R v Dowding & Grollo [2000] VSC 439

6. These are my reasons for ruling as I have done on yet another set of pre-trial applications made on behalf of the accused. The first application in the set was made on behalf of the accused Dowding. It had two limbs to it. The first limb was an application under ss.86(7) to dismiss the charge of conspiracy against him. The second was to sever the hearing of the conspiracy charge from the hearing of the substantive charges against Dowding in the indictment. After I ruled that I would not grant the application for dismissal, but would grant the application for severance, an application was made on behalf of the accused Bruno Grollo and Rino Grollo under ss.86(7). I ruled that I would not grant that application.

9. The indictment as it stood prior to the applications read as follows:

The DIRECTOR OF PUBLIC PROSECUTIONS, who prosecutes in this behalf for Her Majesty the Queen, INFORMS THE COURT AND CHARGES THAT during a period between the 1st day of June 1981 and the 8th day of July 1987 at Melbourne in the State of Victoria BRUCE IVAR DOWDING, BRUNO GORDANO GROLLO AND RINO JOHN GROLLO did conspire with each other to defraud the Commonwealth of income tax by concealing profits derived by Grofam Proprietary Limited as trustee of the Grofam Unit Trust from the construction of the Rialto development in respect of the income years ending 30 June 1983 and 30 June 1984, contrary to paragraph 86(1)(e) of the Crimes Act 1914 until the 24th day of October 1984, and thereafter, contrary to section 86A of the Crimes Act 1914.

And the said DIRECTOR OF PUBLIC PROSECUTIONS, INFORMS THE COURT AND CHARGES that on or about 23rd day of December 1983 at Melbourne in the State of Victoria BRUCE IVAR DOWDING did, contrary to sub-section 29A(2) of the Crimes Act 1914, lodge or cause to be lodged with the Australian Taxation Office the income tax return of the Grofam Unit Trust for the year 1 July 1982 to 30 June 1983 with intent to defraud by false pretence, namely that the particulars shown in the return and in the accompanying documents were true and correct in every detail and disclosed a full and complete statement of the total income derived from all sources in and out of Australia during the year of income, cause a benefit to be given by the Commonwealth to a person, namely the non levy of income tax by the Commissioner of Taxation of income tax due and payable by or in respect of the ultimate beneficiaries of the Grofam Unit Trust."

And the said DIRECTOR OF PUBLIC PROSECUTIONS, INFORMS THE COURT AND CHARGES that on or about the 24th day of December 1984 at Melbourne in the State of Victoria BRUCE IVAR DOWDING did, contrary to sub-section 29A(2) of the Crimes Act 1914, lodge or cause to be lodged with the Australian Taxation Office the income tax return of the Grofam Unit Trust for the year 1 July 1983 to 30 June 1984 with intent to defraud by false pretence, namely that the particulars shown in the return and in the accompanying documents were true and correct in every detail and disclosed a full and complete statement of the total income derived from all sources in and out of Australia during the year of income, cause a benefit to be given by the Commonwealth to a person, namely the non levy of income tax by the Commissioner of Taxation of income tax due and payable by or in respect of the ultimate beneficiaries of the Grofam Unit Trusts."

18. It will be noted that the first count, of conspiracy, is directed to all three accused. On the other hand, the second and third counts, the substantive offence counts of "obtaining by false pretences" are directed only to the accused Dowding. The conspiracy count and the substantive offence counts arise out of events linked to "the Rialto development" which included the erection in the early to mid 1980's of landmark towers in the city of Melbourne. Only the conspiracy count refers specifically to the development, but all three counts refer to Grofam Proprietary Limited, which was at least nominally the builder for at least part of the building work. Grofam Proprietary Limited was one of many companies of which Bruno Grollo and Rino Grollo were directors. Bruce Dowding was the accountant, and close adviser to the Grollos, who was mainly responsible for important decisions as to the accounts of those companies.

21. In other pre-trial application rulings, I have either set out or incorporated by reference, aspects of the very long history of investigations and proceedings involving various Commonwealth agencies and Bruno Grollo and Rino Grollo and persons linked to them. It is not necessary to go into much detail as to same here. In October 1988, the Australian Taxation Office commenced an audit of the Grollo group of companies. In December 1990, the ATO referred allegations of fraud to the Director of Public Prosecutions. In September 1992, the Australian Federal Police commenced investigations. Between September 1992 and March 1994, a variety of proceedings were commenced. In May 1994, Olney J, sitting in the Taxation Appeals Division of the Administrative Appeals Tribunal, started hearing applications on behalf of entities linked to the Grollo group to review objection decisions under the Taxation Administration Act. He heard oral testimony from many witnesses, including Bruce Dowding, Bruno Grollo and Rino Grollo. On 20 September 1994, Olney J handed down his findings. Those findings included his reasons for concluding that the evidence of Bruce Dowding, Bruno Grollo and Rino Grollo as to a major issue, put shortly whether there was an at-cost arrangement, lacked credit. An appeal to the Federal Court was commenced shortly after Olney J handed down his findings, but was not heard until October 1997. Meanwhile, on 22 December 1994, conspiracy charges were laid against Bruce Dowding, Bruno Grollo and Rino Grollo. On 21 March 1995, the hand-up brief was served. On 8 September 1995, particulars of the conspiracy charges were provided. On 13 November 1997, the accused were notified that the conspiracy charges were to be confined. On 2 December 1997, a different set of particulars were provided. On 19 April 1998, the substantive offence charges against Bruce Dowding were laid. I had before me minimal information as to factors determining those charges. Mr Shannon, who was then leading counsel for the prosecution, has since died. On 1 June 1998, the committal hearing commenced. On 24 February 1999, the magistrate made his final ruling, declining to grant an application to adjourn, and thus effectively committing the accused to trial. In July 1999 I was asked to preside at the trial. In August 1999, I commenced hearing pre-trial applications. There was delay between August 1999 and May 2000, occasioned by the need for, and the effect of, rulings as to expert testimony. Since June 2000, I have effectively devoted my attention to bringing this proceeding on for trial, sitting elsewhere only where it suited the lawyers for the parties. Only in the week commencing 16 October was it possible to get a jury empanelled.

24. I have recently re-read comments of the Court of Criminal Appeal of Victoria in R v Smart [1983] VicRp 22; [1983] VR 265, R v Higgins (1994) 71 A Crim R 429, and R v Wilson & Grimwade [1995] VicRp 11; (1994) 73 A Crim R 190. In the spirit of what was said there, and having now sat on over 70 days of hearings of pre-trial applications or mentions, I make certain comments. I am sorely troubled at the expenditure of judicial time. It seems to me that the Director could not have reason to complain that those representing him had not exhausted all avenues of supporting the legitimacy of the proceedings and the charges, or the admissibility of the evidence proposed to be led. The like comment applies as to the accused but I would substitute "challenging" for "supporting". My comments are not clearly irrelevant. In R v Demirok [1976] VicRp 19; [1976] VR 244 at 254, in the context of matters potentially affecting the exercise of the discretion as to severance, it is noted that, in a appropriate case, court time and public expense can be taken into account. On 4 October 2000, during the hearing of another pre-trial application, I enquired as to the character of what had been foreshadowed weeks earlier as an application for severance to be made on behalf of the accused Dowding. I was told then of the proposed application under ss.86(7) and that it was linked with an application to sever in accordance with general principles. Only on 16 October, did some of the wider implications of the ss.86(7) application become apparent to me.

27. Submissions have been put to me as to the principles to be adopted upon an application under ss.86(7). Different positions were taken, on behalf of the prosecution and the accused, as to what those principles were, and as to what should be the result of applying the appropriate principles. I was informed by Mr Judd that he was not aware of any decision upon an application under ss.86(7). No other counsel drew to my attention any such decision. The explanatory memorandum published at the time of the introduction of the amendments in 1995, contains a reference to the need to introduce reforms in relation to, amongst other things, conspiracy. It also contains references to the recommendations of "the Gibbs Committee". Many of the speakers talking to the amendments in debate in the House of Representatives on 1 March 1995 refer to "the Gibbs Committee". The Committee was a committee, chaired by the former Chief Justice, which was charged with reviewing Commonwealth Criminal Law, and which reported in July 1990. In Chapter 44 of the report, which dealt with "Conspiracies where substantive offence committed", the Committee reported: "The Review Committee, whilst strongly supporting the general rule that a charge of conspiracy should not be laid when there is an effective and sufficient charge of a substantive offence, does not recommend that the law be amended to impose a legal restriction of that kind." It set out its reasons, and referred to cases, and textbooks, and to changes proposed in the United Kingdom. The cases included: R v Hoar [1981] HCA 67; (1981) 148 CLR 32 and R v McCready (1985) 20 A Crim R 32.

"44.7 The Review Committee considers that the enforcement of the principles discussed in this chapter is more appropriately left to the courts rather than made the subject of rigid statutory control. It accordingly recommends that there should be no statutory provision which prevents the laying of a charge of conspiracy when a substantive offence has been committed. However, it recommends that express power be given to any court to discharge the jury (in the case of indictable offences) or the court itself (in the case of summary offences) when a charge of conspiracy is brought, to enable the presentment of an indictment or the laying of an information for the completed substantive offence where the court is of the opinion that the interests of justice require that course."

34. At page 6 of the explanatory memorandum, there are these two paragraphs:

"Because of concern that the charge of conspiracy has been overused, or may be overused, it was felt that there should also be procedural restrictions on conspiracy charges. The charge should be subject to the consent of the DPP (or the equivalent authority); see proposed subsection 86(9).

Additionally proposed subsection 86(7) allows a court to dismiss the conspiracy count if it considers that the interests of justice require it to do so. The most likely use of this provision will arise when the substantive offence could have been used, a criticism repeatedly voiced by the courts (see, for example, Hoar [1981] HCA 67; (1981) 148 CLR 32)."

39. Mr Judd, for the accused Dowding, relied strongly on those paragraphs, and took me to four cases bearing on the approach to an application under s.86(7): Hoar, R v Griffiths [1966] 1 QB 589, R v Moore (1987) 1 Qd R 252, and R v Pollitt [1991] VicRp 22; [1991] 1 VR 299. Hoar, Griffiths and Moore are appellate court decisions in which the course followed in the trial below was strongly criticised. The potential for unfairness to the accused was pointed out. It was noted that that potential can arise for reasons that can include that there is added length and complexity in the running of the trial, that specific evidentiary problems are occasioned, and that difficult sentencing dilemmas are created. In Hoar, at page 38, this was said by Gibbs CJ and Mason, Aickin and Brennan JJ: "Generally speaking, it is undesirable that conspiracy should be charged when a substantive offence has been committed and there is a sufficient and effective charge that this offence has been committed." Preceding the stating of that general proposition were two propositions which particularly merit noting. One was that the recital of background facts included that the Court had been informed that the Crown had not decided whether to proceed with substantive offence charges, twelve of which were alleged to be constituted by acts which were the overt acts of the conspiracy, which was the subject of the conviction before the Court. The other was that the Court said, at page 38: "If the Crown's belief was that it had effective charges for the substantive offence then it should have proceeded with those charges..."

11 Pollitt was a ruling of Beach J, who was faced with a presentment including a charge of conspiracy to murder W and a charge of the murder of S. He was faced with a Victorian Crimes Act provisions in these terms:

"Where a presentment contains a count of conspiracy to commit an offence and another count alleging the commission of that offence, the court shall, unless it is of the opinion that to try those counts together would be in the interests of justice, order that the count of conspiracy shall be tried separately from the other count, and the prosecution may elect which count shall be tried first."

Beach J concluded that the burden rested upon the Crown to satisfy him that it was in the interests of justice to try the two counts together and that the interests of justice did not so dictate in the case before him.

45. I turn to cases to which I was not referred by counsel either at all or at least initially. Given the potential impact of my ruling, I think that it would have been preferable if the position revealed in at least some of these cases had been laid before me earlier. As to that, I note that aspects of the issues raised in Hoar and like cases are discussed at some length from page 219 in Gillies' 1990 text on "The Law of Criminal Conspiracy". I also note that Moore , to which I was referred at length, was a decision of the Court of Criminal Appeal of Queensland in 1987. I turn first to two decisions of the Court of Criminal Appeal of Victoria in 1985. They are: McCready (1985) 20 A Crim R 32 and Mills [1986] VicRp 21; (1985) 17 A Crim R 214. In McCready, McGarvie and Ormiston JJ agreed with Young CJ, who said, in two passages, the first at page 39, and the second at page 40:

"I think clear that it is for the Crown to decide upon what offences an accused person is brought to trial by way of presentment or indictment, and, although the Court unquestionably has power to prevent an abuse of its process, it is not for the Court to decide, speaking generally, upon what offence the Crown should proceed. There are, of course, many statement sin the books by judges and courts of the highest standing that it is undesirable to join charges of conspiracy with charges of substantive offences, that the charge of conspiracy should be sparingly employed, that at times a charge of conspiracy by reason of the evidence admissible to prove it may put an accused person at a considerable disadvantage. But all those observations stop short of denying to the Crown the right to indict or present for trial upon such charge as the crown thinks fit."

"Before a court could interfere with a charge presented by the Crown on the grounds that it was an abuse of process, there would have to be some very strong evidence or basis for thinking that the Crown was indeed seeking to achieve an ulterior purpose by the procedure adopted. That would indeed be an abuse of process. It may not be the only abuse of process, but the mere choice of one section rather than another under which to prosecute, even though the section charged carries a higher penalty than the alternative section that might have been used, is not in my view an indication of an abuse of process."

In the judgment of the Court (Young CJ, Crockett and King JJ) in Mills, at page 222, this was said:

"In any case where a conviction has been quashed, it has always been quashed for some reason other than the oppressive nature of the charge of conspiracy: see, for example, Gerakiteys [1984] HCA 8; (1984) 153 CLR 317 (no evidence to support conspiracy); Dawson [1960] 1 WLR 163 (convictions quashed because several conspiracies charged as one); Griffiths [1966] 1 QB 589 (several conspiracies charged as one and substantive counts in the same indictment). We were not referred to any case in which a conviction for conspiracy was quashed solely on the ground that the charging of the conspiracy was oppressive, although we were referred to a number of cases in which the court expatiated upon the undesirability of charging conspiracy: see, for example, Hoar [1981] HCA 67; (1981) 148 CLR 32 especially at 37-39; Grunewald v United States [1957] USSC 59; 353 US 391 at 404 (1957); Ryan (1984) 14 A Crim R 97. It is unnecessary to cite more. The principles are clear. The court does not look with favour on charges of conspiracy realising the disadvantage at which an accused can be placed thereby and although the court retains the power, in the interests of justice, to quash a conviction which is the result of oppression, it will rarely, if ever, do so except where the charge is brought as an abuse of the process of the court."

53. I turn to a number of other cases which I deemed it appropriate to consider. They have included R v Humphries [1982] 1 NZLR 353, R v Mickleberg (1984) WAR 191, R v Debelis (1984) 36 SASR 1, R v Coles (1984) 9 A Crim R 419, R v Ryan (1984) 14 A Crim R 97, and R v Davidovic (1990) 51 A Crim R 197. Not surprisingly there is a considerable diversity in the background circumstances to all these decisions of appellate courts. In most, the concerns expressed in Hoar are referred to, albeit with some differences in emphasis. As in Mills and McReady, there are in Debelis at page 11, comments emphasising considerations going to the exercise of the prosecutor's discretion. The possibility of considering if the adding of a count of conspiracy was an abuse of process was raised in Humphries at page 355. In Mickleberg, the position was not unlike that in Pollitt, in that the concern was with the coupling of a conspiracy count with a count charging the commission of the offence which was its purpose. In Humphries, and Coles, the focus was on events which were seen to be incidents in a continuing conspiracy, as part of a concern as to "total criminality". In Debelis, as in Hoar, the position as to differing penalties was of concern. The potential for the added complexity of a trial, where a conspiracy count was joined with substantive counts was the subject of comment in Davidovic, as it had been in Griffiths, Hoar and Moore. Noted as of particular concern in adding to that complexity was the difficulty of satisfactorily explaining to a jury the precise appropriate use of evidence. Also noted in some cases, as in Davidovic, was the subject of the availability of the option of severance. My review left me troubled that there was a potential for not fully recognising the considerations which might properly be taken into account in a like situation by a judge having to rule on a pre-trial application, and a difficulty in my trying to categorise neatly those considerations.

56. I turn briefly to the subject of the principles governing the exercise of the judicial discretion to order severance of counts. Amongst the leading authorities are Sutton v The Queen [1984] HCA 5; (1983-1984) 152 CLR 528 and De Jesus v R [1986] HCA 65; (1986) 61 ALJR 1. In R v TJB [1998] 4 VR 621 at 626-7, Callaway JA, referred to those cases. He also referred to Rule 2 of the Presentment Rules. Rule 2 permits charges for any offence to be joined in the same presentment if they are founded on the same facts or form, or are part of, a series of offences of the same or a similar character. He said that the rule conferred a true discretion. He then examined submissions as to whether legislative amendments had removed the discretion or had introduce a new element into its exercise. I have also noted what was said (and quoted) by Callaway JA at 630 on the subject of the exercise of judicial discretion.

59. Before I turn to the submissions of counsel, I would note that the order of the making of those submissions was unusual. I have noted above that I was told in passing on 4 October of the proposed application under s.86(7) linked to an application to sever in accordance with general principles. On 16 October, Mr Judd made his submissions, and Mr Robberds commenced his reply. On 17 October, Mr Robberds prefaced further submissions with the following statement:

"Firstly, the Crown would agree to the severance of counts 2 and 3, but on the basis that the conspiracy count remains. Secondly, if the matter is to proceed on the conspiracy count, then the Director of Public Prosecutions will exercise his power under s. 9(4) of the Director of Public Prosecutions Act and decline to proceed with counts 2 and 3 against Mr Dowding.

Thirdly, if Your Honour is minded to dismiss the conspiracy charge against Mr Dowding, we ask to be given the opportunity to recast the indictment and charge substantive offences against each accused, one count against the three accused for the 1983 tax year and one count against the three accused for the 1984 tax return."

64. That statement precipitated the making of certain comments by counsel. The comments did not contribute significantly to my consideration of the issues. I am not disposed to treat the statement as having the import sought to be put on it by counsel for the accused. On the other hand, I consider that the practical result of the making of the statement is that a hearing of any substantive offence charges against any one of the accused is no longer a realistic possibility. After the making of the statement, I ruled against the application for dismissal made on behalf of the accused Dowding. A like application was then made on behalf of Bruno and Rino Grollo, the catalyst being the making of the statement. On 19 October, I queried with counsel whether there were implications arising from what had been said in McCready and Mills. After I heard further submissions as to the second application, I ruled against it.

67. As I have noted earlier, Mr Judd's submissions placed considerable emphasis on the two paragraphs at page 6 in the Explanatory Memorandum which I have set out above, linked to the three passages from Hoar that I have also referred to or quoted above. He also referred to many passages in Moore. He argued: that the underlying policy of ss.86(7) was that there was to be no joining of a conspiracy count and substantive offence counts where there are transactional overlaps; that the approach was not confined to situations where the subject of the substantive offence court was precisely the subject of the conspiracy count; and that it would suffice if there was a substantial overlap of the same transactions on which the counts were based. He then argued, taking me to documents including the prosecution's particulars of overt acts and outline, that the result of the adoption of that approach in the instant case was that I should be satisfied that dismissal of the conspiracy count against the accused Dowding was the proper course. He argued only as a fallback position that the substantive counts should be severed.

70. Messrs Heliotis and Forrest, for Messrs Bruno Grollo and Rino Grollo respectively, indicated that they adopted the submissions of Mr Judd. They placed reliance on the Crown's 17 October statement, and asserted that it identified applicable substantive offences and amounted to an acknowledgment of an ability to prove the substantive offence against each accused in relation to the same transactions the subject of the conspiracy charge. I do not accept that assertion.

73. For the Crown, Mr Robberds submissions included that ss.86(7) was introduced as an acceptance of the Gibbs Committee recommendation. He submitted that each application under ss.86(7) should be looked at in order to determine whether the general rule as spelt out in Hoar should be applied. He submitted that McCready and Mills are indicative of how the courts will still approach an application under ss.86(7). He submitted that, in the instant case, the conspiracy count most appropriately reflects the criminality involved in the concealment of the profits of Grofam P/L, through not only the tax returns, but also the PPS applications and the accounts of Grofam P/L. He submitted that the substantive charges were appropriate to cover the contingency that the jury was not satisfied of a conspiracy between the three accused, but was satisfied that Bruce Dowding gave directions as to certain false entries and omissions in the accounts.

76. The first issue for me to address is as to the effect of ss.86(7). In short, I do not accept the basic propositions put to me by counsel for the Crown or the accused. In my view, ss.86(7) confers a true discretion. It is a discretion to be exercised judicially. There is no onus, and there is no longer a specific fetter of the kind indicated in somewhat different terms in McCready and Mills. Nor is there a different kind of fetter, such as that proposed by counsel for the accused. As noted above, I am reluctant to try to categorise considerations which might affect the exercise of the discretion. But from the cases to which I have referred it sufficiently appears, that it may be appropriate to have regard to many considerations. They include: whether a count of conspiracy to commit an offence is joined with a count alleging the commission of the same offence; likewise but where there is an overlap between the elements of the offence and the alleged overt acts of the conspiracy; whether the joinder can be seen to be an abuse of process; whether a conspiracy count reflects the criminality involved more appropriately than substantive counts; whether double jeopardy is a realistic possibility; whether the complexity of the trial is likely to be increased, because of evidentiary difficulties or otherwise; whether adverse consequences as to sentencing might result; whether the potential for injustice to the accused might arise for any other reason; whether severance is a more appropriate option than dismissal.

79. I turn finally to the exercise of the discretion in the case before me. I am satisfied that this is a case where it could be seen to be a proper exercise of the discretion to dismiss or not to dismiss the conspiracy charge against the accused Dowding. But I am firmly of the view that it is more appropriate not to dismiss it. The position as to the application of the accused Bruno and Rino Grollo is that it seems clear to me that the only appropriate course is to dismiss it. I have had regard to some considerations which it is proper to take into account as to all applications. If the conspiracy and the substantive offence counts were to remain, the potential for added complexity, both as to the handling of aspects of the evidence, and particularly in providing appropriate directions to the jury, is significant. I am satisfied that there is an overlap between the elements of the substantive offence counts against the accused Dowding and the alleged overt acts of the conspiracy. On the other hand, I am not satisfied that the overlap was "perfect" as submitted by Mr Judd. I am satisfied that I should order the severance of the substantive counts against the accused Dowding. I am not satisfied that I should dismiss the conspiracy counts against any of the accused. The exercise of the discretion to sever is a consideration affecting all applications. Like the consideration of avoiding unnecessary complexity, so too considerations of court time and public expense are to be taken into account. I am not satisfied that there has been any abuse of process. The position as to claimed abuse of process has been analysed at considerable length in an earlier ruling. As to penalty, I am informed that the maximum sentence for conspiracy is less than that for obtaining a benefit by false pretences. I am satisfied that, with an order for severance coming on top of the statement of the prosecution earlier referred to, the potential for double jeopardy would effectively be nil.