R v. WALTERS, William John [2002] NSWCCA 291

R v. WALTERS, William John [2002] NSWCCA 291 - NSWCCA 2002 case summary — Zoe

[19]

EVIDENCE AND DEFENCE CASE 10 At the trial, the Crown called evidence from accountants involved in establishing the successive companies. 11 James Ball gave evidence that he worked for the appellant during the operations of Lymkom; that he repeatedly advised the appellant of Lymkom's group tax obligations; that he warned the appellant that his personal expenditures were too high to permit the company to meet its obligations; and that he eventually advised the appellant to put Lymkom into the hands of a liquidator. He advised the appellant to set up Kindby to carry on the bricklaying business, and Frego as an administration company. He received notices from the ATO regarding very substantial arrears of group tax of Kindby, and repeatedly advised the appellant of his obligations. In about late 1993, he refused to set up a further company for the appellant and ceased working for him. 12 Stephen Bates gave evidence that he worked for the appellant from early 1994 to mid-1997; that he reminded the appellant of his obligation to remit group tax on those occasions when he became aware of default; and that he informed the appellant that he was no longer willing to work for him in mid-1997. 13 Three other accountants gave evidence concerning the formation of companies between mid-1997 and early 1998. 14 The Crown also called evidence from persons dealing with the bricklaying business. 15 Laureen Place gave evidence that she was bookkeeper for all the companies throughout the period the subject of the charges; and that throughout the appellant had control of the companies, hired and fired employees, dealt with Meriton Apartments, and maintained exclusive control over the bank accounts, holding cheque books and writing all cheques. She was instructed by the appellant to transfer employees from one company to the next through the sequence of ten companies. She kept the appellant informed of group tax remittance arrears. 16 Diane Reynolds gave evidence that she was accounts manager for Meriton Apartments from April 1994 to the end of the period of the charges. The appellant dealt exclusively with Meriton Apartments concerning the bricklaying business of the succession of companies, and he made all claims for payments and received all cheques. 17 Robert Moody, from the office of the liquidator of Conroy, gave evidence that he interviewed Melita Kristoff, a director of Conroy, in the presence of the appellant, and her account was to the effect that she knew nothing of the affairs of that company and that the appellant carried on that company's business. 18 Evidence was given by two other employees of the business inter alia concerning the continuity of the business through the succeeding companies. Evidence was called from John Ebergir and Brenda Walters, who were shown as employees in the wages records of relevant companies, to the effect that they did no work in the business. Three other witnesses gave evidence as to payments for personal expenses from the companies. Extensive documentation of the financial dealings of the companies was put into evidence. 19 Accountants James Walton and Brian Booth were called. Mr. Walton gave evidence of analyses showing the source and application of funds, called "coversheets", one for each company plus a combined coversheet for Kindby, Frego and Taureema. These documents set out figures for the income of the respective companies and how this income was applied, including amounts paid to the ATO and unpaid group tax, and personal expenses of the appellant. The figures for the first nine companies showed the latter to be between 69% and 100% in respect of the various companies, and to be 46% in relation to the tenth company. Mr. Walton was cross-examined in detail to suggest that some amounts included in the coversheets as personal expenses or unallocated were in fact business expenses; although it should be noted that the unallocated amounts were not in any event included in the personal expenses and the percentages mentioned above. 20 Mr. Booth supported the appropriateness and accuracy of Mr. Walton's analyses. 21 The appellant did not give evidence at the trial. There was called on his behalf an accountant Roslyn Lapsley, who produced reconstructed profit and loss accounts of the companies commencing with Budscan, the company referred to in count 5. These reconstructed accounts indicated what business expenses would have been, based on industry percentages; and were used to support a contention that there was not the money available either to pay personal expenses or group tax as suggested by the coversheets. 22 The defence was essentially that the Crown did not prove defrauding by the companies or knowing involvement by the appellant. Having regard to Ms. Lapsley's evidence, the Crown had not proved there was money available which was diverted to the appellant's personal use. It was not shown beyond reasonable doubt that the failure to pay group tax was otherwise than due to shortage of money and selection between competing commitments, and also disorganisation. No acts or omissions of the appellant that amounted to knowing involvement had been proved. 23 As regards the summing up, it will be convenient to refer to relevant parts of that in relation to particular grounds of appeal. I have already stated the outcome of the trial. 24 It will be convenient to group the submissions under a number of headings, each embracing a number of grounds of appeal. There is some overlapping between grounds of appeal and also between the headings I will adopt.

[52]

Submissions 28 Mr. Abdul-Karim for the appellant first referred to Spies v. The Queen (2000) 201 CLR 603, and submitted that the appellant could not be held to have defrauded the Commonwealth, with whom the appellant had no legal relationship, because the appellant's actions made it less likely that the various companies would pay money owing to the Commonwealth. In this case, the most that could be said was that regular expenditure of the companies' moneys in various ways left insufficient money to pay the group tax. All this was done openly and without concealment, with full disclosure to the Commissioner of Taxation of group tax liability, and with payment of some of that liability. The evidence that was led of the appellant's extravagant lifestyle did not support an inference of dishonesty by the company or by the appellant, but was prejudicial. In any event, the amount of money shown to be involved in this lifestyle (payment of car and boat leases, overseas holidays, etc.) were small compared with the group tax liability, and direction of these amounts towards that liability would not have satisfied it. 29 Mr. Abdul-Karim submitted that, especially having regard to the lack of reliability of the documentary material, it could not be said that non-payment of the group tax was due to any dishonesty of the appellant rather than (say) poor profitability of the companies and disorganisation. The lack of dishonest intention was supported by evidence that the appellant had sought to borrow $1 million in order to pay group tax. In respect of counts 6-10, the appellant was not even a director of the company, and in respect of counts 9 and 10, one director Mr. Jack signed the cheques. Mr. Jack was not called by the Crown, and there was evidence that he exercised control over the companies. 30 Dealing specifically with ground 4, Mr. Abdul-Karim submitted that the trial judge did not identify any specific acts or omissions of the appellant that could indicate that he was knowingly concerned. The trial judge implied that it was sufficient if the appellant was aware of the companies' group tax obligations and of their not being able to meet them. This was a misdirection: R. v. Tannous (1987) 10 NSWLR 303 at 308-9, R. v. Buckett (1995) 79 ACrimR 302 at 306. 31 In relation to ground 8, Mr. Abdul-Karim submitted that in presenting the elements of the offence, and giving advice, the trial judge in effect repeated the Crown case and gave it his imprimatur: cf. B v. The Queen (1992) 175 CLR 599 at 605-6. He did not advert to the defence case at all. 32 As regards grounds 10 and 11I, there were admitted into evidence coloured bar charts showing many luxury motor vehicles and boats, which was material very prejudicial to the appellant. Mr. Abdul-Karim submitted that the material was not probative, because it was not shown that if these items had not been paid for the companies could have satisfied the group tax liability. There was no appropriate direction given as to the use of these charts, or appropriate to avoid prejudice. 33 Mr. Fagan SC for the Crown submitted that, in relation to the six paragraphs concerning the elements of the offence, the only matter as to which a contrary submission was put by Dr. Bishop for the appellant at the trial was that it was necessary to show intent continuing throughout each of the relevant periods. That matter is not a ground of appeal. Mr. Fagan submitted that it was reasonable for the trial judge to explain the elements of the offence in terms of what the Crown had to prove, and to deal with the defence case later, as he did. 34 As regards grounds 4, Mr. Fagan submitted that the Crown case was that the appellant was the mind and will of each company, even when not formally appointed a director; and that accordingly his dishonesty was both the dishonesty of the company and his own knowing concern. This was supported by the evidence of Ms. Place, Ms. Reynolds and Mr. Brierley. As regards Mr. Jack, the material went no further than that he signed some cheques, and accompanied the appellant at various times. 35 The Crown case was that dishonesty could be inferred from the lavish expenditure, despite warnings, and later from the knowledge gained from the fate of earlier companies, and from the moving of employees and the benefit of the contractual connection with Meriton to new companies successively.

[53]

Decision 36 In my opinion, the six numbered paragraphs referred to by the trial judge in the summing up and stated in the document given to the jury were appropriate to put the elements of the offences to the jury. Furthermore, in my opinion there was in this case nothing untoward in explaining how the Crown sought to make these elements out: in my opinion, what the trial judge did was no more than state that this was what the Crown was undertaking to prove, leaving the defence case to be given later. Furthermore, the absence of any relevant objection by the appellant's Counsel means that r.4 applies, and I would not in any event grant leave, at least unless the later grounds concerning failures of the appellant's Counsel should be made out. I would note that these numbered paragraphs were different from the "well-intentioned piece of advice" referred to in ground 8, although that advice also contained six points: I see no error in that advice. 37 In my opinion also, it was open to the jury to find that the appellant was the mind and will of each company at all times; that he determined that available money in the company should be spent on his own personal matters, money which could have been used to pay group tax; and that the appellant knew that thereby each company would be rendered unable to pay the Commissioner of Taxation so that the Commissioner of Taxation would ultimately not be paid at all. It was also open to the jury to find that this amounted to dishonesty both of each company and of the appellant. It did not matter, in my opinion, that the relevant amounts of expenditure would not have fully paid the group tax, so long as they could have paid a substantial part of that group tax and the expenditure deprived, and was known to deprive, the Commissioner of that substantial part. 38 In my opinion, there is no substance in the argument that the expenditure merely amounted to choices between competing creditors, not all of whom could be paid. It was open to the jury to find that the appellant chose to create obligations for his own personal purposes; and in any event, even the pre-existing leases of motor vehicles, as to which it was submitted that the appellant had not during the period of any charge created an obligation to pay, were all in the name of the appellant and not guaranteed by the relevant companies, so that there never was an obligation on the companies to pay them. 39 The circumstance that there was no attempt to conceal the liabilities, and apparently no attempt to conceal assets available, and also the evidence of the attempt to borrow $1 million, could have been considered factors in favour of the appellant; but the inference of dishonesty was well and truly open. 40 In my opinion, all these matters were fairly before the jury, and fairly put to them in the summing up. The summing up also appropriately warned the jury against bias or prejudice arising from issues of lifestyle. 41 Accordingly, in my opinion there is no substance in the grounds and submissions concerning the elements of the offences.

[61]

First of all it is important to understand that there are within this trial as it were ten trials. You are trying ten separate matters. It is true, of course, that there is some, I would have thought, overlap in areas of the evidence. There is certainly an overlap in what I would be suggesting to you in terms of a practically structured approach to each of the counts in the indictment. All of that said however, it remains a cardinal feature of this trial that each count must be considered separately and must be the subject in the way that I have explained of a separate unanimous verdict. It does not at all follow that having reached a verdict, for example, on the first count, that you automatically extrapolate that verdict through the rest of the indictment. That would be quite the wrong way of doing it. It would be equally wrong, for example, having come to the same verdict on the first six counts, to say something along the fines of: "Well really, six out of ten; there is no reason not to say the same thing about the other four". It really is very important to try to understand that those global approaches are not permissible. There are ten separate matters. You must look at each separately. 45 The other relevant passages are passages in the summing up explaining the Crown's case on intention: What, then, is to be said about intention? The Crown's case essentially is that it is a matter of common sense that if you look at those movements of funds in the company, then after all the peripheral debating points have been made the end result is this: the accused was living at a level that required him to have access to large sums of money. If and when he got to the position where he had to choose between using the available funds for his personal non-business expenditure, and cutting down his non-business expenditure and paying his group tax, then in the case of Lymkom his response was completely simple. He kept up his own level of personal non-business expenditure. He did not pay his group tax as by law required; and when it became clear it was not going to be possible to do two of those things at once forever, he transferred out of Lymkom to Kindby, the next company in sequence, his employees, whatever assets Lymkom had that were in a real sense valuable assets in the conduct of his bricklaying business, and every other real function. In a sense, simply shifted the relevant assets and business of the one company into the fresh company with the result, so the Crown contends, that Lymkom was left in such a state that it doesn't matter really how it came to be legally terminated. In every effective business sense it was left asset stripped of anything to which the Commissioner might have recourse to recover the unpaid amounts of group tax.

[64]

That is not a direction of law. It is a comment on the facts and a matter for you. But that certainly is something, however you resolve it, that you will need to consider for yourselves so far as concerns crystallising the Crown and defence cases in the Kindby matter. Submissions 46 Mr. Abdul-Karim submitted that the danger that the jury would in substance use the evidence on the various counts as showing a tendency to act in certain ways or to have a certain state of mind, and/or to infer that the number of similar occurrences suggested that the defaults must be intentional, was so great that separate trials should have been sought and ordered, and/or that the Crown should have tested the admissibility of this material as tendency and/or coincidence evidence. This danger was made worse by the way evidence was presented, in particular with the bar charts relating to the leases of expensive vehicles overlapping the periods of different companies, and also the coversheets being presented in identical form for the various companies, with no discrimination the different circumstances of different companies concerning incorporation, functioning, directors, etc. In terms of grounds 2 and 9, all this exacerbated the danger. As regards ground 1, there was no, or no sufficient, warning against that use of the evidence. 47 Mr. Fagan submitted that it was never suggested to the jury that there was any reliance on the material by way of tendency or coincidence. The trial judge correctly insisted on separate consideration of each count. The only way in which it was suggested that evidence as to one count might support evidence on the others was that it was put that the knowledge gained by the appellant from the events concerning the earlier companies made it very difficult for him to suggest inadvertence in relation to the later companies. Furthermore, no relevant objection was taken to the summing up in relation to these matters, nor was there any relevant request for re-direction.

[65]

Decision 48 In my opinion, the evidence in relation to the early counts was highly relevant and highly probative of intention in relation to the later counts. By the time the appellant was associated with (say) Budscan, he had already seen Lymkom go into liquidation owing about $500,000.00 to the Commissioner, Kindby go into liquidation owing just under $500,000.00, Frego go into liquidation owing a little under $200,000.00, and Taureema go into liquidation owing a little under $900,000.00. That was highly probative of the appellant's knowledge, understanding of consequences, and intention, in relation to Budscan and later companies, not by way of tendency or coincidence evidence, but purely by way of evidence of knowledge. The high probative value of that evidence in that respect, in my opinion, makes it unlikely in the extreme that any application for separate trials in relation to the different counts would have been successful. A trial in which the Crown was deprived of the opportunity to rely on the material in that way, in relation (say) to the charges concerning Budscan onwards, would have been unfair to the Crown. 49 It is true that there was a danger that the material could have been used as tendency evidence or coincidence evidence. That is, it is possible that a jury could reason that, because such similar events happened in relation to so many companies, the appellant had a tendency to act in this way or to have an intention to do so and to bring about the consequence that a company was unable to pay the group tax. It is also possible that a jury could reason that it is unlikely that a series of such similar events all be accidents, and that therefore some or all of them must have been intentional. The notice requirements of ss.97 and 98 not having been complied with, or dispensed with, and no judgment having been made that the s.101 test was satisfied, s.95 prohibited that use of the evidence. The evidence might also have given rise to reasoning based on continuity: that is, if it were inferred, for example, that the appellant had the requisite intention in the cases of Budscan and later companies, it might be inferred that he had the same intention in relation to earlier companies. Although s.97 refers to a tendency to have a particular state of mind, it is not clear to me that reasoning on the basis of continuity in such a manner would be reasoning by way of tendency: however, Mr. Fagan in effect conceded that it would be reasoning by way of tendency, and I will proceed on the basis of that concession. 50 The next point to note is that the jury was never invited to reason by way of tendency or coincidence, but, on the contrary, was instructed to consider each count as a separate case. Furthermore, they were instructed that they could use the material in relation to earlier counts in order to support knowledge and intention in relation to later counts, as I have stated to be appropriate. The question then is, should there have been a specific direction that the jury must not use the material by way of tendency evidence or coincidence evidence. 51 In my opinion, it is a matter of fine judgment as to whether such a specific direction would or would not have been helpful to the appellant. It could suggest a way of reasoning that the jury might find persuasive, and even act upon, notwithstanding a direction to the contrary. Furthermore, it could lead to further emphasis being given to the legitimate use of the material to which I have referred, by way of evidence of knowledge and understanding. One conceivable result might be to give the appellant a better chance of acquittal on the earlier charges, but to increase his chance of conviction on the later charges. 52 In relation to such a matter, the judgment of Counsel appearing for the appellant at the trial carries some weight, at least unless it is shown to be affected by oversight or incompetence. There is no suggestion here of oversight. The question of whether there has been any material failure by the trial Counsel to act appropriately in the interests of the appellant is to be considered later. 53 Having regard to these considerations, in my opinion, unless the grounds associated with alleged failures of the appellant's Counsel at the trial are made out, there is no substance in any of these grounds. DOCUMENTARY EVIDENCE 54 There are a number of grounds of appeal concerning the admission and directions about documentary evidence, especially the coversheets and the bar charts. The relevant grounds are grounds 3, 5, 6 and 11, which are as follows: 3. His Honour erred in allowing the tender of the coversheets into evidence in the light of errors and amendment made to the figures in the various categories purporting to analyse the expenditure of funds alleged to have been siphoned from each company subject to indictment by the accused.

[72]

In connection with the number of changes, the evidence is perfectly clear; although what is not so clear, I would suggest to you, is where that actually leaves you. The figures upon which everybody appears to be prepared to proceed are that overall there were some 326 or so changes; and that between the 1st of May and the 8th of June there was some 326 of them. (This is plainly incorrect but I do not have now the correct figures.) But of course those bare statistics do not take the matter very far; for it becomes necessary then to ask, does it not; What is the distribution of those changes? What actually are they? How are they distributed? What do they all add up to? For example, if it proved to be the case that the 326 changes had all been made in one coversheet relating to a series of supporting documents; by one coversheet in connection with one company; that might point in one direction. If the evidence showed that the 326 were spread in a scattered sort of way more or less evenly over all of the analyses supporting all of the company coversheets, that would suggest an entirely different weight and inference. There is grafted on to that, the unchallenged evidence of Mr Walton that, so far as concerns these changes, it has to be remembered that they were in many cases related changes. His evidence is that 326 changes derive in fact from 14 primary changes. He gave, you remember, in his example: SH Lock-one change; 85 ripple effect changes, that sort of thing. The difficulty is that the evidence simply does not take the matter any further than that. It is a matter for you, but you might think that it does not really help simply to appeal rhetorically to the raw figures unless one can say that behind the raw figures is a distribution of error of such a kind as an intelligent mind would accept as indicating fault of a real, fundamental kind in the reliability of the end result - that is, the coversheet itself. It is a matter for you, but that is as far as the evidence goes, as I understand the evidence upon that part of the matter. You will not have over-looked, of course, in connection with that attack exhibit D, which is the schedule of payments actually made by Meriton to these various companies. That will tell you something about what, according to Meriton's records, - and it is not shown that Meriton has any axe to grind in this trial, - were the actual recorded payments from that company to the various companies, Lymkom in particular among them, with which we are concerned.

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Decision 77 In so far as there is a conflict in the evidence between Dr. Bishop on the one hand, and Mr. Adamson and the appellant on the other, I prefer the evidence of Dr. Bishop. I think it is improbable in the extreme that Dr. Bishop would have advised that the lifestyle evidence could be successfully objected to, or that the Crown case was based upon tendency and coincidence evidence. I think it is also unlikely that Dr. Bishop would have undertaken, if lifestyle evidence was allowed, to lead evidence of the appellant's prior dealings, and then not do so. Dr. Bishop's evidence was called by the appellant, and there was no application on behalf of the appellant to cross-examine him. 78 In my opinion, substantially for reasons already given, there can be no inference of incompetence drawn from the failure to seek separate trials of different counts, the failure to exclude the documentary evidence, or the failure to apply for additional directions concerning tendency and coincidence evidence. 79 Mr. Abdul-Karim accepted that, in order satisfactorily to present evidence as to the appellant's lifestyle prior to the periods of the charges and as to underpayment by Meriton Apartments, it would have been necessary to call the appellant. This would of course have exposed the appellant to cross-examination in the way referred to in Mr. Fagan's submissions. In my opinion, the evidence would in any event have been of small assistance to the appellant's case: it would have left untouched the evidence of warnings by the accountant as to the consequences of the appellant's expenditure from assets of the earlier companies, and the knowledge of those consequences gained through the failure of those earlier companies with massive debts to the Commissioner. 80 In all these circumstances I would not draw any inference of incompetence from a decision not to call the appellant, let alone an inference of incompetence of the nature discussed in R v. Birks (1990) 19 NSWLR 677. Furthermore, in my opinion, if it is wished to rely on a failure to call an accused person as a ground for alleging that a trial has miscarried, it is incumbent upon the appellant in such cases to give detailed evidence as to the substantive evidence that the appellant would have given if called. That has not occurred in this case. 81 For these reasons, in my opinion these grounds of appeal fail.

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Submissions 90 In relation to ground 12, Mr Abdul-Karim submitted that the appellant was not a director of the companies referred to in counts 6 to 10, and that the trial judge wrongly took this as indicating increased culpability, in that he was concealing his position as controller of the companies. He submitted that in fact, due to the failure of the earlier companies, the appellant could not be a director; and also, the fact that he was not a director meant that the "shuffling" of these companies was not entirely within his control. 91 As regards ground 13, Mr. Abdul-Karim submitted that the sentences were such as to show that the appellant's good character had not been appropriately taken into account. Furthermore, the trial judge did not consider alternatives to full-time custody. 92 As regards ground 14, Mr. Abdul-Karim submitted that the trial judge erred in treating the five breaches of restraining order as relevant to the appellant's culpability in relation to the offences for which he was tried and convicted. 93 As regards ground 15, Mr. Abdul-Karim submitted that the trial judge failed to consider whether a lesser or different sentence would better promote rehabilitation, especially having regard to the appellant's age and the unlikelihood that he could work again upon release from the sentences actually imposed. He submitted that the primary judge also failed appropriately to take into account hardship to the appellant's seven year old son, whose mother had died when he was five months old. 94 As regards ground 16, Mr. Abdul-Karim submitted that the trial judge wrongly drew adverse inferences from the appellant's failure to give evidence at the trial or in the sentencing procedure. 95 Finally, as regards ground 17, Mr Abdul-Karim submitted that the appellant's Counsel or the trial judge should have requested a pre-sentence report, and the failure to do so contravenes s.16A(2)(p) of the Crimes Act. Such a report would have been important in relation to such matters as the position of the appellant's son, and remorse and contrition. 96 Mr. Fagan SC submitted that the appellant's Counsel had conceded that a full-time custodial sentence was appropriate; and that a pre-sentence report was generally required where there was a real question of alternatives to full-time custodial sentence.

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