R v David Michael WILLS: Application by WOOLWORTHS LTD for a direction for compensation pursuant to s 77B of the Victims Support and Rehabilitation Act 1996

District Court of NSW|2012-11-14

Bill Nield (for Applicant Woolworths Ltd) Self represented (Respondent) File Number(s): 2009/80902

Introduction. 1On 7 September 2012 after a trial lasting 3 months a jury found David Michael Wills guilty of fourteen receipt of a corrupt benefit and two money-laundering offences. He has been formally convicted and is to be sentenced today for those crimes, which were committed in 1997 and 1998. The corrupt benefits crimes involved the receipt by him of $1,395,000 when he was an employee of Woolworths Limited. Woolworths are in the process of suing Mr Wills in the civil courts seeking compensation for all the losses they say were caused by Mr Wills. Relying on the convictions they ask for a direction by me that Mr Wills pay $750,000 compensation for the loss sustained by them through or by reason of his offences. 2Mr Wills opposes the application.

An aggrieved person's right to seek compensation 3The present application is made pursuant to Part 4 Division 2 Victims Support and Rehabilitation Act 1990 (the Act). 4If a person is convicted by a court of an offence, the court may (on the conviction or at any time afterwards) on notice given to the offender direct that a specified sum be paid out of the property of the offender to any aggrieved person by way of compensation for any loss sustained through, or by reason of, the offence: s77B. 5The acts speak of 'the offence": s77B(1)(b). Here there are sixteen relevant offences. 6A court may not give a direction for compensation for an amount in excess of the maximum amount that, in its civil jurisdiction, the court is empowered to award in proceedings for the recovery of a debt, here $750,000: s77C(b). 7While the words of the section, if strictly applied, would mean that the jurisdictional maximum was available for each offence it would seem both fair and just that that maximum apply to the total compensation awarded for all offences that are part of a general course of conduct. If I am wrong s77D(c) would allow this jurisdictional limit to be taken into account in my determination of each sum to be paid. 8A direction for compensation may be given by a court on its own initiative or on an application made to it by or on behalf of the aggrieved person: s77B(2). 9Loss is not defined but given the distinction in the Act between injury and loss it must include economic loss. 10A causal connection between the loss and the crime must be established: Fagan v Crime Compensation Tribunal [1982] HCA 49; (1982) 150 CLR 666 at 673, R v Skaf [2001] NSWCCA 199 at [35]. 11While the Act is silent on the topic, given the nature of the orders to be made are akin to civil compensation, it seems appropriate that the civil standard of proof apply. That said, here each decision flows from the jury verdict and decisions made by me adverse to Mr Wills in the parallel sentencing proceedings that were made according to the criminal standard of beyond reasonable doubt. 12In determining whether or not to give a direction for compensation, and in determining the sum to be paid under such a direction, the court must have regard to: (a)any behaviour (including past criminal activity), condition, attitude or disposition of the aggrieved person that directly or indirectly contributed to the loss sustained by the aggrieved person, and (b)any amount that has been paid to the aggrieved person or which the aggrieved person is entitled to be paid by way of damages awarded in civil proceedings in respect of substantially the same facts as those on which the offender was convicted, and (c)such other matters as it considers relevant: s77D. 13A court must take into account the factors noted in s77D. Other relevant factors can include the amount sought and the identity of the victim: Flynn v R [2010] NSWCCA 171 at [70] per McCallum J. The asserted impecuniosity of an offender while relevant should not ordinarily be regarded as a reason for declining to make an order as circumstance may change or may later be demonstrated to be false: Connor v R [2005] NSWCCA 431; (2005) 158 A Crim R 389 at [41]. 14Any sum that a court directs to be paid by an offender to an aggrieved person must be paid immediately, or within such period (if any) as is specified in the direction, to the registrar of the court for payment to the aggrieved person: s77E. 15If the whole or any part of the amount specified in the direction is not paid in accordance with the direction, the registrar of the court must, on the application of the aggrieved person, issue to the aggrieved person a certificate which has the effect the same as the entry of a civil judgment in favour of the aggrieved person against the offender specified in the certificate: s77F.

The application 16Notice has been given. It was supported by an affidavit of Andrew Geoffrey Moore (Exhibit A). I have had the benefit of oral and written submissions on behalf of Woolworths made by Mr Neild. Mr Wills, who was unrepresented at sentence and on the application, was given an opportunity to respond and did so. Mr Wills' submissions reiterate his assertions he is not guilty of the offences, which he ascribes to an unfounded and malicious conspiracy against him. Woolworths, not surprisingly, rejects this assertion as false. 17The purpose of the statutory scheme is to compensate victims. So far as economic loss is concerned it provides an alternative to costly civil action. Any direction I make does not preclude or interfere with any civil proceedings except that no judgment can be entered in those proceedings for sums paid following a direction pursuant to the Victims Support and Rehabilitation Act 1990.

The factual basis for the application. 18Mr Wills was convicted after a trial lasting over three months of: (1)Fourteen (14) counts of receiving a benefit corruptly for, as an agent of Woolworths Ltd, showing favour to an Israeli company Az-Ben Electronics Ltd: s 249B(1) Crimes Act 1900 - maximum penalty 7 years imprisonment. (2)One (1) count of money laundering: s 73(2) Confiscation of Proceeds of Crime Act 1985; and (3)One (1) count of conspiring with others to engage in money laundering transactions - a common law conspiracy whose closest equivalent statutory offence is s 73(2) Confiscation of Proceeds of Crimes Act 1989. 19The corrupt benefits received totalled $1,395,950.50 between June 1997 and December 1998. 20Mr Wills was acquitted of the principle count against him; a conspiracy to cheat and defraud Woolworths in respect of the supply and installation of computer hardware and software. Not guilty verdicts were returned on the counts relating to each of his co-accused, Caroll and Peter Henderson. 21In 1998, Mr Wills was a top executive at Woolworths in charge of is Management Services Division (MIS). He was respected for his superior skills in this area. He was a leader in an emerging field. He was well rewarded. His opinions were respected and deferred to. 22In the mid 1990's Mr Wills was looking for a new Point of Sale system for all Woolworths supermarkets. He took to the Senior Executives and Woolworth's Board a proposal that rather than purchase an established system tied to a hardware supplier Woolworth's should develop their own in conjunction with an Israeli company Az-Ben. Az-Ben was represented in Australia by Peter Henderson who through his company, Smart Retail Terminals (SRT), provided Woolworths with computer software and hardware. Caroll Henderson managed SRT with her husband Peter. 23The jury by its verdicts did not accept there was anything criminal in SRT's dealings with Woolworths. It is also fairly clear that they did not accept beyond reasonable doubt the prosecution's proposition, which founded the principle conspiracy count; that Mr Will's initial decision to recommend and push Az-Ben's product, APOS 2000, was from its outset corrupt. 24It is however clear that the jury accepted beyond reasonable doubt that having chosen Az-Ben and APOS 2000, Mr Wills received corrupt benefits from that company's principle, Mr Benzion Weissman, for having shown favour to Az-Ben in its dealings with Woolworths. The offences relate therefore to the giving of corrupt rewards for favourable decisions by Wills associated with the continuation and implementation of the Woolworths contracts with Mr Weissman or his companies, Az-Ben and International Retail Systems (IRS). 25The jury's verdicts indicate a notably comprehensive rejection of most of Mr Wills' evidence and his version of events but also some extension to him of the benefit of the doubt. This is entirely understandable, but his evidence in his defence that money was paid to him by Weissman for a future joint venture to market overseas APOS 2000 and other products could not withstand careful scrutiny. 26 Woolworths paid Weissman's companies many millions of dollars. The money particularised in each of the fourteen corrupt benefit counts was paid by Weissman to Wills via a complex series of transactions which formed part of the money laundering conspiracy of which the jury found him guilty. That money ended up in the Jersey bank account of a British Virgin Islands (BVI) company Cross Border Holdings (CBH). Mr Wills was the beneficial owner of CBH. Evidence at trial from Mr Fogarty a forensic accountant and set out in the spreadsheet of banking transactions (Trial Exhibit 46) show the links between payments made by Woolworths and their eventual receipt by CBH and thus Mr Wills. 27If the offences had not been committed at the very least Woolworths would have received a cheaper deal than that otherwise provided by Az-Ben. There was evidence at trial from Mr Clairs AO and Mr Corbett AO, who were the Chief Operating Officers of Woolworths at the relevant times, that if the offences had been discovered at the time Woolworths would have ended any contractual arrangements with Weismann and Az-Ben much earlier than they eventually did and that considerable losses totalling many millions would have been avoided. I note there was also evidence from Mr Corbett that soon after the contracts were terminated and despite their economic consequences Woolworths' share price increased dramatically from $4 to $26 per share (trial transcript p 153). 28In submissions Mr Nield proffers a number of basis for Mr Will's liability to pay compensation. These include breach of fiduciary duty or money had and received. He submits the loss suffered by Woolworths may be quantified as either the amount of the corrupt commissions received by the offender or the amount of the actual loss suffered by Woolworths in consequence of its entering into the APOS 2000 contract and a related cash registers contract. 29Given the beneficial nature of the legislation and given that the factual foundations for any direction must have their basis in the criminal proceedings it seems appropriate that the loss be calculated on the basis of the amounts received by Mr Wills as corrupt rewards. 30No matter how it is put Woolworths suffered significant economic loss as a direct consequences of Mr Wills' crimes. At its simplest Woolworths was deprived of the benefit of the sums paid to him by Az-Ben and IRS as corrupt rewards for continuing the commercial arrangement he fostered between Woolworths and those Weismann entities in addition to any other economic loss his actions may have caused it. 31Woolworths have commenced civil action against Mr Wills. Those proceedings were stayed pending resolution of the criminal trial. (Exhibit A on the application at [7]). I am informed by Woolworths that their civil action will rely on Mr Wills diverting funds otherwise payable to his employer; his depriving Woolworths of a lesser contract price for the APOS 2000 project (or the inflation of the price paid); his failure to account for funds held as an agent on constructive trust; recovery of bribes due to a principal whose interests have been betrayed and/or as money had and received on their behalf. They claim in excess of $18 million was lost. Not all of these losses directly relate to the crimes of which Mr Wills was convicted. In fact some of Woolworths' dealing with Weismann had a commercial benefit to them, for example the "Y2K" project. I can however find beyond reasonable doubt that Woolworths suffered the economic loss particularised in each of the s 249B(1) Crimes Act 1900 counts of which he was convicted as a direct result of those crimes; totalling at $1,395,950.50. 32Mr Wills enjoyed the benefit of this money from receipt of it in 1996 and 1997. 33Mr Wills will receive a custodial sentence. He is now in his mid 60's. He is not a well man. He will have limited opportunity to earn an income on release. He says he has no capacity to pay the amounts sought. The evidence set out in the affidavit of Andrew Moore (Exhibit A on the application) indicates he has assets (a mortgaged residential unit at Noosa, Queensland) and some capacity to pay a portion of what is sought. He is not yet impecunious, but he may be if the moneys sought are recovered by Woolworths. 34On release from custody Mr Wills may never have the lifestyle he was once accustomed to. When he is released to parole his rehabilitation will be assisted by his capacity and ability to lead a normal law abiding life. That capacity will obviously be enhanced if, on release, he has financial assets on which to rely. If I make the order sought he will have none.

Determination 35Mr Wills has been convicted of fourteen offences pursuant to s 249B(1) Crimes Act 1900. 36Those offences caused at the very minimum a loss to his employer of the sum particularised in each count. There is a direct and common sense causal connection between the amount of corrupt commission particularised and the loss suffered by Woolworths. 37Woolworths is an aggrieved person with the meaning the Act. 38The total amount of compensation awarded to one victim for losses occasioned by one course of conduct should not exceed the jurisdictional limit of the court. 39Woolworths have received no compensation from Mr Wills. 40The only behaviour, condition, attitude or disposition of Woolworths that directly or indirectly contributed to the loss sustained was that they trusted and relied on Mr Wills in their dealing with Az-Ben and with a more astute form of corporate governance Woolworths staff may have detected his crimes earlier. Woolworths did have in place polices and procedures to avoid fraud. As one of Woolworths' top 10 executives it could be presumed Mr Wills was well aware of them. His failure to abide by them was a gross breach of the trust. Those facts do not disentitle Woolworths to compensation. 41That Mr Wills will receive a custodial sentence and when he is released to parole his rehabilitation if he has financial assets on which to rely cannot justify retention of assets, which derive at least in part from his criminal activity. That it may mean he is released form gaol without assets at all is an unfortunate fate shared by most released prisoners. He will be no worse off. He should not be better off because of his crimes. 42That he may be impecunious does not preclude the making of the order. As was pointed out in Connor v R things may change or asserted impecuniosity may be later demonstrated to be false. 43That Woolworths is a large corporation, which had the capacity to not only absorb the loss but also thrive despite it, is a relevant factor but not one, which operates to preclude proper compensation, even if that compensation approaches the jurisdictional limit of the court. 44Woolworths are entitled to orders in the amounts sought restricted only by the jurisdictional limit of the court.

Orders 45I direct that the following sums, totalling $746,806, be paid to Woolworths Limited out of the property of David Michael Wills by way of compensation for loss sustained by reason of the offences particularised in Counts 6, 7, 10, 23 and 33 of the Indictment of which he has been convicted. Count 6 In relation to Count 6, receive benefit corruptly on 4 June 1997, $137,160. Count 7 In relation to Count 7, receive benefit corruptly on 22 January 1998, $22,891 Count 10 In relation to Count 10, receive benefit corruptly on 18 February 1997, $10,000 Count 27 In relation to Count 27, receive benefit corruptly on 1 July 1997, $19,204. Count 33 In relation to Count 33, receive benefit corruptly on 29 August 1997, $557,551 46I decline to make orders in relation to the remaining counts, as the total amount would then exceed the jurisdictional limit of the court. Each party to bear their costs in this application.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 January 2013

Victims Support and Rehabilitation Act 1996(NSW)

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