HIS HONOUR: The application before the Court is an application for a directed verdict on the charges that are currently before the Court. The substantive charges allege various counts of a contravention of s 134.2 of the Criminal Code Act 1995 (Cth) (hereinafter "the Code"), which makes it an offence for a person by deception to dishonestly obtain a financial advantage from another person, where the other person is the Commonwealth or a Commonwealth entity.
In this case it is said that the accused, Mr Pratten, by deception dishonestly obtained a financial advantage from the Commonwealth or a Commonwealth entity, by filing a tax return, which was knowingly false, in that it did not declare all the income, earned by the accused during the years in question.
It is unnecessary at this stage to drill down to any further detail in relation to the allegations. It is sufficient for me to state that this is not a case in which it is alleged there are false invoices, or claims for false or unexpended deductions. It is a case in which it is said by the Crown that moneys paid to the benefit of Mr Pratten was his income in the ordinary sense, and it was known to Mr Pratten at the time that the income tax returns relating to the years in question were lodged, that said income should have been declared and it was not. If all of that is accepted by the jury, the no case to answer or the directed verdict submission is an unusual one.
Ordinarily a directed verdict is based upon the proposition that one or other element of the charge is such that it cannot be proved according to law. In that sense the no evidence test, as it is often referred to, is a test which judges commonly deal with in determining an application of this kind.
The principles upon which a direction may be given are strict. They are confined, but the test, once satisfied, is not discretionary. It is a trial judge's duty to direct a verdict of acquittal if the evidence could not sustain a guilty verdict for the charge preferred. Most often, as earlier stated, that is based upon the proposition that there is no evidence upon which a jury, properly directed, could convict. See for example: Doney v The Queen [1990] HCA 51; (1990) 171 CLR 207 at 212.6.
In dealing with whether an acquittal should be directed, the Court is required to ignore contradictory evidence unfavourable to the Crown case, and to take the Crown case at its highest, including any inferences that may arise from the evidence adduced, and I emphasize the word "may". It is for the jury, not the Judge, to resolve conflicting evidence, and I refer in particular to the judgment of Chief Justice Gleeson in R v R (1989) 18 NSWLR 74 at 81.
Ordinarily such an application, while described as a question of law, involves an assessment of the facts that are proved by the evidence adduced in the Crown case, and ordinarily such an application is made at the close of the Crown case.
For obvious reasons an application of that kind cannot or is not usually made before the closure of the Crown case. Those obvious reasons include that the Crown case could alter.
Nevertheless, it is important to stress that it is not for the trial judge to determine the issue on the basis that a jury verdict would be unreasonable, or as it was once described, unsafe and unsound. If there be evidence, even tenuous, inherently weak or vague evidence, which a jury is able to take into account and which, if accepted by the jury, would support a verdict of guilty, the matter must be left to the jury.
It is not a matter for the trial Judge to pre-empt a potentially unreasonable verdict by a jury, but a matter for the Court of Criminal Appeal, if the verdict ultimately reached be found to be unreasonable.
Secondly, it is insufficient for a trial judge to come to a conclusion that a reasonable hypothesis, consistent with innocence, can be formulated, since such is the foundation of an unreasonable verdict. That is ultimately a matter for the jury, and if they, in the view of the Court of Criminal Appeal, get it wrong, ultimately for the Court of Criminal Appeal, and I refer in particular to the judgment of the Court of Criminal Appeal in Director of Public Prosecutions (NSW) v JMR (1991) 57 A Crim R 39.
This case, as earlier stated, is unusual. No submission is put and no application is made on the basis that the Crown has not proved an element of the offence (except as set out hereunder).
The Court enquired of counsel as to whether such a ground were to be raised, and was informed that it would not be raised. This application for a directed verdict is one that could have been made at the time that the indictment was preferred by the Crown. The submission of the accused, in this case, is essentially that there can be on the facts alleged by the Crown no financial advantage obtained, and, therefore, no offence under s 134.2 of the Criminal Code.
I have in the course of argument referred to two aspects of the submissions that have been put and referred to them as: firstly, the issue of the temporariness of any advantage, if there be an advantage; and, secondly, the nature of financial advantage being such that it cannot be effected in circumstances where it is the statute rather than the income tax return which determines liability to income tax. I will deal with each of those separately.
One other matter should be stated. The accused has gone into evidence. This has been short evidence, predominantly formal, but the accused's case has closed, and this application for a directed verdict is made immediately prior to the addresses being commenced.
The Crown takes issue with the capacity of the defence to raise the issue at this time. There is a dearth of authority on the proposition. However, it seems, from first principles, and the little authority that does exist, that the defence is entitled to make the application it now makes at any stage. Reference has been made to the judgment of his Honour Justice Hunt, as he then was, in R v Haas (1986) 22 A Crim R 299. His Honour said at page 299, after referring to the fact that the accused has already gone into evidence:
"In my view the accused should still be permitted to seek such a ruling immediately at the conclusion of the Crown case, notwithstanding that he has already gone into evidence during the course of that case, retaining the right to call further evidence if his application fails. It has not been argued by the Crown to the contrary.
The only consequence of the accused following the present course is that, so far as it is relevant to this issue, I must take into account that evidence put forward by the accused, as well as the evidence of the Crown witnesses, in deciding whether the Crown has made out a case for him to answer".
That of course was a circumstance where the accused's evidence, or the adducing of the particular evidence, occurred during the course of the Crown case, and not after opening a separate case.
In a judgment of mine in the case called R v Philip Wan Por Leung (No 3) [2009] NSWSC 450 the same situation arose. Because of the unavailability of an expert witness, who was qualified by the accused, the witness was called or interposed during the middle of the Crown case. In that situation the accused, even more obviously than was the case in Haas, supra, that is, in the case before Justice Hunt, had gone into evidence and opened a case.
The view I took in that case was that the no case submission could still be made, albeit that the no case submission was adumbrated immediately at the close of the Crown case.
I stated as a matter of principle that the evidence adduced by the expert could be used to support the Crown case, but not to contradict it, since if it were contradictory of the Crown case, the principles embodied in a no case to answer would not have been followed, were it to be taken into account.
While that judgment was the subject of appeal to the Court of Criminal Appeal on the question as to whether a verdict should have been directed, the Court of Criminal Appeal accepted the statement of principle as to the manner in which that question ought to be decided.
It seems to me that, ultimately, it becomes a question of what is fair and just. If there be a question of law, which renders the charge, as a matter of law, unproved, then it matters not, subject to the ability of the Crown during the course of its own case to alter its case, when that application be made. As a matter of law, the jury cannot decide a question, which could not be before it.
It seems to me that the preferable course is that which underpins the reasoning of his Honour Justice Hunt in Haas, supra, and the reasoning I applied inLeung (No 3), supra, and that would be to allow the accused to put the no case to answer at this point in time.
I then deal with the substance of the application. The application arose in somewhat odd circumstances. The Court asked the parties for an indication of the kind of directions that ought to be given. In the course of the exchange of documentation in relation to that aspect, the accused raised the issue that the case itself could not be proved because of the lack of a financial advantage and urged a direction to that effect. The Court pointed out that it seemed a question of law rather than a question of fact.
I deal with the issues, previously mentioned as the issues, relating to the temporary nature of any financial advantage, and secondly, the operation of the statute.
In one sense every financial advantage is temporary or potentially temporary. Every financial advantage that may be sought can be remedied either by another administrative act of the Commonwealth, or by civil proceedings, if it be a party other than the Commonwealth, and perhaps civil proceedings if it be the Commonwealth. Those civil remedies can also include interest.
The fact, if it be the fact, that the financial advantage alleged by the Crown is a short term advantage, because the Australian Taxation Office levies income tax by the issue of a default assessment, including interest, and in most circumstances penalties, does not in my view render the act incapable of being an act for a financial advantage. A temporary financial advantage, if it be a financial advantage, is still a financial advantage and remains a financial advantage for the time it remains uncorrected. The fact that it is eventually corrected is, in this sense, irrelevant and I so hold.
The second question is a little more difficult and of greater moment. The submission made is essentially a submission based upon a proposition adumbrated by the learned authors of the Federal Criminal Law Service, Messrs Williams, Payne and McNaughton at paragraph 5A - 134.2.10 under the heading "Obtains a Financial Advantage". In the course of their commentary the learned authors say this:
"It is an open question whether the provision [being a reference to s134.2 with which Mr Pratten is charged] will extend to the making of deliberately false statements in an income tax return. Income tax is imposed by the operation of the Act although the precise amount of that is ascertained by assessment and any review decision."
The learned authors refer to Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256.
They go on to say:
"Any amount understated will be subject to a liability to pay interest and administrative penalties. This distinguishes the position from cases such as Matthews andFountain where a person has deferred a present liability to pay a debt by writing a valueless cheque."
Mr Leighton-Daly, who appears for the accused, contrasts the provisions of s 134.2 of the Code with the provisions of s 135.1, which, at least in subsection 1 thereof, refers to a person doing anything with the intention of dishonestly obtaining a gain from a Commonwealth entity or the Commonwealth itself.
It seems to me the fact that another provision of the Code gives rise to an offence which is easier to understand or easier to prove does not mean that s 134.2 does not also give rise to an offence. It would not be the first occasion on which the performance of one act would render a person guilty of a number of offences, some of which are more serious than others.
Properly analysed the submission of Mr Leighton-Daly would render impossible even the obtaining of a gain within the meaning of s 135.1. It may mean therefore that the provision of s 11.1 of the Code would operate to mean a person was attempting either a 134.2 offence or a 135.1 offence, but neither of those issues arise in the present circumstances.
The argument is an ingenious one and one which has a number of compelling aspects. However, in my view, the argument must fail. The reason it fails is because no act, on one view, relating to the Commonwealth could ever mean the obtaining of a financial advantage if the argument were correct. If one were to look at the obtaining of a pension, or a benefit or any kind of grant, all of such benefits are obtained by an application of an Act of Parliament to the objective facts in question. In this case, tax is levied on the basis of the objective income that is earned and properly calculated deducting allowable deductions and the like.
Ultimately the submission of the defence is this: that, because the Commonwealth has (assuming as I must that the Commonwealth has proved its case) proved that Mr Pratten has received income that he did not declare and rectified the situation, no financial advantage is gained. The necessary inference, assuming again that the Commonwealth has proved its case otherwise, from the acts that have been carried out, is that it was intended the Commonwealth would act permanently on the basis of the tax return that was filed. I do not at this point deal with tax amendments and the details, but dealing with it from a hypothetical perspective, the fact that the Commonwealth ultimately takes a view that the objective facts are otherwise than that which have been declared, and the fact they have a capacity to do that, does not render the filing of a return and the obtaining of a tax assessment that is more favourable to the taxpayer than would otherwise be the case anything other than the obtaining of a financial advantage.
In Mendonca, Gibbs J (then sitting as Federal Court of Bankruptcy) dealt with the effect of a tax assessment on bankruptcy and vice versa. The judgment of his Honour turns on whether the tax debts were in existence at the date of the bankruptcy. His Honour held that although tax "was owing" under the statutes for the years in question, since no assessment issued, the "debt" was neither liquidated nor payable and, therefore, could not form the basis for a creditor's petition.
The question before Gibbs J was fundamentally different to the issue pressed by the accused in these proceedings. The fact that the statute renders tax owing, even though no assessment has issued, does not mean that a person cannot deceive the Commonwealth as to the objective facts necessary to finalize an assessment. It is the finalization of the assessment that renders the tax debt payable and the reduction of that which is payable is a financial advantage, which, if obtained dishonestly and by deception, gives rise to the offence.
I agree with the analysis of Gray J in Matthews v Fountain [1982] VR 1045 at [1049]. His Honour was dealing with the presentation of a valueless cheque by a person who could not otherwise pay the debt. His Honour said:
"[1049] In my opinion, however "penniless" a person may be, he derives a financial advantage by evading an antecedent debt, for however short a period. In one sense it can be said that he obtains "credit" or time to pay. The proffering of a valueless cheque is equivalent to proffering counterfeit bank notes. He fobs off the creditor and gains time to pay. The fact that he may, in a given case, be unable to pay is, in my opinion irrelevant. He is relieved for the time being of being harried by the creditor by legal proceedings or otherwise. If the observations of Widgery, L.J. are valid, they would apply equally to the case of a man who, although having the means to pay, has resolved not to do so. It could be said that such a person has not evaded the debt or obtained any financial advantage by his deception. In this connection, one may ask rhetorically - "Why is the valueless cheque proffered?" It is clearly intended to confer some advantage upon the person practicing the deception. Equally clearly, in my opinion it is a financial advantage.
The matter can be looked at another way. By proffering a valueless cheque, the profferor is falsely representing that it is a valid cheque. If the representation had been true, the profferor is would lose the amount of the cheque, upon its presentation. In the case of the false representation he loses nothing upon the presentation of the cheque. He thus obtains a financial advantage by reason of the deception."
It is accurate to assert, as does the accused, that tax is owing on the objectively ascertained amount of income. But it does not follow that a "dishonest deception" that misleads the ATO as to the objective facts is incapable of giving rise to a financial advantage. The advantage may be temporary, because the real facts are discovered, but it is still an advantage.
Moreover, notwithstanding the view expressed by the learned authors of the Service, pensions, benefits, bounties and grants are, in other than quite exceptional cases, based upon either objective circumstance or the administrative decision-maker's understanding or satisfaction as to the existence of circumstances. The distinction between tax, on the one hand, and a pension, on the other, does not withstand scrutiny.
I consider that the filing of a tax return, especially in circumstances where the Act or Statutory schemes require self-assessment, means that a financial advantage is obtained by deception, if a person were dishonest to understate the assessable income earned during any financial year.
For those reasons I reject the current application for a directed verdict.
[2]
Amendments
16 June 2014 - Typographical error
Amended paragraphs: 34 and 35
29 April 2016 - amended case name in coversheet
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Decision last updated: 29 April 2016