Salvatore Arcuri v Regina [2017] NSWDC 173 | Case summary

District Court of NSW|2017-04-12

Judgment

Salvatore Arcuri (the appellant) appeals against the conviction entered by his Honour Magistrate Bartley on 21 November 2016 at the Parramatta Local Court.
The appellant pleaded not guilty to one count of obtain benefit by deception contrary to section 192E(1)(b) Crimes Act 1900. The appellant was convicted following a hearing that took place over more than 10 non-consecutive days.
The issue in the Local Court and on appeal was whether the appellant had acted dishonestly or whether there was a reasonable possibility that he was genuinely and honestly acting in accordance with a legitimate claim of right.

Facts

The facts of the case were largely not in dispute.
The appellant was an accountant practising through a firm known as Wyse & Young at Bella Vista.
On 23 November 2012 the appellant entered into a Personal Insolvency Agreement (PIA), pursuant to the Bankruptcy Act 1966 (formerly known as a Part X arrangement). The PIA required the appellant to pay his unsecured creditors 20 cents in the dollar and to cover the costs of his PIA Trustee, Mr Piscopo, within 12 months.
By late October 2013, it became apparent to the appellant that he did not have the required sum (about $679,000) to make the payment required to meet the obligations under the PIA. On 31 October 2013 the appellant asked Mr Piscopo how much he would have to pay to be granted a 6 month extension of the deadline provided for by the PIA. Mr Piscopo advised that the sum of $120,000 was required to be paid by 23 November 2013 as a condition of him asking the creditors to consent to the extension.

The transaction

In September or October 2013 James Taylor was introduced by a friend Brian Dean to Edward Spencer to discuss the possibility of investing in a company Beechworth Land Estates Pty Limited (Beechworth).
Beechworth owned a number of lots of real property that it intended to subdivide and thereafter develop house and land packages for sale to the public. Mr Dean had already invested in Beechworth through a self-managed superannuation fund (SMSF) and his company BAD Nominees Pty Limited (BAD Nominees) held security over the titles of 3 of the lots.
Mr Taylor subsequently met with Mr Spencer and Rory McDonnell at the Hexham Bowling Club to discuss the investment. By the conclusion of that meeting it was agreed that Mr Taylor through a SMSF would advance to Beechworth the sum of $240,000 at an interest rate of 1% per month (12% per annum) and that the security over the titles held by BAD Nominees would be discharged and that Mr Taylor would be granted security over the same 3 titles.
In order to advance the funds, Mr Taylor had to set up an SMSF and transfer into that fund the money that was then held in his managed superannuation fund, Hillross Super. Mr Spencer recommended that Mr Taylor use the appellant to set up the required SMSF, because he had done so for other people so that they could invest in Beechworth, including Mr Dean.
In early November 2013 Greg Huxley and the appellant met with Mr and Mrs Taylor at their home. Mr Huxley introduced the appellant as Beechworth's accountant. On that day the appellant explained the nature of an SMSF to Mr Taylor and left him with some documentation relating to an existing fund called CMEA Pty Limited (CMEA). CMEA had been set up as a SMSF that could provide for 4 members. The other memberships had been taken up by unrelated parties. The unallocated membership in CMEA was immediately available and its use was intended to save the time ordinarily needed to establish a stand-alone SMSF.
Between 28 October 2013 and 18 November 2013 the appellant and Mr Spencer exchanged the following emails, which were helpfully set out by the solicitor for the DPP in a table, which I gratefully adopt. Date & Time From To Message 28.10.13 - 1:53pm Ed, Attaching "Irrevocable Directions" Arcuri Spencer Please can you sign and witness this and return to me urgently. Thanks 28.10.13 - 3:25pm Arcuri Spencer Ed, Please disregard the previous version. Ed, I have had no response to above request. I can only conclude that you have no desire to have Taylor's money roll-over in his SMSF and then into Griffith Estates, if indeed, this is where it's going. 29.10.13 - 1:30pm Arcuri Spencer I say this because nothing can be done until I do certain things; Hill-Ross are waiting for my trigger to activate the roll-over. It's 2.28. You have until 3.00pm to comply with my request or it will not happen. I kid you not. Regards Sal, Apologies for not getting back to you sooner but was in Brisbane all day yesterday and only got back late last night. 29.10.13 - 2:46pm Spencer Arcuri As you know I can't authorise your request. Firstly, because its not my money to do this. It's the clients and I am sure if he knew you were trying to claim this huge amount he wouldn't be very happy. Secondly its not solely my decision anyway to authorise such transactions as there are other stakeholders involved. Please send your invoice for the $3300 so that it can be paid when funds are available. Thanks Ed, I don't think you 'got' my email. Taylor is NOT paying for my services, it's whichever entity receives $250K. You have known about this matter for months and you gave me your word you would honour it. 29.10.13 - 2:56pm Arcuri Spencer Who are the other stakeholders you refer to ? You have 7 minutes remaining. I'm not kidding you. But I know you will test me. Regards Ed, 29.10.13 - 3:19pm Arcuri Spencer I have pulled the pin on the Taylor roll-over into CMEA Superfund. I have advised Hill-Ross not to roll-over until further instructions from Taylor. Regards Ed, Re: our telecom last night. Which entity will Taylor's funds be deposited in? 11.11.13 - 10:11am Arcuri Spencer Can you please provide the bank account's details - are you the ONLY signatory to this account? Does any other person have access to it? Please advise as I will be directing payments direct to Loreto and I do not want any stuff ups or cancellations. Regards Sal, You need to send me invoices as discussed for set up. 11.11.13 - 10:39am Spencer Arcuri Taylor $5500 inc gst Dias $5500 inc gst Please send asap, Thanks Yes, of course. 11.11.13 - 11:35am Arcuri Spencer But, you haven't answered by (sic) question. Why? Sal, 11.11.13 - 12:04pm Spencer Arcuri I am the only signatory on the account and I will provide you the details shortly. Thanks 11.11.13 - 12:45pm Arcuri Spencer Great … I'm waiting on you Sal, Account details: 11.11.13 - 2:19pm Spencer Arcuri Beechworth Land Estates Pty Ltd 012272 207446798 Thanks 11.11.13 - 2:53pm Arcuri Spencer ANZ, right ? Hi Sal, 13.11.13 - 12:52pm Spencer Arcuri Just following up to see where we are up to. Cheers Rd (sic), Please, what the deposit details ? 13.11.13 - 1:16pm Arcuri Spencer Which entity is getting the money ??? Is it beechworth or Griffiths? Also, I need $100k for my PtX - what's happening here? Sal, Beechworth land estates Pty Ltd is the company. 13.11.13 - 1:48pm Spencer Arcuri I gave you this before. What's the $100k for? Thanks 13.11.13 - 5:03pm Arcuri Spencer My Part X Sal, 13.11.13 - 5:48pm Spencer Arcuri The sooner this happens the sooner you get the funds. Otherwise you may not get anything. I'm trying to help you here Sal. Thanks Ed, I forwarded my invoice 4 times. 14.11.13 - 9:37am Arcuri Spencer How many times must I do this ? If I get nothing, so do you. I'm the one who is helping you. Thanks 14.11.13 - 11:50am Ed, Attaching "Dias Irrevocable Directions" Arcuri Spencer The sooner you sign this and return the sooner I will activate full compliance. Thanks 14.11.13 - 11:51am Arcuri Spencer Attaching "Taylor Irrevocable Directions" 14.11.13 - 11:54am Arcuri Spencer Take 2 - Attaching "Taylor Irrevocable Directions" Take 3… 14.11.13 - 11:58am Arcuri Spencer Sorry for the stuff up. Attaching "Taylor Irrevocable Directions" Please pay direct to school. Thanks Ed, 14.11.13 - 11:59am Arcuri Spencer I will have to show proof that they will be paid. Attaching "Dias Irrevocable Directions" Please understand, I'm not the only one pissed off with non-payment. Thanks 14.11.13 - 12:21pm Spencer Arcuri Sal, Assuming I sign this when will funds be in the account so I can make the payment. Ed, I don't know. I can guess. 14.11.13 - 12:47pm Arcuri Spencer I activate today - funds transferred tomorrow. Monday taylor has funds in his SMSF IF, and IF he transfers Tuesday You will have Wednesday 14.11.13 - 1:02pm Spencer Arcuri OK can we get this moving today. Thanks 14.11.13 - 1:23pm Arcuri Spencer I'm waiting for you and the signed letters !!!! Sal, Just checked with the lawyers and the way it has to be done correctly and is as follows: • funds rolled over from Hill Ross in Jim Westpac account • jim then transfers the funds into solicitors trust account as settlement has to take place as you know 14.11.13 - 2:27pm Spencer Arcuri • on settlement you will be paid your $11,000 • I can get an order to pay to you asap today if possible Please get back to me asap. Can't do it any other way. Thanks Ed, I know all this… 14.11.13 - 3:19pm Arcuri Spencer Who are the solicitors ? Please get them to give me solicitors undertaking ASAP … Mate, I have to trigger the ATO compliance … so please hurry 14.11.13 - 3:26pm Arcuri Spencer Ed, I'm calling Jim taylor and putting an end to this … 14.11.13 - 3:32pm Spencer Arcuri I will now get organised and send to you asap Thanks 14.11.13 - 7:02pm Arcuri Spencer Ed, Yes, no, maybe ??? 15.11.13 - 11:10am Arcuri Spencer Ed, Is this happening? Sal, 15.11.13 - 3:46pm Spencer Arcuri Sorry still waiting on the letter for you. Thanks Ed, In our last conversation, you said we would both go and see jim to sign him up --- 16.11.13 - 10:24am Arcuri Spencer I'm assuming that you have the contract. Can you please repeat what you had in mind regarding the transfer of monies ? Thanks Sal, 16.11.13 - 11:47pm Spencer Arcuri The lawyer has finalised the documentation so when we go up Jim can sign off. Funds can go into your trust account initially. This way you can then get paid immediately. Thanks Ed, 16.11.13 - 11:54am Arcuri Spencer Ok. In whose name is the contract in? Sal Ed, Why does life have to be so difficult? This matter started off with you as Director guaranteeing that I would be paid for past services - that's all I wanted. I asked you if Beechworth had its own bank account and you said yes; You gave me the bank account details; I asked if you were sole signatory and I get no response; We agree on solicitors' undertaking and again I get no response? You then tell me to use my trust account and then transfer the balance into another account after I have deducted my fees; I cannot do that !!! I suggested we open an account in Beechworth and you agreed. We agreed that I would come down Monday night and see Jim on Tuesday; You say on Friday that you will book your tickets; 17.11.13 - 10:09pm Arcuri Spencer I make arrangements to have Tuesday FREE; And now you say Wednesday ??? What are going to tell Jim? ALSO, have you got ALL the DOCS he had to sign ? Where are they ? Jim has to get a Bank Cheques ready for Tuesday, does he know the LEGAL entity details ? Are your docs correct in every detail? Does it have the correct SMSF name and ABN on the contracts? Mate, is this amateur hour ? PLEASE, email me the docs ASAP, as I have NO idea on what's going on. The alternative for me is to fuck the 11K and call it quits. So please, be honest with me and tell me if all this is in place. Thanks, Sal And this is not personal - but I'm fed up. Sal, The documents are done with all correct entity details which you gave to me as follows: CMEA Pty Ltd CAN 147 959 868 Atf The CMEA Superfund ABN 87 360 930 675 of 34 East Street, Warners Bay NSW There is a Beechworth account of which I am the sole signatory. The idea of putting into your trust accounts so you could deduct the $11000 and transfer the balance. 18.11.13 - 11:28am Spencer Arcuri I didn't book my flight because I wasn't sure what was happening and I spoke to Jim and I said we wanted to catch up with him this week and would get back to him once I had spoken to you and then booked my flight. You had to call him to let him know all was ok from your end? Please let me know ASAP if this is the case or it needs to be done some other way. Thanks Edward

On 18 November 2013 the appellant accessed the ASIC online register using the details of his deregistered company, Chan & Naylor Norwest Pty Limited. He nominated himself as the agent for Beechworth, removed Mr McDonnell as a director and nominated himself as a director of Beechworth. The entries alleged that the changes were authorised by Mr McDonnell in his capacity as director and/or secretary of Beechworth. The changes were not authorised by Mr McDonnell.
On 19 November 2013 the appellant opened 2 bank accounts with Westpac Banking Corporation (Westpac) in the name of Beechworth. The appellant was the sole signatory to both accounts.
On 20 November 2013 the appellant and Mr Spencer travelled together by car to Morisset Bowling Club to meet with Mr Taylor. The content of the conversation between them in the car was disputed. The appellant gave evidence that Mr Spencer knew about the appellant appointing himself as a director of Beechworth for the purpose of opening a bank accounts to use for the purpose of the transaction because the appellant did not operate a trust account That version was disputed by Mr Spencer. The Magistrate preferred Mr Spencer's version of events and I will return to this aspect later.
Mr Taylor executed the necessary documents to become a member of CMEA. The loan was increased to $250,000 and the loan documents were amended on the day. Mr Spencer signed the loan documents as a director of Beechworth and the appellant signed as a witness. One of the loan documents was a Deed of Guarantee between Mr Spencer and Mr Taylor in which Mr Spencer guaranteed the obligations of Beechworth relating to the loan and security arrangements (the Guarantee). The Guarantee included a "Business Purpose Declaration" declaring that the credit to be provided by Mr Taylor to Beechworth would be "applied wholly or predominantly for business or investment purposes".
On 21 November 2013 Mr Taylor transfer $250,000 from his account to the Westpac account nominated by the appellant in Exhibit 8. The appellant had inserted the account details in his handwriting on the letter dated 18 November 2013 that became Exhibit 8.
On 21 November 2013 the appellant transferred the sum of $112,500 to BAD Nominees to discharge the security held over the 3 titles. He also transferred the sum of $120,000 to his PIA Trustee, to extend his PIA deadline by 6 months.
The appellant applied a further sum of $5,500 to his own personal expenses. The balance of the funds was applied as contemplated in the transaction. The benefit received by the appellant was specified to be the sum of $125,500.
On 22 November 2013 Peter Mitchell, the usual ASIC agent for Beechworth, appointed Mr Spencer as a director of Beechworth, removing the appellant and Mr McDonnell.
Between 22 November 2013 and 25 November 2013 the appellant and Mr Spencer exchanged the following text messages. Date & Time From To Message 22.11.13 - 11:11am Spencer Arcuri Sal can you please call me asap 22.11.13 - 11:13am Arcuri Spencer In court. Will do after 22.11.13 - 11:14am Spencer Arcuri OK what time. So is everything ok? 22.11.13 - 1:11pm Arcuri Spencer Can't talk right now… I'll call you later 22.11.13 - 2:31pm Spencer Arcuri Sal are you still in court? 22.11.13 - 4:09pm Spencer Arcuri Sal I need to get back to Brian Dean as he needed those funds urgently. Where we up to? Please get back to me as I can't leave to go home until I know this is sorted 22.11.13 - 5:07pm Arcuri Spencer Ed my phone is with some guy who found it when I left it in the court. Pick it up tomorrow. Dean is done. Will transfer the balance on mnday… Ok? sorry about this 23.11.13 - 8:51am Spencer Arcuri Sal got your phone back yet? 25.11.13 - 1:41pm Spencer Arcuri Sal, please check your email I need receipt confirming payments ASAP please its now very urgent. Can you email to me. Thanks 25.11.13 - 1:49pm Spencer Arcuri Sal, I have just checked the account and there are no funds there? What's happening Sal this isn't looking very good my friend. 25.11.13 - 2:09pm Arcuri Spencer Ed welcome to my world for the past 4 years. Now, what can you tell me about Griffith Estates (lot 39) pty ltd? 25.11.13 - 2:15pm Spencer Arcuri What are you talking about Sal. What about lot 39? 25.11.13 - 4:42pm Spencer Arcuri Sal, I trusted you to do the right thing with this transaction and so did the Taylor's and which you obviously haven't. You have definitely knowingly set out to misled me to believe that you were doing the right thing by me and the Taylor's but you have pre conceived the notion to take the money for your own personal gain. It was definitely no accident let's put it that way. As I said I will be forced to report your actions to the police if the money isn't returned by close of business today. This now will serious impact your current legal matter. Some friend you turned out to be. 25.11.13 - 5:27pm Spencer Arcuri Sal I gave you the account details on the letter I gave you. This isn't a commercial matter Sal it's a criminal one. You have the Taylor's money its not yours. They will be pressing charges too. Fix it now or you will go to jail for much more than 6 months it will be years. 25.11.13 - 6:24pm Arcuri Spencer Ed, the money went onto beech worth account. It's not the Taylor's as they get 3 blocks as security and interest. Their position is secured. They have no action against you and beech worth. You can sue me for the balance and I will have counterclaim. Also, you have no standing. For once get Huxley to fix the problem. When are you going to the police? I will come with you. 25.11.13 - 6:40pm Spencer Arcuri Sal, the Taylor's haven't got the titles and they wont get them because Beechworth doesn't have the money. You should have collected the titles as instructed in the letter I gave you before you transferred any money. Start packing your bags Sal as your a little bit too big for your boots right now.

On 25 November 2013 the appellant and Mr Spencer exchanged the following emails. Date & Time From To Message Sal, glad I finally got hold of you just now on your office phone. As you know, I was trying to speak with you all day Friday but apparently you were in court and then you lost your phone. Also this morning I was trying to contact you and I even left a message with your receptionist asking that you call me back urgently as I needed to confirm that all had been finalised with the CMEA settlement as you know this was urgent. From our brief conversation I got the impression you were obviously very busy and in a rush but you did manage to confirm that you had made all transactions and payments to the appropriate accounts. 25.11.13 - 2:38pm Spencer Arcuri However, so that settlement can be finalised in the CMEA matter, fully please confirm (copy of transfer receipt please) that Wyse and Young fee/s of $11,000 paid and the balance of funds have been remitted to the Mortgagor, Beechworth Land Estates Pty Limited and BAD, as directed by me. Sal, I would appreciate response within 30 minutes because as you would appreciate I am under pressure from other parties involved in the transaction to see this has all been carried out properly. Regards Hey Ed, Dean HAS been paid !!! 25.11.13 - 3:13pm Arcuri Spencer Who are the 'other' parties ? What can you tell me about Griffith Estate (Lot 30) Pt Ltd. sal Ed, I should be sorry - but I'm not. I'm sorry that you were in the middle of all people, but, that's how Huxley operates, innocent good people are always caught in the middle. You say you're going to the Police? Well, let me drive you there. This is a commercial matter, not, fraud ! Rockcliffe are the owners, well the purported owners, of Beechworth. I and other people have a different view and the courts will shortly decide. If you look at the invoices you will see what I am owed, what I was promised and what I have been burdened with … my claim is against Rockcliffe not you. I had no other choice but to do what I did; it literally meant my LIFE ! and by the way, it's not a done deal yet. 25.11.13 - 6:00pm Arcuri Spencer No-one has given a fuck about my situation other than lip service. Let me tell you that had it been Huxley in my shoes he would have kept the whole $250K. I did the right thing - I paid Dean. You didn't tell me about the balance and as it's the usual practice that the balance goes to vangory I was (sic) going to let that happen. For 4 years I have been fed shit and promises and let to fry. And you talk to me about doing the right thing ? that I have let you down? Huxley has funds, as you will see - make him fix the problem. Ed, you received 500,000 shares in FDL, 5% in Beechworth, 5% in Griffith - We suspect Lot 30 has been transferred to you - I sent you the company search. Not personal Ed, just an opportunity which I seized with both hands to restore my life. And everyone agrees. Take care

On 25 November 2013, Mr McDonnell had a conversation with Mr Spencer, in words to the following effect, McDonnell said: "Ed did you know that Sal Arcuri has somehow made himself a director of Beechworth?". Spencer replied: "Yeah I got an email from Peter. There must be some mistake, I never appointed him. He must be removed straight away".
On 27 November 2013, Taylor sent an email to the appellant in the following terms (he was assisted in drafting the document by Spencer): Dear Mr Arcuri, Re: CMEA First Mortgage Investment I am advised that you have not settled this matter as I have instructed. I am also advised that you have not collected the three security title deeds; nor have you paid the balance of the advance to the Mortgagor, Beechwood Land Estates Pty Limited. I require the following to be completed today by 5pm today:- Settlement is to be effected and my security titles collected and my security registered as directed; Balance of funds to be paid to Mortgagor, i.e. $137,500. In the event that you cannot attend to this, you are to EFT my funds (i.e.: $250,000) back to my Westpac bank account, today by 5pm. Failure to do either of these will require me to report the matter to various authorities. I do NOT want to be called. Nor do I want an email. I require the matter to be done as directed - again 5pm. Yours faithfully, James Taylor CMEA
Later on 27 November 2013, the appellant responded by email as follows: Dear Mr Taylor, All the executed documents are with either Mr Edward Spencer or his legal representatives. I am awaiting instructions from them to execute the titles. I cannot attend to your request as they have the titles. The dispute between Beechworth and wyse young should not and does not affect your security. Please note that I, with others, have already reported certain aspects about Beechworth to the authorities. Regards, Wyse young
On 28 November 2013, Taylor sent the appellant a letter by email as follows (the letter was dated 27 November 2013, on CMEA letterhead, and Taylor was again assisted in drafting by Spencer): Dear Mr Arcuri, I have received your email. You were to act as directed as per the acknowledged instructions and as my and CMEA's adviser and agent. Please advise by return:- Do you hold CMEA's money, $250,000, in Trust?; If you do not hold CMEA's money:- How much has been disbursed by you? And, to whom? What security do you hold on CMEA's behalf? I have no interest in any dispute that you have with Beechworth Land Estates Pty Limited, Yours faithfully, James Taylor, Director
In November 2013 the Police were contacted.
Beechworth was in liquidation at the time of the hearing. Mr Taylor had submitted a proof of debt.
CMEA was deregistered on 18 May 2014.
Mr Taylor received a payment of $10,000 from Mr Huxley in or about July or August 2014.

The relevant law

The applicable principles to be applied in determination of the appeal are as follows.
Section 18(1) Crimes (Appeal and Review) Act 2001 provides that the appeal is a rehearing on the certified transcripts of evidence, obviously as supplemented by reference to the exhibits tendered in the Local Court and is not an appeal de novo: Gianoutsas v Glykis [2006] NSWCCA 137 at [24]-[31];
The principles governing appeals from judges sitting without a jury apply in that the appellate judge is to form his or her own judgement of the facts while recognising the advantage enjoyed by the magistrate who saw and heard the witnesses called and observing the natural limitations stemming from proceeding wholly or substantially on the transcript record: Charara v R [2006] NSWCCA 244 at [17]-[22].
Whilst the magistrate's reasons are not part of the certified transcripts referred to in section 18(1), recourse may be had to them since the appellate function could not properly take place without reference to them: Charara [23]-[24].
The Court is obliged to give the judgement which in its opinion ought to have been given in the first instance: Fox v Percy (2003) 214 CLR 118 at [23].
The powers of the District Court are exercisable where the appellant demonstrates that the order the subject of the appeal is the result of a legal, factual or discretionary error in which event the appellate court can substitute its own decision based on the facts and law as they then stand: Dyason v Butterworth [2015] NSWCA 52 at [28].
The issue of whether or not error is strictly required before the District Court can intervene was considered but not decided in AG v Director of Public Prosecutions [2015] NSWCA 218. I have proceeded on the basis that I am bound by the law as it is stated in Dyason and other subsequent decisions including Bandana v Director of Public Prosecutions [2016] NSWCA 140 at [10] and Englebrecht v Director of Public Prosecutions [2016] NSWCA 290 at [91].
The term "error" has no precise meaning. It refers broadly to the satisfaction of the appellate judge that the trial judge was wrong and should be corrected. Put negatively, it means that the judgment of the trial judge will not be set aside unless the appellate judge is satisfied that the judgment is wrong. How that state of satisfaction is achieved will depend on a range of factors. A miscarriage of justice warranting intervention may occur in the absence of "error" in the ordinary meaning of that term: AG at [34] per Basten JA.
The elements of the section 192E offence are: 1. the accused; 2. dishonestly; 3. by deception; 4. obtained a financial advantage or caused a financial disadvantage; and, 5. (if a claim of right is sufficiently raised on the evidence) the accused was not conducting himself in accordance with a legitimate claim of right.
In Fuge v R [2001] NSWCCA 208. Wood CJ at CL reviewed the relevant authorities relating to claim of right and summarised the principles from them as follows: 1. the claim of right must be one that involves a belief as to the right to property or money in the hands of another; 2. the claim must be genuinely, i.e. honestly, held, whether well founded in fact or law or not; 3. while the belief does not have to be reasonable, a colourable pretence is insufficient; 4. the belief must be one of a legal entitlement to the property and not simply a moral entitlement; 5. the existence of such a claim, when genuinely held, may constitute an answer to a crime in which the means used to take the property involved an assault, or the use of arms; the relevant issue being whether the accused had a genuine belief in the legal right to the property rather than a belief in a legal right to employ the means in question to recover it; 6. the claim of right is not confined to the specific property or banknotes which were once held by the claimant, but can also extend to cases where what is taken is their equivalent in value, although that may be qualified when, for example, the property is taken ostensibly under a claim of right to hold them by way of safekeeping, or as security for a loan, yet the actual intention was to sell them; 7. the claim of right must, however, extend to the entirety of the property or money taken. Such a claim does not provide any answer where the property or money taken intentionally goes beyond that to which the bona fide claim attaches; 8. in the case of an offender charged as an accessory, what is relevant is the existence of a bona fide claim in the principal offender or offenders, since there can be no accessorial liability unless there has in fact been a foundational offence, and unless the person charged as an accessory, knowing of the essential facts which made what was done a crime, intentionally aided, abetted, counselled or procured those acts; and, 9. it is for the Crown to negative a claim of right where it is sufficiently raised on the evidence, to the satisfaction of the jury.

The admissibility ruling

On 3 September 2015 the appellant commenced giving evidence in the Local Court. During the course of his evidence in chief the appellant sought to tender a number of documents that were marked MFI C, D, E, F, G and H. The Magistrate reserved his decision on the admission of those documents. The appellant completed his evidence in chief on 3 September 2015.The matter was adjourned to 10 December 2015 for further hearing.
On 10 December 2015 the Magistrate delivered reasons as to the admissibility of the documents that had previously been marked.
I was referred in argument to MFI H as being of special significance to the issue of claim of right. MFI H was a letter dated 9 November 2012 to Mr Piscopo from Leon Stefan the CEO of a company Rockcliffe Limited (Rockcliffe), incorporated in Hong Kong. In the letter Mr Stefan stated that Rockcliffe would underwrite the appellant's payment due to creditors pursuant to his PIA, within 12 months of the PIA being executed.
The Magistrate rejected the tender of MFI H because he found it was not relevant, without evidence from the appellant tying the letter to any agreement that applied in November 2013.
In arriving at that ruling, the Magistrate made a number of findings of fact that he expressed to be provisional but necessary to be able to rule on the admissibility of the documents. The Magistrate noted that the appellant's evidence in chief was concluded and it had "often been vague, elliptical and insinuatingly indirect rather than clear or explicit". The Magistrate believed it was impermissibly based on a leading question and that accordingly he would be required to deprecate it. The extent of the evidence as he understood it was that Greg Huxley had made some unspecified promises to the appellant. The Magistrate then made a finding that a number of the documents were relevant to the appellant's motive to be "dishonest", a term that was used a number of times. This was of course the issue at the heart of the case; a claim of right being the reason why it was being argued that the Court could not be satisfied beyond reasonable doubt that the appellant acted dishonestly.
The Magistrate fell into error by not admitting MFI H.
It was clear by the time when the Magistrate came to consider the admissibility of MFI H that there was evidence capable of acceptance (and in some cases unchallenged) to support the following allegations in the appellant's case..
First, the underwriting arrangement that was the subject of MFI H was money the appellant believed was owed to him by Rockcliffe. The case seemed to proceed on the basis that the money was owed by Rockcliffe, but not Beechworth.
Second, Rockcliffe extended the underwriting arrangement after the appellant became insolvent as a result of acting as Greg Huxley's trustee. This was later confirmed when it was put affirmatively to the appellant in cross-examination, including that his appointment as trustee was the reason why the appellant was the registered proprietor of Mr Huxley's family home.
Third, Mr Huxley was involved with Rockcliffe. This evidence was given by Mr Huxley's son.
Fourth, Rockcliffe owned 95% of the shares in Beechworth. This was confirmed by the ASIC records.
Fifth, Mr Huxley was involved in Beechworth. He was present at the meeting with Mr Taylor and introduced the appellant to him.
Sixth, the appellant had issued a number of invoices jointly addressed to Rockcliffe and Beechworth for payment of the PIA amount in accordance with the terms of MFI H. Mr Spencer believed that he had seen those invoices but did not consider that he had the authority to pay them. The invoices were admitted into evidence. The payment of the PIA amount and the invoices was raised by the appellant in the email correspondence with Mr Spencer on 13 November 2013.
Seventh, Mr Huxley was a bankrupt at the relevant time but was still involved in the management of the affairs of Rockcliffe, Beechworth and a company Vangory Holdings Pty Limited.
Based on the collection of those matters, MFI H was relevant, because if it was accepted as genuine it could rationally affect, directly or indirectly, the assessment of the existence of a fact in issue in the proceedings: section 55 Evidence Act 1995.
After the ruling was delivered, the appellant asked the Magistrate to disqualify himself for apprehended bias. The basis of the application was that a fair-minded observer might reasonably apprehend that the Magistrate might not bring an impartial mind to the resolution of the case.
The Magistrate fell into error by failing to recuse himself.
In ruling on admissibility of the documents the Magistrate made an adverse finding as to the content of the appellant's case and by extension to the appellant's credit, before the appellant had finished giving evidence and without affording the appellant the opportunity to make submissions on those matters.
The findings were not necessary for the ruling on admissibility. The alleged paucity of the appellant's evidence could not have been a matter that affected the relevance of the document to the facts in issue in the proceeding. Based on the evidence already adduced MFI H was a relevant document. If the Magistrate was not convinced of the link between the content of MFI H and the fact in issue, the Magistrate should have offered the appellant the opportunity to lead evidence on a voir dire. On 2 May 2016 during the course of final submissions when the admissibility of the documents was raised for reconsideration, the Magistrate informed the parties that he would not revisit any earlier evidentiary rulings.
The Magistrate's discussion of the appellant's motive to be dishonest was also irrelevant, because at no point did the Magistrate's analysis suggest that the documents were being tendered by the appellant for an exculpatory purpose.
The expression of the Magistrate's views as preliminary in this case were not sufficient to remove the reasonable apprehension of bias. The Magistrate's views on the appellant's evidence in chief were expressed clearly and in forceful language after the appellant had completed his evidence in chief. The opportunity for the appellant to change the Magistrate's mind on these matters was extremely limited. So much can be demonstrated by the Magistrate's direct quoting and affirmation of the findings in the admissibility ruling, in his final judgment.
I have not considered the Magistrate's reasons for refusing to disqualify himself as explaining what he meant in the admissibility ruling. Later statements from a judge may generally be considered to explain an earlier statement that may otherwise suggest pre-judgement. But in cases of apprehended bias, the judge's expression of his or her ability to maintain an open mind is irrelevant: British American Tobacco Australia Services Limited v Laurie (2011) 242 CLR 283 per Heydon, Kiefel and Bell JJ.

The final judgment

On 21 November 2016 the Magistrate delivered his oral reasons for judgment.
The Magistrate noted that there were many contentious secondary issues that were unnecessary for the Court to determine, including the direct and indirect relationships between Beechworth, other companies and other people.
I pause to note that the Magistrate's decision turns on the construct that the appellant took the money from Mr Taylor or CMEA. Accordingly, on the Magistrate's reasoning he did not need to determine the relationship between the appellant, Mr Huxley, Beechworth, Rockcliffe and Vangory Holdings.
To the extent that he did analyse the claim of right he did so only by reference to Beechworth, reasoning that if the appellant was owed any money it was by Rockcliffe and not Beechworth and thereby the claim of right could not be made good.
In relation to these matters, to which I will return, it was open on the evidence and in my view was at least equally likely that the appellant took money from Beechworth. Further, it was open on the evidence that Beechworth was intending to pay that money at the direction of Rockcliffe or Mr Huxley and accordingly the analysis of the claim of right was more complicated than that embarked on by the Magistrate.
The Magistrate noted that the prosecution was required to prove the appellant's guilt beyond reasonable doubt.
The Magistrate referred to the principles in Mahmood v Western Australia (2008) 232 CLR 397 at [27] and Louizos v R (2007) 194 A Crim R 233 at [57] and concluded that those principles did not extend to the failure of the prosecution to tender company minutes or other documents. The Magistrate did not set out the basis for or any reasons for arriving at that conclusion. The conclusion was wrong in law. I see no reason why the failure to call evidence from a witness in a criminal prosecution is any different to tendering documents, if the failure to tender those documents was a matter about which the tribunal of fact could entertain a reasonable doubt; for example, the failure by the prosecution to tender a document alleged to be a forgery.
The Magistrate noted that the case largely turned on the recollections of the conversations between Mr Spencer and the appellant and that their recollections of those conversations may not be reliable, quoting Watson v Foxman (1995) 49 NSWLR 315 at 319.
As to credit, the Magistrate found that Mr Spencer was an "honest, frank and indeed guileless witness". The Magistrate found that Mr Spencer's answers were immediate, spontaneous and cogent and were on occasions supported by the contemporaneous evidence. He noted some incomplete memory of secondary detail. He concluded that Mr Spencer was an impressive and reliable witness. I have reservations about accepting the evidence of Mr Spencer based on its content. I will return to that matter.
The Magistrate found that the appellant often hesitated before answering questions, was querulous in cross-examination and intermittently evasive. He was directed to answer on occasions and he intermittently dissembled his answers. The Magistrate concluded that the appellant was an unimpressive witness.
It should be noted that the Magistrate made findings as to credit before making any substantive findings of fact or resolving any of the issues that were presented by the conflicts in the evidence of Mr Spencer and the appellant. For the reasons given I am of the view that the Magistrate had unfairly formed a view about the appellant's credit before he had heard all of the evidence or any relevant submissions and at a time when it was unnecessary to do so.
It appears to me that some of the later findings of fact made by the Magistrate were infected by the unfair adverse findings on credit and not by reason of the resolution of the facts based on the evidence. For example, the Magistrate found that the appellant had no legitimate reason to ask Mr Spencer about the bank account held by Beechworth in the email correspondence of 11 November 2013, reasoning that the appellant only did so with a view to getting his hands on Mr Taylor's money so that he could pay school fees. This was not the only inference available to be drawn from the evidence. At the time, the appellant was trying to have Mr Spencer provide him with an irrevocable direction to pay at least the accounting fees due ($11,000) to him from the transaction. It is possible that the irrevocable directions to pay, which were not tendered even though they were referred to in the email correspondence, contained a direction to the bank to pay the accounting fees, which would have required the signature of any authorised signatories to the account. In other words, there was nothing that can be independently gleaned from the evidence to support the Magistrate's finding of subjective intent on this point other than the Magistrate had already decided to disbelieve the appellant based on the impugned credit findings.
The Magistrate set out the principles in Fuge v R.
The Magistrate then set out the evidence in some detail to establish that the appellant had a motive to take the money. I am not sure why this was necessary or important. Motive was not an element of the offence. It was not in dispute that the appellant was under financial pressure to pay the $120,000 to his PIA Trustee. If he did not pay, he would be declared bankrupt. The Magistrate concluded that the appellant was in severe financial difficulties, desperate and had abundant motive to fabricate relevant debts and other justifications for taking the money.
That conclusion needs to be treated with some caution because there was contemporaneous evidence, some of which was accepted by Mr Spencer about the appellant's claim against Rockcliffe to pay the PIA amount. In final submissions, the prosecutor put that the appellant's "claim of right was fraudulent" but did not as I perceive it specifically put to the appellant in cross-examination or submit that the appellant fabricated the claim against Rockcliffe.
The Magistrate then noted that the appellant first raised the issue of the payment of $100,000 to be put towards his PIA was in email correspondence of 13 November 2013. The Magistrate noted Mr Spencer's evidence that he had not agreed to pay that sum and that he couldn't authorise that payment.
At T12 line 20 of the judgment the Magistrate stated: Mr Arcuri admitted in cross-examination on 10 December 2015 that he opened a (Westpac) bank account (in Beechworth's name) because Mr Spencer would only pay two accounts amounting to $11,000 and Mr Arcuri wanted to control Mr Taylor's funds as Mr Arcuri deemed fit: pages 47-48
The finding was not a fair statement of the appellant's evidence on the point. The appellant gave evidence that he was concerned that Mr Spencer would not pay even the $11,000 that had been agreed for accountancy fees. Mr Spencer had refused to sign an irrevocable authority and had refused to arrange a solicitor's undertaking for that amount. The bank account was opened to allow the appellant to control the disbursement of the funds and because the appellant did not operate a trust account and even if he did he would not have wanted to receive the money himself because he was not acting for Mr Taylor. The appellant gave evidence that Mr Spencer had him opening a bank account of which he was the only signatory and that he had to be a director of Beechworth to do so.
The Magistrate resolved the issue between the appellant and Mr Spencer on the issue of the opening of the bank account in favour of Mr Spencer by reference to credit and by reference to the appellant handwriting the account details on Exhibit 8 under 2 references to the Wyse & Young trust account. The email correspondence on this issue was equivocal and provided support for both versions. As to whether or not the appellant operated a trust account at the relevant time the prosecution could have called evidence to prove the fact.
The Magistrate relied on the Business Purpose Declaration (the Declaration) in the Deed of Guarantee to find that Mr Spencer did not intend the money to go to the appellant. I do not understand the fact that Mr Spencer did not intend for the money to end up with the appellant to be contentious. However, the reasoning employed to arrive at the finding is flawed because it completely misunderstands the reason for the inclusion of the Declaration in the Deed of Guarantee. The Declaration was included for the benefit of Mr Taylor to exclude the operation of certain consumer credit legislation and thereby make the recovery of the money from Beechworth or Mr Spencer easier. It is hard to see how the resolution of a non-contentious matter on flawed reasoning takes the matter much further.
The Magistrate records that the appellant accepted that he had a duty of care to Mr Taylor, but the reference provided is wrong. The Magistrate then found that the appellant took Mr Taylor's money regardless of that duty and that he admitted paying the money to himself without authority. I do not see how the breach of a duty of care, i.e. negligence, was relevant to the determination required.
The Magistrate then found beyond reasonable doubt that the appellant from a period before 18 November 2013 dishonestly embarked on, pursued and completed a multi-step course of deception of Mr Taylor, CMEA, Mr Spencer and Beechworth that included registering himself as a director of Beechworth and opening the bank accounts in Beechworth's name and he thereby received a benefit of or caused a detriment of $125,500. The Magistrate went on to say that he was satisfied beyond reasonable doubt that the money never reached Beechworth and that the financial disadvantage was sustained by Mr Taylor and CMEA.
The Magistrate stated that the conduct of the appellant grievously impugned the credibility of the appellant's claim of right. In fact, the Magistrate's finding was determinative of the appellant's claim of right before he had considered it, because he was satisfied beyond reasonable doubt that the appellant had acted dishonestly and in those circumstances the claim of right did not add anything: R v Macleod (2001) 52 NSWLR 389 at [113].
Nevertheless the Magistrate embarked on an analysis of the appellant's claim of right noting that it was put forward on a number of bases that were inconsistent. The Magistrate noted that the money flowing to Mr Huxley had nothing to do with the source of the money that was Mr Taylor or CMEA. The Magistrate then adopted the findings he made in the admissibility ruling that I have referred to and dealt with at [47] above.
As I have already said the finding that the money belonged to Mr Taylor was not the only reasonable inference that can be drawn from the evidence. It was open for the Court to find that the appellant was Beechworth's agent in the transaction. The appellant was introduced to the transaction by Beechworth, introduced to Mr Taylor as Beechworth's accountant, received his instructions from Beechworth, was provided the documents by Beechworth and was to be paid by Beechworth from the settlement funds. It was open for the Court to find that the appellant received the funds as Beechworth's agent and thereby when Mr Taylor transferred the money into the account he had paid it to Beechworth. The correct finding on this point was a matter of law, that could not be decided based on credit. On that analysis, the Magistrate's finding that he was satisfied beyond reasonable doubt that the money never reached Beechworth was not open to him because there was more than one equally available inference open.
The Magistrate then found that the appellant had been evasive when asked if the $120,000 had been transferred to his PIA Trustee, at page 8 line 22-30 of the transcript on 11 December 2015. That finding is not open in a fair reading of the transcript. The first relevant question is asked at page 8 line 13 where the appellant accepts that he applied the $120,000 to his PIA obligations. On the previous page the cross-examiner had introduced the irrelevant concept of the Declaration. The question following on page 8 at line 17 again included the Declaration concept. The appellant was asked, "Would you agree that your part 10 is not wholly or partly or predominantly a business purpose?". The appellant responded, "Mr Prosecutor, I tendered invoices for work done and it was against those invoices that the money was transferred. It was against invoices." The Magistrate the directed that the appellant answer the question directly. The appellant's solicitor put in argument to the Magistrate that he did answer the question. The Magistrate directed that the appellant answer the question squarely. A different question was then asked, "You'd agree the $120,000 went towards your Part 10?" to which the appellant responded, "Yes". By reference to the irrelevant concept of the Declaration, I am not sure what the appropriate answer to the question put was, but it was not the answer that was required and given to the later question.
The Magistrate rejected the evidence of the appellant that he decided to appropriate the funds when he discovered that they were to be paid to Vangory Holdings at the direction of Mr Huxley. He did so on the basis of his finding beyond reasonable doubt that he always intended to get his hands on Mr Taylor's money. He further stated that the appellant's evidence was incredible and that when he gave it he was dissembling.
The Magistrate concluded that he was satisfied beyond reasonable doubt that there was no credible evidence of a factual basis for the debts asserted by the appellant. He stated that the debts were asserted against Beechworth but not put to Mr Spencer or accepted by him. He reiterated that the debts had nothing to do with Mr Taylor or CMEA. He referred back to his adverse credit findings about the appellant and found that the appellant was motivated by greed.

Consideration

Having conducted an independent assessment of the evidence before the Local Court, I have a reasonable doubt as to the appellant's guilt of the offence of which he was found guilty. In my view the magistrate misused his advantage of hearing and seeing the witnesses by making findings on credit that were in error. As a result I have not afforded the credit findings made against the appellant significant weight. The reasons for my finding of reasonable doubt are as follows.
First, after paying due regard to the Magistrate's finding as to Mr Spencer's credit I am not satisfied having regard to its content that I should accept it. Mr Spencer seemed to have little command of Beechworth during the course of the transaction. He believed that he was a 50% shareholder in Beechworth, when in reality he owned 5% of the shares that were unpaid. He purported to act as a director without actually being a director. There were large periods for which he was removed as a director of Beechworth. He signed the transaction documents without regard to the fact that he was not a director. He gave evidence that he could not authorise the payment of the money that the appellant said he was owed. He did not give evidence as to how he was authorised to do anything relating to Beechworth. If he was the sole director of Beechworth, as he believed he was at the relevant time, I do not understand how he was not authorised to pay the money sought by the appellant if it was owed to him. Whilst he gave evidence that he saw the invoices jointly issued to Beechworth and Rockcliffe he did not take contemporaneous steps to contest them. That would have been consistent with his position in evidence that Beechworth did not owe the appellant the money.
He did not deny that Rockcliffe owed money to the appellant. He gave evidence that the appellant would have to take that up with Mr Stefan or Mr Huxley. He knew that Mr Huxley was involved with the operations of Beechworth, but he was not asked by the prosecution what he knew on that topic.
He had acted as an officer of the One Group of companies for some unspecified period, to which Mr Huxley was also connected. Mr Spencer knew a lot more about the direct and indirect relationships between the relevant entities than he gave evidence about and accordingly when he answered that the debts alleged against Rockcliffe were "nothing to do with me" I am concerned that he was not telling the whole truth.
Mr Spencer took immediate steps to "assist" Mr Taylor by committing him in writing to the position that the transaction had not completed and that the appellant had misappropriated Mr Taylor's funds. This position best suited Mr Spencer's own interests by making it impossible for Mr Taylor to rely on the Deed of Guarantee and to hold Mr Spencer personally liable for the obligations of Beechworth.
There is a further aspect to this. The transaction and the others mentioned revealed a pattern of Beechworth advising retirees to transfer some of their superannuation to a SMSF to invest in Beechworth on the promise of higher than normal returns. For this purpose, Beechworth retained the appellant to set up the SMSFs. This conduct was not in accordance with law. The decision to start up a SMSF required the investors to receive advice from a person that held a Australian Financial Services Licence (AFSL): Park Trent Properties Group Pty Limited v Australian Securities and Investments Commission [2016] NSWCA 298. There was no evidence that the appellant or Wyse & Young held an AFSL. The conduct was at the very least sharp practice on the part of Beechworth and arguably unconscionable. Mr Spencer was an integral part in both instances of the sharp practice deployed to the disadvantage of Mr Taylor.
On that basis, I would not consider Mr Spencer to be guileless or even reliable.
As the Magistrate correctly pointed out the prosecution case rested largely on the evidence of Mr Spencer in his dealings with the appellant. With the exception of Exhibit 8 I do not consider that any of the contemporaneous documentary evidence was supportive of Mr Spencer's evidence. Taking into account all of the evidence, I am not satisfied that I can place any significant reliance on the evidence of Mr Spencer. I am not satisfied that I should find for the prosecution by preferring the evidence of Mr Spencer over the evidence of the appellant as to the issue of the appointment of the appellant as a director and the opening of the Westpac bank accounts.
Second, on the basis of the evidence relating to the claim of right I have a reasonable doubt as to whether the appellant acted dishonestly. Properly characterised the appellant had a legal claim against Mr Huxley and Rockcliffe.
As against Mr Huxley the appellant had incurred debts when acting as Mr Huxley's trustee. This was the position put by the prosecutor in cross-examination and accepted by the appellant. Accordingly, the appellant would have the right to be indemnified from trust property pursuant to the provisions of the Trustee Act 1925, at common law and from the terms of the trust. This would have included an action against Mr Huxley to recover trust property from him.
Further, on about 9 November 2012 Rockcliffe represented to Mr Piscopo and the appellant in MFI H that it would underwrite the appellant's PIA. Based on those representations, the appellant entered into the PIA. Thereafter the appellant had the right to enforce the payment of the PIA amount in equity based on the doctrine of estoppel.
The prosecution did not call Greg Huxley and he is a witness I would have expected to have been called. For the reasons given, the prosecution could have explored the inter relationships between the companies with Mr Spencer.
The appellant's evidence was that Mr Spencer had instructions to disburse the funds at the direction of Mr Huxley and that he diverted them away from the company Vangory Holdings. I am satisfied that I should accept the appellant's evidence that Mr Huxley was controlling the companies and directing their affairs and the flow of funds whilst he was a bankrupt.
The appellant acted consistently throughout the transaction in alleging that he had been promised the funds by Rockcliffe and/or Mr Huxley to meet his obligations in the PIA. He was also very forthright in admitting what he had done in writing shortly after appropriating the money. On my review of his evidence he maintained those admissions throughout.
I accept that his belief that he could recover the money from Beechworth, because it was 95% owned by Rockcliffe was honestly and genuinely held, even if it was a claim was not known to the law.
I am also satisfied that there was a reasonable possibility that the appellant honestly and genuinely believed that he had a legal claim of right against Mr Huxley and Rockcliffe and that the funds that Beechworth had received were being directed to one of them or were being directed at the behest of Mr Huxley.
Accordingly, I cannot be satisfied beyond reasonable doubt that the appellant acted dishonestly and the prosecution have not proven all of the elements of the offence to the requisite standard.

Conclusion

The orders I make are as follows: 1. Appeal against conviction allowed. 2. I set aside the conviction and the penalty imposed by the Magistrate.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 July 2017

Salvatore Arcuri v Regina

At a glance

Court

Decision date

Source

Judgment (12 paragraphs)

Parties

Cases Cited (13)