165 CLR 87
- Case Stated by Director of Public Prosecution (No 2 of 1993) (1993) 70 A Crim R 323
- Darby v R [1982] HCA 32
148 CLR 668
- Doney v Queen [1990] HCA 51
Source
Original judgment source is linked above.
Catchwords
165 CLR 87
- Case Stated by Director of Public Prosecution (No 2 of 1993) (1993) 70 A Crim R 323
- Darby v R [1982] HCA 32148 CLR 668
- Doney v Queen [1990] HCA 51
Judgment (11 paragraphs)
[1]
Application for a "no case" (ref T2599)
Following the completion of the Crown case the accused, Michael Issakidis, made a no case submission in respect of the two counts on the indictment that concern him, namely Counts 1 and 6. He was joined in that application in respect of those counts by the other accused Anthony Dickson. For the reasons I will shortly explain, Mr Dickson's application was completely dependent on the success or failure of Mr Issakidis' application.
On 21 August 2014 both accused were arraigned before a jury panel. The indictment contained six counts. As I have stated, only Counts 1 and 6 concerned Mr Issakidis. Count 1 charges each accused with an offence contrary to s 135.4(5) of the schedule to the Criminal Code Act (Cth) (the Code), namely that:
"Between about 15 November 2005 and 2 December 2011 at Sydney in the State of New South Wales and elsewhere [each accused] did conspire with [the other] to dishonestly cause a loss, or to dishonestly cause a risk of loss to a third person, namely the Commonwealth, knowing or believing there was a substantial risk of the loss occurring."
Count 6 on the indictment charges each of Mr Dickson and Mr Issakidis with a conspiracy under s 11.5(1) of the Code to commit an offence under s 400.3(1), namely that:
"Between about 15 November 2005 and 25 June 2012 at Sydney in the State of New South Wales and elsewhere [each accused] did conspire with [the other] to deal with property of a value of $1 million or more believing it to be the proceeds of crime".
Counts 2 to 5 on the indictment charge only Mr Dickson. They are alternative counts to Count 1.
From the outset it can be seen that both Counts 1 and 6 allege what has been described in this case as a "closed conspiracy", that is, a conspiracy between two and only two persons, namely both accused. Partly for that reason and partly because at this point there does not appear to be any material distinction in the evidence against both accused pointing to the existence of an agreement, it has been accepted that if the no case submission on Count 1 is upheld in respect of Mr Issakidis, then it would follow that Mr Dickson should also be acquitted on that count (see s 135.4(11) and Darby v R [1982] HCA 32; 148 CLR 668). In effect, Mr Dickson cannot be found guilty of conspiring with himself.
Further, from the outset the Crown has accepted that the "predicate crime" for Count 6 is Count 1, that is, the "proceeds of crime" that were said to have been laundered by Count 6 is the proceeds of a crime constituted by Count 1. This has the consequence that an acquittal on Count 1 for any accused must lead to an acquittal on Count 6. Hence in this case Mr Issakidis' submissions were exclusively directed to whether he has a case to answer on Count 1. If it is held that he does not, then an acquittal for him on Count 6 and for Mr Dickson on Counts 1 and 6 ordinarily follows.
[2]
Approach
In Doney v Queen [1990] HCA 51; 171 CLR 207 at 214 to 215 the High Court stated:
"It follows that, if there is evidence (even if tenuous or inherently weak or vague) which can be taken into account by the jury in its deliberations and that evidence is capable of supporting a verdict of guilty, the matter must be left to the jury for its decision. Or, to put the matter in more usual terms, a verdict of not guilty may be directed only if there is a defect in the evidence such that, taken at its highest, it will not sustain a verdict of guilty."
It was accepted by the Crown that its case on Count 1 concerning Mr Issakidis is a circumstantial one. In that respect senior counsel for Mr Issakidis, Mr Byrne QC, referred the Court to the following passage from the judgment of King CJ in Case Stated by DPP (No 2 of 1993) (1993) 70 A Crim R 323 at 327:
"I would re-state the principles, in summary form, as follows. If there is direct evidence which is capable of proving the charge, there is a case to answer no matter how weak or tenuous the judge might consider such evidence to be. If the case depends upon circumstantial evidence, and that evidence, if accepted, is capable of producing in a reasonable mind a conclusion of guilt beyond reasonable doubt and this is capable of causing a reasonable mind to exclude any competing hypotheses as unreasonable, there is a case to answer. There is no case to answer only if the evidence is not capable in law of supporting a conviction. In a circumstantial case that implies that even if all the evidence for the prosecution was accepted and all inferences most favourable to the prosecution which are reasonably open were drawn, a reasonable mind could not reach a conclusion of guilt beyond reasonable doubt, or to put it another way, could not exclude all hypotheses consistent with innocence, as not reasonably open on the evidence." (emphasis added)
However the Crown referred to a number of decisions of the Court of Criminal Appeal of this State which arguably articulate a different approach in respect of applications for a directed verdict in circumstantial cases, including R v JMR (1991) 57 A Crim R 39, and R v PL [2012] NSWCCA 31 ("PL"). In particular in PL at [32] Bathurst CJ, Simpson and Adamson JJ stated:
"It is also clear from the authorities that the sufficiency of evidence to warrant a conviction is to be resolved without regard to evidence which favours the accused as, for example, by qualifying, contradicting or explaining the evidence in support of a conviction [citation omitted]. Further, in a case such as the present which depends in the main on circumstantial evidence, a judge cannot direct a verdict of acquittal if there is evidence in support of the Crown case on which the accused could be convicted even though a reasonable hypothesis consistent with innocence can be formulated …" (emphasis added)
In deciding this matter I am bound to follow this approach.
There is a further aspect of this application. From the outset Mr Byrne QC has also submitted that none of the acts and utterances of Mr Dickson that expressly or implicitly implicate his client in the alleged conspiracy charged by Count 1 were admissible to that effect because there is not reasonable evidence of his client's involvement independent of those acts and utterances (see Ahern v R [1988] HCA 39; 165 CLR 87 at 93) ("Ahern").
In this State it has been held that that issue is addressed in the same manner as a no case submission, although there is a discretion reposed in the trial judge to exclude the use of evidence in that manner if it will "operate unfairly" against an accused (see R v Masters (1992) 26 NSWLR 450 at 466A) ("Masters"). No question of the potential exercise of any such discretion has yet arisen.
Two matters follow at this point. First, in considering whether there is a case for Mr Issakidis to answer on the conspiracy charged by Count 1, regard cannot be had to the acts and statements of Mr Dickson which expressly or implicitly assert Mr Issakidis' involvement in the alleged conspiracy or some aspect thereof. Thus, the question as to whether he has a case to answer merges into the same question as to whether the test in Ahern is satisfied (see R v Chai (1992) 27 NSWLR 153 at 187G).
Second, if I am satisfied that there is a case to answer then the Ahern test will also be satisfied. In that event, the acts and utterances of Mr Dickson which expressly or implicitly assert the involvement of Mr Issakidis in the alleged conspiracy or some aspect thereof will be able to be used as evidence of Mr Issakidis' involvement, subject to the exercise of any discretion to prevent that occurring (Masters at 466A).
[3]
The Scope of Count 1
Some weeks prior to the close of the Crown case the Court provided the parties with a note setting out a draft of directions for the jury in relation to the elements of each count (the "proposed directions") and the rationale for those directions (MFI 35). Subject to one matter, the parties proceeded on the basis that the proposed direction correctly identified the elements of the offences charged by Counts 1 and 6 as they apply to this case.
In respect of Count 1 the proposed direction relevantly stated:
"2. The offence on Count 1 of the indictment has been committed by the accused [ … ] if and only if the Crown proves beyond reasonable doubt that between 15 November 2005 and 2 December 2011:
2.1 He meant to enter into an agreement with [the other accused] to:
(a) cause Neumedix Health Australasia Pty Limited ("Neumedix"), to lodge income tax returns claiming depreciation expenses based on the alleged cost of the purported acquisition of intellectual property by Neumedix where no such cost or obligation had been incurred by Neumedix; and
(b) thereby induce the Commissioner of Taxation to accept that Neumedix sustained substantial tax losses;
2.2 That
(a) intentionally causing Neumedix to lodge income tax returns claiming depreciation expenses based on the alleged cost of the purported acquisition of intellectual property by Neumedix when no such cost or obligation to pay had been incurred by Neumedix and believing that to be so; and
(b) doing so to induce the Commissioner of Taxation to accept that Neumedix sustained substantial tax losses;
was conduct that was:
(c) dishonest according to the standards of ordinary people; AND
(d) known by the accused [ … ] to be dishonest according to the standards of ordinary people;
2.3 That each of Mr Dickson and Mr Issakidis intended to dishonestly cause a loss or a risk of loss to the Commonwealth pursuant to their agreement;
2.4 That [the accused] knew or believed that the loss would occur or that there was a substantial risk of the loss occurring; and
2.5 That either Mr Dickson or Mr Issakidis committed an act pursuant to their agreement."
It was common ground that the phrase "to pay" should be inserted after the word "obligation" in [2.1(a)] of the proposed direction.
Further, as between the Crown and Mr Dickson there is a dispute as to whether the phrase "truly or genuinely" should be inserted between "had" and "been" in [2.1(a)] of the proposed direction and its equivalents so as to reflect the Crown's allegation that any such obligation that might be recorded in any document was in fact a sham. It is not necessary to resolve that debate for the purposes of this application. The issue of substance raised by this application is whether Mr Issakidis has a case to answer in respect of so much of the Crown case that asserts that he entered into and maintained an agreement with Mr Dickson of the kind referred to in [2.1] of the proposed direction on either formulation.
It is important to appreciate the nature of the agreement alleged by the Crown. It is an agreement specifically directed toward the provision of tax returns by NeuMedix that falsely claimed depreciation costs concerning the acquisition of various items of intellectual property. It is not sufficient, for example, for the Crown to prove that Mr Issakidis was, say, simply reckless as to that consequence, that is that he agreed to various matters with Mr Dickson but was only reckless as to whether a false return would be lodged. Instead the Crown will ultimately have to prove that Mr Issakidis agreed to that outcome. Equally, provided that the Crown can prove that he agreed to the achievement of that outcome, then it will not matter if the precise amount of depreciation claimed or the entities that are said to have sold the intellectual property to NeuMedix was not known to him.
[4]
The Nature of the Crown Case
I outlined the general scope of the Crown case in R v Dickson, R v Issakidis (No 1) [2014] NSWSC 1068 at [7] to [8]. I will not repeat that description but further details based on the evidence tendered in the Crown case need to be noted.
The tax returns initially lodged by NeuMedix for each of the financial years 2007, 2008, 2009 and 2010 were tendered in the Crown case. Each of those returns discloses the receipt by NeuMedix of very large amounts of assessable income based upon its subscription for all of the units in the unit trusts that were part of the structured finance deals that NeuMedix undertook with the ANZ Bank and its clients. Each of those tax returns also claimed even larger amounts of deductions for depreciation expenses which, if allowed, meant that no tax was payable by NeuMedix.
The evidence was to the effect that Mr Dickson prepared the tax returns for the financial years 2007, 2008 and 2009 and that the 2010 return was prepared by a firm of accountants, Walsh & Walsh, and then lodged on Mr Dickson's instructions.
The evidence also suggests that depreciation expenses in the tax returns were based upon the amortisation of the alleged cost of the acquisition of three items of intellectual property, namely patents and associated intellectual property which were identified as "Genvax", "CGS" and "ColoGene". The evidence reveals that, after the Australian Tax Office (the "ATO") commenced reviewing and possibly auditing NeuMedix's tax returns, material was provided to the ATO which is capable of suggesting that depreciation expenses claimed in the tax returns were based on the costs it is said that NeuMedix incurred in acquiring those items from the Cayman Islands company, Athena Health Patents Incorporated ("Athena"). Unsigned acquisition agreements between NeuMedix and Athena were supplied to the ATO along with valuations of the intellectual property which was said to support the bona fides of the costs of the acquisitions recorded in the unsigned agreement. The valuations were provided under the letterhead of Karkalla International Holdings Limited ("Karkalla").
The evidence in the Crown case also reveals that a set of amended tax returns for NeuMedix for each of the financial years 2007 to 2010 were later lodged. The Crown's evidence suggests that those returns were prepared by an accountant employed by NeuMedix, Mr Adrian Compton, on the instructions of Mr Dickson. Although the figures in the amended returns in respect of some items of depreciation and the disclosable income arising out of NeuMedix's participation in the unit trusts to which I have referred varied from the original returns, by and large it appears that the methodology in respect of those two items did not differ materially from that used in preparing the original returns.
Mr Dickson's signature is to be found on all of the tax returns except the initial 2009 return which was lodged electronically on his instructions.
[5]
Evidence relied upon by the Crown
There is no evidence that Mr Issakidis saw any of NeuMedix's tax returns, that he saw any of the unsigned assignment agreements purporting to record an acquisition of intellectual property by NeuMedix from Athena upon which the claims for depreciation expenses were based, or that he ever saw the valuations on the letterhead of Karkalla which were provided to the ATO to support the depreciation claims. Nevertheless the Crown submits that an inference is reasonably open that Mr Issakidis agreed with Mr Dickson to effect the lodging of returns claiming false depreciation expenses and that each of them took steps to achieve that aim.
The submissions made on behalf of Mr Issakidis by Mr Byrne QC emphasised the absence of any evidence connecting him to the tax returns lodged and referred to other evidence which indicated that matters of finance, structuring and tax were generally left to Mr Dickson and not undertaken by Mr Issakidis. So much of those general observations can be accepted although that does not preclude Mr Issakidis being a party to any conspiracy. Of their nature conspiracies can contemplate different roles and responsibilities being assigned to and undertaken by the various co-conspirators.
The material relied upon by the Crown as demonstrating at least a prima facie case against Mr Issakidis was set out in its written submissions filed in support of its resistance of Mr Issakidis' application. Although the Crown referred to a wide range of documentary evidence concerning Mr Issakidis, given the nature of the alleged conspiracy I will address the matters that appear to directly concern the ANZ transaction, the acquisition of intellectual property from the inventors, the material provided to Walsh and Walsh and, in particular, the Karkalla assignments.
At this point I note that parts of the Crown submissions address Mr Issakidis' experience and qualifications. The evidence reveals he is a businessman with substantial experience especially in property development and that he has legal qualifications. The Crown submissions also referred to certain contractual obligations that one of his companies incurred in favour of NeuMedix which appear to have involved a requirement that Mr Issakidis review and advise upon NeuMedix's legal relationships and review and advise upon matters concerning its finance arrangements (Exhibit A p 793).
In this area of the law there is no role to play for imputed knowledge. I will treat what is known about Mr Issakidis' expertise and duties as a basis for inferring that, generally, if he was sent material on the relevant topics he read it and was capable of understanding it. Beyond that and, bearing in mind Mr Byrne QC's submissions about what the evidence reveals in fact occurred between Mr Dickson and Mr Issakidis, I will not make inferences concerning what Mr Issakidis must have known or what he must have done beyond what the evidence reveals by what was sent or said to him or sent or said by him.
[6]
ANZ transaction
The first part of the Crown submissions concerns the evidence of Mr Issakidis' involvement in the negotiation, execution and implementation of the structured finance transactions with the ANZ Bank. It is important to note three critical and related features of those transactions.
First, pursuant to those transactions NeuMedix was to receive substantial cash distributions.
Second, as a consequence of NeuMedix becoming a 100 per cent unit holder of the relevant unit trusts it incurred an obligation to declare an even greater amount of assessable income being the net profit of the relevant trust. In fact, the ratio between the cash received and the income attributed to NeuMedix was 9 to 100.
Third, the terms of those transactions were not such that they necessarily required NeuMedix to defraud the Commonwealth to realise any net economic benefit from its participation. Instead whether or not NeuMedix could realise any such net benefit depended upon its ability to generate and claim permissible tax deductions. In the case of NeuMedix it was said that that could be achieved by claiming depreciation expenses arising from the incurring of substantial costs in acquiring patents and associated intellectual property.
The material referred to by the Crown is capable of demonstrating Mr Issakidis' knowledge at the relevant times of the first two features of the structuring transactions that I have identified (see for example Exhibit A pp 347-358 and 511 F-M).
The position is the same with the third feature, namely the necessity for NeuMedix to claim deductions and the manner in which NeuMedix indicated that it would claim deductions. For example, on 9 May 2008 Mr Issakidis was copied in on an email from Mr Dickson to a representative of the ANZ Bank which explained the precise basis that NeuMedix would claim tax deductions, namely by depreciating or amortising the cost of acquiring patents (Exhibit A p 2293).
[7]
Acquisition of intellectual property
Next it is necessary to note the Crown tendered a series of signed agreements evidencing the acquisition by Athena of the three items of intellectual property, that is Genvax, CGS and ColoGene, from their respective inventors. Those agreements and the undisputed evidence of the inventors that were called is more than capable of demonstrating that Athena acquired the Genvax intellectual property in January 2007, the CGS Intellectual Property in March 2007 and the ColoGene intellectual property in November 2007.
As I have previously noted the depreciation claims that were in fact made in the tax returns lodged on behalf of NeuMedix was based upon what appear to be unsigned agreements in which NeuMedix supposedly acquired the relevant intellectual property from Athena. Also, as previously noted Athena was incorporated in the Cayman Islands. There is evidence capable of demonstrating that, at the very least, Mr Dickson controlled Athena. For example, on 12 January 2007 Mr Dickson sent an email to a firm of solicitors in the Cayman Islands issuing instructions for the change of name of Athena and the composition of its Board of Directors (Exhibit A p 858). On 16 May 2008 Mr Dickson wrote to an ANZ Bank representative and described Athena as NeuMedix's "intellectual property warehousing company" (Exhibit A p 2295).
The evidence that was tendered by the Crown in its case is capable of supporting the inference that Mr Issakidis was aware of the fact that Athena acquired the intellectual property for at least Genvax and CGS and was aware of the terms upon which it was acquired.
In relation to the acquisition of Genvax, Mr Issakidis faxed a power of attorney purportedly executed on behalf of Athena which was said to confer authority on a firm of solicitors who otherwise acted for Mr Issakidis to execute the various documents for the acquisition of the Genvax intellectual property by Athena from its inventors (Exhibit A pp1170-1409).
In relation to the acquisition of the CGS intellectual property, on 26 June 2007 Mr Issakidis wrote to a representative of CGS on the letterhead of "NeuMedix Health Group" concerning a dispute that had arisen. In the letter he referred to the "execution of the agreement between our respective companies". The evidence that has been tendered to date only evidences the existence of signed agreements between CGS and Athena, such that the inference is reasonably open that in his letter Mr Issakidis was referring to those agreements. Consistent with this there is evidence that later in 2007 Mr Issakidis participated in the drafting of a letter to CGS on the letterhead of Athena (Exhibit A pp 1757-1761).
Further on 1 April 2006 Mr Issakidis was sent a draft letter by Mr Dickson which was intended for the ANZ Bank. (Exhibit A p 392D). The letter referred to an intention on the part of NeuMedix to "transfer full ownership of these technologies to the Cayman Islands then assign/ licence the technologies to NeuMedix Health Australia Proprietary Limited". The reference to "these technologies" in this passage appears to include Genvax and CGS.
In addition this material is also capable of demonstrating that Mr Issakidis was aware that Athena was an entity controlled by Mr Dickson. In particular the documentary exchange with the representatives of CGS indicate that both he and Mr Dickson were able to speak on Athena's behalf.
It should be noted, however, that I was not referred to any similar documentation which indicated that Mr Issakidis was aware of the fact of the acquisition of the ColoGene intellectual property by Athena and the terms and conditions upon which it was acquired.
[8]
Walsh & Walsh
In the latter part of 2007 Walsh and Walsh Accountants were retained by NeuMedix. The principal of that firm, Mr Walsh, explained that the retainer was initially to prepare financial statements for NeuMedix although he said at a later stage the firm prepared at least one tax return. On 8 November 2007 Mr Dickson sent an email to Mr Issakidis attaching a memorandum (the "November memorandum") (Exhibit A p 1815). Mr Dickson described the November memorandum as a "draft memo to accountant".
Six days later Mr Issakidis sent the November memorandum to Mr Walsh by email. The memorandum asserted that NeuMedix had acquired the Genvax intellectual property for $200,000,000.00 payable over four years under an assignment agreement dated 15 January 2007, and had acquired the CGS intellectual property under an assignment agreement dated 5 March 2007 for $60,000,000.00 payable over four years. The November memorandum stated that: "The technologies were acquired from an Intellectual Property Broking Group, Karkalla International Holdings Limited". On one version of this memo this passage is blurred but whether this reflects a subsequent correction is a matter that need not and cannot be decided at this point.
The November memorandum also referred to NeuMedix entering into an option agreement with Karkalla for, inter alia, the acquisition of intellectual property in respect of ColoGene. The November memorandum asserted that NeuMedix had secured debt funding from, inter alia, Dampier Finance Asia Pacific Proprietary Ltd ("Dampier Asia Pacific") to meet its obligations.
On 14 December 2007 Mr Dickson sent Mr Issakidis an email attaching "Four docs for Accountants" (Exhibit A p 1999). About three hours later Mr Issakidis sent the email and attachments to Mr Walsh. The attached documents included an unsigned assignment agreement pursuant to which Karkalla sold to NeuMedix the intellectual property relating to Genvax, and an unsigned assignment agreement pursuant to which Karkalla sold the intellectual property relating to CGS to NeuMedix. It also included an unsigned option deed under which NeuMedix could acquire the intellectual property concerning ColoGene from Karkalla (the "Karkalla Assignments").
It appears that in early January 2007 there was a meeting between Mr Issakidis, Mr Dickson and Mr Walsh. During that meeting Mr Dickson stated he would prepare NeuMedix's tax returns. Later in January 2007 and then again in February 2007 Mr Walsh sent draft financial accounts for NeuMedix for the financial year 2007 to Mr Dickson and Mr Issakidis. Those draft accounts claim depreciation costs in a manner consistent with what was stated in the November memorandum and the Karkalla Assignments. They also claim a loss of the disposal of intellectual property of some $100,000,000.00 which appears to reflect the other unsigned agreement enclosed with Mr Issakidis' email of 20 December 2007 (Exhibit A pp 2104 and 2124).
Ultimately on what appears to have been 19 March 2008 Mr Issakidis and Mr Dickson signed a set of accounts for NeuMedix for the financial year 2007 (Exhibit A pp 1553-1565 and 2257). These accounts included an entry for depreciation and another entry for loss on the disposal of intellectual property which was consistent with what was stated in the November 2007 memorandum and the Karkalla assignments.
However, on what appears to be 22 June 2009 Mr Issakidis and Mr Dickson signed a revised version of NeuMedix's 2007 accounts which claimed a much larger depreciation figure, being a figure which corresponded with the amount claimed in NeuMedix's 2007 financial year tax return. This set of accounts claimed depreciation expenses in an amount which was consistent with the unsigned agreements recording an acquisition of the relevant intellectual property for CGS and Genvax by NeuMedix from Athena that was later provided to the ATO. As I have noted there is no direct evidence that Mr Issakidis saw those assignment agreements. This change in the accounts appears to have been precipitated by Mr Dickson, possibly around March 2009.
This further set of accounts signed by Mr Issakidis maintained a reference to the provision of funding from Dampier Asia Pacific which was also contained in the first set of accounts that he signed.
In any event, as is to be expected, there were a number of communications with Walsh & Walsh between early 2008 to the time of the signing of both sets of accounts for the financial year 2007. Many of the emails recording those communications that were tendered do not contain any indication that they were sent to Mr Issakidis, however some were. In particular on 27 February 2008 and 28 February 2008 (Exhibit A pp 2229 and 2756) Mr Issakidis was copied in on an email from an accountant at Walsh & Walsh to Mr Dickson which indicated that she was undertaking work on a draft tax return. These emails were capable of conveying to Mr Issakidis, if he did not know already, that there was a connection between the contents of the financial statements and the contents of any tax returns to be lodged on behalf of NeuMedix.
As I have stated, it is a reasonable inference that Mr Issakidis read and comprehended the material that he was sent, received and certainly that he signed. It follows that it is reasonably open for a jury to conclude that Mr Issakidis knew that the financial statements that were being and had been drafted by Walsh & Walsh would be based on the assertions that were made in the November memorandum, backed up by the Karkalla Assignments, as to the effect of those assignments and that it was proposed, initially at least, to prepare tax returns on that basis.
[9]
The Karkalla assignments
The next issue that arises is whether there is evidence from which the jury could conclude that Mr Issakidis knew that any claim for depreciation expenses based on the Karkalla Assignments was false, i.e. is there evidence capable of establishing that he knew that there was no obligation on the part of NeuMedix to pay any such amounts. In my view there was.
Without being exhaustive I note the following matters: First, there is evidence that Mr Issakidis knew that the entity that acquired the intellectual property for Genvax and CGS from the inventors was Athena and not Karkalla International.
Second, there is evidence that he knew of the terms upon which Athena acquired the intellectual property from the inventors of CGS and Genvax. There appears to be a substantial discrepancy between those amounts and what was disclosed as to the consideration payable in the Karkalla Assignments, at least so far as the acquisition of intellectual property by Athena from the inventors of CGS and Genvax was concerned. Broadly the consideration paid by Athena was the entering into of a non-recourse loan for $1.3 million and $1.8 million respectively plus a promise to pay fifty per cent of the gross revenue following commercialisation. On one view the very large amount apparently agreed to be paid to Karkalla by NeuMedix might be seen as having a correspondence with the promise to pay fifty per cent of the gross revenues to the original inventors. However, the evidence is capable of supporting a conclusion that the technologies were, to the knowledge of all concerned, at such an early stage of development that no value of that kind could be so attributed.
Third, in respect of Genvax the Crown tendered an assignment agreement between Athena and NeuMedix dated 2 January 2007 which was signed by Mr Dickson and Mr Issakidis for NeuMedix and under which NeuMedix agreed to pay $18 million for the relevant patents and intellectual property (Exhibit A p 857). This is not the agreement upon which any part of the depreciation claim in any tax return was based in that the consideration paid is too low to generate anything like the type of depreciation expenses that were sought to be claimed.
The Crown contended that this document was prepared to enable Mr Dickson and Mr Issakidis to persuade Barclays Bank to process a payment out of Australia of funds that NeuMedix had received from its participation in the first of the structured finance deals it had entered into with the ANZ Bank. It is unnecessary to address that contention. What is relevant to note is that, on its face, this agreement appears to be completely inconsistent with the Karkalla assignment concerning Genvax that Mr Issakidis sent to Mr Walsh and which was described in the November memorandum.
Fourth, there is evidence capable of demonstrating that Mr Issakidis knew that Mr Dickson effectively controlled Karkalla. In October 2005 Mr Issakidis received an email in which Mr Anthony Dickson described Karkalla as "beneficially owned by John Dickson" (Exhibit A p 211). John Dickson is Anthony Dickson's brother. On 22 June 2006 Mr Issakidis received an email from Mr Dickson attaching a draft deed of release which appears to describe Karkalla as an entity associated with himself and Mr Dickson (Exhibit A pp 427E, 427H).
In December 2007 Mr Issakidis was sent an invoice for the placing of an advertisement by Karkalla that listed its office address as the same address as that of NeuMedix in Sydney and listed a contact person as being a NeuMedix staff member (Exhibit A p 1996).
Fifth, the accounts that Mr Issakidis signed in 2008 are capable of conveying the statement that the source of NeuMedix's funding to acquire the intellectual property from Karkalla was Dampier Asia Pacific whereas there is evidence capable of supporting a finding that Mr Issakidis knew that was not the case.
On a number of occasions Mr Issakidis engaged in email correspondence with an alleged representative of Dampier Asia Pacific called Jay Corbett (see for example Exhibit A pp 1518, 1518A, 1519B, 1519C). Evidence was given by Mr John Dickson which, if accepted, is capable of founding a conclusion that Anthony Dickson and Mr Corbett are the same person and that Mr Issakidis was aware of that. John Dickson's evidence on that topic and his credit generally was strongly attacked in cross-examination. However at no point of the trial, including this one, is it my function to assess matters of credibility.
Further, there is evidence that in early 2007 Mr Issakidis arranged for the transfer of the funds received by NeuMedix from its first structured finance deal with the ANZ Bank to Dampier Asia Pacific's bank account overseas. In doing so it appears that Mr Issakidis completed forms which were submitted to the transmitting bank stating that the funds were to be used to fund the acquisition of intellectual property (see Exhibit A p 1437). However, a note that has been tendered, which is said to be in the handwriting of Mr Issakidis, is capable of being construed as recording an agreement to divide the funds up with the majority to be allocated to Mr Dickson, another person, and some portion to Mr Issakidis personally, with the rest to be used to fund Athena to purchase the intellectual property from inventors (see Exhibit A p 624). The subsequent flow of funds appears to be consistent generally with that construction of the note (see Exhibits S and T).
This material appears to be inconsistent with the documents apparently sent by Mr Issakidis which stated the funds were being sent to Dampier Asia Pacific to fund the purchase of intellectual property. Instead the material is capable of suggesting that, to Mr Issakidis' knowledge, the funds were being sent to Dampier Asia Pacific so that Mr Anthony Dickson could control the funds from offshore for later distribution to his and, to a lesser extent, Mr Issakidis' personal benefit as well as to fund the acquisition of intellectual property from the inventors by Athena.
The significance of this material at this point is that it is capable of founding a conclusion that Mr Issakidis knew that Dampier Asia Pacific was not a third party financier able to fund $100 million of NeuMedix's purchase of intellectual property, but was instead a vehicle for Mr Anthony Dickson to park and then later distribute the cash received from the ANZ Bank. In turn this is capable of supporting a finding that Mr Issakidis knew that NeuMedix did not in truth need any $100 million facility to meets its obligation to Karkalla because there was no such obligation.
[10]
Conclusion
In the end result I am satisfied that there is evidence capable satisfying a jury that: firstly Mr Issakidis knowingly provided documents to Walsh & Walsh that falsely asserted that NeuMedix had incurred an obligation to pay substantial amounts for the acquisition of intellectual property from Karkalla; secondly, that he did so understanding that Walsh & Walsh would use that information to prepare financial accounts; thirdly, that he was aware of a connection between the preparation of any such financial accounts and the contents of NeuMedix tax returns; and fourthly, that he knew that the basis upon which NeuMedix would address its potential exposure to pay tax on its assessable income from the unit trust was by claiming depreciation based on its cost of acquisition of patents. Further, there is also evidence capable of satisfying a jury that he took active steps to facilitate a number of those matters.
However, as already indicated, there is little or no evidence of any direct connection between Mr Issakidis and the tax returns as lodged and the agreements that the depreciation claims were apparently based on. At most there is the revised financial year 2007 accounts for NeuMedix that he signed which also included the note from Dampier that I have described. Instead the evidence is capable of suggesting that, at some point in perhaps late 2008 or early 2009, Mr Dickson determined to change course with the financial accounts of NeuMedix and its tax returns and instead based the depreciation claims on alleged assignments from Athena to NeuMedix. As I have stated, the only evidence of Mr Issakidis being possibly aware of that is his signing of the revised 2007 accounts. Nevertheless I am satisfied that Mr Issakidis has a case to answer on count 1. The evidence that I have outlined is material upon which a jury could be satisfied that he maintained an agreement with Mr Dickson of a kind referred to in [2.1] of the proposed direction. Just because Mr Dickson may have changed the ultimate method of implementing their agreement, would not lead to Mr Issakidis avoiding criminal liability.
If there was an agreement of the kind alleged it appears to be one that contemplated Mr Dickson taking ultimate implementation responsibility for the preparation and lodgement of NeuMedix's tax returns. Of course whether a jury will conclude that there was such an agreement is a different matter but I am nevertheless satisfied that there is a case to answer.
For the sake of completeness I note two further matters. First, I consider it self-evident that, if the jury was satisfied beyond reasonable doubt of the existence of an agreement of the kind contemplated by [2.1] of the proposed direction, then it also could be satisfied by the test of dishonesty set out in proposed [2.2].
Second, in his written submissions Mr Byrne SC made reference to s 9.1 of the Code which excludes criminal responsibility for some offences on some occasions where the accused has the mistaken belief or is ignorant of certain facts.
The above "findings" concerning Mr Issakidis, tentative as they are, do not appear to leave any room for the operation of this section at this point of the trial. The potential application of this provision would need to be considered further.
Accordingly it follows that I dismiss the no case submission put on behalf of both accused in respect of Counts 1 and 6.
[11]
Amendments
18 May 2015 - Paragraph 42: Page number in Exhibit A corrected to read "p 392D"
Paragraph 45: Page number in Exhibit A corrected to read "p 1815".
14 June 2016 - Restriction lifted.
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Decision last updated: 14 June 2016