Macleod v The Queen

[2002] HCATrans 64

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S237 of 2001

B e t w e e n -

ROBERT JAMES MACLEOD

Applicant

and

THE QUEEN

Respondent

Application for special leave to appeal

GLEESON CJ
GAUDRON J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 5 MARCH 2002, AT 11.59 AM

Copyright in the High Court of Australia

MR J.C. PAPAYANNI:   If the Court pleases, I appear for the applicant.  (instructed by Jeffreys & Associates)

MR T.A. GAME, SC:   May it please the Court, I appear for the respondent with my learned friend, MR D. JORDAN, who is in the other Court.  (instructed by Commonwealth Director of Public Prosecutions)

GLEESON CJ:   Yes, Mr Papayanni.

MR PAPAYANNI:   If the Court pleases.  This is a charge under section 173 of the Crimes Act, the first part of it, and the fraud charges are in relation to that, and that is fraudulently appropriating property to his own use or a use other than that of the company and it refers to counts 14, 16, 18, 20 and 22.  Now, it concerns the question of Peters’ Case and the misapplication of that case by reason of what was said in relation to the ‑ by the summing up.  In Peters’ Case, of course, leave was obtained on the basis of Ghosh’s Case and the difference between Ghosh’s Case, giving the standards of ordinary people and the realisation by the accused of that being the subjective element, and also in relation to Salvo and Bonollo in Victoria and, to consider those cases.  Of course, the Court held in Peters’ Case that the need did not apply, because the simple reason was that honesty in that case was in relation to a question of conspiracy and also that, in relation to that, the question of dishonesty was not raised in Peters’ Case, the accused in that case alleging that he was not a party to the conspiracy.

So, in this particular case, his Honour summed up in accordance with what was said in Peters’ Case that the objective standard was sufficient and there was nothing at all by his Honour in relation to the mental element.  Now, in relation to ‑ ‑ ‑

GAUDRON J:   Was any direction sought – no your client was unrepresented at that stage.

MR PAPAYANNI:   Yes.  His defence was that he was legally entitled to lend the money to himself from Trainex.  Secondly, that he believed that he was legally entitled to do that and thirdly, that he was legally entitled to issue cheques on behalf of the company and that he believed that he was entitled to do that and the claim of right was that he was entitled to moneys owed to him, but he believed that he was entitled to money.  Now any of the matters there in relation to his belief was not put by his Honour at all.  In relation to Glenister’s Case (1980) 2 NSWLR, which was relied upon, it sets out ‑ the situation was that they determine at page 601 that it was highly subjective and on page 602 they referred to Armstrong’s Case, which was a case which given reference of Mr Justice Nagle in which he said if it was in the articles of association of the company that they could lend money, well then there was no offence.  It did not matter what the ultimate purpose of it was.

In this case the applicant lent himself money.  He was in control of the company, there was nobody else who had any say at all, and he gave himself certain money and, in relation to that, these counts of fraud were brought about and relied upon in relation to the fact that he had bought a Gold Coast property and also that most of the money went for that and that on the other occasion that he lend money to himself, which he paid to Starlight, which was another company, for a purpose other than the purpose of the company.

Now, of course, Trainex ceased trading in July 1991.  The settlement of the property in relation to the Gold Coast was in 12 March 1991.  The last payment of $524,000 odd was made in July after the property was obtained, was settled, and the amount of money that was transferred to Starlight was $525,000 on about 8 July 1991 and that was for the purpose that Trainex was not a public company, Starlight was a public company, so the moneys were transferred to Starlight so that they could issue a prospectus.  There were different amounts transferred, but there was a cheque drawn in relation to $525,000, not $524,000, but, in any case, moneys were transferred to Starlight for the purpose of they being a public company to get a prospectus in order to obtain these investments, so they are called, in relation to the production of the films.  The applicant owned the copyright in most of these matters for which he was not paid, except to buy Starlight ‑ he had paid an amount of $160,000 in relation to one of the copyrights, but in Health Promotions, which was another matter, the evidence was given that the only amounts of money that were paid was an amount of about $775,000, I think it was, in relation to Toddler Taming, which was a production of a film, but there were ‑ ‑ ‑

GLEESON CJ:   Your argument seems to be directed ‑ ‑ ‑

MR PAPAYANNI:   To the fraud.

GLEESON CJ:    ‑ ‑ ‑to what Justice Simpson said at page 203, paragraphs 109 to 113, is that right?

MR PAPAYANNI:   That is correct.  She said nothing at all about the mental element and the only part that she referred to in relation to the mental element was pointed out to the court that that was in relation to the alternate counts and that was acknowledged by the – if one looks at page 105 one will see his Honour said at the  bottom, he referred to “Impropriety”, gave the exact directions that were given on page 118 and that was in relation to the alternate count.  The alternate count is set out under section 232(6) of the ‑ ‑ ‑

GLEESON CJ:   I am just puzzled about paragraph 109 on page 203.  There is a reference in the first sentence to somebody being “the owner of the money”, do you see that?  Paragraph 109.  He said he thought himself being “the owner or of the money”.

MR PAPAYANNI:   Yes.

GLEESON CJ:   And then in the last sentence of the paragraph there is a reference to borrowing money from the company.  They are two different things.  What was the defence case?  That he was the owner of this money and can do with it as he pleased or that he borrowed money?

MR PAPAYANNI:   Well, it was recorded as a loan, he said, or he was told to record it as a loan from him to purchase the property and a loan to him, which he paid to Starlight, and that was recorded as a loan from him.  So all these transactions were loans and he maintained that he believed that the company owed him more than the claim of right.  Now, there was no direction about a claim of right, there was no direction about the mental element at all.  Now, one of the matters, of course, here ‑ as I say, it was taken straight from Peters’ Case there on 203, and that was the objective case without being the subjective case at all.  Now it did not go far enough to give the Ghosh test.

Now, in this particular case, it was essential, as was pointed out in Peters’ Case, to identify the specific matters which went to his knowledge, belief or intention before.  See, her Honour said in the last bit there, paragraph 113:

In the circumstances, in my view, this was an entirely adequate direction.

That was the objective test.

It is difficult to see how, if the jury found that the appellant had acted dishonestly, they could then find that he acted under a bona fide belief that he was entitled to do as he did.

Well, of course, the bona fide belief negatives dishonesty.

Where dishonesty is a specific element of an offence charged, it is difficult to see that a bona fide claim of right adds anything, or requires anything additional by way of directions.

Well that was the case here.  That is not fraud.

GAUDRON J:   Well that is really a big step, is it not, in your submission?
That really is to say if you are found guilty on inadequate directions then you cannot raise an issue that might have resulted in a not guilty verdict.

MR PAPAYANNI:   Yes. The other matter, of course, was section 5.

GAUDRON J: Section 5, but not in relation to the fraud counts?

MR PAPAYANNI:   No, but I think, your Honour, in relation to that it sets out there, there was no direction.  The direction that her Honour referred to was in relation to the alternate charge, which I pointed out to the Court and it shows on page 105, it is also referred to in paragraph 30, which was in relation to the fraud counts - had nothing at all about any mental element and in paragraph 35 it dealt with exactly the same thing about impropriety and improper conduct that her Honour is referring to as being sufficient in relation to the counts that she mentioned.  So there was no direction.  He was deprived of the opportunity of having his defence put to the court.

Now, in relation to section 5: the simple situation in relation to section 5 is that section 55 of the Corporations Law (New South Wales) Act 1900 says that the question of arrest, charge and indictment is to be dealt with under State law.  Now, in relation to the charge of offering the prescribed interest under section 1064, and the other similar sections, in relation to the State matter you have, in relation to that, the parties to it, the accessories before, aid and abettors and accessories after, if there were any, are all one offence.  Now the Corporations Law Act refers to “an offence”. This is the matter that activates, taken to be a Commonwealth offence under section 29. It is only activated by a State offence and that State offence includes an aider and abettor and so on. There is no knowingly concern in State law so how can the whole matter be activated by reason of something which is related to section 5.

Now, once you apply section 5 to it you have a situation then that a deeming situation is totally different to a taken to be, in relation to this situation. Once you apply section 5 to it, it is deemed to be a Commonwealth offence or guilty of a law against the Commonwealth. If one just takes a situation where a person is committed for trial in relation to section 1064 and then, after committed for trial the DPP says, “We will charge him with conspiracy”; there is not enough for the substantive charge. Now can you go to section 86(2) in relation to that, which is under the Commonwealth Crimes Act, and say, we will charge him under section 86(2) with a conspiracy to commit this State offence under 1064.  Now section 74 of the DPP Act says that only certain parts of the Crimes Act, Part III of the Crimes Act applies. Section 5 is not in Part III.

That tends to suggest that the Crimes Act does not apply, even though it is inconsistent with the application of State law under the Corporations Law Act. When the Corporation says, all the law of the Commonwealth, whether written and so on applies, you then have to look at section 5 under the Crimes Act and you say to yourself, “Does that apply to general criminal law?” It does not, because there is no incidental power that allows section 5, by reason of the Constitution, to apply to all general criminal law. It is only relevant to Commonwealth law and not generally to Commonwealth law.

So you cannot make a law of the Commonwealth in relation to stealing, in relation to the whole of Australia, because they do not have the power, incidental ‑ under section 51 or incidental power. So you cannot have a section 5 attached to a State offence and then continue to be a State offence, because section 56 is put in the Corporations Law to allow a State offence to be dealt with by a judge of the State court. You do not need section 68(2) of the Judiciary Act, because it is not a Commonwealth offence. It cannot be dealt with under section 5 or a section 5 case cannot be dealt with under section 68(2), because it is not a Commonwealth offence under the Judiciary Act.  So you have section 56 which allows a State offence. 

Once you apply section 5 to it, it is not a State offence, because it is not part – you cannot have a knowingly concerned in aiding and abetting as a State offence, which is 1064. So those matters were not considered in Glenister’s Case, which was obiter in any case, because there was no jurisdiction in relation to that and one could not, in my submission ‑ that section 5 cannot be applied to a State offence, because the offence means all the parties to that offence. Aid and abet ‑ and that was John’s Case and so on.

So you have section 5, which is an aid and abettor matter, cannot be applied to a State offence. Mallam v Lee gives one interpretation, and, of course, it is an aid and abettor offence and, of course, Hamilton and Whitehead sets out a different situation in relation ‑ but it does not come within either of those situations because once you are found guilty of that you are deemed to be guilty of a Commonwealth offence and deemed means that you are guilty of it; not taken to be. If you are taken to be something, well then you cannot then be deemed to be; it is not the same thing, in my submission. So that is our whole situation in relation to section 5.

GLEESON CJ:   Thank you, Mr Papayanni.  Yes, Mr Game.

MR GAME:   Just dealing first with the section 5 question. If you look at ASIC v Vis 77 SASR 490 at 508 to 509, this argument was accepted by the court. The answer is to be found in sections 29 – you will see the argument that Mr Papayanni put, it was put and rejected in ASIC v Vis, and the explanation appears on 509 in the second paragraph, namely, paragraph 85:

A second answer, and one about which I am more confident, is found in section 29(2) of the CSA Act. The effect of that provision is that for the purposes of South Australian law, the offence charged against Mr Vis “is taken to be an offence against the laws of the Commonwealth” and not to be “an offence against the law of South Australia”. As applied, section 5 is a law of South Australia. Accordingly, for its purpose, the offence charged is taken to be an offence against the laws of the Commonwealth. Thus, the reference in section 5 to procuring an offence against a law of the Commonwealth is to be read as procuring an offence against the Corporations Law.

And that a complete answer to the point about section 5, and that reasoning was adopted by the Court of Criminal Appeal in this case.

Turning to what was suggested to be a claim of right, Mr Macleod, or Trainex, entered into contracts with a number of film investors without prospectuses, in which they thought they were obtaining interests in the copyright in films, so that they would have a deductible investment for the purposes of section 10B of the Income Tax Assessment Act.  He asserted that contrary to what the documentation showed, that what was taking place was an outright sale of copyright in the script, such as it was, and that Trainex had no obligations to any investors of any kind and he could do with the property as he liked because he owned Trainex.  But in cross‑examination he adopted a fall-back position and the fall-back position was, effectively, that they were loans; that it was technically the money of the company, and that he asserted that the company owed more money to him than he owed to it.

HAYNE J:   That was a flourish, was it not, added to the essential claim which was that these items paid out for home units and the like were recorded as loans which he owed to the company.

MR GAME:   Absolutely.  There was absolutely no documentation to support any of the expenditure of the $2.2 million by him.  There was no loan agreement, there was no documentation, there were no repayments ‑ ‑ ‑

HAYNE J:   Were there records in the company records?

MR GAME:   No, there were no records – Mr Staume was the man in charge of the company records.  It was not even suggested to him in cross‑examination, when Mr Macleod was represented, that he had been asked to make any records of any of these payments and there was no application to recall him.  This was a fall-back position which was adopted in cross‑examination.

HAYNE J:   The trial judge is recorded ‑ and I am reading from the Court of Criminal Appeal’s judgment at page 201 ‑ as saying that the accused gave evidence:

that he directed Mr Staume to record all money advanced to him as loans ‑ ‑ ‑

MR GAME:   That was never put to Mr Staume.  What happened was, with respect to the three cheques that went to the units, there was absolutely no suggestion that that was recorded as a loan, it was not put to Mr Staume.  As to the two payments that went to Starlight, which were the last two of the fraud counts, what happened was, Trainex was closed down, it was a proprietary company.  There was a public company called Starlight, with real proper directors in Queensland who did not realise what Mr Macleod was up to and he could never produce a prospectus and he was never in a position to do so.  But he took the balance of funds out of Trainex and then he told Mr Staume that it was for him to start off the new company and then Mr Macleod withdrew those sums in dribs and drabs from Starlight, but the prosecution charged him with the fraud involving the direction to Staume to pay those sums from Trainex to Starlight credited to his loan account and that was the fraud.

HAYNE J:   Now, leaving aside the fact that the prosecution may have had some advantage out of the several variations on a theme that emerged, what did the trial judge tell the jury to do with this evidence or argument that what had been done was done pursuant to some entitlement?

MR GAME:   Well, your Honour, he gave directions in accordance with the decision in Glenister, we would submit, and those directions were appropriate and this was not a case of dishonesty used in some special sense.

HAYNE J:   Did he tell the jury that the claims of right, if they can be described in that way, were legally insufficient or could not avail the accused?

MR GAME:   No, he did not say that, your Honour.  What he said was ‑ and it appears in paragraph 99 of the judgment of the Court of Criminal Appeal.  Actually you will find it, if I just give you the relevant part of the summing up, at page 118 of the application book:

I might not have made clear to you yesterday that in the accused’s case after counts one to thirteen is that he was legally entitled to use the company funds in the way that he did.  Specifically he said that one, he is owed money for his services such as script writing, acting as a producer and an executive producer.

Could I just pause there.  He was owed $48,000 as a result of his involvement with one particular project and he got paid that and there was no dispute about that.  Just proceeding:

Acting as the director of a company and generally managing the company and acquiring copyright.  Two, that he directed Mr Staume to record all money advanced to him as loans and three, that Trainex owed him more money than he owed Trainex.  Of course you also recall the Crown addressed to you and his submissions as to why you should find the accused acted dishonestly.

And then his Honour reminded the jury of the directions that he had previously given in relation to fraud.  Now there is the judge putting squarely that those matters are relevant for the jury to take into account whether or not he was acting fraudulently in the sense identified in Glenister’s Case and that is correct.

GLEESON CJ:   Well, what he says in the middle of page 119 is that:

in accessing the accused’s case that he was entitled to use the company money as he did you should apply the same principles, that is whether by ordinary notions the accused was acting honestly by the standards of ordinary decent people.

MR GAME:   Well that is correct, your Honour, otherwise you have a direction that says ‑ ‑ ‑

GAUDRON J:   That does not tell you very much if there is a claim of right in the background, does it?

MR GAME:   Well, what is really being advanced is the subjectivity of the thief as ground a claim of right.  I mean, Mr Macleod might have thought all sorts of things.  He did think all sorts of things, but that is hardly the question for the jury to focus their minds on.

GAUDRON J:   I am not too sure, if you make a claim of right, if there could be no possible right.

MR GAME:   This claim of right, if it is a loan it is a claim to a legal entitlement to a loan with no recourse by way of payment as a set off to ‑ ‑ ‑

HAYNE J:   Well I think that is gilding the lily a bit, Mr Game.  I know you had the considerable advantage of the variations on a theme, but at one level this man’s case could be understood, could it not, as being, “I was a one-man company.  I made a loan to myself of a kind common amongst one‑man companies.”?

MR GAME:   Well, if he made a loan then, as I say, he did not record it anywhere.  He did not make any repayments.

HAYNE J:   I understand all that, and those are very powerful forensic tools, but what is the judge to tell the jury about those things?  Are they matters that should have been the subject of instruction or not?

MR GAME:   Well, we say that the directions went far enough and that to say more would be to mislead the jury.  If you said to the jury, “However you cannot find the accused acted fraudulently unless you are satisfied that he did not have a genuine belief, no matter how ill-founded or misconceived, that he was entitled to act as he did”, you would simply be adopting his subjectivity and his subjectivity, in our submission, is not at the heart of fraud.

GLEESON CJ:   Did the judge at any stage say anything to the jury that would permit them to form a view on whether the accused was entitled to use the company money as he did?  How does a lay person assess an assertion of this kind?  How would the jury assess whether the accused was entitled to use the company money as he did or was it common ground that he was not entitled to use the company money as he did?

MR GAME:   Well, he made a bare assertion in cross‑examination, when pushed into a corner, that they were loans, and he produced no evidence to suggest it and he never put it to Mr Staume that that was the case.  So there was absolutely no scrap of evidence that supported this proposition except for the assertion out of his own mouth in cross‑examination.

GAUDRON J:   That is still some evidence before the jury, is it not?  It was sworn I take it?

MR GAME:   It was sworn.

GAUDRON J:   You cannot dismiss it just because it comes from the accused, can you?

HAYNE J:   It depends on which end of the Bar table you are sitting, does it not, Mr Game?

MR GAME:   Yes it does.  Well, we would say, as the court said at paragraph 113, that when you look at the bare claim it really does not add anything to say that he has a bona fide claim to a loan without recourse and that if he believed that ‑ ‑ ‑

GAUDRON J:   Does not say “without recourse”?

MR GAME:   Well he never proposed or suggested any repayment, he never suggested ‑ ‑ ‑

GAUDRON J:   No, but he thought there might have been a final taking of accounts, on his evidence, in which it would come out that the company owed him more.  You see ‑ ‑ ‑

HAYNE J:   Loans repayable at call are common commercial events and ‑ ‑ ‑

MR GAME:   Well he is the only director of this company.

HAYNE J:   Just so.

MR GAME:   The other director in the Crown case was a fiction.

GLEESON CJ:   Did the judge give the jury any directions about the responsibilities of directors?  Did he draw their attention to the fact that the vice in conduct of this kind consists in its effect on creditors and that the reason why directors cannot use company money as their own is because companies deal with members of the public and incur liabilities?

MR GAME:   Yes, well, he did particularly in the context of directions about the alternative counts, which related to improper conduct as a director and you might see that, for instance, at page 118.

GAUDRON J:   Well, what, in essence, Mr Game, do you say is the difference between fraudulently apply and improper exercise of power of a director?  I know that is not the exact word – is it improperly applies or improperly ‑ ‑ ‑

HAYNE J:   Improperly used to its advantage, is it not?

GAUDRON J:   What is the difference between fraudulently applies and improperly uses?  Presumably there is some difference.

MR GAME:   Yes, your Honour.  The offence of fraudulent application has an element of fraudulent, which is dishonesty, which the judge directed the jury.

GAUDRON J:   Well it is not simply dishonesty, is it?  I mean, everybody says dishonesty, but dishonesty is a weasel word, in a sense.  When people say, “Well, is that true?”, and you say, “No, it is not true”.  “Is that dishonest?”  “No, it is not dishonest, because I was only repeating what I thought was true”.  You see it is a weasel concept, which has to be tailored, has it not, to the facts as they emerge?

MR GAME:   Well, that may be so, but pulling together of all of the things that this director did and asking a question about whether or not that was dishonest, would have been a devastating exercise for the judge to have engaged in.

GLEESON CJ:   Was there any question about interest on these loans?

MR GAME:   I cannot recall whether I asked him about interest on these loans, but I ‑ ‑ ‑

GLEESON CJ:   I was wondering this, Mr Game ‑ ‑ ‑

MR GAME:   I asked him whether or not what the – I mean, he was not able to answer any questions about what the terms of these loans were.

GLEESON CJ:   I presume your case was that he just grabbed the money, took it, and used it for his own purposes?

MR GAME:   Yes.

GLEESON CJ:   And that the suggestion raised for the first time in cross‑examination that this was some kind of business transaction between him and the company by way of a loan was a fabrication.  That was your case.

MR GAME:   Yes.

GLEESON CJ:   And I presume one would test that by asking whether the company got any benefit out of the loan?  The most usual form of benefit out of a loan being interest.  You would probably also ask whether the loan was secured, whether it was recorded in any document, when it was repayable, matters of that kind.  Was that part of the defence case that there was anything more to this than just him taking and using the money?

MR GAME:   Absolutely not.  There was no suggestion other than that he said he was the Toad of Toad Hall and he was allowed to take the money because there had been a contract with the company and he could do with it what he liked, involving driving around in fast cars and buying ‑ ‑ ‑

HAYNE J:   And that is what occurs, whether rightly or wrongly occurs, with a large number of $2 companies around the country, and to say whether that is honest or dishonest may obscure some quite deep-seated questions.  Are you asking the jury to do anything more than apply some undifferentiated smell test?  “Does this smell good?”  It is not much help to the jury.

MR GAME:   Well, your Honour, Glenister has stood the test of time ‑ ‑ ‑

GAUDRON J:   I am not entirely sure how consistent Glenister is with what was subsequently said in Peters.

MR GAME:   I thought Peters adopted it in some respects, your Honour.

GAUDRON J:   Yes.

MR GAME:   In respect of dishonesty used in a special sense, which is not this case, this was section 173.

HAYNE J:   But Glenister arose out of the Gollin collapse, did it not?  A public corporation, a massive collapse in its days; I think the deficit was $70 million.  Now here you have a one-man company.  Does that matter?

MR GAME:   Well, we say not, once you get over the hurdle, which we say we do get over it, that you can appropriate funds from one $2 company even if you are the sole director and shareholder in that company, which is the Gomez ‑ ‑ ‑

HAYNE J:   Does that mean that the question of the correctness of Roffel would arise squarely?

MR GAME:   The correctness of Roffel would not arise squarely, because that is a misappropriation case in a theft act sense, and it was distinguished in this case, but disapproved by the House of Lords in Gomez in no uncertain terms and there is quite a strong dissent in Roffel by Justice Brooking, as I recall.  So it does not involve Roffel directly, but I say that solely for the reason that Roffel is a theft act use of the word appropriate.

GLEESON CJ:   Yes, but it is possible to accept the proposition that Roffel is now unreliable source of instruction ‑ ‑ ‑

MR GAME:   Yes.

GLEESON CJ:   - - - but, at the same time, to recognise a cognate problem, which emerges in a case like this, as a claim of right, and to ask how that should be dealt with by a jury.  At the moment I am having some trouble with the notion that ordinary standards of honest conduct, of the kind referred to on page 119, line 20, would assist a lay person to decide whether a person was entitled to use company money as he did, in a situation like this.  It seems to be leaving them to their own devices in an area on which most people would need some guidance.

MR GAME:   But, your Honour, they saw it for themselves in this case.  I mean, this man went to the extent of creating fictional income for fictional films ‑ ‑ ‑

HAYNE J:   You had a lot going for you at trial, I know that, Mr Game.

MR GAME:   He wrote out cheques for, like, $2.12 and ‑ ‑ ‑

GAUDRON J:   But this is a charge of fraudulently appropriating, is it not?

MR GAME:   That is correct.

GAUDRON J:   The money of the company?

MR GAME:   That is correct.

GAUDRON J:   And a count of conspiracy to defraud the investors in circumstances like that might well have been sufficiently dealt with by a general direction of honesty according to ordinary standards, but this is a different situation.

MR GAME:   Your Honour, in my submission, what is really being put is that you go further and you ask yourself questions about whether Mr Macleod though that because this was a $2 company he could do with it what he liked and that, in my submission, has nothing to do with fraudulent misappropriation.  As I said before, it is adopting the subjectivity of the thief and that is not a claim of right.

HAYNE J:   But the point comes home, does it not, when you go back to the terms of the charge, each of the even numbered charges from 14 on:  “fraudulently applied for his own use property owned by” the relevant company?

MR GAME:   Yes.

HAYNE J:   What is the jury told, if anything, about the significance that he is not simply the controller by the sole equity participant in Trainex?  And why does that not distinguish it from Glenister where there were others involved?

MR GAME:   I cannot recall exactly but in Glenister he did say that they were regular loans, but I cannot remember whether ‑ ‑ ‑

HAYNE J:   Yes, but they were loans to directors out of a public company.

MR GAME:   Yes.  The jury were directed, as I said, about directors’ duties in the context of the alternative counts.  With respect to what was put to them in respect of the actual counts themselves, you see an example on page 14 of the application book.  That gives you an example of the directions given in respect of counts 14, 16 and 18, and those directions were taken from Glenister.

HAYNE J:   Yes.

MR GAME:   But once you have an application – just in a factual sense, the case was also very much grounded in what were the terms of the contracts between Trainex and the investors and the obligations that Trainex had to the investors and that was brought home to the jury in clear terms.

GAUDRON J:   I do not understand how it was relevant to counts 14, 16, and 18.

MR GAME:   Well, it was relevant to those counts because Mr Macleod understood that he had obligations to investors with respect to the making of films and that the company had undertaken to make films with investors’ funds but what he did was something entirely different.

GLEESON CJ:   They were the creditors who actually lost out as a result of conduct that left the cupboard bare.

MR GAME:   They lost out when the tax man started asking them questions.

GLEESON CJ:   Yes, but what he was charged with doing was taking things out of the cupboard.

MR GAME:   Yes.  Well, the investors thought they lost nothing for awhile because they got 70 per cent fictional loan on a 30 per cent investment, so they had a tax deduction that financed ‑ ‑ ‑

GLEESON CJ:   They had it geared up.

HAYNE J:   It was a win:win situation, Mr Game.

GLEESON CJ:   Thank you, Mr Game.  Mr Papayanni, was there anything you wanted to add?

MR PAPAYANNI:   Just the Crown acknowledged in proceedings several times ‑ on page 82:

But the Crown is obliged to in effect displace the possibility of a claim of right in Mr Macleod –

and then they had to say at the top of that page also they had to disprove it beyond reasonable doubt.  So, the Crown acknowledged that.

In relation to this question about the company, I gave your Honours the case of Lee v Lee’s Air Farming [1961] AC and at page 27 of that it refers to a case of Sansom and it shortly says – this is Sansom’s Case:

The company made large profits but no dividends were ever declared. . .The capital of the company was £25,000 divided into 2,500 shares of £10 each.  Sansom held 2,499 shares –

and one share was given to someone else.

By its memorandum the company had power to –

give the loan.

The company made what were described in the balance sheets as “loans or advances” to Sansom.  They were made without interest and without any security.

And in that case:

They found that the company was a properly constituted legal entity:  that it had power to make loans to such persons and upon such terms as it should think fit:  that it did make such loans to Sansom, and that such loans did not form part of Sansom’s income –

So, that was, in effect, a situation, in relation to Lee v Lee’s Farming, that there were two separate entities in relation to that and here, in my submission, that was the situation here.

HAYNE J:   Just as to that, Mr Papayanni, was there evidence at trial about the constitution and shareholding of this company?

MR PAPAYANNI:   No, and the onus was on the Crown to do that, because in every company, usually, there is provision for lending money.

GLEESON CJ:   I presume the jury knew what the articles of association of the company provided about loans.

MR PAPAYANNI:   Well, the Crown said it was not a loan and, in effect, they were saying it could not be a loan from the company but if they had the ordinary articles of association – and the onus was on the Crown for that – well, then, it was a loan.  See, one of the loans was recorded.  $5,103, I think, was recorded as a loan by Mr Staume and the applicant gave evidence that he told Mr Staume, because he did not know how to transfer the money from Trainex to Starlight for the purpose of getting a prospectus and so on, and that only fell through – they did obtain a prospectus and so on but the directors who well‑known Queensland people ‑ ‑ ‑

HAYNE J:   Maybe, but was it no part of the evidence led by the prosecution in this case that, for example, it was a proprietary company?  There were prescribed interest charges, were there not?

MR GAME:   Tendered the company records.

HAYNE J:   The company records were in evidence?

MR GAME:   ASIC records were produced and it was our case the co‑director was a non‑existent person.

HAYNE J:   Thank you.

MR PAPAYANNI:   The only – was the registration as a company, proprietary company.  Armstrong’s Case was a case also by Mr Justice Nagle and no decision was given by the Court of Criminal Appeal as to this question of the loan or not.

GLEESON CJ:   It sounds to me as though you may have to face up to an argument about the proviso at some stage before this case reaches its final conclusion, but that is not an argument for today.

MR PAPAYANNI:   Well, he was unrepresented.  Provisos are very seldom applied in relation to an unrepresented accused.  If your Honour pleases.

GLEESON CJ:   In this case there will be a grant of special leave to appeal limited to the grounds set out in paragraphs (a), (b) and (c) of the draft notice of appeal at page 217 of the application book.  In relation to the grounds, the subject of the remaining part of the draft notice of appeal, the Court is of the view that there is no reason to doubt the correctness of the decision of the Court of Criminal Appeal, and in relation to those grounds leave is refused.

AT 12.45 PM THE MATTER WAS CONCLUDED