police statement" was not appropriate in his case as opposed, for example, to that of Mr Hausman.
By reference to paragraphs 3 and 4 of the proposed directions sought (see [14] above), it was submitted that it would be wrong to direct the jury that Mr Mills was "a witness who was, or might have been, involved in the alleged crime". At most, it was submitted, Mr Mills had been involved in peripheral offences not involving money laundering, fraud or blackmail. Decision on s.165 Application Concerning Mr Mills
At the outset, it is important to keep in mind that the present application concerns what the Court should, or should not, say by way of a s.165 direction. It remains open to the Crown and Senior Counsel for the Accused to make submissions concerning the evidence of Mr Mills, and the conclusions which the jury should reach in that respect by reference to the evidence of Mr Mills given at the trial.
Section 165 Evidence Act 1995 does not deal with unreliability of witnesses generally. Rather, the need for a warning typically arises either because the jury needs to be acquainted with the accumulated experience of courts dealing with certain types of evidence, or because there is a danger that the jury may overestimate the probative value of certain evidence: R v Baartman [2000] NSWCCA 298 at [62]; R v Stewart (2001) 52 NSWLR 301; [2001] NSWCCA 260 at 308 [38], 321-323 [95]-[101]; GAR v R (No. 2) [2010] NSWCCA 164 at [97].
Whether the evidence in respect of which a request for a warning is made comes within one of the designated categories, will be a matter for the trial Judge to determine: R v Stewart at 320-321 [95].
A s.165 warning is required if, without such a warning, the jury may not be aware of a particular fact which affected the reliability of evidence of the witness: Agius v R (2015) 252 A Crim R 538; [2015] NSWCCA 200 at [1023].
In determining whether a s.165 warning is required, the Court has regard to the question whether the evidence is "of a kind that may be unreliable": s.165(1).
A helpful illustration of the rationale for s.165 may be found in R v Stewart, where Spigelman CJ observed (at [22]) that there had been no reference to the fact that the witness could lose the benefit of his reduction in sentence, if he failed to give evidence of the character that he did eventually give, with this not being "a matter which would necessarily be known to the jury".
In considering an application for a s.165 warning, it is necessary to keep in mind the purpose of the section, where the authority of the Court is required to assist the jury in an area of potentially unreliable evidence which may not otherwise be within the knowledge or experience of the jurors.
The words in s.165(1)(d) are intended to encompass all those who, as a matter of fact, were actually criminally concerned in the events giving rise to the proceeding: R v Stewart at [18].
Mr Mills is in a different position to Mr Hausman. The draft direction proposed for the Accused concerning Mr Mills (at [14] above) is based largely upon that intended to be given concerning Mr Hausman.
There is no controversy concerning the appropriateness of the direction in Mr Hausman's case. He pleaded guilty to the charges against him and received a discount on sentence by reference to an undertaking to give evidence at this and other trials. The directions to be given with respect to him are appropriate as he was involved in the "alleged crime" with which the Accused is charged and was knowingly involved with the Accused in a number of acts and communications in evidence before the jury. Mr Hausman has given a statement to police and is liable to loss of his discount on sentence if he does not maintain evidence in accordance with his statement.
The position of Mr Mills is different. He has not been charged with any offence. The fact that he received a s.128 certificate is relevant to the present issue, but is not determinative. The offences for which he may be exposed to prosecution (but for the s.128 certificate) are offences relating to the exercise of his functions and duties as a director.
The effect of the s.128 certificate, the existence of which is not known to the jury, means that he is not at risk in the same way as Mr Hausman if he departs in some way from his police statement. There are areas of controversy in his evidence, being the three areas referred to earlier in this judgment (at [22]).
The jury is in a position to assess the credibility and reliability of the evidence of Mr Mills, having seen him give evidence and having regard to other evidence which bears on this question, including documentary evidence.
I am not persuaded that the evidence of Mr Mills falls within s.165(1)(d) Evidence Act 1995 so as to warrant the giving of a s.165 warning by the Court. In these circumstances, the Court is not required to take the steps set out in s.165(2).
Given this ruling, it is not necessary to consider whether there are "good reasons" for not giving a direction for the purpose of s.165(3). If that point had been reached, I would have concluded that there were "good reasons" for not giving a s.165 warning, given the nature of the conduct which could lead to the view that Mr Mills had been "criminally concerned in the events giving rise to the proceeding".
Any area of criminality on Mr Mills' part is far removed from offences of money laundering, blackmail and fraud which are central to aspects of the Accused. In addition, it would be inappropriate to give the directions sought for the Accused concerning Mr Mills in circumstances where he has the protection of a certificate under s.128 Evidence Act 1995 so that he was not, for reasons of self-preservation, bound to stick to his police statement in a manner suggested in the proposed direction.
Given the evidence of Mr Mills and his role in this case, it is difficult to see how the directions sought by the Accused would be appropriate in his case. As a particular form of words is not necessary for the purpose of giving a warning (s.165(4)), a formula of words must be devised which is appropriate to the case at hand. In my view, the difficulty in identifying an appropriate verbal formula for Mr Mills tends to demonstrate why his evidence is not caught by s.165 in the first place.
For these reasons, I declined to give a warning under s.165 Evidence Act 1995 with respect to the evidence of Mr Mills.

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