Gregg v R

[2020] NSWCCA 245

Court of Criminal Appeal

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

Gregg v R [2020] NSWCCA 245

Hearing dates:

22-24 April 2020

Decision date:

30 September 2020

Before:

Bathurst CJ at [1]; Hoeben CJ at CL at [712]; Leeming JA at [713]

Decision:

(1)   Appeal allowed.

(2)   Quash the verdict of guilty on each count of the indictment dated 9 May 2017 and enter a verdict of acquittal on each count.

Catchwords:

CRIME – appeals – appeal against conviction – unreasonable verdict – offences contrary to s 1307(1) of the Corporations Act 2001 (NSW) – sham agreement – whether sufficient evidence of the parties’ intentions and knowledge to convict – whether Crown able to exclude a particular hypothesis beyond reasonable doubt

CRIME – appeals – appeal against conviction – miscarriage of justice – prosecutor’s closing address – rhetorical questions – obligation of prosecutor – references to “no evidence” – reversal of onus of proof

CRIME – appeals – appeal against conviction – miscarriage of justice – written summing up – whether trial judge’s summing up presented the case for each party in a fair and balanced manner

CRIME – appeals – appeal against conviction – error of law – evidence – relevance – opinion evidence – whether trial judge erred in admitting evidence

CRIME – appeals – appeal against conviction – error of law – evidence – relevance – authenticity of a document – whether trial judge erred in refusing to admit evidence – National Australia Bank Ltd v Rusu not followed

CRIME – appeals – appeal against conviction – error of law – jury directions – change in Crown case – definition of “false” in the context of sham – direction on sham – direction as to who was the directing mind of a company

CRIME – appeals – appeal against conviction – error of law – jury directions – question trail which was said to require “yes” or “no” answers – direction that the jury needed only to be satisfied that the Crown case was reasonable – reversal of the burden of proof

CRIME – appeals – appeal against conviction – error of law – whether trial judge erred in refusing to give a Mahmood direction

CRIME – appeals – appeal against conviction – verdict of acquittal substituted

Legislation Cited:

Corporations Act 2001 (Cth)

Criminal Code Act 1995 (Cth)

Evidence Act 1995 (NSW)

Cases Cited:

Antov v Bokan [2018] NSWSC 1474

Australian Competition and Consumer Commission v Air New Zealand (No 1) (2012) 207 FCR 448; [2012] FCA 1355

Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) (2015) 235 FCR 181; [2015] FCA 342

Australian Securities and Investments Commission v Rich [2005] NSWSC 417; 216 ALR 320

Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751; (2018) 127 ACSR 110

Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; [1993] HCA 15

Bank of Valletta PLC v National Crime Authority (1999) 90 FCR 565; [1999] FCA 1099

Bilta (UK) Ltd (in liq) v Nazir (No 2) [2016] AC 1

Budrodeen v R [2014] NSWCCA 332

Burrell v R [2009] NSWCCA 193

Capital Securities XV Pty Ltd v Calleja [2018] NSWCA 26

Chiro v The Queen (2017) 260 CLR 425; [2017] HCA 37

Coshott v Prentice (2014) 221 FCR 450; [2014] FCAFC 88

Daw v Toyworld (NSW) Pty Ltd [2001] NSWCA 25

Dickson v R (2017) 94 NSWLR 476; [2017] NSWCCA 78

Domican v The Queen (1992) 173 CLR 555; [1992] HCA 13

DPP v Pinn [2015] NSWSC 1684

El Ajou v Dollar Land Holdings PLC [1994] 2 All ER 685

Environment Protection Authority v Truegain Pty Ltd (2013) 85 NSWLR 125; [2013] NSWCCA 204

Environmental Protection Authority v Sydney Water Corporation Ltd (1997) 98 A Crim R 481

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55

Federal Commissioner of Taxation v Cassaniti (2018) 266 FCR 385; [2018] FCAFC 212

Fennell v The Queen [2019] HCA 37; (2019) 93 ALJR 1219

Gilham v R [2012] NSWCCA 131

Hadchiti v R (2016) 93 NSWLR 671; [2016] NSWCCA 63

Hamilton v Whitehead (1988) 166 CLR 121; [1988] HCA 65

Hannes v Director of Public Prosecutions (Cth) (No 2) [2006] NSWCCA 373; 60 ACSR 1

Johnson v Miller (1937) 59 CLR 467; [1937] HCA 77

Jones Lang LaSalle (NSW) Pty Ltd v Taouk [2012] NSWCA 342

Justins v R (2010) 79 NSWLR 544; [2010] NSWCCA 242

La Trobe Capital & Mortgage Limited v Hay Property Consultants Pty Ltd (2011) 190 FCR 299; [2011] FCAFC 4

Lewis v Condon (2013) 85 NSWLR 99; [2013] NSWCA 204

Libke v The Queen (2007) 230 CLR 559; [2007] HCA 30

Lithgow City Council v Jackson (2011) 244 CLR 352; [2011] HCA 36

M v The Queen (1994) 181 CLR 487; [1994] HCA 63.

Mahmood v The State of Western Australia (2008) 232 CLR 397; [2008] HCA 1

McKell v The Queen (2019) 264 CLR 307; [2019] HCA 5

Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500

Miles v Bull (1969) 1 QB 258

Montgomery v Stewart (1967) 116 CLR 220; [1967] HCA 11

Moore v R [2016] NSWCCA 185

Moulin Global Eyecare Trading Ltd (in liq) v Commissioner of Inland Revenue [2014] HKCFA 22

National Australia Bank Ltd v Rusu (1999) 47 NSWLR 309; [1999] NSWSC 539

O’Meara v Dominican Fathers [2003] ACTCA 24; 153 ACTR 1

Pell v R [2020] HCA 12; (2020) 94 ALJR 394

Picken v R [2007] NSWCCA 319; ARS v R [2011] NSWCCA 266

R v Apostilides (1984) 154 CLR 563; [1984] HCA 38

R v Hillier (2007) 228 CLR 618; [2007] HCA 13

R v MG (2007) 69 NSWLR 20; [2007] NSWCCA 57

R v Micallef [2002] NSWCCA 480; (2002) 136 A Crim R 127

Roads and Traffic Authority (NSW) v Graincorp Operations Ltd [2010] NSWCA 317

Rockdale Beef Pty Ltd v Industrial Commission of NSW [2007] NSWCA 128; 165 IR 7

S v The Queen (1989) 168 CLR 266; [1989] HCA 66

Saffron v The Queen (1988) 17 NSWLR 395

Scott v Commissioner of Taxation (Cth) (No 2) (1966) 40 ALJR 265

Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449

SKA v The Queen (2011) 243 CLR 400; [2011] HCA 13

Snook v London and West Riding Investments Ltd [1967] 2 QB 786

Tesco Supermarkets Ltd v Nattrass [1972] AC 153

The Bell Group Ltd (In liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1; [2008] WASC 239

The Queen v Baden-Clay (2016) 258 CLR 308; [2016] HCA 35

Towney v R [2018] NSWCCA 65

Walsh v Tattersall (1996) 188 CLR 77; [1996] HCA 26

Whitehorn v R (1983) 152 CLR 657; [1983] HCA 42

Wood v R (2012) 84 NSWLR 581; [2012] NSWCCA 21

Texts Cited:

V Bell, “Documentary Evidence under the Evidence Act 1995 (NSW)” (2001) 5(1) The Judicial Review 1

Category:

Principal judgment

Parties:

Peter Alan Gregg (Appellant)
The Crown (Respondent)

Representation:

Counsel:
T Game SC with J Roy (Appellant)
T McDonald SC with M England (Respondent)

Solicitors:
Webb Henderson (Appellant)
Commonwealth Director of Public Prosecutions (Respondent)

File Number(s):

2017/22547

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

District Court

Jurisdiction:

Criminal

Date of Decision:

30 July 2019

Before:

Lakatos DCJ

File Number(s):

2017/22547

HEADNOTE

[This headnote is not to be read as part of the judgment]

Peter Gregg (the appellant) was the Chief Financial Officer of the company Leighton Holdings Limited (LHL). He was convicted of two offences contrary to s 1307(1) of the Corporations Act 2001 (Cth), namely, that as an officer of LHL he engaged in conduct that resulted in the falsification of the books of the company. He was sentenced to a term of imprisonment of 12 months on count 1, and 2 years on count 2, to be served concurrently by way of an Intensive Correction Order. He appealed against both his conviction and sentence.

The first count related to a payment instruction given by the appellant to the LHL treasury on 15 August 2011, authorising a payment of $15 million to be made to the company Asian Global Projects and Trading FZE (Asian Global). There were two purposes set out in the payment instruction, being $12.5 million “for marketing and advisory services” and $2.5 million for a “loan”. It was alleged that the payment was not made for the stated purposes.

The second count related to a “buy and sell agreement” executed on or around 19 December 2011 but dated 1 August 2011 between LHL and Asian Global. It was alleged that the buy and sell agreement was a sham agreement.

LHL was the holding company of a number of subsidiary companies, including “operating companies” which worked in industries such as construction and mining. One subsidiary company was Leighton International Limited (LIL). In 2010, LIL entered into an agreement with an Indian company, Welspun Infra Projects Private Limited (Welspun Infra). The agreement (Share Purchase Agreement) was for the sale of a 35% interest in a wholly owned subsidiary of LIL, Leighton Welspun, to Welspun Infra for $100 million. Asian Global was an affiliate of Welspun Infra.

The Share Purchase Agreement included a clause that $8 million of the purchase price would be “held back” by Welspun Infra and only paid to LIL if certain conditions were met. If the held back amount was released, there was also an obligation for LIL to “infuse” (or loan) an amount not exceeding about $20 million into Leighton Welspun. If agreement as to the form and manner of the infusion was not met, Welspun Infra could force LIL to repurchase the shares in Leighton Welpsun.

The conditions were met for the held back amount to be paid to LIL, which triggered the infusion obligation. However, there were difficulties with meeting that obligation. On 13 August 2011 Welspun Infra waived the infusion obligation. Two days later, the appellant authorised the payment instruction the subject of count 1. Some draft documents, being an “Agreement to Buy and Sell” and a “Facility Agreement” were circulated shortly afterwards but were not signed. In December 2011, LHL’s internal auditor began asking questions about the $15 million payment. A buy and sell agreement (the subject of count 2) for the value of $15 million was signed on 19 December 2011, and dated 1 August 2011 (with a Mr Khemka signing on behalf of Asian Global).

The Court held, allowing the appeal, quashing the verdicts of guilty and entering verdicts of acquittal:

Whether the trial judge erred in the admission/non-admission of evidence

1. Admission of evidence on the viability of centralised procurement of steel: The trial judge did not err in admitting this evidence. The evidence was relevant as per s 55 of the Evidence Act 1995 (NSW). Some of the evidence was not opinion evidence, since the manner in which the companies operated was a question of fact. Other evidence, which involved expressions of opinion, was given by witnesses who had the necessary experience: [336]-[344] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

Bank of Valletta PLC v National Crime Authority (1999) 90 FCR 565; [1999] FCA 1099, referred to.

1. Non-admission of the Global Business Overview Presentation document: The trial judge erred in not admitting this document. The document was relevant to the facts in issue and had a non-hearsay purpose. The case of Rusu, so far as it states that the authenticity of a document cannot be proved by consideration of the form or content of the document, was incorrectly decided: [362]-[372] (Bathurst CJ); [712] (Hoeben CJ at CL); [713]-[716] (Leeming JA).

National Australia Bank Ltd v Rusu (1999) 47 NSWLR 309; [1999] NSWSC 539, not followed.

Australian Competition and Consumer Commission v Air New Zealand (No 1) (2012) 207 FCR 448; [2012] FCA 1355; Capital Securities XV Pty Ltd v Calleja [2018] NSWCA 26, referred to.

Federal Commissioner of Taxation v Cassaniti (2018) 266 FCR 385; [2018] FCAFC 212, considered.

Whether the jury directions on count 1 were affected by errors of law

1. Direction that the jury had to be unanimous about the falsity only one of the purposes in the payment instruction: The change to the Crown case in the Crown’s closing address, that to find guilt the jury could be satisfied of the falsity of either of the purposes of the payment instruction, rather than both, was oppressive and resulted in a miscarriage of justice: [394]-[398] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

Roads and Traffic Authority (NSW) v Graincorp Operations Ltd [2010] NSWCA 317, considered.

1. The charge was not rendered duplicitous by the change in the Crown case, which contented there were alternative bases for finding guilt. Construing the statute, the offence in s 1307 of the Corporations Act focuses on conduct which produces a particular result. The relevant conduct here was the making of the two entries on the payment instruction which was said to result in the falsification of the books of the company, which was a single act of criminality: [399]-[413] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

Environment Protection Authority v Truegain Pty Ltd (2013) 85 NSWLR 125; [2013] NSWCCA 204; Johnson v Miller (1937) 59 CLR 467; [1937] HCA 77; Montgomery v Stewart (1967) 116 CLR 220; [1967] HCA 11; S v The Queen (1989) 168 CLR 266; [1989] HCA 66; Walsh v Tattersall (1996) 188 CLR 77; [1996] HCA 26; Hannes v Director of Public Prosecutions (Cth) (No 2) [2006] NSWCCA 373; 60 ACSR 1, considered.

1. Direction on recklessness: The jury direction as to recklessness was not affected by an error of law. It would be open to the jury to find that the appellant did not act dishonestly but was aware there was a substantial risk that the entries did not reflect the true purpose and he was unjustified in taking that risk: [424]-[427] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

Whether the jury directions on count 2 were affected by error of law

1. Definition of “false”: The Crown case on count 2 was put on the basis that the buy and sell agreement was a sham. The definition of “false” in the jury directions, which included backdating and said there was no requirement to prove dishonesty, was therefore affected by an error of law, in circumstances where the definition of falsity was said to “carry over” to count 2: [443]-[448] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55; Coshott v Prentice (2014) 221 FCR 450; [2014] FCAFC 88, referred to.

1. Proving sham: The jury directions on sham were not affected by an error of law. The direction given by the trial judge, including his correction that none of the listed factors taken alone or in conjunction was necessarily sufficient to establish sham, directed the jury’s mind to the fact that they needed to be satisfied beyond reasonable doubt that both parties to the knowledge of each other intended the agreement to have no legal effect and acted dishonestly in entering into it: [460]-[467] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55; Snook v London and West Riding Investments Ltd [1967] 2 QB 786; Lewis v Condon (2013) 85 NSWLR 99; [2013] NSWCA 204; Scott v Commissioner of Taxation (Cth) (No 2) (1966) 40 ALJR 265; Miles v Bull (1969) 1 QB 258; Coshott v Prentice (2014) 221 FCR 450; [2014] FCAFC 88, referred to.

Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449, considered.

1. Leaving recklessness on count 2: In the context of the written directions, the mistaken reference in the summing up to recklessness would not have misled the jury: [473] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

2. Direction that Mr Khemka was the relevant party for proving sham: The jury direction that Mr Khemka was the directing mind of Asian Global was affected by error. The question for the jury was to determine who was responsible for Asian Global entering into the agreement, and then attribute that person’s intension and knowledge to Asian Global: [483]-[494] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

Tesco Supermarkets Ltd v Nattrass [1972] AC 153; El Ajou v Dollar Land Holdings PLC [1994] 2 All ER 685; Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500, considered.

Hamilton v Whitehead (1988) 166 CLR 121; [1988] HCA 65; The Bell Group Ltd (In liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1; [2008] WASC 239; Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751; (2018) 127 ACSR 110, referred to.

Whether the jury directions reversed the onus and diminished the burden of proof

1. Yes/No Question trail: It was not necessary for the jury to be positively satisfied that an answer to any of the questions in the question trail was “no” in order to acquit the accused. The jury should have been directed that if they were not satisfied beyond reasonable doubt that the answer to any of the questions was “yes” they should acquit. The direction that if the jury was undecided as to the answer of any of the questions in the question trail, they should consider whether the answer was in the negative, diminished the onus on the Crown and placed a positive burden on the appellant to satisfy the jury that the answers to the questions should be in the negative: [503]-[511] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

Moore v R [2016] NSWCCA 185; Budrodeen v R [2014] NSWCCA 332; Hadchiti v R (2016) 93 NSWLR 671; [2016] NSWCCA 63, considered.

Towney v R [2018] NSWCCA 65, referred to.

1. Direction that the jury needed only to be satisfied that the Crown case was reasonable: There was a misdirection by the trial judge, as it was not for the jury to determine whether there was “any other reasonable conclusion arising from the facts”, but for the Crown to exclude all reasonable hypotheses inconsistent with guilt: [522]-[524] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

Moore v R [2016] NSWCCA 185; Hadchiti v R (2016) 93 NSWLR 671; [2016] NSWCCA 63; Towney v R [2018] NSWCCA 65, referred to.

Whether the trial judge erred in refusing to give a Mahmood direction in relation to the absence of the Operating Company Chief Financial Officers from the Crown witnesses

1. It was unnecessary for the trial judge to give a Mahmood direction, as there was no reason to suggest that the CFOs of the operating companies would be material witnesses: [535]-[537] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

Whether the trial was affected by miscarriages of justice

1. Prosecutor’s closing address: There was a substantial miscarriage of justice arising from the prosecutor’s closing address. The series of rhetorical questions used tended to suggest that absent an explanation from the appellant, the jury could conclude that the payment was made for a purpose other than that stated. However, the obligation is on the prosecutor to call all witnesses relevant to the unfolding of the narrative. In the context of the rhetorical questions, the jury may have placed weight on the comment that the appellant did not give evidence. The prosecutor’s reference to “no evidence” on certain matters in effect asked the jury to draw inferences against the appellant and reversed the onus of proof: [572]-[590] (Bathurst CJ); [712] (Hoeben CJ at CL); [713]-[719] (Leeming JA).

Gilham v R [2012] NSWCCA 131; R v MG (2007) 69 NSWLR 20; [2007] NSWCCA 57; Wood v R (2012) 84 NSWLR 581; [2012] NSWCCA 21; Whitehorn v R (1983) 152 CLR 657; [1983] HCA 42; R v Apostilides (1984) 154 CLR 563; [1984] HCA 38, referred to.

1. Summing up: In summing up, each of the prosecution and defence case must be accurately and fairly put to the jury, and a written summary for the jury should also present the case for each party in a fair and balanced manner. Some parts of the trial judge’s written summary of the parties’ cases did not provide a balanced and fair summary. [606]-[615] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

Domican v The Queen (1992) 173 CLR 555; [1992] HCA 13; Justins v R (2010) 79 NSWLR 544; [2010] NSWCCA 242; Hadchiti v R (2016) 93 NSWLR 671; McKell v The Queen (2019) 264 CLR 307; [2019] HCA 5, referred to.

Whether the verdicts were unreasonable

1. The principles on which a court will set aside a verdict as unreasonable are well established. In a circumstantial case, it is important to look at the evidence as a whole in considering whether the jury reached an unreasonable verdict. In this case, it would be open to the jury to be satisfied of various matters, including that LIL was at risk of being required to repurchase the shares, and that the payment the subject of the payment instruction was made in connection with the grant of the waiver of the infusion obligation and the provision of the held back amount: [667]-[681] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

Dickson v R (2017) 94 NSWLR 476; [2017] NSWCCA 78; Fennell v The Queen [2019] HCA 37; (2019) 93 ALJR 1219; see also R v Hillier (2007) 228 CLR 618; [2007] HCA 13; Pell v R [2020] HCA 12; (2020) 94 ALJR 394; Libke v The Queen (2007) 230 CLR 559; [2007] HCA 30; M v The Queen (1994) 181 CLR 487; [1994] HCA 63, referred to.

1. Count 2: To find sham, the jury would have to have found that each party, to the other’s knowledge, was going through the charade of negotiating an agreement which was not intended to have any legal effect; however, there was no evidence about the intention and knowledge of Welspun or Asian Global. Other factors, including the lack of value obtained from the agreement, and the concern from the internal auditor about the commerciality of the agreement, did not make it a sham. While it would have been open to the jury to infer that the agreement was made to formalise the payment the subject of the payment instruction and that LHL did not expect to obtain any real benefit, in the absence of any evidence from those involved in the negotiations and the intention of Asian Global, there is a reasonable doubt that the agreement was a sham: [682]-[699] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

The Queen v Baden-Clay (2016) 258 CLR 308; [2016] HCA 35, referred to.

1. Count 1: For the purpose of the $12.5 million payment, the Crown was not able to exclude beyond reasonable doubt the hypothesis that the parties agreed to enter into an agreement in the nature of the buy and sell agreement (and make the $2.5 million loan) in substitution for the infusion obligation. This is particularly so in the absence of material concerning the negotiations that took place. There was, however, evidence that the description of the payment being for “marketing and advisory services” was consistent with the objects of the buy and sell agreement. It was not open to the jury to conclude beyond reasonable doubt that this entry was false and that the appellant acted recklessly in making the entry: [700]-[707] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

2. For the purpose of the $2.5 million payment, it would seem difficult to come to the conclusion that one entry on the payment instruction was false and made recklessly whilst entertaining reasonable doubt as to the other. In light of other evidence from which it can be inferred that it was anticipated that the infusion issue was to be resolved in part by the making of the $2.5 million loan, it was not open for the jury to find beyond reasonable doubt that the appellant did not believe it was the true purpose of the payment or was reckless in stating that was the case: [708]-[709] (Bathurst CJ); [712] (Hoeben CJ at CL); [713] (Leeming JA).

Judgment

1. BATHURST CJ: The appellant Mr Peter Alan Gregg (the appellant) was charged on indictment dated 9 May 2017 with the following offences:

Count 1:   “On or about 15 August 2011 at Sydney, New South Wales and elsewhere, being an officer of a company, namely Leighton Holdings Limited, engaged in conduct that resulted in the falsification of books affecting or relating to affairs of the company, namely, a payment instruction relating to two payments to be made to Asian Global Projects and Trading FZE in the total sum of $15,000,000 (USD).

Contrary to section 1307(1) of the Corporations Act2001”.

Count 2:   “Between about 15 August 2011 and about 19 December 2011 at Sydney, New South Wales and elsewhere, being an officer of a company, namely Leighton Holdings Limited, engaged in conduct that resulted in the falsification of books affecting or relating to affairs of the company, namely, an Agreement to Buy and Sell between the company and Asian Global Projects and Trading FZE dated 1 August 2011.

Contrary to section 1307(1) of the Corporations Act2001”.

2. Following a trial before a jury the appellant was convicted of each offence. He was sentenced to a term of imprisonment of 12 months on count 1, and 2 years on count 2, to be served concurrently by way of an Intensive Correction Order. He has sought leave to appeal against his conviction and sentence on the following grounds:

“Conviction

1.   The verdicts were unreasonable or cannot be supported having regard to the evidence.

2.   The trial judge erred in admitting evidence on the viability of centralised procurement of steel.

3.   The trial judge erred in rejecting the Appellant’s tender of the Global Business Overview Presentation.

4.   The jury directions on count 1 were affected by errors of law including:

a.   That the jury had to be unanimous as to the falsity of only one of the two stated purposes in the Payment Instruction; and

b.   That the jury only needed to be satisfied that the Appellant was reckless as to whether his conduct would result in the falsification of company books.

5.   The jury directions on count 2 were affected by errors of law including:

a.   Defining ‘false’ to not require dishonesty or an intention to deceive or mislead, and to include falsity by omission and backdating;

b.   That ‘sham’ could be proved by a combination of ‘factors’, or ‘enough’ factors, without proving the intermediate fact of both parties intending the agreement not to be legally binding;

c.   Inadvertently leaving recklessness on count 2 contrary to the trial judge's ruling; and

d.   Directing that Mahesh Khemka was the relevant party, or relevant directing mind and will of the party, to the Buy and Sell Agreement for the purpose of proving sham.

6.   The jury directions reversed the onus and diminished the burden of proof, including by:

a.   Utilising a question trail that compelled ‘Yes/No’ answers to essential questions, imposing a burden on the Appellant to positively persuade the jury that the answer to the essential questions was ‘no’ to obtain an acquittal; and

b.   Directing that the jury needed only to be satisfied that the Crown case on the ultimate question of guilt was reasonable and that it was not satisfied that an alternative explanation was reasonable, placing a burden on the Appellant to provide a reasonable explanation and/or diminishing the burden on the Crown to merely showing that its case ‘reasonably arises’, and circumventing the burden of beyond reasonable doubt that applied to essential intermediate fact.

7.   The trial judge erred in refusing to give a direction that the jury could have regard, in considering whether there was a reasonable doubt about the Appellant’s guilt, to the absence of the Operating Company Chief Financial Officers from the Crown witnesses (a Mahmood Direction).

8.   The trial was affected by miscarriage(s) of justice arising from:

a.   The Prosecutor’s closing address which impermissibly commented on the Appellant’s silence, reversed the onus of proof and misstated the legal elements of the offences; and

b.   The summing up, which presented an imbalanced and incorrect summary of the parties’ respective cases and permitted the Crown to put new arguments to the jury after the Appellant's closing address to which the Appellant was not permitted to respond.

Sentence

9.   The trial judge erred in imposing the maximum penalty for an offence of below mid-range seriousness.

10.   The sentences are otherwise manifestly excessive.”

3. During the course of the hearing of the appeal the appellant was given leave to amend his Notice of Appeal by adding the following ground as ground 5(e):

“The trial judge erred in declining to leave the s 1307(3) defence to the jury on count 2.”

4. Section 1307 of the Corporations Act 2001 (Cth), so far as relevant, is in the following terms:

“1307   Falsification of books

(1)   An officer, former officer, employee, former employee, member or former member of a company who engages in conduct that results in the concealment, destruction, mutilation or falsification of any securities of or belonging to the company or any books affecting or relating to affairs of the company is guilty of an offence.

…

(3)   It is a defence to a charge arising under subsection (1) or (2) if the defendant proves that he, she or it acted honestly and that in all the circumstances the act or omission constituting the offence should be excused.”

5. Books is defined in s 9 of the Corporations Act in the following terms:

“books includes:

(a)   a register; and

(b   any other record of information; and

(c)   financial reports or financial records, however compiled, recorded or stored; and

(d)   a document;

but does not include an index or recording made under Subdivision D of Division 5 of Part 6.5.”

6. The conduct said to be the subject of count 1 was the giving of a handwritten payment instruction by the appellant to Mr Thomas McKay, the Executive General Manager of Treasury for Leighton Holdings Limited (LHL) on 15 August 2011. It was in the following terms:

“Tom.

Please arrange two payments payable today (Monday) US time.

(1)   USD 12.5 million

(2)   USD 2.5 million

to the above account

Payment   1. is for marketing and advisory services

2. is a loan at the prevailing USD rate for 12 months.”

7. The payment was directed to go to a beneficiary, Asian Global Projects & Trading FZE (Asian Global), the intermediary bank being Standard Chartered Bank New York.

8. The conduct said to constitute the offence the subject of count 2 was the procuring of the entry into an agreement by LHL with Asian Global, which was said to constitute a sham.

9. This agreement (the buy and sell agreement) is relatively short and it is convenient to set it out in full:

“Agreement to Buy and Sell

THIS AGREEMENT (‘Agreement’) is entered into at Dubai on 1^st day of August 2011:

BETWEEN

[LEIGHTON Holdings Limited], a company incorporated under the laws of Australia having its principal place of business at 472 Pacific Highway, St Leonards, NSW 2065 (hereinafter referred to as the ‘Buyer’, which expression shall unless repugnant to the context or meaning thereof shall mean and include its successors and permitted assigns);

AND

Asian Global Projects & Trading FZE, a company incorporated under the laws of United Arab Emirates (UAE) and having its principal place of business at PO Box 8403, SAIF Zone Sharjah UAE (hereinafter referred to as ‘Seller’, which expression shall, unless repugnant to the context and meaning thereof, be deemed to mean and include its successors and permitted assigns).

The Buyer and Seller are collectively referred to as the ‘Parties’ and individually as ‘Party’.

RECITALS:

A.   Across its various subsidiary companies, Buyer is engaged in a wide range of engineering and construction projects across various sectors including water and oil and gas where there are significant requirements for steel materials, and steel pipes and where there is advantage to be gained from ‘bulk buying’[.]

B.   Seller is a supplier of steel and steel pipes, through its contacts with internationally reputed manufacturers of high grade steel and steel pipes (collectively ‘Materials’). Seller is interested in arranging supplies of steel and pipes to Buyer for its projects. Seller is also willing to commit to certain levels of supply and price benefit in return for Buyer’s business.

C.   The Buyer and Seller are desirous of entering into an agreement that is mutually advantageous to the Parties.

NOW THEREFORE, in consideration of the above, [i]t is hereby agreed by the Parties as follows:

1.   Buyer has a significant requirement towards procurement of Materials across its various subsidiary companies and their projects and whilst it wishes to purchase from/through Seller, purchase shall remain at Buyer sole discretion and shall be at all times on a non exclusive basis.

2.   For all purchase requirements from Buyer and Buyer’s subsidiary companies, Seller will provide preferred and commercially beneficial pricing no matter the exact size of individual orders and will at all times view the total Buyer ordering on a collective basis, regardless of the entity or entities through which the purchase takes place.

3.   Seller further commits that all Leighton orders will be given preferential status for delivery through seller’s contacts and shall ensure supply Buyer’s orders in time frames that are faster than market norms.

4.   In consideration of Seller’s commitments, Buyer will pay USD 15 million (US Dollars fifteen million only) [hereinafter referred to as ‘Consideration’] on execution of this Agreement.

5.   The aforesaid consideration is payable to the Sellers for their commitment to arrange supplies at the earliest delivery schedules and lowest prices to the best of its knowledge and efforts and are not refundable and non adjustable against actual orders placed even if the quantum of orders placed by the Buyer are lower than the [sic] expected by it or the Seller is unable to arrange supplies of materials due to any reason beyond its control or supplies are rejected by the buyer.

6.   This agreement is valid for a period of 2 years from the date of Agreement.

7.   The Parties agree that this Agreement shall be confidential between them, and shall not be disclosed to any third party except as may be required by law or a court of competent jurisdiction.

8.   This Agreement shall be subject to the laws of the [sic] Singapore.

9.   Any dispute in relation to this agreement shall be referred in the first instance to the CEO’s [sic] of Buyer and Seller for resolution. If after 30 days of notification of a dispute the Parties have failed to resolve amicably between the CEO’s [sic], then the matter may be referred to arbitration. Arbitration shall be before a single arbitrator selected by mutual agreement of the Parties, or failing mutual agreement, but [sic] the Chairman of the SIAC, in Singapore, pursuant to the laws of Singapore and in accordance with the SIAC rules.”

10. The Agreement was executed on behalf of LHL by the appellant and on behalf of Asian Global by a Mr Mahesh Khemka.

The Leighton Group

11. In the period in question, LHL was the holding company of a number of subsidiary companies including Leighton International Limited (LIL), Leighton Asia Limited and various domestic operating companies. Leighton Contractors (India) Private Limited, subsequently renamed Leighton Welspun Contractors Private Limited (Leighton Welspun), was initially a wholly owned subsidiary of LIL.

12. Mr Stephen Johns was a director of LHL from December 2009 until March 2013, and was appointed Chairman of the Board on 24 August 2011. Prior to becoming Chairman of the Board he was the Chairman of the Audit Committee.

13. Mr Johns described LHL as having a “very unusual business model”. He stated that LHL was a holding company that did not operate or run specific businesses, but delegated day-to-day business operations to the operating companies who acted independently. He stated that the operating companies competed against each other and tendered against each other for projects, leading to a lot of duplication. He stated that this model changed when Mr David Stewart and then Mr Hamish Tyrwhitt became Chief Executive Officer, when there was a move towards looking at how “synergies” and “efficiencies” could be achieved in order to make savings across the Leighton Group.

14. In the 2010/2011 financial year the Leighton Group had suffered a number of financial setbacks. In a media release of 14 February 2011, LHL reported a $217 million profit for the six months to December 2010, which was down 25 per cent “from $289 m[illion] last year”. The media announcement indicated expectation of a net profit after tax of around $480 million for the full financial year. However, by May 2011 LHL had announced an expected loss for the financial year of $427 million.

15. In a report dealing with the loss, delivered to the LHL Board at a meeting on 30 May 2011, the then Chief Executive Officer, Mr Stewart stated that two of the Group’s business priorities in the short and medium term were first, to ensure “no more negative surprises” and that the 2011 and 2012 results were delivered as forecast and second, to establish a sustainable operating platform for the Group which built and made use of the Group’s capital and “[a]voids self-destructive intra-group competition of all kinds”. The minutes of the Board meeting also record Mr Stewart’s remarks that a priority was to ensure no more negative surprises and that the 2011/2012 results were delivered as forecast.

The sale of shares in Leighton Welspun

16. As I indicated, Leighton Welspun, then known as Leighton Contractors (India) Private Limited, was a wholly owned subsidiary of LIL. In 2010 negotiations took place with the Indian based Welspun Group of Companies in relation to a joint venture between that group and the Leighton Group in India. It was not in issue that the Welspun Group was controlled and largely owned by a Mr BK Goenka. The negotiations culminated in the sale of 35 per cent of the shares in Leighton Welspun to Welspun Infra Projects Private Limited (Welspun Infra) for the sum of approximately US$100 million. The initial agreement was entered into on 24 December 2010 and was announced to the market on 29 December 2010. The media release referred to the following comments made by Mr Stewart who at the time was Chief Executive Officer elect:

“‘We have been working successfully in India for 7 years and see the transaction as very important in taking our Indian business to the next stage of its development. Having a local partner clearly provides greater access to the market, particularly when Welspun has such a complementary portfolio of businesses,’ said Mr Stewart.

‘Operating since 1985, Welspun Group Limited has interests in infrastructure, the oil and gas sectors, steel, steel pipes, and home textiles. The Company has a global presence, operating in more than 50 countries and in 2009/10 had annual revenues of around US$1.6 billion.

‘The transaction will generate US$80 million in cash and result in a one-off gain to Leighton Holdings of approximately US$200 million,’ said Mr Stewart.”

17. The transaction resulted in the revaluation of Leighton Welspun in the accounts of LHL to approximately $300 million.

The Share Purchase Agreement and associated agreements

18. The Share Purchase Agreement was entered into on 24 December 2010. The parties were LIL, which was described as the Seller, Leighton Welspun, described as the Company, and Welspun Infra, described as the Purchaser.

19. The sale shares were defined as constituting 35 per cent of the issued capital of Leighton Welspun and the purchase consideration was stated to be 470 crore. It should be noted that it was agreed that one crore was worth approximately AUD $200,000 at the relevant time. Thus the total purchase consideration in Australian dollars was approximately $94 million. However, it was common ground between the parties at the trial that it was appropriate to treat the sale price as approximately US$100 million.

20. Clause 2.1 of the Share Purchase Agreement provided for the sale and purchase of the sale shares. It was in the following terms:

“2.1   Subject to the fulfillment of the Seller’s Conditions Precedent and relying on the representations and warranties and the indemnities given by the Seller and the Company under this Agreement, the Purchaser hereby agrees to purchase and the Seller hereby agrees to sell the Sale Shares free from all Encumbrances to the Purchaser for the Purchase Consideration. Provided however that the Parties have agreed that the entire Purchase Consideration shall not be paid to the Seller on the Closing Date and the Held Back Amount will be held back. Payment by the Purchaser, of the Held Back Amount to the Seller shall be conditional upon the achievement of the EBITDA Target by the Company. In the event, the EBITDA Target is not achieved by the Company, the Purchase Consideration less the Held Back Amount paid on the Closing Date, shall be the Final Purchase Consideration for the Sale Shares and the Escrow Agent shall release the Held Back Amount to the Purchaser.”

21. EBITDA was defined in the Agreement, and EBITDA Target was defined to mean EBITDA of 340 crore for the target period (approximately AUD $68 million).

21. The Held Back Amount was defined as the sum of 40 crore (approximately AUD $8 million).

22. Clause 6 of the Share Purchase Agreement dealt with the condition for payment of the Held Back Amount. So far as relevant it provided as follows:

“6.1   The obligation of the Escrow Agent to release the Held Back Amount shall be conditional upon the Company having achieved the EBITDA Target for the period beginning July 1, 2010 and ending on June 30, 2011 (‘Target Period’).

6.2   Certificate of Adjusted EBITDA: The Company Auditor shall produce a certificate evidencing the Adjusted EBITDA for the Target Period (‘Company Certificate’) on or before July 15, 2011 and submit the same to the Seller and the Purchaser.

6.3   Adjusted EBITDA less than EBITDA Target: If the Company Certificate states that the Adjusted EBITDA is less than the EBITDA Target, then the Seller and the Purchaser shall not later than 2 (Two) Business Days from the date of receipt of the Company Certificate, jointly instruct the Escrow Agent in the format provided in the Escrow Agreement and the Escrow Agent shall immediately release the Held Back Amount to the Purchaser.

6.4   Adjusted EBITDA equal to or more than EBITDA Target: Subject to Clause 6.8 and Clause 6.9, if the Company Certificate states that the Adjusted EBITDA is equal to or more than EBITDA Target and the Purchaser agrees with such Company Certificate, the Seller and the Purchaser shall, within a period of 2 (Two) Business Days from the date of receipt of the Company Certificate, jointly give instructions to the Escrow Agent in the format provided in the Escrow Agreement and the Escrow Agent shall release the Held Back Amount to the Seller.

6.5   Review of the Adjusted EBITDA: In the event, the Company Certificate states that the Adjusted EBITDA is equal to or more than the EBITDA Target and the Purchaser does not agree with the Company Certificate, the Purchaser shall have the right to nominate an auditor to undertake and complete a review of the Adjusted EBITDA for the Target Period, who shall deliver to the Purchaser and the Seller, a certificate evidencing the Adjusted EBITDA for the Target Period (‘Purchaser Certificate’) within a period of 14 (Fourteen) Business Days of receipt of the Company Certificate.

6.6   Purchaser’s review confirms EBITDA Target: Subject to Clause 6.8 and Clause 6.9, if the Purchaser Certificate states that the Adjusted EBITDA is equal to or more than the EBITDA Target, the Seller and the Purchaser shall within a period of 2 (Two) Business Days from the date of receipt of the Purchaser Certificate, jointly give instructions to the Escrow Agent in the format provided in the Escrow Agreement and the Escrow Agent shall release the Held Back Amount to the Seller.

6.7   Purchaser’s review does not confirm EBITDA Target: If the Purchaser Certificate states that the Adjusted EBITDA is less than the EBITDA Target, then Held Back Amount shall be retained in the escrow and an independent third auditor, being one of the Big 4 auditing firms, shall be appointed by the Seller and the Purchaser within a period of 5 (Five) days from the receipt of the Purchaser Certificate who shall review the Adjusted EBITDA and submit a certificate to the Seller and the Purchaser confirming whether the Adjusted EBITDA is less than, equal to or more than the EBITDA Target (‘Independent Auditor Certificate’) within 3 (Three) months from the receipt of the request for the review. Subject to Clause 6.8 and Clause 6.9, in the event the Independent Auditor Certificate states that the Adjusted EBITDA is equal to or more than the EBITDA Target, the Seller and the Purchaser shall, within a period of 2 (Two) Business Days from the receipt of the Independent Auditor Certificate give joint instructions to the Escrow Agent in the format provided in the Escrow Agreement and the Escrow Agent shall immediately release the Held Back Amount to the Seller. In the event Independent Auditor Certificate states that the Adjusted EBITDA is less than the EBITDA Target, the Seller and the Purchaser shall, within a period of 2 (Two) Business Days from the receipt of the Independent Auditor Certificate, give joint instructions to the Escrow Agent in the format provided in the Escrow Agreement and the Escrow Agent shall immediately release the Held Back Amount to the Purchaser.”

24. It can thus be seen that the $8 million the subject of the Held Back Amount was payable to LIL if the adjusted EBITDA for the target period was equal to or exceeded the EBITDA Target, and to Welspun Infra if Leighton Welspun failed to reach that target. Adjusted EBITDA was defined in the Agreement. It is unnecessary to set out the definition.

25. Clause 6.9 as originally set out in the Share Purchase Agreement provided as follows:

“6.9   Further, prior to the release of the Held Back Amount, the Purchaser and Seller shall mutually agree on the manner of dealing with the NHAI Claims and settlement between the Parties in relation thereto.”

26. It should be noted that NHAI was defined as the National Highway Authority of India. The Claims referred to in cl 6.9 were defined in the Shareholders Agreement (see [27] below) in the following terms:

“‘NHAI claims’ means a sum of Rs 1,38,00,00,000 (Rupees One hundred thirty eight crores) towards dues and advances to the LIN/OSE JV for the works done by the Company, as a contractor for OPIPL and OPAPL and, as outstanding in the books of the Company as of 31 March 2010 or any such increased amount lying outstanding in the books of the Company as on the Closing Date”.

27. On the same day, 24 December 2010, the parties also entered into a Shareholders Agreement. It is unnecessary to deal in any detail with the Shareholders Agreement in its original form, but it imposed an obligation on LIL to provide technical expertise and know-how to Leighton Welspun and contained non-competition provisions by LIL and Welspun Infra that neither they nor their respective affiliates would compete for any contract in respect of which Leighton Welspun was desirous of making a bid.

28. In addition, the parties to the Share Purchase Agreement and the Shareholders Agreement entered into a Business Co-operation Agreement dated 24 December 2010. That Agreement imposed the following obligations on LIL and Welspun Infra:

“5.2.2   Leighton’s business opportunities post the Effective Date offered to Welspun

Post the Effective Date, Leighton shall afford the following business opportunities in the specific sectors, other than Joint Concession Project(s), below to Welspun:

(a)   Oil and Gas Sector

(i)   In the event, the Company requires the supply of pipes in connection with its EPC Contracts in the Oil and Gas Sector in India the Company shall provide a ROFR to Welspun in relation to the commercial contracts for the supply of such pipes.

(ii)   In the event, the Company sub contracts all or any portion of its EPC Contracts in the Oil and Gas Sector India, the Company shall provide a ROFR to WPL in relation to such sub contracts. The provisions of Clause 4 and Clause 6 shall apply to such sub contracts.

(b)   Industrial Construction Sector

In the event, the Company sub contracts all or any portion of its commercial contracts with regard to its Industrial Construction Sector in India, the Company shall provide a ROFR to WPL in relation to such sub contracts. The provisions of Clause 4 and Clause 6 shall apply to such sub contracts.

(c)   Railway Sector

In the event, the Company sub contracts all or any portion of its commercial contracts with regard to its business in the railway sector in India, the Company shall provide ROFR to WPL in relation to such sub contracts. The provisions of Clause 4 and Clause 6 shall apply to such sub contracts.

5.2.3   Supply of pipes

The Company will introduce Welspun Corp Limited and its Affiliates in the pipe manufacturing business (‘Welspun Pipes’) to the Leighton companies/Affiliates/business associates for procurement of pipes from Welspun Pipes by the Leighton Group or its business associates, globally on a best endeavour basis such that Welspun Pipes receives the opportunity to supply pipes for the oil and gas and other contracts undertaken by Leighton Group and its business, globally.

It is clarified that whether or not the Leighton Group/its business associates is to procure the pipes mentioned above for their oil and gas contracts globally lies in their sole discretion.

…

5.3   Welspun’s covenant

5.3.1   Welspun’s business opportunities prior to the Effective Date offered to Leighton

In case of Welspun’s Existing Projects, Welspun shall, in good faith, make available opportunities to the Company as an EPC Contractor post the Effective Date, to the maximum extent permissible, subject to compliance with applicable Law, memorandum of understandings, EPC Contracts and contractual arrangements undertaken by the Company prior to the Effective Date.

5.3.2   Welspun’s business opportunities post the Effective Date offered to Leighton

Post the Effective Date, subject to Clause 2 and Clause 3, wherever Welspun Group intends to give an EPC Contract to a Third Party in Oil and Gas Sector, Industrial Construction Sector, Power Sector and other infrastructure sectors, the Company shall have a ROFR, regarding such EPC Contracts. It is clarified that Welspun may not have the conclusive decision making powers in respect of all Welspun Group companies and in such case Welspun’s obligation herein would be to facilitate the appointment of the Company on a best endeavour basis. For avoidance of doubt, this Clause 5.3.2 shall not apply to Clause 3.2.”

29. The Effective Date was defined as the closing date, which was the date of completion of the Share Purchase Agreement.

30. In addition, LIL, Leighton Welspun and another company in the Welspun Group, Welspun Infratech Limited, entered into a Support Agreement on 24 December 2010. Broadly speaking, that Agreement obliged LIL to render technical support to companies in the Welspun Group in respect of bids for work in connection with bid documents issued by governmental authorities.

31. The parties sought to deal with the matters the subject of the original cl 6.9 of the Share Purchase Agreement in a Supplemental Agreement also dated 24 December 2010. Recital C of that Agreement was in the following terms:

“C.   In the aforesaid context, the Parties have agreed that in the event Leighton is entitled to receive the Held Back Amount the Parties shall agree upon the manner and terms on which, Leighton shall infuse a sum, by way of a subordinated debt, subscription to preference shares or in any other manner permitted under Applicable Law and as may be mutually agreed between the Parties corresponding to the NHAI Claims (in full or any part thereof) written off by the Auditors or a sum corresponding to the Identified Claims (as defined in Clause 3.1.1 of this Agreement), or any part thereof, in relation to which, an arbitral award is passed against OPAPL and/or OPIPL (not exceeding Rs. 1,00,00,00,000 (Rupees One hundred crores)) into the Company, which shall be subordinated to all secured and unsecured debt raised by the Company (‘Advance’). Further, the Parties have agreed, that the manner and terms for infusing the Advance and corresponding amendments to the Articles of Association of the Company shall be made prior to the release of the Held Back Amount and all necessary actions shall be taken to implement such understanding and in the event the Parties fail to arrive at the said understanding, the same shall result in Welspun having an option of calling upon Leighton to purchase all the Equity Securities held by Welspun in the Company in accordance with the terms of this Agreement.”

32. The Supplemental Agreement amended the Share Purchase Agreement by defining IRR as having the meaning ascribed to it in the Shareholders Agreement, and by inserting a new cl 6.9. This provision was in the following terms:

“6.9   If the Seller is entitled to receive the Held Back Amount under this Clause 6, prior to release of the Held Back Amount to the Seller, (i) the Parties shall mutually agree on the manner and terms on which, the Seller shall infuse the sums (being a sum not exceeding a sum of Rupees 1,00,00,00,000 (Rupees One hundred crores)), by way of a subordinated debt, subscription to preference shares or in any other manner permitted under Applicable Law and as may be mutually agreed between the Parties corresponding to (a) the NHAI Claims (or any part thereof) written off by the Auditors or (b) the Identified Claims, or part thereof, in relation to which, an arbitral award has been passed against OPIPL and/or OPAPL (‘Advance’), and (ii) the Parties shall execute definitive agreements on the understanding arrived at between them in (i) above in relation to the Advance, and corporate action shall be taken by the Company for amending its Articles of Association to incorporate a provision for such infusion of the Advance in the manner contemplated by the Purchaser and the Seller, in the form and manner satisfactory to the Purchaser (‘Prior Actions’). In the event, the mutual agreement as aforesaid is not arrived at between the Parties and the Prior Actions are not completed in relation to the Advance within a period of 45 (Forty Five) days from the date on which the Seller is entitled to receive the Held Back Amount under Clause 6.4 or Clause 6.6 or Clause 6.7 as relevant, the Purchaser shall be entitled to call upon the Seller to purchase all the Equity Securities held by the Purchaser and its Affiliates in the Company at a Price which gives the Purchaser a 20% (Twenty percent) IRR on the Investment Amount. Provided however, it is clarified that if the Seller is entitled to receive the Held Back Amount in accordance with the provisions of Clause 6.4 or Clause 6.6 or Clause 6.7 as relevant, irrespective of the agreement as aforesaid being arrived at between the Parties in relation to the Advance, the Held Back Amount shall be released to the Seller and the Seller and the Purchaser shall give joint instructions to the Escrow Agent within a period of 2 (Two) days from the expiry of the foregoing period of 45 (Forty Five) days not withheld. Further, notwithstanding anything contained in this Agreement, the obligation of the Seller to infuse the Advance shall not be limited by anything contained in Schedule 5 and the provisions of Schedule 5 shall not apply to the obligation of the Seller to infuse the Advance.”

33. Further, the Supplemental Agreement amended the Shareholders Agreement by inserting two new clauses in the following terms:

“6A   If Leighton is entitled to receive the Held Back Amount under Clause 6 of the Share Purchase Agreement, prior to release of the Held Back Amount, (i) the Parties shall mutually agree on the manner and terms on which, Leighton shall infuse the sums (being a sum not exceeding a sum of Rupees 1,00,00,00,000 (Rupees One hundred crores)), by way of a subordinated debt, subscription to preference shares or in any other manner permitted under Applicable Law and as may be mutually agreed between the Parties corresponding to (a) the NHAI Claims (or any part thereof) written off by the Auditors or to (b) the amounts corresponding to the Identified Claims, or part thereof, in relation to which, an arbitral award has been passed against OPIPL and/or OPAPL (‘Advance’), and (ii) the Parties shall execute definitive agreements on the understanding arrived at between them in (i) above in relation to the Advance, and corporate action shall be taken by the Company for amending its Articles of Association to incorporate a provision for such infusion of the Advance in the manner contemplated by the Purchaser and the Seller, in the form and manner satisfactory to the Purchaser (‘Prior Actions’). In the event, the mutual agreement as aforesaid is not arrived at between the Parties and the Prior Actions are not completed within a period of 45 (Forty Five) days from the date on which Leighton is entitled to receive the Held Back Amount under Clause 6.4 or Clause 6.6 or Clause 6.7 of the Share Purchase Agreement, as relevant, Welspun shall be entitled to call upon Leighton to purchase all the Equity Securities held by Welspun and its Affiliates in the Company at a price which gives Welspun a 20% (Twenty percent) IRR on the Investment Amount by issuing a notice in writing to Leighton in this regard (‘Welspun Put Notice’). Leighton shall complete the purchase and sale of all the Equity Securities held by Welspun and its Affiliates in the Company within a period of 30 (thirty) days from the date of receipt of the Welspun Put Notice. It is clarified that notwithstanding anything otherwise contained in the Share Purchase Agreement, the obligation of Leighton to infuse the Advance shall not be limited by anything contained in Schedule 5 of the Share Purchase Agreement and the provisions of Schedule 5 of the Share Purchase Agreement shall not apply to the obligation of Leighton to infuse the Advance.

…

6AA   In the event, after the agreement has been arrived at between the Parties in relation to the Advance under Clause 6A above, Leighton fails to infuse the Advance into the Company in the manner agreed to between the Parties under Clause 6A above, it shall be Leighton’s Event of Default and the provisions of Clause 15.2.3, Clause 15.2.4 and Clause 15.3 shall apply to the same.”

34. The Share Purchase Agreement was further amended by a second Amending Agreement dated 6 February 2011. It inserted a new cl 6.9:

“6.9   The agreement relating to the manner of and terms on which, the Seller shall infuse the sums (being a sum not exceeding a sum of Rupees 100,00,00,000 (Rupees Hundred Crore)) corresponding to (a) the NHAI Claims (or any part thereof) written off by the Auditors or (b) the Identified Claims, or part thereof, in relation to which, an arbitral award has been passed against OPIPL and/or OPAPL, shall be arrived at between the parties, prior to the release of the Company’s management accounts for the Target Period to the Company Auditor, for providing the Company Certificate in accordance with Clause 6.2. If such written agreement is not arrived at between the Parties and definitive agreements in relation thereto not signed prior to such release of the said management accounts, the Purchaser shall be entitled to call upon the Seller by issuing a notice to the Seller to purchase all the Equity Securities held by the Purchaser and its Affiliates in the Company at a price which refunds the Investment Amount (i.e. Rs. 430 Crores) and gives the Purchaser, a 20% (Twenty percent) IRR on a sum of Rs. 470 Crores from the Closing Date till the date of completion of such sale and purchase of all the Equity Securities held by the Purchaser and its Affiliates in the Company under this Clause 6.9 (‘Welspun’s Buyout Price’). In the event, the Purchaser issues a notice requiring the Seller to purchase all the Equity Securities held by the Purchaser and its Affiliates under this Clause 6.9, (i) the sale and purchase of all the Equity Securities held by the Purchaser and its Affiliates in the Company at the Welspun’s Buyout Price shall be completed within a period of 30 (thirty) days from the date of receipt of notice by the Seller and (ii) notwithstanding anything otherwise contained in Clause 6, the Seller and the Purchaser shall immediately and no later than 2 (two) Business Days from the date of such notice, issue joint instructions to the Escrow Agent for the release of the Held Back Amount to the Purchaser.”

35. On 17 February 2011, the Shareholders Agreement was amended by inserting the following definition of IRR:

“‘IRR’ means the compounded percentage return on the Investment Amount, from time to time, on the relevant date, calculated using the XIRR function of Microsoft Excel; it being clarified that the computation of IRR will take into account (i) the Closing Date in case of the Purchase Consideration and the date on which each investment is received by the Company from Welspun respectively, (ii) all dividends or other distributions received by Welspun from the Company and the respective dates on which the dividends and/or other distributions are received and (iii) any amount paid by Leighton to Welspun pursuant to Leighton’s indemnification obligations under the Share Purchase Agreement less any cost and expenses incurred by Welspun for recovery of the indemnity amount and the dates on which such indemnity amounts have been received;

Provided however that for the purpose of Clause 6A, ‘IRR’ means the compounded percentage return on a sum of Rs. 470 Crores and any other investment that may be made by Welspun in the Company, from time to time, on the relevant date, calculated using the XIRR function of Microsoft Excel; it being clarified that the computation of IRR will take into account (i) the Closing Date in case of Rs. 470 Crores and the date on which each investment is received by the Company from Welspun respectively, (ii) all dividends or other distributions received by Welspun from the Company and the respective dates on which the dividends and/or other distributions are received and (iii) any amount paid by Leighton to Welspun pursuant to Leighton’s indemnification obligations under the Share Purchase Agreement less any cost and expenses incurred by Welspun for recovery of the indemnity amount and the dates on which such indemnity amounts have been received”.

36. Clause 6A was also amended to make it consistent with the amended cl 6.9 of the Share Purchase Agreement.

37. On 21 April 2011, the parties entered into an Agreement which identified the NHAI Claims relevant to the infusion obligation. The claims were described as the OPIPL and OPAPL claims. Clauses 2.2 and 2.3 of the Agreement provided as follows:

“2.2   It has been agreed that in case OPIPL and OPAPL fail to invoke arbitration and nominate their arbitrators under the relevant concession agreements entered into with the NHAI in connection to the Identified Claims latest by September 30, 2011 (‘Non Arbitrated Claims’), then the Seller shall have an obligation to immediately infuse into the Company, a sum corresponding to such portion of Rs 100 (One hundred) crores which bears the same proportion as the Non Arbitrated Claims bears to the Identified Claims. In this regard therefore, for the purpose of Clause 6.9 of the Share Purchase Agreement and Clause 6A and Clause 6AA of the Shareholders Agreement, the above understanding shall find mention in the written agreement (which shall further mention that one of the conditions for infusion of monies by the Seller is the release of the Held Back Amount to the Seller) to be arrived at between the Parties and which agreement shall be arrived at between the Parties, prior to the release of the Company’s management accounts for the Target Period to the Company Auditor, for providing the Company Certificate in accordance with Clause 6.2 of the Share Purchase Agreement. The failure of the Parties to arrive at such written agreement in relation to infusion of the said amounts within the period set out in Clause 6.9 of the Share Purchase Agreement and Clause 6A of the Shareholders Agreement shall also entitle the Purchaser/Welspun to the rights contained in the said Clause 6.9 of the Share Purchase Agreement and Clause 6A of the Shareholders Agreement. Further, if the written agreement in relation to the infusion of the aforesaid amounts by the Seller/Leighton is arrived at within the said period, but if Seller/Leighton fails to infuse the said aforesaid amounts in accordance with such written agreement arrived at in relation to the same, it will also be a Leighton’s Event of Default and Welspun shall be entitled to the rights contained in Clause 15.2.3, Clause 15.2.4 and Clause 15.3 of the Shareholders Agreement.

2.3   It is clarified that:

2.3.1   the obligation of the Seller to infuse the monies under Clause 6.9 of the Share Purchase Agreement and 6A of the Shareholders Agreement shall not exceed in aggregate Rs 100 (One hundred) crores.

2.3.2   It is clarified for the removal of doubt that other than the event contemplated in this Agreement, the events set out in Clause 6.9 of the Share Purchase Agreement and Clause 6A of the Shareholders Agreement (NHAI Claims being written off by the Auditors or arbitration award being passed in relation to the Identified Claims against OPIPL and/or OPAPL), may occur at any time and shall not be limited by any time periods or cut off dates and the obligation of the Seller/Leighton under the agreement to be entered into between the Parties pursuant to Clause 6.9 of the Share Purchase Agreement and Clause 6A of the Shareholders Agreement shall arise immediately upon the happening of such events.”

38. Further, on 27 April 2011 the parties executed a term sheet concerning the infusion of the 100 crore. The term sheet described LIL as the provider of the funding, and that the sums advanced would “always be subordinated to all secured and unsecured debts availed by the Company”, stating that the preferred means of infusion would be redeemable preference shares. The term sheet also contained the following provisions:

2	Instrument	To be agreed by Welspun and Leighton at a later date subject to prevailing laws. The sums advanced under the instrument shall always be subordinated to all secured and unsecured debts availed by the Company (whether prior to or after the infusion of such sums under the Instrument).
3	Limit of the facility	INR 100 crores (‘Facility’); and there can be multiple instruments forming part of this Facility. The provisions of this Term Sheet shall mutatis mutandis apply to each Instrument. Subject to the aforesaid limit of Rs.100 crores, the quantum of the drawdown(s) of the Facility towards each instrument shall be as follows: 1. a sum corresponding to the NHAI Claims (in full or any part thereof) written off by the Auditors; or 2. in relation to Identified Claims where OPIPL and OPAPL (as relevant) has failed to invoke arbitration and nominate its arbitrators under the relevant concession agreements by 30 September 2011 (‘Non Arbitrated Claims’), a sum corresponding to such portion of the Facility which bears the same proportion as the Non Arbitrated Claims bears to the Identified Claims; or 3. a sum corresponding to the Identified Claims or any part thereof in respect of which an arbitral award is passed against OPIPL and / or OPAPL.
6	Tenure of the Facility/Redemption period	6 (six) years from the funds being received by the Company under each Instrument. It is clarified that each Instrument will have a tenure / redemption period of 6 (six) years from the date of funds being received by the Company. Single bullet Redemption / Repayment at the end of 6 (six) years from the date of receipt of funds under each Instrument.
7	Issuance/Conditions Precedent	The Facility will be drawn down only if the Held Back Amount i.e. Escrow Amount (Rs 40 crores less withholding tax) is released to LIL and within 10 days of any of the following event has occurred: 1. the NHAI Claims (or part thereof) are written off by the Auditors; and/or 2. non-submission of the notices to NHAI by OPIPL and/or OPAPL (as relevant) invoking the arbitration and nominating its arbitrators under the concession agreements in relation to Identified Claims by 30th September 2011; or 3. arbitral award is passed against OPIPL and OPAPL in connection with Identified Claims (or part thereof). It is clarified for the removal of doubt that the above events (other than sub-para 2 above) may occur at any time and shall not be limited by any time periods or cut off dates and the obligation of LIL to infuse the Funds under the Instrument shall arise immediately upon the happenings of such events.

39. Both the 21 April Agreement and the term sheet were executed on behalf of LIL and Leighton Welspun by a Ms Ameeta Chatterjee.

40. The evidence does not disclose the date on which the Share Purchase Agreement was in fact completed. Having regard to an email of 26 April 2011 from Mr Russell Waugh, the Managing Director of Leighton Welspun, to Mr David Kent, the General Manager of Tax of LHL, and the appellant, completion appears to have occurred on 28 April 2011.

The relevant contractual rights and obligations

41. Because there were some issues concerning the construction of the agreements, it is convenient that I deal with them at this point in the judgment.

42. The first point to note is that in each of the Share Purchase Agreement, the Business Co-operation Agreement and the Support Agreement, the Leighton counterparty was LIL. This is relevant in considering the effect of compliance with the infusion obligation or the failure to achieve the EBITDA target on the accounts of LHL. Although it was suggested that the failure to reach the EBITDA target and/or the meeting of the infusion payment would affect the accounts, there was no evidence as to how they would be affected, particularly in circumstances where the Leighton Group accounts would be prepared on a consolidated basis, the consolidated accounts presumably including Leighton Welspun which remained a subsidiary of LIL after completion of the Share Purchase Agreement.

43. Second, cl 5.2.3 of the Business Co-operation Agreement envisaged companies in the Leighton Group purchasing Welspun’s pipes from one of the companies in the Welspun Group (see [28] above). Although described as an opportunity for Welspun and expressly providing that the Leighton Group had an unfettered discretion whether or not to purchase such pipes, it does demonstrate that the concept of group purchases for Leighton from companies in the Welspun Group was a matter within the contemplation of the parties at the outset of the relationship between them. It should be noted that in contrast to the buy and sell agreement, which was between different parties, it did not provide for preferred pricing or preferred delivery over the period of the agreement.

44. The third matter to note is that the Share Purchase Agreement was subject to ongoing negotiations between the date it was entered into and the date of closure. That is evident from the evolution of cl 6.9. I have referred to Recital C to the Supplemental Agreement of 24 December 2010 and the amendment to the Share Purchase Agreement effected by that agreement at [31] and [32] above which provided for the infusion of 100 crore but which, although setting out possible alternatives, left open the manner in which it was to be undertaken.

45. Fourth, although the second emanation of cl 6.9 of the Share Purchase Agreement and the original cl 6A of the Shareholders Agreement as originally inserted provided for agreement as to the amount and manner of the infusion within 45 days after the date LIL became entitled to the Held Back Amount, the final version of these provisions provided it had to be agreed before the release of the management accounts, which occurred no later than 15 July 2011, the date on which Leighton Welspun’s auditors were required to produce the adjusted EBITDA certificate.

46. It also should be noted that the ultimate agreement did not provide for any time within which the repurchase notice could be given. The appellant seemed to assume the right had been spent by the time the payment instruction had been given, whereas the Crown assumed it was on foot. Neither party explained the legal basis for their assumption.

47. Further, neither the Shareholders Agreement nor the Share Purchase Agreement made provision for the time in which the infusion obligation was to be met. It was presumably contemplated by the parties that it would be dealt with in the agreements the parties were required to enter into. To some extent that matter was clarified by the 21 April 2011 agreement and the term sheet of 27 April 2011 to which I have referred at [37] and [38] above.

48. In those circumstances, it is neither necessary nor appropriate to set out to define the precise legal rights and obligations of the parties at the date of the payment instruction. The most that can be said is that LIL was at least subject to potential liability to buy back the shares by virtue of the failure to reach an agreement as to the manner of infusion and liable in addition to the repayment of the purchase price to an additional amount of 20 per cent of that price from the date of closure until the date of repurchase of the shares.

Communications from 14 March 2011 to 27 April 2011

49. Issues concerning the implementation of the Share Purchase Agreement arose prior to its completion. On 14 March 2011 Mr Parvez Umrigar, the Managing Director and CEO of Welspun Infratech, emailed Mr David Savage, the then Managing Director of LIL. The email, which was copied to Mr Stewart and to Mr Goenka, the Chief Executive of the Welspun Group, raised three issues. First, the fact that Leighton India and Welspun had not been able to make headway on how they “should get Hochtief and Welspun to come closer”. The reference to Hochtief was a reference to a German group which had by that time acquired a majority interest in LHL. The second issue concerned the Support Agreement. Mr Umrigar emphasised its importance and his concern that Leighton and Welspun were not “on the same page” concerning it. The third matter raised was the potential infusion of 100 crore into Leighton Welspun. In respect to that issue Mr Umrigar made the following comments:

“As we understand from the Leighton India team, the Company is sure to exceed the targeted EBITDA of Rs. 340 crore. This would mean that the Escrow Amount of Rs. 40 crore will get released to Leighton. At the same time, there is no progress on the NHAI Claim matter. Delay in initiating the Claim matter with NHAI means delay in the Company ultimately receiving the money either from NHAI or failing which from Leighton.”

50. The concluding paragraphs of the email from Mr Umrigar stated that the Hochtief understanding and the Support Agreement were crucial as they formed the “cornerstone” of various future understandings and that it was advisable to have “absolute clarity and necessary documentation” before the remittance of the 430 crore. He said that the infusion was important as it would have commercial implications, and that it was “advisable to conclude all understandings at this juncture”. The appellant was the Chief Financial Officer of LHL at the time. Although he was not copied into the email, it was forwarded to him by Mr Stewart and on 14 March 2011 he forwarded it to Mr Kent and Mr Philip Hatten, asking that they discuss it. Mr Hatten was the General Manager of Investments and Acquisitions at LHL. Mr Kent stated in evidence at the trial that his role in the sale was to co-ordinate a team from LHL to oversee the transaction. He was asked to undertake this task by the appellant.

51. On the same day, Mr Kent emailed Mr Chris Breen with copies to Mr Hatten and Mr Savage, and asked what progress had been made on the agreements concerning the loan of 100 crore. He indicated that he thought that the Hochtief MOU had been shared with Welspun and they were happy, and that there appeared to be a “large expectation gap” between Leighton and Welspun as to the Support Agreement. It is not clear from the evidence what precise position Mr Breen held. However, he was evidently a person involved in the negotiations concerning the agreements.

52. On 17 March 2011 Mr Kent emailed Ms Chatterjee and Mr Breen, requesting an update on where the negotiations stood in relation to the issues raised by Mr Umrigar in his email and whether or not they expected completion to be delayed as a result of those matters. The email was copied to the appellant, Mr Hatten and Mr McKay. Ms Chatterjee was an employee of LIL based in India. She held the position of General Manager, Investments and Acquisitions at Leighton Contractors (India) Private Ltd (Leighton Welspun).

53. On 21 March 2011 Mr Kent forwarded the emails to which I have referred above to Mr Stewart with copies to the appellant.

54. The emails were also forwarded to Mr Bill Wild, who was the Deputy Chief Executive Officer of LHL. On 21 March 2011, Mr Stephen Sasse, who was the General Manager of Organisational Strategy at LHL, was forwarded an email from Mr Wild to Mr Stewart which was copied to the appellant. That email was in the following terms:

“David

(1). Hochtief. You are across this.

(2). Support Agreement. This is not a big deal. We have to support them if they want to bid jobs that we don’t and they have to meet all costs including funding any equity we put in in their behalf. We get an indemnity from them which I guess is OK unless of course we ever parted company. We have to watch reputational issues if they screw up doing the job. We will agree a protocol with them so that we don’t need to reinvent the wheel every time one of these things comes up.

(3).   Financing the Indore claim. We are liable to put in up to Rs 100 crores to cover the cash sought in the claim. I gather that this money could be tied up for as much as 5 years. I don’t understand how/when it is returned. I understand that Parvez is suggesting that we leave in the 40 crores that is currently in Escrow to cover the warranty we gave on the EBITDA number. Seems that we are not getting that much cash out of the sale. There always seems to be something else that we weren’t aware of!”

55. On 22 March 2011, Mr Kent sent an email to Mr Waugh in India which was copied to Mr Stewart, Mr Wild, the appellant, Ms Chatterjee and Mr Hatten. Mr Waugh was the CEO of Leighton Welspun and was a co-accused in the proceedings. It referred to the issues raised by Mr Umrigar and made the following comments:

“I have spoken with Peter Gregg this morning and we need to reiterate a couple of points in relation to the Welspun JV:

the Completion of the JV is under intense scrutiny both within and outside LHL; and

the profit impact on the reported half year results is a critical issue for LHL.

Due to this scrutiny and these concerns we require regular contact (preferably daily) with you and your team between now and Completion (including cash receipt of sale proceeds) to monitor progress on the JV and relationships with key decision makers at Welspun. Communication to date has been a little patchy. I am seeking to co-ordinate the LHL governance and risk issues.”

56. The same day, Mr Wild sent a further email to Mr Stewart, the appellant and Mr Sasse making the following comments:

“4.   Welspun: It now appears that we have to put Rp [sic] 100 crore into the Indian business to finance the revenue shortfall arising from the toll road claims. Nobody seems to know when it can be withdrawn; Parvez mentioned a 5 years. It apparently does not constitute a writeback risk but given the uncertainty and the possible long period over which the money can be tied up, we obviously need to increase the provision against these claims, probably by the whole US$10 million that was not provisioned previously. This situation was not disclosed by Savage. I also understand that there is a Long Stop Date of 30 March on this deal; again important information not disclosed.”

57. On 30 March 2011, Mr Umrigar emailed Mr Savage with a copy to Mr Goenka and stated that clarity was needed from Leighton/Hochtief on three fronts, namely, the Mumbai Airport, NHAI Mega Road projects and future opportunities of common investment interests in India. He noted he forwarded draft wording for the Support Agreement and that the issues around the 100 crore infusion were yet to conclude.

58. On 1 April 2011 Mr Goenka emailed Mr Stewart, Mr Savage and Mr Wild. He indicated that (Indian) Reserve Bank approval for the transaction had been obtained, reiterated Mr Umrigar’s concern regarding the Hochtief understanding and the Support Agreement and made the following comments regarding the 100 crore infusion:

“(3)   NHAI Claim / EBITDA Rs. 340 cr and Rs. 100 crore infusion: I believe that certain legal interpretation issues have cropped up regarding NHAI Claim, but I do expect that this will be sorted out by the teams concerned. Also we await the outline regarding the Rs. 100 crore instrument. This clarity is important as I understand that Leighton – India is fairly confident that the EBITDA target will be achieved.”

59. Mr Waugh indicated to Mr Wild that he had a meeting the next morning with Mr Goenka to discuss the issues. In response, Mr Wild sent an email to Mr Waugh copied to Mr Stewart, the appellant and Mr Sasse in the following terms:

668. In the present case, in considering the question of whether the verdicts are unreasonable, although the conduct giving rise to each count took place at different times it is relevant in considering each count to examine the oral and documentary evidence in respect of the period leading up to the payment instruction, and the period between the payment instruction and the entry into the buy and sell agreement.

669. In my opinion, it was well open to the jury to consider that the resolution of the manner of the infusion and any impact that matter would have on the accounts of LHL was a matter of importance to the appellant in his capacity as Chief Financial Officer of LHL. LHL had announced it had booked a profit as a result of the transaction with Welspun but also had significant losses for the year. Even without Mr Stewart’s comment to the LHL Board at the meeting of 30 May 2011 that the aim was to ensure “no more negative surprises”, it is obvious that any unexpected further diminution in profit or increase in losses would be a matter which both management and the Board would be clearly concerned to avoid.

670. The second matter which it would be open to the jury to conclude was that the manner of infusion was a matter of some difficulty and complexity. The original cl 6.9 of the Share Purchase Agreement left open the manner of dealing with the NHAI claims (see [25] above). The second version in the Supplemental Agreement of 24 December 2010 provided for the infusion and set out that if agreement as to the manner it was to be made was not reached within 45 days after LIL was entitled to receive the Held Back Amount, Welspun Infra had the option to require LIL to repurchase shares in Leighton Welspun. Clause 6.9 in the second Amending Agreement limited the time for reaching agreement as to the manner of infusion to the date of receipt of the management accounts. It is clear from these agreements that both the fact of the infusion and the manner in which it was to be achieved was of importance. It is also clear from the Term Sheet that the manner of infusion had not been agreed upon at the time of closing (see (2) in the Term Sheet referred to at [38] above).

671. Thus from the time of closure up to the time of release of the management accounts, LIL was at risk of being required to repurchase the shares, and in the period from the release of the accounts up to the receipt of the waiver was at least potentially under an obligation to repurchase the shares should Welspun Infra exercise the option. I have summarised the position at [41]-[48] above.

672. It must also be remembered in this context that the profit resulting from completion of the sale was of very considerable importance to LHL. Quite apart from Mr Stewart’s comment concerning no negative surprises, the critical nature of the profit was emphasised in the email from Mr Kent to which I have referred at [55] above which was written following a discussion between him and the appellant.

673. However, it must be remembered that provision had been made in respect to the NHAI claims (see the KMPG report to the Audit Committee referred to at [93] above). Further, the correspondence leading up to the closure of the Share Purchase Agreement indicated that Welspun saw benefit to it not only from that agreement but also from the Business Co-operation Agreement and the Support Agreement (see [49] and [59] above; see also the evidence of Mr Hatten at [133] above and the evidence of Mr Kent at [174] above). It must be remembered that if LIL was required to repurchase the shares, those agreements would terminate (cl 11.3 of the Business Co-operation Agreement provided that it would automatically terminate if Welspun Infra’s shareholding in Leighton Welspun fell below 11 per cent, whilst cl 8.2 of the Support Agreement provided it was co-terminus with the Business Co-operation Agreement). Further, so far as the impact on profitability was concerned, the infusion if it took place by way of loan, subordinated loan or the issue of redeemable preference shares (see the Term Sheet set out at [38] above) would not have an impact on profit.

674. That the concern about profitability was focussed on the inability to meet the EBITDA target is demonstrated by the emails Mr Kent wrote in May and early June 2011 (see [66], [70], [71] and [75] above; see also the evidence of Mr Kent at [164] above).

675. However it is also clear that in the period leading up to and after 15 July 2011 there were ongoing discussions concerning the manner of infusion, particularly after it became apparent that Leighton Welspun was likely to meet the EBITDA target. That is apparent from the email from Mr Kent to Mr Waugh of 3 June 2011 (see [75] above) in which various means of resolving the issue surrounding the Held Back Amount and the infusion were discussed. It is also apparent from the emails passing between Mr Waugh, Mr Kent and Ms Chatterjee between 5 June and 14 July to which I have referred at [77]-[82] above, and also from the email from Mr Kent to Ms Chatterjee, Mr Travis Young and Mr Mendes to which I have referred at [89] above in which Mr Kent described the issues raised as a reality which needed to be discussed and resolved.

676. It is also clear that at least by August 2011, the appellant was concerned to achieve finalisation of each of the two outstanding issues. That is demonstrated by the emails which passed between various officers of LHL, Leighton Welspun and LIL in the period from 8 August 2011 to 12 August 2011 which I have summarised at [83]-[91] above. This correspondence was taking place in the context of the finalisation of the accounts. I have referred at [93] above to the statement in the Audit Report of 5 August 2011. As I pointed out at [248] above, the evidence of the lead auditor, Mr Young, was that at the time of the Audit Committee meeting of 5 August 2011 he understood there was an oral agreement that the infusion would be waived and that the waiver would ultimately be in writing. He also stated that the obligation was a material issue and he would not have signed off on the accounts as lead auditor if there were material outstanding issues.

677. In these circumstances, it would be open to the jury to infer the following matters. First, to the knowledge of Mr Gregg up to 12 August 2011 there was no agreement between the parties that the EBITDA Certificate produced by the Leighton Welspun auditor was sufficient to fulfil the precondition to the payment of the Held Back Amount. Second, contrary to the terms of the Share Purchase Agreement, the method of infusion had not been formally settled and the infusion obligation had not been waived. Third, failure to receive the Held Back Amount would impact on the company profit. Fourth, the failure to resolve the infusion issue would at the very least delay completion of the accounts and may have required provision to be made in them for a contingent liability against the repurchase obligation.

678. It would also be open to the jury to be satisfied that the payment the subject of the payment instruction was made in connection with the grant of the waiver of the infusion obligation and the provision of the Held Back Amount.

679. It is in that context that the question of whether the verdict of the jury on counts 1 and 2 was unreasonable falls to be considered. As I have indicated, it is convenient to deal first with ground 2. This is because if it was open to the jury to conclude that the buy and sell agreement was a sham it must follow that the payment instruction was false, and as the finding of sham would involve the conclusion that the appellant acted dishonestly, there could be no doubt the jury could find he acted dishonestly in respect of the payment instruction.

Count 2

682. It is important to note that on the day of the payment instruction the appellant emailed Mr Waugh, advising that he assumed Ms Chatterjee was doing documentation for the loan amount and that the payment was made in two tranches, and Mr Waugh responded that Ameeta was working on two documents.

683. Two days later, Ms Chatterjee produced a buy and sell agreement without apparently receiving any further instructions (see [98] above). I have not set out her version of the agreement but it referred to a payment of $12.5 million. As I have indicated the agreement was headed “Agreement to Buy and Sell”. That is of some significance as Ms Chatterjee, who was not called to give evidence, was directly involved in the negotiations leading up to the payment and it can be inferred she believed the document she prepared reflected the outcome of those negotiations. It is correct that Mr Waugh made certain changes (see [98] above), but as is apparent from the emails to which I have referred at [83]-[85] above, he was involved in the final stages of negotiations with Mr Goenka which led to the waiver and the payment instructions. It may be inferred that the agreement he produced reflected his view of the outcome of the negotiations. It is of some significance that the jury was not satisfied beyond reasonable doubt that he had aided and abetted the appellant in conduct that resulted in falsification of the books of the company, namely, the buy and sell agreement.

684. As I have pointed out, on 12 September 2011 Ms Chatterjee forwarded the first draft of the Facility Agreement which Mr Waugh stated had to be discussed with Mr Goenka to achieve closure (see [101] above). That document was forwarded to Mr Travis Young “[a]s discussed”. Mr Travis Young was not called.

685. It is true that very little if anything was done to advance the documentation up to December, but having regard to Mr Waugh’s email of 3 December 2011 it is evident he was seeking to obtain finality with Mr Goenka. This occurred before the involvement of Dr Brixel.

686. It is also evident that completion of the documentation became more urgent following Dr Brixel’s intervention (see the email to which I have referred at [108] above). Mr Waugh indicated that one reason for the delay was that “the guy BK allocated to review legally … just got to it yesterday”. I have set out the concluding portion of the negotiations at [109]-[115] above and it is unnecessary to repeat what I there set out.

687. At this point two things may be noted. First, the agreement was negotiated between two parties, one of whom obtained legal advice as to its terms. To find a sham the jury would have to have been satisfied beyond reasonable doubt that everything that occurred from the time Ms Chatterjee sent her first draft was a sham and that each party, to the other’s knowledge, was going through the charade of negotiating an agreement which was not intended to have any legal effect. Further, the jury would have to have reached that conclusion in the absence of any evidence to show that the persons involved at either Welspun or Asian Global believed they were entering into a sham agreement and knew that the appellant shared that belief.

688. Second, although Dr Brixel’s intervention may have added to the urgency of completing the documentation, the email from Mr Waugh of 3 December 2011 demonstrates that the appellant was seeking completion prior to that time.

689. I have dealt with the proposition that Mr Khemka was the guiding mind of Asian Global in dealing with ground 5(d) (see [483]-[494] above). The jury presumably proceeded on the basis of the direction by the trial judge that he was the guiding mind. Having regard to the fact that all the negotiations were conducted with Mr Goenka and it is relatively clear that he was making the final decision on the form of the agreement, there must at least be a reasonable doubt that Mr Khemka was the guiding mind. Further, in my view there is no evidence from which it could be inferred that either Mr Goenka or anyone else involved in the negotiations believed they were negotiating an agreement intended to be a sham.

690. There is a further difficulty with the nomination of Mr Khemka as the guiding mind of Asian Global. Quite apart from the difficulty of demonstrating that he was the guiding mind of the company and held the belief that the agreement was a sham, it is difficult to see how the appellant could believe that to be the case where Mr Khemka played no part in the negotiations and had no contact with anyone from LHL up to the time the agreement was executed.

691. The Crown in its written submissions submitted there was compelling circumstantial evidence that Mr Khemka entered into the agreement with no intention that it would operate according to its terms. That evidence was in effect Mr Khemka’s failure to respond to the appellant’s attempt to contact him after his request for a meeting on 23 December 2011 (see [123]-[124] above) and his failure to respond to Mr White’s email of 27 February 2012, sent by Mr White after Mr Khemka had been referred to him by the appellant. These requests by the appellant were either part of the sham or reflected the view that the agreements had some effect. I am not satisfied beyond reasonable doubt that the former conclusion can be reached.

692. The Crown in its written submissions called in aid the fact that no value was received from the agreement, none of the operating companies were provided with it or used it and no steps were taken to develop a relationship between the Leighton Group and Asian Global. There are a number of difficulties with this submission. First, as I pointed out in dealing with ground 5(b), the fact that an agreement was uncommercial or entered into for an ulterior motive does not lead to the conclusion that the document was a sham (see [462] above and the cases there cited). Second, it must be remembered that Mr White in his capacity as Procurement Manager of the holding company LHL sought to contact Mr Khemka, as did the appellant. Third, there was evidence that Asian Global was an affiliate of Welspun (see the evidence of Mr van de Laan to which I have referred at [191] above).

693. Further, as Mr White pointed out he was told by Mr Gregg to seek to obtain steel from a Welspun entity and that if he did the Asian Global agreement would be in play: see [289] above.

694. The Crown also placed reliance on the evidence of Dr Brixel. It is not necessary to deal with the conflict of evidence between him and Mr Johns as to the reason he ceased his investigation (see [203] and [239] above). It was quite appropriate for the internal auditor to be concerned about the commerciality of the transaction. That does not make it a sham. Further, in regard to commerciality it must be remembered that the memorandum from the appellant to the Chief Executive Officer, Mr Tyrwhitt, of 21 December 2011 (see [121] above) was said to attach a business case. In the absence of evidence from Mr Tyrwhitt it is difficult to conclude that no business case was attached.

695. It is convenient at this stage to deal with the significant part of the Crown case, namely, that centralised procurement of steel had not been considered by the Leighton Group and was impractical having regard to the structure of the Group whereby the operating companies competed with each other. There are a number of matters to be noted. First, whether the label of centralised procurement or strategic procurement is applied, the buy and sell agreement on its face provided an opportunity to purchase steel at competitive prices. Mr Wild accepted that there were persons within LHL who believed centralised procurement was desirable (see [143] above). Mr Kent accepted that a better deal in relation to steel could save the Group tens of millions of dollars (see [180] above). Mr Laslett said that the agreement could be useful (see [227] above) as did Mr Munro (see [258] above). Further, to the extent it was suggested the concept was novel it must be remembered that the Business Co-operation Agreement expressly contemplated group purchase by the Leighton companies (see [28] above). In addition, the appointment of Mr White as Procurement Manager for the holding company LHL and the importance the appellant attributed to his role (see [279] above) demonstrates that the appellant had a strong view concerning the desirability of centralised procurement. Further, Mr White agreed that the appellant was generating ideas about centralised procurement although sometimes was unaware of the detail required for such activities. Further, as is apparent from the evidence of Mr Pack, LHL at the time was seeking cost savings which involved increased co-ordination in respect of procurement: see [305] above.

696. I do not think the fact that the agreement was backdated affects the position. Of itself it would not make the agreement a sham and there is nothing to suggest, notwithstanding the insertion of 1 August as the date of the agreement, that there was any concealment of the time it was executed.

697. I have dealt with all the matters which the Crown relies on in support of the proposition that the agreement was a sham. As I pointed out at [668] above, this being a circumstantial case it is necessary to look at the evidence as a whole. I have set out the matters relied upon by the Crown at [657]-[661] above. At their heart they involve the proposition that the agreement was uncommercial, perhaps improvident and in fact never acted upon. It would be open to the jury to infer that the agreement was made to formalise the reason for the payment the subject of the payment instruction and that it was unlikely that LHL would obtain any real benefit from it and did not expect to. However, in the absence of any evidence from the persons involved in the negotiations and the intention of the decision-maker for Asian Global, I am left with reasonable doubt that both parties to the knowledge of each other dishonestly entered into the agreement intending it to have no legal affect.

698. In reaching this conclusion I am conscious of the position of the jury as the constitutional tribunal for deciding issues of fact: The Queen v Baden-Clay (2016) 258 CLR 308; [2016] HCA 35 at [65]. That is so notwithstanding the erroneous directions on elements of the offence and the fact that in some respects the trial was conducted in a manner which was unfair to the appellant. However, taking into account any advantage the jury may have had I am left with a reasonable doubt as to the guilt of the accused.

699. It follows that ground 1 so far as it relates to count 2 is made out.

Count 1

700. There is an initial difficulty in dealing with count 1 in that it is not clear whether the jury arrived at the verdict of guilty on the basis that one or both of the payment instructions were false and the appellant was reckless in giving the instruction. As I indicated, the judge in sentencing proceeded on the basis that only one of the stated purposes was false, namely, the $2.5 million payment said to be a loan. However unsatisfactory it may be that although the case was particularised and conducted on the basis that the stated purpose for both payments was false, having regard to the manner in which the case was put to the jury in determining whether the verdict was unreasonable, it is necessary to consider whether the jury was entitled to be satisfied beyond reasonable doubt that the stated purpose for either of the payments was false and the appellant was reckless in giving the instruction, as distinct from determining that both were false and the appellant was reckless in giving both instructions.

701. I have set out at [679]-[680] above the inferences that in my view the jury was entitled to draw of the importance in the appellant’s mind of resolution of the issues in relation to the Held Back Amount and the infusion. Importantly, it would be open to the jury to find that the payment was made in connection with the obtaining of the waiver and the release of the Held Back Amount.

702. The real question in my mind, at least as to the purpose of the $12.5 million payment, is whether in the circumstances where there was an apparent inability to agree on the manner in which the infusion was to otherwise take place, the parties agreed to resolve the issue by entering into an agreement in the nature of the buy and sell agreement (and make the $2.5 million loan) in substitution for the obligation to make the infusion. If the Crown was unable to exclude that hypothesis beyond reasonable doubt the question remains even on that hypothesis whether the jury was entitled to be satisfied beyond reasonable doubt that the appellant was reckless in stating that the payment was made for marketing and advisory services.

700. The hypothesis is not purely speculative. The parties were evidently looking for alternatives to the infusion (see, for example, Mr Kent’s email of 3 June 2011 at [75] above, Mr Kent’s email of 12 August 2011 at [89] above and a possible provision of the contract in respect of the Pakri Barwadih Mine in substitution for the infusion agreement at [75]-[76] above). Further, as I indicated in dealing with count 2, Ms Chatterjee produced a version of the buy and sell agreement within a very short period of the payments being made and I have concluded that it was not open to the jury to be satisfied that the buy and sell agreement ultimately entered into was a sham.

701. The difficulty in excluding that hypothesis arises from the absence of any material concerning the negotiations which took place, particularly between Ms Chatterjee on the LIL side and Mr Goenka and Mr Umrigar on the Welspun side. The Crown sought to avoid that difficulty by stating that it did not have to prove the true purpose, merely that the stated purpose was false. That may be so, but in the absence of any evidence as to the content of the negotiations, it does not seem to me that the jury could be satisfied beyond reasonable doubt that the Crown had excluded the possibility that the parties had agreed to enter into the buy and sell agreement in substitution for the infusion.

702. The Crown again emphasised that the case was a circumstantial case. I have set out the circumstances upon which the Crown relied (at [662] above). I have already indicated that I agree that the matters referred to give rise to the inference that the payment was made in connection with the waiver and that it was made in circumstances where it was important to the appellant and LHL that the matter be resolved in a manner that preserved the announced profit. I have also indicated it was open to the jury to infer that the appellant regarded it in the interests of Leighton to remove the contingent liability in respect of the repurchase option. The difficulty is that none of this excludes the alternate hypothesis to which I have referred.

703. The other matters referred to by the Crown do not advance the position. The fact that some emails were not forwarded to all of the Project Melbourne team does not seem to me to be of particular importance when it appears that as late as 12 August 2011 Mr Kent and Mr Travis Young (who was not called) and Ms Chatterjee were still considering the issue. The length of time it took to negotiate the agreement must be offset against the fact that Ms Chatterjee was almost immediately able to provide a draft.

704. It follows in my opinion that the Crown did not negate beyond reasonable doubt the possibility that an agreement had been reached that the infusion obligation would be substituted with an agreement in the nature of the buy and sell agreement. There remains the question as to whether on that hypothesis the description of the payment of the $12.5 million as being for marketing and advisory services was false and the appellant was reckless in making that entry. The evidence of Mr Johns and Mr White supported the proposition that the entry was consistent with the objects of the buy and sell agreement (see [244], [282] and [294] above). Although the Crown submitted that the credit of Mr Johns was in issue, she did not make the same remarks in relation to Mr White. In these circumstances I do not believe it was open to the jury to conclude beyond reasonable doubt that the entry was false and that the appellant acted recklessly in making the entry.

705. There remains the payment instruction so far as it relates to the loan. It would seem to me difficult to come to the conclusion that one entry was false and made recklessly whilst entertaining reasonable doubt as to the other. Further, it seems clear that at least up to the time of closure it was anticipated the infusion would be by way of loan or redeemable preference shares, a form of loan capital (see the Term Sheet), and having regard to the request made to Ms Chatterjee to provide two documents and her production of the Facility Agreement, it can be inferred that at least on the LHL side the infusion issue would be resolved in part by the making of the $2.5 million loan. Further, up to the time of execution Mr Waugh and the appellant were seeking to have the $2.5 million treated as a loan (see [112] above). In these circumstances it does not seem to me open for the jury to find beyond reasonable doubt that when the appellant made the entry as to the purpose of the payment of $2.5 million, he did not believe that was the true purpose of the payment or was reckless in stating that that was the case.

706. In these circumstances, ground 1 so far as it relates to count 1 has been made out.

707. It is thus unnecessary to deal with the appeal against sentence.

Conclusion

711. In the result I would make the following orders:

1. Appeal allowed.

2. Quash the verdict of guilty on each count of the indictment dated 9 May 2017 and enter a verdict of acquittal on each count.

712. HOEBEN CJ at CL: I agree with the Chief Justice and the orders which he proposes. I also agree with the additional remarks of Leeming JA.

713. LEEMING JA: I have had the very considerable advantage of reading the reasons for judgment of the Chief Justice in draft. I agree with his Honour that not only must the appeal be allowed and the guilty verdicts quashed, but also verdicts of acquittal should be entered on each count. The following two points are by way of elaboration, and are not inconsistent with anything in the Chief Justice’s reasons.

714. First, I agree that National Australia Bank Ltd v Rusu (1999) 47 NSWLR 309; [1999] NSWSC 539 should be regarded as bad in law, insofar as it holds that inferences as to the authenticity of a document cannot be drawn from its form and contents. The correctness of this aspect of Rusu was doubted by Gyles and Weinberg JJ in O’Meara v Dominican Fathers [2003] ACTCA 24; 153 ACTR 1 at [85] and by Basten and Gleeson JJA and me in Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [2018] NSWCA 26 at [99]-[102]. It was regarded as plainly wrong by Perram J in Australian Competition and Consumer Commission v Air New Zealand Limited (No 1) (2012) 207 FCR 448; [2012] FCA 1355 at [99]-[104], by White J in Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) (2015) 235 FCR 181; [2015] FCA 342 at [94], and, at the appellate level, in Federal Commissioner of Taxation v Cassaniti (2018) 266 FCR 385; [2018] FCAFC 212 at [64]-[65] (Stewart J, Greenwood and Logan JJ agreeing). There have also been appellate statements that it is not necessary to determine the correctness of Rusu: see for example Jones Lang LaSalle (NSW) Pty Ltd v Taouk [2012] NSWCA 342 at [34]. Such statements also carry weight. Curial paralipsis – pointedly reminding the reader of what a decision is not authority for – is seldom accidental, and serves the useful purpose of flagging the possibility of a future change in the law.

715. True it is that there have also been statements, including in this Court, endorsing Rusu. Thus it was said in Daw v Toyworld (NSW) Pty Ltd [2001] NSWCA 25 at [46] by reference to Rusu that “[t]he Evidence Act 1995 does not permit documents to authenticate themselves save in limited circumstances”. As the Chief Justice notes, that decision was criticised by V Bell, “Documentary Evidence under the Evidence Act 1995 (NSW)” (2001) 5(1) The Judicial Review 1 at 3. So far as I am aware, this aspect of Rusu has never been endorsed by any appellate decision which has reconciled what was said with the authority given by s 183 of the Evidence Act to draw reasonable inferences (including as to authenticity) from the document sought to be tendered.

716. This Court’s decision today will simplify the position going forwards. It may not alter the outcomes of disputed tenders in many cases. At least two judges at first instance, confronted by the need to choose on the one hand between following Rusu and its endorsement in Daw v Toyworld, and the more recent series of appellate doubts and reservations of position, have after a careful review of the authorities, chosen not to follow Rusu, recognising, implicitly or explicitly, that the sentence in Daw v Toyworld (NSW) Pty Ltd was not binding: DPP v Pinn [2015] NSWSC 1684 at [36]-[46] and Antov v Bokan [2018] NSWSC 1474 at [326]-[347]. Thus this Court’s confirmation that this aspect of Rusu should not be followed will not substantially alter the results which have already been reached.

717. Secondly, in relation to ground 8(a), the Crown’s closing address occupied some of Wednesday 28 November, some of Friday 30 November, and a brief period on Monday 3 December. It is difficult from the transcript alone to assess the full impact of what was said, over an extended period, and in particular what weight was given to the rhetorical questions repeatedly posed for the jury’s consideration. Transcript does not reveal intonation and emphasis, and it seldom records pauses.

718. At the time, counsel then appearing for Mr Gregg complained of the pauses:

“So it’s a statement that Waugh and Gregg didn’t give evidence immediately after the rhetorical question, ‘What does that mean?’ And then there’s a pause, ‘No obligation on them to do so. You can’t draw any inference from them not giving evidence but you can look at the evidence and say, “What do I draw from this? What is left for us to do?”’ This is highly problematic, I’m sorry. It troubled me at the time and, reading it, it’s worse.”

719. However, the Court was told that Mr Gregg’s lawyers had reviewed parts or all of the sound recording, and did not rely upon the pauses mentioned above. There may be cases when in order to make good a ground of this nature, it may be necessary to go to particular parts of the sound recording (if there is one) in order to expose what is said to be the difficulty. I am not to be taken to be encouraging that course, and if it is to be followed, it is important to bear in mind the analogous principle concerning the evidence of a witness which has been recorded stated in SKA v The Queen (2011) 243 CLR 400; [2011] HCA 13 at [31] and [116], namely, that in such exceptional cases, the applicant would have to identify with precision what is not apparent from the transcript which warrants a review of the recording.

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Gregg v R - ANNEXURE - Written directions (7577260, pdf)

Decision last updated: 30 September 2020