Court of Appeal (Qld)|2006-02-24|Before: McMurdo P, Jerrard JA and Atkinson JSeparate, reasons for judgment of each member of the Court, each concurring as to the, orders made
McMurdo P, Jerrard JA and Atkinson JSeparate, reasons for judgment of each member of the Court, each concurring as to the, orders made
Catchwords
CRIMINAL LAW – APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION
– APPEAL AND NEW TRIAL – PARTICULAR GROUNDS –
UNREASONABLE OR
INSUPPORTABLE VERDICT – WHERE APPEAL DISMISSED – appellant tax
Source
Original judgment source is linked above.
Catchwords
CRIMINAL LAW – APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION– APPEAL AND NEW TRIAL – PARTICULAR GROUNDS –UNREASONABLE ORINSUPPORTABLE VERDICT – WHERE APPEAL DISMISSED – appellant taxaccountant convicted by a jury of 10 fraudcharges – convictions relatedto appellant lodging tax returns for clients which claimed deductions for“Employee RetentionPlans” – clients had agreed to purchaselump sum insurance bonds financed by the Chase AMP Bank – loan approvalswere not given prior to the end of the financial year in which the deductionswere claimed – appellant set up a different companyto provide finance butCrown alleged that no insurance bonds were in fact purchased before the end ofthe financial year –defence case was that even if no actual expenditureoccurred the clients were “definitively committed” to the schemeprior to the end of that financial year – whether the guilty verdicts wereunreasonable or could not be supported having regard
to the evidence
CRIMINAL LAW – APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION
– APPEAL AND NEW TRIAL – MISCARRIAGE OF JUSTICE
–
CIRCUMSTANCES NOT INVOLVING MISCARRIAGE OR IN WHICH MISCARRIAGE NOT SUBSTANTIAL
– indictment particularised charges
as false deductions claimed as
“expenditure in relation to the purchase of an insurance bond”
– appellant asserted
on appeal that the deductibility of the scheme arose
from the obligation to pay a lump sum contribution to a staff benefit trust
regardless of the trustee’s obligation to purchase an insurance bond
– Crown conceded the inaccuracy on appeal –
whether the inaccuracy
caused a miscarriage of justice
CRIMINAL LAW – APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION
– APPEAL AND NEW TRIAL – PARTICULAR GROUNDS –
UNREASONABLE OR
INSUPPORTABLE VERDICT – WHERE APPEAL DISMISSED – appellant’s
clients paid deposits for the scheme
with the balance to be financed by loans
– deposit money was transferred to another of the appellant’s
companies through
an intermediate company, Mevton – appellant asserted
that the transaction could only be characterised as a dishonest application
of a
chose in action held by Mevton and the trustee could have no equitable interest
in that chose in action unless Mevton had knowledge
of the dishonesty –
appellant was no longer a director of Mevton but there was evidence to suggest
that he was still involved
in its operation – whether the jury were
entitled to find that Mevton had knowledge of the appellant’s
dishonesty
CRIMINAL LAW – APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION
– APPEAL AND NEW TRIAL – MISCARRIAGE OF JUSTICE
–
CIRCUMSTANCES NOT INVOLVING MISCARRIAGE OR IN WHICH MISCARRIAGE NOT SUBSTANTIAL
– MISDIRECTION AND NON-DIRECTION –
PARTICULAR OFFENCES –
appellant’s employee was indemnified from prosecution and gave evidence
against the appellant –
judge directed the jury to consider whether the
other Crown evidence supported the evidence of the indemnified witness –
during
the trial the appellant challenged the direction given that allegedly
inadequate reasons given by the appellant to explain the situation
could be used
to corroborate the evidence of that witness – Crown conceded on appeal
that a misdirection had occurred –
whether the misdirection caused a
miscarriage of justice
CRIMINAL LAW – APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION
– APPEAL AND NEW TRIAL – APPEAL AGAINST SENTENCE
– APPEAL BY
CONVICTED PERSONS – APPLICATIONS TO REDUCE SENTENCE – WHEN REFUSED
– PARTICULAR OFFENCES –
OTHER OFFENCES – appellant sentenced
to seven years imprisonment on each count with parole after two years and nine
months
– sentencing judge found it was appropriate to consider the impact
of the offending on the Australian Tax Office and the appellant’s
clients
– the Court of Appeal has previously emphasised the need for general
deterrence in tax fraud cases – whether
the sentence was manifestly
excessive
CRIMINAL LAW – APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION
– APPEAL AND NEW TRIAL – APPEAL AGAINST SENTENCE
– APPEAL BY
ATTORNEY-GENERAL OR OTHER CROWN LAW OFFICER – APPLICATIONS TO INCREASE
SENTENCE – OTHER OFFENCES –
Commonwealth DPP appealed against the
non-parole period of two years and nine months – sentencing judge took
account of a period
of eight months imprisonment that the appellant had served
for a previous conviction which was then overturned – whether it
is
appropriate to take account of previous wrongful imprisonment when determining
the non-parole period
Income Tax Assessment Act 1936 (Cth), s 51Corrective Services
Act 2000 (Qld), s 135(2)(d)Criminal Code Act 1899 (Qld), s
668E(1A)Penalties and Sentences Act 1992 (Qld), s 161
Barnes v Addy (1874) LR 9 Ch App 244, appliedCodelfa
Construction Pty Ltd v State Rail Authority of NSW (1981-1982) 149 CLR 337,
followedColes Myer Finance Ltd v Federal Commissioner of Taxation
[1993] HCA 29
(1993) 176 CLR 640, followedCompensation Scheme Ltd v West Bromwich
Building Society [1997] UKHL 28
[1998] 1 WLR 896, citedConsul Development Pty Ltd v
DPC Estates Pty Ltd [1975] HCA 8
(1975) 132 CLR 373, applied Edwards v The
Queen [1993] HCA 63
(1993) 178 CLR 193, followed Federal Commissioner of Taxation v
Australian Guarantee Corporation Ltd [1984] FCA 240
(1984) 2 FCR 483,
followedFederal Commissioner of Taxation v James Flood Pty Ltd [1953] HCA 65
(1953)
88 CLR 492, consideredKajewski v Commission of Taxation [2003] FCA 258, followedMaggbury Pty Ltd v Hafele Aust Pty Ltd [2001] HCA 70
(2002) 185 ALR
152, cited New Zealand Flax Investments Ltd v Federal Commissioner of
Taxation [1938] HCA 60
(1938) 61 CLR 179, appliedNilsen Development Laboratories
Pty Ltd v Federal Commissioner of Taxation [1981] HCA 6
(1981) 144 CLR 616,
followedPark v Brothers [2005] HCA 73
S226 of 2005, 6 December 2005,
citedR v Baunach [1999] QCA 207
CA No 88 of 1999, 4 June 1999,
considered and followedR v Cannon [2005] QCA 41
CA No 293 of 2004,
28 February 2005, followed R v Nguyen and Phan [1997] 1 VR 386,
followedR v Stratford & McDonald [1985] 1 Qd R 361, considered
and applied R v To and Do [1998] QCA 106
(1998) 100 A Crim R 558, followedR v
Wright [1994] QCA 16
(1994) 74 A Crim R 152, followedSecured Income Real Estate
(Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51
(1979) 144 CLR 596,
appliedWeiss v The Queen [2005] HCA 81
M50 of 2005, 15 December
2005, considered and applied
Judgment (203 paragraphs)
[1]
CRIMINAL LAW - APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION - APPEAL AND NEW TRIAL - PARTICULAR GROUNDS - UNREASONABLE OR INSUPPORTABLE VERDICT - WHERE APPEAL DISMISSED - appellant tax accountant convicted by a jury of 10 fraud charges - convictions related to appellant lodging tax returns for clients which claimed deductions for "Employee Retention Plans" - clients had agreed to purchase lump sum insurance bonds financed by the Chase AMP Bank - loan approvals were not given prior to the end of the financial year in which the deductions were claimed - appellant set up a different company to provide finance but Crown alleged that no insurance bonds were in fact purchased before the end of the financial year - defence case was that even if no actual expenditure occurred the clients were "definitively committed" to the scheme prior to the end of that financial year - whether the guilty verdicts were unreasonable or could not be supported having regard to the evidence
[2]
CRIMINAL LAW - APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION - APPEAL AND NEW TRIAL - MISCARRIAGE OF JUSTICE - CIRCUMSTANCES NOT INVOLVING MISCARRIAGE OR IN WHICH MISCARRIAGE NOT SUBSTANTIAL - indictment particularised charges as false deductions claimed as "expenditure in relation to the purchase of an insurance bond" - appellant asserted on appeal that the deductibility of the scheme arose from the obligation to pay a lump sum contribution to a staff benefit trust regardless of the trustee's obligation to purchase an insurance bond - Crown conceded the inaccuracy on appeal - whether the inaccuracy caused a miscarriage of justice
[3]
CRIMINAL LAW - APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION - APPEAL AND NEW TRIAL - PARTICULAR GROUNDS - UNREASONABLE OR INSUPPORTABLE VERDICT - WHERE APPEAL DISMISSED - appellant's clients paid deposits for the scheme with the balance to be financed by loans - deposit money was transferred to another of the appellant's companies through an intermediate company, Mevton - appellant asserted that the transaction could only be characterised as a dishonest application of a chose in action held by Mevton and the trustee could have no equitable interest in that chose in action unless Mevton had knowledge of the dishonesty - appellant was no longer a director of Mevton but there was evidence to suggest that he was still involved in its operation - whether the jury were entitled to find that Mevton had knowledge of the appellant's dishonesty
[4]
CRIMINAL LAW - APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION - APPEAL AND NEW TRIAL - MISCARRIAGE OF JUSTICE - CIRCUMSTANCES NOT INVOLVING MISCARRIAGE OR IN WHICH MISCARRIAGE NOT SUBSTANTIAL - MISDIRECTION AND NON-DIRECTION - PARTICULAR OFFENCES - appellant's employee was indemnified from prosecution and gave evidence against the appellant - judge directed the jury to consider whether the other Crown evidence supported the evidence of the indemnified witness - during the trial the appellant challenged the direction given that allegedly inadequate reasons given by the appellant to explain the situation could be used to corroborate the evidence of that witness - Crown conceded on appeal that a misdirection had occurred - whether the misdirection caused a miscarriage of justice
[5]
CRIMINAL LAW - APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION - APPEAL AND NEW TRIAL - APPEAL AGAINST SENTENCE - APPEAL BY CONVICTED PERSONS - APPLICATIONS TO REDUCE SENTENCE - WHEN REFUSED - PARTICULAR OFFENCES - OTHER OFFENCES - appellant sentenced to seven years imprisonment on each count with parole after two years and nine months - sentencing judge found it was appropriate to consider the impact of the offending on the Australian Tax Office and the appellant's clients - the Court of Appeal has previously emphasised the need for general deterrence in tax fraud cases - whether the sentence was manifestly excessive
[6]
CRIMINAL LAW - APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION - APPEAL AND NEW TRIAL - APPEAL AGAINST SENTENCE - APPEAL BY ATTORNEY-GENERAL OR OTHER CROWN LAW OFFICER - APPLICATIONS TO INCREASE SENTENCE - OTHER OFFENCES - Commonwealth DPP appealed against the non-parole period of two years and nine months - sentencing judge took account of a period of eight months imprisonment that the appellant had served for a previous conviction which was then overturned - whether it is appropriate to take account of previous wrongful imprisonment when determining the non-parole period
Weiss v The Queen[2005] HCA 81; M50 of 2005, 15 December 2005, considered and applied
[30]
W Abraham QC, with A J MacSporran SC, for the appellant/ respondent
[31]
B Walker SC, with P J Davis SC, for the respondent/appellant /applicant
[32]
Commonwealth Director of Public Prosecutions for the appellant/respondent
[33]
Ryan & Bosscher for the respondent/appellant/applicant
[34]
[1] McMURDO P: I agree that the appeal against conviction should be dismissed for the reasons given by Jerrard JA.
[35]
[2] Those reasons demonstrate that the learned primary judge wrongly directed the jury that the appellant's inadequate explanations for damning aspects of the prosecution case were evidence capable of supporting the evidence of the indemnified prosecution witness, Mr Stevens: see Edwards v The Queen.[1] That error will result in the appeal being allowed and the quashing of the appellant's convictions on counts 1 - 10 unless this Court considers that the appeal should instead be dismissed because "no substantial miscarriage of justice has actually occurred" (s 668E(1A) Criminal Code). In determining that often difficult issue an essential consideration is whether this Court, after reviewing the whole of the properly admissible evidence, decides that evidence establishes the appellant's guilt on each count beyond reasonable doubt: Weiss v The Queen.[2]
[36]
[3] The learned primary judge gave full and fair directions to the jury as to the standard and onus of proof.[3] His Honour also directed the jury that in reaching their verdict they must not simply choose between the evidence of Mr Stevens on the one hand and the evidence of the appellant on the other because the burden of proof is on the prosecution; if they found the defence evidence unconvincing they must put it to one side, consider the rest of the evidence which they do accept and decide whether on that evidence they are satisfied beyond reasonable doubt that the prosecution had made out its case on each charge.[4] The judge carefully warned the jury of the danger of acting on Mr Stevens' evidence without other independent supporting evidence.[5] Although the appellant's inadequate explanations were wrongly put to the jury as evidence capable of corroborating Mr Stevens, his evidence was capable of being corroborated by a large body of other evidence.[6] The facts set out by Jerrard JA show the prosecution case on each count was compelling, even without Mr Stevens' evidence. During the summing-up the jury asked the trial judge "If we disbelieve the transaction between Grade and Security Life occurred and we must question the agreement made with Mevton, must we consider Mevton's ability to finance the loans, for example, Grade?". In context, this question and the jury's subsequent guilty verdicts show that the jury clearly rejected Mr Hart's attempt to explain those aspects of the prosecution case which would otherwise demonstrate his guilt and that they were satisfied on the evidence they did accept of his guilt on each count beyond reasonable doubt.
[37]
[4] These matters in combination persuade me that the incorrect jury direction has had no real significance upon this jury's verdict. I am confident that, had the jury been properly directed, their verdicts on each count would inevitably have been guilty. After considering the whole of the evidence I am independently satisfied of the appellant's guilt on each count beyond reasonable doubt. The misdirection to the jury here did not amount to such a significant denial of procedural fairness that, even though this Court is persuaded of the appellant's guilt beyond reasonable doubt, it is nevertheless necessary to order a re-trial.[7] There is no substantial miscarriage of justice in dismissing the appeal.
[38]
[5] I also agree with Jerrard JA's reasons for refusing the Commonwealth Director of Public Prosecutions' appeal against sentence and the appellant's application for leave to appeal against sentence.
[39]
[6] JERRARD JA: These proceedings included an appeal by Steven Hart against his conviction in the District Court at Brisbane on 25 May 2005 on 10 charges alleging fraud. Nine of those convictions were for defrauding the Commonwealth, in breach of s 29D of the Crimes Act1914 (Cth), and the conviction on count 10 was for an offence of dishonest application of money, or fraud, contrary to the provisions of s 408C(1)(b) of the Criminal Code 1899 (Qld). Mr Hart was sentenced to seven years imprisonment, to be served concurrently, on all 10 offences; and on the nine Commonwealth offences the learned trial judge ordered that the non-parole period was two years and nine months. On count 10 the judge recommended that Mr Hart be eligible to apply for parole after serving two years and nine months. Mr Hart has applied for leave to appeal against the severity of all those sentences, and the Commonwealth Director has appealed against the asserted manifest inadequacy of the sentences imposed on the counts of defrauding the Commonwealth.
[40]
[7] Those nine counts each alleged that between 1 June 1990 and 30 June 1991 at Brisbane, Mr Hart defrauded the Commonwealth by causing an income tax return to be lodged for the financial year ending 30 June 1990, which contained a false claim for a deduction. The particulars provided for each count read:
[41]
(a) the income tax return for the following entity claimed the following amount as expenditure in relation to the purchase of an insurance bond:
(i) (in each count there appeared the name of a [different] small proprietary company, and a dollar amount ranging from $80,000 to $500,000):
(b) no such expenditure had been incurred in that financial year."
[42]
[8] Count 10 alleged that between 4 September 1990 and 17 October 1990 at Brisbane Mr Hart dishonestly applied to the use of Harts Australia Ltd ("Harts") $335,000, the property of Hartcorp Fidelity Ltd ("HFL") and being the amount of a general deficiency, and further that that property came into the control of Mr Hart subject to a trust, direction or condition that it should be applied to the purpose of purchasing insurance bonds from the AMP.
[43]
[9] During all relevant periods Mr Hart was a registered tax agent and the managing director of Harts. He was effectively the principal of a large accounting practice, and controlled companies of which, for example, one held a dealer's licence in relation to securities, another was a finance brokerage company, another a company lending mortgage finance, yet another an insurance brokerage company, and HFL, which was the trustee of a number of individual private superannuation funds.
[44]
[10] These included that in 1989 Mr Hart adapted an investment opportunity then being marketed by the AMP, known as Employee Retention Plans ("ERPs"), and offered those to some of the clients of the accounting practice in the period leading up to 30 June 1990. The nine counts of defrauding the Commonwealth were based on events involving nine clients who agreed to enter into the arrangements known as ERPs. A significant feature of an ERP (as described originally to the clients) was that it could provide a tax deduction to a client employer making a contribution to a staff benefit trust fund for the purchase of a 10 year lump sum single premium insurance bond from the AMP,[8] in favour of a key employee of the client. If the employee remained employed by the client for a period of 10 years, the employee would receive the proceeds of the insurance bond; the contribution to the staff benefit trust for the purchase of the bond was tax deductible because the client was providing an incentive to retain key employees by way of the gift to the trust.[9] The appellant's written outline contended that the deductions were valid provided the ERP was a commercially viable and realistic arrangement. The scheme was marketed on the basis that participating clients would contribute 12.7 per cent by way of deposit and borrow the remaining 87.3 per cent of the face value of the bond from Chase AMP; the 12.7 per cent contributed by the client and the 87.3 per cent borrowed would be used by the trustee of the staff benefit trust fund to buy the lump sum bond.
[45]
[11] The necessary arrangements and structuring of ERPs properly entered into, as originally proposed, were as follows:
[46]
• A trust would be set up for the benefit of the employee of a corporate taxpayer, and in the case of each employer there was a separate ERP trust fund.
[47]
• The amounts to be contributed to those trust funds differed from client taxpayer to taxpayer.
[48]
• Each client taxpayer would provide 12.7 per cent of the total contribution of cash needed to buy the lump single premium insurance bond.
[49]
• The balance of the contribution would come from a loan by the Chase AMP Bank.
[50]
• The client corporate taxpayer (the employer) and the employee - usually the active director, or a significant director or employee of the taxpayer - would enter into agreements, the essence of which was a provision that the employer would enter into ERP arrangements for the benefit of the employee, and the employee would be loyal to the employer.
[51]
• The money deposited to the trust funds would be used to purchase the lump sum bonds in the name of the trustee, which would hold those bonds under the respective trusts for the benefit of the respective employees for a period of 10 years.
[52]
• Promoters of the ERP scheme asserted that the capitalised income earned by each bond would not be taxable in the hands of the trustee, and that the only tax attaching to the payment by the trustee of the matured bond to the employee would be fringe benefits tax, payable either on the original lump sum (the view of the promoters) or, perhaps, on the full amount of the matured bond (the opinion of one of the tax investigators involved in the matter). Nothing turns on those two differing opinions. Advantages described by Mr Hart in his evidence included that the 87.3 per cent borrowed was an interest only loan, with the interest payments tax deductible, as well as the 100 per cent deductibility of the bond amount.[10]
[53]
[12] A number of Mr Hart's clients entered into ERPs, and approvals for loans to those client taxpayers by the Chase AMP Bank had been made by 30 June 1990. For those clients there were what the prosecution conceded to be genuine financial arrangements in place, permitting the client company to claim a tax deduction in that financial year, pursuant to s 51 of the Income Tax Assessment Act1936 (Cth). Shortly before 30 June 1990 it became apparent to Mr Hart that some client taxpayers who had agreed to enter into ERP arrangements would not have loans to them approved by the Chase AMP Bank prior to 30 June 1990. The Chase AMP Bank, which had as its sole security for its loan a charge over the AMP bond to be purchased, had required in the first week in June 1990 that the loan from it be to the trustee (HFL) and not to the client taxpayer. That in turn required the preparation of further documents, including an indemnity from the employer (the client taxpayer) indemnifying the staff benefit trust fund with respect to the loan. That requirement by the Chase AMP Bank delayed loan approvals by it_._[11]
[54]
[13] To deal with the problems caused by those delays, documents were prepared recording the introduction of a company Mevton Pty Ltd ("Mevton") into the proposed arrangements, as a lender in place of the Chase AMP Bank prior to 30 June 1990. Those documents approved loans by Mevton to the taxpayer clients. Mr Hart intended that when the Chase AMP Bank approved loans to those clients (necessarily after 30 June 1990), Mevton would be treated as an intermediary or what he called a "securitiser", and would drop out. Mevton was effectively controlled by Mr Hart and the indemnified Crown witness Ian Stevens; it had not traded, had no assets prior to 30 June 1990, and did not have a bank account until September 1990. Letters of offer of loans by Mevton to the taxpayer clients were prepared.
[55]
[14] Thirteen clients of the accountancy practice, who had agreed to enter into ERP arrangements, had not had loans from the Chase AMP Bank approved for their transactions by 30 June 1990. For those clients Mevton was recorded as the lender as at 30 June 1990 rather than the Chase AMP Bank; documents prepared before 30 June 1990 recorded approval of a loan from Hartcorp Finance (a company Mr Hart controlled) to Mevton, and by Mevton to HFL as trustee of the relevant staff benefit trust. However, after 30 June 1990 approvals were still sought from Chase AMP Bank on behalf of those taxpayer clients. Some of those clients accepted Chase AMP Bank offers as late as 20 September 1990.
[56]
[15] The 13 clients whose applications for finance from Chase AMP Bank had not been approved prior to 30 June 1990 had all paid their 12.7 per cent deposit before that date, in accord with the way in which the scheme had been promoted to those clients. The total amount of moneys paid by the 13 clients to HFL as trustee for their respective staff trust funds was $335,000. Count 10 relates to Mr Hart's conduct in assertedly applying that money for purposes unrelated to the identical terms of each trust deed, and instead to the purposes of the company Harts, namely to meet a cash flow difficulty in paying that company's wages. That money was applied to that purpose over the period 5 September 1990 to 16 October 1990, and the Crown case was that it was never repaid.
[57]
[16] Income tax returns for the year ended 30 June 1990 were lodged by those 13 client taxpayers, claiming as deductions the amount those clients had agreed to commit to the ERP scheme. Mr Hart was party to the lodgement of those returns. Nine of them are the basis of counts 1 - 9 on the indictment, those being the matters in which the prosecution had statements from the relevant company directors called as witnesses.
[58]
[17] The Federal Commissioner of Taxation ("FCT") had begun investigating Mr Hart's ERPs during the 1990s, and in response to an investigation in 1997 Mr Hart produced documents to the investigators which he said had come into existence in 1990. Those documents described loans made before 30 June 1990 by Grade Enterprise Limited ("Grade") in respect of each of the nine taxpayer clients whose transactions were the basis of a count in the indictment, the amount lent being 87.3 per cent of the deduction claimed in the 1990 year by that client; the documents Mr Hart produced also demonstrated that a company Security Life Insurance Co Limited ("Security") had been paid the amount lent by Grade Enterprise Limited to each taxpayer client, and had issued an insurance bond to HFL as trustee, equivalent to 87.3 per cent of the claimed deduction in each case.
[59]
[18] Both Security and Grade were incorporated in, and conducted business in, Vanuatu.
[60]
[19] Mr Hart arranged in November 1990 for HFL, as trustee of each of the 13 relevant client staff benefits trusts, to purchase standard or regular insurance policies with the AMP, payable by monthly premiums. The clients, in the main, were not aware of that development, and the controlling minds of the respective corporate clients believed that the monthly payments the client companies were making, and were requested to make to Mevton in late 1990 (applied to paying those premiums), were repayments of a loan the clients believed had been taken out to finance the purchase of a lump sum premium insurance bond with the AMP. The clients were told that the Chase AMP Bank finance had not been pursued, and that Mevton was the financier instead. It was not disputed that the signatures of all directors, other than the company controlled by the witness Francis Sharkey, had been forged on the applications for those AMP regular monthly premium policies. No ten year lump sum bond had in fact been purchased from the AMP and there had been no payment of the face value of a lump sum bond by any of the 9 (or 13) corporate clients prior to 30 June 1990.
[61]
[20] The prosecution submitted that the Mevton loan documents were brought into existence before 30 June 1990 on Mr Hart's instructions, simply to have in place a paper trail in the event that the Australian Tax Office ("ATO") queried the claimed deduction, and to provide grounds for a pretence that Mevton had provided finance for the necessary loans by the end of the 1990 financial year. On the appeal Ms Abraham QC, for the Director, referred the Court to the standard form minutes for directors' meetings for the companies named in the 9 counts, which meetings purported to agree to accept Mevton's offer of a credit facility, offered before 30 June 1990. One of those 9 sets of minutes was dated 26 June 1991; another was dated 20 June 1990 at the top and 22 November 1990 at the bottom. Ms Abraham QC repeated the Crown submission at the trial, that the later dates were accurate, but inserted in error. The prosecution also contended that the documents evidencing a loan by Grade and the issue of insurance bonds by Security had only come into existence (on Mr Hart's instructions) in 1997, and were simply shams designed to mislead the FCT in its investigation.
[62]
[21] The prosecution case was that each client taxpayer had agreed through its relevant or respective directors to enter into an ERP arrangement in the expectation that a loan would be approved for the client's transaction by the Chase AMP Bank and applied to buying a lump sum single premium insurance bond prior to 30 June 1990, and had believed that had happened. This was said to be consistent with the evidence from the witnesses that when payments were made to Mevton late in 1990, the common understanding of the client taxpayers was that they were repaying capital borrowed to enable the purchase of a lump sum premium bond before the end of the 1990 financial year.
[63]
[22] The primary case for the defence at the trial relied very largely on the evidence of Mr Hart, which was that the deductions claimed for each client taxpayer were not fraudulent because the expenditure had actually been incurred, as evidenced by the payments made for the purchase of the lump sum insurance bonds from the Vanuatu company Security. The appellant's written argument on the appeal conceded that the jury may have rejected Mr Hart's evidence about the Vanuatu transactions, and did not argue that the jury could not properly have done so. That was a sensible concession by counsel for Mr Hart. The evidence suggesting that the Vanuatu documents, and the purported issue of a lump sum insurance bond by Security, financed by a loan from Grade, were an elaborate but clumsy fabrication included the following evidence:[12]
[64]
• The taxpayer clients, through their controlling directors, were all initially told that the employer entity (their company) would be making a contribution to the staff benefit trust to enable the purchase of an AMP bond with money borrowed from the Chase AMP Bank (Mr Hart's evidence agreed with that evidence);
[65]
• An arrangement of that nature was confirmed in the majority of cases by the documents which recorded the initial interview with the client concerning an ERP. Those documents, where dated, showed dates from mid-May 1990 to very late in June 1990, and appeared to have been completed on the day of the first interview with each client advising them of ERP possibilities. The documents - essentially recording information about the client companies and their directors - all contained in pre-printed form the statement that finance would be required from the Chase AMP. The documents were usually filled in by hand, to record what the particular client company wanted to claim as an ERP deduction, particulars of directors' names and other like details, and the contents reflected an assumption each client would pay 12.7 per cent from its other funds;
[66]
• The trust deeds entered into in each case referred to the money placed in the trust fund being used to purchase an insurance policy with the AMP;
[67]
• The clients all paid initial deposits of roughly 12.7 per cent of the face value of the bond to be purchased, confirming by that conduct in common that there existed an arrangement in each case to borrow the remainder of it;
[68]
• Taking as an example (by agreement on the appeal) the documents and transactions relating to count 2 of the indictment, involving the company Askena Pty Ltd and the Kajewski family, who understood they were placing $200,000 in an ERP, the application by HFL on behalf of Askena Pty Ltd ("Askena") for a single premium ($174,600) policy with Security in Vanuatu was dated 1 June 1990, which was 25 days before the trust deeds, essential for the arrangement, were signed. It was also 21 days before the date on the Kajewskis' data processing document, which was very likely the date they first heard of the scheme;
[69]
• The Security policy of insurance on Mr Kajewski's life purportedly recorded an actual payment of $174,600 (in Australian dollars) received on 26 June 1990, the day the trust deeds were signed;
[70]
• The insurance bond statement from Security to HFL as trustee for Askena Pty Ltd recorded that the commencement date of the policy was 26 June 1990;
[71]
• A loan account statement purporting to be issued by Grade recorded a loan facility transaction for the Askena ERP happening on 28 June 1990;
[72]
• The clients were not told about the Vanuatu transactions, which if genuine would have made it irrelevant for them to request finance from Chase AMP (or Mevton), and would have placed them under an obligation to repay Grade;
[73]
• Other documents showed that Mr Hart had continued to pursue approvals for loans from the Chase AMP Bank as late as August 1990, inconsistent with the Vanuatu transactions being genuine; Askena was offered Chase AMP finance by a letter dated 15 August 1990;
[74]
• The paper used in the documentation evidencing the transactions, seized from Vanuatu, was manufactured in 1995 or later;
[75]
• Also seized in Vanuatu was a flow chart sent from Australia, and a separate list of the 13 clients who were participating in the ERP arrangements (purportedly) through Mevton. The flow chart appeared to explain how the arrangements through the two Vanuatu companies would operate; that document had a fax date imprint of 21 June 1997;
[76]
• The documents seized in Vanuatu were the result of a "cut and paste" process, using old letter heads (Mr Hart had changed his business address between 1990 and 1997), and Mr Hart's original signature had been placed on photocopies of those "cut and pasted" documents. Mr Hart's evidence agreed that had happened (in or about 1995); he swore it did because he was told then that the original documents held in Vanuatu had been misplaced, and he had no copies in Brisbane;
[77]
• The standard form of the application for an insurance policy from Security provided for Mr Hart to agree to a medical examination; his was not the life purportedly being insured; and
[78]
• The indemnified witness Stevens, who was employed throughout the relevant period in Mr Hart's office and closely involved in all transactions, swore that the documentation purporting to issue in Vanuatu in 1990 had been created in its entirety in 1997, to provide evidence in response to inquiries then being conducted by the ATO. He also swore that the purported offers of loans by Mevton were not sent to the clients before 30 June 1990. Mr Stevens had originally been charged on the 9 Commonwealth counts as a co-accused, but became a Crown witness prior to the committal proceedings. He admitted at the end of his evidence-in-chief at the trial that his evidence was quite different from what he had told the ATO investigators, and that he gave that quite different account on oath in the Federal Court in Kajewski v Commissioner of Taxation[2003] FCA 258. That different account had supported the story that Grade and Security were involved before 30 June 1990[13] and that Mevton had been a go-between.
[79]
[23] On the appeal the alternative defence case advanced at the trial was the one pressed in argument, namely that if the jury concluded that there had been no actual expenditure on a lump sum bond incurred prior to 30 June 1990, nevertheless the deductions claimed were not false, and were justified, as the various clients were "definitively committed" prior to 30 June 1990 to making the payment (for the purchase of a lump sum insurance bond) after 30 June 1990. That alternative ground did not rely on the Vanuatu documents being genuine or any transaction involving Vanuatu companies having ever happened. Nor did it rely on Mevton being a genuine source of finance for single premium lump sum insurance bonds, nor on any such bonds having actually been purchased by HFL, nor on any money actually having been lent to any client taxpayer for that purpose. The argument contended that the real point was that the directors of the taxpayers had each given evidence of agreements between the taxpayer companies and the employee directors, whereby the taxpayer agreed to make the payment, claimed as a deduction, to the staff benefit trust to be created, for the purchase of a lump sum insurance bond for the benefit of the employee. It was submitted that each such agreement had been legally binding between the taxpayer and the employee, who had a right of action if the agreed amount was not paid into a promised trust fund for the agreed purpose. The taxpayer therefore had a definitive commitment to make the payment, and could claim a deduction.
[80]
[24] The grounds of appeal reflecting that submission and numbered 1, 2, 5, and 8 were argued together, summarised by the proposition that there was no evidence from which the jury could find that the amounts claimed as deductions were not deductible. The central submission was that there was no doubt that the sums claimed as deductions may have been deductible, although those amounts had not actually been paid by the taxpayer clients before 30 June 1990 to the common trustee HFL. The factual and legal issue identified by that ground of appeal was whether the client taxpayers had incurred the obligation to pay the amount claimed or had become "completely subjected or definitively committed to pay the money". That way of putting the issue derived from the joint judgment in Federal Commissioner of Taxation v James Flood Pty Ltd[1953] HCA 65; (1953) 88 CLR 492 at 506 where the following passages appeared, referring to s 51.
"(1) All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing such income, shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature, or are incurred in relation to the gaining or production of exempt income."
[83]
"The word 'outgoing' might suggest that there must be an actual disbursement. But partly because such an interpretation would produce very strange and anomalous results, and partly because of the use of the word 'incurred', the provision has been interpreted to cover outgoings to which the taxpayer is definitively committed in the year of income although there has been no actual disbursement."
[84]
"For under our law the facts must satisfy the expression 'losses and outgoings incurred'. These words perhaps are but little more precise than the word 'established' or the expression used above 'definitively committed'. But they do not admit of the deduction of charges unless, in the course of gaining or producing the assessable income or carrying on the business, the taxpayer has completely subjected himself to them. It may be going too far to say that he must have come under an immediate obligation enforceable at law whether payable presently or at a future time. It is probably going too far to say that the obligation must be indefeasible. But it is certainly true that it is not a matter depending upon 'proper commercial and accountancy practice rather than jurisprudence'."
[85]
[26] The learned judge directed the jury in the following terms:[14]
[86]
"Now, the tax law says, well, you don't always have to simply pay the money. It is enough if you have a definitive commitment or it is commercially certain or there is an inevitable obligation that you will pay the money after 30th of June. Now, there's been lots of arguments in this case as to what the definitive commitment was. What you need to know, of course, it is something like or is a binding legal obligation, a binding legal and commercial obligation that you can't walk away from - that's what it really means - even though the actual event, like doing the work or whatever, may not have happened or been completed. You have to say it's an expense incurred and that it can be predicted that you will certainly pay it."
[87]
[27] The learned judge also directed the jurors in notes handed to them prior to the summing up, and to which the learned judge referred when delivering the summing up, that:
[88]
"There was a right to claim the deduction if, by 30 June, Askena was 'definitively committed' or 'commercially certain' or had an 'inevitable obligation' to pay the $174,600 after 30 June (as opposed to a mere wish or expectation that it would be paid)."
[89]
[28] Neither party suggests that those directions were inaccurate. They are consistent with what was said in Federal Commissioner of Taxation v James Flood, and in both earlier and subsequent statements on the point. In New Zealand Flax Investments Ltd v Federal Commissioner of Taxation[1938] HCA 60; (1938) 61 CLR 179 at 207 Dixon J wrote that:
[90]
"'Incurred' does not mean only defrayed, discharged, or borne, but rather it includes encountered, run into, or fallen upon. It is unsafe to attempt exhaustive definitions of a conception intended to have such a various or multifarious application. But it does not include a loss or expenditure which is no more than impending, threatened, or expected."
[91]
Barwick CJ wrote, in Nilsen Development Laboratories Pty Ltd v Federal Commissioner of Taxation of the Commonwealth of Australia[1981] HCA 6; (1981) 144 CLR 616 at 624, when approving those remarks by Dixon J, that he would emphasise the statement that the word incurred "does not include a loss or expenditure which is no more than pending, threatened or expected" and would add "no matter how certain it is in the year of income that that loss or expenditure will occur in the future". In that same case Gibbs J wrote (at CLR 627) that it was clearly necessary that there should be a presently existing liability, to establish that an expenditure not actually made but payable at a future time had been "incurred".
[92]
[29] That description was approved by Toohey J in Federal Commissioner of Taxation v Australian Guarantee Corporation Ltd[1984] FCA 240; (1984) 2 FCR 483 at 491, where His Honour concluded that what was necessary was a presently existing liability before there can be an outgoing incurred in s 51(1). Consistently with that, the joint judgment of Mason CJ, Brennan, Dawson, Toohey, and Gaudron JJ in Coles Myer Finance Ltd v Federal Commissioner of Taxation[1993] HCA 29; (1993) 176 CLR 640 wrote: (at 662)
[93]
"Flood therefore stands as authority for the proposition that a liability must presently be existing in order to be 'incurred' within the meaning of s 51(1).
So much was accepted in Nilsen Development Laboratories Pty Ltd v Federal Commissioner of Taxation, which held that the amounts provided in the taxpayer's accounts to meet employees' long service leave entitlements were not outgoings "incurred" within the meaning of s 51(1) because there was no liability to make payment until the employees either took the leave entitlements or ceased employment. The decisions in Flood and Nilsen proceed on the footing that the Court, in determining entitlement to a deduction under s 51(1), accepted the legal or jurisprudential analysis rather than the commercial view as the correct one."
[94]
[30] Consistently with those statements of principle, Drummond J wrote in Kajewski v Commissioner of Taxation[2003] FCA 258 (at [21]), when considering on a taxation appeal the tax return the subject of count 2 in the indictment:
[95]
"It was no part of the applicants' case that Askena incurred an outgoing of $200,000 by 30 June 1990 merely by determining to establish its Staff Benefit Trust and by also determining then to make a payment of $200,000 into that trust by that date. Merely by making these determinations Askena could not have 'completely subjected or definitively committed' itself to make the $200,000 payment into the Trust so that its entitlement to claim the $200,000 deduction (if a business outgoing) thereupon arose... Askena's decision to make such a payment, though it may have been made before 30 June 1990, was a unilateral and voluntary one that it was free to revoke at any time before it was implemented. Moreover, Askena did not intend to pay $200,000 of its own moneys into the Staff Benefit Trust by 30 June 1990. It intended to borrow $174,600 of sum in order to make that payment. Counsel for the applicants... correctly recognised that Askena could only show that it had incurred an outgoing to the extent of $174,600 in the 1990 year in respect of the Staff Benefit Trust that could satisfy s 51(1) if, by that date, Askena had entered into a legally enforceable agreement to borrow that sum for that purpose."
[96]
[31] Notwithstanding that clear analysis unfavourable to his argument in this Court, the appellant's senior counsel submitted that in the criminal trial the onus was on the Crown to prove beyond reasonable doubt that the respective taxpayers were not "definitively committed", and that the critical commitment on or before 30 June 1990 was (again taking count 2 as an example) by the Kajewskis as directors to pay $200,000 to a staff benefit trust, for the benefit in 10 years' time of the employee and co-director Bill Kajewski. On the appeal senior counsel acknowledged that none of the trust deed, the service agreement, or the supplementary agreement entered into (the latter two being between Askena and Bill Kajewski) contained any express covenant by Askena for the payment of the amount claimed as a deduction (or any amount) to a trust for the employee's benefit, but submitted that the recitals in the supplementary agreement assumed that there had been a decision by the employer to implement the ERP, and also assumed the existence of other arrangements between the parties. Accordingly, it was argued, the real point was whether or not there had been agreement between the employee and the taxpayer employer, reached prior to 30 June 1990, whereby the employer agreed to pay to the trustee the amount claimed as a deduction; if so, there was a "definitive commitment" by the taxpayer. The written argument contended that the Crown had wrongly concentrated in the trial on the arrangements made for borrowing the 87.3 per cent by each taxpayer client, whereas, in the appellant's submission, the important issue for the jury were the arrangements made for each taxpayer to set up the ERP and the taxpayer's commitment (to the employer) to making a payment to the trustee of the amount claimed as a deduction. It was submitted that if the arrangements had been made to set up the ERP, and the commitment to make the payment to it was made before 30 June by any relevant taxpayer, then the finance "really didn't matter", and the amount claimed would still be deductible.
[97]
[32] It was submitted that the various taxpayers, through their directors who were witnesses, generally described how each had made a commitment to enter into an ERP transaction, at the time when the scheme was first explained to the respective taxpayers. That explanation was usually given in the first instance by the indemnified witness Stevens, and at that stage Mr Stevens (or Deborah Campbell, another promoter of the ERP scheme employed by Mr Hart, and who worked with Mr Stevens) was describing an arrangement which involved borrowing money from the Chase AMP Bank to purchase a lump sum security bond. That was the proposition to which each director witness agreed he or she had made a commitment.
[98]
[33] The cross-examination of each of the relevant witnesses followed a similar and obviously carefully chosen path, adopted for a forensic purpose. Each witness was encouraged to agree that he or she had worn two hats at the time of the meeting with Mr Stevens (or Deborah Campbell) when the scheme was explained, and when a commitment to enter into it was given; each witness had both been the employee intended to be benefited by the ERP, and was also a director or controlling director of the employer taxpayer. Hence the two "hats", and each witness was encouraged to agree that a commitment had been made. Generally the witnesses accepted that it had been agreed by the company and the employee to "commit to the ERP", and that the commitment was going to be (whatever the sum claimed as a deduction was), and that to "formalise that agreement, documents had to be signed".[15]
[99]
[34] What that evidence established was that the respective directors had agreed, at relatively short notice before the end of the financial year, to enter into arrangements for an ERP on behalf of themselves as employees and the companies they controlled which employed them, and to gain an immediate tax advantage for the company and a long term personal financial benefit for themselves. That agreement was no more than an acknowledgment that it seemed an excellent idea, providing the proposed loan from the Chase AMP Bank was obtained on acceptable terms and the lump sum premium bond purchased on the conditions described to the witnesses.
[100]
[35] Taking again as an example count 2 and the Kajewskis, the evidence from Bill Kajewski was that he, his brother, and mother were all significantly involved in management of their family company, and had agreed to enter into a $200,000 ERP, for the purpose of ensuring that he remained working in the family business. Absent that ERP, he may have been inclined to leave it and strike out on his own. Mr Hart's senior counsel, Mr Walker SC, submitted on the appeal that the legal relationship between Mr Kajewski and the family company Askena Pty Ltd had changed once that commitment to enter into a $200,000 ERP was made at the meeting, held in all probability on 22 June 1990. He argued that either on that date, or at the very latest the date on which the staff benefit trust deed was executed (which was dated 26 June 1990), Bill Kajewski had a right of action against Askena to enforce an obligation to him to enter into an ERP of $200,000. Mr Walker SC readily agreed that there would be little commercial utility in any such action, and that there was no evidence that either Mr Kajewski, or any other employee, had taken any action against any of the 13 taxpayer companies which had not entered into the described ERPs. He submitted that was not the point, which was that the right of action existed, and that it independently demonstrated Askena's definitive commitment to an ERP of that value. Mr Walker SC argued that it mattered little that no document bound Askena to settle $200,000 on the trust, because the agreement to do so was partly oral and partly in writing.
[101]
[36] Ms Abraham QC referred the Court on the appeal to passages in the evidence which showed that both Mr Hart and the Crown had repeatedly referred to the proposed ERP transactions as a "package". Adopting that term in her argument, she submitted that what had been "sold to" each client company was a package, and that the complete package required both approvals by Chase AMP of a loan and acceptance of that loan offer by the client company. She argued that the 13 clients who had not had finance approved by Chase AMP which those clients had accepted prior to 30 June 1990 had not received the benefit described to each of them; a lump sum deduction (taking Askena again as the example) of $200,000 could not be claimed on the regular monthly premium insurance policy actually taken out later, in November 1990.
[102]
[37] She submitted that the evidence had not supported the suggestion that the directors of the client companies knew that Mevton was the proposed lender before 30 June 1990, and that those who had said otherwise in evidence were honestly mistaken. Ms Abraham QC referred to the minutes of director's meetings accepting Mevton's offer, bearing those dates later than 30 June 1990. She also referred to flow charts seen by Mr Sharkey and Mr Wilson, they being directors of two different companies involved in the 9 counts, and the two directors who thought Mevton had been referred to before 30 June 1990; but those flow charts referred to the payment of regular premiums, and accordingly must have come into existence after the date on which Mr Hart had abandoned the idea of borrowing from Chase AMP on behalf of those clients to purchase a lump sum bond, and had decided instead to get a regular monthly premium life policy for each employer director. Mr Stevens' evidence was that that decision was taken in August 1990 by Mr Hart, and that evidence was not challenged in cross-examination. It followed, Ms Abraham QC submitted, that the flow charts shown to Mr Sharkey and Mr Wilson were created after that date in August and not by 30 June 1990. Further, the evidence from the directors of the other companies provided either inferential or explicit support for the Crown argument that Mevton had been referred to only after 30 June 1990 and not before, consistent with the evidence of Mr Stevens.
[103]
[38] The appellant's argument treats the "commitments" variously acknowledged in cross-examination as a description of a binding and enforceable obligation by each employer client to fund an ERP of a specified amount, but the submission gives no regard to the general circumstances in which those commitments were made. As Ms Abraham QC contended, there was nothing for any of those 13 taxpayer clients to be definitively committed to by 30 June 1990; no package was in place and no deal was done. Accepting that it is proper to treat each employee director, such as Bill Kajewski, as a person wearing two "hats" when each client company instructed the accountants to go ahead and prepare the necessary documents in the very short time remaining, and accepting that each employee director and the company could contract with each other, the surrounding circumstances known to both Askena and Bill Kajewski[16] included the important condition that the accountants ensure that the company Askena was able to borrow 87.3 per cent of the lump sum premium from Chase AMP on terms acceptable to Askena, entered into before 30 June 1990. That was an essential part of the scheme. There was no plan by Bill Kajewski or Askena to borrow from the Chase AMP for any other purpose, or to borrow from any other source, or for any other reason, or to set up a staff benefit fund for any other purpose, and no need for an insurance policy or bond for any other reason, or any other need or reason to enter into any service agreement or supplementary service agreement between Askena and Bill Kajewski. All those separate steps were entered into, to the knowledge of both those parties, for the sole objective of establishing a proper basis for an ERP beneficial to the company and employee, central to which was the proposed borrowing from the nominated lender.
[104]
[39] The appellant's counsel adroitly focused on the argument that the taxpayer companies had definitively committed themselves to an ERP by 30 June 1990, evidenced by the documents executed before that date and by the payment of the deposit. But the taxpayers had not definitively committed themselves to settle any specific amount on the trustee of the staff association trust. The taxpayer companies were committed to paying for the cost of the documents prepared for the purpose of an application to the Chase AMP Bank for a loan on behalf of each taxpayer, and the cost of the preparation of the other documents prepared for the purposes of an ERP, and to paying for the services of the accountants in and about that exercise. I am prepared to accept that they were each also committed, by the agreements between the respective company and the employee director, to applying for a loan from the Chase AMP, and were under a legal obligation to their employee directors to make that application and take the steps necessary to set up an ERP, should the Chase AMP Bank offer finance on terms acceptable to the company. That is, each taxpayer company was obliged not to frustrate a process of obtaining an ERP and not to act so as to deny to its employees a benefit of the agreement (the commitment described in cross-examination) to apply for a Chase AMP Bank loan, and if granted, enter into the ERP; there was an implied obligation on the company and the employee directors that each should do all that was reasonably necessary to secure performance of that agreement.[17] But it went no further than that. It was not an agreement that the company would pay $200,000 into a staff benefit trust irrespective of the source of that money.
[105]
[40] Mr Walker SC argued that a "subject to finance" clause is not implied in every commercial agreement, and should not have been in the agreement between each company and its employee who was to benefit from the ERP. But the background circumstances known to each director and the company, and against which their respective presumed or objectively imputed intentions would be ascertained,[18] included the financial affairs of the respective corporation, its incapacity to pay to a trust fund the amount of the proposed deduction without borrowing 87.3 per cent of it, and knowledge of all the proposed steps and the proposed borrowing, and that those steps and borrowings were proposed only for the purposes of an ERP. I am satisfied that it was certainly open to the jury to conclude beyond reasonable doubt that each of the nine companies named in the indictment were not definitively committed by 30 June 1990 to paying the sums claimed as tax deductions to a staff benefit trust, and that accordingly the amounts claimed were not tax deductible by those employers; and that Mr Hart knew that but caused those deductions to be claimed falsely. Those grounds of appeal should be dismissed.
[106]
[41] Mr Hart's written outline contended the convictions were unsafe and unsatisfactory, a submission that should be understood as meaning that each verdict was unreasonable or could not be supported having regard to the evidence.[19] That ground requires that this Court consider the evidence on each count and ask itself whether it thinks that upon the whole of the evidence it was open to the jury to be satisfied beyond reasonable doubt that Mr Hart was guilty of that count. That evidence on counts 1 to 9 has already been very largely described herein, dealing with the first substantive grounds. It made a strong Crown case, and as put by the Crown at the trial and on the appeal, was a strong case even without the evidence of the indemnified witness Stevens. As Mr Hanson QC for the prosecution submitted to the jury:[20]
[107]
• the evidence of the client taxpayer company directors, explained by the documents those directors saw or which recorded what they first were told (and supported by Mr Hart's evidence) was that what was described to them was a Chase AMP finance package to finance the purchase of an AMP 10 year single premium bond;
[108]
• yet a company, Security, of which those directors knew nothing - and Mr Hart agreed they were not told about the loan from Grade and the policy from Security - issued a policy for Bill Kajewski on the very day, 26 June 1990, that Askena signed the trust deed;
[109]
• the policy Security issued was for $174,600, not $200,000, recorded as received that day from Grade;
[110]
• that evidence purported to establish that without the knowledge of the individual directors of any company Mr Hart had organised an insurance policy with Security for less than the intended $200,000, and financed by a finance company of which the directors knew nothing;
[111]
• those directors believed they were to purchase an AMP bond financed by the Chase AMP Bank;
[112]
• Security was incorporated on 9 March 1990, Grade on 7 November 1989; neither company in any way resembling the solid Australian company the AMP with whom the taxpayers understood they were investing;
[113]
• the correspondence with Grade and Security was signed by Mr Hart, as he admitted; but his original signature was on a photocopy document, which seemed strange; and the paper was manufactured years after 1990, and the documents were "a cut and paste job". Instructions on how the ERPs would work was sent to Vanuatu in 1997, together with a list of clients;
[114]
• around that same time (1997) the ATO was requiring that Mr Hart produce evidence to support the claimed deductions;
[115]
• as late as November 1992 the client companies were being told that initially their investment was with the AMP, in a capital guaranteed bond, yet the documents Mr Hart produced to the ATO showed that the initial investment was with Security. It was a curious matter and a gross neglect of the various clients' affairs not to tell them of that fact;
[116]
• Mr Hart's defence was conducted in the alternative, namely that if the jury rejected the claim of a loan from the company Grade in Vanuatu that purchased an insurance bond from Security, then there had been a loan in June 1990 from Mevton. Yet the overwhelming thrust of the evidence of the witnesses was that they had not heard of Mevton until well after the end of June 1990, and no payments to Mevton were commenced until November and December 1990. If the Mevton loan in June 1990 was genuine, that too seemed very strange. There was no reason why repayments to that company should not have begun earlier;
[117]
• the payments made by the client companies to Mevton did not repay any loan made by that company, but instead were paid by it to HFL and then to the AMP, to pay the regular premiums on the regular life policies taken out around November 1990 with the AMP;
[118]
• those policies were procured with forged signatures, and were not what the clients had contracted to obtain;
[119]
• there was not one document signed by the clients and dated by them that acknowledged that the Mevton loan was in place as of June 1990.
[120]
[42] To all of that evidence, as Mr Hanson QC submitted at the trial, the Crown could then add the evidence of Mr Stevens, who essentially affirmed what would otherwise have been clear simply from a careful analysis of the documents, namely that there was no genuine loan from Mevton although documents were prepared to suggest that there was, and there had been no involvement of Grade or Security at all, and not before 30 June 1990. I agree that Mr Stevens' evidence gave direction or guidance to a proper understanding of that other evidence, but really no more than that. It confirmed what the other evidence established. Accordingly, ground 12 should be dismissed too, with respect to each of the first nine counts.
[121]
[43] The first argument made on the appeal in the written outline, dealing with ground 9 of the appeal, related to the identical terms of counts 1 to 9 on the indictment. It was submitted that the particulars common to each count, alleging a deduction claimed as "expenditure in relation to the purchase of an insurance bond", was misconceived; and that the deductibility of the respective sums claimed pursuant to s 51 arose by virtue of the taxpayer's obligation to pay to the trustee (HFL) the taxpayer's lump sum contribution to the staff benefit trust, not because of the obligation, which was HFL's, to purchase a bond from an insurance company, be that the AMP or any other insurance company. A no case submission was made at the trial on that basis, and the prosecution declined to seek leave to amend the indictment, and submitted that it had deliberately been drawn in the way that it was.[21] The Crown submission to the learned judge was that the deduction, while for expenditure by the taxpayer on a payment to the relevant trust, was an expenditure for the purpose of enabling HFL to buy the lump sum insurance bond, and that the particulars accurately described the position.
[122]
[44] I agree that the deduction claimed was for expenditure on an employee retention policy, by means of a settlement of the claimed deduction to the respective employee's trust fund. But the relevant issue for a legitimate claim to deduct expenditure, whether on the purchase of an insurance bond or a payment as settlor to a trust fund, was whether those outgoings were incurred in gaining or producing an assessable income, or necessarily incurred in carrying on a business for the purpose of gaining or producing that income. That was the question posed by s 51 of the Income Tax Assessment Act1936. The relevant point for the prosecution was that the deduction claimed, however it was described, was for an expenditure which had not in fact been incurred in that financial year, and to which the taxpayer had not been definitively committed in that financial year, even if the payment was not made in that year.
[123]
[45] On the appeal the respondent's written outline implicitly conceded inaccuracy in the particular criticised, but submitted that particulars were an aid to describe what the defence was called upon to answer, and that the gravamen of what had been alleged against Mr Hart, and sought to be proved in respect of each count, was abundantly clear. It was submitted that Mr Hart's counsel had never suggested that he did not know the case he had to meet at the trial, and that Mr Hart was not in any way prejudiced by the particulars given. The respondent submitted on the appeal that those particulars could be cured by amendment without any prejudice to Mr Hart.[22]
[124]
[46] Taking Askena as an example, the tax return simply claimed a $200,000 expense of "employee retention plan", without any further elaboration. The prosecution did not establish that Mr Hart caused that tax return to be lodged containing in it a false claim for a deduction claimed "as expenditure in relation to the purchase of an insurance bond", although that was the legitimate object behind the claimed expenditure. That particular as worded in each of the nine indictments was not made out. But Mr Hart was not in the least misled as to the case made against him, namely that he well knew no legitimate expenditure on an ERP could be claimed in that financial year, and had an application for leave to amend been pressed, I would give leave to amend the indictment by deleting the words "in relation to the purchase of an insurance bond" in each of counts 1 - 9. However, no miscarriage of justice was or would be occasioned to Mr Hart if the words remained.
[125]
[47] Each of these grounds specifically relates to the conviction for an offence against s 408C of the Criminal Code, for misappropriation of property, count 10 on the indictment. The $335,000 found to have been misappropriated resulted from the deposit of $347,242 on 29 June 1990 into a HFL ANZ cheque account, that amount being the ERP deposits paid by the 13 taxpayer clients for whom AMP loans had not been negotiated and to whom loans had been purportedly made by Mevton (and, as well, by Grade in Vanuatu). Funds of that same general amount moved from one HFL account to another, and then between 5 September 1990 and 16 October 1990 cheques paying $337,600 were drawn on the HFL account into which those funds had found their way, and were deposited over that period to a Mevton account, and paid by Mevton to a Harts account in cheques totalling $335,000 between 5 September 1990 and 16 October 1990. Mr Stevens said that had been done to pay the wages bill for Harts' employees; the documentary exhibits did not demonstrate the use to which Harts had put that $335,000, and certainly did not demonstrate any repayment of it at any time.
[126]
[48] The indictment alleged that Mr Hart had dishonestly applied that $335,000 to the use of Harts, the $335,000 being the property of HFL which had come into Mr Hart's control subject to a trust, direction or condition that it be applied to the purpose of purchasing insurance bonds from the AMP. Mr Hart's written outline of argument in support of grounds 4 and 6 of the appeal contends that the payments by HFL to Mevton between 5 September 1990 and 16 October 1990 - of funds which can be traced back to the taxpayers' deposits with HFL - were not an appropriation by Mevton in breach of the HFL trust deed. That written argument referred firstly to the evidence by Mr Stevens that HFL had lent those moneys to Mevton, and then to the standard terms of each deed. Clause 3.1 required HFL to effect a life insurance policy with the AMP, as agreed between the employer and HFL, and clause 3.3 relevantly read as follows:
[127]
"All money received by the Trustee but no [sic] for the time being required to be applied as a premium on a Policy may, in the absolute discretion of the Trustee ...be invested ...in any manner in which the Trustee, if it were personally entitled to such assets, could invest, and without restricting the generality of the foregoing may be invested in Australia or elsewhere:-
...
(b) on deposit with any....company or financial institution...;"
[128]
[49] Mr Hart's written argument submitted that the Crown had not proved an obligation by HFL to make payments to the AMP for 10 year lump sum bonds, because the Crown had not proved that there had been agreements between each employer and the trustee for lump sum premium bond policies. That submission, which was inconsistent with the principal argument orally advanced on the appeal, reflected the uncertainty in the evidence of most of the director witnesses as to quite what it was that had been described to them 15 years earlier. Taking the Kajewskis again as an example, Mr Bill Kajewski said in cross-examination:
[129]
"Now, you knew that part of these arrangements was that there was to be a bond - insurance bond - with the AMP. That was tied into it in some fashion? - That's correct.
Now, that could have been a periodic payment bond, couldn't it, where you pay money into AMP from time to time or it could have been a lump sum bond; you just don't know? - I do not know that, sir."
[130]
[50] That answer reflected the tenor of most of the answers in cross-examination, although not all. But the rest of the evidence, including Mr Hart's,[23] was that the proposal as originally described was for the purchase of a lump sum premium bond. For each client once Chase AMP Bank approved a loan acceptable to it, the deposit and loan were required to be applied to the one lump sum premium. That was why that amount was deductible. On the most beneficial view for HFL (it was common ground that Mr Hart controlled it), if the deposit placed on trust was not "required to be applied as a premium" until an agreement was reached to borrow the 87.3 per cent of the lump sum premium amount from the Chase AMP Bank, it was nevertheless open to the jury to find that it was dishonest to pay that money to Mevton. Nothing in the evidence suggested that lending Mevton money could honestly be regarded as a safe investment. The evidence did not suggest any repayment by Mevton of the money lent, and did establish the purchase of regular premium life insurance policies, the premiums for which were paid by payments wrongly understood as the interest repayments on a loan by Mevton. As Ms Abraham QC pointed out on the appeal, once those deposits were applied for a purpose other than purchasing a lump sum premium bond, it became impossible to purchase a bond in the amount claimed as a tax deduction. The jury were entitled to be satisfied that there was a dishonest application of those deposit moneys.
[131]
[51] Ground 10, added by leave, made the different point that what was dishonestly applied to the use of Harts was a chose in action for $335,000 that was the property of Mevton, not the property of HFL. When cheques were drawn on the HFL account and deposited to a Mevton account, HFL had a chose in action against Mevton, and Mevton had one against the bank. When Mevton drew cheques and deposited them to a Harts account, Harts had a chose in action against the bank and Mevton one against Harts, the right to repayment of the loan to Harts. Accordingly, the submission ran, there was no property of HFL applied to the use of Harts. It was submitted that HFL had no equitable interest in Mevton's chose in action against the bank, unless Mevton took it with notice of HFL's breach of trust and Mr Hart's dishonesty. It did not, because its directors did not include either Mr Hart or Mr Stevens, the two people whose conduct had caused the money to pass from the HFL trust account into a series of other HFL accounts, then into the Mevton's account, and finally to the account held by Harts. It was argued that Mevton took what had been HFL's chose in action against the bank without notice of dishonesty by Mr Hart (and Mr Stevens), because the directors of Mevton were Mr Hart's wife and Mr Hart's former de facto wife, who were not shown to have known of the transactions.
[132]
[52] That submission conceded that if Mevton had notice of Mr Hart's dishonesty, HFL would have an equitable interest in the chose in action Mevton acquired, and the submission referred to Barnes v Addy(1874) 9 LR Ch App 244 and Consul Development Pty Ltd v DPC Estates Pty Ltd[1975] HCA 8; (1975) 132 CLR 373. In Consul Gibbs J wrote (at CLR 396 - 397) that the principle stated in Barnes v Addy (which makes a stranger to a trust a constructive trustee of trust property received by that stranger in the circumstances described in the judgments in Barnes v Addy), extends to a situation where a person received trust property and dealt with it in a manner inconsistent with trusts of which (he) was cognisant. The proposition that Mevton was not controlled by Mr Hart and Mr Stevens can be readily dismissed; while the Mevton company extracts recorded that they were its directors until 4 May 1990, the other evidence showed that they remained in control of it thereafter, irrespective of who were its nominal directors. Mr Hart's own evidence was that:
[133]
"We're in June when we did this. Because what we then did is that we - we then decided this night that we would - we would use Mevton as - because we're - we were using Mevton as a securitisor on the side, we thought we'd do Mevton again in relation to doing the loans, going from Fidelity, finishing up in Harts. So, we used Mevton in the middle."[24]
[134]
[53] The "we" were a Mr Gagan, a Mr Chapple, Mr Stevens and Mr Hart. Mr Gagan was an ex-bank manager giving advice, and Mr Chapple was a commercial lawyer. There was no suggestion in Mr Hart's evidence (or Mr Stevens') that either of the directors on the record needed to be consulted about that important decision, and Mr Stevens' evidence was that it was Mr Hart who directed that the money be transferred from the Mevton account to the Harts account.[25] The jury could really find only that Mr Hart remained the active and managing director of Mevton. Therefore that company knowingly received property HFL held on trust and dealt with it inconsistently with that trust, when the cheques were deposited to Harts' account. The jury were entitled to accept the Crown submission that Mevton was a mere (knowing) conduit through which Mr Hart caused the deposit money held by HFL to be paid to Harts. They were entitled to accept Mr Stevens' evidence that Mr Hart caused all of that to happen, and that Mr Hart had thereby dishonestly applied the property of HFL held on trust to the use of Harts, irrespective of the number of accounts conducted by companies he controlled and through which cheques passed. That ground of appeal should be rejected, as should all grounds specifically challenging the conviction on count 10, including ground 10.
[135]
[54] The prosecution prepared a list of the evidence it argued was capable of corroborating the evidence of Mr Stevens. That list was not given to the jury, but was the subject of submissions by both counsel and directions by the learned trial judge. There were 39 such matters in the list prepared by the Crown, and after argument in the absence of the jury the learned trial judge accepted that all but number 37 on the list were matters which could collectively be put to the jury as potentially corroborating that indemnified witness.[26]
[136]
[55] A copy of that list was provided to this Court in a supplementary bundle of documents. Matters numbered 6 and 7 on that list are Mr Hart's assertedly inadequate reasons given in evidence for reconstructing the Vanuatu documents, and assertedly inadequate reason for an absence of Mr Hart's own office or file copies of the reconstructed documents. Number 15 is Mr Hart's assertedly lack of satisfactory explanation for not telling the client taxpayers of the Vanuatu companies in 1990, and matter number 23 is Mr Hart's assertedly inadequate explanation for committing the client taxpayers' money to a Vanuatu company which had only been in existence for about three months and which had no trading history. Matter number 38 related to count 10. It was Mr Hart's assertedly inadequate explanation for having taken the $350,000 from HFL's trust account and for causing it to be placed in a Harts account.
[137]
[56] The directions to the jury by the learned judge included a direction that they should look to see whether there was any evidence capable of supporting Mr Stevens' evidence, because Mr Stevens was an indemnified accomplice who had admitted not having told the truth before. The judge gave a further direction that there was a whole category of evidence capable of supporting Mr Stevens, but that it was completely up to the jury whether they accepted or rejected that evidence, and also whether they themselves thought that it did support what Mr Stevens said. The learned judge then summarised the points advanced by Mr Hanson QC as corroboration, including the age of the paper used to record the Vanuatu transactions, the cutting and pasting of letters, placing Mr Hart's original signature on a photocopied document, the sending of the fax on 21 June 1997 with a list of clients and a diagram, and the judge then gave the following direction:
[138]
"Mr Hart's reasons for reconstructing the documents he said in 1995, wasn't it I think, whether that's an adequate or inadequate reason. The Crown asserts it's inadequate. It's all a matter for you all of this, the strength you give to all or any of these things."[27]
[139]
[57] The learned judge then went on to refer to other matters that the Crown relied on as corroboration of the evidence of Mr Stevens about the Vanuatu documents and about the Mevton purported loan, including their inconsistency with the Chase AMP applications and the lack of any payment to Mevton until November 1990; and then the learned judge moved to count 10. The judge directed the jury:
[140]
"And then turning to the misappropriation count, count 10, this is put forward as supporting Stevens..."[28]
[141]
The judge listed the matters relied on as potential corroboration (that the money was assertedly taken in breach of the express terms of the trust deed, that it was taken when it was needed for the AMP bond, that it was never repaid, and that its use was covered up by deceit in the purported repayment of the Mevton loan which was in fact the purchase of regular life policies), and then directed the jury in these terms:
[142]
"It is said that Mr Hart's explanation is itself so weak and unsatisfactory that you would find that as corroboration for the allegations against him by Stevens."[29]
[143]
The learned judge added, regarding all of the matter identified as potentially corroborative that:
[144]
"Now they're all the things that are capable of being corroborative because they all seem logically, if they exist, to have some link with what you have to consider. It is completely a matter for you if you think they support the Stevens evidence or not and I'll come to what is said about them by Mr Davis." [30]
[145]
[58] Mr Hart's counsel at the trial (Mr Davis SC, as he is now) had specifically challenged the proposition that assertedly inadequate reasons given in evidence by Mr Hart, for his having taken or not taken any particular step, could be capable of corroborating Mr Stevens' evidence, either generally or on the point about which Mr Hart's evidence was said to be an inadequate explanation. Those objections were overruled, but have been conceded by Ms Abraham QC on this appeal to be correct. The specific concession was that in light of the joint judgment in Edwards v The Queen,[31] to elevate Mr Hart's answers in evidence to the plateau of potential corroboration required that they be treated as an implied admission of guilt and be the subject of the explicit directions approved in the joint judgment in Edwards. Those directions were not given.
[146]
[59] The Crown had argued at the trial that the directions it sought and obtained were supported by the decision of this Court in R v Stratford & McDonald[1985] 1 Qd R 361 at 366 - 367. In that case McDonald was convicted, relevantly, of possession of a dangerous drug for sale. The principal evidence against him was that of an accomplice Stratford, who had pleaded guilty to a count of cultivation of that same crop. Stratford's evidence was that he and McDonald had agreed to cultivate the crop and to receive 50 per cent of the proceeds of sale of it; McDonald was found in the general area after a police raid on the crop, and in possession of a pair of secateurs which, in the opinion of a scientific witness, had been used to sever the stalks of cannabis located at the plantation which had detectible striations on those stalks. McDonald had told the police he had nothing to do with the cannabis and that he was simply looking for waterfalls; on his trial he admitted having helped harvest the crop, but said he did so only on one night, at Stratford's specific invitation extended some weeks earlier, and for $5,000. He said he had no other connection with the crop. The learned trial judge had directed the jury that the Crown evidence going to prove that McDonald had assisted in harvesting the crop, and McDonald's own admission that he did that, were capable of amounting to corroboration. That was the direction upheld on appeal.
[147]
[60] The passage in R v Stratford & McDonald on which the Crown relied, in the judgment of Macrossan J (as His Honour then was), read as follows:
[148]
"The present case illustrates that, although a particular piece of evidence may have a certain consistency with both the prosecution and defence cases, it is, nevertheless, capable of being regarded as possessing a higher degree of consistency with one case than with the other. The appellant's explanation in his evidence that he had assisted in harvesting the cannabis, but had done so having no prior involvement in the crop and only in response to an invitation casually extended some weeks before, was capable of being regarded as not a satisfactory explanation of why the appellant's assistance should have been required at all, why the harvest should have been undertaken at midnight and why he should have been offered $5,000.00 by Stratford for such brief assistance. In other words, features of the appellant's own explanation could be regarded as lacking cogency and the trial judge, at one point properly drew these matters to the jury's attention. The effect of the appellant's evidence in the witness box was that he conceded that he had given an untruthful account to the police when first questioned, but the possible use of this falsehood as corroboration was not put to the jury in the summing up and there is no need to pursue it here. In my opinion, however, the evidence that the appellant assisted in the harvest of the cannabis crop was capable of providing corroboration of the accomplice's testimony on the first count and the first ground taken by the appellant therefore fails."[32]
[149]
[61] Macrossan J, with whom the other judges agreed, went no further than an observation that aspects of a defendant's evidence lacking cogency and not providing a satisfactory explanation of a defendant's admitted conduct could properly be drawn to the jury's attention by a trial judge. That judgment also holds that while a particular piece of evidence may have a certain consistency with both the prosecution and defence cases, it is nevertheless capable of being regarded as possessing a higher degree of consistency with one case than with the other; it may fall to be so regarded where a defendant's explanation lacks cogency, and gives what the jury considers an unsatisfactory explanation for that particular piece of evidence. The judgments in R v Stratford & McDonald did not hold that the unsatisfactory explanation itself was capable of providing corroboration, but rather that it failed to rob otherwise potentially corroborative evidence of that character.
[150]
[62] The prosecution was correct in its concession on this appeal, because the decision in R v Stratford & McDonald held that harvesting the crop was capable of being corroboration, not that providing an unsatisfactory explanation for harvesting it was capable of being corroboration. On the appeal Ms Abraham QC attempted to limit the error to count 10, contending that that direction had been given only in respect of that count, but that submission cannot be accepted. The prosecution had sought the direction given in respect of counts 1 to 9 as well, in those earlier numbered points in its list of potentially corroborating evidence, and the directions the judge gave were not confined to count 10; and they repeated (as describing potential corroboration) an argument by the prosecution about the explanation for the 1995 cutting and pasting. It would have been very difficult for the jury to confine those directions to count 10. Accordingly, the appeal should be considered on the basis that those erroneous directions were given in respect of Mr Hart's explanations for all counts.
[151]
[63] Mr Hanson QC based a significant part of his address to the jury on comments critical of Mr Hart as a witness. He submitted at the beginning of his address that Mr Hart was "an evasive witness, in fact the very epitome of evasiveness",[33] and soon enough thereafter referred to "his self serving claims or explanations",[34] argued "people like this have no credibility, none whatever",[35] later referred to there being "no real explanation at all. A most unconvincing reason for taking this very strange step"[36], and to "it's a pretty pathetic explanation as to why the money was taken" (re count 10),[37] and then to "what do you think of that bumbling, stumbling, totally unsatisfactory reason for taking the money?" [38] (also re count 10). Those submissions were consistent with the rather un-disguised scorn with which Mr Hart's account was treated in his cross-examination by Mr Hanson QC. The prosecution accordingly made Mr Hart's lack of credibility in his explanations an important part of its case. Mr Hart's written outline argues that the misdirection was therefore significant.
[152]
[64] It has long been the law that a defendant's statements, proven by independent evidence to be false, are capable of being corroboration of the accusation to which they respond, where a jury or court concludes that the defendant lied because unable honestly to account in any way consistent with that defendant's innocence for the evidence about which the lies were told. That was established in Eade v The King[1924] HCA 9; (1924) 34 CLR 154 (at 158), and repeated in Edwards v R[39]; summarised in Edwards[40] by the statements that (for lies to be corroboration) "It must be a lie which an innocent person would not tell", and that the accused must be lying because he is conscious that "if he tells the truth, the truth will convict him".[41] The prosecution could have put its case that way in this matter, but did not, arguing instead the different proposition that a weak and unsatisfactory explanation of events in evidence was potentially corroborative, leaving it to the jury to appreciate why. The judgment in Edwards requires that the explanation be spelt out for them. That was not done and Mr Hart has established a misdirection and error of law.
[153]
[65] What is striking about this case is that the matters the prosecution relied on as potentially corroborative of Mr Stevens were the same matters that it relied on as establishing its case without the evidence of Mr Stevens. It has also long been the law that potentially corroborative evidence, standing alone, need not establish any proposition beyond reasonable doubt,[42] as also remarked by Macrossan J in R v Stratford & McDonald, where His Honour wrote:
[154]
"Evidence which is correctly described as corroborative does not have to be so complete that it alone proves the whole of the offence charged..."[43]
[155]
[66] It follows that the prosecution was actually devaluing its own independently established case by also presenting it as corroboration of Mr Stevens, when that other evidence, without Mr Stevens, was sufficient to establish guilt beyond reasonable doubt. When considering that evidence, without the evidence of Mr Stevens, the prosecution were certainly entitled to point to, and have the judge point to, the reasons for which the prosecution said the jury should reject Mr Hart's evidence. They were entitled to argue it was unconvincing and weak, and it was open to the jury to agree, and be satisfied beyond reasonable doubt that Mr Hart's evidence did not leave them in any state of doubt as to his guilt. Rejecting his explanations did not confirm any part of the evidence that explanation attempted to answer, just as rejecting an explanation did not corroborate Mr Stevens' evidence on that or other points. But rejecting his explanations as weak and unconvincing resulted in the jury being able to be satisfied beyond reasonable doubt on the whole of the evidence that he was guilty.
[156]
[67] If the evidence pointed to as corroboration had been only of that character, and not capable of proving the case by itself, then the error shown may have had some real consequence. But even if that other evidence had only been potentially corroborative, there was no complaint on the appeal that any of the other matters (33 in all) relied on as potentially corroborative were incorrectly left to the jury. The result is that on any view, the misdirection about the result of considering Mr Hart's explanations weak or unsatisfactory had no significance for the verdicts. It was the evidence which convicted Mr Hart, not the misdirection. Accordingly, I would hold that no substantial miscarriage of justice actually occurred by reason of the wrong direction about corroboration. The appellant has not made out that he suffered such a miscarriage of justice as to warrant the quashing of the convictions[44] on that ground.
[157]
[68] Since writing this judgment I have read the decision in Weiss v The Queen[2005] HCA 81. I am satisfied from my assessment of the evidence described in this judgment that Mr Hart was proved beyond reasonable doubt to be guilty of all 10 offences. The circumstantial case was almost impossible to explain away, although Mr Hart attempted to do so. No substantial miscarriage of justice has actually occurred as a result of the misdirection, because applying the criminal standard of proof to the whole of the evidence results in the conclusion that the evidence properly admitted at the trial led to a conviction on all offences.
[158]
[69] Mr Hart's written outline contained brief submissions about an amended ground 11, which complained that the learned trial judge did not, in the summing up, properly leave the defence case to the jury nor give a Jones v Dunkel direction. That ground related to one submission made to the jury by Mr Davis SC, who had remarked in the course of those submissions that the jurors had not heard from the two people in Vanuatu whom Mr Stevens had identified as co-conspirators in defrauding the FCT by participating in fabricating the Vanuatu documents and the pretence of a loan by Grade to Security for an insurance bond. Nor had the jurors heard from Deborah Campbell, from all of the controlling personnel of the 13 companies, nor from other persons named by Mr Davis SC.
[159]
[70] The learned trial judge directed the jurors about those submissions in these terms, which accorded with what Gaudron and Hayne JJ wrote in Dyers v R:[45]
[160]
"Various things were said, particularly by Mr Davis, about certain people not being called as witnesses, but the judge's answer about that is always pretty brief. We do not know what they might have said if they were here and we do not know why they're not here, and it is not for any of us to speculate about those things. Your job is simply to get on and decide the case on the evidence that you have got. That is all I need to say about it."
[161]
[71] Mr Davis did not complain to the learned trial judge that direction was inadequate in submissions Mr Davis later made, but invited the judge to add by way of a further suggested direction that he (Mr Davis) had submitted that all of those persons (named by Mr Davis) had not been called, and the only person they had heard from was the admitted liar, Mr Stevens. Mr Davis did not submit to either the judge or the jury any particular suggestion about any evidence that any of those persons not called as witnesses might or could have given as witnesses if called, and his only request to the trial judge was that the argument Mr Davis made be repeated by the learned judge, by way of a reminder that the submission had been made. The learned judge declined.
[162]
[72] Mr Hart's written outline does not explain why a Jones v Dunkel direction should have been given about the prosecution not having called the persons named by Mr Davis, and neither the learned trial judge nor this Court can ignore Dyers v R. The directions the learned judge gave accorded with authority and common sense, in the absence of any information about what those witnesses might have said. That ground of appeal should be dismissed.
[163]
[73] It follows that all grounds of appeal against conviction should be dismissed. That leaves for consideration Mr Hart's application for leave to appeal against his sentences, and the appeal by the Commonwealth Director against the sentence on counts 1-9.
[164]
[74] On Mr Hart's application Mr Davis submitted that the learned sentencing judge had over emphasised deterrence and the ultimate loss caused to the taxpayers through the imposition of penalties, resulting in a head sentence argued to be too high overall. Those submissions reflected the statements by the learned trial judge when passing sentence that it was appropriate, when judging the criminality of what Mr Hart had done, to look at the overall impact; both on the ATO and on the clients. With respect, that seems a very proper approach, and the learned judge sentenced on the basis that the immediate loss to the ATO by the nine false deductions described in the indictment was an amount in the order $650,000. On the Director's appeal, this Court was informed that the underassessment of tax was $750,364.19, and that the total tax and penalties as a result of the fraud were $2,053,902.74, the penalties of course being imposed on the taxpayers for late payment. A good number of them wrote victim impact statements which were referred to by the learned sentencing judge, describing the effect on them of a subsequent and very significant tax reassessment, resulting from breaches of the trust they had all placed in Mr Hart. It was appropriate to take all those matters into consideration.
[165]
[75] In R v Wright[1994] QCA 16; (1994) 74 A Crim R 152 at 160 this Court endorsed a hardening of approach towards offenders committing tax fraud, particularly those committing calculated and systematic fraud involving substantial sums of money. That attitude was confirmed in R v To and Do[1998] QCA 106; (1998) 100 A Crim R 558 where, this Court endorsed at 560 the statement of Brooking JA in R v Nguyen and Phan[1997] 1 VR 386 at 389, to the effect that the seriousness of the offence of defrauding the Commonwealth of large sums of money, by not declaring assessable income, had not always been sufficiently reflected in sentences passed in the past; and that those who systematically defrauded the revenue of large sums must in general expect a substantial custodial sentence.
[166]
[76] In R v Baunach[1999] QCA 207, this Court increased a sentence on an appeal by the Commonwealth Director, imposed on an offender who pleaded guilty to 18 counts of defrauding the Commonwealth. Those offences were committed over a five year period, by a self-employed accountant with no prior criminal history. That offender essentially intercepted and withheld cheques drawn by his clients in favour of the ATO, to an amount totalling $800,000; $92,000 of that was recovered. He was originally sentenced to six years imprisonment with a non-parole period fixed at 12 months, and on appeal this Court increased the non-parole period to two years. Significantly, Davies JA wrote, and the other judges agreed, that:
[167]
"General deterrence, as this Court has said more than once, is an important factor in cases such as this. Whilst one may doubt the general deterrent effect of sentences of imprisonment in many classes of cases, I think this is one of those in which it is of undoubted importance. It must be made clear to people in positions such as that of the respondent, who are intelligent enough to appreciate it when they are told, that the commission of offences of this kind is likely to result in a substantial term of imprisonment."
[168]
[77] Those observations were entirely appropriate on Mr Hart's sentence, and the learned judge did not in any way err in regarding deterrence as a matter of considerable significance. It was. Further, the sentence imposed in Baunach, after a plea, makes it very difficult for Mr Hart to demonstrate that the sentence imposed on him, after a trial, was manifestly excessive. He was not entitled to any reduction in either the head sentence or the non-parole period by reason of any co-operation with the administration of justice. Instead, he had engaged in a sustained campaign of dishonesty both in 1990 when the original returns were lodged, then in the mid to late 1990s when his fraud was unravelling, and continuing to his trial. His conduct showed no remorse at all for the consequences he caused to the taxpayers or the Commonwealth. His application should be dismissed.
[169]
[78] The Director's application focused on the length of the non-parole period, arguing that that should be in the order of four 8and a half years. Ms Abraham QC pointed to the use of $335,000 obtained by the commission of count 10, and used to prop up Mr Hart's own business, never repaid; and to that offence being committed in addition to the defrauding of the Commonwealth. There is force in that argument, but it does not establish that the head sentence was manifestly inadequate, particularly when compared to that in Baunach.
[170]
[79] A significant part of the Director's argument on appeal was that the learned judge had erred, when fixing the non-parole period, by taking into account time spent in custody on another matter. Mr Hart had been convicted on another occasion of two different offences of defrauding the Commonwealth, and sentenced to imprisonment. He had served eight months of that when his conviction was overturned on 4 March 2005,[46] about six weeks before the trial in this matter began. The learned sentencing judge in the instant case held that it would be unjust not to take into account a period of imprisonment which someone like Mr Hart had had the misfortune to suffer from a conviction later overturned, and that Mr Hart should be given full credit for the 256 days spent in prison on those other, overturned, convictions. The judge expressly declared that that was being taken into account in fixing the non-parole period. It follows that had the 256 days not been served, the non-parole period would have started at the halfway point of the seven year sentence.
[171]
[80] Subject to recommendations by a sentencing court to the contrary, and special provision for serious violent offences and for life sentences, parole eligibility at the mid-point of a sentence is a standard legislative assumption[47] for sentences imposed for offences against State laws in Queensland. There is no reason in principle for not applying that assumption when sentencing as well for Commonwealth offences, in the absence of any evidence or argument that the assumption leads to any difficulties in a sentencing regime. Putting aside the time already served for another (overturned) offence, a head sentence of seven years with a non-parole period of three and a half years seems appropriate enough for these offences of dishonesty committed 15 years ago, with ongoing attempts to conceal them, and then to deny that they happened, by a mature aged first offender with some health problems.
[172]
[81] That leaves only the issue of the time in jail on another conviction. I do not think it was wrong in principle for the learned judge to take that into account, nor to give it the weight that the judge did. The misfortune of being imprisoned when he ought not to have been was a relevant personal circumstance upon which Mr Hart could rely for some mitigation of an otherwise appropriate penalty. In R v Cannon[2005] QCA 41 this Court reaffirmed the existence of a general sentencing discretion to consider as a mitigating factor a period of presentence custody which could not strictly be deducted pursuant to s 161 of the Penalties and Sentences Act1992 (Qld). I consider that applied here, and that the Director's application should be dismissed.
[173]
[82] Accordingly, I would order that the appeals against conviction and against sentence be dismissed.
[174]
[83] ATKINSON J: For the reasons given by McMurdo P and Jerrard JA and on my own independent assessment of the evidence as it appears from the whole of the record of the trial, excluding the inadmissible evidence, I am satisfied beyond reasonable doubt that the appellant is guilty of each of the offences of which he was convicted by the jury. No substantial miscarriage of justice has actually occurred in this case. The inclusion of the inadmissible evidence in this case did not amount to a significant denial of procedural fairness. The proviso found in s 668E(1A) of the Criminal Code applies[48] and the appeal against conviction should be dismissed.
[175]
[84] I also agree, for the reasons given by Jerrard JA that the appellant's application for leave to appeal against sentence should be refused and the Director of Public Prosecutions' appeal against sentence should be dismissed.
[3] See, for example, the judge's summing-up at Appeal Book 1991, 2014, 2021, 2029 and 2058 and the judge's summary handed to the jury prior to the summing-up, p 1, paras 2 - 4, p 2, p 3 para 26, p 5 para 34, p 6.
[179]
[4] See the judge's summing-up at Appeal Book 1993 - 1994, 2058 - 2059 and the judge's summary handed to the jury prior to the summing-up at p 1 para 11.
[180]
[6] See Jerrard JA's reasons [56] and the judge's summing-up at Appeal Book 2063 - 2070.
[8] Counsel on the appeal suggested those had a life insurance component; Mr Hart said otherwise in his evidence at AR 1033.
[183]
[9] The prosecution did not challenge that a payment actually made in a financial year for the described purpose would be tax deductible in that year; in support of that unchallenged proposition the appellant's counsel referred to Heather (Inspector of Taxes) v P-E Consulting Group Ltd[1973] 1 All ER 8 and Gandy Timbers Pty Ltd v Federal Commissioner of Taxation (1995) 95 ATC 4167 at 4171.
[184]
[12] As summarised in the respondent's outline of argument in paragraph 35.
[185]
[15] For example at AR 681, in the evidence of the witness Sharkey. The argument on appeal was that those oral agreements were examples of the first (or second) classes described in Masters v Cameron[1954] HCA 72; (1954) 91 CLR 353 at 360; see too Pagnan S.p.A v Feed Products Ltd [1987] 1 Lloyds Rep 601 at 619.
[47] By reason of s 135(2)(d) of the Corrective Services Act 2000 (Qld).
[203]
[48] As the High Court held with regard to the appellate court's task in Weiss v The Queen[2005] HCA 81 at [39]: "Three fundamental propositions must not be obscured. First, the appellate court must itself decide whether a substantial miscarriage of justice has actually occurred. Secondly, the task of the appellate court is an objective task not materially different from other appellate tasks. It is to be performed with whatever are the advantages and disadvantages of deciding an appeal on the record of the trial; it is not an exercise in speculation or prediction. Thirdly, the standard of proof of criminal guilt is beyond reasonable doubt."