Bartlett v The Queen [No 2] - [2013] WASC 83

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CRIMINAL

CITATION: BARTLETT -v- THE QUEEN [No 2] [2013] WASC 83

CORAM: EM HEENAN J

HEARD: 17-18 DECEMBER 2012 & 4 FEBRUARY 2013

DELIVERED : 15 MARCH 2013

FILE NO/S: INS 107 of 2012

BETWEEN: PETER MERVYN BARTLETT
First Applicant
RONALD GEORGE SAYERS
Second Applicant
DEBORAH JEANNE GRACE
Third Applicant
AND
THE QUEEN
Respondent

Catchwords:

Criminal law - Evidence - Admissibility - Relevance - Conspiracy - Alleged similar facts or tendency evidence - Evidence Act 1906 (WA) s 31A - Relevance to motive and intention - General factual background - Prejudice

Legislation:

Crimes Act 1914 (Cth)
Criminal Procedure Act 2004 (WA)
Income Tax Assessment Act 1936 (WA)

Result:

Evidence admissible

Category: B

Representation:

Counsel:

First Applicant     :     Mr R Richter QC, Mr D A Staehli SC & Mr M C Boyce
Second Applicant     :     Mr R Richter QC, Mr A E Eyers & Mr M C Boyce
Third Applicant     :     Mr I D Hill QC & Ms N K Kaddeche
Respondent:     Mr P Roberts SC & Mr A L Troy
First intervener by leave     :     Mr M J Ritter SC (responding to summons to produce documents)
Second intervener by leave   :     Ms K A Vernon (responding to summons to produce documents)

Solicitors:

First Applicant     :     Clifford Chance
Second Applicant     :     Clifford Chance
Third Applicant     :     Jackson McDonald
Respondent:     Director of Public Prosecutions (Cth)
First intervener by leave     :     Australian Crime Commission
Second intervener by leave   :     Clifford Chance

Case(s) referred to in judgment(s):

Attorney‑General v Hitchcock (1847) 1 Ex 91; (1847) 154 ER 38
Bartlett v The Queen [2012] WASC 503
Commissioner of Taxation v Hart [2004] HCA 26; (2004) 217 CLR 216
Federal Commissioner of Taxation v Peabody [1994] HCA 43; (1994) 181 CLR 359
Federal Commissioner of Taxation v Spotless Services Ltd [1996] HCA 34; (1996) 186 CLR 404
Narkle v The Queen [2001] WASCA 31; (2001) 23 WAR 468
Nicholls v The Queen [2005] HCA 1; (2005) 219 CLR 196
R v Funderburk [1990] 1 WLR 587; [1990] 2 All ER 482
R v Seller & McCarthy [2012] NSWSC 934
R v Seller; R v McCarthy [2013] NSWCCA 42
Smith v The Queen [2001] HCA 50; (2001) 206 CLR 650

EM HEENAN J: This directions hearing has addressed applications to set aside certain summonses to produce documents, other incidental directions and, more significantly, applications for rulings upon objections to the admissibility of certain evidence proposed to be led at trial by the prosecution.
Before coming to those less contentious matters it is necessary to observe that all these matters were dealt with after my decision in Bartlett v The Queen [2012] WASC 503 had been given on 20 December 2012, by which a temporary but partial stay of these prosecutions was ordered pending the delivery of the decision of the New South Wales Court of Criminal Appeal on the appeal to that court from the decision in R v Seller & McCarthy [2012] NSWSC 934 or until further order. The decision of the New South Wales court on that appeal had not been delivered at the time of this hearing but the disposition of the matters raised by the various parties at these hearings is not affected by that temporary or partial stay order. The decision in that appeal has since been given on 1 March 2013: R v Seller; R v McCarthy [2013] NSWCCA 42.
It was the wish of all the parties, and I am satisfied that it was in the interests of efficiency and dispatch, that these procedural and evidential issues should be dealt with, as far as it was possible to do so, in the time available at present in order to avoid the necessity to do so later should it emerge that the order staying the prosecutions should ultimately be discharged.
Except for the application by the Australian Crime Commission (ACC) to set aside certain summonses issued to it by the first and second applicants for the production of documents in respect of which claims for privilege and/or public interest immunity were being advanced and in respect of which the first and second applicants pressed for it to be dealt with immediately, no party or applicant submitted that any other approach should be taken.

Applications to set aside summonses

The Crown in the right of the Commonwealth has issued certain summonses to Messrs Clifford Chance, the firm of solicitors acting for the first and second applicants. These summonses seek the production of specified documents but the solicitors have asked for further time to complete the investigations and searches which are necessary to consider their response to the summons. Counsel for the Commonwealth Director of Public Prosecutions (CDPP) agreed to this request and, accordingly the time for compliance with that summons dated 17 January 2013 was extended to 10 o'clock on 18 February 2013.
As already noted, the first and second applicants have issued summonses to the ACC seeking the production of documents which those applicants consider may be material in revealing the nature and extent of the use, if any, made by the CDPP or other prosecuting authorities of information derived from the first or second applicants as a result of their compulsory examinations under s 30 of the Australian Crime Commission Act2002 (Cth) (the ACC Act). For the details of these examinations see Bartlett v The Queen. These materials were submitted to be relevant by the first and second applicants if it becomes necessary for the applicants to establish that they have suffered, or will suffer, prejudice of a kind which would justify the grant of permanent stays of the prosecution on common law principles such as referred to in [144] of my reasons in Bartlett v The Queen. Counsel for Messrs Bartlett and Sayers submitted that convenience and practicability favoured the immediate determination of the claims of privilege or public interest immunity which have been raised by the ACC in its application to set aside those summonses.
After hearing submissions for the first and second applicants and by the ACC, I declined to deal with the application to set aside those summonses at this point and adjourned them for hearing, if necessary, at a date to be fixed after the decision of the NSW Court of Criminal Appeal in the appeal from R v Seller & McCarthy had been delivered. My reasons for doing so were, briefly, that until the fate of the appeal from the decision in R v Seller & McCarthy became known and a decision is given in the present case on whether or not there should be a permanent stay of these prosecutions on the grounds which led to the partial stay, it will be difficult to identify the criteria by which any remaining undetermined residue of the application for a stay should be determined.
Another reason to defer the application by the first and second applicants for a stay of the prosecutions based on any actual use of the examination product is that may well require a resolution of several outstanding summonses issued to third persons requiring the production of documents to the solicitors for the first and second respondents which have not yet been answered or fully answered ‑ including the summons issued by the CDPP to Clifford Chance. As the returns to those summonses have not yet been completed, the applicants for the stay are not yet in a position to identify all evidence upon which they intend to rely for the stay applications. This makes it impractical to attempt to do so at the moment.
It does not seem to be an efficient use of the court's time or efforts, nor of the resources of the various parties, to attempt to assess the relevance of the materials over which there are contested claims for privilege, public interest immunity, relevance or other issues at this point while the hallmark criteria remain uncertain. I considered that it would be more efficient and a better use of time if these matters were left for determination after the decision in the appeal in Seller & McCarthy or the decision of the High Court of Australian in X7 v Australian Crime Commission, whichever might be delivered first. It is for this reason that the hearing of those applications was adjourned to a date to be fixed.

Criminal Procedure Act 2004 s 98(2) application by Ms Grace

By an application dated 15 October 2012 the third applicant, Deborah Grace, applied pursuant to s 98(2)(a) of the Criminal Procedure Act 2004 (WA) for an order that the prosecution shall not lead evidence from any prosecution witness concerning any meeting held on 29 June 2003. Written submissions were filed in relation to that application and it was dealt with by further oral submissions on 17 and 18 December 2012. In the course of those submissions, counsel for the CDPP announced that the prosecution would not seek to adduce any such evidence against the third applicant, Mrs Grace, and in view of that stated position her counsel did not press for any formal order or ruling on the application. It can be taken, at least unless and until any different indication in this respect is given by the CDPP and ruled upon by the court, that such evidence shall not be adduced at the trial against the third accused, Ms Grace.

CPA s 98 applications by Messrs Bartlett and Sayers

By application dated 15 October 2012, the solicitors for the first and second applicants applied for rulings to be made by the court pursuant to s 98 of the Criminal Procedure Act that the following evidence be excluded at the trial of this prosecution:
(a)any evidence led in relation to the organisation and establishment of overseas entities for the purpose of asset protection;
(b)any evidence led in relation to the establishment, existence and/or legitimacy of any tax minimisation arrangements entered into by Bartlett and Sayers save for evidence particularised in par (d) below;
(c)any evidence from or concerning Jillian Saint (Saint) including: the circumstances of Saint's employment by Dunn, the intended purposes of her employment, and any legal opinion given by Saint concerning any tax minimisation arrangement devised by Dunn, other than opinions, if any, communicated by her to any of the accused prior to 16 May 2000;
(d)any evidence led in respect of the Appointor arrangement (by deed on 16 May 2000) save for the fact that there existed a tax minimisation arrangement of this name that was entered into by the Barminco Unit Trust (the BUT) in the 2000 ‑ 2001 financial year;
(e)any evidence that concerns the operation and investigations conducted by the ACC known as Operation Wickenby;
(f)evidence concerning the law of taxation and other matters led viva voce from the witnesses Mark Barrington (statement dated 25 September 2012) and Jane Louise Stott (statement dated 9 October 2012).

Hearing on 17 and 18 December 2012

The application for rulings on these points was the subject of extensive evidence and submissions at the hearings on 17 and 18 December 2012 but on that occasion the emphasis shifted to whether or not the prosecution was at liberty to adduce at the trial all or parts of a 'Dossier' which had been prepared by the solicitors for Messrs Bartlett and Sayers and in turn submitted by them to the ACC on 14 September 2005 when the solicitors were advancing submissions that the compulsory examinations of their clients listed by the ACC should be postponed.
A major question in issue in the course of submissions to determine the admissibility of some or all of the Dossier was whether certain passages in the Dossier purporting to summarise the 'Appointor scheme' and the 'Crossline transaction' which had been drafted by Mr Ian Cochrane, a solicitor for the applicants at Clifford Chance, was indeed accurate. This issue also raised a question of whether the Dossier could be regarded as having been delivered to the CDPP with the knowledge and authority of either the first or second applicants. They contended that it was no more than information obtained by Mr Cochrane from a third person, Mr Dunn (one of the alleged conspirators who had not been charged) without the knowledge or approval of either Mr Bartlett or Mr Sayers. This resulted in oral evidence being given by Mr Robert Philp of the ACC as to the circumstances under which the 'Dossier' was delivered, apparently on behalf of Messrs Bartlett and Sayers, by Mr Cochrane. The first and second applicants then filed and read an affidavit of Mr Cochrane relating to this issue and Mr Cochrane was cross‑examined on that affidavit by counsel for the CDPP.
The result of all of this was that counsel for the CDPP agreed to reformulate and to limit the extent to which use could be made at the trial of the Dossier or any part of its contents and foreshadowed that Mr Cochrane may be called as an additional witness for the prosecution at the trial to adduce evidence as contained in his affidavit and as emerging from this cross‑examination.
At the hearing on 17 and 18 December 2012 counsel announced that certain agreements or accommodations had been reached between the CDPP and the solicitors for Messrs Bartlett and Sayers relating to the admissibility of some of the evidence the subject of the headings in the application of 15 October 2012 and that it would, accordingly, be unnecessary for the court to make formal rulings on those aspects of the evidence where such agreement had occurred.
Other than to this extent, the issues raised by this application were not fully developed and it was not possible to do so in the time which had been allotted for that hearing. It was then announced by counsel that negotiations between the legal representatives for the parties would continue in an attempt to resolve outstanding issues. That has obviously since occurred to some extent but not sufficiently to dispose of all issues in contention. These remained for hearing and determination on 4 February 2013.

Evidential issues resolved by agreement

By 4 February 2013 the parties had agreed or acknowledged certain of the controversies over the disputed evidence. These are:
1.Counsel for the CDPP has stated that the only evidence which the prosecution proposes to lead from the witness Jillian Saint is the fact that she never told Bartlett or Sayers that the 'Appointor scheme' was an acceptable tax reduction scheme or likely to be upheld if ever challenged by the Federal Commissioner of Taxation.
For this reason, counsel for the first and second applicants did not press for any ruling on par (c) of their application of 15 October 2012 concerning the circumstances of Jillian Saint's alleged employment by Dunn, the intended purposes of her employment or any legal opinion given by her concerning any tax minimisation arrangement devised by Dunn other than opinions, if any, communicated by her to any of the accused prior to 16 May 2000.
The position, therefore, is that the prosecution is at liberty to call Jillian Saint as a witness at the trial to give evidence restricted to establishing that she did not inform or advise either Bartlett or Sayers that the 'Appointor scheme' would, briefly stated, be or be likely to be successful as a tax minimisation measure.
2.With regard to the objection to any proposed reference to the operation and investigations conducted by the ACC into Operation Wickenby (par (e) of the application) conferral between counsel has produced agreement that the prosecution will not seek to lead any evidence to identify or explain the operation known as Project Wickenby and will not seek to lead evidence about it.
Counsel accept that, inevitably, there is a possibility that there may be occasional or inadvertent reference by a witnesses or some other to the name Operation Wickenby, or some variation of it, and acknowledge, having regard to the all the circumstances, that little can be done to prevent that and that some risk of that occurring is inevitable. However, counsel for the first and second applicants are content with the decision of the prosecution that it will not seek to lead evidence about that operation. Accordingly it is not necessary to deal with par (e) of the application.
3.It is necessary to say that although the application raises objection to any evidence led in respect of the Appointor arrangement except for the fact there existed a tax minimisation arrangements of that name entered into by Barminco Trust in the 2000 ‑ 2001 financial years, that objection was not at first, fully pressed by counsel for the first and second applicants. Nevertheless, their written submissions were not abandoned or withdrawn and counsel did, eventually, maintain objections to parts of this evidence.
4.As for par (f) of the application relating the leading of evidence concerning the law of taxation, that was resolved at the hearing on 17 ‑ 18 December 2012 on the basis that a suitably qualified and experienced officer of the Australian Taxation Office (the ATO) or other person suitably acquainted with the administration of the taxation law could give evidence of the practical operations of the taxation law relating to the obligation to make and file returns; to give full disclosure; of the different forms of taxation to which a tax payer may become liable; and the general practical administration of the handling of returns; investigations; and objections by the ATO together with explanations as to the different forms of tax and the different situations in which they may become payable.
The initial basis of that last objection was that it was not permissible for a witness to give evidence on matters of law as it was the province of any trial judge to direct the jury as to so much of the law as would be sufficient for the jury to understand and determine the case. There is, of course, no doubt about the application and continuity of that principle and, if at any point, there is any issue or controversy as to what the law on any matter is or was, whether it be part of the law of taxation, commercial law or otherwise, it will be for the trial judge to direct the jury in that regard. The court will not receive or allow evidence to be adduced as to the content of any domestic, as opposed to foreign, law.
However, the nature and administration of trusts, whether a unit trust or discretionary trust; what are the powers and functions of a trustee, an Appointor or a beneficiary; or the taxation consequences of a trustee holding income to which no beneficiary is then presently entitled; are all areas which are likely to be touched upon in the evidence in this case. I re‑emphasise that if there is any uncertainly or controversy as to what the law is in relation to any of these or other matters it will be for the trial judge and the judge alone to give directions or make determinations in those respects.
However, to comprehend sufficiently the evidence of the commercial transactions undertaken by parties or entities associated with this case and to appreciate the commercial incentives, or disadvantages which may have explained or motivated them, it may be necessary for the relevant framework to be sketched and the significance of the different entities and their susceptibility to taxation to be explained. I consider that this can be done by a person suitably experienced and qualified in the administration of taxation law but that any such witness will not, of course, be permitted to state what the law is on any controversial question although the commercial consequences of the state of the law may be the subject of evidence and the particular law may need to be identified and explained sufficiently to make evidence of the facts comprehensible.
That left for resolution the objections by the first and second applications set out in pars (a), (b) and (d), which are:
(a)Any evidence led in relation to the organisation and establishment of overseas entities for the purpose of asset protection (what has been termed as a 'Crossline' issue); and
(b)Any evidence led in relation to the establishment and existence and/or legitimacy of tax minimisation arrangements entered into by Bartlett and Sayers other than the Appointor arrangement.
…
(d)any evidence led in respect of the Appointor arrangement save for the facts that there existed a tax minimisation arrangement of this name that was entered into by the Barminco Unit Trust (the 'BUT') in the 2000 ‑ 2001 financial years.
as only these matters upon which rulings were sought.

Details of the evidence to which objection has been made

Although counsel have agreed and this application has proceeded on the basis that the determination of the objections to this evidence should be approached and undertaken on the basis of broad classifications of the evidence concerned, the particular passages in the evidence of various witnesses have been identified and the various statements of the witnesses containing this evidence are before the court. In view of the way the matter was approached, it is unnecessary to do more than simply identify the evidence of various witnesses to which objection was taken by brief references.
Further details of the particular portions of those statements to which objection was taken and copies of the statements redacted in such degree as reflects the present attention of the CDPP to adduce evidence are to be found in a document produced by counsel for use at this hearing entitled 'Pre‑trial Hearing 14 ‑ 16 November 2012 ‑ Witness Statements Relevant To s 98 Application By First And Second Named Accused'.
Accordingly, that evidence can be summarised as follows:
(a)Evidence to be led in relation to the organisation of an establishment of overseas entities for the purpose of asset protection:
(i)statements of Trevor Neil Thomson dated 12 December 2006, 22 December 2008 and 8 June 2009 being portions only;
(ii)Sherryl Bonnie Paternoster:
portion of the statement of 15 September 2006
(iii)Sandra Joy Amaranti‑Smith
portion of the statement of 18 November 2008
(iv)Charles Douglas James Watson
portion of the statement of 14 February 2007.
(b)Evidence to be led in relation to the establishment of any tax minimisation arrangements entered into by Messrs Bartlett and Sayers save for evidence in respect of the existence of the Appointor Arrangement:
(i)the statement of Robert O'Connor QC of 4 October 2007
(ii)the statements of Trevor Neil Thomson of 12 December 2006, 22 December 2008, 8 June 2010 and 23 December 2010
(iii)Charles Douglas James Watson
portion of the statement of 14 February 2007 and 2 December 2010
(c)Evidence to be led in respect of the Appointor Arrangement save for the fact of its existence
(i)the statement of Paul Francis Fletcher of 19 September 2012
(ii)portion of the statement of Agostino Irdi of 22 December 2008
(iii)portion of the statement of Trevor Neil Thomson of 12 December 2006, 22 December 2008, 8 June 2010 and 23 December 2010
(iv)Robert O'Connor QC, statement of 4 October 2007
(v)Michael James Ogden, statement of 20 March 2010
(vi)Paul Gregory Dodds, statement of 15 April 2008 and the document entitled 'Further Evidence To Be Given By Paul Dodds' annexed to a letter from CDPP of 19 September 2010
(vii)Geoffrey Allan Hewitt, portion of the statement of 23 May 2007.

The nature of the prosecution case

In order to deal with these objections which, as the subsequent analysis will reveal, deal largely with questions of relevance, it is necessary to identify the case intended to be advanced by the prosecution in more detail than has previously been outlined.

The 'False Interest' scheme

The allegation in the indictment is that between about 15 August 2002 and about 17 July 2004 at Perth and elsewhere Bartlett, Sayers and Grace did conspire with each other and with Gregory John Dunn and Trevor Neil Thomson with the intention of dishonestly causing a loss to a Commonwealth entity contrary to s 155.4(3) of the Criminal Code (Cth). The intended loss to be caused to the Commonwealth is said to be the non‑payment of income tax on the taxable income of the Barminco Unit Trust (BUT) for the financial year ending 30 June 1999 which was represented in income tax returns as having been distributed equally to the P M Bartlett Family Trust and the R G Sayers Family Trust. The manner in which the dishonest loss was to be caused to a Commonwealth entity was by a plan, involving false resolutions and false minutes to record fraudulent transactions purporting to allot special units in the BUT to the two family trusts by backdated documentation showing that the allotment of those units had taken place during the 1999 financial year. The effect of this, so it was intended, according to the prosecution, was that although the BUT profits for the financial year ended 30 June 1999 would be shown to have been distributed equally between the Bartlett Family Trust and the Sayers Family Trust, each of those two trusts would have deductible expenses which would substantially, if not entirely, offset that income and so remove or diminish any liability for those two trusts or their beneficiaries to pay income tax on their distributions of the BUT profit for that financial year.
These alleged false transactions all occurred in or about September 2002 notwithstanding that they purported to relate to profits and taxation liabilities arising during the financial year ending in June 1999. The reason for this was that due to the complexity of its affairs and related entities, the income tax return for the BUT for the year ended 1999 was not prepared or lodged until late 2002. No allegation by the prosecution of wrongdoing is alleged because of that delay.
Part of the reason for the delay in the finalisation of the BUT taxation return for the year ended 30 June 1999 was a series of accounting complexities involved in identifying the actual net profit of the unit trust for the 1999 tax year. Well before 1999, attempts had been made to estimate that net profit and the amounts available for distribution as part of ongoing financial management which included the estimation of accruing or future taxation liabilities. However, the activities of September 2002 and their preparations were, so the prosecution alleges, caused by the realisation earlier that year by the Barminco accountants and officers that the profit of the BUT for the 1999 tax year was going to be approximately $7.1 million (revised later in 2003 to almost $7.9 million) ‑ much greater than had previously been estimated.
While many businesses might naively celebrate at such apparent good news this was not an entirely welcome discovery by the officers of Barminco or by the first and second applicants. This is because this larger than estimated profit meant that various measures taken before 2002 to reduce or remove the liability for taxation on the income from the BUT for the 1999 year would not be wholly efficacious. This much larger profit would render the beneficiaries to whom it would be distributed liable for income tax which the earlier precautionary measures had been designed to avert.
Worse still, according to the prosecution, from the viewpoint of the officers of the BUT, including the first and second applicants, such a $7.1 million profit for that year was very likely to attract special scrutiny, even closer scrutiny than had hitherto been experienced, by the ATO of the affairs of Barminco, the two applicants and other associated entities. According to the prosecution, this was a particularly ominous prospect for Bartlett and Sayers because it had a very high probability of resulting in close scrutiny by the ATO of the so‑called 'Appointor scheme' which involved a series of measures taken by Barminco, Bartlett, Sellers and others to eliminate, or largely reduce, the taxation liability of the BUT and the Bartlett and Sayers family trusts for income tax for the financial years ending in June 2000 and 2001.
Accordingly, although the alleged false transactions of September 2002, related to taxation liabilities accruing from the financial year ending 30 June 1999 and securing, if they were regarded as genuine and legitimate, a certain degree of tax saving for the 1999 tax year, the financial interests of the applicants Bartlett and Sayers would be affected to a much greater degree if the Appointor scheme were put under close scrutiny by the ATO and disregarded.
This accounts for the contention by the prosecution that the motives of the applicants for becoming involved in the alleged conspiracy and false transactions of September 2002, and the means adopted to implement those transactions, were influenced more by their concerns to protect the Appointor scheme than by a desire for further tax saving for the additional unexpected profits accruing from the 1999 tax year. However, that, too, was a contributing motive or inducement but to a less extent than concerns arising from the potential disregard or disallowance by the ATO of the Appointor scheme.
From this it becomes apparent that the Appointor scheme did not relate to revenues or income of the BUT or of the Sayers or Bartlett Family Trusts derived during the 1999 tax year. In other words, the $7.1 million additional profit which was the subject of the alleged false transactions in September 2002 was not income affected by the Appointor scheme. Nor did the false transactions of September 2002 and the alleged fraudulent attempt to conceal taxable income of the BUT and the Sayers or Bartlett Family Trusts for the 1999 year constitute any part of the design or implementation of the Appointor scheme. It was, so the prosecution acknowledges, distinct from the Appointor scheme and its financial design, implementation and effect.
Here lies the crux of the issues arising on the present applications. The conspiracy is alleged to have been motivated and prompted by concerns then held by Sayers, Bartlett and the other conspirators to protect the Appointor scheme from close examination by the ATO and the possible, or probable, disregard of the Appointor scheme by the ATO which would result in a very large tax liabilities for the 2000 and 2001 revenues of the BUT or of the Sayers and Bartlett Family Trusts.
The case for the prosecution is that Messrs Bartlett and Sayers were closely involved in and familiar with most, if not all, of the details and intricacies of the tax saving measures which had been adopted to minimise liability for tax for the revenues of the BUT and of the Sayers and Bartlett Family Trusts, not just for the 1999 tax year, especially after then for the 2000 and 2001 years when the Appointor scheme was established and operational.
At the material times, from pre‑1999 until well after 2002, Bartlett and Sayers were working in conjunction with the alleged co‑conspirator Dunn, who promoted the use of the various tax minimisation schemes, including the Appointor scheme and the false transactions of September 2002 relating to the 1999 year. On numerous occasions, Dunn arranged for legal and accounting advice, including opinions from tax counsel, to be sought and obtained in respect of various aspects of these and another proposed tax schemes.
The other proposed tax scheme referred to is the 'Underground/Overground' profit making undertaking or plan which was a proposal relating to the 2002 tax year for revenues derived by the BUT and the Sayers and Bartlett Family Trusts. The evidence is that this Underground/Overground scheme was never implemented but it was the subject of an opinion given to the solicitors for Messrs Bartlett and Sayers by a tax counsel, Mr R K O'Connor QC, in late June 2002. That opinion is part of the evidence which the prosecution seeks to adduce at this trial and to which objection is taken by counsel for Messrs Bartlett and Sayers both on the ground of relevance and, alternatively, on the grounds of disproportionate prejudice if it were to be admitted.
Because the Underground/Overground tax scheme and the opinion of tax counsel relating to it does not deal with the 1999 tax year income of the BUT or the Sayers and Bartlett Family Trusts, nor with the Appointor scheme, it is necessary to identify the relevance which the prosecution submits it may have to this prosecution or facts likely to be in issue at the trial. It will be necessary to examine that question more closely later.
For the present it is sufficient to note that the prosecution submits that evidence relating to: the tax minimisation measures adopted by the BUT and by Messrs Bartlett and Sayers for their respective family trusts for the period before and including the 1999 tax year; to the Appointor scheme covering the 2000 and 2001 years; and as advised upon in the O'Connor QC opinion of June 2002 the Underground/Overground tax scheme, is all relevant to show the level of appreciation and sophisticated understanding of each of Messrs Bartlett and Sayers of affairs of the trusts and of the intricacies and vulnerabilities of the tax measures adopted to eliminate or reduce taxation liabilities over the various periods. In turn the prosecution submits that this evidence tends to show that these two accused were willing and comprehending participants in the conspiracy between themselves, Grace, Thomson and Dunn to record those false transactions in an attempt to cause loss to the Commonwealth by diminishing the liabilities of the two family trusts for income tax for the 1999 year.
The challenged evidence is also relied upon to attempt to establish that a desire to protect the Appointor scheme from closer scrutiny was a powerful and influential factor leading them to embark on the conspiracy involving the false transactions. While it is not being alleged that the Appointor scheme was improper, illegal or ineffective for taxation or other purposes, an appreciation of it is necessary to explain why such wealthy and successful businessmen would embark upon such a course of serious fraud as is alleged in the September 2002 false transactions.
It is necessary to state explicitly that the prosecution does not allege that the Appointor scheme, nor the attempt by the fraudulent transactions of September 2002 to shield it from closer examination is part of the conspiracy alleged in the indictment. Nor does the prosecution contend that it was an attempt to cause loss to a Commonwealth entity. Nevertheless it is referred to as the part of the overt acts by Messrs Bartlett and Sayers done in furtherance of the alleged conspiracy.

Background facts

A firm of accountants, Thomson Fisher & Co, provided taxation and accounting services to Dunn, Sayers and Bartlett, as well as to entities and trusts associated with each of them. Thomson, one of the alleged co‑conspirators but not a party to this indictment, was a partner of that firm and was also a director of a number of companies associated with Bartlett. Thomson's firm was responsible for compiling draft income tax returns for the BUT. However, as at the end of the 2002 financial year, no income tax returns for that trust had been lodged since 1998.
In about July 2002 Thomson was confronted by Bartlett and Sayers about the unsatisfactory state of the BUT's financial records and the failure to lodge income tax returns. Arrangements were made for the accused Grace, who was then an employee in Thomson's firm, to be seconded to Barminco to assist in bringing the accounts and income tax returns up to date, with the assistance of a Mr Geoffrey Hewitt, an accountant employed by Dunn. Grace continued as an employee of the firm Thomson Fisher & Co until she later became an employee of Barminco and, finally, as an accountant through her own firm, Cammiade & Co (as it was then known). She resigned from Thomson's firm on 24 September 2002. From about July 2002 Grace's duties included reviewing the income of the BUT from the 1999, 2000 and 2001 financial years and preparing draft income tax returns.
Grace had been briefed by Thomson on the Appointor Arrangement and she understood how it worked. Grace had previously been involved in collating material to obtain legal advice on the scheme prior to its implementation. Grace was given all the original files for the entities and trusts associated with Bartlett and Sayers. She took those with her when she was seconded to Barminco.
In or around September 2002 Grace finalised the review of the accounts of the BUT for the year ended 30 June 1999 and identified Barminco's profit as $7,084,170.
Prior to the implementation of the Appointor Arrangement, Thomson had believed that Barminco had included losses which could have been taken up in Barminco's accounts for 1999, leaving no profit. Dunn and Thomson appreciated that the profit identified by Grace had to be disclosed in the yet to be lodged 1999 income tax return of the BUT, but this created problems. First, the disclosure in BUT's 1999 income tax return of the $7.1 million profit was contrary to what was contained in the audited Barminco 1999 Special Purpose Financial Report. Second, and more importantly, the existence of a $7.1 million profit, part or all of which had not been distributed in accordance with the instructions that had been given to R K O'Connor QC in relation to the Appointor arrangements, created a problem about the accuracy of those instructions.
The income tax returns to be lodged for Paveway Pty Ltd and Verncrest Pty Ltd ‑ the beneficiaries to whom BUT's income was usually distributed ‑ disclosed a nil income for the 1999 year and those companies had since been deregistered. O'Connor QC's opinion was to be relied on to legitimise the Appointor Arrangement with the ATO. If factual assumptions made in that opinion were demonstrably wrong, this would render the opinion useless and would jeopardise the ATO's acceptance of the Appointor Arrangement and any future tax minimisation arrangements. This would have had dire financial consequences for Bartlett and Sayers as well as creating problems for Dunn and Thomson.
In about early September 2002 a meeting was held, at which at least Dunn, Thomson and Grace were present, during which various ways to deal with the implications of the recently discovered profit of the BUT for 1999 were discussed and dismissed as unworkable.
Eventually, Dunn came up with what he considered to be a solution to the problem. The BUT would purport to allot special units to the Bartlett and Sayers Family Trusts, evidenced by back‑dated documentation to show that the allotment had taken place during the 1999 financial year. The special units were to be documented as only part‑paid, with the Bartlett and Sayers Family Trusts incurring liability for interest on the unpaid portion of the price of the allotments. The BUT's 1999 net income would be disclosed in its 1999 income tax return as having been distributed to the Bartlett and Sayers Family Trusts, but the Bartlett and Sayers Family Trusts would claim in their 1999 income tax returns that they had tax deductible expenses, namely interest payments on the unpaid price of the allotments, offsetting the distributions. That would cause all of the BUT's 1999 financial year distributable profit to disappear, on paper at least, thereby removing any consequential income tax liability for anyone arising from this income. This, Dunn believed, would create the least problems for the ATO's acceptance of the Appointor Arrangement and the application of O'Connor QC's opinion.
Dunn's plan required the participation and cooperation of Bartlett and Sayers and also Thomson. It was Bartlett and Sayers (and Thomson) who would have to sign the various back‑dated and other documents needed to evidence and implement the made‑up transactions. In September 2002, Dunn gave Thomson handwritten draft resolutions, dated 14 and 16 June 1999, involving Bremerton Pty Ltd, Nebraska Pty Ltd and Laurinay Pty Ltd. (These were the trustee companies of the various family trusts.) Dunn told Thomson to have the resolutions typed up on old style minute paper, which he knew Thomson had, using a typewriter. This was to ensure that the documents looked authentic and left no trail. Dunn also told Thomson to bring along some old pens with which to sign the documents. Thomson had his secretary prepare the documents in accordance with Dunn's directions.
In September 2002, Dunn presided over a meeting in the Barminco board room that was attended by Thomson, Bartlett, Sayers and others. Dunn had written up the fraudulent transactions on a whiteboard. Dunn presented the false resolutions dated 14 and 16 June 1999 and took the persons present at the meeting through the resolutions from beginning to end and explained the transactions using the whiteboard. The prosecution contends that everyone present was aware of what was gong to occur and its effect. On this, or a subsequent, occasion Thomson signed the false resolutions on behalf of Laurinay, Bartlett signed on behalf of Bremerton, and Sayers signed on behalf of Nebraska Pty Ltd.

Subsequently, Thomson had the secretarial volume for the BUT updated to reflect the fraudulent transactions. Thomson and Bartlett signed back‑dated letters addressed to the trustee for the BUT (dated 14 and 16 June 1999). Thomson signed the back‑dated BUT Special Unit Certificates (dated 14 and 16 June 1999). Thomson signed back‑dated minutes of meetings (dated 14 and 16 June 1999).
According to the false resolutions, on 30 June 1999 Bremerton Pty Ltd as trustee for the P M Bartlett Family Trust was to be allotted 79.9 million additional special units by Barminco in its capacity as trustee for the BUT, with a value of $1 for each special unit (plus an additional 100,000 special units, fully paid to $1; the apparent purpose of this was to round out the allotted units to 80 million).
Bremerton Pty Ltd paid $7,990 for the special units which equates to paying 0.01 cent in each $1 with half of the special units to be held on trust for Nebraska Pty Ltd as trustee for the R G Sayers Family Trust.
The P M Bartlett Family Trust and the R G Sayers Family Trust were to pay interest on the unpaid balance of the cost of the newly allotted special units, namely the sum of $79,892,010 (ie, $79,900,000 less $7,990). Barminco in its capacity as trustee of the BUT was to charge 9% per annum on the unpaid amount.
Also the resolutions purported to resolve that on 30 June 1999, Bremerton Pty Ltd as trustee for the P M Bartlett Family Trust and Nebraska Pty Ltd as trustee for the R G Sayers Family Trust would each pay one day's interest ($19,699 in total) and pre‑pay 364 days' interest (about $7.17 million in total) to Barminco as trustee for the BUT. Of these payments Bremerton Pty Ltd as trustee for the P M Bartlett Family Trust and Nebraska Pty Ltd as trustee for the R G Sayers Family Trust were to claim the full amount as tax deductions for the 1999 financial year but the resultant income to Barminco as trustee for the BUT was to be split across two financial years. An amount of $19,699 was to be recorded as income of the BUT in the 1999 financial year and the balance of income was to be recorded in the 2000 financial year and become subject to the Appointor Arrangement.
At some stage the original signed copy of the resolutions dated 14 and 16 June 1999 went missing or were destroyed, leaving only photocopies available for inspection.
On 19 September 2002, a 1999 BUT income tax return was lodged with the ATO. The income tax return disclosed net income of $7,103,869 (which is the figure arrived at by Grace, $7,084,170 plus interest of $19,699). This net income was disclosed as having been distributed to the R G Sayers Family Trust ($3,551,934) and the P M Bartlett Family Trust ($3,552,935). Section 10 of the return was headed Gross Interest and disclosed a figure of $430,148. In the agent's copy of the amended 1999 BUT income tax return there is a description of that interest; it includes one day's interest ($19,699) supposedly paid to Barminco by the Bartlett and Sayers Family Trusts during the 1999 year.
On 24 September 2002, Grace tendered her resignation to Thomson's firm. She explained that her resignation resulted from what she described as deviations from accepted accounting and taxation practices that appeared to be used by the firm. After Grace's resignation from Thomson's firm, she immediately commenced employment with Barminco. At Barminco her work included accounting and tax work for the BUT. She was also responsible for the accounts of the R G Sayers Family Trust and the P M Bartlett Family Trust. Thomson and Dunn had separate discussions with Grace about how to make the accounting entries for the BUT and Bartlett and Sayers' Family Trusts to give effect to the fraudulent transactions.
In about December 2002 Grace brought the resolutions and minutes which purported to give effect to the fraudulent transactions to the attention of Mr Charles Watson ('Watson'), finance director of Barminco. Watson accepted the documents at face value and incorporated them into the revised financial statements of the BUT.
The outcome of the review of the BUT's accounts by Grace meant that Barminco's accounts needed to be re‑audited. In January 2003 Grace identified yet further net income to be included in Barminco's 1999 return. Barminco's 1999 taxable profit had now risen to $7,830,258. On or around 31 January 2003 and 3 February 2003 Dunn, Thomson, Grace and others met with Barminco's external auditors to explain the changes required, including the 'oversight' relating to the issue of 79.9 million special units and related income and expenditure under the fraudulent transactions.
Between January 2003 and June 2003 Grace and Dunn instructed Thomson what to include in the various income tax returns to give effect to the fraudulent transactions and the Appointor Arrangement, and to take account of the newly identified increase in Barminco's 1999 taxable profit. The instruction included reference to:
(a)income tax return (Barminco - 2000 and 2001 financial years);
(b)income tax return (P M Bartlett Family Trust - 1999 and 2000 financial years;
(c)income tax return (R G Sayers Family Trust - 2000 financial year);
(d)amended income tax return (Barminco - 1999 and 2000 financial years);
(e)amended income tax return (R G Sayers Family Trust - 1999 financial year);
(f)amended 1999 tax return for Christy Shore (nee Sayers - the daughter of Sayers); and
(g)amended 1999 tax returns for Peter and Carol Bartlett (the former wife of Bartlett).
On 7 May 2003 Thomson sent a copy of the amended 1999 R G Sayers Family Trust return and an amended 1999 Christy Shaw (nee Sayers) return for Sayers' approval. The R G Sayers Family Trust return disclosed distributions received of $453,644 (this was approximately half of the newly identified, in January 2003, additional BUT net profit). This amount was in turn disclosed in both income tax returns as having been distributed to Christy Shaw. These returns were lodged with the ATO.
On 22 May 2003, Bartlett and Charles Watson signed off on a Barminco 'Revised Special Purpose Financial Report' for the year ending 30 June 2000. In the Notes to the Report (page 9) under the subheading of 'Interest' the following appears:
The trustee allotted a further 79,900,000 Special Units of one dollar each ($1.00) paid to 0.01 cents per unit on 16th June 1999. Interest of some $7,190,281 was receivable by Barminco on this allotment, with $7,170,582 relating to the year ended 30 June 2000. This transaction was not incorporated in the original financial report.
The adjustments to the financial report arising from this error affected the current and prior year results. The amount relating to the prior year results totals $19,699. However, the amount relating to the current year had been treated as an abnormal item. The previous omission of this had the effect of understating profit by $7,170,582.
And under the subheading of 'Distribution To Unitholders':
The distribution to unitholders has been corrected to reflect the distribution to the special unitholders. The original financial report incorrectly distributed the profit to the ordinary unit holders. Distribution also now reflects the taxable distribution made as per the requirements of the Trust Deed. The original financial report incorrectly showed the accounting distribution.
The Revised Profit and Loss Statement showed an 'operating profit' for 2000 of '$22,108,000 (instead of a loss of $2,084,000 in the previous Report) and distributions of $13,295,000 to Bremerton No 1 Account and $13,296,000 to Bremerton No 2 Account'.
On or about 23 May 2003 Bartlett signed the agent's copy of an amended 1999 Barminco Unit Trust income tax return. The net income disclosed in that return was $7,873,454. The statement of distribution showed that an amount of $3,936,727 was distributed to each of the Bartlett and Sayers Family Trusts. The agent's copy of the return had a page with a subheading 'Interest' as follows:
'R G Sayers Family Trust  $ 9,849
P M Bartlett Family Trust  $ 9,850
Various   $10,449
Gross Interest  $30,148'
The first two items are the supposed payments of interest to Barminco that were said to have occurred in 1999 ($9,849 + $9,850 = $19,699 ‑ one day's interest).
On or about 23 May 2003 Bartlett signed the agent's copy of the 1999 P M Bartlett Family Trust income tax return and an electronic lodgement declaration. That return was lodged electronically. The return disclosed distributions from trusts of $3,936,727 and deductions relating to distributions of $3,595,141. The net income of the P M Bartlett Family Trust was disclosed at $217,116 distributed to Peter Bartlett, $108,558, and Carol Bartlett, $108,558. Also on 23 May 2003 amended 1999 income tax returns were lodged on behalf of Peter Bartlett and Carol Bartlett reflecting the above figures.
In about June 2003 Grace set up her own accountancy business and replaced Thomson's firm as the BUT's tax agent. Between about January 2004 and July 2004, Grace, in accordance with Dunn's instructions, prepared and lodged with the ATO the remaining income tax returns and other documents required to give effect to the Appointor Arrangement. These included:
(a)income tax return (P M Bartlett Family Trust - 2001 financial year);
(b)income tax return (R G Sayers Family Trust - 2001 financial year);
(c)letter requesting an amendment of the income tax return for the Corpex Trust for the 2001 financial year; and
(d)letter requesting an amendment of the income tax return for Key World Nominees Pty Ltd for the 2001 financial year.
Despite the lack of any follow‑up action by the ATO after visits in October 2001, the alleged conspirators anticipated that sooner or later there would be problems with the ATO, particularly after the lodgement of the 1999 BUT return and the 1999 Bartlett and Sayers Family Trusts' returns (or amended returns). In June 2003 Dunn recruited a former ATO Assistant Commissioner, Ms Saint ('Saint'), to assist in preparing for an anticipated legal challenge to the ATO's non‑acceptance of the Appointor arrangement. Saint was told in a meeting she had with Dunn, Bartlett and Sayers that her salary was being funded by Bartlett and Sayers. Saint was asked to prepare an opinion on the Appointor arrangement.
Bartlett and Sayers adopted further tax avoidance schemes put forward by Dunn for their family trusts for the 2003 and 2004 financial years.

Investigations by the ACC

Dunn came to the attention of the ACC in 2004. In 2005 the ACC began the issue of a number of search warrants in connection with, inter alia, the various tax avoidance schemes that Dunn, Bartlett and Sayers had been involved with during the years 1999 to 2004. In addition, various persons, including Bartlett, Sayers, Thomson and Grace, but not Dunn, who was by then in Thailand, were examined by the ACC pursuant to its compulsory powers.
During the course of the ACC investigations, Thomson admitted his involvement in the false interest transactions. Thomson was eventually charged with an offence against s 135.4(3) of the Criminal Code (Cth). On 6 May 2010 Thomson pleaded guilty to that offence in this Court and was sentenced by McKechnie J to a term of imprisonment of three years and three months with a minimum term of 13 months. Thomson was given a discount on his sentence pursuant to s 21E of the Crimes Act (Cth).
In December 2010 officers of the ACC sought to separately interview Bartlett and Sayers. Both declined to be interviewed. However, at their interviews both presented prepared signed statements; Bartlett's statement was dated 8 December 2010, Sayers' statement was dated 6 December 2010.
Sayers claimed (par 19) that after reading legal opinions obtained he believed that the Appointor Arrangement was 'legal'. He stated (par 28) that he had complete trust in Dunn and signed what Dunn put in front of him. Sayers further stated:
28.I can't recall the issue in 1999 of 80 million $1 special units in the Barminco Unit Trust, 79.9 million of them partly paid to 0.01 cent, and can't recall a $7 million interest expense arising from the issue of these partly paid special units.
29.I am aware that there is an issue concerning minutes and resolutions in relation to Barminco Unit Trust and dated 14 and 16 June 1999 respectively as to whether those minutes and resolutions are false and as to whether they were created in 2002 rather than in 1999.
30.I have been shown the documents in question and I have no recollection of having signed either of the documents nor have I any recollection of having been presented with these documents either in 1999 or 2002. I don't recall being present in any meeting at which these transactions were explained either in 1999 or 2002. The signatures which are purported to be mine look like my signatures. It is possible I signed both documents. However, I note that I have signed on behalf of Nebraska Pty Ltd, that is a beneficial and not legal owner the units in Barminco Unit Trust but I would not ordinarily be required to sign a minute of this nature.
31.I am aware that [it] is suggested that an explanation of these transactions was offered in or about September 2002 by Mr Dunn. I have no recollection of the meeting although there were a number of meetings that I attended with Mr Dunn and others about financial matters concerning Barminco during the period 2000 to 2005.
32.The first I heard about such a meeting was when I was told by my solicitor what Justice McKechnie said in sentencing Mr Thomson in May 2010.
33.I certainly do not recall attending any meeting at which it was suggested that a claim for false interest deductions could or should be made. Nor do I recall attending any meeting at which it was suggested the documents should be falsified or backdated or that we should engage in any other illegal activity. I am certain that if I had been present at any such meeting I would have remembered it very clearly and stated in no uncertain terms that I wished to be no part of such an arrangement. I would have just paid the tax.
34.I would never knowingly sign a document containing false information and it has never been my practice to backdate documents.
35.If I did sign the documents then they were put in front of me to sign by either Mr Dunn or Mr Thomson, probably with other papers to sign as ordinarily happened and I would have signed them without reading them or necessarily understanding them.
36.I signed a number of documents that related to the taxation arrangements proposed by Mr Dunn for the years 2000 to 2004 inclusive that I didn't understand but I did so on the basis that I believed everything that was being done was 'kosher'.
37.At no time was I told that there was a proposal to create a false interest charge to avoid tax or that documents I was signing were designed with that intent.
38.I also placed the utmost faith in Mr Thomson and it was my practice to sign documents placed before me by Mr Thomson on the basis that I trusted him.
39.I have never done or intended to do anything illegal. In fact I made every effort to ensure that we got the best advice money could buy to ensure that all business dealings and tax arrangements were legal and I relied entirely on that advice. The suggestion that I would have been involved in something illegal with these transactions is completely contrary to my past form in obtaining the best possible advice.
In relation to the statement provided by Bartlett to the ACC in December 2010, he said (par 21) that he thought that the structures Dunn presented 'were completely above board'. At par 23 of his statement Bartlett stated:
23.Greg [Dunn] always appeared to be a very fastidious person. Whenever we held meetings Greg would always have the paperwork prepared. He would ask Trevor for the time and record when each meeting opened. He would then read out the minutes and generally explain what was happening. He would close that meeting prior to commencing any further meetings. Documents such as minutes and promissory notes were handed around the table to be signed by each of us in strict accordance with Greg's instructions. I really did not understand the consequences of what it all meant, or precisely what I was signing. I signed because I trusted Trevor and Greg.
Further in his statement at par 36 and following Bartlett said:
36.On or about 27 May 2002, after we had attended a meeting with lawyers in Singapore, Greg, Ron [Sayers] and I were heading back to our hotel and Greg told Ron that Trevor hadn't put in the last three years' tax returns. It was obvious Greg was very disappointed with Trevor and I was absolutely shocked. Until then I had always assumed Trevor had kept all our tax and financial affairs up to date and that all tax returns had been lodged when required as this is what I paid him to do.
37.After we returned to the hotel, we sat in the hotel lobby and Greg told us that Trevor had received 10% commission from him for introducing him to us. I was very angry at this information, especially because Trevor always denied getting the commission from Greg despite me specifically asking him several times whether he had done so.
38.Some time after I returned from Singapore in May 2002, I met with Trevor in my office. He apologised for not telling me about his arrangement with Greg and for failing to file tax returns … At some time, I cannot remember when, I said that he should go his way and I would go mine and I asked him to resign as a director from all my companies …
Further, in his statement delivered to the ACC in December 2010 Bartlett also stated:
43.I do not remember the issue of 80 million $1 special units in the Barminco Unit Trust, 79.9 million of them partly paid to 0.01 cent.
44.Given the extent of my business interests, the amount of meetings I attend, and the number of documents I am required to sign, I am not surprised by this. I rely heavily on my advisers to check documents before they are presented to me for signature. I was accustomed to signing documents that Trevor and other advisers placed before me. However, I would never knowingly sign a document that contained false information and it has never been my practice to backdate documents.
45.My solicitor told me earlier this year that in passing sentence on Trevor, Justice McKechnie referred to a meeting chaired by Mr Dunn and attended by me, Ron, Trevor and others at which a scheme involving special units and false interest deductions were presented. This meeting was said to have occurred in September 2002.
46.I have no recollection of a meeting occurring in September 2002 or at any other time when the issue of special units or false interest deductions was presented. As I have said previously, I do remember meetings where Greg would use a whiteboard. This was not unusual. If a meeting had taken place where such a presentation had been given I'm certain I would have remembered it and stated my opposition to such an arrangement.
47.The issues in relation to the 1999 taxation year and the minutes of the meetings held on 14 and 16 June were brought to my attention by my lawyers, Mallesons Stephen Jaques, in May 2006. I do not recall seeing either document before then, nor do I recall signing either document. The signature that purports to be mine on the document dated 16 June 1999 does not look like my usual signature.
So far in these proceedings at least there has not been any direct issue as to whether the statements provided by Bartlett and Sayers voluntarily to the ACC investigators in December 2010 are themselves admissible. Those statements, or similar statements, were later tendered by them at the compulsory examinations conducted by the ACC under s 30 of the ACC Act under circumstances in which each witness invoked a claimed privilege against self incrimination but which was unavailing because of the provisions of s 30(4). To that extent, the evidence of Bartlett and Sayers taken by the examiners is subject to the direct use immunity conferred by s 30(4) of the Act with the result that the evidence taken compulsorily before the examiners would not be admissible against either witness.

Nevertheless, this evidence, which has been disclosed to the prosecution in accordance with the directions given by the examiner under s 25(9) of the ACC Act, see R v Bartlett [60] ‑ [63], has clearly put the CDPP on notice that each of Bartlett and Sayers is likely to assert, whether directly or indirectly, that he did not attend any such meeting or meetings in 2002 as alleged by the prosecution; did not knowingly agree to, implement or sign any documents relating to the backdating of resolutions and other documents falsely recording the issue in 1999 of the 80 million special units in the BUT, nor knowingly claim falsely that the Sayers or Bartlett family trusts or entities associated with them were entitled to deductions against income of $79 million or thereabouts for the alleged interest payments on the unpaid portion of the capital due under the special units.
Further, while Sayers appears to have acknowledged the similarity in the signatures on the 2002 document (falsely backdated to 1999) he does not acknowledge them to have been his genuine signature. Bartlett appears to assert that his apparent signatures on those documents are not his own. Both Sayers and Bartlett in these statements have asserted that any documents which they may have signed were signed honestly as a result of their trust in Dunn and Thomson; that neither would knowingly backdate any documents; and that neither would be party to any false or fraudulent transaction to misrepresent the income or liability to taxation of either themselves or any of the entities with which they were associated. The significance of this, for present purposes, is that the prosecution is on notice of these assertions and consequently has determined to lead evidence in the prosecution which would, if accepted, refute them and establish that each of Sayers and Bartlett were well aware of the financial and taxation considerations affecting the position of the BUT and the Sayers and Bartlett trusts beneficiaries and the potential impact on taxation liability for them of the discovery made in 2002 that the profit of Barminco for the 1999 tax year was some $7.9 million greater than previously anticipated.
The prosecution seeks to go further to establish that by 2002 each of Sayers and Bartlett was aware of the susceptibility of the Appointor Arrangement to rejection by the ATO and to risk of consequent assessment to large liabilities for income tax for the BUT and/or the Sayers and Bartlett Family Trusts for income derived in the tax years for 2000 and 2001 if the Appointor Arrangement were to be disregarded. The prosecution seeks to prove that a substantial impetus for the alleged fraudulent transactions in 2002 was to overcome a position where, up until then, the BUT had not made a profit for the 1999 income tax year and that that state of affairs had been part of the facts set out in the instructions to Mr R K O'Connor QC for his opinion upon the efficacy of the proposed Appointor scheme which, on the express stipulation recorded by Mr R K O'Connor QC that all the instructions given to him were factually correct, was opined to be effective.
The case for the prosecution is that if it turned out that the BUT or the Sayers and Bartlett family trusts or any of them had made a substantial profit for the 1999 year the discrepancy between that fact and the facts postulated in the O'Connor opinion which endorsed the efficacy of the Appointor Arrangement could very possibly, even probably, enhance the prospect that the Federal Commissioner of Taxation (FCT) would disregard the Appointor scheme when assessing the liability of the BUT and/or the Sayers and Bartlett family trusts to income tax in the 2000 and 2001 years. In order to prove this and to refute the foreshadowed defences of Bartlett and Sayers, the prosecution wishes to lead evidence which would establish that both Bartlett and Sayers were fully aware of the potential significance of the discovery of the unexpectedly large profit of the BUT in 2002 arising from the 1999 year and why this presented a situation which needed to be addressed in order to protect the efficacy of the Appointor Arrangement.

The Appointor Arrangement or Scheme

As already recorded, it was the potential vulnerability of this scheme to being disregarded by the FCT under pt IVA of the Income Tax Assessment Act1936 (Cth) (ITAA) which, according to the prosecution, constituted a substantial incentive and the major influence for Messrs Bartlett and Sayers to enter into the alleged conspiracy and attempt the fraudulent backdating of minutes and other documents in September 2002. The prosecution does not allege that this scheme was itself illegal or fraudulent and, at least at present, is not attempting to establish that it was one which the FCT could or did disregard under pt IVA. Nevertheless, the prosecution contends that the basic elements of the Appointor scheme and the purpose which it was to achieve in reducing liability for taxation for the income years 2000 and 2001 are relevant and material in viewing the actions of Messrs Bartlett and Sayers in 2002 and any explanations which they may be expected to provide about their knowledge and conduct in the latter half of 2002 and following.
One description of the Appointor scheme is to be found in the opinion prepared by Mr R K O'Connor QC dated 24 March 2000 and provided to solicitors instructing him on behalf of the Bartlett and Sayers interests. In that opinion, the author describes the arrangement this way:
Essentially, the proposal is as follows. Mr P M Bartlett, Mr R G Sayers have been, and are, the Appointors of the two family trusts, respectively. [Namely the P M Bartlett Family Trust of which Bremerton Pty Ltd is the trustee and the R G Sayers Family Trust of which Nebraska Pty Ltd is the trustee.] Both those trusts were created on 4 September 1985, before capital gains tax became effective on 20 September 1985. What is under contemplation is that Messrs P M Bartlett and Sayers will resign their offices as Appointors of the two family trusts in consideration for payment of $27 million. By virtue of the reasons discussed below, including that Messrs P M Bartlett and Sayers have been Appointors since before the enactment of the capital gains tax legislation, it is suggested that that $27 million will not be taxed. The New Appointor (Timebase Investments as trustee of the Corpex Trust) to both family trusts will pay the $27 million to Messrs P M Bartlett and Sayers as the cost price of attaining those offices as part of a profit‑making undertaking or plan so that that cost should be deductible in the calculation of the profit on realisation in the profit‑making undertaking or plan. It is proposed that the New Appointor[s] will have distributed to it from the P M Bartlett Family Trust and the R G Sayers Family Trust, over a period of two years, an amount of $30 million. Under the documentation, that New Appointor/beneficiary of the two family trusts will then irrevocably cease to have any entitlement to further income from the two family trusts and that cessation is to be the realisation or finalisation for the profit‑making undertaking or plan in which the $27 million should be able to be deducted. Thus, the $27 million received by Messrs P M Bartlett and Sayers is sought to be received as a non‑taxable amount, yet that $27 million paid by the New Appointor/beneficiary is sought to be allowed as a deduction against the $30 million income received under the profit‑making undertaking or plan …
On the express stipulation that his advice was conditional upon the accuracy of the instructions provided to him, Mr O'Connor advised that, while the final position could never be entirely free from doubt and could be expected to face challenge by the FCT, the merits of the argument supporting the effectiveness of the scheme should be accepted. Significant steps in the reasoning of counsel towards that eventual advice were:
(a)The amount of $27 million payable to Messrs Bartlett and Sayers upon their relinquishment of the offices of Appointors of the two family trusts would not be assessable as ordinary income.
(b)There would be no capital gains tax liability upon the proceeds from the realisation of the office of Appointor because even if that office did amount to a species of 'property', it was acquired before the commencement of the CGT legislation.
(c)Two of the three prerequisites for the operation of provision of pt IVA of the Income Tax Assessment Act (the ITAA) were present, namely the existence of a scheme and an objective conclusion that a party to the scheme had entered into it for the sole or dominant purpose of gaining a tax benefit for a taxpayer.
(d)Nevertheless, a 'tax benefit' within the meaning of s 177C(1) of the ITAA did not arise because none of the beneficiaries of the two family trusts who had previously received distributions could be regarded as having a reasonable expectation that they would receive the income distribution from the trusts in 2000 or 2001 if the current arrangements were not entered into. That conclusion was supported, to a significant extent, by the instructions provided to Mr O'Connor that the past beneficiaries of the two family trusts who had received significant distributions, namely Verncrest Pty Ltd (for the Bartlett Family Trust) and Paveway Pty Ltd (for the R G Sayers Family Trust) would be placed in liquidation and would not, in any circumstances, be regarded as having a reasonable expectation of receiving distributions from the family trusts for the 2000 and 2001 years.
(e)As it could not be said that there was any particular beneficiary who had a reasonable expectation to have received distribution but for the implementation of the scheme, the decision in Federal Commissioner of Taxation v Peabody [1994] HCA 43; (1994) 181 CLR 359 meant that the provisions of pt IVA of the ITAA could not be successfully employed to disregard the scheme. Counsel also opined that there was nothing in the then more recent case of Federal Commissioner of Taxation v Spotless Services Ltd [1996] HCA 34; (1996) 186 CLR 404 to cast doubt on that conclusion or the applicability of what counsel regarded to be the principle drawn from Peabody.
I interpose here to observe that, at the very least, it may well be an open question as to whether the decision in Peabody stands for the principle deduced by counsel or that that principle is as widely applicable as counsel suggested. Similarly, there would appear to be reason to question whether or not the subsequent decision of the High Court in Spotless could be regarded as endorsing the principle extracted from Peabody by counsel. With regard to the critical conclusion in the R K O'Connor QC opinion about whether or not a 'tax benefit' had been derived by any taxpayer as a result of the scheme, the Justices in the High Court, Brennan CJ, Dawson, Toohey, Gaudron and Kirby JJ in Spotless said (423 ‑ 424):
The taxpayers submit that the Full Court erred in holding that, if the scheme had not been entered into or carried out, an amount of income from the use of the sum on deposit would have been, or could reasonably be expected to have been, included in the assessable incomes of the taxpayers for the year of income. They submit that there is no possible way of knowing whether the amount actually derived from the investment, or any other particular amount, would have been included in the assessable income of the taxpayers had they chosen not to make the investment that they did. It is said that, if the taxpayers had not entered into the scheme, there would have been no interest and no amount would have been included in the assessable income with the result that the definition of 'tax benefit' set out above makes no sense in the context of the present case.
The submission turns upon the use in par (a) of s 177C(1) of the expression 'an amount not being included'. This applies where, but for the scheme, 'that amount' would have been included in the assessable income or might reasonably have been expected to be so included. The submission is that the reference in this case is to the amount of interest actually received from the EPBCL [European Pacific Banking Co Ltd in the Cook Islands] after the imposition of withholding tax. It is said that without the scheme there would have been no investment in EPBCL, that amount would not have existed, and par (a) of s 177C(1) would have had no subject matter upon which to operate.
In our view, the amount to which par (a) refers as not being included in the assessable income of the taxpayer is identified more generally than the taxpayers would have it. The paragraph speaks of the amount produced from the particular source or activity. In the present case, this was the investment of $40 million and its employment to generate a return to the taxpayers. It is sufficient that at least the amount in question might reasonably have been included in the assessable income had the scheme not been entered into or carried out.
This is even more apparent from the later decision of the Commissioner of Taxation v Hart [2004] HCA 26; (2004) 217 CLR 216 which, however, had not been determined and therefore was not available to counsel at the date of the O'Connor opinion in March 2000. However, in Hart Gleeson CJ and McHugh J observed at [9] ‑ [18] that a transaction may take such a form that there is a particular scheme in respect of which a conclusion of the kind described in s 177D is required, even though the particular scheme also advances a wider commercial objective and, at [35], Gummow and Hayne JJ observed that the 'person' whose purposes is to be identified under s 177D is the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme and that s 177D makes plain that the person whose purpose is to be identified may be (but need not be) the relevant taxpayer or one of the other taxpayers mentioned in the section. At [63] and [64] Gummow and Hayne JJ go on to suggest the importance of identifying the dominant purpose of a relevant person as distinguished from the dominant purpose of the scheme and then said at [66]:
In the present matters, the respondents would obtain a tax benefit if, in the terms of s 177D(1)(b), had the scheme not been entered into or carried out, the deductions 'might reasonably be expected not to have been allowable'. When that is read with s 177D(b) it becomes apparent that the inquiry directed by Pt VIA requires comparison between the scheme in question and an alternative postulate.
The O'Connor QC account of the details of the Appointor scheme turned out to be incomplete. Evidence in the prosecution case reveals that consideration payable to the resigning Appointors, Messrs Bartlett and Sayers upon the relinquishment of their office as Appointors was $45 or $50 million and not the $27 million referred to in the O'Connor QC opinion and that the new Appointor, Timebase Investments, paid $45 million to Messrs Bartlett and Sayers to acquire those offices as Appointors, to become an eligible beneficiary under the two trusts 'as part of a profit‑making undertaking or plan'.
Therefore, from an objective viewpoint, there certainly appears to have been reason to consider that the efficacy of the Appointor scheme in eliminating taxation liability for the Sayers and Bartlett family trusts or their respective beneficiaries for the 2000 and 2001 years was precarious. Furthermore, from the descriptions of the Appointor scheme and its intended effects, it becomes apparent that the amount of income for the BUT which was to be distributed to the Sayers and Bartlett family trusts in 2000 and 2001 (whether $27 million as assumed in the O'Connor opinion or $50 million appearing from other evidence) was very much greater than the $7.1 million or so which was recognised in 2002 as being the profit in the BUT in the 1999 financial year and which was purportedly to be eliminated by the alleged fraudulent transactions.
I return therefore to the thrust of the submissions for the prosecution that a powerful reason for the alleged conspiracy and fraudulently backdated transactions of September 2002 was to remove any significant profit from the two family trusts for the 1999 tax year and so, as was hoped, to diminish the prospect that the ATO would undertake a closer scrutiny of the affairs of the BUT or the two family trusts then or later, especially for the financial years of 2000 and 2001 when the liability for taxation on much larger profits was to be eliminated by the operation of the Appointor scheme.
Significantly, the CDPP also seeks to establish that by 2002 Messrs Sayers and Bartlett had reasons to be apprehensive about the efficacy of the Appointor scheme and to believe that it was under investigation by the ATO. The case for the prosecution is that in October 2001 their accountant, Thomson, was visited by officers of the ATO enquiring about the Appointor Arrangement, of which the ATO had become aware following communication from the WA State Revenue office (the deed of appointment of the new Appointor had been lodged for stamp duty purposes in July 2000). During the discussion with officers of the ATO Dunn referred to and showed them a legal opinion which had been obtained which was said by Dunn to support the legitimacy of the Appointor Arrangement. However, there was no follow-up action taken by the ATO after these visits.
During late 2001 and early 2002, Dunn and Thomson began organising overseas entities for Bartlett and Sayers 'for asset protection purposes', which in effect meant transferring assets overseas so that they would not be available to any potential creditors such as the ATO. It is important to note that Bartlett and Sayers deny any knowledge of or involvement in this. At about this time Dunn, Bartlett and Sayers also spoke of setting up a 'fighting fund' of $500,000 sourced from Dunn's commission, to be used for legal costs of challenging any action by the FCT to disregard the Appointor Arrangement.
In May 2002 Bartlett and Sayers travelled to Singapore with Dunn to see a lawyer to further these alleged endeavours to establish a suitable offshore entity. It seems that it was during this trip that Dunn informed them that Thomson had not filed income tax returns for the Barminco trust for the last three years and that Dunn had paid Thomson a commission.
By May 2002 the Appointor scheme was about to expire as it operated only to the end of the financial year ending 30 June 2002. Other preparations were under way for a new proposed tax saving scheme, which I have already mentioned as the Underground/Overground trust scheme. Again solicitors acting for interests associated with Messrs Bartlett and Sayers sought the opinion of counsel, Mr R K O'Connor QC, on the effectiveness of the proposed Underground/Overground trust scheme. Mr O'Connor gave his opinion on this matter on 25 June 2002. Despite it being obvious, I should stress that this Underground/Overground trust scheme for a period after 1 July 2002 was not directly relevant to the operation of the Appointor scheme nor to the alleged unlawful and fraudulent transactions of September 2002 which were backdated for the 1999 income tax year. Nevertheless, the CDPP submits that advice and warnings given by Mr O'Connor QC to the Bartlett and Sayers in that opinion are relevant and material when it comes to determining the state of knowledge of Messrs Sayers and Bartlett in mid‑2002 and the economic forces and interests applicable to their positions at that time. According to the prosecution, this advice reveals another powerful factor which induced Messrs Sayers and Bartlett to engage in measures intended to distract or discourage the ATO from scrutinising the affairs of the BUT, the two family trusts and the Appointor scheme for any of the periods from the 1999 tax year onwards until then.

There is, therefore, on this view, a link between the desire to establish an overseas entity to hold assets which might be sequestered from creditors, including the ATO, and the various transactions and promissory notes and the attempts to secure them which were advanced by the allegedly fraudulent issue of the 79 million special units. The transactions demonstrate a degree of financial and commercial sophistication going beyond the routine and a readiness to commit large financial investments to offshore destinations.
The prosecution case is that it would be very surprising indeed if this were to have been done without the express knowledge, understanding and approval of Messrs Sayers and Bartlett and that an inference is available that the rationale for these initiatives was to remove significant assets from the claims of creditors within the jurisdiction. This in turn connotes an apprehension that assets within the jurisdiction could well become subject to claims by major creditors and, in the circumstances disclosed, the most obvious potential creditor was the FCT.
It is certainly the case that the prosecution do not allege that the steps to establish overseas asset protection entities were dishonest or illegal but that does not mean that those steps are irrelevant. However, as they are not alleged to be dishonest or illegal, there is little basis upon which to fear that they may be regarded by a jury or others as discreditable or prejudicial if disclosed. What is relevant is that the existence of such structures and the need to transfer significant assets to them and to secure those assets had practical consequences within Australia giving rise to the need to disclose those liabilities to Crossline in the accounts of the BUT which, as already described, led to steps being taken partly to pay the unpaid portion of the units said to have been issued.
I consider that the existence of the offshore entity, the steps taken to secure assets to it by the issue and the endorsement of various promissory notes and the consequent dislocation of lending ratios for the BUT to the alarm of its auditors and financier are all part of the matters relevant to establish motivation of Messrs Bartlett and Sayers to protect their assets and to reduce liabilities which, in the circumstances that arose, provided both the incentive and the need for the alleged fraudulent and backdated transactions of September 2002. These too arise out of apprehensions about the reliability of the Appointor Scheme. I accordingly consider that evidence of the measures taken to establish an overseas structure established for asset protection and the steps taken to transfer assets to it and secure those assets in the general sense proposed by the prosecution are admissible.

Evidence concerning other tax minimisation schemes entered into by Bartlett and Sayers subsequent to the Appointor Arrangement

This area of objection relates to proposals for a new taxation minimisation scheme for the 2002 financial year ending on 30 June. This involved instructions given by Dunn to R K O'Connor QC and the eventual issue of O'Connor's second opinion dated 25 June 2002 about the proposed Underground/Overground trust scheme. Details of that opinion have already been set out. Nevertheless, to recapitulate, O'Connor advised against entering into that scheme, advised that it could endanger the Appointor Arrangement, and that Bartlett and Sayers could be regarded by the FCT as serial tax avoiders. There was reference to a need to take advice from a barrister specialising in criminal law. In its statement of material facts the prosecution sets out an allegation that on 26 June 2002 there was a meeting at Thomson's office attended by Dunn, Bartlett and Sayers in which Dunn told the latter that as a result of the O'Connor QC opinion they should not proceed with that scheme and instead that the Bartlett and Sayers family trusts could access tax losses through another scheme. The statement of material facts then asserts that Dunn explained that the fee charged for accessing these tax losses would be 15% of the net profit distributed from the BUT to the Bartlett and Sayers family trusts. He said that there was insufficient time to obtain a legal opinion on the scheme given that the end of the financial year was only days away. The SMF asserts that Bartlett and Sayers agreed to proceed with the new scheme for the 2002 year.
The submissions for Messrs Bartlett and Sayers in support of the objections to evidence on this topic emphasise that the prosecution case is one which alleges the fraudulent transactions of September 2002 and following periods, designed to support the false interest scheme being backdated to the 1999 tax year, entered into in a dishonest attempt to protect the Appointor Arrangement. Consequently, it is submitted that any discussion, evaluation or implementation of further tax minimisation schemes by Dunn, Bartlett and Sayers for the 2002 year or following have no relevance to the false interest scheme. The submission is that the utilisation of further arrangements for the 2002/2003 financial year or beyond shows Bartlett's and Sayers' willingness to seek to minimise taxation due from them in relation to the BUT net profits but does not make it any more probable that they entered into the false interest scheme. Essentially, the submission is that entry into later tax minimisation arrangements has no bearing upon entry into the false interest scheme and is, accordingly, irrelevant.
In further support of that submission, counsel for Bartlett and Sayers submit that the attempt to adduce evidence of different tax schemes for the 2002 year is an attempt to attack the characters of Bartlett and Sayers by portraying them as knowing participants in further taxation ventures of potentially dubious legitimacy. The submission is that not only is that irrelevant, it is not supported by any other facts and is prone to create prejudice to these two accused and to open up many time consuming and irrelevant collateral issues.
These submissions for Bartlett and Sayers also advance the contention that by delving into evidence concerning the apparent viability of tax arrangements which are not the subject of the current charge there would be a real risk that the jury would become involved in arbitrating upon the legitimacy of such arrangements as if it were the AAT or the Federal Court and that this is impermissible.
In answer to these objections, counsel for the prosecution accepts that the details and efficacy of any tax minimisation schemes entered into or proposed by Bartlett and Sayers for the 2002 financial year or later are not relevant and will not be the subject of detailed evidence for examination. Nevertheless, counsel for the prosecution submits that a general outline of the activities of Bartlett and Sayers during this period, the advice they received from R K O'Connor QC about the potential consequences of entering into the Underground/Overground trust scheme and associated matters are relevant principally because of timing. The important feature in this regard is that the alleged conspiracy and the false interest transactions of September 2002 were entered into at a time shortly after Bartlett and Sayers became aware of the vulnerability of the Appointor scheme, an appreciation triggered by the discovery of the unexpected dimension of the profits of the BUT in the first half of 2002 and were dealing with the consequences of the attempts to secure assets for the offshore entity, Crossline, which created the financial concerns already described. The significance of the second O'Connor QC opinion, for the prosecution, is not the details or advice which he gives with regard to the Underground/Overground trust tax scheme but, rather, the stark warning given by counsel that Bartlett and Sayers were at risk of being regarded as serial tax avoiders.
The importance of timing is stressed by the submission for the prosecution that the Appointor Arrangement did not cease to have significance at the end of the financial year on 30 June 2001. In practical terms, it was necessary for income tax returns for the family trusts to be filed for the year ended 30 June 2001 and for them to be accepted by the FCT. The prosecution case is that the only income tax return which had been lodged by mid‑2002 which was in any way consequential and dependent upon the Appointor scheme was the return lodged on 10 May 2001 on behalf of Timebase Pty Ltd as trustee for the Corpex trust for the 2000 year ‑ Timebase and the Corpex trust were entities associated with Dunn.
Continuing in the chronological sequence, the prosecution seeks to establish that towards the end of the 2002 financial year Dunn was devising a new tax scheme for Bartlett and Sayers. This resulted in the R K O'Connor QC opinion of 25 June 2002 which concluded that the scheme was technically efficacious but that it was essential that full and true disclosure be made of all arrangements in the returns for the year of income ended 30 June 2002 culminating in the warnings of the likelihood of the Commissioner taking the very hardest possible line in arguing that pt IVA will apply to the arrangements.
The prosecution seeks to adduce evidence from the witness Hewitt, who attended a meeting between Bartlett, Sayers, Dunn and Thomson and recalls Sayers saying once that they were in jeopardy of being regarded as serial tax avoiders in an opinion, indicating that Sayers had read and understood O'Connor QC's advice. It is accepted by the prosecution that neither Sayers nor Bartlett entered into the Underground/Overground trust scheme which had been the subject of the second O'Connor QC opinion. The position adopted by the prosecution is that by August‑September 2002 when the alleged conspiracy was entered into, Bartlett, Sayers and their associated entities were in jeopardy of the Appointor Arrangement not being accepted by the ATO and also that they faced the prospect of any scheme which they proposed to embark upon for the 2002 year being similarly disregarded. In other words, the evidence proposed seeks to establish that the magnitude of financial consequences for Bartlett and Sayers and their associated interests of the Appointor scheme not being accepted was, by August‑September 2002, even greater than they had been at any previous time.
Furthermore, the prosecution seeks to establish that the close relationship between Bartlett and Sayers continued up until at least 2004 with further tax minimisation schemes being devised by Dunn and adopted by them for the 2003 and 2004 years. Reference to this continuing relationship and to subsequent schemes can be found in the Bartlett and Sayers statements of 6 December and 8 December 2010 already mentioned.
Counsel for the prosecution has clearly explained that it is not the intention of the Crown to lead any evidence concerning the details of any tax minimisation schemes adopted by Bartlett and Sayers for the years 2002 to 2004 but rather to focus on the fact that there were such schemes. The submission is that a jury could not make a proper evaluation of a contention that in August and September 2002 Dunn and Thomson set out to dupe Bartlett unless evidence of his knowledge and participation in these schemes was adduced.
An important factor in considering these objections is that it is no part of the case for the prosecution to try and prove that any of the tax schemes adopted by Sayers and Bartlett from 2002 onwards was in fact or law illegal or inefficacious. There is no suggestion of dishonesty by either of them in their activities with respect to such schemes. That being the case, there is no basis for considering that the evidence is prejudicial because, by definition, legal tax minimisation schemes or measures are permitted by law and explanations of this, including any direction in this regard which may be prudent or necessary by the trial judge, should prevent unjustified prejudice arising from the presentation of such evidence.
Again, as it seems, the evidence of the realisation by Bartlett and Sayers of the fragility of the Appointor scheme and its consequences, coupled with the stark warning given to them in the opinion by R K O'Connor QC, is possibly probative of their state of knowledge and intention when considering the September 2002 proposals to record and implement the falsely backdated interest scheme. Again it is relevant to motive and to the commercial factors likely to influence Bartlett and Sayers in making decisions about their tax affairs at that time. It is equally, perhaps more so, potentially probative in refuting the foreshadowed explanations offered by Bartlett and Sayers in their December 2010 statements that they did not know or understand the details of the effect of the September 2002 arrangements and signed those documents, if at all, in the honest belief that they were legitimate, acting on assurances from Thomson and Dunn, whom they had no reason to distrust.
As the prosecution does not in any way seek to impeach the legality or the effectiveness of the tax minimisation schemes proposed for 2002 or subsequent years (or for that matter the Appointor Arrangement) there will be no occasion for the jury to act in the role of the AAT or the Federal Court in determining the legality or effectiveness of any of these schemes. No more is intended by the prosecution than to establish that, from the point of view of Sayers and Bartlett and their immediate advisers, by 2002 there was reason for them to be concerned about the acceptability to the ATO of the Appointor scheme, and at least the subsequent scheme proposed to O'Connor QC in 2002 and that they were faced with the possibility that if the Appointor scheme was not accepted then heavy taxation assessments and penalties could follow. The starkness of the consequences was emphasised by O'Connor QC. The significance of the evidence is that it discloses facts from which it may be inferred that Sayers and Bartlett had become fearful of the consequences if the Appointor scheme were not accepted by the FCT, and that their alarm in this regard was increased as time went by and by the concern expressed by R K O'Connor QC in the June 2002 opinion.
The next step in the prosecution argument is that this evidence could lead to the further inference or conclusion that both Bartlett and Sayers, in conjunction with Thomson, Grace and Dunn, embarked on the conspiracy and the false interest transactions in order to protect the Appointor scheme and to minimise the risk of those adverse consequences actually occurring. This being so, I consider the evidence relevant and, hence, admissible.

Evidence relating to the Appointor Arrangement save for the existence of a scheme by that name

The objections by counsel for Messrs Bartlett and Sayers to any evidence to be led in respect of the Appointor Arrangement save for the fact that there existed a tax minimisation and this was entered into by the Barminco Unit Trust in the 2000 ‑ 2001 financial years is that there is no attack made upon the legitimacy of that arrangement pleaded by the indictment nor in the statement of material facts.
Despite this, the accused Bartlett and Sayers object that the prosecution is seeking to prove that Dunn told Bartlett and Sayers that the Appointor Arrangement became vulnerable to attack by the ATO on account of profit discovered for the BUT for the 1999 financial year. As earlier stated, the prosecution seeks to allege that it was the need to avoid this vulnerability of the Appointor Arrangement which provided the motive for Bartlett and Sayers to enter into the false interest scheme. Counsel for these accused accepts, therefore, that the existence of the Appointor Arrangement is tangentially related to the prosecution case of motive and to that degree only may be relevant.
However, the objection is to the reception of evidence from Thomson that Dunn had said to Bartlett and Sayers that the profits for the BUT in 1999 caused vulnerability for the Appointor Arrangement. The objection is that evidence concerning the Appointor Arrangement could not rationally affect, directly or indirectly, the assessment of the probability of Thomson truthfully stating that he heard Dunn tell Bartlett and Sayers that the Appointor Arrangement was vulnerable because of the discovery of the extra income with the BUT for the 1999 tax year ‑ discovered belatedly in the first half of 2002. This submission discloses the likelihood that Thomson's evidence in this respect will be challenged, possibly denied, and that the proposed evidence will do nothing to enhance or support the credibility of Thomson.
Counsel for Bartlett and Sayers refer to par 48 of the statement of material facts filed by the prosecution which states:
The existence of the $7 million profit, part or all of which had not been distributed in accordance with the instructions that had been given to O'Connor in relation to the Appointor Arrangement … [namely, that profits would be distributed to Verncrest and Paveway and these companies then liquidated and de‑registered] … created a problem about the accuracy of those instructions. Income tax returns had been lodged for Paveway Pty Ltd and Verncrest Pty Ltd disclosing nil income for the 1999 year and those companies have now been de‑registered. O'Connor's opinion had been and was relied upon to legitimise the Appointor Arrangement with the ATO. If factual assumptions made in that opinion were demonstrably wrong, this would render the opinion useless and would jeopardise the ATO's acceptance of the Appointor Arrangement and any future tax avoidance arrangement. (emphasis added by counsel for Bartlett and Sayers)
These two accused acknowledge that there was a discrepancy between what O'Connor QC was instructed and what, in fact, had occurred. O'Connor QC had been instructed that any profit for 1999 distributed out of the BUT and through the family trusts would in turn be distributed to the corporate beneficiaries, Verncrest and Paveway (who would then be liquidated and deregistered). In fact, the profit derived by the BUT in 1999 was distributed through the family trusts and ended up with Bartlett, his former wife, Carol Bartlett, and Christie Shaw (nee Sayers). This was one difference between what R K O'Connor QC had been instructed and what, in fact, had occurred. Further, Verncrest and Paveway were not, in fact, liquidated until the following financial year.
Counsel for the accused Bartlett and Sayers submit that there is, accordingly, no basis for the prosecution to assert that this difference somehow made the opinion of O'Connor QC 'useless' and that the 'ATO's acceptance of the Appointor Arrangement and any future tax avoidance arrangement' would be 'jeopardised' thereby. Counsel for the accused submit that for the purposes of admissibility the difference between O'Connor QC's instructions concerning distributions and the distributions actually made in fact does not make it logically any more likely that Dunn warned Bartlett and Sayers that any profit in the BUT in 1999 created vulnerability for the Appointor Arrangement. The submission goes on to assert that, to the contrary, the fact that there were distributions from the 1999 profit to the non‑corporate beneficiaries about which O'Connor QC was not told ‑ distributions of which Dunn must have been aware and must have been sanctioned by him ‑ means that it was unlikely that Dunn ever warned Bartlett and Sayers, as the prosecution assert, on the basis of evidence from Thomson. Counsel draws attention to the fact that there was a profit of at least $5.9 million of the BUT in the 1999 tax year and that this had been known for some time.
The next steps in the submissions for Messrs Bartlett and Sayers are that all this reveals that by the case for the prosecution:
(a)the substance of the Appointor Arrangement is not attacked by the present charge;
(b)the need to avoid vulnerability for the Appointor Arrangement provides the alleged motive for commission of the offence charged and the only potential relevance of the Appointor Arrangement at all; and
(c)there is nothing inherent in any evidence concerning the nature of the Appointor Arrangement, its execution, or in any expert assessment and this arrangement's viability which increases the objective likelihood of the existence of this motive.

From this position, counsel for the accused Bartlett and Sayers submit that it follows that the prosecution should not be permitted to adduce any evidence relating to the Appointor Arrangement except only to state that it existed as a tax minimisation arrangement for the two financial years following 1999. In making this submission, counsel for these accused accept that if the prosecution chooses to make its case for motive as outlined, it should not be precluded from making a reference simply to the bare existence of the Appointor Arrangement and its years of operation.
This concession, however, is followed by the further submission that any evidence adduced by the prosecution which ventures into the details or substance of the Appointor Arrangement or opinions as to its viability as a legitimate tax minimisation arrangement will be irrelevant and may set up a collateral dispute about the efficacy of the Appointor Arrangement as a matter of taxation law.
For the prosecution, counsel for the DPP has repeatedly made it clear that the Crown does not intend to challenge the legality or the efficacy of the Appointor Arrangement. The crown case is, as correctly perceived by counsel for Sayers and Bartlett, that concern entertained by Dunn, Thomson, Bartlett and Sayers about the efficacy of the Appointor Arrangement was a significant motive and incentive for the accused entering into the conspiracy and the false and fraudulent transactions of August‑September 2002.
However, to understand the reasons for that concern, its force and the magnitude of the potential economic consequences, it is necessary, so the prosecution submits, to know a little of the Appointor scheme, at least in relation to its intended financial consequences. Accordingly, the prosecution seeks to lead evidence from the witnesses Paul Fletcher, the solicitor who instructed O'Connor QC in relation to the preparation of his first opinion, part of the statements of Mr A Irdi, all the evidence of Mr R K O'Connor QC and evidence of the witnesses M Ogden, P Dodds and T Thomson contained in the brief relating to the entry upon the implementation of, and apprehensions held about, the efficacy of the Appointor scheme. None of this evidence, however, will seek to establish that the scheme was illegal or ineffective, rather only that there were apprehensions relayed to Bartlett and Sayers and held by them that it may be ineffective and could be disregarded by the FCT, in which case large taxation liabilities for Bartlett's and Sayers' interests could be expected to follow. The magnitude of these financial consequences involves the reception of evidence, from O'Connor at least, that the intention of the Appointor scheme was to transfer $27 million profit from the BUT or their family trusts to Bartlett and Sayers in the form of a capital payment free of tax. It would render the $30 million paid for the acquisition of the roles of appointors deductible in the hands of the new appointors and so to eliminate any profit of those trusts for the 2000 and 2001 years effectively preventing the accrual of any liability to income tax on any part of the profit derived by the BUT or the two family trusts for those years.
I consider this evidence to be potentially probative of the reasons why Bartlett and Sayers entered into the alleged conspiracy and the false interest transactions of August‑September 2002 and also to refute the foreshadowed explanations by them that they believed that any documents which they signed in relation to that backdated scheme were legitimate and that they did so honestly acting on the faith of advice from Thomson and Dunn, whom they trusted.

Summary

For these reasons I consider that the objections to the admissibility of portions of the evidence intended to be led for the prosecution as identified in pars (a), (b) and (d) of the application by Messrs Bartlett and Sayers dated 15 October 2012 should be dismissed.
These rulings have been made, as sought by counsel, on a broad basis dealing with certain categories and areas of evidence which have been more particularly identified in the written submissions but which, in any event, all counsel submit can readily be identified, if necessary, by discussions between counsel. Should it be necessary to define the areas of admissibility or the evidence which has been accepted as relevant more closely by reference to particular passages of witness statements or other materials, then that could be done by further application if necessary and for which liberty to apply is expressly reserved.