WILLS v PETROULIAS

Court of Appeal (NSW)|2003-12-16|Before: Spigelman CJ, Handley JA, Santow JA, Simpson J, Kiefel J

The Applicant in this proceeding (Petroulias) claimed that the Court of Appeal made errors in respect of its treatment of the judgment of Simpson J, the existence of certain evidence and its reliance on the failure of the Applicant to identify any prejudice he had suffered.

(per Spigelman CJ, Handley and Santow JJA agreeing)

A. The summary nature of the presentation of the evidence at the committal before Simpson J does not detract from this Court's conclusion that evidence existed to satisfy committal for an offence under s 29D. There was evidence before the magistrate of a genuine assertion contrary to the Private Binding Rulings on the issue of fringe benefits tax liability. [15], [17]-[18]

B. The Court accepts that its previous identification of evidence of a genuine dispute or genuine assertion of a position by the Commissioner on the issue of tax deductibility of contributions to the scheme went too far. This does not affect the ultimate view that the Court reached in its previous judgment. [19]-[20]

C. Section 110 of the Act operates and no order quashing or setting aside the committal should be made, subject to the power to amend or remit the under s 110(2).

D. Simpson J appears to have been misled in her erroneous interpretation of Essenbourne by a submission to her by counsel for the Respondent. The Court was not aware of this at the time of its previous judgment and certain paragraphs of that judgment should be withdrawn. [29], [33]

E. The Claimant is not disentitled from raising this issue on appeal. The effect of a judgment is not a matter for concession and this Court can determine the appeal on the correct understanding without any prejudice arising for the Applicant. [36]

F. The discretion of Simpson J under s 109 of the Act did miscarry as a result of this error and the discretion should be re-exercised. [36]-[38] Essenbourne Pty Ltd v Commissioner of Taxation [2002] FCA 1577 discussed. Walstern v Commissioner of Taxation [2003] FCA 1428 referred to.

G. With respect to both fringe benefits liability and income tax deductibility, the Commissioner was precluded from arguing these matters by the Private Binding Rulings in respect of the schemes to which they applied. The conclusion of the Court, in the alternative to the application of s 110, that the discretion under s 109 should not be exercised to quash the committal on these matters is unchanged. [46]-[48]

H. The Applicant will have an opportunity to make submissions on the issue of costs under s 41A before the magistrate. [54], [60]-[62]

I. The previous orders of the Court failed to fulfil the requirements of s 110(2) of the Justices Act 1902 and should be vacated. There was not sufficient the evidence before the magistrate to commit the Applicant on the charge now presented by the Commissioner. The Court should not settle the indictment which is an administrative function of the magistrate. The matter should be remitted under s 110(2)(b). [68]-[69] Kolalich v Director of Public Prosecutions (NSW) (1991) 173 CLR 222 referred to.

G. The Court could make an order in the same terms under s 109(c), on the alternative basis that its discretion under s 109 should not be exercised to quash the order for committal. [71]

Orders Orders of this Court of 3 October 2003 vacated. Leave to appeal granted and appeal allowed. Orders 2, 3, 5 and 6 of Simpson J set aside. Case remitted to the magistrate to make the order of committal according to law. No order as to costs in the proceedings in this Court or before Simpson J.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40219/03

SPIGELMAN CJ HANDLEY JA SANTOW JA

Monday 22 December 2003 Gary Andrew WILLS v Nikytas Nicholas PETROULIAS Judgment 1 SPIGELMAN CJ: This is an application pursuant to Pt 40 r9 of the Supreme Court Rules to set aside or vary the judgment of this Court delivered on 3 October 2003 in Wills v Petroulias [2003] NSWCA 286. This Court allowed the appeal from the judgment of Simpson J, set aside her Honour's orders and dismissed the appeal to the Supreme Court, pursuant to s104 of the Justices Act 1902 ("the Act"), from the decision by a Magistrate to commit the Opponent for trial for an offence under s29D of the Crimes Act 1914 (Cth). Pursuant to a request to the Claimant made on the part of the Opponent, judgment was not entered. 2 Simpson J delivered two judgments in the matter: Petroulias v Wills [2002] NSWSC 1190 and Petroulias v Wills [2003] NSWSC 106. In the first judgment her Honour left open the issue of the orders that ought to be made as a result of her findings. In view of the subsequent judgment of the Federal Court of Australia in Essenbourne Pty Ltd v Commissioner of Taxation [2002] FCA 1577, her Honour determined, in the second judgment, that the appropriate order was to quash the committal order of the Magistrate. For the reasons set out in this Court's earlier judgment at [43]-[47], the Court determined that her Honour erred in her assessment of the effect of the Federal Court decision in Essenbourne. 3 Furthermore, this Court determined that there was evidence before the Magistrate on the basis of which an order of committal could be made. 4 Finally, in the course of considering the application of ss109 and 110 of the Act, the Court made reference to the failure of the Opponent to identify prejudice that he had suffered of a pertinent character. 5 Each of these matters is sought to be contested pursuant to the application under Pt 40 r9. 6 The Opponent identified the grounds on which the application is made to be threefold: "(i) A misunderstanding of the basis upon which Simpson J dealt with the decision of Essenbourne, and of her conclusion in regard to that decision, including the concessions of the parties in respect to the same; (ii) The acceptance, in error, by the Court of Appeal of the existence of evidence before the magistrate and before Simpson J, and also before it, by which the power in s110 of the Justices Act was applied to overcome any error in the decision of the magistrate to commit for trial; (iii) The ruling by the Court of Appeal that the Opponent had not identified prejudice that he might suffer of a pertinent character, when such issue was not argued before the Court of Appeal and was not an issue raised on the Leave Application or Draft Notice of Appeal. 7 In the course of oral submissions a fourth issue arose: whether the Court's orders were in accordance with s110(2) of the Act set out in par [83] of the previous judgment. 8 Simpson J identified errors in the decision of the magistrate as referred to in pars [34] and [35] of this Court's previous judgment. It is sufficient for present purposes to set out the summary of her Honour's views in par [5] of her Honour's supplementary judgment of 3 March 2003: "I took the view that, unless there was evidence that the rulings were at least arguably incorrect, it remained the position that there was no evidence that the Commonwealth had been deprived of any right of any value." 9 For the reasons outlined in pars [63]-[79] of the earlier judgment of this Court, the Court concluded that the element of deprivation, which had been expressed by the Claimant in various terms, including a lost opportunity to litigate, was sufficient for purposes of an offence under s29D of the Crimes Act 1914. 10 The Court further concluded that there was evidence before her Worship which would satisfy the requirements of s41(2) and s41(6) of the Act and that there were sufficient grounds to have authorised an order of committal within s110 of the Act. The second of the two grounds for this application as set out above challenges these findings. (See 6 above.) It is convenient to deal with that matter first.

The Evidence Point 11 I summarised the nature of the evidence before the magistrate in par [78] of the previous judgment: "[78] The element of 'genuineness' was established on the basis of the contrary opinions expressed, the contrary rulings made and the circumstances and manner in which they were made." 12 I had earlier stated, in pars [56] and [58], that there was evidence before the magistrate of the strongly held view, within the ATO, that the fringe benefits tax regime would in fact apply to the schemes the subject of the relevant Private Rulings. Indeed, those views culminated in a formal Public Ruling to that effect. In this regard the evidence was plain, in my opinion, that a particular position was being genuinely asserted. The very existence of the Public Ruling was, I believed, sufficient in this regard. 13 During the course of the argument before this Court I raised the question of evidence with counsel for the Claimant in terms of the formulation of King CJ in The Queen v Kastratovic (1986) 42 SASR 59 at 65. I raised the question with counsel for the Opponent in terms of whether the evidence of "the differences of view in the tax office" was evidence capable of supporting the relevant element. 14 The summary manner in which evidence before the magistrate was placed before Simpson J does not detract in any manner from the force of this conclusion this Court reached. A Schedule of Particulars was tendered before her Honour. That Schedule had been prepared on the issue of dishonesty. However, dishonesty was not in issue. The evidence that was before the magistrate, upon which the Schedule was based, was set out in a column in the Schedule and its effect summarised in another column. That summary, by reference to the body of statements and documents in evidence, established that a particular view was held, indeed strongly held, in the ATO on this matter. That this particular document was prepared for a purpose other than the identification of the element of detriment in the charge of defrauding, does not detract from its utility for purposes of determining whether or not evidence existed capable of satisfying a jury, and upon which there was a reasonable prospect that a jury would convict, with respect to the existence of a 'genuine dispute' or a 'genuine assertion' of a position. 15 The magistrate was conducting an inquiry in accordance with the system referred to, conveniently, as a 'paper committal'. This was not a trial. What was required was the identification of evidence which would satisfy the requirements of the two steps in s41 of the Act and, in the event, the test in s110. The summary of the large body of evidence by means of the Schedule was a convenient way of presenting the actual evidence before the magistrate to Simpson J. As Mr Richter QC, who originally appeared for the Opponent, told this Court: "the exhibits at the committal were all tendered notionally". The Schedule summarised many of those exhibits. 16 In his written submissions on the application presently before the Court, Mr Richter submitted - as adopted by Mr N Clelland SC who appeared on the hearing of the application - that any concession that had been made was limited to the issue of dishonesty. 17 A committal is not conducted in this narrow technical manner. The evidence placed before the magistrate has such force and effect as it is entitled to. A person accused of an offence cannot crimp the inquiry by seeking to artificially narrow its focus through concessions. The documents, including the witness statements, speak for themselves. They establish that there was evidence before the magistrate entitling her to commit (as this Court found in par [79] of its previous judgment), because the evidence manifested a 'genuine dispute' or a 'genuine assertion' of position on the issue of the applicability of the fringe benefits tax. 18 Mr Clelland submitted that the particulars could not be used as evidence of a "genuine dispute" without knowing the full range of facts before the magistrate. This submission should be rejected. The summary of the evidence in the form of the particulars, and in that part of the opening before the magistrate before this Court relied upon in the same manner, indicate a 'dispute' or 'assertion' of the relevant character. No submission was, or is made, that the summaries of the evidence were in any way inaccurate. The summaries are sufficient with respect to the fringe benefits tax issue. 19 The position is otherwise with respect to the deductibility issue. In par [60] of the previous judgment I referred to a particular relating to deductibility. There were other references to this issue in the particulars which indicated that the matter was alive. However, I accept the submission of Mr Clelland that none of these references was such as to rise to the level of a 'genuine dispute' or 'genuine assertion' of a position. Insofar as this Court's judgment did suggest that there was such material before the magistrate, it went too far. 20 This conclusion does not, however, affect the ultimate view the Court reached in pars [78], [79] and [90] of its previous judgment that s41(2) and (6) and s110 of the Act were satisfied on the evidence before the magistrate relating to the fringe benefits tax issue. By force of s110(1) the Supreme Court was not able to quash or set aside the order of committal, subject to s110(2) which I will consider below.

The Essenbourne Issue 21 I turn to the matter raised in par 6 above, the submission that this Court proceeded on a misunderstanding of the way in which her Honour dealt with the decision in Essenbourne. That part of the Court's reasoning was set out in pars [43]-[47] of the previous judgment, after I had set out her Honour's use of that decision. 22 It was in the course of determining that her Honour erred in the exercise of the discretion as to what orders should be made under s109, that this Court relied, as one basis for doing so, on her Honour's erroneous analysis of Essenbourne (see at [85]-[86]). On the other basis so identified, and affirmed above, the Court was also entitled to re-exercise the discretion. (See pars [86] and [90] of the previous judgment.) 23 If s110 operates in accordance with its terms, as I have concluded above, then this Court's reasoning with respect to Essenbourne becomes an alternative basis on which to allow the appeal from Simpson J. (Compare [90]-[91] of the previous judgment.) Even if s110 was not satisfied, the issue would remain as to how the Supreme Court should exercise the discretion under s109. This was the issue addressed by Simpson J in her second judgment where, as set out in pars [36]-[44] of this Court's prior judgment, Essenbourne proved decisive. 24 It does appear that her Honour was misled by the Appellant's submissions in this respect. 25 In par [46] of this Court's previous judgment, I said: [46] Paragraph 1 of the Private Binding Ruling, tendered as typical of the rulings with which the present proceedings are concerned, as quoted above, is a ruling to the effect that the employer is entitled to a deduction for the amount contributed to the unit trust. On the agreed basis that the rulings in these proceedings were not materially different, Essenbourne establishes that this paragraph was incorrect." 26 In her judgment of 3 March 2003, Simpson J, in a passage the conclusion of which I quoted at [38] of the previous decision, said: "[6] … Bearing in mind the rather scanty information available to me concerning the factual basis of the private rulings and the s29D charge, it is not possible for me to make an informed or independent assessment of the extent to which the arrangements the subject of the Essenbourne judgment are comparable with those of which the applicant was the proponent. However, senior counsel for the respondent agreed that the arrangements were essentially the same, and made no attempt to identify any material differences between the two schemes. I propose, therefore, to accept that the decision in Essenbourne amounts to a decision that the arrangements the subject of the applicant's scheme are effective legitimately to avoid the incidence of taxation, and that a taxpayer who implemented arrangements the subject of the Private Rulings would, on the authority of Essenbourne not be liable to taxation." 27 The Opponent did not dispute that her Honour proceeded on the basis that Essenbourne found against the Commissioner on all relevant points. However, he submitted that this was based on a concession to that effect by the Claimant. He submitted that that concession, and the Opponent's own position before Simpson J, proceeded on the basis that the Private Ruling was not determinative on the issue of deductibility in that it could turn on the facts of a particular case. 28 In his original submissions to this Court, Mr P Hastings QC, who appeared in this Court for the Claimant on both occasions, identified the central error in her Honour's reasoning about the judgment of Essenbourne in terms of the proposition that, with respect to the issue of tax deductibility, Essenbourne in fact represented a victory for the Commissioner and not for the taxpayer. This was in the forefront of the Claimant's submissions in this Court. 29 What I was not aware of at the time of writing the earlier judgment was that this error was contributed to in substantial measure by counsel for the Claimant. It does appear that in his submissions to Simpson J, a distinction was drawn between the reasoning in Essenbourne on the deductibility issue and the fringe benefits tax issue. However, counsel for the Opponent informed her Honour that the decision was a victory for the taxpayer on the issue of deductibility, contrary to the actual reasoning of Kiefel J. 30 The following transpired before Simpson J (emphasis added): "HER HONOUR: … What I am concerned about is the rather diffuse way that the material has been put before me andd that is the reason I am trying to pin you down on what you accept that Essenbourne really decides these other cases, given that Essenbourne is the last word and is not being appealed. If it were a decision of the High Court, for example, the only question would be whether the factual substratum of the Petroulias schemes was the same as the factual substratum of the Essenbourne scheme. HASTINGS: I think that is undoubtedly correct. If there was a High Court decision in principle the decision would affect the Petroulias schemes. HER HONOUR: The decision would decide the Petroulias schemes. That is really what I'm trying to pin you down on. HASTINGS: On those issues, yes. HER HONOUR: And I'm doing that because the evidence does not enable me to make that comparison myself, at least I don't think it does. HASTINGS: On the fringe benefits tax issue-- HER HONOUR: It is only fringe benefits tax, isn't it? There are no other taxes-- HASTINGS: There is. If you read Essenbourne about deductibility under the old s 51. HER HONOUR: On the Petroulias charge? HASTINGS: Yes. HER HONOUR: That is not part of the fraud that you allege. The fraud that you allege is directed only to fringe benefits tax. HASTINGS: No, because the rulings were dealt with two parts to the tax legislation. One was the initial question about whether the expenditure by the employer was deductible as a business expense, and your Honour has the rulings. You will see there was quite a bit of time spent on that issue of whether under the old s 51, I think it is now something else, the expenditure by way of the consideration by the employer was deductible as a business expense in the first place. Then, on the assumption that it was, there was then the second issue as to whether, if it was for the benefit of an associate under the legislation it attracted fringe benefits tax. So the fringe benefits tax is only half the legal argument. The tax benefits of the scheme, because if you didn't get the deduction in the first place there was no point in going into the scheme as an employer. HER HONOUR: Has that part been decided by Essenbourne? HASTINGS: That was canvassed as well and ruled in favour of the taxpayers. But again that emphasises why the facts of each case are not factually always the same. HER HONOUR: The Commissioner does not lose the right to, we have been through this, challenge on the basis of the facts. HASTINGS: He does in a sense, your Honour. If there is no litigation because the person has a ruling and he puts his assessment in and gets assessed as per the ruling, that is the end of the matter. HER HONOUR: You never lose the right. HASTINGS: If the matter goes to court because the taxpayers-- HER HONOUR: Then all the facts are ventilated. But you never lose the right to litigate the facts. I know you say from a practical point of view you don't do it, but you don't lose the right to litigate the facts. Once the ruling is given, it is given on the assumption that the scheme is put into effect in the way it is described in the application for a ruling. At any time the Commissioner can come back to one of these schemes and say: This ruling is not binding because your scheme is not in conformity with what you propose, and it doesn't matter whether he doesn't do it. He can do it. HASTINGS: That's right. HER HONOUR: The fraud or the tax that you say may be avoided is the same in each case as that in Essenbourne, each of which was decided against you. HASTINGS: I think in general that is correct " 31 The emphasis in this passage indicates that Mr Hastings referred to the deductibility issue in Essenbourne as having been "ruled in favour of the taxpayers", followed by his final acceptance of her Honour's proposition that each of the issues had been "decided against you". 32 Earlier, Mr Richter had informed her Honour of the effect of Essenbourne in more accurate terms: "The significance of that judgment, apart from the fact that the Commissioner did not appeal it, is this: it is a clear ruling that fringe benefits tax does not apply to these arrangements. It is also a clear ruling that in that particular case deductibility was litigated, as it always can be, as Pt 4A, and it was ruled that the deduction was not allowable for various reasons." [Emphasis added.] 33 It does appear that her Honour proceeded on the basis that the Commissioner had lost the deductibility issue in Essenbourne, but this was based on an erroneous submission by the Claimant. In these circumstances, out of fairness to the Opponent and to Simpson J, I withdraw pars [43]-[47] of my previous judgment. 34 This still leaves the position, however, that her Honour approached the exercise of the discretion on the erroneous basis that the Commissioner had lost the deductibility issue in Essenbourne. She reached the conclusion as set out above at [26]. With respect to deductibility, however, Essenbourne did not in fact justify such a conclusion. 35 The Opponent submits that the Claimant should not be permitted to resile from the position taken before Simpson J. This submission should be rejected. 36 The express acknowledgement that the ruling in Essenbourne on the issue of deductibility was against the Commissioner was in error. This is not, in my opinion, a matter about which it is impermissible for an appellant to take a different position on appeal. This was not a concession on a matter which the court is unable to ascertain for itself, not least because Mr Richter described the situation more accurately. The effect of a judgment is not a matter for concession. Counsel for the Claimant made a mistake about the effect of the judgment and as a result, it appears, led the trial judge into error. However, the error is obvious and pursuing the correct understanding on appeal does not involve any form of prejudice to the Opponent. 37 Alternatively, Mr Hastings maintained the submission before Simpson J that, notwithstanding the settlement of Essenbourne, the Commissioner asserted that his Public Ruling was correct and that such schemes were liable to fringe benefits tax. The Private Rulings, he submitted, prevented the Commissioner contesting Essenbourne in any case to which they applied. As noted in this Court's previous judgment at [56]-[57], the Claimant maintained this position in this Court. Her Honour did not give this submission weight. She treated the reasoning in Essenbourne as determinative. However, the failure to lodge an appeal in that case was explained because the whole proceedings were settled. 38 Accordingly, on either of these grounds, her Honour's exercise of the s109 discretion miscarried and it fell to this Court to re-exercise it. I reiterate that this occurs in the alternative to the conclusion I have reached based on s110. 39 The judgment in Essenbourne was not before the magistrate and, accordingly, was not relevant to the application of the s110 constraint. It was, however, relevant to the exercise of the s109 direction, assuming away the s110 constraint. Indeed, its use in this way proved determinative before Simpson J. 40 It was the Opponent who presented Essenbourne as a matter to which her Honour should have regard on the exercise of the discretion. This Court is also entitled to do so. As I said in par [84] of the previous judgment, no submission to the contrary was made. I do not resile from the conclusion that Essenbourne indicates that there was an arguable case on the fringe benefits tax issue. I also concluded at [84] that Essenbourne establishes that the deductibility issue was "strongly arguable". In view of the subsequent submissions, I would withdraw the word "strongly" but reaffirm the basic proposition. 41 Mr Clelland contends, as Mr Richter contended before Simpson J, that the issue of deductibility was always open for determination by a court on the evidence in a particular case. The submissions in this Court focus on that part of the exchange with Simpson J quoted above, which refers back to earlier consideration that issues of deductibility may depend on the facts of the particular case. It was submitted that par [1] of the Private Ruling, tendered in the proceedings as representative of other rulings, has a conditional quality about it. The application of the ruling depends upon the facts of a particular case. 42 I do not regard the submissions of Mr Hastings before Simpson J, with respect to the effect of different factual situations, as constituting a proposition from which he sought to resile on the appeal. It can be readily accepted that a claim for deductibility may be rejected on different grounds depending on the facts. 43 For example, one of the matters that may affect the outcome of a claim for deductibility in a particular case is identified in par [3] of the Private Ruling, quoted in par [21] of this Court's previous decision, requiring any contributions to be 'reasonable and not excessive'. This and other such matters can vary from case to case. 44 The written submissions of the Opponent referred to pars [24]-[29] and [33] of Essenbourne which were described as "findings as to the subjective intent of the taxpayer". In those paragraphs Kiefel J was concerned with subjective elements on the issue of deductibility. These matters do turn on facts as the Opponent submitted. Mr Clelland referred the Court to the subsequent confirmation of the factual basis of this part of the decision in Essenbourne by Hill J in Walstern v Commissioner of Taxation [2003] FCA 1428 at [70]-[72]. 45 However, that was not the only basis on which her Honour found for the Commissioner on deductibility. In pars [34]-[36] of her judgment, Kiefel J went on to deal with an alternative contention on the part of the Commissioner that the payment was of a capital nature. Her Honour concluded that the expenditure was of a capital nature. Hill J in Walstern also noted that this raised different considerations. (See at [79]-[80].) Factual issues may still arise. Mr Clelland drew particular attention to the possibility of annual contributions under the PIC scheme in contrast with the one-off nature of payments in Essenbourne and Walstern. 46 The proposition that the outgoing was of a capital nature remains distinctly arguable under the PIC scheme. It is a matter which par [1] of the Private Ruling could prevent the Commissioner contesting. The deductibility question is generally a question of mixed fact and law. The rulings determined that the facts submitted and assumed in the application for a ruling entitled the taxpayer, as a matter of law, to the tax treatment set out in the ruling. The Commissioner was deprived by the ruling of the opportunity to argue otherwise. 47 Accordingly, the Commissioner in the schemes presently before the Court, has been deprived of the opportunity of arguing that a scheme complying with the application - which was handed up to this Court - for the purpose of both 'retaining key employees' and 'increasing employee productivity and profitability' with the possibility of annual contributions, was expenditure of a capital nature. Accordingly, par [1] of the Ruling was capable of having an impact constituting the element of defrauding. 48 I would reach no different conclusion to that of the first judgment. Even if s110 did not require the Court to do so, the discretion under s109 should not be exercised to quash the order for committal. 49 The issues not resolved on the evidence before the magistrate, e.g. the arguability of the fringe benefits tax issue or both arguability and 'genuine dispute' or 'genuine assertion of a position' on deductibility are real issues which may still arise. They could arise on a reopening of the committal before the magistrate or on a Basha inquiry before a trial. These are choices which the Crown has yet to make. Important public interests are involved in these prosecutions. They should not be compromised by the exercise of a discretion to quash the order for committal in the circumstances of the proceedings as a whole.

The Prejudice Point 50 The final issue raised by the Opponent in this application is under the heading of "Prejudice" (see 6 above). The submission to this Court spoke in terms of the exercise of "a discretion in the application of s110 of the Justices Act 1902". The reference to discretion in the relevant paragraphs of this Court's previous judgment, such as [84]-[85] and [91], relates to the discretion in s109 of the Justices Act as to what order ought be made. Section 110 operates as a constraint on the exercise of that discretion. 51 The Opponent submits that s110 was not available to the Court of Appeal. Plainly it was a relevant section which, in terms, prevents the Court quashing or setting aside an order in certain circumstances. One submission now made is that ss41(2) and 41(6) require the learned magistrate to comply with the rules of natural justice, including a requirement to notify the defendant of consideration being given by the magistrate, when evaluating evidence at the s41(2) stage, of committing the defendant for trial on an indictable offence different from the specific information with which he was charged. The Opponent submitted, in written submissions, that it is not appropriate to apply s110 to the decision a magistrate makes under s41(6), because this overlooks the effect of the failure to have duly complied with s41(2). 52 This is a new submission. It was not made before Simpson J, or in this Court at the first hearing. I would not grant leave to raise any such issue at this stage. In any event, I cannot see any reason why the clear words of s110 should be read down. Furthermore, the obligation to afford natural justice with respect to the application of s110 arises in this Court, when the Court is considering whether to make an order to quash or set aside the order for committal under s109. 53 I note that in the outline of submissions filed on behalf of the Opponent on this application there is a reference under a subheading "The Charge as Laid" to a proposition that the Opponent has never had "procedural fairness with respect to any alternative formulation". This submission was not developed in oral submissions and it is not clear what is being asserted. 54 An alternative formulation to the original charge was put before Simpson J. No issue of procedural fairness was raised before Simpson J or in this Court on the first occasion. It cannot be raised now without leave. Leave should be refused. In any event, there was no denial of procedural fairness as the issues were raised. All matters considered in this Court's prior judgment were agitated in this Court. 55 The discussion in this Court's previous judgment on the issue of prejudice in pars [87]-[89] occurred in the context of the Court's exercise of the discretion under s109, it having been found that her Honour's exercise of the discretion had miscarried. 56 The first proposition on the issue of prejudice now advanced for the Opponent is that, when this Court raised with counsel for the Opponent the facts of R v Taylor (1997) 6 Tas R 310, it was done for a particular purpose expressed in the written submissions as: "Whether late amendment of the charge in Taylor (during trial) indicated that the substance of the charge was not material until the trial process". This is not an accurate characterisation of the way in which the issue was raised. Handley JA expressly said: "If that can be done in the middle of a trial, why should we interfere with a committal?" This question went directly to the issue of discretion as to what order ought be made. 57 The second proposition advanced on the issue of prejudice by the Opponent is that, if he had been committed for trial by the magistrate on the principle of law enunciated in this Court's judgment, instead of the charge on which he was in fact committed for trial, the Opponent would have been entitled to apply for costs pursuant to the provisions of s41A(1)(b) of the Justices Act 1902. He identifies his inability to do this as a relevant form of prejudice. 58 Sections 41A(1), (2) and (2A) provide: "41A(1) The Justice or Justices: (a) when making an order discharging a defendant as to the information then under inquiry, or (b) when committing a defendant for trial for an indictable offence which is not identical in all respects to the indictable offence with which the defendant was charged, may, in and by an order made by the Justice or Justices (which, in the circumstances referred to in paragraph (a), may be the same order as the order discharging the defendant) adjudge that the informant shall pay to the clerk of the court to be paid to the defendant (or, if the informant so elects, directly to the defendant) such costs as to the Justice or Justices seem just and reasonable. (2) The amount so allowed for costs shall in all cases be specified in the order requiring payment. (2A) Costs are not to be awarded in favour of a defendant unless the Justice or Justices is or are satisfied as to any of the following: (a) that the investigation into the alleged offence was conducted in an unreasonable or improper manner, (b) that the proceedings were initiated without reasonable cause or in bad faith or were conducted by the prosecution in a improper manner, (c) that the prosecution unreasonably failed to investigate (or to investigate properly) any relevant matter of which it was aware or ought reasonably to have been aware and which suggested either that the defendant might not be guilty or that, for any other reason, the proceedings should not have been brought, (d) that, because of other exceptional circumstances relating to the conduct of the proceedings by the prosecution, it is just and reasonable to award costs." 59 The order for costs made by Simpson J, which this Court set aside, was made pursuant to s76 of the Supreme Court Act 1970. Her Honour had held that the exercise of the power under that section was not confined in the same way as the power is confined by s41A(2A) of the Justices Act. The Claimant made submissions to this Court to the effect that her Honour's order for costs should be set aside in any event, on the basis that her Honour did not exercise the discretion under s76 bearing in mind the restraints on the magistrate imposed by s41A(2A). In the light of this Court's earlier decision, this issue did not need to be determined. 60 No submission was made to this Court, on the part of the Opponent, directed to the situation with respect to costs before the magistrate if the appeal from Simpson J were allowed. The Claimant has submitted that the Opponent should not now be entitled to raise new arguments in this regard. I would not shut the Opponent out for that reason. The Claimant suffers no prejudice and, in other respects, has had the benefit of raising issues that were not agitated before the magistrate or Simpson J. Furthermore, for reasons I will give below, the matter has to go back to the magistrate for the formulation of a charge. 61 There is no doubt that the basis of this Court's reasoning differs from the prosecution case advanced before the magistrate. Indeed, this Court upheld the decision of Simpson J that there was no evidence to support the specific charge before the magistrate. The magistrate will now amend the order for committal pursuant to s110(2)(b). 62 On the assumption, but without deciding, that s41A(1)(b) will be applicable to this situation; the Opponent will have an opportunity to persuade the magistrate that one of the circumstances specified in s41A(2A) applies.

The Orders 63 During the course of his submissions on prejudice Mr Clelland referred to prejudice arising from the fact that the Opponent was to be committed pursuant to an order referring to a charge which is not the charge that will be pressed. He referred to the observations in Kolalich v Director of Public Prosecutions (NSW) (1991) 173 CLR 222 at 226-227 that it was contrary to natural justice that a person could be committed without knowing the offence for which they are committed. The Court was informed that the Crown had not at that point formulated a new charge. 64 These submissions focused the Court's attention on the terms of s110(2). The orders previously made by the Court had the effect of reinstating her Worship's original order for committal. This Court had upheld Simpson J's conclusion that there was no evidence to support the original charge. It went on, however, to hold, unlike Simpson J, that there were sufficient grounds before the magistrate to authorise an order for committal free from the error under s110(1). In such a case this Court had either to amend the order under s110(2)(a) or to remit the case to the magistrate to make the order authorised by law and amend the order accordingly under s110(2)(b). The previous orders of the Court did not do either. Accordingly, those orders should be vacated. 65 The Court asked Mr Hastings to formulate a new charge so that the Court could determine whether it should act under s110(2)(a). The charge submitted was: "THAT Nikytas Nicholas Petroulias between about 1 September 1997 and 27 February 1999 did defraud the Commonwealth, namely the Australian Taxation Office, in that while an officer of the Australian Taxation Office, he did by dishonest means cause Private Binding Rulings and Advance Opinions to issue to taxpayers, thereby depriving the Commissioner of Taxation of the opportunity of recovering tax contrary to the Rulings and Opinions." 66 Mr Clelland submitted that this charge repeated the vice found in the original charge before the magistrate. I reject that submission. The use of the word "opportunity" gets across the idea of imperilment or risk or prejudice, without asserting an actual loss of revenue. 67 The charge as submitted is not however limited to the risk/imperilment/prejudice identified in pars [63]-[78] of this Court's previous judgment. It is not materially different from the alternative substituted before Simpson J, i.e. "to endeavour to avoid tax". This Court upheld Simpson J's conclusion that a charge of that character required evidence that the Private Rulings were at least arguably wrong. (See at [55], [59] and [62].) The only material before this Court to suggest that it is arguable is the judgment in Essenbourne. There was nothing before the magistrate. 68 The Court should only exercise the power under s110(2)(a) when it is satisfied that an amendment to the order for committal is clearly justified on the basis of the "sufficient grounds" it has identified pursuant to s110(1). I am not so satisfied. 69 As the Court stated at [48] of the previous judgment, the Court should not settle the indictment. That is not a judicial function. A magistrate conducting an administrative inquiry is, however, empowered and obliged to do so. This Court should remit the matter under s110(2)(b). 70 As this Court concluded in the first judgment and, for the above reasons, has affirmed in this judgment, the appeal from Simpson J should be allowed even if s110 does not operate, that is, on the basis of the re-exercise of the s109 discretion, even if unconstrained by s110. On that basis, s110(2) does not operate in terms. 71 In my opinion, the court would be able to make an equivalent order to s110(2)(b) under s109(c). Such an order would not fall within the precise terms of s109(d) which refers to an order remitting the matter to the magistrate. However, the existence of s109(d) should not be used to cut down the broad terms of s109(c) empowering the Court to make "such order as it thinks fit". If necessary, an order equivalent to an order under s110(2)(b) could be crafted to carry into effect, in the same way, this Court's alternative basis for allowing the appeal. 72 The previous orders of this Court had the effect that there was no order as to costs before Simpson J. No complaint is made about that aspect of the Court's orders. Both parties had succeeded on issues raised before Simpson J. I had previously proposed that the appeal to this Court be allowed with costs. The Opponent has had a partial success in this further hearing, including on matters concerning the Crown's conduct before Simpson J. In all the circumstances there should be no order as to the costs of the appeal. 73 The orders I propose are: Vacate the orders of this Court of 3 October 2003 and substitute the following:

3 Orders 2, 3, 5 and 6 of 3 March 2003 are set aside.

4 Remit the case to the magistrate to make the order of committal authorised by law and to amend the order accordingly.

5 No order as to costs of the proceedings before Simpson J or in this Court. 74 HANDLEY JA: I agree with Spigelman CJ. 75 SANTOW JA: I agree with Spigelman CJ. **********

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Crimes Act 1914(Cth)s 29D

CITATION : WILLS v PETROULIAS [2003] NSWCA 390 HEARING DATE(S) : 16 December 2003 JUDGMENT DATE : 22 December 2003

CATCHWORDS : CRIMINAL LAW - Defrauding the Commonwealth - Element of loss - Whether evidence thereof - CRIMINAL PROCEDURE - Appeal from committal - Where evidence presented in summary form - Exercise of discretion on appeal - Whether charge should be settled by magistrate Crimes Act 1914 (Cth) s 29D LEGISLATION CITED : Justices Act 1902 ss 41, 41A, 104, 109, 110 Supreme Court Act 1970 s 76 Essenbourne Pty Ltd v Commissioner of Taxation [2002] FCA 1577 Kolalich v Director of Public Prosecutions (NSW) (1991) 173 CLR 222 Petroulias v Wills [2002] NSWSC 1190 CASES CITED : Petroulias v Wills [2003] NSWSC 106 R v Taylor (1997) 6 Tas R 310 The Queen v Kastratovic (1986) 42 SASR 59 Walstern v Commissioner of Taxation [2003] FCA 1428 Wills v Petroulias [2003] NSWCA 286 Nikytas Nicholas Petroulias PARTIES : (Applicant/Opponent) Gary Andrew Wills (Respondent/Claimant) FILE NUMBER(S) : CA 40219/03 COUNSEL : N Clelland SC (Applicant/Opponent) P Hastings QC (Respondent/Claimant) SOLICITORS : Coadys (Applicant/Opponent) Commonwealth Director of Public Prosecutions (Respondent/Claimant)

FACTS The Opponent in the appeal in which judgment was given by the Court of Appeal on 3 October 2003 ( Wills v Petroulias [2003] NSWCA 286) applied pursuant to Pt 40 r 9 of the Supreme Court Rules 1970 to have that judgment set aside or varied. The main appeal (pursuant to s 104 of the Justices Act 1902) concerned the committal of the Opponent (Petroulias) on a charge of defrauding the Commonwealth ( Crimes Act 1914 (Cth), s 29D). Petroulias was accused that when he was a First Assistant Tax Commissioner, he procured the issue of Private Binding Rulings in favour of certain employee productivity incentive schemes in the promotion of which he had an interest.

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