R (Cth) v Petroulias

R (Cth) v Petroulias - [2007] NSWSC 879 - NSWSC 2007 case summary — Zoe

[22]

The Element of Deprivation in this Case 6 To prove the element of deprivation, it is necessary for the Crown to prove that the Commissioner of Taxation had an arguable case to put that the private binding rulings or advance opinions were wrong and, accordingly, that the risk to the revenue was such that the Commonwealth was deprived of something of value: R v Petroulias at 667 [11]. It is an issue of law for me, as the trial Judge, to determine whether the arguable case was capable of success in the sense explained by Spigelman CJ and Hunt AJA in R v Petroulias at 667 [12]. If this issue arises at the close of the Crown case, it will fall to be determined in accordance with the principles in Doney v The Queen [1990] 171 CLR 207 at 214-215. 7 If the fraud count is left to the jury, then in accordance with the judgment of Spigelman CJ and Hunt AJA at 668 [14], despite its obvious legal character, the arguable case issue is a fact in issue in the trial involving the element of deprivation, and is to be determined by the jury. In the joint judgment of Spigelman CJ and Hunt AJA, the approach to be taken by a jury with respect to this issue was expressed in the following way at 667 [13]: "An arguable case is (by definition) a case which is supported by an argument which is plausible or apparently reasonable on its face. A plausible or apparently reasonable argument is one which can be reasoned logically from one step to the next step to its conclusion. It is not the function of the relevant tribunal to determine whether either the Commissioner's argument or the taxpayer's argument is correct, or even which is the more plausible or the more apparently reasonable argument. It may be that each of those parties has an arguable case. That is not unusual in litigation. Even though the taxpayer may have an arguable case, it does not mean that the relevant tribunal may not be satisfied beyond reasonable doubt that the Commissioner also has an arguable case. If so satisfied that the Commissioner has an arguable case, the relevant tribunal has resolved the issue posed by a second category fraud case, subject to the mens rea component identified in para 3, supra." 8 After referring to the directions to be given to the jury concerning the arguable case issue, Spigelman CJ and Hunt AJA stated at 668-669 [18]-[19]: "The issue for the jury to determine is whether or not the arguments propounded on either of the two issues identified in the previous paragraph are of sufficient strength to justify the conclusion beyond reasonable doubt that the Commonwealth was in fact deprived of something of value by reason of the issue of the private rulings. It should be noted that the Commonwealth's case in this regard could be made out if the members of the jury determined that the Crown case was of sufficient strength on either the fringe benefits tax issue or the deductibility issue. It would not be necessary for jurors to be unanimous as to which of the two were of such strength.

[23]

The approach to be taken, already identified in para 13, supra, will constitute the basis for the directions to be given to the jury. It would not be appropriate for the trial judge to direct the jury that, depending on the view they have formed of certain factual matters, the Australian Tax Office did lose something of value - or even that the rulings did put the revenue of the Commonwealth at risk. Such a direction may well be subject to various permutations and combinations of the factual matters, and the direction could lead to confusion. The more usual form of directions to a jury - and the infinitely safer one - is to define the issue which the jury must determine, then explain to them the arguments of both parties in relation to the relevant factual material, and finally conclude that, if the Crown has satisfied them that it has established that particular issue, they may move on to the next issue." 9 With respect to the nature of admissible evidence on the arguable case issue, their Honours observed at 670-671 [27]: "Related to this issue as to whether the decision is one for the judge or the jury is the admissibility of evidence upon which the decision is to be based. In our opinion, but subject to the Crown being permitted to enlarge its particulars in the light of the decision now given by the Court of Criminal Appeal, there is no bar to the admission of relevant statements by courts or others as to the interpretation of these provisions merely because they may have come into existence after the time when the private rulings were made. What the law was at that time is an objective matter which the Crown must prove. That objective fact has nothing to do with any state of mind on the part of the accused which may be relevant to his mens rea. There is therefore no need to restrict the admissible material to material which was in existence at that relevant time. The issue as to what the law was at the relevant time may be proved by reference to what has since been held to be the law, provided that there has been no change in the relevant statutory provisions in the meantime. It is presumed to have been the law all along." 10 In a separate judgment, Mason P dissented upon the question whether the arguable case issue was one for the trial Judge or the jury. Mason P held that the arguable case issue was a matter of law, as part of a mixed question of fact and law, which the trial Judge ought determine: R v Petroulias at 691-693 [125]-[134]. 11 A number of the Federal Court decisions referred to at paragraph 4 above were adverted to by Mason P in R v Petroulias at 679 [61]-[62], 691 [125], 693 [137] and 694-697 [140]-[149].

[29]

The Relevance Test 13 Evidence is relevant in a proceeding if it is evidence that, if accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding: s.55 Evidence Act 1995. Except as otherwise provided by the Act, evidence that is relevant in a proceeding is admissible in the proceeding: s.56(1) Evidence Act 1995. 14 I approach the question of relevance on the basis that there is not said to be a decision of the Federal Court of Australia dealing expressly with an arrangement directly under consideration in this trial. In tendering the six decisions listed in paragraph 4 above, the Accused seeks to open up a broad category of defence as to the way in which the fringe benefits tax and deductibility issues have been treated in the Federal Court of Australia. I anticipate that arguments will be advanced for the Accused which seek to demonstrate that the six Federal Court decisions listed in paragraph 4 bear upon the arguable case issue forming part of the element of deprivation. This will likely involve a process of examination of the six decisions to ascertain whether they are distinguishable in fact or law, and whether they shed light upon the arguable case issue. 15 I approach the objection as to relevance of the four decisions tendered by the Crown, bearing in mind that there will be questions of fact and degree in determining the extent of assistance of particular decisions to the jury in this trial. The question of relevance is to be considered by reference to the fringe benefits tax and/or deductibility issues relied upon by the Crown in the trial. 16 In approaching these objections, I bear in mind the range and variety of the 75 advance opinions and private binding rulings contained in Exhibit C95 and summarised in the schedule (Exhibit C94). The question of relevance is not be approached by reference only to the set of Federal Court decisions which the Accused seeks to tender and which is listed at paragraph 4 above. Rather, the test of relevance involves consideration of the fringe benefits tax and deductibility issues in the context of the range of arrangements identified in the advance opinions and private binding rulings contained in Exhibit C95.

[30]

The Harris and Prebble Decisions 17 Mr Sutherland SC, for the Accused, objects to the tender of the Harris and Prebble decisions upon a number of bases, including relevance. His submissions are recorded in the transcript (T1768, 1788-1793, 1804) and need not be reproduced in this judgment. The submission contends that the decisions relate to circumstances which are so different to the facts in issue in the present trial that they do not satisfy the relevance test. He submits that the Crown, in tendering these cases, seeks to advance a case not previously put by the Crown. It is submitted that the tender of these decisions cannot be seen as a reaction by the Crown to the tender of the six Federal Court decisions relied upon by the Accused. He submits that the deductibility question in Harris and Prebble involved the construction and application of s.82AAE Income Tax Assessment Act 1936 (Cth), a provision which is not under consideration in this trial. Accordingly, Mr Sutherland SC submits that these decisions ought not be admitted into evidence. 18 The Crown submits that these decisions are relevant with respect to the deductibility and fringe benefits tax issues which have been part of the Crown case throughout with respect to the fraud count. The Crown submits that both Harris and Prebble deal with non-complying superannuation fund arrangements for employee benefits and, in both cases, the Courts ruled that deductions were not allowable primarily because of the link between the employer/controller of the fund and the beneficiary. The Crown submits that these characteristics are to be found in the Productivity Incentive Corporation non-complying superannuation fund and, accordingly, the decisions provide guidance in ascertaining whether the contrary argument is arguable given the arguments accepted by the Full Court by the Federal Court of Australia in each case. 19 I have read these decisions for the purpose of the present ruling. Having done so, I am satisfied that each decision is relevant and admissible having regard to the statutory test in ss.55-56 of the Act. I accept the Crown submissions with respect to these decisions. I am not satisfied that there is any unfairness to the Accused in the tender of these decisions, nor that the Crown is in some way changing its case. I accept that the question of deductibility under consideration in these cases arose under a different statute to that directly relevant to this trial. Nevertheless, the concept of deductibility under consideration in these cases is sufficiently relevant to warrant their admissibility in the trial. The weight to be given to these decisions for the purpose of determining the issues in the trial will be a matter for the jury. I am satisfied, however, that each decision is admissible.

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