R v Cox

Supreme Court of Victoria|2005-06-24|Before: KAYE J.

CRIMINAL LAW - Conspiracy to traffic heroin - Money laundering - Expert evidence - Accountant - Evidence as to "betterment" - Admissibility - Discretion.

1 In this matter I made a ruling, on 16 May 2005[1] that the evidence of Mr Gerard Curtin, a forensic accountant proposed to be called on behalf of the Crown, was inadmissible in its then form. Mr Curtin's report has been reformulated into a second draft, with a view to overcoming the aspects which I ruled made the first draft inadmissible. Each of the accused, nonetheless, has objected to the admissibility of the second draft of that report. For the purposes of determining the admissibility of Mr Curtin's evidence, a voir dire was held on which Mr Curtin gave evidence.

unsourced cash deposits $465,473

unsourced cash payments $239,174

TOTAL: $704,648

unsourced cash deposits $ 77,003

unsourced cash payments $ 92,988

TOTAL: $169,990

unsourced cash payments and

deposits $ 31,952

8 In his second draft reports Mr Curtin has set out, in significantly greater detail, the methodology and assumptions employed by him in reaching those conclusions. He also gave evidence before me as to the basis upon which he formulated the assumptions on which he relied.

9 Mr Curtin's evidence was that his first task was to identify moneys coming into and going out of the accounts of each of the three family units. In doing so he adopted a cash flow basis of accounting, which he described as a fundamental accounting technique. In other words he adopted a process of identifying, recording, classifying and summarising each transaction. In doing so, he produced a document for each of the three family units which is Annexure 1 to each of his three reports. That document reflects the inflows into, and outflows from, the accounts of each of the three family units concerned. In doing so he consolidated all of the accounts of the family units into one. Mr Curtin then proceeded to offset some of the transactions contained in the accounts against other transactions. Those offsets are set out in Annexure 2 to each of the three reports. They are also recorded, by appropriate colour coding, in Annexure 1 to each report.

10 Mr Curtin was limited as to the information which he was able to obtain as to the use to which a large number of cash withdrawals were put, and as to the provenance of a significant number of cash deposits and cash payments. He recognised that a number of potentially unsourced cash deposits or unsourced cash payments could be directly related to a previous cash withdrawal from an account, the proceeds of which he had been unable to trace. In order to overcome the limitations of the information available to him he adopted a method which would enable him to eliminate transactions which could be "related", in other words which could match otherwise unsourced cash deposits or cash payments to untraced cash withdrawals. In order to do so he developed a set of assumptions and criteria which he specified in each of his reports. In doing so he adopted a two-stage process. The first stage consisted of an examination of each unsourced cash deposit and cash payment against each prior untraced cash withdrawal, taking into account the following criteria: whether the unsourced cash deposit and/or cash payment was less than or equal to the untraced cash withdrawal; the amount of the unsourced cash deposit/payment; the proximity of the unsourced cash deposit/payment to the prior untraced cash withdrawal (the period was generally three to four days, however this was flexible); the proximity of the unsourced cash deposit/payment with other unsourced cash deposits/payments; the consistency of the prior untraced cash withdrawal with other untraced cash withdrawals; the source of the untraced cash withdrawals; and the denominations of the untraced cash withdrawal and the unsourced cash deposit/payment. By using those criteria, Curtin was able to relate otherwise unsourced cash deposits and cash payments to otherwise untraced previous cash withdrawals. He offset those amounts, again by use of the appropriate colour code on Annexure 1 to each of the reports.

11 Having undertaken that first stage, Mr Curtin then considered the remaining transactions which consisted of unsourced cash deposits and unsourced cash payments in excess of available prior untraced cash withdrawals. In respect of those transactions he undertook a further analysis to determine whether there was any further information which might permit the offset, or reduction, of the unsourced cash deposit/payment. In doing so he developed and used the following criteria: the amount of the unsourced cash deposit/payment; the consistency and proximity of the unsourced cash deposit/payment with other unsourced cash deposits/payments; the amount of the prior untraced cash withdrawal; the consistency of the prior untraced cash withdrawal with other cash withdrawals; other untraced cash withdrawals within the three to four day period (e.g. whether the aggregation of the withdrawals would offset the unsourced deposit/payment); other transactions detected/not detected around this time considering the consistency of the transaction along with the overall context of the family unit's transactions (e.g. household transport).

12 Where Mr Curtin was able to obtain further information, the previous untraced cash withdrawal was allocated to off-set or reduce the otherwise unsourced cash deposit or unsourced cash payment. Again the matching of the two transactions was appropriately colour coded on Annexure 1.

13 At the conclusion of that process all unsourced cash deposits and cash payments which could not be offset against prior unsourced cash withdrawals were characterised by Curtin as "unsourced cash deposits" and "unsourced cash payments".

14 Mr Curtin gave evidence concerning his methodology, and concerning the basis upon which he developed the criteria and assumptions which he used and which I have described above. As set out in my previous ruling, Mr Curtin is a certified practising accountant. For the last 14 years he has been employed by the Victoria Police in the investigation of fraud. Before that he was employed by the State Revenue Authorities. Mr Curtin referred to Statement of Forensic Accounting Standards - APS 11 - published by the Institute of Chartered Accounts in Australia. In particular he referred to clause 23 of that standard which provides:

"During the course of providing forensic accounting services, members may be instructed, or may seek, to utilise estimates or make assumptions concerning past or future events, facts or amounts, in circumstances where more data is not available. In such circumstances, members should ensure that the use of such estimates or assumptions is:

(a) reasonable in the circumstances; and

(b) suitably qualified and disclosed."

15 Mr Curtin stated that that standard, and in particular the reference to the concept of reasonableness in the development of assumptions, is no more than a codification of what has been in practice in accounting for a long time. He stated that, applying that standard, and using his experience in preparing cash flow analyses, he developed the assumptions and criteria to which I have referred above. He stated that he himself has not, in the past, developed the same assumptions or criteria upon which he relied in this case. However, he described the process of developing appropriate assumptions and criteria, based on the accounting concept of reasonableness, as a process which he had undertaken on a number of occasions, and which is common to accountants in general. Thus he answered the following question:

"And the question I was trying to get to was this: that from your experience, training and background are you aware of other accountants using the same process as part of an accounting process?

---In relation to the exact criteria, I am not sure; a general principle that I am applying is simply approaching an issue of an unknown quantity from the perspective of reasonableness. It happens every day in accounting in terms of trying to determine what is a reasonable approach to a specific issue that arises. It happens with respect to asset valuations. It happens with respect to determining liabilities. Assumptions have to be made and in this particular instance the issue that I was confronted with, and it is an issue that happens in nearly every cash flow that I have done, that the unknown is the cash withdrawals and the cash deposits. In a lot of the instances I have been involved with, cash deposits are known so it is the cash withdrawals and the application of those funds that are the unknown, and my process has always been to allow cash withdrawals to be offset against cash payments where it accounts for that transaction. I know that this process is adopted throughout the accounts at the Major Fraud Group. As to other accountants using this, I am not sure, but it is a general accepted practice to make assumptions in order to accommodate issues that are arising, as long as those assumptions are realistic and reasonable."[2]

16 Similarly, in cross-examination, in answer to questions about the assumptions which he made, Mr Curtin stated:

"What you have done in this analysis in order to plug the gaps is make a number of assumptions?---Yes.

And those assumptions are still based on your perception about how a family unit save and spend their cash?---No.

No?---The assumptions are based on accounting and my experience in preparing cash flows over the years.

You say there is an objective standard that you apply to what is done with cash withdrawals?---What I have done is attempt to categorise a particular transaction, and that is a cash withdrawal being related to a cash deposit.

In doing so you apply your opinion as to what a family unit would do with a cash withdrawal; for example, how long they would hold on to it before spending it?---That is based on my experience as to looking at transactions within accounts and the relationship between a withdrawal and a deposit within accounts; so it is not an assumption on what people do, it is based on what my experience is and what I believe is realistic and reasonable.

...

Apart from accounting standard 11 which speaks of 'reasonable in the circumstances', there is no further definition or test to be used in the concept of reasonableness, is there?---I think it is just a general accepted concept of what reasonable is. It is applied throughout accounting, a reasonable approach to the valuation of assets, a reasonable approach to anything; it is simply an approach that is based on the general meaning of what reasonable is."[3]

17 Again, later in cross-examination he described his use of the concept of reasonableness and the development of the criteria on which he relied as follows:

"It is essentially based on the way I prepare cash flow analyses. This is not exclusive to this matter. For every cash flow analysis I have done, there are situations where there have been cash withdrawals, cash deposits and cash payments into various accounts and I use this process regularly. So it is simply based on my experience in the examination of accounts. ... It is not exclusive to this matter. It is something I have done. I have applied in many other instances where I have done cash flow analysis."[4]

18 On behalf of each of the accused it was submitted that Mr Curtin should not be permitted to give evidence, as set out in his second draft report, in relation to the "unsourced cash payments" and "unsourced cash deposits" identified by him in the foregoing process. That submission was made on two bases, namely:

(a) the evidence is not admissible as expert evidence;

(b) in any event I should exclude the evidence in the exercise of my discretion.

Admissibility of evidence as expert evidence

19 Mr Young, who appeared for Cox, submitted that the evidence of Curtin relating to unsourced cash payments and deposits was not the evidence of a duly qualified expert. He contended that the standard applied by Curtin was no more than a "motherhood" principle. He argued that the criteria postulated and applied by Curtin lacked the rigour and precision which one would expect in respect of expert evidence. Mr Young further submitted that the use of terms such as whether a cash withdrawal "accounts for" a corresponding cash deposit or payment, and whether a cash deposit or payment is "unsourced", is misleading, since those terms are not based on any precise scientific methodology.

20 Mr Georgiou, who appeared with Ms Spowart on behalf of Sadler, supported the submissions of Mr Young. He submitted in particular:

(a) that it has not been demonstrated that the assumptions, opinions and conclusions by Curtin are matters which come within a field of specialised knowledge;

(b) that the conclusions drawn by Curtin are based on matters which relate to human nature and behaviour within the normal limits of normality and thus are conclusions which a jury could determine for themselves without the evidence of an expert;

(c) even if the opinion evidence sought to be adduced falls within a field of enquiry requiring specialised knowledge, Mr Curtin is not qualified to give such expert evidence.

21 Mr Georgiou submitted that, as acknowledged by Mr Curtin in his evidence on the voir dire, the methodology he used was the same which he utilised in respect of his first report. On the previous voir dire Mr Curtin had acknowledged that his conclusions were based on his views as to the spending behaviour of family units. Mr Georgiou further submitted that, when properly analysed, the criteria and assumptions specified by Mr Curtin in his report are no more than assumptions concerning human spending behaviour.

22 Conversely, Mr Georgiou submitted that if the views expressed by Mr Curtin are views based on accountancy expertise, rather than views as to normal spending habits of family units, they are, to that extent, irrelevant. The issue before the jury is whether any of the identified cash payments or cash deposits were funded from a source outside the known legitimate sources of cash available to the particular family unit. The question of whether a particular cash withdrawal was used by a particular family unit, that is, either the Ferguson, Sadler or Cox family unit, to fund a specified cash deposit or payment, ultimately must be determined by reference to the jury's appreciation of the ordinary spending habits of human beings, and not by reference to any accounting exercise. Thus Mr Georgiou submitted that, in so far as the views expressed by Mr Curtin derived from accountancy expertise possessed by Mr Curtin, they are not relevant to the matters in issue in this trial.

23 Mr O'Doherty, who appeared with Ms A. Marjanovic for Ian Ferguson, adopted the submissions of Mr Young and Mr Georgiou. His fundamental submission was that the views expressed by Mr Curtin relate to matters which are within the knowledge and experience of layperson's, and are thus not matters for expert evidence. Ms Tittensor, who appeared on behalf of Joanne Ferguson, agreed with the submissions made by Mr O'Doherty.

24 In response, Mr Leckie SC, who appeared with Mr D. Brown on behalf of the Crown, submitted, first, that, as an accountant, Mr Curtin is appropriately qualified to compile, on a cash flow basis, a consolidation of the accounting records of each of the family units, which is constituted by Annexure 1 to each of the three reports. Indeed, as Mr Leckie submitted, none of the accused have argued to the contrary. Mr Leckie further submitted that Mr Curtin is qualified as an accountant to explain to the jury the methodology which he uses, as an accountant, to identify cash withdrawals which may be off-set against cash payments and cash deposits. While that task is not the same task as that to be performed by the jury, nonetheless the evidence of the accountant as to the manner by which he matches cash withdrawals on the one hand with cash payments or cash deposits on the other, assists the jury to understand how they are to go about their task of identifying, from Annexure 1 to each report, cash payments and cash deposits which were not funded by corresponding cash withdrawals from those accounts. Mr Leckie submitted that the jury should have at its disposal the technique and reasoning which Mr Curtin employs as an expert in approaching particular transactions and in particular in determining whether or not those transactions are matched by corresponding cash withdrawals. In doing so the expert would not be expressing a view as to ordinary human spending habits. Rather his criteria and assumptions would be specified, for the jury to judge, and thus to form their own views as to the particular transactions which Mr Curtin has identified as "unsourced". Mr Leckie submitted that it would be unrealistic to place Annexure 1 before the jury, without the assistance of the expert in guiding them as to the type of criteria by which they should assess the transactions contained in the document.

25 The accused have not objected to the production in evidence of Annexure 1, in so far as it constitutes the identification of various cash transactions in the accounting documents of the three family units, organises that data, and characterises that data by reference to the type of transaction revealed as either cash in-flows or cash out-flows. The compilation of such a document is classically a role performed by a qualified accountant. Counsel have not submitted that Mr Curtin does not possess appropriate qualifications and expertise to have produced that document in that manner. Nor has it been contended that Annexure 1, in so far as it reflects that exercise, may not be put before the jury as a convenient compilation and consolidation of the various accounts of the three family units; see R v Mitchell;[5] Butera v DPP.[6]

26 The critical question then is whether it is admissible for Mr Curtin to give evidence of his opinions as to which of the cash purchases and cash deposits, identified by him in the accounts, he considers were and were not derived from the proceeds of a previous cash withdrawal in the same accounts. The principles which are to be applied in determining that question are set out in paragraphs 12 to 16 of my earlier ruling, and I shall not repeat them in this ruling. In the context of the issues that now arise, the two relevant questions are:

(a) Whether the formulation and application of the assumptions and criteria identified by Mr Curtin in his reports are in the province of a specialised field of learning experience or expertise. In particular, the question is whether a jury, without the assistance of Mr Curtin's evidence, would be "unlikely to prove capable of forming a correct judgment".[7]

(b) If so, whether Mr Curtin is appropriately qualified to express those opinions.

27 If Annexure 1 were tendered through Mr Curtin, without Mr Curtin expressing any views as to whether particular cash payments or cash deposits identified in them may be sourced from cash withdrawals in the same account, a jury would be left to its own devices without any guidance in the evidence as to how to determine that question for itself. A perusal of Annexure 1 to each of the three reports persuades me that, to put such a document before a jury without any guidance from the evidence, would be to ask too much of a jury. Each of the documents contains a large number of transactions. Each line of the document contains a significant amount of information. Faced with such a document, a jury would, without guidance from the evidence, have considerable difficulty reaching any meaningful or appropriate conclusion relating to the cash payments and cash deposits which are identified in the accounts. In other words, on the face of the three documents it is self-evident that a jury would be unlikely to be able to form a correct or meaningful judgment on the accounts, as to the cash payments and cash deposits identified in them, without assistance from the witness who compiled the document.

28 In this context, it is significant that both numerically, and more importantly in terms of the monetary amounts involved, the transactions in respect of which Mr Curtin has performed what might be described as a "judgment call" by reference to his criteria and assumptions are a minority of the transactions set out in Annexure 1 relating to each of the Cox, Ferguson and Sadler family units. Certainly in monetary terms, the significant majority of the cash deposits and cash payments set out in Annexure 1 in each case do not have any possible relationship to a corresponding cash withdrawal. Yet if Mr Curtin were precluded from giving evidence identifying those transactions, the jury would be deprived of valuable assistance, without which they might not be able to form the appropriate conclusion in relation to the "uncontroversial" transactions.

29 Conversely, as indeed it seemed to be accepted by counsel, as a minimum it would be necessary for Curtin to be able to identify transactions which he, as an accountant, would consider must be off-set in the accounts. Some of those transactions would be off-set because of information ascertained by Curtin in the course of his investigations. However, some other of those transactions would be off-set because of the application by Curtin of the criteria and assumptions developed by him. If those off-sets were not made, then the balance of "unsourced" transactions in each account would be unfairly inflated to the detriment of the accused. Yet, if the accountant is to be permitted to give evidence as to the transactions which he has off-set, then he must be permitted to explain why he has off-set those transactions and removed them from the category of potentially unsourced cash deposits or cash payments. Ex hypothesi, by giving such an explanation, the accountant must, of necessity, expose why he has not, similarly, eliminated the remaining cash deposits and cash transactions which he has characterised as "unsourced". In other words it is practically inescapable that, once Annexure 1 is put before the jury, Mr Curtin must give evidence as to the application of his assumptions and criteria, at least to explain why it is that he has off-set some of the cash deposits and cash payments in the accounts against other corresponding cash withdrawals.

30 The evidence now before me on the voir dire does, I consider, establish that the development and application of the criteria and assumptions by which to assess whether a cash payment or deposit is to be off-set against a cash withdrawal is the product of the expertise and experience of Mr Curtin as a certified practising accountant. On the first voir dire, Mr Curtin did not satisfy me that the exercise which he had then performed was derived from or related to his expertise as an accountant. However the evidence now before me, and to which I have referred earlier in these reasons, does satisfy me that, in seeking to "match" cash deposits and payments with cash withdrawals, Mr Curtin has brought to bear the expertise which he has gained through his training and qualification as an accountant. In other words in conducting cash flow analyses Mr Curtin, and indeed other accountants, are required to develop and apply criteria, based on the accounting concept of reasonableness. While in each case different criteria and assumptions may be developed, nevertheless the accountant calls upon his or her experience and expertise in developing and applying those criteria, informed as he or she must be by the requirement of reasonableness. Accordingly, I accept that Mr Curtin was acting as an expert accountant, and using his expertise as such, in developing and applying the criteria and assumptions set out in his report.

31 Counsel for the accused have contended that the criteria and assumptions developed by Mr Curtin are no more than principles relating to the normal spending habits of family units. However, on analysis, it is clear that the exercise conducted by Curtin was based essentially on an accountant's methodology, and not based on any assumptions by him as to spending habits. For example, he was cross-examined as to why he would not off-set a smaller prior cash withdrawal against a larger subsequent cash deposit or cash payment in the same account. His response[8] made it clear that as an accountant he would not off-set the two amounts without being provided with further information. Similarly, Mr Curtin stated that, in applying his criteria, he would not off-set a cash deposit against a cash withdrawal where both transactions occurred from the same bank account.[9] As an accountant he considered he would not be at liberty to off-set the two transactions because they did not evidence a transfer of funds from one account to another. Each of those two responses, in my view, make it clear that, whatever similarity Mr Curtin's exercise bears to an assessment of the ordinary spending habits of a family unit, nonetheless the exercise performed by Mr Curtin was based on an accountant's methodology.

32 Thus, the giving of evidence by Mr Curtin as to the criteria and assumptions developed and applied by him would not usurp the role of the jury. This is because Mr Curtin would not be purporting to give evidence as to the normal spending habits of individuals. Rather, Curtin's evidence would be confined to evidence that, as a forensic accountant, by applying criteria and assumptions developed by him, he is able to off-set particular withdrawals against other payments or deposits in the accounts. By doing so the accountant would not be usurping or performing the role to be performed by the jury.

33 It was in response to such a proposition that Mr Georgiou, on behalf of Sadler, submitted that, that being so, the exercise of the accountant in identifying cash deposits and cash payments which were not to be off-set against cash withdrawals is not relevant to the issue before the jury. As Mr Georgiou pointed out, the question for the jury is whether it is satisfied beyond reasonable doubt that each questioned cash deposit or cash payment was not sourced from a cash withdrawal from the accounts of the relevant family unit. Accordingly, he submitted, the different accounting exercise performed by Mr Curtin is irrelevant to the question which the jury needs to determine.

34 That submission by Mr Georgiou does have some attraction. However, the answer to it lies in the conclusion which I have already reached, namely, that a jury would not be able to make any meaningful or appropriate use of Annexure 1 without evidence as to the basis upon which they might consider the transactions which are set out in the document. Such evidence, if admitted, would be the evidence of the accountant, who compiled the document, as to the methodology which he applies, not as a juror, but as an accountant. That methodology may not be the same methodology ultimately adopted and accepted by the jury. Nonetheless, the fact that the methodology adopted by the accountant does not specifically answer the question which the jury ultimately needs to ask for itself, does not make the evidence of the expert irrelevant. As Mr Leckie correctly pointed out, the evidence of the accountant, as to his approach to correlating cash deposits and payments on the one hand with cash withdrawals on the other hand, is relevant to provide suitable guidance or assistance to the jury in its selection of appropriate criteria by which the jury, as the tribunal of fact, is to use the data and information contained in Annexure 1.

35 For those reasons it is my conclusion that the evidence sought to be adduced from Mr Curtin as to the off-setting of cash deposits and cash payments against cash withdrawals in the document which is prepared as "Annexure 1" to each report is evidence admissible as opinion evidence to be adduced from Mr Curtin as an appropriately qualified accountant.

36 I add to that conclusion three riders which emerged during argument. First, it seems that, in developing Annexure 1, Mr Curtin, in respect to some transactions, went beyond the accounting documentation which had been obtained on the execution of subpoenas and search warrants. In particular, there are some transactions which he has included in the accounts which are based upon alleged cash purchases made by the accused and described in the depositions. It would, of course, be misleading for Mr Curtin to include those transactions in Annexure 1 as being transactions based on accounting documents. Subject to hearing further submissions on this issue, he may be entitled to include those transactions, if they are the basis of appropriate proof, and if they are included on that basis only; see Ramsey v Watson;[10] R v Haidley and Alford.[11]

37 Secondly, in each of the three reports, for each month in respect of which Mr Curtin has detected an "unsourced" cash payment or cash deposit, he has stated:

"My analysis indicates that there was some other source of funds to account for the Cash Payments (or cash deposits) detected during the month."

38 Similarly, at the end of each report, Mr Curtin expresses his conclusions in terms that his " ... analysis indicates there was some other source of funding to account for the cash deposits and payments" detected by him during the period 1 January 1999 to 30 June 2002.

39 That statement by Mr Curtin not only involves the drawing by him of an inference, but also the expression by him of an opinion which is essentially a matter for the jury. In fact, if the jury were to accept Mr Curtin's analysis, it would accept that Mr Curtin had, on the information available to him, and by using the accounting criteria adopted by him, identified cash payments and cash deposits which were not sourced from cash withdrawals, or from other known sources of income. What conclusion is to be derived from such evidence is essentially a matter for the jury. I raised this matter in argument with counsel. Mr Leckie agreed that the conclusions of Mr Curtin, as thus expressed, were inadmissible. That concession by Mr Leckie is correct. I would not permit Mr Curtin to give evidence of his conclusions in the form in which they are now expressed.

40 The third rider is similar and relates to the use by Mr Curtin of the term "unsourced" in respect of cash deposits and cash payments for which he has not been able to identify any source, either from the information available to him, or by application by him of the criteria and assumptions which he as an accountant developed. In essence, the "unsourced" transactions are those which he has not been able to eliminate as being sourced from funds, based on the information available to him, and based on the application of the criteria and assumptions identified by him in his reports. The unqualified use by Curtin of the word "unsourced" expresses a conclusion or inference by the accountant from that exercise. It is not an inference or conclusion which he is permitted as an expert to express. The reaching of that conclusion is a matter for the jury.

Admissibility of evidence - discretion

41 The second basis upon which the accused seek to have the evidence of Mr Curtin excluded is by an exercise of the judicial discretion. In each case it is submitted that the probative value of Mr Curtin's evidence is limited, and that it is significantly outweighed by the unfair prejudice which would be occasioned to each accused should Mr Curtin be permitted to give that evidence.[12]

42 Different submissions were made on this aspect of the case by counsel on behalf of each of the accused. However, the submissions did contain some points in common which I shall consider before turning to the submissions made on behalf of each accused.

43 The starting point for the submission on behalf of each of the accused was that the probative value of the evidence of Mr Curtin was considerably limited. First, each of the reports contains a statement of the "inherent limitations" of the financial analysis undertaken by Mr Curtin. Those limitations included that the information provided was restricted to detected documented transactions; the records of each family unit are incomplete; and there was an absence of information concerning cash deposits, cash payments and cash withdrawals. In respect of this third aspect, the source of cash deposits and cash payments have not been provided, and there has been no information as to the application of cash withdrawals. It is because of those limitations that Mr Curtin has had to develop his assumptions. Counsel for the accused have submitted that the assumptions now identified in the expert's reports are themselves "fragile". Some of them, self-evidently, operate arbitrarily and artificially. For example, the assumption that an earlier cash withdrawal is not off-set at all against a subsequent cash payment is artificial and prone to error. Thus the nature of the criteria adopted by Curtin means that the figure ultimately arrived at by him in each case is of dubious validity.

44 It is clear that the exercise undertaken by Mr Curtin has its limitations, deriving from the limited amount of information available to him. Further, it is evident that the accuracy and validity of Mr Curtin's analysis depends upon the appropriateness and validity of the criteria and assumptions utilised by him. Nonetheless, despite those limitations, the evidence does potentially have significant probative value. As I have already stated, a number of cash deposits and cash payments, characterised by Curtin as "unsourced", are unaffected by the assumptions and criteria which he has adopted. In other words, in respect of those transactions, there is no available cash withdrawal, or other source of income, which could conceivably account for those transactions. Thus in each case the report of Mr Curtin does identify a significant amount of cash transactions which, on their face, do not seem to be affected by the limitations to which Mr Curtin has adverted. Further, the limitations of information available to Mr Curtin potentially can work in both directions. It is true that the limitations on information available to Mr Curtin may mean that he is not in possession of information which might account for otherwise unsourced cash payments or cash deposits. On the other hand the same limitations mean that he may not have identified a significant amount of unsourced cash payments.

45 On the matters which were revealed on the voir dire, and on the basis of matters put in cross-examination, I do not accept that the probative worth of Mr Curtin's evidence is slight or insignificant by virtue of the limitations and assumptions specified in his report. Ultimately an assessment of the weight of the evidence is a matter for the jury. However I do not conclude that the evidence can only be characterised as having slight probative worth. Further and importantly the evidence is directed to a central issue in the case. The Crown case against the accused is based on an allegation of a significant amount of trafficking in heroin over a three and a half year period. On the Crown case significant amounts of payments in cash were made to one or more of the accused Cox, Sadler and Ian Ferguson. In that context the identification by the accountant of cash payments and cash deposits, which are not accounted for by information available to him, or by cash withdrawals from the accounts of the accused, is particularly relevant.

46 Each of the accused has also submitted that the evidence of Curtin, if admitted, would be unfairly prejudicial to that accused. Two common arguments were made on behalf of each of the accused. First, it was submitted that the effect of the evidence of Mr Curtin was to reverse the onus of proof on each accused. Counsel referred to the evidence of Curtin that he did not off-set an earlier cash withdrawal from a bank account of an accused against a subsequent cash deposit into the same bank account. It was submitted that by doing so Curtin did not off-set amounts which, in reality, may well have been related transactions. By not off-setting those two amounts Curtin in effect cast an onus on the accused to prove that the cash deposit was funded from the proceeds of the prior cash withdrawal. A similar point was made in respect or Curtin's evidence that he did not off-set an earlier cash withdrawal against a subsequent larger cash payment. Again, in reality, an earlier cash withdrawal, in those circumstances, might have been used to partially account for the subsequent cash payment.

47 While the methodology of the accountant may well be open to scrutiny and indeed criticism, nonetheless I do not accept that his methodology does involve a reversal of an onus of proof as contended for by the accused. The effect of the accountant's evidence is no more than that, applying his methodology and criteria, two transactions are not off-set or related. Such a proposition by the accountant does not cast any onus of proof on the accused. The adoption of those criterion means no more than that, as an accountant, Curtin did not apply criteria which would permit the off-setting of the two transactions. However, essentially it is a matter for the jury whether they are satisfied beyond reasonable doubt that one transaction is not off-set against another. The jury may or may not accept the methodology of the accountant. Indeed they may accept his methodology but not be satisfied beyond reasonable doubt that two transactions are not related. However in any event the adoption of the methodology and assumptions by the accountant is no more than that; it does not, contrary to the submissions of the accused, reverse any onus of proof in the case.

48 The main aspect of prejudice contended for by the accused is that there is a risk that a jury will seize on the "bottom line" figure of Curtin in each of his reports. Thus the jury may take the view, particularly in a long case, that the figure derived by Curtin is a figure arrived at by an experienced and expert accountant, and thus invest it with undue weight. It was submitted that this risk is particularly significant in this case because of the similarity of the criteria relied on by Curtin to the type of assumptions a jury might itself make in determining whether particular transactions are related or to be off-set.

49 There is, of course, always a risk that a jury, in any case, might be beguiled by any expert, and tend to give the views of that witness excessive weight simply because of the status of the witness as an expert. However, as in any case, I consider that such a risk can be appropriately counteracted by judicial direction, both during the trial, and in final directions, as to how the jury is to scrutinise and assess the evidence of the expert for itself.

50 In this case, the expert has now articulated each of the limitations to his report, and each of the assumptions and criteria adopted by him in determining whether or not particular transactions are "unsourced". The jury will be instructed that they are to take into account all of the limitations specified by the accountant, and any other limitations revealed in evidence. Further, the jury will be instructed that it is for them to critically analyse and assess the criteria and assumptions relied upon by the expert. Further and importantly, if the evidence of Mr Curtin is to be admitted, it will be on the basis that the witness is not expressing views based on assumptions as to the spending habits of ordinary people. The evidence would be admitted on the basis that Curtin, using his expertise and experience, was analysing the transactions as an accounting exercise. In other words, Mr Curtin would not be permitted to express views which might usurp the role of the jury. Rather the evidence of Mr Curtin would be admitted to provide guidance to the jury as to how an accountant might approach the exercise. Ultimately, however, the jury will be directed that it is a matter for them to determine in each case whether or not a particular cash transaction has been shown not to be derived from a known source of funds of each accused.

51 I now turn to consider individually the submissions made on behalf of each accused as to the prejudice which they might suffer should the evidence of Curtin be admitted.

Cox - discretion

52 Mr Young submitted that there were factors particular to the case of Cox which rendered the evidence of Mr Curtin of little probative value. He submitted that, on the other hand, there was significant prejudice in having the evidence admitted against his client.

53 Mr Young submitted that, when properly scrutinised, the evidence of Mr Curtin was of little probative worth in the case against Mr Cox. First, he submitted that the "bottom line" figure of $31,000 betterment assessed by Mr Curtin against Mr Cox is fragile and of little probative worth. He relied on matters which I have already discussed above, such as the limitations on the material available to Curtin and the nature of the assumptions and criteria relied upon by Curtin. Further, in the case of Cox he also pointed out that Curtin has not taken into account other potential sources of cash. In particular he has not taken into account the fact that Cox, since early 2000, conducted an investigation business ("Selection Investigations") from which he might have derived cash income. Further the analysis of Curtin ignores the "cash out" component of payments made by Cox by credit card to supermarkets. All of those payments were characterised as "household expenses" by Curtin, not taking into account the fact that they may have also resulted in "cash out" to the customer.

54 In addition Mr Young submitted that the evidence was of little probative worth for the following reasons:

(a) The amount of "betterment" found against Cox - a little over $30,000 - is insignificant, particularly in the context of a conspiracy in which the Crown alleges that $1.5m of drugs were trafficked.

(b) On the Crown case the allegations against Cox of direct trafficking in heroin was restricted to the period before September 1999. Yet Curtin only found one "unsourced" cash payment in that period. The bulk of the "unsourced" payments and deposits identified by Curtin fall into the period between January 2000 and June 2001. Cox was not a member of the Victorian police force during that period. There is no allegation that he himself directly trafficked drugs during that period.

(c) In analysing the accounts of Ferguson and Sadler, Curtin was able to identify significantly lower recorded household expenses for particular periods of time, which were not matched by any relevant increase in cash withdrawals. In those cases the Crown will rely on an inference that, during those periods, those two accused had available to them cash funds by which to meet their ordinary household payments. On the other hand, Mr Curtin's report does not identify any such "aberrations" in household expenses, which were relatively even over the whole of the relevant period.

55 Thus Mr Young submits that the evidence of Mr Curtin against his client is of little or no probative worth. On the other hand he submits that his client would sustain real prejudice should the evidence be admitted against him. The main proposition made by Mr Young is that the jury will, notwithstanding the matters to which I have just adverted, give undue weight to the evidence of Curtin, such evidence gaining weight from the evidence which Curtin will give in respect of both Ferguson and Sadler. In other words, Mr Young contended that the jury might "lump" the evidence of Mr Curtin into the "one basket", and thus consider the evidence of Curtin against Mr Cox as being as compelling as it might be against Ferguson and Sadler. The Crown case against Cox is substantially built around the evidence of the informer, Duy Le, whose credibility will be under legitimate attack. Thus the evidence of Curtin is significant in this case as providing important support for the Crown case against Cox. If the jury give it untoward weight, which it does not deserve, then a grave injustice will be occasioned to Cox as a result of the admission of the evidence.

56 In response, Mr Leckie argued that the evidence is admissible against Cox. If Cox was to stand trial alone, there would be no occasion to exercise the discretion in his favour. The fact that he may be facing a joint trial with the two other co-accused on a count of conspiracy does not alter that circumstance. Any prejudice may be allayed by appropriate judicial direction. If I was of the view that such direction could not off-set any prejudice to Mr Cox, then that circumstance would be relevant on an application by Cox for a separate trial. Further and in any event, Mr Leckie rejected the proposition by Mr Young that the evidence was, in any event unfairly prejudicial to his client.

57 At the moment I am faced with a presentment in which Mr Cox is jointly charged with one count of conspiracy with Ian Ferguson and Sadler. It is, I consider, inappropriate for me to approach the matter on the basis that, if Cox were to suffer undue prejudice by reason of the admission of the evidence, then that is a matter which might be dealt with on an application for separate a separate trial. I consider that it is appropriate that I treat the presentment as it now stands, namely as a joint presentment. It is in that context that I must consider the submissions put forward by Mr Young.

58 Notwithstanding the submissions of Mr Young I do not consider that the evidence of Curtin in respect of his client is of slight probative value. As I have already stated, the limitations on the information available to Mr Curtin, and the assumptions made by him, do not of themselves render the evidence of tenuous weight. Nor do I consider that the other matters adverted to by Mr Young and to which I have already referred reduce the evidence of Mr Curtin to that of only limited or little probative value. Certainly, Mr Curtin concedes that his methodology is imprecise. There may well have been available to the accused other sources of cash, such as "cash out" from supermarkets, and cash from the accused's private investigation business. Those are matters which might be pointed out to the jury in cross-examination and for the jury to take into account. Nonetheless it does seem to me that the evidence is of probative worth. Although the betterment identified by Mr Curtin falls outside the period in which it is alleged that Cox himself directly trafficked drugs, nonetheless it falls within the period within which the Crown alleges that Cox was a party to the conspiracy. The majority of the unsourced cash payments and deposits are to be found between January 2000 and June 2001. The evidence of Duy Le is that he was obtaining large amounts of heroin from Ferguson between the end of 1999 and the end of 2000. Thus the unsourced cash payments and deposits identified by Curtin are not dissociated in time from the period in which the most substantial amount of trafficking of heroin occurred on the case made by the Crown against the three conspirators.

59 The primary prejudice argued by Mr Young is based on the proposition that the jury will "lump together" the evidence of Curtin in respect of Ferguson, Sadler and Cox. In a joint trial there is always some risk that a jury will fail to treat each accused separately. It is for this reason that trial judges give clear and repeated directions to juries that they are to treat the case against each of the accused separately. Certainly if this case proceeds as a joint trial, that direction will be given to the jury at the outset. At appropriate stages during the trial it will be repeated. Such a direction will also be given, of course, in the final charge to the jury. Further, it seems to me that Mr Young's submission fails to give proper credit to the capabilities of modern juries. Experience, and particularly recent experience, has demonstrated that juries do pay careful heed to directions that they must consider the case against each co-accused separately, and indeed that they must consider the cases against a single accused, charged on different counts, separately. In this case, I do not consider that there is a significant risk that a jury will "lump" the evidence of Curtin in respect of Cox with, for example, the evidence of Curtin in relation to Ferguson. Quite clearly the evidence of Curtin in respect of those two accused is quite different. It is different in its bottom line figure. Further and importantly it is different in relation to the types of transactions which are identified in Annexure 1 in each case. In my view any suggestion that a jury would simply treat Curtin's evidence in respect of the two accused in the same way is to seriously underrate the capabilities and conscientiousness of modern juries.

60 For those reasons I am not persuaded that there would be any untoward prejudice to the accused Cox should I admit the evidence of Curtin against him in a joint trial with his co-accused, Ferguson and Sadler. Certainly I do not consider that any prejudice would outweigh the potential probative value of the evidence so as to justify the exclusion of evidence, otherwise admissible, in the exercise of my discretion.

Sadler - discretion

61 On behalf of Sadler, Mr Georgiou submitted that, because of the assumptions and methodology adopted by Curtin, the probative value of the current "betterment" figure of $169,000 is only slight. Further, its worth is depreciated by the fact that the accounts relate not only to the accused man Sadler, but also his wife Caroline Sadler. Transactions by her, and recorded on those accounts, may impact on the figure produced by Curtin. The evidence of betterment is significant evidence against Sadler. The amount of $169,000 is on its face large. Yet it is of dubious validity. Mr Georgiou submitted that, by being a large amount, there is a danger that a jury will give it undue weight.

62 As I have already stated, the jury will be directed, both during and at the conclusion of the trial, as to the approach which they must take in assessing the evidence of experts, and in particular the evidence of Curtin. They will be directed that it is for them, not Curtin, to determine the question of whether the accounts of the accused disclose cash transactions for which there is no known source. The criticisms which were made of Mr Curtin both in cross-examination on the voir dire and in submission are, I consider, criticisms which can be readily understood by a jury. For example, particularly with Annexure 1 before them, the jury will, I consider, have little difficulty understanding the criticism of Mr Curtin for failing to off-set cash withdrawals and cash deposits from and into the same bank account. Similarly a jury will understand other criticisms such as the failure of Mr Curtin to off-set, at all, a previous cash withdrawal against a larger subsequent cash payment or cash deposit. None of those matters are particularly complex or sophisticated. They are the type of matter which the jury will be directed to take into account in assessing the assumptions and methodology employed by Curtin. For those reasons I do not consider that there is a risk of prejudice to the accused man Sadler in the admission of the evidence, based on the proposition that the jury might give the evidence a weight beyond that which it deserves. I therefore do not consider that the probative value of the evidence is outweighed by any untoward prejudice which would justify the exclusion of the evidence against Sadler.

Ian Ferguson - discretion

63 On behalf of Ian Ferguson, Mr O'Doherty adopted the arguments made by Mr Georgiou in respect of his own client. For the reasons which I have already expressed, I do not consider that there is a basis to exercise the discretion to reject the evidence. Indeed in the case of Ian Ferguson, the amount of "betterment" found by Curtin is high. The amounts involved in the transactions in respect of which Curtin made "judgment calls" are comparatively small. Even if those transactions were removed, nonetheless the amount of unsourced cash transactions found by Curtin would be significant, and would thus be of real probative worth. For those reasons I do not consider that there is a discretionary basis on which to exclude the evidence of Curtin against Ian Ferguson.

Joanne Ferguson - discretion

64 Ms Tittensor, on behalf of Joanne Ferguson, adopted the submissions of Mr O'Doherty. Joanne Ferguson is not charged with conspiring to traffick heroin. She is charged jointly with Ian Ferguson with engaging in transactions and other property which she knew were the proceeds of the conspiracy contrary to s.122 of the Confiscation Act 1987. The evidence of Mr Curtin is relevant to that count, and no submission was made to the contrary on behalf of Mrs Ferguson. For the reasons already expressed I do not consider there is any discretionary basis to exclude the evidence of Curtin against Joanne Ferguson.

Conclusion

65 For the reasons expressed in this ruling, I reject the submissions made on behalf of each of the accused that the evidence to be adduced from Mr Curtin is inadmissible. That conclusion is subject to the qualifications expressed in these reasons, namely:

(1) In so far as Curtin's conclusions are based on transactions which do not appear in the accounting documents, but which are derived from depositional material, the conclusions must be so expressed by Curtin, and the underlying transactions must be proven by admissible evidence.

(2) As I have stated above[13] I would not permit Curtin to express his conclusions in the manner stated in his reports, namely that his analysis "indicates there was some other source of funding to account for" the cash deposits and cash payments detected by him in each of the three reports. Nor would I permit him to make unqualified use of the term "unsourced" in describing cash deposits and cash payments for which he has not been able to identify any source, either on the information available to him, or by application by him of the criteria and assumptions he has developed.

[1] R v Cox and ors (Ruling No. 1) 2005 VSC 157.

[2] T 526-7.

[3] T 482-3.

[4] T 486.

[5] [1971] VicRp 5; [1971] VR 46 especially at 59-60; affirmed on appeal, R v Smith [1970] HCA 48; (1970) 121 CLR 572 at 577 (Menzies J).

[6] [1987] HCA 58; (1987) 164 CLR 180 at 190 (per Dawson J).

[7] See Clark v Ryan [1960] HCA 42; (1960) 103 CLR 486 at 491 (per Dixon CJ).

[8] T 487-8.

[9] T 491-503.

[10] [1961] HCA 65; (1961) 108 CLR 642 at 648-9.

[11] [1984] VicRp 18; (1984) VR 229 at 250.

[12] Cf. R v Christie [1914] AC 345 at 559; Alexander v R [1981] HCA 17; (1981) 145 CLR 395 at 402-3 (Gibbs CJ), 430 (Mason J); R v Swaffield [1998] HCA 1; (1998) 192 CLR 159 at 191-2; R v Harris (No. 3) [1990] VicRp 28; [1990] VR 310 at 318 (Ormiston J).

[13] At [37]-[40].

At a glance

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Judgment (26 paragraphs)

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Cases Cited (6)