Pratten v R
[2021] NSWCCA 251
•25 October 2021
|
New South Wales |
Case Name: | Pratten v R |
Medium Neutral Citation: | [2021] NSWCCA 251 |
Hearing Date(s): | 26 and 27 July 2021 |
Date of Orders: | 25 October 2021 |
Decision Date: | 25 October 2021 |
Before: | Gleeson JA at [1] |
Decision: | (1) Extend the time for filing of the notice of application for leave to appeal to 12 June 2019. |
Catchwords: | CRIMINAL LAW — appeal against conviction — seven offences of dishonestly obtaining a financial advantage by deception by lodging tax returns which did not disclose all assessable income — whether monies paid to appellant or to third parties at his direction were income of appellant or loans — whether trial miscarried because evidence wrongfully admitted that amended notices of assessment were issued to appellant — whether trial judge erred in directions given to jury concerning elements of the offences and on tax law — whether a Shepherd direction required as to appellant’s control of Vanuatu company making payments to him or to third parties at his direction — whether verdicts were unreasonable and not supported by the evidence — whether proviso applied notwithstanding evidence wrongfully admitted — Criminal Appeal Act 1912 (NSW), s 6(1) |
Legislation Cited: | Criminal Appeal Act 1912 (NSW), ss 5(1)(b), 6(1) |
Cases Cited: | Arthur Murray (NSW) Pty Ltd v Federal Commissioner of Taxation (1965) 114 CLR 314; [1965] HCA 58 |
Texts Cited: | RW Parsons, Income Taxation in Australia: Principles of Income, Deductibility and Tax Accounting |
Category: | Principal judgment |
Parties: | Timothy Charles Pratten (Appellant) |
Representation: | Counsel: |
File Number(s): | 2010/315475 |
Decision under appeal: | |
Court or Tribunal: | Supreme Court of New South Wales |
Jurisdiction: | Criminal |
Citation: | - |
Date of Decision: | 09 September 2016 |
Before: | Rothman J |
File Number(s): | 2010/315475 |
JUDGMENT
GLEESON JA: The appellant, Mr Timothy Charles Pratten, seeks leave to appeal against his convictions of seven offences of dishonestly obtaining a financial advantage by deception, of which he was found guilty on 9 September 2016, after a trial by jury before a Supreme Court judge (Rothman J). Those offences were contrary to s 134.2(1) of the Criminal Code Act 1995 (Cth) (the Code) which provides:
134.2 Obtaining a financial advantage by deception
(1) A person commits an offence if:
(a) the person, by a deception, dishonestly obtains a financial advantage from another person; and
(b) the other person is a Commonwealth entity.
The trial was a retrial. Mr Pratten’s prior convictions by jury were quashed on appeal: Pratten v R [2014] NSWCCA 117. The charges related to a failure by Mr Pratten to disclose assessable income in seven tax returns with a resultant reduction in his liability to pay income tax. Counts 1 and 2 related to the financial years ending 30 June 2003 and 30 June 2004 respectively, both returns being lodged on 18 August 2005. Count 3 related to the financial year ending 30 June 2005, the return being lodged on 21 June 2006. Counts 4 to 7 related to the four subsequent financial years ending 30 June 2006 to 2009 respectively, the returns being lodged on 29 September 2009.
Mr Pratten was sentenced on 29 April 2016 to a total of 5 years’ imprisonment, with a non-parole period of 2 years: R v Pratten (No 25) [2016] NSWSC 539. An appeal against sentence by the Commonwealth Director of Public Prosecutions (the Director) was allowed. On 17 March 2017, Mr Pratten was resentenced to a total sentence of 6 years and 4 months’ imprisonment, with a non-parole period of 3 years and 9 months, which included a partially concurrent sentence for an offence contrary to s 37(1) of the Proceeds of Crime Act 2002 (Cth) (being imprisonment for 6 months): Director of Public Prosecutions (Cth) v Pratten (No 2) (2017) 94 NSWLR 194; [2017] NSWCCA 42. Mr Pratten was released on parole on 19 October 2019.
Mr Pratten’s grounds of appeal raise the following issues:
(1)the admissibility of evidence given by an officer of the Australian Taxation Office (ATO) that the Commissioner of Taxation had issued Mr Pratten amended notices of assessment for the 2002 to 2009 tax years (ground 1A), or alternatively, the failure by the primary judge to give the jury directions sufficient to extinguish or diminish the prejudice of such evidence (ground 1);
(2)the directions given in relation to two elements of the offences: “deception” and “financial advantage” (grounds 2 and 3);
(3)the directions given in relation to tax law, specifically those concerning the derivation of ordinary income (ground 5);
(4)the refusal of the application to discharge the jury (ground 4);
(5)the failure of the primary judge to give a Shepherd direction as to proof of Mr Pratten’s control of a company in Vanuatu (ground 6); and
(6)whether the verdicts on all counts are unreasonable and cannot be supported by the evidence, specifically, the sufficiency of evidence that Mr Pratten controlled a company in Vanuatu (ground 6).
As will be seen, several of the grounds raised additional issues.
Leave to appeal is required insofar as the grounds involve a question of mixed fact and law: Criminal Appeal Act 1912 (NSW), s 5(1)(b). Grounds 1, 4 and 6 fall into this category.
Mr Pratten accepted that he also requires leave pursuant to r 4 of the Criminal Appeal Rules (NSW) insofar as the grounds complain of matters where no direction in the terms sought had been requested during the trial; this involves grounds 1, 2, 3, 5 and (part of) 6. At the time of the hearing, the Criminal Appeal Rules had been repealed and replaced by the Supreme Court (Criminal Appeal) Rules 2021 (NSW), which came into force on 1 May 2021. The equivalent provision, in almost identical terms in the new rules, is r 4.15.
Mr Pratten also requires an extension of time up to 12 June 2019 when his application for leave to appeal was filed. The extension was not opposed by the Crown and should be granted; the delay, although extensive, was satisfactorily explained in Mr Pratten’s affidavit of 11 April 2019.
Whilst Mr Pratten was represented by counsel at trial, he was self-represented in this Court. His written submissions on appeal exceeded 300 pages. In oral argument, Mr Pratten gave a more concise identification of the essential points he relied upon.
The Crown’s case
In broad outline, the Crown case was that insurance premiums in excess of $19 million, collected in Australia by an insurance broker controlled by Mr Pratten, were transferred to an insurance company incorporated in Vanuatu. Of the $19 million, amounts in excess of $4.5 million were returned to Mr Pratten or transferred to third parties at his direction, including to entities associated with him in Australia. The Crown case was that the amounts returned to Mr Pratten, and transferred to his associated entities and third parties at his direction, constituted ordinary income which should have been declared in his tax returns and that, by dishonestly failing to declare these amounts, Mr Pratten obtained a financial advantage by deception for the income tax years ending 30 June 2003 to 30 June 2009, being a resultant reduction in his liability to pay income tax.
The circumstances of the alleged offending were more complex. Up to June 2002, an Australian insurer, Rural & General Insurance Ltd (RGIL), provided insurance to small businesses for commercial risks. Mr Pratten was a director of RGIL and indirectly a shareholder in RGIL. From July 2002, RGIL ceased to underwrite new business and went into runoff as a result of being unable to meet the new prudential and licensing requirements for Australian insurers introduced by the Federal government following the collapse of the HIH Insurance Group.
Mr Pratten changed his business operations in response to the legislative amendments. On 15 August 2002, an insurance broker, Presidential Financial Services Pty Ltd, changed its name to Rural & General Insurance Broking Pty Ltd (RGIB). Mr Pratten and Mr Aaron Stephenson were directors of RGIB. 71 Cowper Street Holdings Pty Ltd (71 Cowper Street), a company owned and operated by Mr Pratten as sole director and shareholder, was the majority shareholder in RGIB. On 20 August 2002, the Vanuatu accounting firm, BDO Chartered Accountants (BDO), of which Mr Pratten was a client, incorporated a company in Vanuatu originally under the name Rural & General International Insurance Limited (RGII), which changed its name in March 2005 to Commercial Pacific Insurance Limited (CPI).
RGII/CPI was set up by BDO to underwrite insurance provided to Australian small businesses. The initial shareholders of RGII/CPI were Global Nominees Limited and Credit Facilities Limited, nominee companies of BDO.
RGIB entered into an insurance agency agreement with RGII/CPI on 23 August 2002, under which RGIB issued cover notes and insurance policies on behalf of RGII/CPI in return for a commission equal to 33 per cent of the net premiums received. The Crown case was that CPI effectively used RGIB to sell CPI’s insurance policies in Australia, and that the two companies did not operate at arm’s length. There was evidence that incorporating a foreign insurance company in Vanuatu, which did not carry on any business in Vanuatu, had certain commercial advantages including no or minimal requirement to pay tax, total secrecy, total flexibility for meetings, rules and other formalities, and no requirements as to capital backing to underwrite insurance (Exs O and P).
From December 2005, reinsurance of the risks insured by RGII/CPI was placed through a London broker, Alsford Page & Gems Ltd. Mr Don Cantwell was a broker with that company. He gave evidence at the trial that he first met Mr Pratten in 2005, when Mr Pratten told him that CPI was set up to take over the business of RGIB and that CPI was “mine”.
Up until June 2004, the director of RGII/CPI was Global Nominees Limited, and the secretary was Credit Facilities Limited, both BDO nominee companies. In June 2004, Mr Pratten became a client of another Vanuatu accounting firm, PKF Vanuatu Chartered Accountants (PKF), and the directors of RGII/CPI changed to Astrolabe Limited and Astrolabe Nominees Limited, two nominee companies administered by PKF. The shareholders of CPI became two other Vanuatu-based nominee companies used by PKF, Garde Limited and Tenir Limited. The principals or employees of PKF included Mr Robert Agius, Mr Iain Johns and Ms Kelly Fawcett.
During the tax years of 2003 to 2009, RGIB remitted premiums received for policies issued on behalf of RGII/CPI, totalling $19,049,046, either to the bank account of Vanuatu International Trust Company Limited (VITCO) (from 2 October 2002 to 1 June 2004), a trust company controlled and administered by BDO, or the bank account of International Finance Trust Company Limited (IFTCO) (from 15 June 2004 to 26 July 2009), a trust company controlled and administered by PKF.
Ms Rosanna Celona, a forensic accountant, gave evidence of the premiums collected and remitted by RGIB to VITCO and IFTCO, prepared an analysis of the VITCO and IFTCO transfers, and the payments into and out of Mr Pratten’s account with the St George Bank in Sydney. Of the total payments of $5,009,732 made from the VITCO and IFTCO accounts to Australia, amounts totalling $2,913,006 (over the seven-year period from 30 June 2002 to 30 June 2009) were made directly to the personal bank account of Mr Pratten. The remaining payments (totalling $2,096,726 over the same period) were made to third parties and applied either in the acquisition of assets in the names of those parties, or in the payment of monies owing to them by Mr Pratten, or in the payment of other expenses owed by Mr Pratten.
The assets acquired were a Robinson R44 helicopter, three rural properties, a hardware business at Stroud (a small country town north of Newcastle, New South Wales), and a Mitsubishi truck. The expenses related to those assets, and also a motor vessel “Los Lobos”, school fees of Mr Pratten’s two daughters, rent on a Darling Point property in Sydney (which was occupied by Mr Pratten), and architectural fees for a proposed residence at Port Vila in Vanuatu. Details of the direct and third-party payments relating to these properties, assets and expenses, which were spread over more than one tax year, are shown in the table attached to this judgment as Schedule 1.
Other than the first five payments for the purchase of a rural property known as Skallet in the tax year ending 30 June 2003 (totalling $458,835), the Crown case was that the monies transferred from the VITCO and IFTCO accounts to Australia were the premiums that had been sent to CPI by RGIB, which were then returned to Mr Pratten, either as remuneration for services or distribution of profits. The Crown case was that Mr Pratten had a beneficial interest in CPI and, although Mr Pratten may not have controlled all of CPI, he was nonetheless able to give directions for monies to be paid from CPI to himself or entities associated with him.
The payments utilised for the purchase of Skallet occurred prior to the incorporation of RGII/CPI on 20 August 2002. There was evidence that those monies had come from a loan by RGIL to Griffith Narrandera Primary Property Developments Pty Ltd (GNPPD), a company incorporated in Australia of which Mr Pratten was the sole director and held 50 per cent of the Class A shares, whilst 100 per cent of the Class H shares were owned by Mr Pratten’s company, 71 Cowper Street (see [12] above). Following legal argument, the Crown case was confined to payments received by Mr Pratten, or made at his direction, from CPI. As a result, the jury was directed that it could only take into account the Skallet payments as proof that Mr Pratten controlled Pacific Property Investments Ltd (PPI), a Vanuatu-incorporated company to which Mr Pratten had directed the five payments as the purchaser of Skallet, and that the payments could not be used to establish Mr Pratten’s guilt in relation to the counts on the indictment.
The Crown case was that the payments made by CPI directly to Mr Pratten and to third parties, recorded in Schedule 1 to this judgment, were made on Mr Pratten’s instructions or at his direction. The Crown alleged that those payments were income, in the ordinary meaning of that term, in the hands of Mr Pratten, and derived from CPI, none of which was declared as income in his tax returns. The Crown further alleged that Mr Pratten was aware that the amounts should have been included as income and dishonestly, and by deception, understated his income in his tax returns and thereby obtained a financial advantage from the Commonwealth, being a lesser liability to tax.
It is necessary to say something more about some of the third-party payments relating to the assets purchased in the name of an entity other than Mr Pratten.
Helicopter
The helicopter was purchased in June 2005 for $180,000 in the name of “Sonarpia Pty Ltd”, as trustee of the Pratten Family Trust. Mr Pratten and his daughters were named as the primary beneficiaries of that discretionary trust, which was formed in May 2003. A file note by Stacks Law Firm, Taree, Mr Pratten’s solicitors, recorded that the helicopter was purchased with money from Mr Pratten on loan to the trust. Mr Pratten described himself as the owner of the helicopter in correspondence in January 2007 with Heliflite, a helicopter distributor, and in an email to his then accountant, Mr John Greer, in May 2008.
Following the purchase of the helicopter, $72,378 was paid from the IFTCO account in the financial years ending 30 June 2006 and 2008 for expenses relating to the running and maintenance of the helicopter.
Motor vessel – “Los Lobos”
The motor vessel was a 45-foot “sports fishing” boat registered in the name of a BDO nominee company, Global Nominees Limited, on or about 1 November 1999. After 2004, the vessel was registered in the name of Astrolabe Services Limited, a PKF-associated company. The evidence established, and Mr Pratten accepted, as did defence counsel in closing address, that he was the beneficial owner of the vessel. In the financial years ending 30 June 2005 to 30 June 2007, $263,897 was transferred from the IFTCO account for expenses in relation to “Los Lobos”, including fees for use of a slipway and repairs to the vessel.
Real property assets
The real property assets, comprising “Skallet” at Terreel Road, Wards River (a grazing property), the “Macedo” block (a 50 acre block adjoining Skallet), and a development block at Mill Creek Road, Stroud (the Stroud development block), were each purchased in the name of PPI.
The Crown case was that Mr Pratten controlled PPI. Before June 2004, the sole director of PPI was Global Nominees Limited, the BDO nominee company. From July 2004, PPI was “administered” by PKF; its sole director was changed to Astrolabe Services Limited, the PKF nominee company. In an intercepted telephone call on 3 December 2008, following the execution of search warrants by the AFP, Mr Pratten told Mr Andrew Neill of PKF that the AFP was particularly interested in PPI, “but … that’s OK that’s all owned by me that’s no problems I don’t care everybody knows it’s the property so I’ve got no issues with that. …”.
(1) Skallet
Mr Pratten negotiated the purchase of Skallet for $485,000 with Elders Gloucester in around May 2002. He told his solicitor, Mr Ray Martin of Gloucester, on 9 May 2002, that he had a private agreement with a very good friend and business colleague, Mr Adrian Sinclair, who was based in Vanuatu, that he himself would not be the purchaser but that a Vanuatu company would purchase the property. That company was PPI. On 1 June 2002, Mr Pratten advised Mr Martin that either himself or GNPPD would lease the property for a 20-year period to carry on the farm and farm-related business. Mr Pratten described his occupation of the farm as being at the “whim” of PPI, however, no lease of Skallet was ultimately entered into with PPI.
On 29 July 2002, five payments totalling $458,835 were transferred from the VITCO account to Mr Martin for the purchase of Skallet, including for stamp duty and legal expenses. The purchase was completed on around 20 August 2002. Although these payments were ultimately not relied upon as evidence on count 1, the Crown relied upon these payments as evidence of Mr Pratten’s control of PPI, which the Crown alleged had purchased the Skallet property for his benefit.
There was evidence that Mr Pratten had inspected the property and had communicated with the vendor’s agent about issues with the property, including the septic system, prior to settlement. There was also evidence that Mr Pratten conducted a pre-settlement check of the property and had found that the cattle yards had been removed and that the fencing was cut, damaged and left open. He sent a letter to the vendor’s agent on 5 August 2002 stating that “the deal is off”. He instructed Mr Martin on 7 August 2002 that settlement may proceed if the cattle yards are returned to the property. The Crown relied upon the nature of these communications as evidence of Mr Pratten giving instructions in relation to the property, rather than merely acting as a representative of BDO in relation to the purchase by PPI, to establish Mr Pratten’s beneficial ownership of Skallet.
Skallet was used by Mr Pratten to operate a business under the name “Myidaho Natural Beef”, which was owned by Mr Pratten. In a finance application dated 18 August 2008 for the lease of a tractor, Mr Pratten described his assets as including “my farm … I have no debt – hence I will have tax problem [sic] this year for the farm’s operations because it will turn a profit and I have only very few expenses”.
In the 2005 to 2008 tax years, payments were made to third parties from the accounts of VITCO and IFTCO in relation to expenses incurred for the Skallet property. The Crown alleged that these amounts constituted income received by Mr Pratten. In his email communications with PKF, Mr Pratten’s requests for monies relating to Skallet were variously expressed as payment of specific invoices by “TT”, as assistance in financing specified purchases, and as an “advance” of funds, “loans”, and “loan amounts”.
(2) Stroud development block
In about March 2004, Mr Pratten negotiated a deed of option for PPI to purchase the Stroud development block for $140,000. PPI exercised that option in August 2004 and contracts were exchanged on 16 August 2004 for $150,000. Completion of the sale occurred in February 2006. Again, the solicitor acting on the purchase was Mr Martin. The formal admissions made by Mr Pratten at trial included that payment of the option fee, legal fees, purchase price and other expenses relating to this property, totalling $178,699, was made from the accounts of VITCO or IFTCO (Ex 2).
The Crown case was that Mr Pratten was the beneficial owner of the Stroud development block. When PPI changed accountants from BDO to PKF in June 2004, Mr Pratten sent an email to Mr Iain Johns of PKF attaching an email from Mr Lindsay Barrett of BDO and correspondence from Mr Martin about the exercise of the option to purchase the Stroud development block and said, “I received this from Lindsay regarding a property. I will talk to you later about how things work”. The Crown relied upon this communication as evidence of Mr Pratten directing how the transaction was to occur.
Subsequently, on 8 November 2004, Mr Johns of PKF sent an email to Mr Martin enquiring as to the status of the contract and noted, “[w]e are waiting for our client to arrive in Vanuatu (anticipated to be around 20th of this month) whereupon we will be in a position to proceed with the FIRB matters”. There was evidence that Mr Pratten arrived in Vanuatu on 18 November 2004. The Crown relied upon these circumstances for an inference that Mr Pratten was the “client” of PKF Vanuatu who was obtaining the benefit of the transaction involving the purchase of the Stroud development block.
There was evidence of monies transferred from IFTCO for the payment of legal and architectural fees associated with the Stroud development block in the financial year ending 30 June 2007, that Mr Pratten communicated with the architect, Mr Hugh Slayter, about development of the property, and that invoices for Mr Slayter’s fees addressed to Mr Pratten c/- RGIB were paid from the IFTCO account. Mr Slayter gave evidence that when he met Mr Pratten in 2006, Mr Pratten said to him words to the effect:
I have a property at Stroud. I want to go commercial – I remember him saying that they had to get, people at Stroud had to go a long way to go to a supermarket, so he thought it was a good position to put a supermarket just outside of town.
The Crown relied upon this, and other evidence (including the intercepted telephone call referred to at [28] above), as indicative of Mr Pratten’s beneficial ownership of the Stroud development block and pointed to the fact that Mr Pratten also personally paid for some expenses in relation to the development of this property.
(3) Macedo block
In February 2007, Mr Pratten negotiated the purchase of the Macedo block for $150,000 from Mr George Macedo, being 50 acres of grazing land adjoining Skallet. In a letter to his solicitor at Stacks, Taree, dated 15 February 2007, after describing himself as the owner of the property immediately adjacent to the 50 acres owned by Mr Macedo, Mr Pratten explained that he sought to purchase the Macedo block in order “to expand my own grazing property”. Mr Pratten paid $15,000 to Mr Macedo on about 26 February 2007 from his personal bank account which he told his solicitor was the deposit. In a letter to Mr Macedo dated 10 May 2007, Mr Pratten described the $15,000 as an amount paid for an option to purchase the property and said, “I confirm my agreement to purchase the section of your land located at Lot 70 XXX”.
In his email communications with PKF, Mr Pratten’s requests for monies relating to the purchase of the Macedo block were variously described as “loans”, or requests that the “directors agree” to the payments, or in the case of stamping and registration fees, a “recommendation that this account be settled ASAP …”. An amount of $104,744 was paid by instalments from the IFTCO account, with the property ultimately purchased in the name of PPI.
Stroud hardware store
In January 2003, Mr Pratten negotiated with Elders Real Estate, Stroud, to purchase the premises and business of the Stroud hardware store at 71 Cowper Street, Stroud, for $220,000. Contracts for the sale of the land and for the sale of the business were signed by Mr Pratten as the purchaser. Again, Mr Martin acted as solicitor on the purchase. Mr Pratten later decided that the purchaser should be a company and acquired a shelf company which changed its name to 71 Cowper Street.
An amount of $219,983 was transferred from VITCO to Mr Martin in May 2003 for the purchase of the property and business. Although 71 Cowper Street granted a registered mortgage over the property in favour of PPI (wrongly described in the mortgage as Pacific Properties Pty Ltd) securing an amount of $220,000, in an email dated 19 December 2007 (see [46] below), Mr Pratten described the Stroud hardware store as his own, gave instructions on how to deal with the store in the event of his death, and made no reference to any debt owing to PPI in respect of that property or the business.
Mitsubishi truck
In May 2007, Mr Pratten negotiated the purchase of a property at Boundary Street, Paddington, for $1,000,000 in the name of 71 Cowper Street. On 23 August 2007, Mr Pratten’s solicitor, Mr Tony Marshall of Stacks, Taree, requested that Mr Pratten arrange the transfer of $255,000 into the firm’s trust account in anticipation of settlement. That transfer was made from the IFTCO account on 31 August 2007, however, the transaction ultimately did not proceed. On 29 November 2007, about $110,000 of the monies held on trust by Stacks was applied to pay the balance of the purchase price of a Mitsubishi cattle truck, which Mr Pratten had purchased earlier on about 20 July 2007 for about $114,910, paying a deposit of $5,000 on 3 August 2007.
Although the invoice for the cattle truck was issued in the name of Myidaho Natural Beef, Mr Pratten’s farming business, the vehicle was registered in the name of Mr Pratten’s company, 71 Cowper Street. In correspondence with a motorcycle club on 30 May 2008, offering assistance with obtaining public liability insurance, Mr Pratten referred to having purchased the truck from a club member and described the vehicle as his own stating, “… [r]ecently I purchased a cattle truck”.
Port Vila property
In August 2006, Mr Pratten discussed with Mr Slayter, the architect, a proposal to develop a block of land at Port Vila, Vanuatu, with a view to having a place to live in Vanuatu. In an email to Mr Slayter in August 2007, Mr Pratten referred to changes to the proposed designs for the property. The Crown relied on this email to support an inference that the property was intended for Mr Pratten’s personal use. In a later email to Mr Slayter in June 2008, Mr Pratten described the property as his “one day retirement home in Port Vila”. Invoices issued by Mr Slayter to RGIB for services in respect of the Port Vila residences, totalling $7,579, were paid by transfers from IFTCO in May and October 2007.
The Crash email
In an email dated 19 December 2007 sent by Mr Pratten to his co-director of RGIB, Mr Stephenson, prior to flying to Vanuatu, Mr Pratten gave instructions about how his assets were to be dealt with in the event of his death (the “Crash” email). The email included instructions about:
valuing “my piece of the business and take it or sell out”, and putting the money into trust for his daughters, with his mother to receive monthly payments for life;
selling the helicopter (“say $220,000”), the boat (“say $220,000 as well”), and the Stroud Hardware store (“say $450,000”); and
“[t]he vanautau [sic] stuff will be taken care of – farm and local properties – business interests etc, here and there should all be sold and any money kept offshore for when the girls are older. Should earn a fair bit of interest – they might decide to live o/s anyway so money can stay offshore”.
The Crown relied upon these statements by Mr Pratten as being inconsistent with the monies from CPI being loans and as admissions that Mr Pratten owned the assets and properties referred to in the email.
Lodgement of tax returns
Mr Pratten’s tax returns for the years ending 30 June 2003 to 30 June 2005 were prepared by Mr John Greer of Griffiths, Forrest & Greer Accountants. Mr Pratten changed accountants in 2008 and his tax returns for the 2006 to 2009 tax years were prepared by Mr Stuart Berry and Ms Megan Hamberger of Addison Partners Pty Ltd.
Two of the questions in the tax returns enquired about whether Mr Pratten had a direct or indirect interest in any “controlled foreign company” (Q18), and whether he owned or had interests in any “assets located outside Australia” which had a total value of $50,000 or more (Q19). Mr Greer prepared draft tax returns for Mr Pratten on 21 November 2007 which answered “Y” to both questions. Mr Greer gave evidence that the draft returns were never sent to Mr Pratten. Mr Greer drew these questions to Mr Pratten’s attention in an email dated 26 November 2007. On 17 December 2007, Mr Pratten responded to Mr Greer by email stating:
I have a beneficial interest in Commercial Pacific Insurance Ltd (CPI) which is a Vanuatu registered insurance company.
My beneficial interest is that I will receive 25% of the profits of the company after it is wound up and by constitution it has to be within 10 years of its operations, ie 2012.
Mr Greer replied to Mr Pratten by email on 19 December 2007 concerning questions 18 and 19 as follows:
Q 18 - You do not have an interest in a controlled foreign company if you do not have at least 50 % interest or control with other Australian interests.
Q 19 – This question only needs to be answered Y if your current equity value of the shares is greater than $50,000, … - you may not have any present equity in the company or know what that equity would be worth!
Mr Greer gave evidence that he was unable to answer questions 18 and 19 without further information, which Mr Pratten said he would provide, but nothing was forthcoming. In cross-examination, Mr Greer agreed that having a beneficial interest whereby Mr Pratten was to receive 25 per cent of the profits of a company after it was would up within ten years of operation would not be sufficient to change the response to questions 18 and 19 from no to yes. He also accepted that Mr Pratten never told him that he had a shareholding overseas.
On 4 December 2008, the day after the execution of the search warrants by the AFP, Mr Pratten spoke to Mr Greer by telephone; the 2006 and 2007 tax returns had still not been lodged. Mr Pratten told Mr Greer that he would “work it out exactly what has to be done there … year 2006 and 2007” and asked Mr Greer, “can you bear with me for a week?”. Mr Pratten then telephoned Mr Berry and requested that he prepare his 2006 and 2007 tax returns. When Mr Pratten’s 2006 and 2007 tax returns were lodged by Mr Berry, questions 18 and 19 were answered in the negative. The Crown relied upon this chronology of events as evidence that Mr Pratten changed accountants in order to avoid disclosing in his tax returns his foreign interests and assets.
Evidence inconsistent with loans
To the extent that Mr Pratten referred in some communications with PKF to the transfers from the IFTCO account as “loans” or “advances”, the Crown case was that this was a false trail designed to disguise the nature of the payments, and that the payments were made following a direction by Mr Pratten, rather than any formal application, which was inconsistent with features of a loan. The Crown contended that Mr Pratten was directing BDO and PKF to return to him in Australia monies to which he was entitled and that the Vanuatu accountants involved in the transactions were simply acting as a “post box” for Mr Pratten in Vanuatu. The Crown case emphasised that the commercial features of the transactions were inconsistent with the monies being loans; for example, if CPI had lent money to finance the purchase of the helicopter, it would have obtained a charge over the helicopter, which it did not.
To show that the payments were inconsistent with the purported “loans”, the Crown relied upon the fact that the purported loans increased in value over the years but were never repaid, that no record was kept of interest payments owing on the loans, and the transactions were not the subject of any formal documentation. The Crown also relied upon the typically informal nature of Mr Pratten’s requests to PKF, such as the request in an email to PKF dated 27 April 2007 where Mr Pratten wrote “I have seven (7) payment requests altogether … Please confirm that these payments will go forward ASAP please”, as being inconsistent with the alleged loans.
The Crown contended that the absence of records kept of the quantum of the loans suggested that they were shams. The Crown pointed to steps taken by Mr Pratten on 4 December 2008, the day after the execution of the search warrants, to reconstruct the amount of the alleged loans, as being inconsistent with the monies being loans. The transcripts of the telephone intercepts recorded Mr Pratten:
(1)asking Ms Kelly Fawcett of PKF at 8.49 am for a “dollar for dollar” calculation of all the loans over the years, and stating that he wanted to make sure that “all loan agreements are up to date” so that if the authorities decide to suggest that it is income, and he lost on the argument that the monies were loans, he would be able to argue there were deductions available in relation to each such amount; and
(2)asking Mr Greer at 9.24 am about loans (which was inconsistent with Mr Pratten having received previous advice about loans from Mr Greer, as Mr Pratten had claimed in his evidence).
The Crown also relied upon two contemporaneous documents as being inconsistent with the alleged loans from CPI. One was the “Crash” email referred to at [46] above, in which Mr Pratten treated various assets as his own and made no mention of the obligation to repay debts or loans in respect of those assets. The other was the finance application referred to at [32] above, in which Mr Pratten made no mention of any loans, other than a car lease, and recorded his assets as including properties in Paddington and Woolloomooloo, properties overseas, and also “in the Hunter region, my farm, some commercial properties etc” (which the Crown submitted was a reference inferentially to the rural properties and the Stroud hardware store).
The defence case
At trial, Mr Pratten made formal admissions (Ex 2) in relation to:
his directorships and shareholdings in RGIL, RGIB, 71 Cowper Street, GNPPD, Sonarpia, and the relationship between RGIB and CPI;
his personal bank accounts with St George Bank;
the funds flowing from RGIB to VITCO and IFTCO for the 2003 to 2009 financial years, and the payments totalling in excess of $5 million sent from the Vanuatu accounts of VITCO and IFTCO to him directly ($2,096,726), or to specified third parties ($2,913,006);
expenses incurred in relation to the three properties, the Stroud hardware store, the motor vessel, his daughters’ school fees, the purchase of the Mitsubishi cattle truck, helicopter maintenance and the architectural fees for the proposed residence in Port Vila; and
the amount of assessable income declared in his tax returns for 2003 to 2009 tax years, and the electronic lodgement of those tax returns by his accountants.
The defence case was that the payments received by Mr Pratten or third parties at his direction from the VITCO and IFTCO accounts were not income of Mr Pratten because the monies were loans from CPI which had to be repaid, and loans are not assessable income. Defence counsel opened the defence case in these terms:
Let me make it quite clear, as clear as I possibly can, the payments were loans made by CPI.
Defence counsel identified the key issues at trial as being whether those monies could be characterised as income (as opposed to loans), and whether Mr Pratten acted honestly in declaring the amounts of assessable income in his income tax returns.
Mr Pratten gave evidence and was cross-examined over 11 days. He denied that the amounts paid from the Vanuatu accounts of VITCO and IFTCO to him directly or to specified third parties were income received by him. He gave evidence that he started borrowing money from RGII/CPI in 2003 and had negotiated the loans with BDO and PKF. He said the loans from CPI had to be repaid and had been documented by individual loan documents when BDO was administering RGII/CPI and were recorded in a loan account which he signed off annually when PKF was administering RGII/CPI. He gave conflicting evidence as to whether interest was payable on the alleged loans; he said that interest was payable if the loans were not paid back, that the loans were interest free, that he had not paid any interest, that the loans had not been finalised as he had not received his payout from CPI which would be balanced against the loans, and that “one cancels the other out”. The defence case pointed to some documentation that appeared to confirm the existence of loans; an unsigned loan agreement with RGII/CPI dated 9 December 2003 for $126,759, and sole director resolutions of RGII/CPI for this loan and a further loan of $75,000 on 6 January 2003. Mr Pratten also said that several of the disputed payments were reimbursements from CPI for expenses he had incurred, such as at Officeworks and legal fees paid to solicitors.
Mr Pratten gave evidence that he changed accountants at the end of 2008 from Mr Greer to Mr Berry because, unlike Mr Berry, Mr Greer did not understand the cattle grazing business and Mr Pratten had missed out on deductions in relation to Myidaho Natural Beef as a result. Mr Pratten also said that he changed accountants because Mr Berry was “cheaper”.
Mr Pratten denied that he was the beneficial owner of either CPI or PPI, or that he controlled either of those companies. He also denied that the rural properties in New South Wales and the Port Vila property were his personally. According to Mr Pratten, either Mr Juris Ozols, a solicitor in Vanuatu, or Mr Agius, a partner of PKF Vanuatu, controlled CPI. Mr Pratten described himself as the agent of PPI in Australia. In closing address, defence counsel submitted that, even if the jury was satisfied that Mr Pratten controlled CPI, CPI had genuinely loaned Mr Pratten the monies in issue and that loans are not assessable income.
Mr Pratten denied having an intention to deceive the ATO in lodging his tax returns or having an intention to pay less tax than was legally required. When taken through each of his tax returns in cross-examination, he denied he had deliberately failed to declare income. The jury may be taken by the guilty verdicts to have rejected this evidence.
Rulings on fresh or new evidence on appeal
Mr Pratten sought to rely upon fresh and new evidence on appeal. It is necessary to deal with this application before addressing the grounds of appeal.
There is a distinction to be made between “new evidence” and “fresh evidence”. Fresh evidence is evidence not available to the accused at the time of the trial, actually or constructively. Evidence is constructively available if it could have been discovered, or available at the trial by the exercise of due diligence: R v Abou-Chabake (2004) 149 A Crim R 417; [2004] NSWCCA 356 at [63] (Kirby J).
The documentary material sought to be relied upon fell into seven categories:
(1)extracts of transcripts of evidence of two Crown witnesses at Mr Pratten’s first trial;
(2)a subpoena to produce filed 27 May 2015 issued to the Commissioner of the AFP and related correspondence from the Commissioner objecting to the subpoena;
(3)documents relating to Mr Pratten’s tax affairs, including notices of amended assessment dated 4 August 2010 for the financial years ended 30 June 2003 to 2009, objections lodged by Mr Pratten, the Commissioner of Taxation’s decision in relation to objections, and the Administrative Appeals Tribunal (the Tribunal) decision to adjourn Mr Pratten’s application for review;
(4)documents relating to the ATO’s general processes and functions, being financial statements of the ATO for the years 2002-2003 to 2015-2016;
(5)a transcript of evidence of Mr Michael Cranston in separate criminal proceedings in the District Court in 2019;
(6)a report by M Chesterman, J Chan and S Hampton entitled “Managing Prejudicial Publicity” dated February 2001; and
(7)a report of Ms Jane Goodman-Delahunty dated 7 July 2021.
The Crown objected to all of the material in items (1) to (7) above on the ground of relevance. Objection was also taken to the report in item (7) on the ground that the report was in the form of “advice” which sought to usurp the function of an appellate court in relation to questions which were matters of law for the Court to determine.
In his reply submissions, Mr Pratten indicated that he did not press the material in items (2), (4) and (5). The transcript of separate criminal proceedings, item (5), was not pressed following a concession made by senior counsel for the Crown for the purposes of the appeal that the ATO processes are fallible and may be, at times, attended by error. That leaves for consideration items (1), (3), (6) and (7).
Legal principles
In MRW v R [2011] NSWCCA 260 at [46], Bathurst CJ identified three questions that need to be considered where a conviction is sought to be quashed and a new trial ordered on the basis of fresh evidence:
First, is the evidence fresh evidence in the sense that it was not available to the appellant at the time of trial …; second, was it credible or capable of belief and third, was there a significant possibility that the jury acting reasonably would have acquitted the appellant.
The third proposition in MRW v R expressed in terms of a “significant possibility” is derived from the formulation of Mason and Deane JJ in Gallagher v The Queen (1986) 160 CLR 392 at 402; [1986] HCA 26, with which Gibbs CJ at 399 and Dawson J at 421 substantially agreed. The ultimate question for an appellate court is whether there has been a miscarriage of justice at the trial: Gallagher v The Queen.
As explained in Xie v R [2021] NSWCCA 1 at [434] (Bathurst CJ, R A Hulme and Beech-Jones JJ):
With the first question, where the material in question is evidence that was in existence as at the time of the trial, the relevant issue is whether that material “could not then have been available to the appellant by the exercise on his part of reasonable diligence in the preparation of his case” (Ratten v The Queen (1974) 131 CLR 510 at 516 per Barwick CJ). If the material does not meet the first of the above tests, that is, if it is not fresh evidence but only new evidence, then there would only be a miscarriage of justice if the appellant satisfies this Court that the new evidence is such that, taken with the evidence at the trial, the conclusion should be drawn that he was innocent or that his guilt was not established beyond reasonable doubt (Ratten at 518 and 520).
Application of principles
Applying these principles, all of the material in items (1), (3), (6) and (7) is inadmissible on appeal.
As to item (1), the short extracts from the transcript of evidence given by two witnesses at the first trial (FA Gerald Fletcher and FA Thomas Walker) is not fresh evidence. The material was in existence at the time of the second trial and could have been used by defence counsel in cross-examination of FA Walker who gave evidence at the second trial. Nor does this material meet the third criteria referred to in MRW v R at [46], set out above. Moreover, no attempt was made in the course of Mr Pratten’s oral submissions to explain the relevance of this material on appeal.
As to item (3), the documents are not fresh evidence, but only new evidence relating to Mr Pratten’s tax affairs. Mr Pratten submitted that these documents were relevant to show that proceedings under Pt IVC of the Tax Administration Act 1953 (Cth) (TAA 1953) to review the Commissioner’s objection decision were on foot before the Tribunal at the time of the second trial. However, Mr Pratten could have sought to adduce such evidence at the second trial through cross-examination of the Crown witnesses or the tender of documents. None of this material, taken with the evidence at trial, supports the conclusion that there is a significant possibility that the jury acting reasonably would have acquitted Mr Pratten.
As to item (6), no submission was made by Mr Pratten in support of the admission of this document, being an empirical study of the impact of pre-trial publicity on juries. The report is not fresh evidence, but only new evidence, as it can be inferred that the report was available to the defence at the trial through the exercise of due diligence. In any event, the report is plainly inadmissible.
As to item (7), the report of Ms Goodman-Delahunty, a forensic and legal psychology consultant, is fresh evidence. The report gives “advice” on four questions: (1) the persuasiveness of evidence of amended tax assessments given by Mr Steven Barns of the ATO; (2) the trial judge’s explanation of Mr Barns’ evidence; (3) whether certain remarks of the trial judge in summing up cast suspicion or doubt on Mr Pratten’s proper fiscal conduct prior to 2003; and (4) whether the trial judge’s remarks in summing up could have tainted Mr Pratten’s character.
The wrongful admission of evidence can amount to an irregularity or failure to strictly comply with the rules of procedure and evidence and as thus be a miscarriage of justice within the third limb” of s 6(1): GBF v The Queen (2020) 94 ALJR 1037; [2020] HCA 40 at [24].
Mr Pratten’s contention that the report is relevant because it goes to the facts in issue on grounds 1 and 1A involves a misunderstanding of the nature of the report. The “advice” or opinion of a person claiming to be an expert in assessing the impact or effect on the jury of certain evidence, or the remarks of the trial judge during the trial and in summing up, is not relevant to a fact in issue in a criminal trial. In purporting to address questions of law or questions of mixed fact and law, the report seeks to usurp the functions of an appellate court. The report is not relevant to the appeal.
GROUNDS OF APPEAL
It is convenient to address the grounds of appeal in the following order:
challenges to the directions to the jury which are the subject of grounds 2, 3 and 5;
failure to discharge the jury (ground 4);
challenge to the admissibility of certain evidence given by Mr Barns (grounds 1 and 1A);
failure to give a Shepherd direction regarding the control of CPI (ground 6); and
unreasonable verdict (ground 6).
Ground 2: Direction as to deception
Ground 2 contends:
The trial judge erred in failing to direct the jury as to the specific act of deception on the Crown case, and instead, misdirected the jury as to the element of deception thereby causing the trial to miscarry.
Background
The trial judge gave both written and oral directions as to the elements of the offence under sub-s 134.2(1) of the Code in these terms:
[6] In order to prove the offences, the Crown must prove beyond reasonable doubt that:
(a) Mr Pratten gained a financial advantage from the Commonwealth;
(b) He did so by deception;
(c) He acted dishonestly.
As to the element of dishonesty, the trial judge directed the jury, both in writing and orally, that:
[10] “Dishonesty” or “dishonestly” must be given their ordinary meaning. It has an objective and subjective aspect. That is, it must be dishonest by the standards of ordinary people and known to the defendant to be dishonest according to those standards.
[11] In other words, in this case, in relation to each year that is subject to a charge, you, the jury, must be satisfied:
(a) that there were amounts of income received by Mr Pratten that were his income and not declared; and
(b) he acted dishonestly in not declaring them and knew he was acting dishonestly.
The second element in (b) above, involves a number of aspects:
(i) “Dishonesty” or “dishonestly” is to be given its ordinary meaning;
(ii) In order to have acted “dishonestly”, Mr Pratten, in the circumstances of this case, must have:
• Known the amounts were income in his hands;
• Deliberately failed to declare them; and
• Acted with the purpose, by deceiving the Commonwealth, of obtaining a financial advantage.
As to the element of deception, the trial judge instructed the jury:
I didn’t give you directions about deception. Part of the reason for that is I don’t think in this case it is a matter of great moment, that is, if you were ultimately to come to the view that the Crown had proved beyond reasonable doubt that Mr Pratten receive [sic] income and was acting dishonestly by community standards and knew he was acting dishonestly by community standards, then deception almost follows because the filing of a tax return that did not disclose that income would be a deception.
Nevertheless, deception is an element of the offence and, as a matter of formality, I have to tell you that you have to find that there was deception involved in that which Mr Pratten did in order for you to find guilt.
The reason that it is more complicated is that, frankly, the Commonwealth Criminal Code under which Mr Pratten has been charged is one of the more complicated criminal statutes on the books.
So what I am really saying to you is you have to find deception as well, but in some practical senses, in fact almost every practical sense, the term deception in this case and the term dishonesty in this case, in terms of a mental element, overlap significantly. I do have to tell you, however, that you can deceive someone, that is, be involved in deception, through reckless behaviour, you don’t have to intend to deceive somebody.
So as I said, you may think if you came to the conclusion that Mr Pratten acted dishonestly and knew the amounts were income and should have been declared, then there was an actual and known deception of the Tax Office. But if you were to have issues about deception, as distinct from dishonesty, you should understand that deception can be caused by recklessness, that is, by a deliberate disregard of consequences known to the accused or the substantial risk that what he was doing would deceive the Australian Taxation Office.
Later in the summing up, the trial judge directed the jury that they needed to be satisfied beyond reasonable doubt “that the accused acted dishonestly, that he engaged in deception and that he obtained a financial advantage, that is, he received income he did not declare”.
Submissions
The principal submissions advanced by Mr Pratten were that the trial judge:
(1)failed to give a direction that the jury had to be satisfied beyond reasonable doubt that Mr Pratten had committed the particular deception alleged by the Crown, which Mr Pratten described as “the avoidance”, namely, that Mr Pratten changed his accountants in 2008 from Mr Greer to Mr Berry to avoid disclosure of his interests in Vanuatu after a query was made by Mr Greer in relation to questions 18 and 19 of his tax returns;
(2)had conflated the elements of deception and dishonesty in the directions to the jury; and
(3)failed to give a direction that the element of deception was the “physical” element of the offence.
In addition, complaint was made that the Crown Prosecutor had failed to draw these matters to the attention of the trial judge.
Consideration
For the purpose of Ch 7 of the Code (“The proper administration of government”), in which the offence under sub-s 134.2(1) is contained:
“deception” is defined in s 133.1 of the Code:
133.1 Definitions
In this Part:
…
deception means an intentional or reckless deception, whether by words or other conduct, and whether as to fact or as to law, and includes:
(a) a deception as to the intentions of the person using the deception or any other person; and
(b) conduct by a person that causes a computer, a machine or an electronic device to make a response that the person is not authorised to cause it to do.
“dishonesty” is defined in s 130.3 of the Code:
130.3 Dishonesty
For the purposes of this Chapter, dishonest means:
(a) dishonest according to the standards of ordinary people; and
(b) known by the defendant to be dishonest according to the standards of ordinary people.
the determination of dishonesty is a matter for the trier of fact; in this case, the jury: Code, s 130.4.
Mr Pratten’s challenge to the direction on deception is based on a misconception that the Crown relied upon Mr Pratten’s conduct in changing accountants in 2008 to prove the act of deception. That was not the Crown case. The act of deception relied upon by the Crown was Mr Pratten causing his tax returns to be lodged whilst knowingly under-declaring his income. Mr Pratten was cross-examined about his intention to deceive the Commonwealth in relation to his tax returns.
The evidence relating to Mr Pratten’s change of accountants in 2008 was relevant to the Crown’s circumstantial case about Mr Pratten’s state of mind and whether he acted dishonestly. The evidence was also relevant to assessing whether Mr Pratten was being truthful when he gave evidence that he did not have an interest in CPI or PPI.
The jury was correctly directed as to the elements of the offences, relevantly, that dishonesty and deception are separate elements of the offences. The direction as to deception correctly distinguished the act of deception as an element of the offence from the “mental element” of the offence involving dishonesty.
Although the trial judge did not expressly describe the alleged act of “deception” as “conduct” or the “physical” element of the offence, the directions identified the nature of the conduct relied upon by the Crown as the act of deception: causing tax returns to be lodged in which Mr Pratten’s income was knowingly under-declared. That was sufficient. It was not necessary for the directions, which contrasted the act of deception relied upon by the Crown from the mental element of dishonesty, to describe the act of deception as the “physical” element of the offence.
The direction correctly noted that in practical terms there was a significant overlap between the fault element of dishonesty (that Mr Pratten had received income and acted dishonestly in not declaring that income in his tax returns and knew he was acting dishonestly) and the “physical” element of deception (Mr Pratten’s conduct in causing tax returns to be lodged in which his income was knowingly under-declared). That does not mean that the directions as to the elements of dishonesty and deception were conflated. The directions were clear that dishonesty and deception are separate elements of the offence.
Given the above, the complaint that the Crown Prosecutor did not draw the asserted deficiencies in the directions to the trial judge’s attention is misconceived.
Rule 4.15
Rule 4.15 of the Supreme Court (Criminal Appeal) Rules provides:
No direction, omission to direct, or decision as to the admission or rejection of evidence, given by a trial judge may, without the leave of the Court, be allowed as a ground for appeal or an application for leave to appeal unless objection was taken at the trial to the direction, omission, or decision by the appellant or applicant for leave.
In Obeid v R (2017) 96 NSWLR 155; [2017] NSWCCA 221 at [24]-[25], Bathurst CJ (Leeming JA, R A Hulme, Hamill and N Adams JJ agreeing) accepted, as Basten JA pointed out Greenhalgh v R [2017] NSWCCA 94 at [14], that the exercise of the discretion to grant leave conferred by the former r 4 (which was in almost equivalent terms to r 4.15) cannot be proscribed. In Trevascus v R [2021] NSWCCA 104 at [32], Bellew J observed that in Obeid, Bathurst CJ went on to formulate a number of propositions in relation to the operation of r 4, which Bellew J summarised as follows:
(1) the discretion conferred by rule 4 will be exercised in an applicant's favour where there has been a miscarriage of justice, such that the applicant has lost a real chance of acquittal;
(2) if a necessary element of a fair trial according to law has been overlooked, leave should generally be granted; and
(3) the giving of proper directions by the trial judge to the jury as to the elements of the offence is a necessary element of a fair trial.
In Greenhalgh v R at [17]-[19], Basten JA said of the significance of legal representation at trial for the operation of r 4:
[17] The discretionary power conferred by r 4 has a number of particular features which affect its application. Where, as in this case and in most serious criminal trials, there is legal representation at trial the following principle, stated by Gleeson CJ in Nudd (at [9]), is applicable:
A criminal trial is conducted as adversarial litigation. A cardinal principle of such litigation is that, subject to carefully controlled qualifications, parties are bound by the conduct of their counsel, who exercise a wide discretion in deciding what issues to contest, what witnesses to call, what evidence to lead or to seek to have excluded, and what lines of argument to pursue…. It is the fairness of the process that is in question; not the wisdom of counsel. As a general rule, counsel's decisions bind the client. If it were otherwise, the adversarial system could not function.
[18] Inherent in that proposition is the need to assess unfairness “by reference to an objective standard, and without an investigation of the subjective reasons for that conduct” (Nudd at [9]). Accepting that there may be unusual cases where the reason why an act or omission occurred may be relevant, the Chief Justice nevertheless reiterated (Nudd at [10]):
As a matter of principle, such objectivity is consistent with the assumptions on which the adversarial system operates. As a matter of practicality, it avoids the difficulties inherent in turning a criminal appeal into an investigation of the performance of trial counsel.
[19] An objective assessment may be inconclusive. In some cases it will be possible to infer that a step was not taken which might have been taken, for tactical reasons. However, in most cases it will be difficult to know from reading the transcript of the trial whether some tactical advantage may have been perceived, whether a step was not taken based on instructions as to how the case should be run, or whether it was omitted through inadvertence.
The statement by Gleeson CJ in Nudd v The Queen [2006] HCA 9; (2006) 80 ALJR 614 at [9], to which Basten JA referred in Greenhalgh v R at [17], was affirmed in The Queen v Baden-Clay (2016) 258 CLR 308; [2016] HCA 35 at [48].
As there was no objection at trial to the directions on deception, r 4.15 applies. I would refuse leave. In any event, for the reasons given, ground 2 has not been made out.
Ground 3: Direction as to financial advantage
Ground 3 contends:
The trial judge erred in directing the jury as to the constitution of financial advantage, an essential element of each offence, in a way that confused and conflated the financial advantage alleged on the Crown case, that of being a lesser liability to tax consequent on failing to declare income, with that of a financial advantage resting on undisclosed income alone, so that it cannot be certain that the jury verdicts of guilty were rendered unanimously on a properly informed basis, thus causing the trial to miscarry.
Background
In the general written directions, the trial judge directed the jury:
7. In the particular circumstances of these offences:
(a) There is no issue that, if there were a financial advantage, it was from the Commonwealth;
(b) That, if one or more of the disputed amounts in any one year to which the Crown have referred were income of Mr Pratten, it was required to be declared and, since it was not declared, was a financial advantage unless there is a reasonable possibility on the evidence before you (being evidence you accept) that there were sufficient business deductions to negate wholly any such income. (Emphasis added.)
During legal argument about the general directions proposed to be given to the jury, defence counsel foreshadowed that the issue of deductions was not going to be the subject of a submission by the defence and requested that par [7(b)] be taken out of the general directions. The trial judge disagreed and indicated that par [7(b)] would remain and there would be some comment about deductions, consistent with the decision of this Court on the first conviction appeal and the tax law directions: Pratten v R [2014] NSWCCA 117 at [106].
In the tax law directions, the trial judge directed the jury on the concept of deductions:
Taxable income
19. Taxable income is calculated by determining the assessable income minus all allowable deductions. Tax will be assessed on the taxable income, less losses, which have arisen from previous tax years, that meet the rules allowing them to be carried forward.
Deductions
20. A taxpayer may deduct from their assessable income any “loss or outgoing” to the extent that it is incurred in gaining or producing their assessable income, or if it is necessarily incurred in carrying on a business, but may not deduct capital expenditure or private expenditure.
21. Where assessable income exceeds allowable deductions, the balance is taxable income.
The trial judge also gave the following oral directions:
So, if Mr Pratten in fact received income that he did not declare, that is, a financial advantage from the Commonwealth, and got a tax advantage for it, that is a financial advantage from the Commonwealth. But the Crown also needs to prove beyond reasonable doubt that he did so as a matter of deception and he did so dishonestly. Now, not much attention has been paid to deception. You can deceive the Commonwealth recklessly. I do not think anyone is putting that. In some senses, in a case such as this, if you found the receipt of income that was not declared and was not offset by allowable deductions such that there was a financial advantage and you found that Mr Pratten knew that it was income, that is, knew it was dishonest, you would probably not trouble yourself with the question of deception for very long, and for that reason, neither of the parties have paid much attention to it. (Emphasis added.)
Submissions
Mr Pratten’s challenge to the direction on financial advantage relied upon the following propositions:
(1)the direction on financial advantage conflated the financial advantage alleged on the Crown case (being a lesser liability to tax consequent on failing to declare income) with that of the financial advantage resting on undisclosed income alone;
(2)to the extent that on occasions the trial judge referred to the failure to declare “income”, there was a possibility or likelihood that the jury reasoned to verdicts of guilt based upon a misunderstanding of the element of financial advantage, relying upon undeclared income alone to prove financial advantage; and
(3)the general directions at [7(b)] were legally incorrect as deductions do not “negate” income, rather deductions reduce assessable income to taxable income from which a taxpayer’s liability for tax is calculated.
Again, Mr Pratten complained that the Crown Prosecutor had failed to draw these matters to the attention of the trial judge.
Consideration
Whether the direction conflated financial advantage with undisclosed income alone
Section 4-15 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) provides that “taxable income” for the income year is to be calculated as follows:
…
Taxable Income = Assessable Income – Deductions
The statutory regime relating to Mr Pratten’s liability for income tax was explained in Pratten v R [2014] NSWCCA 117 at [87]:
The statutory regime provided that income tax became due and payable by the appellant 21 days after the due date for lodgement of his return or after a notice of assessment was given, whichever was the later: s 204(1) of the Income Tax Assessment Act 1936 (Cth) (ITAA36). The appellant was deemed to have received a notice of assessment of his taxable income and of the tax payable on that taxable income on the filing of each of his tax returns: s 166A of ITAA36. The amount of tax which by s 204(1) then became due and payable was the amount specified in each return. Once that tax-related liability was due and payable, the amount of the tax was a debt due to the Commonwealth and payable to the Commissioner of Taxation: Taxation Administration Act 1953 (Cth), Schedule 1, s 255-5.
The adequacy of the trial judge’s directions and summing up will necessarily depend upon the circumstances of the case and the nature of the issues involved at the trial. In RPS v The Queen (2000) 199 CLR 620; [2000] HCA 3, Gaudron ACJ, Gummow, Kirby and Hayne JJ said at [41]:
… The fundamental task of a trial judge is, of course, to ensure a fair trial of the accused. That will require the judge to instruct the jury about so much of the law as they need to know in order to dispose of the issues in the case. No doubt that will require instructions about the elements of the offence, the burden and standard of proof and the respective functions of judge and jury. Subject to any applicable statutory provisions it will require the judge to identify the issues in the case and to relate the law to those issues. It will require the judge to put fairly before the jury the case which the accused makes. … (Citations omitted.)
The Crown case was that the financial advantage obtained by Mr Pratten was a lesser liability to tax consequent on failing to declare income. That is, by not declaring income, the amount of income tax that Mr Pratten was deemed by the lodging of the return to be assessed as liable to pay, was less than it would have been had that amount been declared as income.
In oral argument, Mr Pratten accepted that the trial judge directed the jury to take into consideration the question of deductions in determining whether there had been proper disclosure of taxable income. Nonetheless, Mr Pratten submitted that the jury must have been overwhelmed by the so-called “conflated” direction in the first sentence of the oral directions, which referred to “income that he did not declare” (see [103] above), such that financial advantage could be concluded by the jury on (undisclosed) income alone, without taking into consideration the possibility of deductions. I reject this submission.
The directions and summing up are to be taken as a whole. Mr Pratten’s contention erroneously takes out of context the abbreviated reference in one sentence of the oral directions to undeclared income from the remainder of the directions on the element of financial advantage. The jury was correctly directed to consider the question of allowable deductions and to determine whether Mr Pratten received income that was not declared and was not offset by allowable deductions such that there was a financial advantage, that is, a lesser liability to tax.
Use of the word “negate”
Accepting that deductions “reduce” assessable income, there is no substance in Mr Pratten’s contention that the jury was misdirected by the use of the word “negate” in par [7(b)] of the general directions.
First, given the immediately preceding reference in par [7(b)] of the general directions to “business deductions”, the context in which the word “negate” was used in par [7(b)] was that “deductions” reduce assessable income.
Second, the concept that deductions “reduce” assessable income was explained to the jury in the tax law directions at pars [19], [20] and [21], which were consistent with s 4-15 of the ITAA 1997 (see [102] above). Those tax law directions were repeated in the oral directions (see [103] above). Taken together, the general directions, the tax law directions and the oral directions correctly explained to the jury that taxable income is calculated by determining the taxpayer’s assessable income minus allowable deductions.
Given the above, the complaint that the Crown Prosecutor did not draw the asserted deficiencies in the directions to the trial judge’s attention is misconceived.
As there was no objection at trial to the directions on financial advantage, r 4.15 applies. I would refuse leave. In any event, for the reasons given, ground 3 has not been made out.
Ground 5: Directions on tax law as to derivation of ordinary income
Ground 5 contends:
The trial judge erred in his directions as to how the jury was to approach the question of derivation of ordinary income.
Background
The jury was provided with written directions on tax law which relevantly included:
Assessable income
12. Australian taxpayers are required to include in their returns all income derived directly or indirectly from all sources whether in or out of Australia in the twelve months of the relevant financial year or other approved substituted accounting period.
13. The time at which income is derived is, relevantly, when it is paid to or dealt with as directed by the taxpayer or on her, his or its behalf. An item of an income character is derived when it has “come home” to the taxpayer. The fact, if it be the fact, that income is earned illegally, immorally or invalidly does not preclude derivation of income. An item of an income character that has been derived will be income in the amount of its realisable value.
14. The assessable income of an Australian resident (which includes Mr Pratten) includes:
a) Assessable income earned in Australia and assessable income earned overseas;
b) Assessable income to which the taxpayer is entitled and which is dealt with on the person’s behalf or as the person directs.
15. Not all money or items of value received by a taxpayer are assessable income, for example, loan monies are generally not treated as assessable income for companies, trusts or individuals.
16. The general rule relating to “loans”, described in 15 above, does not apply in two circumstances:
(a) the amount, although described as a loan, is not really a loan in that it is not genuine, has no legal effect i.e. is not to be repaid;
(b) if the amount were an advance on income being an amount paid before the taxpayer is entitled to be paid which, in practical terms, was not intended to be repaid other than in the sense that it is required to be worked off later or credited against future income due or to be due later.
Ordinary income
17. Assessable income consists of ordinary income and statutory income. Ordinary income, usually, excludes distributions from a trustee of a trust to a beneficiary of that trust and excludes genuine loans.
18. Otherwise, an item is ordinary income if the item has been derived in circumstances that gives it, in other respects, an income character. Some criteria for determining whether an amount (or a gain) is income include:
a) The character of an item as income must be judged in the circumstances of its derivation by the taxpayer, and without regard to the character it would have had if it had been derived by another person;
b) To have the character of income an item must be a gain by the taxpayer who derived it;
c) There is no gain unless an item is derived by the taxpayer beneficially;
d) There is no gain if an item is derived by the taxpayer from himself;
e) There is no gain if an item is derived by the taxpayer as a contribution to capital;
f) A gain that is a mere gift does not have the character of income;
g) A mere windfall gain does not have the character of income;
h) A capital gain does not ordinarily have the character of income;
i) A gain that is one of a number derived periodically has the character of income;
j) A gain (other than a capital gain) derived from property (e.g. rent) has the character of income;
k) A gain that is a reward for services rendered or to be rendered has the character of income; and
l) A gain that arises from an act done in carrying on a business (including an isolated business venture) has the character of income. (Emphasis added.)
The tax law directions also included pars [19], [20] and [21], which are set out at [102] above.
In the summing up, the trial judge succinctly summarised the respective cases of the Crown and the defence on whether the monies received by Mr Pratten and his associated entities in Australia were assessable income or loans:
The Crown case is, in a nutshell, that Mr Pratten diverted money to Vanuatu, utilising Vanuatu’s corporate secrecy regime. Then, aware that loans, if genuine, would not be income, he transferred the money out of Vanuatu to his account, or to the account of one or more of his companies, calling them loans to evade tax, all the while having no intention or requirement to repay the monies. In a nutshell that is the Crown case. In that way these monies were brought home to Mr Pratten by Mr Pratten as part of a deliberate scheme to deceive the Australian Government and the tax department.
…
The accused says, bearing in mind it is for the Crown to prove its case, not the accused to disprove it, that there is sufficient detail in the documents to show that the money received was in the category of loans, including, in that regard, that the Crown has not proved beyond reasonable doubt that they were not genuine loans. Mr Pratten gives evidence that the monies received were loans. It is not for Mr Pratten to disprove. It is for the Crown to prove. Even if you were to disbelieve Mr Pratten, it is still for the Crown to prove otherwise.
Later in the summing up, the trial judge stated:
In essence, were the loans genuine? Were the monies genuine loans? And did Mr Pratten understand that they were not genuine loans, that is, that they were not needed to be repaid? If both of those are answered, one way or the other, that will answer to a large degree all of the issues that I have said have to be answered in order for you to find a verdict one way or the other.
Ultimately, the questions that you have to answer and the verdicts that you reach depend upon three simple questions. In each year to which the charges relate were the amounts Mr Pratten received, either directly or indirectly, from IFTCO or VITCO, that is, the amounts he received himself or the payments made by IFTCO and VITCO to third parties, were they income of Mr Pratten? Secondly, did Mr Pratten know the receipts and payments were income that was required to be declared? Thirdly, did he dishonestly deceive the Commonwealth to obtain a financial advantage in not declaring them? They are the three simple questions. (Emphasis added.)
Submissions
In writing, Mr Pratten submitted that the directions on tax law misdirected the jury as to the concept of derivation of ordinary income for three reasons:
(1)the directions confused the concept of derivation of income with that of the timing of when an item becomes income;
(2)the directions gave the impression that the fact that monies were dealt with by Mr Pratten or on his behalf was sufficient to conclude that those monies were assessable income; and
(3)the trial judge failed to direct the jury that in order to be satisfied that an amount was ordinary income of Mr Pratten, the jury had to be satisfied that any undeclared income originated from CPI.
As to the first scenario, it was open to the jury on the Crown case to accept that the payments by CPI, or at least some of them in each tax year, were a distribution of Mr Pratten’s share of profits of CPI as one of the beneficial owners of CPI. Such payments in the hands of Mr Pratten or paid to third parties at his direction constituted ordinary income which should have been declared in his tax returns.
As to the second scenario, it was open to the jury on the Crown case to accept that the payments by CPI, or at least some of them in each tax year, were remuneration for Mr Pratten’s services provided to CPI. In this scenario it was not necessary for the Crown to show that Mr Pratten controlled CPI or directed the payments to occur. It was sufficient that Mr Pratten gave directions in relation to where those payments were to be made, either to his own bank accounts or to third parties for his benefit, and that those amounts could be characterised as Mr Pratten’s ordinary income.
Contrary to Mr Pratten’s submission, it was not necessary for the Crown to prove beyond reasonable doubt that BDO and PKF were “immutably bound” to execute Mr Pratten’s directions. The Crown’s circumstantial case was a “strands in a cable” type case, rather than a “links in a chain” type case. The trial judge did not err in not giving a Shepherd direction. Leave to rely upon this complaint should be refused under r 4.15.
Whether the verdicts are unreasonable
A ground of appeal which asserts that the verdicts are unreasonable or cannot be supported having regard to the evidence requires that the Court address “whether it thinks that upon the whole of the evidence it was open to the jury to be satisfied beyond reasonable doubt that the accused was guilty”: M v The Queen (1994) 181 CLR 487 at 493; [1994] HCA 63; MFA v The Queen (2002) 213 CLR 606; [2002] HCA 53 at [25], [58]; SKA v The Queen (2011) 243 CLR 400; [2011] HCA 13 at [11]-[12]. In answering this question, an appeal Court must bear steadily in mind the jury’s advantage in resolving conflicts in the evidence of various witnesses. The question is one of fact which requires this Court to make “an independent assessment of the evidence, both as to its sufficiency and its quality”: SKA at [14]; and disclosing in its reasons its assessment of the capacity of the evidence to support the verdicts: BCM v The Queen [2013] HCA 48; (2013) 88 ALJR 101 at [31]. It is not simply a matter of deciding whether as a matter of law there was evidence to support the verdict. This Court must determine whether, in all the circumstances, it would be dangerous to permit the verdict to stand: SKA at [14], citing M v The Queen at 492-493. These principles were confirmed in Pell v The Queen (2020) 268 CLR 123; [2020] HCA 12 at [43]-[45].
In a circumstantial case such as the present, it is important to consider the totality of the evidence; the evidence is not to be looked at in a piecemeal fashion. As the joint judgment observed in The Queen v Baden-Clay at [47] “all of the circumstances established by the evidence are to be considered and weighed in deciding whether there is an inference consistent with innocence reasonably open on the evidence” (emphasis in original). A doubt that may be felt when considering one part of the evidence in isolation may be resolved when considering that evidence in the context of the evidence as a whole.
Sufficiency and quality of the evidence that the payments were income
In accordance with the principles referred to above, I have undertaken an independent assessment of the evidence, both as to its sufficiency and to its quality. In approaching this task I have had regard to the elements of the offence; the accused’s defence; the issues in contest at the trial; the manner in which the trial was conducted; the way in which the case was ultimately left to the jury; and the particulars of this ground of appeal, relevantly, the asserted insufficiency of the evidence of Mr Pratten’s control of CPI.
The jury had to determine whether the payments made from the VITCO and IFTCO accounts to Mr Pratten or to third parties at his direction were (1) by way of loan, (2) by way of reimbursement to Mr Pratten of expenses paid by him on another’s behalf, or (3) by way of distribution of the profits of CPI or remuneration for his services.
There was no issue at trial as to the source of the payments to Mr Pratten or to third parties for his benefit. The evidence established that in each of the tax years in question monies were paid by RGIB to VITCO or IFTCO as premiums due to RGII/CPI and that subsequently lesser amounts were paid out of those accounts either to RGIB, to Mr Pratten, or to or for the benefit of third parties at his direction. The payments back to RGIB were principally for commissions due under the agency agreement. The evidence included the formal admissions made by Mr Pratten in Ex 2 and the forensic analysis by Ms Celona. The amounts of these various payments are set out in the table below:
| Tax Year ending 30 June | RGIB to CPI (VITCO/IFTCO) | VITCO/IFTCO to RGIB | VITCO/IFTCO to Mr Pratten | VITCO/IFTCO to third party |
| 2003 | 1,463,592 | 820,558 | 389,898 | 678,808 (see [284] below) |
| 2004 | 2,449,990 | 1,231,015 | 269,117 | 6,250 |
| 2005 | 2,190,000 | 738,307 | 89,859 | 242,633 |
| 2006 | 3,883,464 | 1,522,857 | 645,022 | 350,388 |
| 2007 | 4,673,000 | 2,053,284 | 1,000,427 | 380,780 |
| 2008 | 4,378,000 | 2,314,360 | 422,369 | 400,014 |
| 2009 | 11,000 | 38,410 | 96,314 | 37,854 |
As indicated, the Crown case was confined to payments sourced from CPI and did not include the first five payments from the VITCO account in the 2003 tax year (totalling $458,825) for the purchase of Skallet. Thus, of the payments to third parties from the VITCO account for the 2003 tax year, totalling $678,808, only part of this amount ($219,983) was sourced from CPI; these payments from CPI related to the purchase of the Stroud hardware store: see [42] above.
As to the character of the payments, there was evidence supporting Mr Pratten’s contention that the payments were by way of loan. That evidence included the accounts of CPI which showed CPI having made loans for the years ending 31 December 2003 ($797,110), 31 December 2004 ($853,577), 31 December 2005 ($1,516,657), 31 December 2006 ($4,464,000), and for the further period of 1 January 2007 to 30 June 2009 ($6,361,126). All loans were recorded as unsecured, except for the year ended 31 December 2006 which recorded the loans as secured. The borrowers were only identified in the accounts for the period ending 30 June 2009, which included Mr Pratten ($2,559,427) and PPI ($826,760).
The accounts of CPI for the relevant years are all dated and signed as audited by Mr Kym Butler: the year ending 31 December 2003 are dated August 2004; the year ending 31 December 2004 are dated August 2005; the year ending 31 December 2005 are dated June 2008; the year ending 31 December 2006 are dated June 2008; and the accounts for the 30-month period ending 30 June 2009 are dated 21 May 2012. The audit opinions for the years ending 31 December 2005, 31 December 2006 and the period ending 30 June 2009 are qualified. The 2005 and 2006 accounts contain a note that CPI did not provide details in relation to debts due from RGIB and commissions payable to it. The accounts for the period ending 30 June 2009 noted a post-balance date event in January 2011 that Mr Pratten sold two ordinary shares in 71 Cowper Street to CPI for $876,456 “to reduce the existing Unsecured Loan” owing from Mr Pratten.
There was evidence that in the period BDO was “administering” the affairs of CPI and PPI, the sole director of RGII/CPI signed written resolutions to make a loan to Mr Pratten of $75,000 on 6 January 2003 and $126,750 on 9 December 2003, and that there was an unsigned loan agreement between RGII/CPI and Mr Pratten dated 9 December 2003 for $126,750.
There was evidence that in the period when PKF was “administering” the affairs of CPI and PPI, Mr Pratten would make requests that payments from IFTCO be made either into his personal bank account or to a third party in payment of an expense or to enable the purchase of an asset to proceed. Those requests took several forms. Some requested that Mr Johns or Mr Agius of PKF “arrange payment of invoices by TT”. Some requests were made to “borrow” funds, or that funds be “advanced”. Some requests were expressed as “assistance in financing” purchases. One request in August 2007 referred to “confirmation that the loans are available” and made payment requests. Another request referred to the payment of “standard debts” and others referred to “property settlements”. The “standard debts” included rent on the Darling Point property and school fees for Mr Pratten’s daughters in Sydney.
There were other references in the evidence to monies being advanced by way of loan from CPI to Mr Pratten in the telephone intercept recordings. In a conversation on 3 December 2008 between Mr Pratten and Mr Agius shortly after search warrants had been executed on that day, Mr Pratten said:
… I said well hang on a second um that’s not quite how it works um money goes off overseas to an insurance company not a brokerage the brokerage puts the money into an insurance company the insurance company then pays claims has expenses and then after all that there may be a profit depending on what the I-B-N-R is and then after that um after that I may take a loan from time to time and that’s about it for which I you know may or may not pay interest on and I’ve gotta pay it back one day so hello.
In another conversation around this time, Mr Pratten made similar statements concerning loans that were made from the profits of CPI. Mr Pratten told Mr Berry on 4 December 2008 that in relation to his “Vanuatu dealings” he had “always borrowed money over there in order to you know um buy things for the farm”.
In a telephone conversation on 4 December 2008 with Kelly Fawcett of PKF, Mr Pratten was recorded as saying:
… I wanna work out exactly dollar for dollar ah what all of the loans have been over the years … I wanna make sure that that’s done so and I just wanna make sure cause if they , if they [sic] decide to say a lot of it is income or whatever and I argue that if I argue it successfully I argue it but if I argue it and lose there’s a lot of that money was spent on business type things which are deductible this end you know what I mean.
…
And when I come over I’ll have a look at all the transfers and work out which went where and what was for each one and ah there’ll be … There’ll be I imagine there’ll be a couple of hundred but um it won’t take that long to go through and determine what the hell goes on.
In another conversation on the same day, Mr Pratten asked Mr Greer:
I did wanna ask you … with um er loans right … you know if if you take a loan from a company its gotta be … um what do you call it documented … [y]eah within seven years and yeah secured or repaid within seven years.
…
Yes well, I’ve got a feeling what they’re gunna says is any money that came over to me personally from Vanuatu was income … But I’ve got it all loan documented you know.
In an email dated 12 December 2008, Mr Pratten said to Mr Berry:
The moneys I borrowed are bundled up in a whole bunch of loans I have with another organisation and are not repayable as yet, there will be some interest payable I suppose, but, not yet sure.
Mr Pratten also gave evidence that the payments from the VITCO and IFTCO accounts to him or to third parties at his direction were loans or, in some cases, by way of reimbursement of expenses.
The jury was not obliged to accept Mr Pratten’s evidence.
The jury was entitled to accept the evidence of the Crown witnesses and to consider their evidence in combination, as opposed to in a piecemeal way. There was evidence that in each of the financial years ending 30 June 2003 and 30 June 2004, Mr Pratten received payments from VITCO into his personal bank account, which were applied in part in payment of living and other personal expenses. In the year ending 30 June 2003, the amount withdrawn from Mr Pratten’s personal bank account by ATM was $25,904.73 and the amount paid in satisfaction of VISA card purchases was $177,207.69. In the year ending 30 June 2004, the amount withdrawn by ATM was $51,340 and the amount paid in satisfaction of VISA card purchases was $75,405.05. Significant drawings by ATM continued for the following years in question from 2005 to 2009.
There was evidence that in each of the financial years ending 30 June 2005 to 30 June 2009, Mr Pratten received the benefit of payments made by IFTCO, on his behalf, in satisfaction of school fees totalling $99,230 and rent totalling $192,256, as shown in Schedule 1 to this judgment. As to the payment of school fees, in a letter dated 15 July 2005, Mr Pratten told Lane & Lane Lawyers that “[d]ue to Family Court matters, my funds have been difficult to access” and that he had arranged to telegraphically transfer the sum of $5,000 to Kambala on 18 July 2005. That payment was made by IFTCO on 20 July 2005, as promised by Mr Pratten.
The jury was required to assess whether the payments from the VITCO and IFTCO accounts to Mr Pratten or for his benefit were made by way of loans from CPI. In addressing that question, the jury was entitled to take into account the following matters.
First, there was no evidence of the making of any agreements for loans or the terms of any such agreements, other than assertions by Mr Pratten, and one unsigned loan agreement for $126,750 with RGII/CPI and sole director resolutions of RGII/CPI resolving to make loans to Mr Pratten on 6 January 2003 ($75,000) and on 9 December 2003 ($126,750) in the 2003 tax year. The total amount referred to in these documents ($201,750) was significantly less than the payments from VITCO in the 2003 tax year to Mr Pratten’s personal bank account of $389,898, and for the benefit of third parties of $219,983 (relating to the purchase of the Stroud hardware store).
Second, Mr Pratten’s contemporaneous statements referring to “loans” or “advances” did not identify the amounts he had “borrowed” or the terms of any arrangements. His evidence was extremely vague as to the time for repayment and whether the amounts would need to be repaid. His evidence was also unclear as to whether any interest was payable on the alleged borrowings and whether, and if so, how much interest was payable: see [60] above.
Third, Mr Pratten did not keep contemporaneous records of when and what amounts he had allegedly borrowed from RGII/CPI, which was consistent with him being under no obligation to repay the monies advanced or to pay interest on them.
Fourth, the evidence did not show that there had been any loan repayments by Mr Pratten to CPI at any time before December 2008 when the search warrants were executed. As indicated, the accounts of CPI for the period ending 30 June 2009 noted a post-balance date event in January 2011 which purported to reduce the existing unsecured loan owing from Mr Pratten: see [286] above.
Fifth, prior to 2009, Mr Pratten did not keep any systematic record of expenses paid with monies received from VITCO and IFTCO, or claim that any expenses were deductible, other than in tax returns lodged in September 2009 for the tax years ending 2007, 2008 and 2009. This was consistent with the monies being receipts which he did not treat as taxable, not because they were not income but because they were not to be declared as income.
Sixth, there were contemporaneous documents recording statements by Mr Pratten which were inconsistent with him having borrowed any monies from CPI: see [272]-[273] above.
On the whole of the evidence, it was open to the jury to be satisfied beyond reasonable doubt that the monies transferred from the VITCO and IFTCO accounts to Mr Pratten, or to third parties at his direction, were income to which he was entitled and were not loans that had to be repaid. The evidence referred to above, including the intercepted conversations, overwhelmingly supported the conclusion that, to the extent that these amounts were sometimes called “loans” or “advances”, this was not the true position. The amounts were paid and received by Mr Pratten, or transferred at his direction, as either the return of his share of the profits of CPI or as remuneration for his services.
Having reviewed the evidence and the documents placed before this Court, excluding the evidence of Mr Barns which was wrongfully admitted, I have concluded that it was open to the jury to be satisfied beyond reasonable doubt that Mr Pratten was well aware that the payments from the VITCO and IFTCO accounts to him, or at his direction, were income in his hands that was required to be declared in his tax returns for the years in which it was received. It was also open to the jury to be satisfied beyond reasonable doubt that Mr Pratten therefore dishonestly, and by deception, obtained a financial advantage from the Commonwealth by understating his income in his tax returns which he caused to be lodged, being a resultant reduction in his liability to pay income tax.
I am satisfied, excluding the evidence of Mr Barns which was wrongfully admitted, that it would not be dangerous to allow the verdicts of guilty to stand.
The proviso
The Crown submitted that, notwithstanding the wrongful admission of evidence of Mr Barns, its case against Mr Pratten was very strong and that the proviso applies.
Section 6(1) of the Criminal Appeal Act provides, in effect, that this Court shall allow an appeal against conviction if:
(1) the verdict of the jury is unreasonable or cannot be supported having regard to the evidence;
(2) the judgment of the court of trial is wrong by reason of a wrong decision of a question of law; or
(3) for any other ground where there has been a miscarriage of justice,
provided that the Court may dismiss the appeal if it considers that no substantial miscarriage of justice has actually occurred.
The proviso directs attention to whether the error identified as having occurred at trial is not such as to have occasioned any substantial miscarriage of justice. The proviso is capable of applying to the wrongful admission of evidence: Wilde v R (1988) 164 CLR 365 at 373; [1988] HCA 6; Kalbasi v State of Western Australia (2018) 264 CLR 62; [2018] HCA 7 at [12] (Kiefel CJ, Bell, Keane and Gordon JJ). The onus of proof for dismissal of an appeal under the proviso lies on the prosecution: GBF v R [2020] HCA 40; (2020) 384 ALR 569 at [24], citing Weiss v The Queen (2005) 224 CLR 300; [2005] HCA 81 at [18] (Gleeson CJ, Gummow, Kirby, Hayne, Callinan and Heydon JJ).
Three propositions which are fundamental to the application of the proviso are stated in Weiss at [39]. First, the appellate court must itself decide whether a substantial miscarriage of justice has actually occurred. Second, the task is objective and is to be performed regardless of the advantages and disadvantages of an appellate court deciding an appeal on the record of the trial. Third, the standard of proof of criminal guilt is beyond reasonable doubt.
There is "[n]o single universally applicable description of what constitutes 'no substantial miscarriage of justice'" (emphasis in original): Weiss at [44]. However, as was pointed out in Weiss at [44]:
It cannot be said that no substantial miscarriage of justice has actually occurred unless the appellate court is persuaded that the evidence properly admitted at trial proved, beyond reasonable doubt, the accused's guilt of the offence on which the jury returned its verdict of guilty. (Emphasis added.)
In Filippou v The Queen (2015) 256 CLR 47; [2015] HCA 29, French CJ, Bell, Keane and Nettle JJ said at [15] that what is meant by “substantial miscarriage of justice” is that the possibility cannot be excluded beyond reasonable doubt that the applicant has been denied a chance of acquittal which was fairly open to him or her or that there was some other departure from a trial according to law that warrants that description.
In Kalbasi at [12], the joint judgment confirmed the position in Weiss that an appellate court must make its own independent assessment of the evidence and determine whether, making due allowance for the “natural limitations” that exist in proceeding wholly or substantially on the record, the accused was proved beyond reasonable doubt to be guilty of the offence on which the jury returned its verdict of guilty: Weiss at [41]. The joint judgment in Kalbasi further noted (at [15]) that Weiss requires the appellate court to consider the nature and effect of the error in every case.
Application of principles
In this case, the question is whether there has been a substantial miscarriage of justice by reason of the wrongful admission of Mr Barns’ evidence. An assessment of the nature and effect of that error directs attention to the significance of Mr Barns’ evidence to the issues that the jury were required to determine and the directions given to the jury concerning that evidence.
As indicated, the issues the jury were required to determine included the proper characterisation of the payments from the VITCO and IFTCO accounts to Mr Pratten, or to third parties at his direction, specifically, whether or not the payments were loans (as Mr Pratten said in his evidence and some contemporaneous documents suggest), or the return of Mr Pratten’s share of profits of CPI or remuneration for his services, being income that should have been declared in Mr Pratten’s tax returns in the years in question (as the Crown alleged).
The evidence which was wrongfully admitted was opinion evidence; it was not relied upon by the Crown for proof of the charges. It was admitted on a very limited basis to show “formally” that the Commissioner of Taxation did not agree with Mr Pratten when he said that he did not owe any money and to show that the prosecution was not academic. In closing submissions, both the Crown and the defence treated Mr Barns’ evidence accordingly; neither party referred to Mr Barns’ evidence as irrelevant, which was wrongly admitted.
The jury was correctly directed that the opinions of the Commissioner of Taxation, the ATO and Mr Barns were not relevant to the elements of the offences, namely, “whether something is income, should have been declared, was known to have been declared, and was dishonestly done for the purpose of obtaining a financial advantage”. The jury was also correctly directed that it was for them to determine whether the Crown had established beyond reasonable doubt whether an amount was income and had not been declared in Mr Pratten’s tax returns.
In these circumstances, the jury’s assessment of the evidence on the issues they were required to determine in order to arrive at verdicts of guilt would not have been affected by Mr Barns’ evidence that the Commissioner of Taxation had issued amended notices of assessment for 2003 to 2009, which the jury had been told, correctly, did not affect their task.
There is no disadvantage in this Court deciding the appeal on the record of the trial, excluding the evidence wrongfully admitted. The error in admitting the opinion evidence of Mr Barns was not of a kind that could prevent this Court from having the capacity to assess whether the offences with which Mr Pratten was charged were proved beyond reasonable doubt: Kalbasi at [17].
The strength of the Crown case was manifest. Having considered the evidence, I am satisfied that the evidence, properly admitted at trial, proved beyond reasonable doubt Mr Pratten’s guilt of the offences on which the jury returned its verdicts of guilty. The possibility has been excluded beyond reasonable doubt that Mr Pratten has been denied a chance of acquittal which was fairly open to him. I consider that there has been no substantial miscarriage of justice. Accordingly, the proviso applies.
Conclusion
I propose the following orders:
(1)Extend the time for filing of the notice of application for leave to appeal to 12 June 2019.
(2)Grant leave to appeal against conviction on grounds 1, 1A, 4 and 6.
(3)Refuse leave to appeal under r 4.15 of the Supreme Court (Criminal Appeal) Rules 2021 (NSW) on grounds 2, 3, 5 and 6 (insofar as ground 6 challenges directions, or omission to direct the jury).
(4)Appeal dismissed.
JOHNSON J: I have had the considerable advantage of reading the judgment of Gleeson JA concerning this appeal. I agree with his Honour’s reasons and proposed orders.
With respect to the question whether the verdicts are unreasonable (at [278]-[306]), I have reviewed the evidence adduced at the trial (excluding the evidence of Mr Barns which was wrongfully admitted) and find that it was open to the jury to be satisfied beyond reasonable doubt of the guilt of Mr Pratten on each of the counts where a verdict of guilty was returned.
Concerning the application of the proviso (at [308]-[321]), I am well satisfied that this is a proper case for application of the proviso. As Gleeson JA has explained, this was a very powerful Crown case. After placing to one side the wrongly admitted evidence of Mr Barns, I am satisfied that the evidence proved beyond reasonable doubt the guilt of Mr Pratten of each of the offences upon which he was found guilty by the jury.
BEECH-JONES J: At the commencement of the hearing of this appeal, Mr Pratten applied for my disqualification on the basis of apprehended bias. When it is said that one member of an appellant court should be disqualified on the grounds of actual or apprehended bias, then the application is determined by the individual judge and not the Court as a whole (see Barton v Walker (1979) 2 NSWLR 740 at 756; Bainton v Rajski (1992) 29 NSWLR 539; see for example DJ Singh v DH Singh and Others (No 2) [2018] NSWCA 31 and Waterhouse v Independent Commission Against Corruption (No 3) [2016] NSWCA 134). After hearing Mr Pratten, I declined to disqualify myself. I stated that I would provide reasons at the time the Court published its substantive judgment. I now do so.
The basis for the application that I disqualify myself is my appearance as Counsel for the defendant in proceedings in August 2011 which were resolved by a judgment of Hall J delivered in April 2012 some six weeks after my appointment to this Court: Rural and General Insurance v Goldsmiths Lawyers [2012] NSWSC 358. In those proceedings, I acted for the former solicitor to Rural and General Insurance Broking Pty Ltd (“RGIB”). The solicitor had acted for RGIB in defamation proceedings against the Australian Prudential Regulatory Authority (“APRA”) in the Supreme Court of the Australian Capital Territory (at [4]). In the proceedings before Hall J, RGIB was successful in reviewing the decision of a costs assessor who had declined to review the costs charged by the solicitor defendant to RGIB (at [75]). RGIB was also successful in obtaining an order under s 728 of the former Legal Profession Act 2004 (NSW) for the provision of an itemised bill costs ([81]). Thus, the subject matter of the proceedings was the decision of a costs assessor and the exercise of the discretion conferred by s 728 of the LPA 2004. I did not appear in the defamation proceedings and have no recollection of what they related to.
In his disqualification application, Mr Pratten stated that, during the hearing of the proceedings before Hall J, I cross examined him and put matters to him “adverse to [his] character”. I do not recall doing so. There is no specific reference to any evidence given by Mr Pratten in cross examination in Hall J’s judgment. However, it is clear that Mr Pratten swore affidavits that were read before Hall J (at [7]) and he gave oral evidence (at [82]). I will address the application on the basis that I did cross examine Mr Pratten and put to him matters that were adverse to his credit. It was not suggested that they related to any matter relevant to the facts of this appeal.
The governing principle applicable to an application to a judge to disqualify themselves is that “a judge is disqualified if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide” (Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63 at [6]; “Ebner”). Whether this test is satisfied is to be determined by a two-stage test, namely (Ebner at [8]):
First, it requires the identification of what it is said might lead a judge (or juror) to decide a case other than on its legal and factual merits. The second step is no less important. There must be an articulation of the logical connection between the matter and the feared deviation from the course of deciding the case on its merits. The bare assertion that a judge (or juror) has an ‘interest’ in litigation, or an interest in a party to it, will be of no assistance until the nature of the interest, and the asserted connection with the possibility of departure from impartial decision making, is articulated. Only then can the reasonableness of the asserted apprehension of bias be assessed.
The application of this test to the circumstance in which a judge has previously acted as the legal representative for one of the parties before him or her has arisen in a number of cases. They were recently reviewed by Bell P in Kostov v Director of Public Prosecutions (NSW) (No 2) [2020] NSWCA 94 at [25] to [40] (“Kostov”). Although this case concerns a judicial officer who previously acted against one of the parties to an appeal, those cases are still of relevance especially as I acted for Mr Pratten’s former solicitor.
Two matters should be noted about the test for apprehended bias as it applies to a judicial officer’s previous experience as a legal practitioner. First, in Re Polites; Ex parte The Hoyts Corporation Pty Ltd (1991) 173 CLR 78 at 87 to 88; [1991] HCA 25, Brennan, Gaudron and McHugh JJ noted that a prior relationship of legal adviser and client does not generally disqualify the legal adviser from later sitting in proceedings in which that client is a party, although the position may be different if the correctness or appropriateness of their advice is an issue in those proceedings.
Second, the knowledge attributed to the hypothetical fair minded lay observer includes a working understanding of the basic or ordinary practices, training and obligations of judges, barristers and solicitors (S & M Motor Repairs Pty Ltd v Caltex Oil (Australia) Pty Ltd (1988) 12 NSWLR 358; (1998) 91 FLR 175 at 380 to 381; British American Tobacco Australia Ltd v Peter Gordon [2007] NSWSC 109 (BATA) at [63]; Aussie Airlines Pty Limited v Australian Airlines Pty Limited & Qantas Airlines Limited (1996) 65 FCR 215 at 222; [1996] FCA 813; Charisteas v Charisteas [2021] HCA 29 (Charisteas) at [12], including what such practices might preclude (Charisteas at [14])). This imputed knowledge includes an understanding that barristers do not usually become associated or identified with their clients and that a “judge is a professional who by training, tradition and oath is required to discard irrelevant, immaterial and prejudicial material” (BATA at [63]; Kostov at [38] to [39]).
An example of this which has some relevance to this case, is Re Eric Abraham & Houda Jury; Ex parte Westpac Banking Corporation [1997] FCA 600 (“Jury”). In Jury, a debtor sought to resist the making of a sequestration order by the Federal Court by going behind the judgment in the Supreme Court on which the application for the sequestration order was based. The debtor contended that the judgement debt was affected by apprehended bias on the part of the judge who heard his case and entered judgment against him. That judge had advised the parties at the commencement of the proceedings that many years previously he had been briefed to appear on behalf of the prosecution at the committal proceedings of a witness who was to be called by the judgment debtor and in proceedings in which that witness had sought a stay of his prosecution. As counsel, the trial judge was not involved in the decision to prosecute the witness. In Jury, Lockhart J concluded that no apprehension of bias arose from the trial judge’s involvement in earlier proceedings as Senior Counsel for a party. Implicit in his Honour’s reasoning was that in previously appearing as counsel the trial judge was not to be imputed with a personal belief as to the allegations made against the witness, being the first step in Ebner, or as acting on them, being the second step in Ebner. The Court of Appeal addressed the same circumstances in Dovade Pty Ltd v Westpac Banking Group (1999) 46 NSWLR 168 at 180 to 181; [1999] NSWCA 113 on the basis of waiver.
One aspect of the practice of barristers and solicitors conducting court proceedings is that they may put adverse propositions to witnesses in cross examination provided there is a proper evidentiary basis for doing so. Consistent with the above authorities, the hypothetical reasonable lay observer is taken to understand that this is undertaken to advance their client’s case and does not necessarily attribute to the barrister or the solicitor that they hold an opinion as to what was suggested to the witness. As noted, in this case the only matter specifically identified as potentially engaging the first limb of Ebner was Mr Pratten’s recollection that something adverse to him, unrelated to this case, was suggested by me to him in the cross examination before Hall J over a decade ago. It follows that the reasonable hypothetical lay observer is not necessarily taken to attribute whatever suggestion that was put to be a personal view held by me then (much less now). Further, as for the second limb of the Ebner test, this application is taking place in a context where the subject matter of the appeal is the fairness of Mr Pratten’s trial on matters unrelated to the issues in the proceedings before Hall J. This Court is not determining Mr Pratten’s credibility as a witness itself. In all these circumstances, there is no “logical connection between the matter [identified by Mr Pratten] and the feared deviation from the course of deciding the case on its merits” (Ebner at [8]).
In relation to the substance of Mr Pratten’s appeal, I have read the reasons of Gleeson JA and agree with them. In particular, in relation to the unreasonable verdict ground, having reviewed the record of the trial I am satisfied that “upon the whole of the evidence it was open to the jury to be satisfied beyond reasonable doubt” of Mr Pratten’s guilt (M v The Queen (1994) 181 CLR 487 at 493; [1994] HCA 63). I agree with Gleeson JA’s reasons in relation to the wrongful admission of the evidence concerning the amended assessments and the application of the “proviso” to s 6(1) of the Criminal Appeal Act 1912.
I agree with the orders proposed by Gleeson JA.
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Schedule 1 (109277, rtf)
Amendments
25 October 2021 - See [332]; Charisteas v Charisteas [2021] HCA 29 added to Coversheet.
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