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[1999] VSCA 98
Court of Appeal (Vic)
1999-07-02
WINNEKE, P., BUCHANAN and CHERNOV, JJ.A.
Original judgment source is linked above.
(a) Account No. 769582; "Douglas Edward Reid".
(b) Account No. 769910; "Douglas Edward Reid/Decer Ceder".
(c) Account No. 769937; "Douglas Edward Reid/Ulupna Island".
(d) Account No. 315884; "Douglas Edward Reid/Springvale Pastoral".
The applicant and his wife also maintained an account with the Commonwealth Bank; numbered 9002-4060; and he also had an account with Barclays Bank in Melbourne and the Coutts & Co. Bank in London.
(a) On 14 April 1992, Cosse of AFG wrote to Were informing it that, in accordance with arrangements made between AFG, on the one hand, and the applicant and Coats, on the other, it agreed "in principle" to participate as a sub-underwriter to the SCA public share offer to the extent of US.$10 million. The agreement to participate was said to be conditional upon, inter alia:
(i) SAS and SCA concluding a lease agreement relating to certain aircraft in "a manner satisfactory to [AFG]".
(ii) The execution of a "satisfactory sub-underwriting agreement".
(b) On 4 May 1992, SAS informed the applicant by "fax" (document A129) that it was not prepared to lease the three MD-82 aircraft to SCA pursuant to a lease agreement which required SAS to guarantee AFG's sub-underwriting commitment to the SCA public share offer. SAS confirmed that it would be prepared to enter into a "clean lease" of the aircraft to SCA.
(c) In a letter written to Coats, copy of which was sent to the applicant, on 5 May 1992 (document A58), AFG put a new proposal to SCA involving the following:
(i) SCA "look exclusively to GPA" to locate the additional four aircraft beyond the three aircraft to come from SAS; and also look to GPA for a US.$5 million sub-underwriting commitment.
(ii) AFG to sub-underwrite the public share offer of SCA to the extent of US.$5 million and "inter-position itself as a lessee/sub lessor" of the three SAS aircraft with KLM guaranteeing its sub-underwriting commitment. AFG proposed that in its sub-lease of the SAS aircraft to SCA, it would receive by way of rental payments US.$20,000 more per aircraft per month than it would pay to SAS pursuant to the head lease.
(iii) SCA was to remunerate AFG for "all out of pocket expenses".
(d) On 11 May 1992 AFG sent a "letter of intent" to the applicant (A.60) setting out the terms upon which it was prepared to offer the three MD-82 aircraft to SCA. The terms required SCA to place security deposits of US.$195,000 per aircraft upon accepting the proposal and a further deposit of similar amount upon the signing of the proposed lease agreement. The proposal was also made conditional upon the execution by AFG of a sub-underwriting agreement between it and Were. SCA was given until 13 May 1992 to accept this proposal.
(e) On 13 May 1992 the Managing Director of AFG (David Gould) wrote to the applicant advising of "latest developments" (A.65). He advised that AFG had received from Were copies of the sub-underwriting agreement which Were required both AFG and GPA to sign. He informed the applicant that GPA had agreed that its solicitors, Messrs. Allen Allen & Hemsley, would represent both GPA and AFG in advising on the propriety of the sub-underwriting agreement. He also advised the applicant that, if AFG were to participate as a sub-underwriter, it would have to be done through an "off-shore company" whom he nominated to be "AFG-SCROSS Ltd", incorporated in the Netherland Antilles. Gould also advised the applicant that AFG could not execute the sub-underwriting agreement unless and until:
(i) Allens had reviewed the sub-underwriting agreement and "signed off on it".
(ii) The Board of SCA had passed a resolution resolving or acknowledging that the "commercial offer as outlined in the Letter of Intent represents the `best' offer available to SCA". He advised the applicant that a "draft resolution" would be prepared by Allens and faxed by them to the applicant.
(iii) SCA had executed the Letter of Intent and forwarded the security deposits.
(f) On 14 May 1992 the applicant "faxed" to AFG the signed Letter of Intent which purported to be "accepted and agreed" by SCA and notified that "security deposits" of US.$585,000 had been transferred to AFG's account (A.67).
(g) On 14 May 1992, Allen Allen & Hemsley "faxed" to the applicant a letter (A.176) in which they advised him that GPA had authorized them to act for AFG. They enclosed with the letter a draft of what they suggested would be a suitable "certified Board minute".
(h) On 14 May 1992 Gould of AFG wrote to the applicant enclosing a "new form of Commitment Letter" which he said was to be "a binding commitment as opposed to a revocable letter of intent" (A.66).
(i) On 15 May 1992 the applicant sent by "fax" to Gould the "new form of Commitment Letter which I have signed" (A.69). The signature which he affixed records that the agreement has been signed on behalf of SCA.
(j) On 19 May 1992, the applicant sent to AFG, by facsimile, (A.70) a letter in the following form:
I hereby certify that the attached pages are a true copy of extract of minutes of the regular Board of Directors meeting held earlier today.
Attached to the transmission was a document purporting to be "minutes of Meeting of the Board of Directors" of SCA, held on Tuesday 19 May 1992 "at 12 noon at 140 Jolimont Road Jolimont". The "minutes" followed the form of the Allens' prototype which had been previously forwarded to the applicant. The "minutes" purported to be signed and initialled as "a true and correct record" by Sir Leo Heilscher as "Chairman".
The Crown alleged that these minutes were false, that there had never been a meeting of the Board of Directors of SCA on 19 May 1992, that no resolution of the type alleged to have been recorded in the "minutes" had ever been passed by the Board, and that the signature of Heilscher as chairman was a forgery. These facts were the subject of count 5 on the Indictment, which alleged that the applicant "being an officer of [SCA] falsified books relating to the affairs of [SCA]".
Once again the issue in relation to this count was confined. The applicant said the minutes had been typed in advance of the Board meeting which was in fact held on 20 May and that Sir Leo had signed it on that day. He said that Sir Leo and Coats both knew that the minute was required urgently by AFG so that the sub-underwriting agreement could be transmitted to Were by 20th May. He had arranged for Collins to type the first part of the minutes on the 19th. He then held it for Sir Leo to sign on 20th. He "believed" that Sir Leo had signed it. Sir Leo said that he had not signed the document and there was evidence that the signature was affixed by "cut and paste" methods. The applicant also told the jury that the Board had agreed not to include the full contents of the minutes in the "Minute Book" because it was too long and had authorized an abbreviated reference. In the Minute Book produced at the trial there was, in fact, no such resolution recorded.
The other directors who were said to have participated in the resolution and who were called at the trial denied knowledge of the minute, the content of which, they said, was a matter of some importance to them because there was concern about breaches of s.205 of the Corporations Law.
In respect of this count, the Crown alleged that the applicant was prepared to falsify the true minutes of the company because he was desperate to secure AFG's participation as a sub-underwriter and he knew that he would not secure it without a "certified" board resolution of the type which AFG required. The Crown thus alleged that the applicant was unable to satisfy the jury that he had acted "honestly", the offence being one against a section of the Corporations Law in which the onus in this respect shifted to the accused.
(k) On or about 20 May 1992 Coats went to London to negotiate aircraft leases with AFG and SAS in accordance with the arrangements which had been made between AFG and the applicant. In his evidence, admitted pursuant to the provisions of the Foreign Evidence Act (Cth.), Coats said that he was aware of the proposals for AFG to be a sub-underwriter and he thought that SCA had executed a letter of intent with AFG in respect of the leasing of aircraft from SAS through AFG. In London, he said he met with Peter Rudzitis from AFG and officials from SAS in the offices of Clifford Chance, solicitors for SAS. Representatives of GPA were also there. Coats said that SAS refused to enter into a lease which involved AFG as a sub-lessor but would only agree to lease the three MD-82 aircraft directly to SCA. As a consequence Coats said that he negotiated leases of the three aircraft direct with SAS. He believed that Mr. Rudzitis was unhappy with this result and that he, Coats, believed that SCA would be required to compensate AFG for the loss which it would suffer as a result of it losing its "sub-lessor's entitlement". He said that he had told the applicant about the result of the meeting and his belief that it was appropriate to compensate AFG for the loss which it would suffer.
(l) On 9 June 1992 AFG wrote a letter to SCA calling upon it to finalize matters relating to the arrangements between AFG and SCA. Rudzitis, who wrote the letter, said that AFG was not prepared to release SCA or SAS from their obligations and also suggested that it was not prepared to release the US.$585,000 which SCA had advanced to AFG by way of security deposits on 14 May 1992.
(m) On 9 June 1992, the applicant transmitted, by facsimile, a letter to Cosse & Gould of AFG (A.85) in which he informed them that "Bill Ranken (of Were) will try and call you this evening". He also advised that there was doubt about the Queensland Government accepting a sub-underwriting commitment of A$10 million but that, even if it did not, "Your exposure will be US.$3.9 million, so we need to discuss how we can make this figure sound commercial in such an agreement". The applicant concluded the letter by saying:
"I would appreciate that you don't seem concerned by this amount when Ranken calls you. It just means that we will have to fund you for more than we would like to do and you in turn will have to invest somewhat more than you would prefer."
(n) On 11 June 1992 a letter was sent by Rudzitis of AFG to the applicant and Coats which the Crown alleged triggered a series of events which went to the heart of the applicant's frauds against SCA. The letter (identified as A.82) followed the break-down of the aircraft leasing arrangements which had been proposed for the lease of the three SAS aircraft.
The letter referred to "our conversations with Mr. D. Reid" and enclosed "attached letters" which were to be signed, if acceptable, and returned to AFG by the following Friday. The "attached letters" outlined a commercial agreement between AFG and SCA entirely different from the one which had been previously agreed in the "commitment letter" of 14 May 1992. The proposed agreement contained an acknowledgment by SCA that it should compensate AFG for the "lost income stream" which the direct lease arrangement between SAS and SCA of the 3 MD-82 aircraft had occasioned to AFG. AFG was prepared to release SCA from its obligations under the "commitment agreement" on the basis that SCA agreed to pay to AFG "an amount equal to the present value of the difference between the rental stream SCA proposed to pay to [AFG] and the rental stream [AFG] proposed to pay to SAS". This was called the "present value amount" (PVA) and was to be calculated according to a formula which was set out in the letter and which was designed to produce a lump sum the equivalent of US.$20,000 payable monthly over a 72 month period in respect of each aircraft. So calculated, the PVA came to US.$3,793,476.77 (about A$5 million).
(o) On 13 June 1992 the arrangements referred to in the preceding paragraph were formalized in the form of a "letter agreement" (A.3) signed by Coats on behalf of SCA and Rudzitis on behalf of AFG. By this agreement SCA bound itself to pay the PVA "on or before 23 June 1992" unless the agreement was "terminated by mutual consent" before that date. In addition, SCA agreed to pay AFG its "out of pocket expenses" incurred by it in procuring the SAS aircraft for SCA.
It was the Crown's allegation at trial that this agreement placed SCA in a hopeless financial position. SCA did not have the means by which to pay such a capital sum. The negotiation of the so-called "PVA agreement", so the Crown alleged, was the trigger for a series of frauds which the applicant perpetrated on the company. For his part the applicant contended that the negotiation of the agreement was entirely a "frolic" of Coats and that he knew nothing about it until the commitment had been made. The measures which he thereafter took to cope with the problem were, he said, taken with the authority of the Board and were in the interests of the company.
(p) On the same day as the "PVA agreement" was signed, namely 13 June 1992, AFG, through Gould, presented an alternative arrangement to SCA. In a letter addressed to the applicant and Coats (A.4) Gould said that AFG would be prepared to release SCA from its obligation to pay the PVA on condition that SCA, by 23 June 1992, could find an alternative sub-underwriter "to assume all of the obligations of AFG-SCROSS Ltd pursuant to the agreement entered into between [that company] and [Were]". This offer was made on the further condition that SCA procured from Were an unconditional release from AFG-SCROSS Ltd's obligations under the sub-underwriting agreement. As a further price of being relieved from its PVA commitment, SCA was to agree to enter into a Financial Services Agreement (FSA) with AFG. This alternative offer made by AFG was labelled by it as "Scheme B" and, so the Crown alleged, was the scheme which the applicant preferred.
(q) Nothing happened until 22 June 1992 when AFG sent an invoice to the applicant calling upon SCA to pay the PVA of approximately US.$3.793 million (A.5). Receipt of that invoice prompted a telephone conversation between the applicant and Gould because on 23 June 1992, Gould wrote a letter (A.88) to the applicant, referring to the conversation which they had earlier had and informing him that AFG was:
"indifferent to either `Scheme A' or `Scheme B' as were defined during our conversation."
He then went on to describe "Scheme A" as the PVA agreement which involved the payment by SCA of the US.$3.79 million, pursuant to which AFG would retain its reduced sub-underwriting commitment. "Scheme B" required SCA to find an alternative sub-underwriter; to procure a release from Were; to compensate AFG for its "out of pocket expenses" and to enter into the FSA, which was to be for a period of five years and pursuant to which SCA was to retain AFG for all transactions involving the acquisition and/or disposition of aircraft and spare parts and also the financing of aircraft.
(r) On 26 June 1992 the applicant wrote a letter (A.225) to Gould and Cosse of AFG in which, so the Crown contended, he opted for "Scheme B". He referred to "recent telephone conversations" and, having confirmed that the "underwriting shortfall" would be 65% of the amount underwritten, he concluded:
"I will let you know on Monday ... the actual amounts which are being taken up by your replacement underwriters and which companies are involved because each of the companies are nominating more than one subsidiary to undertake their respective proportions of the underwriting commitment."
The evidence of Cosse, admitted pursuant to the Foreign Evidence Act, was to the effect that AFG had been told by the applicant that he had arranged for a group of "institutional investors" to take up the sub-underwriting commitment of AFG-SCROSS Ltd.
(s) As the Crown contended, AFG was adamant, once the applicant had indicated that SCA wished to pursue "Scheme B", that it should enter into the FSA. On 26 June 1992 Gould wrote to the applicant enclosing a "form of the [FSA]" which AFG proposed (A.89). He also alluded to the fear that Were might not be prepared to release AFG-SCROSS Ltd. from its sub-underwriting commitment and suggested that the problem might be overcome by a "back to back" sale and purchase agreement of the shares constituted by the shortfall. In other words AFG was suggesting that the replacement sub-sub-underwriters ("the investment group") pay the amount of the shortfall (estimated at A$4.462 million) to AFG-SCROSS Ltd. which would then immediately remit the same amount to Were with directions to issue the shares to the brokers for the "investment group", whom the applicant had nominated as Bell Buckle Securities Ltd. Ultimately, so the Crown alleged, this was the scheme agreed to by the applicant, purporting to act on behalf of SCA, to "buy out" the underwriting commitment of AFG. It was implemented by means of a draft "sale and purchase" agreement which had been sent by AFG to the applicant on 1 July 1992 (A.93) pursuant to which the brokers for the sub-sub-underwriters agreed to forward to AFG-SCROSS Ltd. the sum of US.$3,346,875 (the equivalent of A.$4.462 million) in payment for 8,925,000 shares in SCA. Upon receipt of the purchase price AFG-SCROSS Ltd. bound itself to use the proceeds to pay for the said shares which it was obligated by its sub-underwriting agreement to buy, and upon such payment to Were to deliver the shares, or direct delivery of them, to the brokers for the sub-sub-underwriters.
This agreement was returned to AFG-SCROSS Ltd. under cover of a letter written by the applicant to Gould (A.92) on 2 July 1992. The agreement purported to have been executed by "AFG-SCROSS Pty. Ltd. " and was signed by a "H.W. Black - Director".
(t) The Crown alleged that there never were any "substitute sub-underwriters", whether taking the form of "institutional investors" or "AFG-SCROSS Pty. Ltd." or "H.W. Black". This was, so the Crown contended, an elaborate fraud conceived by the applicant to avoid the immediate threat of the PVA agreement (Scheme A) whilst at the same time ensuring that the public offer of shares proceeded by deceiving Were and the ASC into believing that the sub-underwriting commitment of AFG was still extant. According to the Crown the applicant was able to perpetrate these frauds by gaining access to and using moneys held in the "float account" of SCA.
(u) On 30 June 1992 the applicant contacted Robert Tingiri from WBC. A file note of Tingiri of that date, exhibited at trial (doc.657) recorded that the applicant had called on that day to "discuss (the) possibility of a temporary increase in his facilities:", the reason given being that "he wishes to make certain payments on behalf of SCA totalling $5.00 M.". The file note also recorded that in support of this "temporary" accommodation the applicant would "deposit an NCD for $5 million". Tingiri gave his authority for the temporary excess on the basis that the Negotiable Certificate of Deposit was lodged.
On the same day, the applicant wrote to Tingiri (doc.39) confirming the conversation "whereby you agreed to advance me the sum of $5M. for a short term only ... against which you will hold a Negotiable Certificate of Deposit for a similar amount ...".
(v) Again, on 30 June 1992, a letter on SCA letterhead, and purporting to be signed by the applicant and Coats was sent to Tingiri authorizing him "to purchase on our behalf three Negotiable Certificates of Deposit for the undermentioned amounts, and for you to hold as security for advances to D.E. Reid in return for moneys owing to him from this company ...". The first of the NCD's authorized was for $5M. This letter was exhibited as Exhibit 656 in the trial. It was specifically the subject of count 7 on the indictment/presentment ("false accounting"). The Crown alleged that the signature of Coats was a forgery and further alleged that it was false in its substance because the company did not owe $5M to the applicant as the letter suggested.
The applicant said that Coats signed the document and was well aware that the money was to be obtained to enable the PVA to be paid to AFG. He claimed that the PVA was still owing and Coats knew it. The transaction was thus not undertaken with a view to gain for himself and was not dishonest.
(w) On the faith of the purported instructions given by SCA, WBC purchased a bank bill for $5M (discounted to $4.998 million) with a maturity date of 2 July 1992. The purchase was debited to the SCA Trust Account. However, before the "temporary accommodation" was advanced to the accounts of the applicant, Tingiri's superior, one Alexander, intervened and refused to approve such a loan to the applicant against security provided by the company.
(x) On 1 July 1992 the applicant went to a John Woods, a senior officer with the Commonwealth Bank. Woods gave evidence that he had spoken to the applicant on the morning of 1 July in the course of which the applicant had sought a loan of $5M from the Commonwealth Bank for the ostensible purpose of funding a payment to GPA. According to Woods the applicant told him that he was owed $5M by SCA and that he held in excess of 14 million shares in the company. Woods told the applicant that his bank would require a board resolution of SCA before the matter could proceed.
(y) On 1 July 1992, AFG wrote to the applicant enclosing an advice from their attorney, a Mr. Jack Miles of Messrs. Kelly, Drye & Warren, which confirmed that the "simultaneous purchase - resale structure" involving the sub-underwriting shortfall was an appropriate method of achieving what had been agreed. The letter (document A93) stated:
"it is acceptable to have our sub-sub-underwriters to wire the necessary funds to a U.S. account."
AFG enclosed with the letter the form of stock purchase agreement, to which we have previously referred, wherein the sub-sub-underwriters agreed to purchase the SCA stock held by AFG-SCROSS Ltd. for A.$4,462,500. AFG proposed, on receipt of that sum, to fund an identical amount to Were. AFG requested the applicant "to have the sub-sub-underwriters execute the stock purchase agreement tomorrow and to wire the funds immediately". It assured the applicant that, upon the receipt of the $4,462,500 from the sub-sub-underwriters, it would immediately forward a cheque for a similar amount to Were with the necessary instruction to issue the shares to Bell Buckle Securities or their nominee.
It was the Crown contention, in the light of this correspondence, that "Scheme B" was clearly in operation. It was further its allegation that the applicant desired to avoid payment of the PVA amount at all costs, but to engender the appearance that AFG-SCROSS Ltd was still underwriting the public share offer. The advice received from Kelly Drye & Warren confirmed that their instructions were that the applicant:
"had identified a group of Australian institutional investors willing to purchase" all the SCA stock held by AFG.
(z) On 2 July 1992 the applicant had a further discussion with Woods to which the latter deposed. Woods said that he was told by the applicant that he owned 14.876 million shares in SCA. The Crown allegation was, on the basis that this evidence was accepted, that the applicant was "counting" the AFG shares as his own. Woods said that the applicant had told him that A.$5 million had already gone to AFG and that he wanted an additional A.$5 million to pay to GPA. Woods said that he told the applicant that he would not be able to get Commonwealth Bank authority for such an advance for at least two weeks.
(aa) On 2 July 1992 the applicant gave a direction to WBC, on SCA letterhead, and purporting to be signed by Coats and Heard, as follows:
"You are instructed to redeem the Bank bill due today which you hold as security for temporary advances to D.E. Reid, and credit the proceeds to clear his obligations to your Bank." (document 658)
This direction was addressed to Tingiri. On the same day the applicant sent another letter, on his own private letterhead (part of 658) to Tingiri as follows:
"Please redeem the maturing Bank bill today 2 July 1992 and deposit the proceeds to my account as drawn in settlement of prior arrangements."
Tingiri did as he was instructed by these documents. The Bank bill referred to was for A.$5M and was the "Negotiable Certificate of Deposit" which had previously been drawn against the SCA Trust account.
The Crown asserted that this was a theft of SCA moneys. The signatures of Heard and Coats, it alleged, were forgeries. No Board authority was given for the payment and, it was said, no money was owed by SCA to the applicant. The money went to the applicant's private account to reduce the overdrafts which were then owed to WBC. This was count 9 on the indictment, which alleged that the applicant, "on 2 July 1992, stole a bank bill to the value of $5 million belonging to [SCA]".
The applicant, in his evidence, did not deny that the $5 million had gone to reduce the overdrafts in a number of his or his companies' private accounts with WBC. He said, however, that he had made the arrangements through Tingiri to get the $5 million so that he could pay AFG the PVA amount which Coats had foolishly and without authority, obliged SCA to pay. He said that Tingiri's file note (see para (u)) confirmed his stated intention. He had intended the money to be forwarded to AFG on 30 June 1992 and that he had asked Tingiri on that day whether the amount had been forwarded and had been told that the payment had been "queried" by Tingiri's superior officer but that it would be sent on the following day. Thus, he said, at the time when he instructed WBC to redeem the NCD and credit the proceeds to his accounts, he believed that those accounts had already been debited with the $5 million PVA which he had agreed to pay on behalf of SCA. He did not discover until 11 July 1992 that the amount had not been sent and that, by then, the proceeds of the maturing bank bill had been credited to his private accounts. He said he had tried to get Tingiri to reverse the arrangements but had been unsuccessful. He had then taken steps to sell some of his overseas properties to repay SCA but all steps had failed. He agreed that the letters of direction (658) had been typed by his secretary, Collins, but that Coats had signed it and forwarded it to Brisbane for Heard to sign. He said that he did not forge the signatures to the document. Accordingly he said that there was no "theft" of the SCA bank bill because he had not acted dishonestly and, at the time when he directed the payment of the proceeds to his account, he had no intention of permanently depriving SCA of those proceeds.
The Crown contended that this evidence was patently false. By 30 June the PVA was no longer owing, as he knew, because he had "opted" for Scheme B. The Crown pointed out that he had never repaid the money and, indeed, had thereafter asserted to the Board that the money had been paid to AFG as "security deposits". Furthermore he had agreed that, on 30 June 1992, he was obliged to repay to WBC $5 million, for which WBC had been pressing.
(bb) In support of count 9 and, independently in support of count 8 on the presentment, the Crown also alleged that, on 2 July 1992, the applicant had forwarded to WBC a "document of authority" (document 661) signed by himself, and purporting to contain the signature of Heard, in the following form:
"By resolution of a properly constituted meeting of the Directors of the Company, the Company's banker [namely WBC] was irrevocably authorized at any time or times, without notice to the Company of the Bank's intention so to do, to appropriate the whole or any part of any balance for the time being standing to the credit of any one or more of the Company's accounts (present or future) with the Bank against the debt balance of any other account or accounts of the Company (present or future) with the Bank upon which occasions and in such proportions as the Bank may think fit - in express pursuance of the resolution, the Bank is hereby formally notified of the above authority and hereby irrevocably authorized accordingly. By Order of the Board."
This authority was signed by the applicant, as "Deputy Chairman of Directors", and purported to be signed by Heard, as director, of SCA.
The Crown asserted at the trial that this document was a total fabrication engineered by the applicant to "unlock the vault" of the only account of SCA which stood in credit; namely the Float Trust account. There was, so the evidence revealed, no such Board resolution and Heard denied that he had ever signed such authority. That evidence was supported by a hand-writing expert. It was the Crown's contention that the applicant had fraudulently created such authority in order to fulfil the arrangements he had made with AFG and GPA. Some $5 million was owing to GPA for "security deposits" and, so the Crown asserted, the applicant needed the $4.462 million which he had agreed to pay AFG for the "back to back" stock purchase.
The applicant's defence to count 8 (which alleged "false accounting') was that he had created and signed the document, but that Heard had also signed it. He said that Heard had agreed to sign the document because it would "save the company a great deal in bank interest". He further said that the Trust Account was still under the control of Coopers & Lybrand and could not be used. He said that although there had been no formal Board resolution, Heard was aware of the direction which was designed to "give comfort" to WBC that when the "float moneys" did become available, it would be entitled to draw on the account. There was therefore no dishonesty.
(cc) Again, on 2 July 1992, the applicant wrote a letter (doc 659) on SCA letterhead, signed by himself as "Executive Deputy Chairman" and his secretary, Collins, as "cheque signatory to the account of [SCA]", to Tingiri of WBC. Inter alia, the letter stated:
"I would be grateful if you would receive from us, the undermentioned irrevocable authorities, and debit our account number 10-7415 for the cost of same. 1. Telegraphic transfer of AUD 4,462,500 (equivalent of US dollars) to be sent to [AFG], the Chase Manhattan Bank N.A. ... A Number 021 000021 Account Number 039-1160181 Reference AFG-SCROSS. 2. Telegraphic transfer to Chase Manhattan Bank, New York, Swift Code CHAUS 33 for US.$3,600,000 - for account of: Allied Irish Bank plc, account No.001-1-067899 for credit to Irish Aerospace Limited Account No. 01-94335-37."
These sums of money, the Crown alleged, were, first, the sum which the applicant had agreed to pay to AFG to "buy it out of its underwriting role" and, secondly, the amount agreed to be paid to GPA for security deposits.
The letter, in the form which we have described, was not found in the SCA files. In its stead there was to be found another document, purporting to be a copy of the letter (doc 2685) omitting the reference in paragraph 1 to "AFG-SCROSS". The Crown alleged that the latter document had been "doctored" by the applicant to support his contention that the money advanced to AFG was for "security deposits" and to conceal any reference that it was a sum being paid to purchase the company's own shares.
(dd) Again on the same day, 2 July 1992, the applicant wrote, in his capacity of Executive Deputy Chairman of SCA, to Gould of AFG (A92), informing him that "we did not get all the proceeds in from the various sub-underwriters in time for the Bank to remit same today" and further informing him that he would get them "for value Friday 3 July".
Clipped to this document was a copy of the last page of the "Share purchase agreement" which had previously been sent to him by AFG for signature by the sub-sub-underwriters. This document represented the purchaser to be "AFG-SCROSS PTY Ltd" over the name of "H.W. Black; director".
The Crown alleged, as we have previously stated, that there was no such company and no "H.W. Black", and that the applicant was using the company's money to buy the shares effectively for himself. This was the theft alleged in count 11. The Crown asserted that this was the fulfilment of "Scheme B" and made a mockery of the applicant's claim in defence to count 9 that the PVA was still owing to AFG. The deceit of the applicant, the Crown said, was indicated by the claims which he was making to others that he owned more than 14 million shares in SCA.
The applicant's defence to the theft alleged in count 11 was that AFG, through its subsidiary AFG-SCROSS Ltd remained as a sub-underwriter of the float and that he was not responsible for the document describing the purchaser as AFG-SCROSS Pty. Ltd. or the name of "H.W. Black" as director. He pointed to the fact that AFG had thereafter dealt in the shares through Bell Buckle (count 18) He agreed that the $4.462 million had been paid to AFG but said that the amount was paid as "security deposits" for aircraft. He said that AFG wanted a "dollar for dollar" equivalent of the underwriting commitment to cover its risk in undertaking that commitment and also to indemnify SAS in the event that SCA breached its lease agreements. It was Coats who told him that AFG was entitled to these moneys and it was because of Coats' duplicity that the $4.462 million was sent to AFG. He agreed that he had approached Woods of the Commonwealth Bank for $5M but "it could not be done". He said that AFG wanted to use an off-shore entity for their sub-underwriting commitment but also wanted an Australian based nominee company "for tax purposes". He said that "they" had tried to replace AFG as sub-underwriter but had been unable to do so and, therefore, the "simultaneous sale and purchase" agreement did not proceed. He said that he and Coats had both signed the letter (2685) of 2 July 1992 authorizing the transfer of the A.$4.462 million. He could not recall signing what the Crown suggested was the "real authorizing letter" (659) but "presumed" that he had. He denied that he had stolen the $4.462 million to purchase SCA shares but he agreed that under "Scheme A" AFG would not "underwrite" unless they were paid the PVA amount. He also agreed that he had written to AFG on 26 June telling them that he "had found replacement underwriters". In further cross-examination, the applicant agreed that, on his account, by 2 July 1992, both the PVA and the $4.462 million security deposits had to be paid to AFG. He also agreed that none of the letters passing between AFG and himself called for the payment of a security deposit in the amount of $4.462 million. He also agreed that the correspondence, to which we have referred, suggested that "Scheme B" was on foot, and that there was no claim for the PVA until later when AFG claimed it because SCA had not entered into the FSA. The applicant continued to blame Coats for the predicament in which the company found itself, although he agreed that he was responsible for most of the correspondence.
(ee) The evidence admitted under the Foreign Evidence Act, generally supported the case made by the Crown on counts 9 and 11. Cosse said that, between 13 and 23 June 1992 the applicant told him that he "had put together an investment group" to relieve AFG of their sub-underwriting commitment; that the AFG lawyers had prepared the "sale and purchase agreement" which he had received back from the applicant in the name of "AFG-SCROSS Pty. Ltd., H.W. Black director"; that he believed that company was a holding company for the "institutional investors"; it was not a subsidiary of AFG. AFG had received the transfer of $4.462 million and that sum was "immediately turned around" and sent to Were. AFG had never received a "deposit". He said that AFG had received from Were, in July 1992, a "substantial shareholder notice" and, when he queried the applicant he had said it was an "administrative problem" and not to "worry about it". He said that SCA had consistently failed to honour the FSA agreement which it had undertaken to do as part of "Scheme B" and that, in November 1992, he had instructed Kelly Drye & Warren to make a demand for the PVA. The applicant had come to New York following that demand and agreed to sign the FSA if AFG would withdraw its demand for the PVA. On 1 December 1992 AFG instructed its lawyers to write to SCA withdrawing the demand (A425). We refer further to these matters hereafter.
(ff) Following the transfer of the $4.462 million to AFG on 3 July 1992 (count 11), AFG wrote to the applicant on 6 July (A10) confirming that it had wired the same amount back to Were. In that letter the author said:
"I would be personally grateful if you could sign and facsimile to me the [FSA] between AFG and [SCA] sent to you last week ... ."
Again, on 17 July 1992, Gould of AFG wrote to the applicant (A239) saying, inter alia:
"... Rick [that is Cosse] has informed me that [SCA] have not as of yet executed the [FSA]. Could you please arrange to have the document duly executed ... I do not believe it is necessary to remind you that until the [FSA] is executed, the operative document existing between [AFG] and [SCA] remains the Letter Agreement dated June 8."
On 20 August 1992 Gould wrote a further letter to the applicant (A18) again calling for the execution of the FSA and stating:
"All of our efforts have been consistently rebuffed by [SCA] through a process of continual deferment on your part ... . Please remember that pursuant to the Agreements, [SCA] presently owes [AFG] an amount approximating US.$3.75 million." (that is, the PVA).
Further correspondence was sent from AFG to the applicant calling for the FSA until, finally, on 23 November 1992 the formal letter of demand was sent claiming the PVA in default of the execution by SCA of the FSA (this correspondence will be referred to in the context of summarising later counts on the presentment).
"So we wrote a cheque out for that amount of money for the float, and I asked Mr. Coats if he could put them in his name temporarily and he said yes ... but he could not do it in Brisbane - so in the end I had to hold those shares in my name."
He agreed that the company's money was used and not refunded because the shares never traded "at par". However he said that he had insisted that they be held in a "separate tranche" so that they could be "replaced". He said that what he had done was "stupid" but not dishonest.
The Second Phase; August 92 to January 93, Counts 13-23
"We are enclosing herewith a copy of Form 603 Notice of Interest of Substantial Shareholder, which we received from [AFG] with the request that we forward it to you."
Inter alia, the form 603 Notice stated that AFG had become aware on 29 July 1992 of being a substantial shareholder. It further stated that:
"P.P.P. Nominees is holding the shares as nominee of AFG-SCROSS Pty. Ltd. which is a wholly owned subsidiary of [AFG]."
This document purported to be on the letterhead of AFG which, so the Crown alleged, had been "cut and pasted" onto the top of the document. It also purported to bear the signature of Cosse as "director" of AFG which, again, the Crown alleged was forged.
(iii) Count 15 (furnishing false information to auditor)
"There have been numerous telephone discussions with [AFG] and I requested a letter from them which does not advance the matter very much further. Principals from the company (that is, AFG) plan to be in Australia early October for further discussions in this regard."
"b. Aircraft security deposits Attached is correspondence from [AFG] regarding security deposits of US.$3.3 million, which the Australian equivalent was $4,462,500, and we have requested likewise details on the security deposit from G.P.A. but, at the present time, have not had a response. We are following up on this."
"As per clause 25 of the Letter of Intent executed on May 13, we hereby give notice that we require from [SCA] additional security of US.$3,300,010. This money will be held by [AFG] until such time as [AFG] negotiates final agreement with [SAS] in relation to the agreement entered into with them on February 20, 1992 in relation to the three McDonnell Douglas MD-82 aircraft which are the (sic) subject to the separate leases which [SCA] have entered into with S.A.S. Once [AFG's] obligations in relation to these aircraft with SAS have been extinguished, which we expect to be early October, we would then as previously advised return to you the said deposit plus interest."
"6. The security deposits were paid to [AFG] on 3 July 1992. 7. The amount of the security deposit paid to [AFG] was approximately AUS.$8,500,000 and was based on their assessment of the risk they were undertaking by indemnifying SAS for any loss they may incur as a result of breach by SCA in the performance of its obligations under the lease."
Additionally, in his letter, the applicant "confirmed" that:
"1. ... there is no other correspondence touching on the circumstances of this matter. 2. There was certainly no arrangement or understanding that the entry by [AFG] into the sub-underwriting agreement was conditional upon entry by SCA into the lease arrangements. 3. The security deposit monies paid to [AFG] were from an overdraft account of SCA and not monies raised by the Prospectus."
The Crown alleged that this information was false, and led McDonald into giving to the board a false opinion.
"In order to accommodate the wishes of both SAS and SCA, [AFG] hereby releases SCA from its obligations to [AFG] ... provided that SCA agrees to pay and does pay to [AFG] the Security Deposit as referred to in paragraph 25 of the Commitment Agreement."
"pursuant to such Commitment Letter, SCA is required to remit to [AFG] a Security Deposit on or before 30 June 1992. Please accept as formal notification and invoicing of such payment amounts, SCA should remit to [AFG] US.$7,003,660 ... ."
"... in relation to your query, regarding indemnity arrangements, that AFG and its parents have given separate indemnities to SAS against any loss, consequential or otherwise, that SAS may suffer in the event that `there is any default under the leases or there is any breach by [SCA] of any obligation, covenant or warranty ...'."
"On behalf of [AFG] we demand that SCA wire-transfer the sum of US $3,793,476 by 3 p.m. New York time on November 30, 1992 ... . If [AFG] does not receive full payment as requested, we will initiate legal action to recover the foregoing amount together with interest at the rate of 9% per annum from 23 June 1992 ... ."
"In light of your discussions with Messrs. Gould & Cosse at [AFG] on November 25, 1992 [AFG] has asked me to withdraw the demand in our letter to you of November 23, 1992. [AFG] will not initiate legal action at this time on the agreement that good faith negotiations to arrive at a settlement prior to December 31, 1992 will continue. [AFG], of course, reserves all its rights if a satisfactory arrangement is not reached by December 31, 1992." (emphasis added)
"As we will be looking to take a considerable parcel we welcome the opportunity to discuss making such an investment by way of private placement. ... We look forward to continuing our discussion regarding the purchase of your company's stock by way of a private placement over the next 3 or 4 months, at which our tourism investment fund will be fully established."
Document 2062, the letter bearing date 2 October 1992, again was addressed to the applicant and stated:
"Just a personal note to let you know that we have now received all the necessary internal approvals to invest in [SCA] ... ."
Neither of these letters, according to Finkel, was authorized or sent by him. The applicant, in his evidence, suggested that Tingiri of WBC must have dictated them to Collins to support a facility in favour of the applicant.
"This cash shortage has only been further escalated by the non return of the [AFG] deposits caused by that Company not being able to gain relief from SAS of its obligation in connection with our aircraft leases from SAS."
Having referred to further matters of history, which the Crown alleged were distorted in his own favour, he went on to say that he had "once again" agreed to assist the Company by way of the following support (inter alia):
"(b) Lend or procure the lending to the Company an amount of $8.427 million representing the balance outstanding from [AFG]. This advance would be repayable under the terms proposed in the Loan Agreement to be tabled at the Board Meeting."
"As you are aware my bankers - [WBC] - have approved ... a facility amounting to $14 million which is currently awaiting approval ... . This funding is required in order that I can make two secured loans to the Company totalling $14 million dollars in line with the documentation you are currently preparing."
The letter also asserted that SCA needed the funds because (inter alia) of the failure to repay security deposits of $10 million.
"In addition, we request that your company provide reconciliation of the Half Year Accounts to 31 December 1992, with the Accounts referred to in the prospectus, together with appropriate commentary on the differences." (our emphasis)
"[SCA] is completing a reconciliation of those results with the results forecast in its prospectus, and that reconciliation should be provided to the [Stock Exchange] by tomorrow morning."
"20(1) This Part applies to a proceeding, in any Australian court, that is:
(a) a criminal proceeding for an offence against the law of the Commonwealth; or
(2) This Part also applies to a proceeding, in any court of a State or Territory specified in the regulations, that is:
(a) a criminal proceeding for an offence against the law of that State or Territory;
(b) a related civil proceeding of a kind specified in the regulations in respect of that State or Territory."
Victoria was among the States and Territories specified in the regulations made under the Act. Section 25 of the Act gives the Court a discretion to prevent foreign material being adduced in evidence.
"Sec.77 of the Commonwealth Constitution expressly confers upon the Parliament power to make laws investing the Court of the States with Federal jurisdiction. But the provisions of sec.77 and sec.79, which explicitly give legislative power to the Commonwealth in respect of State Courts, make it plain that the general powers of the Parliament to legislate with respect to the subjects confided to it, like the similar powers of Congress, must not be interpreted as authorizing legislation giving jurisdiction to State Courts."
However, it is not inconsistent with that limitation that the Commonwealth pursuant to a head of power contained in s.51 can legislate as to the proof of a matter in a State court.
"The sole source of power to confer Federal jurisdiction on a State court lies in sec.77(iii).
The legislative power in respect of bankruptcy and insolvency is ample enough to enable the Parliament to regulate all matters which fairly fall within that subject and its comprehensive nature needs no elaboration. Further, like every other legislative power over a subject matter, its extent is amplified by the principle that everything incidental to the main purpose of the power is contained within the ground itself. But, however far this particular head of legislative power might otherwise have been considered to go towards authorizing the Parliament to create courts of bankruptcy and to invest them with judicial power, an examination of the explicit grant of judicial powers contained in the judicature chapter shows that for such a purpose the Parliament cannot go outside the latter powers and must conform to whatever limitations they import."
It does not follow that in legislating pursuant to one of the heads of power in s.51 the Commonwealth lacks power to make laws directing the way in which a State court exercises State jurisdiction.
"We consider the offers made completely inadequate to enable a proper defence response and we believe that it is justifiable for us to decline to go along with the Director's conduct."
Coadys suggested that the applicant seek other legal advice and that he might consider representing himself at the hearing in New York.
"(1) The court may direct that foreign material not be adduced as evidence if it appears to the court's satisfaction that, having regard to the interests of the parties to the proceeding, justice would be better served if the foreign material were not adduced as evidence.
(2) Without limiting the matters that the court may take into account in deciding whether to give such a direction, it must take into account:
(a) the extent to which the foreign material provides evidence that would not otherwise be available; and
(b) the probative value of the foreign material with respect to any issue that is likely to be determined in the proceeding; and
(c) the extent to which statements contained in the foreign material could, at the time they were made, be challenged by questioning the persons who made them; and
(d) whether exclusion of the foreign material would cause undue expense or delay; and
(e) whether exclusion of the foreign material would unfairly prejudice any party to the proceeding."
"a) the Learned Trial Judge erred in finding as a fact that Applicant instructed his legal advisers not to attend to cross-examine witnesses in US.
b) the Learned Trial Judge erred in finding that Applicant and/or his legal advisers made a deliberate tactical decision not to attend US to cross-examine witness.
c) the Learned Trial Judge misdirected herself as to the relevant issues to be considered when deciding whether to admit US evidence, in that she gave undue weight to the circumstances surrounding the failure of applicant and/or his legal representatives to attend US and failed to consider whether the admission of evidence would result in unfairness to applicant in the trial before the jury by
ii) leading the jury to place undue weight on the evidence
iii) denying the defence an opportunity to challenge the US evidence at the appropriate point in the proceedings and to put its case before the jury fully in running rather than in the final address."
"For two centuries past, the policy of the Anglo-American system of evidence has been to regard the necessity of testing by cross-examination as a vital feature of the law. The belief that no safeguard for testing the value of human statements is comparable to that furnished by cross-examination, and the conviction that no statement (unless by special exception) should be used as testimony until it has been probed and sublimated by that test, has found increasing strength in lengthening experience. ... [I]t is beyond any doubt the greatest legal engine ever invented for the discovery of truth."
"... I am satisfied on the balance of probabilities, that the defence was given a proper opportunity to cross-examine, which the accused did not accept. There were resources available to the defence at the time which could have supplemented the offer made, if the adequacy of the fees had been the only consideration. Some of those resources were expended on the injunctive proceedings rather than on supplementing any perceived deficiencies in the amount of costs and expenses offered by the Crown."
Grounds 2 and 4 - Failure to sever counts 8-12, 16, 17
(a) The presentment did not comply with the Presentment Rules because the above counts and the remaining counts did not form a series of transactions within the meaning of those Rules.
(b) In any event, her Honour should have exercised her discretion to sever the counts because the hearing of all the charges would unduly prejudice the applicant and would result in a miscarriage of justice.
(c) Developments at the trial were such as to constitute a miscarriage of justice which could have been avoided by the severance of the counts in question.
- counts 18-20, being three counts of theft and one count of falsifying documents (known as the Body Shop counts which related to a discrete set of transactions)
"Your Honour has given them the elements of the charges and you are relating the facts to the charge(s) but I felt that your Honour also has to relate the facts of each count to the law on each count."
"send the jury away for a number of days so that your Honour can re-structure the charge in such a way that you do, on a count by count basis, relate the admissible evidence to the particular elements of the charges."
"I think really those are the major complaints that I have in this. Your Honour has put the defence as we put it on each count, so that in relation to each count its covered, and I suppose I put much more additional material, but your Honour has covered the basis of the defence on each count. I think that is really all I'm concerned about at this stage, your Honour."
"If it appears that a witness whose evidence is important has some mental disability which may affect his or her capacity to give reliable evidence, common sense clearly dictates that the jury should be given a warning, appropriate to the circumstances of the case, of the possible danger of basing a conviction on the testimony of that witness unless it is confirmed by other evidence. The warning should be clear and, in a case in which a lay juror might not understand why the evidence of the witness was potentially unreliable, it should be explained to the jury why that is so. There is no particular formula that must be used; the words used must depend on the circumstances of the case."
Ground 6 - Contemporaneity of intent and appropriation
(a) the applicant's evidence that he did not learn about the failure of Tingiri to transmit the $5m to AFG until about 11 July 1992, some nine days after he believed the funds had been sent;
(b) Collins' evidence that the applicant was very angry that the funds had not been sent to the US. It was contended that this evidence was capable of corroborating the applicant's evidence of his belief as to the fate of the funds.
"I have said to you that you must consider the intent of the accused in relation to any specific count as it was at the time to which the count relates. There may, of course, be evidence of matters occurring outside that time which you may consider throw light on the intent of the accused at that time."
Ground 7 - Failure to direct properly on Collins' evidence
Grounds 10, 12, 13 - Verdicts on counts 4, 16, 23 unsafe and unsatisfactory
(a) whether Sir Leo's evidence as to the events in the boardroom when there was a telephone discussion between Nankin and Coats, were undermined by his initial recollection that the board meeting took two days and not three and that Nankin rang Coats and not the other way around;
(b) how it used Nankin's evidence about Coats' use of the word "reconciliation";
(c) whether Coats was the person who tampered with the letter.
"I accept that it is important that you should be able to rebuild a personal life in retirement as a member of the community to which you have contributed in the past. This is the only matter which I am able to take into account in mitigation to any significant extent."
"The whole story from beginning to end is one of greed of a wealthy man who wished so much to become more wealthy and later as time went on at least to preserve what he had, that he was prepared to forge and to steal and then to lie and deceive and forge again in order to conceal his forgeries and thefts."
His victims were many but, in the long run, were substantially the shareholders and creditors of the company. Her Honour concluded that the applicant had no feelings of remorse for what he had done, which was in gross breach of the trust which he owed to the company. She accepted that the applicant was unlikely to offend again but that it was:
"of overriding importance that other people in authority and positions of trust are made to understand what will be the result of behaviour such as yours ..."
R
Reid [1999] VSCA 98
Mr. Lincoln, who appeared for the applicant both at trial and before this Court, abandoned ground 11 which had asserted that the applicant could not have been lawfully convicted of the theft alleged in count 11 because there was no evidence of "appropriation of another's property", having regard to the fact that the funds alleged to have been stolen were transmitted by telegraphic transfer (cf. R. v. Parsons [1999] HCA 1; [1998] 2 V.R. 478).