R v Boskovitz
[1999] NSWCCA 437
•20 December 1999
CITATION: R v. Boskovitz [1999] NSWCCA 437 FILE NUMBER(S): CCA 060633/98 HEARING DATE(S): 14 April 1999, 7 May 1999 JUDGMENT DATE:
20 December 1999PARTIES :
Regina v. Katy Rachelle BoskovitzJUDGMENT OF: Wood CJatCL at 1; Hidden J at 2; Smart AJ at 3
LOWER COURT JURISDICTION: District Court LOWER COURT FILE NUMBER(S) : 93/11/1052; 94/11/0342 LOWER COURT JUDICIAL OFFICER: Shillington DCJ
COUNSEL: M A McGregor QC (Appellant)
T Game SC and D Jordan (Crown Respondent)SOLICITORS: Jeffreys & Associates (Appellant)
Commonwealth Director of Public Prosecutions (Respondent)CATCHWORDS: Criminal Law - knowingly making false statements with intent to obtain financial advantage; senior executive and company directors' statements to obtain and maintain credit facilities; false impression created; admissibility of prejudicial evidence to establish knowledge; adequacy of summing up; sentencing; relationship of public deterrence and subjective factors; duties of directors and company executives.; overwhelming Crown case ACTS CITED: Crimes Act 1900, s. 178BB
Evidence Act 1995, ss. 56, 101, 137CASES CITED: Lock (1997) 91 A Crim R 356
AH 98 A Crim R 71
Fraser CCA, unreported 10 August 1998
Domican (1992) 173 CLR 555
Zorad (1990) 19 NSWLR 91
Piazza (1997) 94 A Crim R 459
Maslen v. Shaw (1995) 79 A Crim R 199
Kylsant (1932) 1 KB 442
Aaron's Reefs Ltd v. Twiss (1896) AC 273
McDonald (FCA) (1994) 71 A Crim R 370
Corbett (1991) 52 A Crim R 112
Pantano (1990) 49 A Crim R 328
Hawkins (1989) 45 A Crim R 430DECISION: Appeal against conviction on each count dismissed. Leave to appeal against sentences granted. Appeal against sentences allowed, sentences quashed. In lieu of the sentences imposed, the appellant is sentenced on each count to a minimum term of 2 years 3 months starting on 2 October 1998 and ending on 1 January 2001 and an additional term of 1 year 9 months starting on 2 January 2001.
IN THE COURT OF
CRIMINAL APPEAL60633/98
Wood CJ at CL
Hidden J
Smart AJMonday 20 December 1999
Headnote
The appellant was convicted of 3 counts alleging that, with intent to obtain a financial advantage for a company, she made a statement which was false in a material particular and which she knew to be false. The false statements, which included creating a false impression, were made by her to three banks to obtain and maintain credit facilities and concerned the financial position of Linter Group Ltd of which she was a senior executive and director.Held: (1) The evidence of Mr Travers which showed her knowledge and involvement in the matters in question was admissible despite its prejudicial effect. The danger of unfair prejudice did not outweigh its probative value. Further, as the evidence was directly relevant to a fact in issue it was admissible and ss. 97 and 101 of the Evidence Act were inapplicable.
(2) The summing up was not, in the circumstances, inadequate. It put the defence case sufficiently on each count, having regard to the facts in issue.
(3) The judge did not impermissibly allow a conclusion as to guilt on one count to flow over to the other counts. He restricted the use of evidence on one count on which a conclusion of guilt had been reached to the consideration of the state of mind of the appellant on the other counts.
(4) There was ample material to support the verdict on each count.
(5) The sentences comprising a minimum term of 3 years and an additional term of 2 years were excessive. This case fell a little short of the worst type of case of this kind which would justify the maximum penalty of 5 years. It was a bad case meriting substantial sentences. Concurrent sentences of 4 years comprising a minimum term of 2 years 3 months and an additional term of 1 year 9 months should be substituted.
(6) This case should stand as a stern warning to all company directors and company executives that they cannot simply go along with and implement the decisions of their superiors if their implementation involves them in dishonesty or making false statements to banks or others. Such directors and executives must refuse to engage in such conduct even if the result be that their services are terminated. Although that is hard, it is better than the alternative of a substantial period in gaol. The individual responsibility of each director and executive cannot be over emphasised. They should also realise that the Commonwealth Crown will prepare its case thoroughly making it hard to escape and that any trial is likely to be long and expensive.
IN THE COURT OF
CRIMINAL APPEAL
60633/98
Wood CJ at CL
Hidden J
Smart AJMonday 20 December 1999
KATY RACHELLE BOSKOVITZ v. THE QUEEN
JUDGMENT1 WOOD CJ at CL: I have had the advantage of reading in draft the reasons for judgment of Acting Justice Smart. I agree with his reasons and the orders he proposes.
2 HIDDEN J: I agree with Smart AJ.
3 SMART AJ: Introduction - Mrs. Boskovitz appeals against her conviction by a jury of three counts under s.178BB of the Crimes Act 1900, namely, that with intent to obtain a financial advantage she made a statement which was false in a material particular and which she knew to be false. She seeks leave to appeal against the severity of concurrent sentences comprising a minimum term of three years and an additional term of two years. All 3 counts and statements related to an entry of $240 million cash recorded in the Linter Group Limited (LGL) financial statements for the year ended 31 March 1989.
4 The first count was based on a statement made by her to the Bank of Tokyo of Australia Ltd around 25 August 1989 that that entry represented a deposit of the balance of all available bank loans. The advantage sought was a cash advance facility of $10 million from that bank for Linter Textiles Corporation Ltd (LTCL).
5 The second count was based on a statement made by her to Westpac Banking Corporation around 13 September 1989 that the $240 million cash had been used to fund the takeover of Brick and Pipe Industries Ltd and to retire debt. The advantage sought was bridging finance of $20 million and/or an extension of an existing bill facility agreement of $50 million for LGL.
6 The third count was based on a statement made by her to Chase AMP Bank Ltd around 24 November 1989 that the $240 million was drawn down from Citibank backed financing secured on Tootal shares. The advantage sought was an extension of an existing bill acceptance and discount facility of $20 million from Chase AMP Bank for LTCL.
7 The trial had a number of features. The Crown case was well prepared with a large amount of oral and documentary evidence. The Crown went to the jury on the basis of the appellant’s falsity including creating false impressions, that is making the Banks think that the financial position of LGL was stronger than it was. The Crown endeavoured to and succeeded in negating innocent explanations for what occurred and possible defences. The Crown was put to proof of most facts. The trial was hard fought. The appellant did not give evidence but made an exceptionally long statement (extending over 125 pages) from the dock in which she admitted much of what had been alleged against her and previously not admitted. As a result the issues were narrowed considerably and the judge was able to sum up comparatively briefly. When the jury retired they were given the transcript.
8 At the trial the Crown led evidence as to the corporate history and the operation and financial position of LGL and subsidiary companies, and what they were trying to achieve, the accounts of LGL and its subsidiaries as at 31 March 1989, the corporate structure, the appellant’s role, the statements which she made to the banks to maintain and extend credit facilities and her knowing them to be false.
9 The appellant was a director and an experienced senior executive of LGL and other related companies. She knew the state of the finances of the various companies. She did not determine the strategies of the companies. The directing force was Mr. Abraham Goldberg, a corporate entrepreneur. She implemented his strategies and directions and those of directors and executives senior to her.
10 In about 1980 Mr. Goldberg had taken over a corporation called Entrad Ltd (Entrad). The appellant had been employed by that company for several years prior to the takeover and she continued after the takeover in a senior position. Her responsibilities involved dealing with banks in relation to finance for Entrad and related corporations. In mid-1988 companies controlled by Mr. Goldberg took over LGL, then the largest textile business in Australia, with a sound and profitable textile business employing around 6,000 people and generating a substantial cash income. Shortly after the takeover the appellant became a director of LGL. Her principal duties involved dealing with banks to obtain finance including maintaining and extending credit facilities and moving money around the various companies in the Goldberg and Linter Groups. There were sundry inter company loans.
11 In 1989 the financial position of LGL generally deteriorated. This was due in part to LGL lending hundreds of millions of dollars to a private company in the Goldberg Group called Gibraltar Factors Pty Ltd (Gibraltar). It was used as the internal banker and through it the funds in the Group were shifted. Gibraltar could not repay the loans. On 26 January 1990 LGL was placed in receivership.
12 When in August and September 1989 LTCL and LGL sought credit facilities they needed to and did submit the latest available accounts. The accounts for LGL and its subsidiaries were made up as at 31 March 1989, the close of the financial year for LGL. The balance sheet showed as a current asset, cash in the sum of $240,213 in the consolidated accounts and $220,863 in the LGL accounts. Note 7 to the accounts read:13 This credit had been achieved as a result of quite a number of cheques being circulated around the various companies in the Group on 29 March 1989 and the involvement of 2 companies in the Elders Finance Group in what is colloquially called a round robin. The steps taken and the accounting entries made were:
“ Consolidated Holding
Cash held on deposit $220,971 $220,861”
CompanyNot surprisingly this attracted the attention of the banks and caused them to inquire. They were misled as to this by false statements made by the appellant.
The Round Robin
14 The Crown contended that the effect of the treatment of these transactions in the accounts of LGL as at 31 March 1989 was to create the false impression in those accounts that LGL had access to $240 million cash when in fact $220 million of this asset was never accessible but fully pledged.
(i) Entrad sought $220 million from Elders Finance & Investment Co. Ltd (Elfic) and by cheque paid it an establishment fee of $220,000 on 28 March 1989.(ii) On 29 March 1989 a cheque for $220 million was drawn and presented on the Elders Finance Group Account payable to Westpac for a bank cheque payable to Entrad Ltd being the loan from Elfic. At settlement the Westpac bank cheque for $220 million was handed to Entrad which then handed the cheque to Westpac.
(iii) On 29 March 1989 a cheque for $220 million was presented on the Entrad Ltd bank account payable to Westpac for a bank cheque payable to LGL. At settlement the Westpac bank cheque for $220 million was handed to LGL which then handed the bank cheque to Westpac.
(iv) On 29 March 1989 a cheque for $220,000,001.60 was presented on the LGL bank account payable to Westpac for a bank cheque payable to Elders Finance Group Ltd (EFG). At settlement the Westpac bank cheque was handed to EFG by LGL ($1.60 represented the cost of the bank cheque).
(v) On 29 March 1989 a promissory note issued by EFG having a face value of $224,588,054 maturing on 12 May 1989 was handed to LGL. After the settlement the bank cheque payable to EFG was deposited into its bank account. EFG is the parent company of Elfic.
(vi) At the settlement the promissory note issued by EFG was pledged as security for $220 million due to Elfic by Entrad.
(vii) For 28 March 1989 the accounting records of Entrad record the payment of $220,000 to Elfic.
(viii) For 29 March 1989 the accounting records of EFG record the payment of $220 million to Entrad and those of Entrad the receipt of $220 million from EFG.
(ix) For 29 March 1989 the accounting records of Entrad record the payment of $220 million to Gibraltar and those of the latter the receipt of $220 million from Entrad.
(x) For 29 March 1989 the accounting records of Gibraltar record the payment of $220 million to LGL and those of LGL the receipt of $220 million from Gibraltar.
(xi) For 29 March 1989 the accounting records of LGL show the payment of $220 million to EFG for the purchase of the promissory note and those of the latter the receipt of $220 million from LGL.
Thus, $220 million was never available to LGL as it was fully pledged: see para. 6 above. The appellant was involved in the round robin and in making the misleading statements to the banks as to the $240 million.
The Accounts and Asset Quality
Mr. Maxsted, a partner of KPMG and the liquidator of LGL , gave evidence to the effect that the $220 million transaction accounted for most of $240 million cash recorded in the LGL accounts and that there were no other funds available to LGL at the time. The $220 million transaction was not adequately disclosed in the LGL accounts because the promissory note should have been recorded as a receivable in the accounts (and not as cash on deposit) and its unavailability due to the pledge should have been noted. Mr. Laws, a former partner of Price Waterhouse, who had supervised the annual audit of LGL confirmed that a pledge should normally be recorded as a contingent liability. The former financial controller of LGL, Mr. Gale, said that pledged cash was different from free cash and that the offsetting liability arising from a pledge should be reflected in the financial accounts. That is obviously so.
15 Mr. Maxsted said that on the LGL accounts, the $220 million transaction had the effect of reducing the loan from LGL to Gibraltar from $303 million to $83 million and increasing the amount of cash on deposit from $861,000 to over $220 million. This can be verified from an examination of LGL’s accounts ledger and liquidity reports. The summary in graph form in evidence of the LGL ledger in relation to the loan by LGL to Gibraltar shows that in February 1989 the amount of the loan was about $240,000 million and that in March 1989 it was about $60,000. The accounts of LGL as at 31 March 1989 show the amount of the loan from LGL to Gibraltar as $83,844,000. It was classed as a receivable.
16 Mr. Maxsted explained that the description of an asset as cash, rather than a loan, was significant because of the lesser quality of an asset recorded as a loan, particularly a loan to a related company. Mr. Maxsted said that his initial assessment indicated that in January 1990 LGL’s liabilities exceeded its assets by $460 million. A significant part of this deficit was due to the inability of Gibraltar to repay its loan. The total owed by Gibraltar to LGL during the latter half of 1989 was in the region of $500 million. During the latter half of 1989 LGL’s external debt levels were consistently in excess of $600 million.
The Appellant’s Knowledge
17 The Crown established the appellant’s knowledge of the $220 million transaction by tendering the minutes of a meeting of directors of LGL on 28 March 1989 at which she was not only present but appointed chairman. That meeting agreed to the arrangements outlined and authorised LGL completing the necessary documents. It authorised the appellant on its behalf to purchase a promissory note issued by EFG with an aggregate value of $220 million. On the same morning she chaired a meeting of the directors of Entrad which authorised the arrangements and the completion of the documents. It also appointed her and her fellow director, Mr. Roy Travers severally as attorneys to execute the required facility letter and other documents. The appellant signed a certificate that LGL was not prohibited by s.230 of the Companies (NSW) Code from giving security to Elfic in respect of financial accommodation being provided to Entrad by Elfic pursuant to a Letter of Offer dated 28 March 1989 from Elfic to Entrad. She signed a letter of 28 March 1989 on behalf of Entrad requesting an advance of $220 million by bank cheque in favour of the company.
18 Mr. Roy Travers was shown as the other director attending both the meetings of directors. He was a solicitor and adviser to Mr. Goldberg and a non-executive director of several companies in the Goldberg group. In evidence Mr. Travers said that he had no involvement in the $220 million transaction and that he neither attended the directors’ meetings nor signed documents which purported to bear his signature. The documents and the evidence of Mr. Travers showed that the appellant was closely involved in implementing the $200 million transaction. She must have appreciated that the pledge of the promissory note was inadequately disclosed in LGL’s accounts.
19 In her dock statement the appellant said:
(i) “Now one of the things the $240 million was primarily done for a reason, to shed the best light possible on Linter’s accounts” and(ii) “… the $220 million was not done for the long term benefit … it was done … to enhance the look of the balance sheet because there was certain people out there to impress.”
She explained that the transaction was done to assist in Mr. Goldberg’s planned takeover of Tootal, a large company based in the United Kingdom with business outlets and interests throughout the world.
20 The appellant asserted and it was not disputed that she did not prepare the offending accounts. The gravamen of the complaints against her was that knowing all about the $220 million transaction and that the accounts created a false impression she made false statements about the entries relating to cash held on deposit.
21 There is one further background matter. On 12 May 1989 the promissory note fell due. On that day LGL, by letter, signed by the appellant, directed that all moneys due and owing to it by EFG under the promissory note be paid that day to Elfic in partial satisfaction of the loan facility granted by the latter company to Entrad. That was done and acknowledged. The outstanding balance of $265,206.27 was paid by Entrad to Elfic. It is not necessary to set out the many accounting entries made in the books of the various companies in the Goldberg Group.
Bank of Tokyo Count
22 As to the first count, in June 1989, Mr. Arkins, Senior Management Corporate Banking, Bank of Tokyo and two other senior executives of that bank met with Mr. Deans of LGL and discussed establishing a banking relationship between their companies. LGL was looking for a loan of $20 million. Mr. Arkins met with Mr. Deans and the appellant around 29 June 1989 for further discussions. The financial issues were dealt with by her and the corporate issues by Mr. Deans. She sought a cash advance with a bill option and suggested that the loan be to LTCL.
23 There was a further meeting with the appellant on 6 July 1989 when there was a fair amount of discussion as to the movements in balance sheet items, loans and the amount of cash shown in the balance sheet. By mid-July 1989 the bank had reduced the amount of any loan to $10 million. Approval was sought from the Bank’s Overseas Corporate Financial Division in Tokyo. It wanted the financial statements of the Linter Group which the latter supplied. On 24 August 1989 the Australian Division received a list of questions from Tokyo. Mr. Arkins prepared some questions of his own. One of his questions was “What’s happened to the $240 million cash?” This figure had been taken from the March 1989 financial statement.
24 Mr. Arkins met with the appellant on 25 August 1989. She told him that the bid to take over Tootal had been unsuccessful but that they had made a $20 million profit in that exercise and would be looking at repaying all the bank loans which had earlier been drawn down. Mr. Arkins asked the appellant what had happened to the cash on deposit on 31 March 1989 balance date. She replied that the cash on deposit had been reduced to repay the loans that had earlier been drawn down from all of the banks earlier in the year in relation to the Tootal acquisition. He asked her where the $240 million had come from and she responded that they (LGL and subsidiaries) had drawn down on the available lines of credit which they had with their existing bankers. She stated that the cash on deposit was part of a ploy to indicate to Tootal that their bid was serious and that they had the financial wherewithal to increase their offer if the first offer was not accepted. In the memorandum of 25 August 1989 to the bank’s Tokyo office Mr. Arkins stated:
“Further, in anticipation of having to possibly increase its bid for Tootal, LGL drew the balance of all available bank lines and placed them on deposit ($240 m). The strategy was apparently part of a ploy which was necessary to disguise to Tootal shareholders, LGL’s liability to accommodate an increase in its pending bid.”
The appellant confirmed that this was in substance what she said to Mr. Arkins (T. 1372.15 and 1374.25). There appears to be some conflict between what Mr. Arkins said as to the object of the ploy but, importantly there is no doubt that it was a ploy. She further stated that they no longer needed the cash on deposit and that it had all been used to repay those bank lines so that the cash on deposit figure was basically negligible post that repayment of those loans. That answer was incorrect. The information obtained from the appellant by Mr. Arkins was transmitted to Tokyo.
25 By letter of 29 August 1989 the Bank of Tokyo offered LTCL a $10 million cash advance facility and that offer was accepted on 30 August 1989. A loan agreement was executed and the facility in the full amount was drawn down on 1 September 1989.
26 Mr. Arkins stated that if he had been told that the $240 million reflected a fully pledged promissory note by Linter to meet a slightly greater liability of Entrad to repay Elfic, that there had never been any cash available and a promissory note was used to meet Entrad’s liability to Elfic, the Bank of Tokyo would have been unlikely to proceed with the transaction. There had been a window-dressing exercise which did not truly reflect the financial position of LGL. The bank would also have taken a negative view of the company if he had known that the effect of the transaction was to reduce intercompany debt for a brief period until May 1989 from $340 million to $116 million. This was because the accounts would not portray the true position. He would have made inquiries about the recoverability of the loans to see whether the true value of such assets was as listed.27 The second count arose out of negotiations between LGL and Westpac concerning a new bridging facility of $20 million and the extension of an existing bill facility of $50 million. By a facsimile message of 5 September 1989 addressed personally to the appellant, Westpac sought “details on the following items in the audited 31/3/89 financial statements for Linter Group Ltd as soon as possible:
Westpac Count
28 In answer to the request “List of banks included in Bank loans of $416 million and the use these funds were put to” the appellant replied, amongst other things “of these borrowings, $220 m was placed on deposit at balance date.”
…
Linter Group Limited Consolidated
By letter of 13 September 1989 the appellant replied “Since balance date, approximately $125 m of this cash has been used to fund the Brick & Pipe takeover, the balance used to retire debt.”
What has the cash of $240.2 million been used for?”
In answer to the request about Entrad and guaranteeing subsidiaries and as to the increase in total tangible assets of $441 million from $168 million as at 30 June 1989 to $628 million as at 31 December 1989 the appellant replied:
“The increase in total tangible assets of $441 m results from
i) revaluation of investments in Linter Group Limited;
This was a flow-on effect. The reference to 31 December 1989 related, apparently, to a forecast as at this date.
ii) rationalisation of all intercompany loans through a finance company, i.e. Gibraltar Factors.”
29 The evidence of Mr. Maxsted (T.448-452) was that $220 million was used to purchase a promissory note and was not cash on deposit, that $125 million was expended on the Brick and Pipe takeover but those moneys came not from the non-existing cash on deposit but from moneys coming back from the failed Tootal bid. None of the $220 million listed as cash was used to retire debt. There was no evidence that there was $220 million placed on deposit at the balance date. The Crown also relied on the true nature of the $220 million transaction.
30 Mr. Myers said (T.305) that if he had known of the $220 million transaction he would have had to reassess the whole position and would have needed further information concerning the recoverability of the loans to Gibraltar. Mr. Tomlin, who during 1989 was a Manager and then Senior Manager, National Accounts, Corporate Division, Westpac said that if he had known of the $220 million transaction this would have affected his credit review of the Group Accounts. That sum was not available as suggested as it was already pledged. The recommendation which he made to the head office credit committee would have changed significantly. Similarly, his credit assessment would have been affected if he had been told that none of the borrowings from the banks had been placed on deposit but were fully drawn down or very nearly fully drawn down. This would mean that there was no cash available. His credit assessment would also have been affected if he had been told that the effect of the $220 million transaction was to reduce inter company loans from a figure of $340 million to $116 million but only to 12 May 1989 on the promissory note maturing (T.1197-1199).
Chase AMP Count
31 Count three concerned a false statement made on 24 November 1989 during negotiations with Mr. Brimo and Ms. Panditaratne of Chase AMP Bank Ltd for an extension of an existing $20 million bill facility to LGL. Ms. Panditaratne said that the main purpose of the meeting of 24 November 1989 was to clarify the entries in the financial statements as at 31 March 1989. Some information was missing and there had been significant changes in the accounts from the previous set and the bank wanted to find out what was happening. She recalled Mr. Brimo asking what were the reasons for the high levels of cash balances, intercompany loans and advances and debt. The appellant replied that they (LGL) were going to move on the Tootal acquisition and for that purpose they drew down on a Citibank loan. The cash balance represented the moneys so drawn down. The loan from Citibank was secured by the Tootal shares. Since the balance date the Tootal bid had aborted, the Citibank loan had been repaid and everything had been normalised. She took notes at the meeting and afterwards prepared a memorandum which accurately recorded what had been said (T. 504-508). She said that Mr. Brimo pointed to the sizeable amount of advances to associate companies, other risks and other receivables and asked what they related to and who they were given to. The appellant responded to that question but Ms. Panditaratne’s recollection of it was hazy.
32 In her memorandum Ms. Panditaratne wrote:
It was false to state that the $240 million represented a draw down of Citibank financing of the Tootal takeover bid.
“Around the close of fiscal 89, Linter was positioning itself for the Tootal takeover and the Citibank back financing (secured on the Tootal shares) was drawndown in anticipation of launching the bid. Therefore, the sizeable $240 m cash balance at FYE 89. The bid having been since aborted the facility has been repaid and cash balances normalised. By 9/5/89 all Tootal shares were disposed of.”
33 Mr. Brimo said that at the meeting he sought the reason for the large amount of cash held by LGL in March 1989 and the large level of intercompany loans. According to Mr. Brimo, Mr. Deans made most of the statements on behalf of LGL and the appellant supported his statements by nodding. It was stated on behalf of LGL that the cash was being held to facilitate or actually fund the acquisition of the shares in Tootal. However, when the acquisition did not proceed certain aspects of the financial statements which reflected finances put in place for the acquisition had been unwound. Mr Brimo said that after the meeting he checked the memorandum prepared by Ms. Panditaratne and found it to be correct. He said that he was told by Mr. Deans that after the Tootal bid aborted the cash was used to repay bank facilities and that the shares in Tootal were disposed of.
34 Mr. Brimo stated that in response to his questions Mr. Deans told him that the large level of intercompany loans was due to loans being advanced to subsidiaries within the group acquiring shares in Tootal. When the takeover bid did not proceed the intercompany loans to the subsidiaries were repaid consequent upon the sale of the shares in Tootal. Mr. Brimo said that he asked for interim September 89 financial statements to show that these transactions had taken place. They also wanted the explanations justifying the large upward revaluation of certain assets. Mr. Brimo stated that Chase AMP Bank would be moving away from general working capital financing into more project or cash flow based lending.
35 By letter of 28 November 1989 Ms. Panditaratne advised the appellant of the bank’s information requirement. She wrote that presumably most of the issues would be satisfactorily explained through the interim financials (accounts as at 30 September 1989). It is apparent from reading the evidence of Ms. Panditaratne that she had a preciser recollection than Mr. Brimo. She had written the memorandum.
36 Ms. Panditaratne said that if she had been told that $220 million of $240 million was a pledged promissory note to repay a loan due from Entrad to Elfic and of the transaction involved this would have affected any assessment she made as to the future of the bank’s facility. A promissory note is different from cash and she would have needed details of the pledge. She emphasised the liquidity provided by cash. If she had been told that the effect of the transaction was to raise the item described as intercompany loans by an extra $220 million from $116 million this would have affected her credit analysis. Intercompany advances involve a different risk as they are generally not funds used in the business to which the bank is directly lending. It is hard, if not impossible to make any assessment as to the quality of those assets, the returns to be derived from them and the return or recovery of those funds. She said that if the bank had known of the transaction and its effect instead of the information supplied by the appellant the bank would have re-appraised the credit quality of the company and then possibly looked at if and how the bank could have terminated the bill facility. She accepted that there could have been difficulties in doing that.
37 Mr. Brimo said that if he had been told of the transaction, the bank would have reconsidered the financial statements to determine whether the financial position of LGL was impaired in any way and whether there could have potentially been an event of default. He also said that if he had been told that the effect of the transaction was to reduce intercompany loans from about $340 million to about $116 million this would have set off all sort of alarm bells. This was because the bank was financing ostensibly a textile and garment business and the sudden appearance of a large component of intercompany loans would have raised questions as to what those loans were financing.
Other False Statements
38 The Crown sought to use the similar context and content of the false statements as evidence of a co-ordinated course of deception practised by the appellant on LGL’s banks. On this basis the Crown led evidence of another similar false statement by the appellant to Ms. Hui of Citibank on 23 October 1989. It was not the subject of a charge. In response to a question from Ms. Hui as to why LGL still had $240 million cash at bank on 31 March 1989 if it had lent $228 million to Harbour Bridge Holdings, the appellant said that LGL had called on all undrawn lines in case there was an increase in the bid price for Tootal and more funds were required. The appellant added that as the funds were not required they had been used to repay those credit lines. Ms. Hui said that she pressed the appellant further as to any amounts which had subsequently been drawn down and that the appellant ultimately conceded that at least $100 million had been drawn down for working capital purposes by LGL.
39 The falsity of the statements and the appellant’s knowledge were further underlined in an exchange of correspondence between Mr. S. McClay of Elfic and the appellant. By fax dated 11 September 1989 Elfic noted that the cash position as at 31 March 1989 for LGL was reported at $233,469 and asked “What is the current cash position? If it remains at these levels, why is the current additional loan being sought?” The appellant by letter of 13 September 1989 replied:
“$220 m short deposit
$18 m prepaid Bond interest due 1/4/89
Mr Deans
Current cash position - nil on deposit.”
40 By agreement, portion of a statement made by Mr. R.M. Deans to the Australian Securities Commission on 5 June 1999 and portion of his evidence given on 17 July 1992 were read to the jury. He was a former Deputy Chairman and Chief Executive of Bankers Trust Australia Ltd and the former Chairman of LGL, LTCL, Entrad and Dinomino Investments Ltd and an associate member of the Australian Society of Certified Practising Accounts. The effect of his evidence was that cosmetic exercises to enhance a company’s balance sheet at the close of the financial year were common and that banks understood this. He gave examples of how the enhancement occurred.
41 Mr. Deans stated that during March 1989 Mr. Goldberg spoke with him by telephone about once or twice per week. Mr. Goldberg wanted about $220 million drawn down as he was sure the moneys would be used in the takeover. The organisation of a transaction was discussed. Mr. Goldberg stated that he had spoken to the appellant about the transaction and would give her instructions. Mr. Deans said that he was told by Mr. Goldberg to keep out of it and to leave it to him. Mr. Deans was generally aware that the appellant and Mr. Goldberg spoke by telephone but not of specific conversations and how frequently they spoke. At some stage either before or after 31 March 1989 the appellant told Mr. Deans that Mr. Goldberg required the transaction to be completed and the facility drawn down by 31 March 1989.
42 Mr. Deans thought that a competent banker would be suspicious of the amount of cash disclosed on LGL’s accounts. The appellant was the person who could and would answer bankers detailed questions about the accounts.
43 According to Mr. Deans he had a heated argument on 18 August 1989 with Mr. Goldberg and other executives of LGL about $220 million being shown in the accounts as a cash item. It was a receivable. He regarded what had been done as unconscionable and said so. Further, it was important that the receivable was fully encumbered. Mr. Deans objected to having to sign the balance sheet, particularly on very short notice. He was placed under much pressure and eventually signed the accounts. It was Mr. Deans’ belief that the accounts which he saw about 3 August 1989 showed the $220 million as a receivable.
44 Mr. Deans believed that the appellant was probably present at the meeting at which he discovered that the $220 million had been changed to a cash item.
Some Funding Details
45 The Crown case was buttressed by further evidence, some of which I will mention briefly. This further evidence was necessary to negate any innocent explanation for what had occurred. There was a lot of movement of funds within the Group and associated companies and there were potentially a number of explanations. In late 1988 LTCL raised about $244 million from the issue of subordinated debentures by Drexel Burnham Lambert in the United States (the Drexel Funds). A summary of the movement of the Drexel Funds prepared by Mr. McLeod (a prosecution officer) rebutted the hypothesis that the Drexel Funds accounted for the $240 million cash recorded in LGL’s accounts. The summary revealed that the Drexel Funds were used to fund the attempted takeover of Tootal leading up to March 1989 and, after the failure of that bid, were used to purchase Brick and Pipe Limited in mid-1989. This evidence was corroborated by Mr. Maxsted.
46 Mr. Wormsley, a director of J. Henry Schroder & Co. Ltd, a London bank, which acted for LGL and Mr. Goldberg in the Tootal takeover bid said that Mr. Goldberg was the directing force and that the group of people closest to Mr. Goldberg included the appellant and Mr. Roy Travers. He met with the appellant in London in mid-January 1989 and attended quite a number of meetings with her, that is, more than two or three. They covered matters relating to the debt portion of the funding for Landmark Textiles, the bid company formed on behalf of Mr. Goldberg to make the takeover bid. Mr. Wormsley’s recollection was that the appellant, Mr. Fitzgerald and himself were the three principally involved in the negotiation of the Citibank facility. Major points of principle were addressed to the appellant. Where instructions were needed, they were obtained from either the appellant or Mr. Goldberg.
47 The Crown also relied on these answers given by the appellant in civil proceedings in Victoria in 1992.
“No money was borrowed for the acquisition of the Tootal shares. Not one cent was borrowed. The funds that were used by the Tootal shares were effectively sourced from Linter Group. When the shares were sold, Linter’s money came back, but there was never any borrowing to actually acquire any Tootal shares. We never got to the bid stage.”
and
“Subsequently, the funds that came back from the sale of the Tootal shares were used in the acquisition of the shares in Brick and Pipe but in between you are asking me, at any particular day I wouldn’t know what those funds were used for, sir.”
Elders
48 The Crown relied on the evidence of Ms. M. O’Donnell, a solicitor employed in the corporate services and lending area of EFG, to establish the high degree of involvement and knowledge of the appellant in relation to the $220 million transaction. It did so in two ways. It elicited from Ms. O’Donnell the part played by the appellant in that transaction. It also elicited the part played by the appellant in a similar transaction in December 1988. The amount was different in that there was a $100 million loan to Entrad. The documents prepared and used in December 1988 were similar to those used in the March 1989 transaction. The differences were immaterial. There was a “round robin” with settlement taking place on 30 December 1998 with the appellant being present and actively participating and handing across some of the documents. Two days earlier Ms. O’Donnell spoke to the appellant about the documents which she would be sending to her and EFG’s security requirements.
49 In late January 1989 the transaction was reversed. Repayment was effected by what was tantamount to a set off. LGL directed that $100 million of the amount it was owed by EFG should be repaid to Elfic to partially discharge Entrad’s debt to Elfic.
50 In mid-March 1989 Ms. O’Donnell learnt that Entrad had requested a loan facility of $220 million. She spoke to the appellant about the transaction, initially, about stamp duty on the security document. Ms. O’Donnell did not attend on settlement.
51 Mr. S.A. McClay was a chartered accountant on secondment to Elfic from either LGL or AFP Investment Corporation which had been taken over by Mr. Goldberg. In late December 1998 he received a telephone call from the appellant to have a meeting to discuss a proposal. The meeting was held in late December but he could not recall all the details. What she sought was that one of the Elders Finance companies lend Entrad $100 million with LGL putting up cash security to cover the amount borrowed and that the transaction be completed by 31 December 1998. He prepared a memo dated 29 December 1988 and that contained information which she had supplied. He attended at settlement on 30 December 1988 with Ms. O’Donnell. The appellant was there representing LGL and associated companies. A number of items (documents) were handed by the appellant to Ms. O’Donnell who handed the appellant a Westpac cheque in favour of Entrad for !00 million. The cheque was handed to an officer of Westpac by the appellant. It is not necessary to further rehearse the details of the round robin and the transaction.
52 Mr. McClay said that he met with the appellant in mid-March 1989. She sought a loan of $220 million secured for 45 days and required the transaction to be completed by 31 March 1989. In general terms the transaction was to be similar to that of late December 1988. He prepared a memorandum containing the information which she had supplied and recommending the transaction. After Board approval a letter was sent to her offering the facility sought. The letter reflected the understanding reached between the appellant and Mr. McClay as to what was to take place.
Elders’ Settlements
53 Mr. P.G. Brindley worked in the Treasury Department of LGL. On 30 December 1988 the appellant told him of the proposed $100 million transaction. She said that there was to be a loan from Elders to Entrad which would allow the repayment of a loan from Gibraltar Factors to LGL, that LGL would put the money on deposit with Elders and that that deposit would be pledged with Elders to cover the first loan that occurred. It was described as a round robin transaction. He was in the appellant’s office. There were telephone calls with Elders as to some of the details of the transaction and its requirements. There was a telephone call to Mr. A. Goldberg and a Board Meeting of LGL was held over the telephone to attend to the Elder’s requirements, the directors present being Mr. Goldberg and the appellant. Mr. Brindley was appointed company secretary for the day. He filled in various parts of the minutes of LGL and subsequently of Entrad at the appellant’s direction. Mr. Brindley said that in the case of Entrad, R. Travers was shown as being present as a director. He did not see Mr. Travers. A bundle of documents was completed. Mr. Brindley said that he attended at settlement with the appellant. Mr. Brindley was about 22 years of age.
54 Mr. Brindley became aware of a similar transaction in March 1989 involving $220 million. He had discussions with the appellant about it around the time of settlement. She told him that he would be involved in the settlement with the process being similar to that in December 1988. His writing appeared on a cheque requisition seeking a bank cheque from Westpac in favour of Elders Finance Corporation Limited. He had been asked “to make the settlement occur for the $220 million Elders’ transaction” by the appellant. He was not told anything about the $220 million transaction.
55 Mr. Brindley said that the appellant was significantly involved in dealing with banks and financial issues but she was not involved in daily things like accounts and budgets. She was involved in discussions with banks regarding loans in a significant way as to LGL. She played a significant role in relation to the links between Linter group companies and Entrad and Gibraltar Factors. Mr. Brindley was wary of the $220 million transaction and careful not to respond to questions about the $220 million which appeared on the financial statements. He was not fully aware of the implications. It appeared to be balance sheet window dressing.
56 Ms. R.P. Robbins, an accountant with Entrad, had contact with the appellant every one or two days. They discussed the condition of the various bank accounts and what funds were flowing in and what payments had to be made on the various borrowings of the companies. If moneys were needed to meet any particular obligation she spoke to the appellant. She prepared liquidity reports for a number of companies. Those relating to the Entrad Group and Gibraltar Factors went to Mr Deans and the appellant.
LGL Accounts
57 There was a large body of evidence called as to how the $220 million came to be recorded in the LGL accounts. It was common ground that in an early draft set of accounts the item was shown as a receivable and not as cash on deposit. The early draft or drafts were prepared by officers of LGL. There were many drafts of the accounts. Mr. G.C. Laws, the audit partner of Price Waterhouse at the time pointed out that he was concerned with the audit of the LGL accounts and that his firm was not involved with the Entrad Group audits nor the audit of Gibraltar Factors and had no access to any of their books. His main contacts were with Mr. P.D. Thew, the company secretary of LGL and Mr. D. Gale, the Finance Director for LGL. They did not have any specific knowledge of the affairs of the Entrad Group and associated companies. Less frequently he spoke with the appellant.
58 Mr. Laws said that in one of the later drafts the item was shown as “Cash on deposit”. He discussed the accounting treatment of the item with Messrs. Thew and Gale. He was provided with a letter from EFG describing a $220 million promissory note on deposit. There was no mention in the letter of the $220 million being encumbered. Mr. Laws thought that he first learnt that the $220 million was pledged to meet a liability from Entrad to Elfic in about January 1990. Mr. Laws stated that he made a note, disclosure of cash $220 million short term deposit, not cash, amount able to be recalled except as cash, cash actually received mid-April. Mr. Laws said that he initially sought the accounts of Gibraltar Factors from David Gale. He eventually got them through Mr. Gale or the appellant. Mr. Laws said that he decided that the accounts were not misleading showing the item as cash because:
“Well, primarily I was told by Gale that Linter could get the money back at any stage if they wanted to and that the time I signed the accounts the cash had actually been received back by Linter any way, so there was no doubt about it coming back.”
59 Mr. Werro, the audit manager from Price Waterhouse confirmed that at no time in 1989 was he aware that the promissory note was pledged. If he had known, the accounts should have shown that the asset was encumbered. He would have expected to have been told that the asset was encumbered. He was told that the money was available on call by Messrs. Thew and Gale.
60 Mr. Gale said that he had no knowledge of the $220 million transaction as it occurred. He first learnt that the $220 million promissory note was pledged to meet a similar liability of Entrad to Elfic when he was told by the receiver after the collapse of the Goldberg group. It was his belief that Gibraltar Factors had been able to liquefy some of the advances that had been made to it and return the moneys to LGL. Messrs. Gale and Thew paint the picture of not being fully informed by the appellant as to what was happening.
61 This short review of the evidence demonstrates that the Crown case was a very strong one. The appellant appears to have been one of the principal cohorts of Mr. Goldberg who has left Australia.
The defence case
62 This comprised an unsworn statement by the appellant and evidence from Mr. Durlacher, another former senior executive of the Goldberg group. The unsworn statement which lasted about 1½ days was discursive and repetitive. Some of the statement was irrelevant and other parts were of peripheral relevance. It was punctuated with extensive comment and argument. She was critical of counsel for the Crown, the senior investigator from the Australian Securities Commission, some of the witnesses and the conduct of the Crown case. She commented extensively upon the credit of some of the witnesses whose evidence was adverse to her. This was despite a number of instructions from the judge not to do so. She made many important concessions.
63 These points seem to emerge from her statement:
(a) $220 million was borrowed by Entrad and paid to LGL which brought an IOU (promissory note). Elders wrote out a paper saying IOU $220 million plus the specified interest and promised to pay the sum on 12 May 1989.(b) This was all done to shed the best light possible on LGL’s accounts for the Tootal takeover bid. It was only a temporary expedient designed to last for the duration of that bid. It had no other purpose.
(c) Mr. Goldberg made an all out effort in his bid for Tootal. Its acquisition was of great importance to him and the businesses. The expenditure of $500,000.00 to have accounts which would impress was not high in view of what was at stake.
(d) There was very little difference in the context between a receivable and cash. In any event, the unavailability of the $220 million promissory note, due to the pledge did not mean that those funds could not fairly be described as cash. There were real funds behind the promissory note and the pledge did not change their character. However, she knew it was not accessible to LGL unless other security was substituted in place of the pledge.
(e) Everyone in LGL and Entrad knew that the promissory note was pledged and spoke about it, including the staff in the treasury and accounts departments. The majority opinion now is that the promissory note should have been classified as a receivable and not as cash. She had nothing to do with the classification.
(f) The “security” or pledge given by LGL for Entrad’s borrowing should have been shown as a contingent liability. It was an unfortunate accident by others in LGL that a note to the accounts was not inserted as to the contingent liability. (She explained the nature of a contingent liability.) She did not realise that such a note had not been inserted in the accounts until after all the questions were asked 7 or 8 years ago.
(g) The contingent liability notes were usually done by Mr. Thew and he was on holidays when the accounts were settled. He did not complete the contingent liabilities schedules. The person completing these schedules must have inadvertently omitted to include a note about the $220 million promissory note. It was not her responsibility to attend to such a matter or see that it was done.
(h) Messrs. Thew and Gow were told about the $220 million transaction by Mr. Brindley about the time it happened. Mr. Brindley also told one of the auditors that the promissory note was with Elders.
(i) There had been a poor investigation. The prosecuting authorities were more concerned about gathering material to support the prosecution case against her than carrying out a thorough and accurate investigation.
(j) In August 1989 LGL asked Westpac for a loan to tide it over a temporary hiccup in its cash flow. Mr. Goldberg had just finalised the takeover of Brick and Pipe, a very good business.
(k) She was not guilty of the Bank of Tokyo charge. She did not say anything to that bank which was false in any material way. What she told that Bank was absolutely true.
(l) She was not guilty of the Westpac charge. She did not make the statement charged. She was not the author of the letter of 13 September 1989. She signed the letter but at the time she did not read it.
(m) She was not guilty of the Chase AMP Bank charge. She did not make the statement alleged in the charge and she had absolutely no intention at the meeting on 24 November 1989 to extend any facility that Linter had with that bank at that time.
(n) What Mr. Arkins reported to the Head Office of his bank as to what she said was more or less correct but she believed that she would probably have said words to this effect: ‘In anticipation of having to possibly increase the bid for Tootal the balance of all available bank loans was drawn down and placed on deposit, i.e. $240 million. This strategy was part of a ploy which was necessary to disguise from Tootal shareholders the Group’s ability to accommodate an increase in the pending bid. Unfortunately, the Tootal bid was subsequently aborted. The 28 per cent parcel was sold at a profit of $18 million and all of the loans were repaid post 31/3/89 balance date.’ She never spoke in terms of Linter alone because she represented the Goldberg group. She claimed that she was an Entrad employee and never really associated with the Linter Group. She was an Entrad person working with Goldberg and Linter.
(o) Mr. Arkins was aware that each of the divisions operated on a stand alone basis. She insisted that when she spoke to Mr. Arkins she used the word “we” and he knew that she was referring to the Goldberg Group including Linter and Entrad. The Crown had seized on a small part of a whole conversation and thereby taken it out of context. She complained. “These two lines do not tell the reader that the drawing down of these loans was part of a ploy to show Tootal shareholders our ability to accommodate an increase in the bid price.” (There seems to be some ambivalence in the materials whether the ploy was designed to disguise that the Goldberg Group could increase its bid or to demonstrate its capacity to do so and its financial strength.)
(p) Elfic was a merchant bank and the transaction was sourced from an available bank loan. There was thus a bank which was willing to lend money to Entrad, so it had a facility and drew down the money and advanced it to Linter. Linter did what it wanted with this money. Accordingly the statement that $240 million cash recorded in the LGL financial statements dated 31 March 1989 represented a deposit of all available bank loans was completely true. (This contention smacked of sophistry). She insisted that the cash on deposit in the balance sheet represented actual funds.
(q) Nobody was misled about the entries because all the bankers were told about the Tootal ploy and that the funds had been reversed. They were put on notice that the entry mentioned could not be relied upon. The banks were not told of the round robin.
(r) She did carry out the transaction but she had the help of other people. She said “While this was real cash, I knew that it was pledged. While there was actual money, I knew that the Group could not access it without substituting security to EFG but that was never brought up”.
(s) The transaction was not an exercise to reduce the intercompany indebtedness between Gibraltar and Linter. Gibraltar was simply the financier for all the Goldberg companies.
(t) She relied on some accounts of LGL prepared as at 30 June 1989 which she asserted were given to the Bank. (This was disputed). She described it as a forecast balance sheet as at 30 June 1989. This corrected any incorrect impressions gained from the March Accounts of LGL.
(u) Neither she nor Mr. Deans made a statement to Mr. Brimo and Ms. Panditaratne of Chase AMP Bank on 24 November 1989 or at all that the $240 million cash recorded in the financial statements of LGL of 31 March 1989 was drawn down from Citibank backed financing secured on Tootal shares. The usual thing was said namely that LGL borrowed the money from the available facilities. The words alleged were not used because they never drew down on the Citibank facility. The Drexel Funds had been used to fund the Tootal bid and did not account for the $240 million recorded in the LGL accounts.
(v) The Chase AMP facility had been organised in about October 1989 by Messrs. Selig and Brindley. She and Mr. Deans had nothing to do with it. They had some meetings when Mr. Brimo and Ms. Panditaratne came to their office to sell products and/or services and to talk about general banking. About mid-October 1989 Chase AMP started pulling the money lines much to their Group’s annoyance. Relations became cool. On 24 November 1989 she, Deans, Brimo and Panditaratne chatted generally. Mr. Deans complained about what the bank had done. Mr. Brimo told them that Chase AMP was moving from the traditional lines the Goldberg Group was enjoying. There was no discussion about finance. Subsequently the bank’s letter and questionnaire were received. These were placed in the files. She denied that she had even signed an acceptance of a letter of offer issued by Chase AMP to Linter in 1988.
(w) As to the Westpac charge, she said that the Linter treasury officers told her that there were a few hiccups in the cash flow. Westpac (per Mr. Myers) was approached for bridging finance of $40 million, but told $20 million would probably do. She said that the bridging finance was originally $20 million but it was reduced to $10 million because the cash flow improved in the company. She handed Westpac’s request for information to the treasury department, probably to Mr. Brindley. She was very busy on the IEL takeover. She was handed a reply for her signature. She glanced at the document to ascertain its purpose and signed it. She did not read it carefully as she had every faith in her competent staff. She did not have the questions and she did not have sufficient knowledge to assess the correctness of the answers. She was not in a position to access the detailed information maintained in the Linter office. It was a very busy day for her and she relied on her staff. She often signed 50 letters per day, many of which the staff had prepared She said that she never turned her mind to the bank bills in any way. Her only purpose was to get over the temporary hiccup in the cash flow.
(x) Mr. Ludkin of Westpac was not concerned that the $240 million represented the result of a round robin. He was concerned to stabilise LGL and to obtain as much security as possible.
(y) Messrs. Ludkin and Tomlin of Westpac were aware that the $240 million had gone. He had also worked out what was involved in the loans to associated companies and the change in liabilities.
(z) She had no recollection of signing the letter of 13 September 1989 to Elfic in response to its fax of 11 September 1989. The letter of 13 September must have been prepared by one of her staff and she signed it amongst a lot of other letters.
(aa) Mr. Brindley drafted the Linter minutes for the meeting of LGL bearing date 28 March 1989 inserting her name as one of the directors and leaving a blank for the name of the other director. As a result of seeing certain documents in Court she was able to say that there was no meeting on 28 March 1989. Due to a combination of circumstances, the documents for the meeting were faxed to Mr. Travers probably on 29 March 1989 and they spoke on the telephone on that day. There was no meeting in the office. The original documents were sent to him by courier. The documents came back signed on the afternoon of 29 March 1989. If the document was not signed by Mr. Travers, it was nothing to do with her. To her it seemed like his signature. The directors of the company had a lot of telephone meetings. The company secretary was not sitting next to them. The directors had about one formal board meeting per year. The company did not send copies of completed minutes of directors’ meetings to each director.
(ab) The auditors had not spoken to her about the accounts and the $220 million transaction. She had no involvement in the way in which the matter was dealt with in the accounts. She had never knowingly made a false statement to the banks. The corporate structure was very fluid and complex and it was constantly changing. This and the amount of business being conducted prevented stories being made up.
64 Mr. Durlacher was an experienced accountant. In 1989 he was the financial controller for the Goldberg Group of companies. There were three distinct groups of companies, trusts and entities within the Goldberg empire. One group consisted of the private companies of Mr. Goldberg for which he (Durlacher) was responsible. No information from or about these was to be communicated to the Linter Group or the Entrad Group without Mr. Goldberg’s express consent. This rule applied to Gibraltar Factors. Mr. Goldberg kept his finger on the pulse of all companies in the Goldberg group and his consent was required for action taken by the directors of those companies. He said Mr. Goldberg often sought advice from Mr. Travers. Mr. Durlacher was involved in the distribution of moneys received back (about $250 million) after the failure of the Tootal bid. He conferred with Mr. Goldberg and made a list of the moneys to be repaid and the lenders of those moneys. About $125 million came back into Gibraltar Factors and arrangements were made to repay $115 million to $120 million. Much of the money was drawn back 2 or 3 weeks later to fund the Brick and Pipe takeover. The balance of about $125 million went to the Linter Group to pay out various facilities, some permanently and some to be redrawn later.
65 Mr. Durlacher was responsible for supplying certain information to the Bank of New Zealand in respect of the March 1989 accounts of the Linter Group. He obtained the information requested from Mr. Gale or Mr. Thew or Mr. Brindley. He prepared a draft letter which read:66 Appeal Grounds 1, 2 and 3 can be summarised thus:
Mr. Durlacher had asked the appellant to check the draft letter and confirm that the reply was correct. She did so and the letter was sent.
“The cash on deposit was there at balance date to provide funds for the possible takeover of Tootal PLC. Since balance date, approximately $125 million of this cash has been used to fund the Brick and Pipe takeover.
1. In contravention of s.56 of the Evidence Act the judge erred in ruling that the evidence of Mr. Travers was admissible when it was irrelevant. There was no issue to which it related.2. In contravention of s.137 of the Act the judge erred in ruling such evidence was admissible given that its probative value (if any) was outweighed by the danger of unfair prejudice to the appellant.
3. In contravention of s.101 of the Act the judge erred in ruling tendency evidence admissible which did not substantially outweigh its prejudicial effect.
67 The evidence of Mr. Travers was that he had not attended any meeting of directors of Entrad at 11.00 a.m. or LGL at 11.15 a.m. on 28 March 1989 as shown in the minutes of the meetings. (That was later confirmed by the appellant in her dock statement.) He also said that he had not signed the minutes, the power of attorney and the letter of 28 March 1989 from Entrad and LGL to Elfic requesting the immediate advance of $220 million to Entrad. He had not seen Elfic’s letter of 28 March 1989 to Entrad of the loan facility being made available, that of LGL of 29 March 1989 signed by the appellant irrevocably requesting Elfic make available financial accommodation to Entrad and the certificate of 28 March 1989 of LGL that it was not prohibited by s.230 of the Companies (NSW) Code from giving security to Elfic in respect of financial accommodation being provided to Entrad by Elfic.
68 The effect of Mr. Travers’ evidence was that he had no knowledge of the $220 million transaction and was not involved in implementing it, the signatures did not appear to be his and he did not attend the meetings. It also had the effect of establishing that the appellant set up and ran the whole exercise and ploy. It was her project. She was the director in charge.
69 The appellant contended that the evidence was irrelevant. She submitted that by the time Mr. Travers came to give evidence on the 12th day of the trial it had been conceded on her behalf that she was not attempting to distance herself from participating in setting up the $220 million transaction. Prior to his giving evidence the appellant objected to its admissibility on the grounds set out above, stressing that it was not relevant and that it was highly prejudicial. The Crown submitted that the non-presence of Mr. Travers went to the issue of the knowledge of the appellant as to the real nature of the transaction and perhaps some desire to keep it as secret as possible. The judge said:
There was some dispute as to exactly what had been submitted to the judge. The transcript contained a brief summary. In this Court the Crown stated that, before the judge, the appellant conceded that the transaction took place and that she had signed the various documents where her signature purportedly appears. However, her knowledge and the extent of it and her state of mind were live issues throughout the case until she made her statement. What the judge said in his ruling correctly stated the position.
“… it is relevant to the issue of knowledge as to the nature of the transaction and as to her knowledge of the transaction and as to her state of mind at the time she made the alleged statements to the various bank officers.”
70 Mr. Travers’ evidence was cogent, amongst other things, by a process of excluding himself, as to the extent of the appellant’s knowledge of and degree of involvement in the $220 million transaction which was behind the cash recorded in the LGL accounts. Such knowledge and involvement could and was likely to affect the jury’s assessment of the appellant’s state of mind at the time of making the false statement, in particular, her knowledge of the inaccurate disclosure of the $220 million transaction in the LGL accounts. Mr. Travers’ evidence was thus relevant in accordance with ss. 55 and 56 of the Evidence Act 1995. On the documents Mr. Travers was the only other director involved in the transaction. It was prudent and necessary for the Crown to call Mr. Travers to rebut any suggestion that he implemented the transaction and, more importantly to show that it was her project and that she understood the effect of the transaction. I reject the challenge to the admissibility of the evidence based on relevance.
71 The appellant submitted that the evidence had little or no probative value and in any event was outweighed by the danger of unfair prejudice to the appellant. The appellant submitted that probative value of evidence means the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue (Lock 91 A Crim R 356 at 360). The main issue in the proceedings was whether she made a statement which she knew to be false in a material particular when she was asked about the entry of cash on deposit of $240 million. That entry was largely as a result of a transaction in which she was intimately involved. Material which established that she was deeply involved in carrying out the transaction and knew a great deal about it was of considerable importance in assessing whether she knew that the statements which she made to the banks were false in a material particular. The $220 million transaction accounted for nearly all of the $240 million recorded as total cash. The appellant’s knowledge of the true position, acquired through her involvement in implementing the $220 million transaction was of substantial probative value because it went to whether the appellant was consciously deceiving the three banks.
72 As earlier mentioned, the judge admitted Mr. Travers’ evidence as being relevant to the appellant’s knowledge and involvement and the degree thereof and to her state of mind when she made the statements. The evidence was neither tendered nor sought to be used to show any tendency by the appellant to act dishonestly. The judge was correct in holding that the probative value of the evidence was not outweighed by the danger of unfair prejudice to the appellant.
73 The appellant further contended that the evidence was tendency evidence, specifically evidence as to bad character. She submitted that the evidence did not have significant probative value, that is, that its degree of relevance to the events giving rise to the offence charged was not important or of consequence: Lockyer (1996) 89 A Crim R 457 at 459; Lock (1997) 91 A Crim R 356; AH 98 A Crim R 71 at 79; Fraser, CCA, unreported 10 August 1998.
74 However, the Crown did not seek to use Mr. Travers’ evidence to show any tendency on the part of the appellant. For example, in summing up the judge said:
“Mr. Travers’ evidence was to the effect that he did not sign those minutes (Ex.1) and he was not present at any meetings and that he had no knowledge of that transaction.
The evidence … is perhaps no longer of the significance it might otherwise have been because it was there to confirm the accused’s intimate knowledge and understanding of the transaction and its need to be completed before balance date, 31 March 1989.”
The judge then referred to her statement in which she “indicated that she knew the purpose of the transaction and certainly with regard to Tootal its object.”
75 The evidence was directly relevant to a fact in issue and therefore admissible. Accordingly ss. 97 and 101 of the Evidence Act 1995 do not apply. The appellant’s submissions focussed on one aspect of Mr. Travers’ evidence, namely that he was not present and did not sign the documents which purported to bear his signature. There were a number of possibilities of which forgery was one. It is a big jump to say that the appellant forged the signature or acquiesced in such a course. The Crown sought to use the evidence for the different purpose earlier mentioned. Appeal Grounds 1, 2 and 3 fail.
76 Appeal Ground 4 could be summarised thus: The judge erred in admitting, over objection, evidence on material issues which resulted from leading questions by the Crown Prosecutor.
77 This was not pursued except to the extent that it refers to Mr. Travers’ evidence and is taken up in Grounds 1 to 3. It is not necessary to take this ground further.
78 I will defer Appeal Grounds 5 and 6 and deal with them in conjunction with Appeal Ground 9.
79 Appeal Ground 7 alleges that the summing up was defective and lacked fairness and balance. The Crown had to go to considerable lengths to prove its case. It called a lot of oral evidence and tendered many exhibits. The transcript and the exhibits run to over 2500 pages. The Crown led evidence showing that there was no substance in many potential explanations as well as proving its case. There were large numbers of dealings and inter-company transactions and the financial affairs of LGL and the Goldberg Group had some complexity.
80 When the trial started virtually every fact was in dispute. Painstakingly the Crown case was built up and what had happened was exposed. Some inroads were made into the evidence of some of the Crown witnesses but overall the Crown case could be described as very strong. Some of the witnesses called by the Crown were cross-examined at considerable length. It was put to some witnesses that in some sense and to some extent he or she was responsible for the way in which things had gone wrong. The appellant suggested that she carried out Mr. Goldberg’s instructions, Mr. Travers was senior to her and close to Mr. Goldberg. Other staff prepared letters and documents for her. She was so busy that she signed them without reading them and appreciating what they were saying. This applied to letters to banks.
81 In her statement the appellant made, amongst other things, many admissions and concessions and effectively removed most of the issues which had been raised earlier or not conceded. For example, she conceded that she knew what the $220 million transaction was, that the promissory note was pledged and that there was no cash unless a “white knight” came along. No one did. The judge, as a result of what she said, was able to tell the jury that the real issues lay within a relatively narrow compass.
82 She filled in some gaps in the Crown case. She explained the purpose behind the transaction of 29 March 1989. As she related this balance sheet enhancing exercise it became apparent out of her own mouth that the transaction which she implemented was a manoeuvre designed to deceive those dealing with LGL and associated companies. In moments of reflection she must have realised that making the balance sheet look better for the Tootal takeover by the ploy used was dishonest. Having acknowledged the ploy and its purpose nobody would accept that about five months later she was going to forget what had happened or that another gloss could be put upon it. She faced a massive Crown case which could not be circumvented. Her attempts to blame others were unconvincing especially as in some instances the relevant allegations had not been put to the witness called by the Crown.
83 It would not have assisted the accused if the judge had referred at length to the terms of the dock statement. That would only have cemented the appellant’s guilt. Instead, the judge selected the main points made by the defence on the central issues. He tried to keep the matter as simple as possible. I turn now to the detailed complaints. Complaints (a) and (b) read:
(a) His Honour presented as conclusions of fact matters which were material and at issue, namely:
(i) The appellant had made the impugned statements and that the statements were false;
(ii) The $220 million transaction had no commercial advantage for the company. The appellant and several Crown witnesses agreed that the commercial advantage of the $220 million transaction related to the attempt of Abe Goldberg to takeover a company called Tootal in the United Kingdom. Whether the jury accepted this as the original reason for the transaction was pivotal to the defence
(b) His Honour erred in law by directing the jury that if they determined the questions posed by the banks as being important to the banks - and stating that in any view the amount of $220 million is a significant figure - then that is the context to determine if the answers were material in a false particular.
84 It is not correct to say that the judge presented as conclusions of fact that the appellant had made the impugned statements. The judge in explaining the elements of the offences told the jury that they had to be satisfied beyond reasonable doubt that the appellant with the intent to obtain for Linter Textiles (or LGL)an advantage of a financial nature made a statement which was false in a material particular, that is important or significant in the context in which the statement of fact was made. It must be material for the purpose for which the advantage is sought. Later, in the summing up the judge identified the statements which the Crown alleged were false referred briefly to the evidence in support. That evidence pointed strongly to the falsity of the statements (and I include creating a false impression). The judge then briefly outlined her defence and responses. The judge left it to the jury to decide whether she had made the statements and whether they were false and known by her to be so.
85 The judge reminded the jury that the transaction had cost Entrad about $500,000 and that it gained Entrad nothing by way of any financial or commercial advantage. He added that “it did … allow what you might think was a false picture of the state of the balance sheet as at the end of the financial year … by presenting two hundred and twenty million dollars as being in cash and reducing the Gibraltar loan”. What the judge said was accurate. The judge was highlighting that there was no legitimate commercial or financial advantage and that the only advantage was to enable deceptive accounts to be prepared in connection with a takeover. At the conclusion of the summing up and at the appellant’s request the judge further explained that when Mr. Maxstead said that there was no commercial rationale for the transaction he was talking in terms of dollars and cents and not the enhancing of the accounts for the Tootal bid.
86 The judge was only stating the obvious when he said that on any view the amount of $220,000 million is a significant figure. The judge told the jury that they had to decide whether the statements made were material and that they were entitled to take into account whether the banks regarded the statements as material. The judge pointed out that the banks were seeking information as to the accounts supplied to them.
87 I would reject the grounds contained in paragraphs (a) and (b).
88 In Ground 7 (c) the appellant complained that the judge did not direct the jury to consider all the evidence as a whole. While the judge did not use these words expressly, he did tell them that they had to consider all the circumstances of the case. It was implicit from the summing up that the jury had to consider all the materials. The jury would have understood this. I reject this complaint.
89 In ground 7 (d) and (e) the appellant complained that the judge directed the jury only to consider the examination in chief of witnesses for the Crown in relation to the issue of materiality and failed to direct the jury to consider their cross-examination which caused the witnesses effectively to abandon their evidence in chief. In ground 7 (k) the appellant complained that the judge did not relate any of the facts raised by the defence to the element of materiality although specifically requested to do so by way of re-direction.
90 The judge explained the concepts of materiality and “false in a material particular”. He referred to the evidence which was given in chief by Messrs. Arkins, Myers and Brimo on the question of materiality. He did not quote from their cross-examination. However, it must be remembered that the appellant denied responsibility for the statement in the letter signed by her and sent to Westpac and that the statements alleged by Mr. Brimo and Ms. Panditaratne were made by her. She admitted the essence of the evidence of Mr. Arkins as to what was said. The judge did not purport to summarise the evidence given but to state the contentions of the Crown and the appellant on each count and give a brief reference to the evidence. The judge was not obliged to do more. It was not a case where he was required to summarise the evidence at length.
91 The appellant requested the judge to refer to concessions obtained by her counsel in cross-examination of Mr Arkins, Mr Myers, Mr Tomlin, Mr Ludkin, Ms Panditaratne and Mr Brimo as to materiality. The Crown contended that it would be unwise to do so because the judge would have to refer to the Crown evidence-in-chief and re-examination which neutralised or wiped out any concessions. The Crown further contended that the issues had been highlighted and sufficiently covered and that going through all the evidence as to materiality would not assist the appellant. The matter was best left as it was. The closer the examination of the materials the stronger the Crown case appeared. It was virtually impossible for the appellant with her knowledge to mount an effective argument as $220m was not in truth cash and the pledge was not shown in LGL’s accounts. The issue of materiality was sufficiently covered in the Summing Up. I would add that this was not a case where the evidence of the bank officers as to materiality was necessary. LGL’s accounts were submitted to the banks to enable them to consider making or extending a loan. The correct position as to the accounting entry of cash, $240 million and the inclusion of a note as to the pledge were obviously important as were the statements as to how the sum of $240 million or $220 million had been applied.
92 I reject the challenges in Ground 7(d), (e) and (k).
93 Appeal Grounds 7(f), (g), (h), (I) and (j) contend that the judge:94 In amplification she submitted that the judge effectively ignored the defence case which was:
(f) directed the jury to take a selective and simplistic view of the evidence when
that for the defence required issues of some complexity to be considered in the
light of a significant body of evidence;(g) failed to properly put the defence case in not directing the jury to consider the
possibility of the defence’s alternative hypothesis to that of the prosecution;(h) did not remind the jury of the evidence by way of cross-examination favourable
to the defence;
(i) referred to the accused’s statement in a summary and dismissive manner;
(j) failed to present the arguments on behalf of the accused at all, or in a fair
balanced and unbiased manner.
(a) The transaction by which cash was recorded on the balance sheet was a real transaction involving real cash.(b) The recording of the proceeds of the transaction as cash was legitimate in the appellant’s mind, properly classified as a result of the auditors’ acceptance of it.
(c) The $220 million transaction was not carried out to manipulate the audited accounts (which would be ready by about August 1989) but to show a short term cashed up position for the Tootal bid.
(d) The Tootal bid having failed, the necessity to show “cash” on the balance sheet had expired. But the transaction had to be shown on the balance sheet.
(e) As to the Bank of Tokyo count, nothing she said to that bank was false in any material way. It was absolutely true. She put some of the conversation with Mr Arkins in slightly different terms. She said that the charge was confined to two lines in the balance sheet and that this did not put the matter in context. The bank was given the latest balance sheet available being the Executive Summary Budget as at 30 June 1989 which revealed no cash and told of the Tootal ploy. Thus it could no longer rely on the accounts as at 31 March 1989.
(f) As to the Westpac count, she was not the author of the letter containing the statement relied upon. She did not have time to deal with it as she was heavily involved in the IEL takeover. She did not have the information nor the access to the information to respond to the Westpac questions. The charge refers to two types of financial advantage. She sought bridging finance. She did not approach Westpac as to the existing bill facility.
(g) As to the Chase-AMP count, she said that she did not make the statement alleged and there was no intention at the meeting on 24 November 1989 to extend any facility LGL had with the bank. She believed that the note-taker had put together two ideas or two thoughts. One was that LGL was going to be financed by Citibank and the other was the question and answer as to the $220 million or $240 million. The discussions were not for the purpose of a “financial advantage.” The original loan, a bill facility, was in place and rolled over monthly. She did not arrange nor administer the loan. By November 1989 the bank had withdrawn some important facilities without prior notice. It was seeking legal advice whether it could pull out of the bill facility. Neither Mr Deans nor she addressed the roll over of the bills. They did not talk about the companies for the purpose of renewal of the facility.
95 Inherent in the appellant’s submissions is the notion that it was legitimate to enhance the accounts for the purpose of the Tootal bid. I do not agree especially as there was no note to the accounts about the pledge. The Tootal ploy was designed to mislead. The appellant has not been charged in respect of the transaction and the entry but in respect of the statements which she made about the entry and what lay behind it. To tell the banks that it was a ploy did not go far enough given what she said and wrote. Much of what the appellant said about the transaction in her dock statement is not a defence to the charges laid which focussed on what she said and wrote in August-November 1989.
96 It is true that in his Summing Up the judge reviewed the transaction critically, pointing out that it cost Entrad $500,000 and conferred no financial advantage save that of enhancing the balance sheet for the purpose of the Tootal takeover bid. All this was beyond argument as was the misleading nature of what had been done.
97 As to the Bank of Tokyo count the judge reminded the jury that the appellant had said in her dock statement that the account given by Mr Arkins of the statement which she had made was essentially accurate. The judge repeated her defence “As to the Bank of Tokyo, I am not guilty. I do not believe that I said anything to the Bank of Tokyo which was false in a material particular, in fact what I told the Bank of Tokyo was absolutely true.” He reminded the jury that she had given details as to why this was so. The judge continued “She said, well what I said really amounted to telling them about the $220 million transaction. That what happened was that money was paid down, or at least the promissory note was available as I understand it, as cash, although in my view it should not be there as cash… But it was there, it was drawn down and for that reason you would conclude that…. I didn’t have any state of mind that what I was saying about that transaction when I told Mr Arkins about it, was in any way false.” Later the judge said “The accused’s case is that yes she did make the statement set out in the first count but she did not believe it was false, I have already dealt with that aspect of the matter.”
98 In my opinion the judge has put the appellant’s case sufficiently on the Bank of Tokyo count. He has endeavoured to do so succinctly and to keep the issues as simple as possible. This was a case where the essential features were capable of being swallowed up in a mass of detail and words and lost. It should not be overlooked that the Summing Up followed shortly after the appellant’s statement in which she made her points several times over. Counsel had also addressed. Any further review of the materials was unnecessary. The details were fresh in the jury’s mind.
99 As to the Westpac count the judge pointed out that the Westpac request for information was addressed to the appellant and started off with the personal touch of “Dear Katy” and that the Crown’s case centred on this part of the reply, “Since the balance date approximately $125 million of this cash has been used to fund Brick and Pipe takeover and the balance to retire debt.” The judge touched on the evidence as to the effect on the bank of this statement and gave the jury the transcript references. The judge reminded the jury of her defence “I didn’t make the statement” and “I am not the author of the letter, I did sign the letter but I did not read it.” The judge elaborated, “So what she is saying is, she simply did not read the letter, it was prepared by somebody else and she said, in effect if she had read it she would not have signed it.”
100 Later the judge said:
“It was her case that she did not or was not responsible for….the letter to Westpac…all she did was sign the letter and had not seen the request which would have made it clearer if she had read them both as to what precisely was being referred to….”
At the request of the appellant the judge again reminded the jury at the conclusion of the Summing Up that she emphasised that she did not have the questions when she signed the Westpac reply.
101 In my opinion the judge put the essence of the defence case on the third count simply and clearly. It was not easy to accept that being responsible for organising loans and having spoken with Mr Myers from Westpac and having received a letter addressed to her personally she signed the reply without looking at its contents. It was not an unimportant matter. There was no point in complicating or obfuscating the issue. The appellant gave the jury an excellent opportunity to assess her in her statement. She was not a person who could not handle a mass of material.
102 The judge reminded the jury that the Chase-AMP count was based on the statement allegedly made by Mr Deans or the appellant at the meeting of 24 November 1989 recorded in the contact memorandum made shortly afterwards in these terms:103 The judge then directed the jury to consider the effect of the statements they found to be made and he referred them to some short passages in the evidence. The judge gave directions as to common purpose about which no complaint is made. The judge said:
“Around the close of fiscal ’89” that’s 31 March ’89 - “—Linter was positioning itself for the Tootal takeover and the City Bank backed financing secured on the Tootal shares was drawn down in anticipation of launching the bid. Therefore the sizeable two hundred and forty million cash balance as at the end of the financial year, the bid having since aborted, the facility has been repaid and the cash balances normalised. By 9/5/89 all Tootal shares were disposed of.”
104 At the conclusion of the Summing Up the appellant’s counsel said as to the third count in the presence of the jury:
“As to the third charge she said she did not make the statement and there was absolutely no intent at the meeting on 24 November to extend any facility that Linter had with a bank at that time.”
A little later he continued:
“With regard to the third count, she says:
“Well I simply was not there when any such misrepresentation was made, that if I had been I would have said something. If it was said, it was said by Deans. If it was said, it was not said in my presence.””
“And in relation to the putting of the defence case the most important one is the alternative explanation offered about which there was cross-examination of both Mr Brimo and Miss Panditaratne, the elision of the two ideas. In other words the bringing together of two separate statements made, each of which was independently true but the combination of both gave the misleading impression.”
The judge replied:
“Members of the jury I think she’s referred to that and it certainly is part of Mr Glissan’s address that the recollection of Miss Panditaratne and Mr Brimo was it’s suggested not reliable because they were relying on notes which were made subsequently.”
105 Again, I am of the view that the judge sufficiently put the appellant’s case on the third count. It was very simple. There was no intention to extend the bill facility and neither she nor Mr Deans in her presence said what was alleged. There was powerful evidence to the contrary.
106 The judge reminded the jury that in her statement the appellant had said in effect that she was an honest person, that she did not make dishonest statements such as those alleged and that what she said she truly believed. The judge directed the jury that the law required them to take her good character into account on each of the counts both on the question of her guilt and on the question of her credibility. He explained that the evidence went to the improbability of a person of good character committing the offences alleged and the weight they would attach to her statement.
107 Later in the Summing Up the judge reminded the jury of her comments at T.1441:
“Just to sum up in answer to everything that has gone on here….I ask you to accept this, I am not a liar, I do not believe I have ever said anything wrong to any banks that I have dealt with. I have never told untruths…I did not always call them back because I did not always have the time but we always had an open door we spoke with them fairly freely and honestly.”
108 The judge also referred briefly to the evidence of Mr Durlacher called on her behalf. His evidence about the Bank of New Zealand letter and probably having spoken to her personally about it was adverse for the appellant.
109 The following further exchange took place between senior counsel for the appellant and the judge in the presence of the jury:
“GLISSAN: The one other matter of fact your Honour was the very beginning of the summing up when your Honour was dealing with Mr Maxsted’s evidence. You said Mr Maxsted had given evidence there was no commercial rationale and we asked your Honour to remind the jury that there was cross-examination of other witnesses later in the case, that the commercial rationale was in relation to the Tootal bid and the matter that your Honour subsequently dealt with. That’s to say the $220 million transaction to give the appearance in relation to the Tootal bid at the availability of funds for the purpose of increasing the bid.
HIS HONOUR: Yes, I should say perhaps when he said no commercial rationale he was perhaps thinking of dollars and cents and not its use in the proposed takeover of Tootal.”
110 Despite the many complaints about the summing up it was not objectionable and it did put her defences sufficiently. It was not deficient. It was given in the context of her comprehensive statement which contained many concessions and eliminated many sub- issues. The jury had the transcript and the judge gave them references to some important sections of it. The jury had the benefit of two capable addresses from senior counsel. The appellant’s case was at its best when put succinctly. Complaints of lack of fairness and balance and that the judge was dismissive of the defence case are without substance. The real trouble from the appellant’s point of view was the considerable strength of the Crown case and the feeble quality of the defence case.
111 The judge’s task was to identify for the jury the appellant’s case on the facts in issue: Domican (1992) 173 CLR 555 at 560-561; Zorad (1990) 19 NSWLR 91 at 105; Piazza (1997) 94 A Crim R 459 at 460 and 463. That task he discharged. If the judge had gone into the details to the extent sought by the appellant’s counsel that would not have assisted the jury or her. Further, in order to place the evidence containing the details in context, the judge would have had to make additional detailed references to the evidence in the Crown case. That would have exposed more problems for the appellant. It was not necessary.112 Appeal Ground 8 could be summarised thus:
I reject the challenges to the Summing Up contained in Appeal Ground 7.
It was submitted that the jury should have been directed to consider each count and the evidence as to each separately and that any finding of fact as to a particular count was not able to be used by the jury when considering other counts. Further, the directions given invited the jury to engage in impermissible circular reasoning.
The judge erred in directing the jury that they could use conclusions arrived at on one count to assist them in determining the guilt of the accused as to the other counts.
113 Early in his Summing Up the judge told the jury that it was important that they look at each of the counts separately. Further, the judge separated each of the counts and explained the Crown and defence cases as to each count separately.
114 The direction complained of was as follows:115 Immediately before the direction complained of the judge said:
“The Crown’s position is that it is clear that in each case the accused knew that the respective statements were false and that you would not need to consider other counts in the way that I have outlined. But let me give you an example of how you could look at these other counts on the question of what was her state of mind.
Assuming, members of the jury, that you were satisfied with regard to the second count that not only had she signed exhibit G, the letter setting out what was done with the two forty million dollars when she wrote to Westpac, if you find it was in fact her letter in every sense of the word, if with regard to that count you were satisfied that she made a false statement, knowing that it was false, to obtain the financial advantage for the Linter Group, if while considering the first count you were unable to decide whether in fact she did realise that what she was saying was false, you could turn to that second count and say, ‘Well does this demonstrate a pattern of conduct in which she is making false statements to various parties?’ And if that were the situation, you could use that evidence from the second count to confirm what would be open to you with regard to the first count, bearing in mind that the accused says, ‘Yes, I did make those statements to Mr Arkins but I had no state of mind that what I said was false, was untruthful.’
So that is the way, members of the jury, in which you would be entitled to look at other counts, but that is the only way in which you should do so, and in other respects you should look at each of the counts quite separately, one from the other.”
Particular objection was taken to the passage in the second paragraph starting with the words “if while considering the first count” and ending with the words “with regard to the first count,” it being contended that it contained a marked error of logic.
116 The judge then referred to the statement of Ms Hui which was read to the jury and its effect. Ms Hui recounted, as to the bank of New Zealand loan, the explanation of the appellant to her of the entry of $240 million cash in LGL’s accounts. As this statement was not the subject of a charge, its relevance was limited to its use as co-incidence evidence under s.98 of the Evidence Act 1995. Before addresses the Crown outlined how it sought to use the co-incidence evidence and addressed accordingly. (T.1501-2).
“I have told you that you must look at each count separately but this is subject to the following direction: if having regard to a particular count you were satisfied that the accused made a statement, or concurred in a statement, in respect of the fourth count, what you found was material and false and was made with intent to obtain a financial advantage and the question of the accused’s knowledge as to its falsity was not determined on the evidence relevant to that count, if you had made that determination with regard to another or others of the counts, you could use that fact if it led you to the conclusion that the accused was using different explanations, also false, but changed only to fit in with the known facts touching that particular bank.”
The appellant in her statement when dealing with the Chase-AMP count said that when asked about the $220 million or $240 million the usual thing was said “You borrowed the money from the available facilities.” The Crown contended that the usual story was the one which the appellant had been consistently telling other people with variations to accommodate events which happened along the way.
117 The judge’s example of how evidence as to one false statement may be used in deciding her state of mind when she made another false statement was a sufficient and simple explanation of co-incidence reasoning applied to the facts of the present case. In the context, the direction was focused on the evidence supporting the different counts. It would not have misled the jury into using a conclusion of guilt on one count as a basis for finding the appellant guilty on other counts. The judge expressly limited the use of the co-incidence evidence to the appellant’s state of mind, that is, whether she knew what she was saying was false. I reject Appeal Ground 8.
118 Appeal Grounds 5, 6 and 9
These cover some of the same ground. Grounds 5 and 6 assert that the judge erroneously refused to direct verdicts for the appellant on counts 1 and 3. Ground 9 is that the verdicts were unsafe and unsatisfactory. That means in the present case they were not supported by the evidence and that there has been a miscarriage of justice.
119 As to the Bank of Tokyo count the appellant submitted that there was no evidence fit to go to the jury in that the statement by the appellant was true, was not false in a material particular and was not knowingly false in a material particular. Both at the trial and on appeal the appellant relied on substantially the same matters. Mr Arkins had been told that the cash on deposit had been reduced to repay the bank loans that had earlier been drawn down from all of their bankers in relation to the Tootal bid, that as a result the cash on deposit figure was basically negligible and that the cash on deposit on LGL’s balance sheet was a ploy. As at 25 August 1989 when the appellant allegedly made the statement that the $240 million represented a deposit of all available bank loans it was not a material statement given what else Mr Arkins had been told and that the transaction had been unwound. Further the complaint in the Indictment was a deposit of all available bank loans rather than a deposit of an available bank loan.
120 There was a case to answer. The whole tenor of the appellant’s replies was to create the false impression that LGL had access to $240 million cash to be used as necessary for the purposes of the company. In doing so she actively concealed the true effect of the $220 million transaction. The representation of the $240 million as borrowed funds does not render the falsity immaterial. There was no $240 million cash borrowed or otherwise accessible to LGL as at 31 March 1989. The references to the cash being able to be used to fund further the acquisition of Tootal shares implies that the funds were available for LGL’s purposes.
121 The references to available lines of credit being drawn down and repaid suggests rather strongly a movement of funds from banks to LGL which could be used by LGL during the period of the loan. There was also the implication that LGL had access to substantial amounts of existing credit and was a good credit risk. The bankers would reasonably have understood that on repayment of the loans the liabilities of LGL would be reduced accordingly.
122 The accounting treatment of the $220 million in LGL’s accounts had the effect of substantially reducing the amount shown as lent to Gibraltar Factors, a related company. There is a significant difference between cash and a substantial loan to a closely related private company.
123 Although she had knowledge of the $220 million transaction and what it involved and of the misleading impression created by the accounts of LGL, the appellant said nothing about the promissory note and it being pledged to Elfic. She knew that there was no available cash.
124 LGL and the appellant were intent on obtaining and maintaining credit facilities. The accounts of the various companies reveal that these were much needed. The false statements were significant and relevant to obtaining and maintaining credit facilities. See Maslen v Shaw (1995) 79 A Crim R 199 at 202 and Kylsant [1932] 1 KB442. In the latter case the Court said:125 Earlier reference had been made to these remarks of Lord Halsbury LC in Aaron’s Reefs Ltd v Twiss AC 273 at 281:
“The falsehood in this case consisted in putting before intended investors, as material on which they could exercise their judgment as to the position of the company figures which apparently disclosed the existing position but in fact hid it. In other words, the prospectus implied that the company was in a sound financial position and that the prudent investor could safely invest…”
“…….I think one is entitled to look at the whole document and see what it means taken together…. It is said that there is no specific allegation of fact which is proved to be false. Again I protest, as I have said, against that being the true test. I should say, taking the whole thing together, was there false representation? I do not care by what means it is conveyed - by what trick or device or ambiguous language: all those are expedients by which fraudulent people seem to think that they can escape from the real substance of the transaction. If by a number of statements you intentionally give a false impression and induce a person to act upon it, it is not the less false although if one takes each statement by itself there may be a difficulty in showing that any specific statement is untrue… The whole of this transaction seems to me to have been fraudulent to the last degree.” (p.284).
I follow this approach.
126 The Bank of Tokyo count should undoubtedly have been left to the jury. The evidence amply supported the conviction. There was no miscarriage of justice.
127 It was not suggested either at the trial or in this Court that the judge should have directed a verdict for the appellant on the Westpac count. The grounds of appeal contended however that the verdict on this count was unsafe and unsatisfactory. There is no substance in the contentions that on the whole of the evidence it was not open to the jury to conclude that the impugned statement in this count was false in a material particular and was known by the appellant to be false. She received the request for information, she signed the reply and she wanted very much to obtain and maintain credit facilities with Westpac. This was a matter of importance. Her explanation was not credible. The appellant further submitted that the jury may have entered a verdict of guilty in relation to the Westpac count based on conclusions reached on counts 1 and 3 which were not open. This is not so. The Westpac count was based on the reply signed by the appellant whereas the other counts were based on statements made orally to the bankers. In dealing with Appeal Ground 8 I have explained why there is no substance in this complaint. The verdict on the Westpac count was amply supported by the evidence and there was no miscarriage of justice.
128 As to the Chase-AMP count the appellant contended that there was no evidence fit to go to the jury that the statements alleged to be made by the appellant or by Mr Deans in her presence and with her concurrence were false in a material particular and false to her knowledge. Both before the trial judge and this Court the appellant relied on arguments which were substantially similar to those relied on as to the Bank of Tokyo count. The appellant contended that it appeared from the prosecution evidence that whatever statement was made as to drawing down $240 million from Citibank for the Tootal bid secured on Tootal shares, Chase-AMP were told that the money was drawn down. It made no difference whether the drawing down was from a Citibank loan or from an EFG loan. The appellant contended that Chase-AMP were made aware that the money drawn down was not free and unencumbered but tied up in the Tootal bid and secured. In any event the money had been paid back as Chase-AMP knew. The matter had historical interest only. It was submitted that the Crown case on materiality had to fail as the matter was not sufficiently significant. The reasons given earlier in relation to the Bank of Tokyo count apply in respect of this count. LGL did not have access to $240 million such as it claimed.
129 The Chase-AMP count (count 3) should have been left to the jury as the false statement alleged was material. Chase-AMP was not told the true overall position. The verdict was well supported by the evidence and there was no miscarriage of justice. I reject the appellant’s challenge.130 Each of the appeals against conviction on counts 1, 2 and 3 must be dismissed.
The evidence led by the Crown as to guilt was overwhelming. The appellant’s convictions were inevitable on the evidence. She has not lost any reasonable possibility of being acquitted.
Severity Appeal131 The concurrent sentence imposed on each count was the maximum penalty of 5 years, comprising a minimum term of 3 years and an additional term of 2 years. Each of the offences arose out of the appellant forwarding the March 1989 accounts (or a draft thereof) to the banks and her oral or written statements as to those accounts to the banks. The appellant was the director responsible for organising credit facilities but she always acted at the behest of and under the direction of Mr Goldberg, the owner of the companies. He was the dominating force. She had staff under her.
132 The credit facilities involved large sums of money. She was not acting to secure financial advantages for herself but rather for the companies under Mr Goldberg’s control. She was a salaried employee. That is not the only consideration. The Bank of Tokyo advanced $10 million.
133 The appellant had an understanding of her duties and obligations which was seriously deficient. She lacked honesty and failed to tell the true story, which she knew, to the bankers. She was prepared to deceive them and did so.
134 The judge correctly proceeded upon the basis that the appellant had no previous convictions. He noted the evidence from three persons of repute who spoke of her in the highest terms. They spoke of her reputation for honesty and integrity, her devotion to her family and friends and her loyalty.
135 In his report of 21 October 1998 Dr John Phillips wrote that she was a 49 year old woman married with a fifteen and a half year old son. She comes from a relatively protected and comfortably placed middle class background. She is of high average or better intelligence. She has a University degree in accounting. She told Dr Phillips that she remained relatively unaware of the major problems faced by the Goldberg Group until fairly late in her employment with that organisation. She described herself as a creature of habit. In effect she had worked for the one organisation most of her life. She felt that her life had been on hold for the 7 years prior to the trial. Dr Phillips concluded that there were strong obsessional features in her personality and that she has a strong need to control any situation in which she finds herself. A lengthy custodial sentence may lead to significant psychological symptoms or at worst a frank psychiatric disorder. She is likely to be very lonely in prison. Most of the female prisoners are much younger and have a very different social, economic and cultural background. The appellant is not interested in drugs.
136 The remuneration received by the appellant was modest. For example, for the year ended 30 June 1988 her taxable income was $64,777 and that for the year ended 30 June 1989 was $63,351. She did not receive generous bonuses, shares or options. Her remuneration did not match her responsibilities.
137 The judge observed that it was not possible to determine if the true and parlous state of the Goldberg Group had been disclosed in August 1989 and thereafter what actions the banks and other creditors could have taken, but it was not unreasonable to conclude that the continuation of lines of credit and the granting of new lines of credit must have had an adverse effect on the position of the creditors.
138 The judge concluded:
“Despite the positive matters adverted to I regard the need for general deterrence to be essential. Directors of large commercial organisations have a great social responsibility to act honestly and responsibly, particularly when dealing with lending institutions. Commercial dealings are based on the need for trust and breaches of that trust can have and have had significant effect on the economic health of the nation. These offences are individually to be regarded as amongst the worst examples of this class of criminal activity. The maximum penalty applicable, as I have said, is one of five years imprisonment. I regard it as appropriate to impose such maximum sentences on each on a concurrent basis in this case.
As indicated I bear in mind the lack of any contrition. I do find however special circumstances being the prisoner’s previous good character, and the unlikelihood of further offences.”
139 The appellant submitted that the sentences were manifestly excessive and that the judge failed adequately to take into account that there was no evidence of any advantage, financial or otherwise which was received by the appellant as a result of the impugned false statements. She was a mere functionary answerable to Mr A Goldberg, the effective owner of the company. She submitted that the sentence was outside the range for the subject offences and was one more appropriate to an offender who had made the false statements for substantial personal gain.
140 The appellant further contended that the offences did not reveal a “worst case” situation because the Crown neither established nor sought to establish that anyone had suffered financial loss, she had not received any personal financial benefit, she had no prior criminal history, there were strong subjective factors and the case did not require personal deterrence. Her conviction would preclude her from holding further Directorships in companies and from obtaining employment in fields in which she had worked.
141 It was not an ingredient of the offence that someone had suffered financial loss or received a personal benefit. It is, however, reasonable to conclude that loss was probably suffered at least by the Bank of Tokyo. It advanced $10 million.
142 The appellant submitted that the judge was influenced by irrelevant factors. There was, she argued, no evidence that she was the instigator of the round robin transaction. The judge accepted that. She was not charged in relation to the round robin transaction. The judge regarded it as a device to deceive. This was a correct description. From the judge’s remarks, he regarded the transaction and some other matters as part of the context in which the offences occurred. She negotiated with the Banks knowing all about the transaction. I do not accept her submission that the judge dealt with her as if she was on trial for her participation in the round robin and for her role as a director of LTCL and LGL. Her directing role meant that she was the person with the knowledge to whom requests for information were directed. She responded to those requests.
143 The appellant submitted that in sentencing her the judge took into account irrelevant matters such as the appellant making no attempt to limit the issues and leaving most matters at large until her statement from the dock. The judge also referred to the procedural steps taken on her behalf including her initial pleas of guilty, her being given leave by the Court of Criminal Appeal to withdraw her pleas, the substitution of fresh charges and the failed application for a stay including a failed application or appeal from that refusal.
144 These were no more than observations designed to reform and shorten criminal trials and the reasons for the delay in the charges being finalised. For many years judges have dealt with matters of general importance in criminal trials in their remarks on sentence. This enables the community to become aware of deficiencies in the criminal justice system which need attention. The judge did not let these matters affect the sentences.
145 The appellant contended that the judge had attached undue weight to considerations of general deterrence and that this had led him to attach insufficient weight to the subjective factors and the special feature that she was in a subordinate position and had felt bound to carry out the instructions of the dominating Mr Goldberg. Reliance was placed on McDonald, (FCA), (1994) 71 A Crim R 370 at 380 and Corbett, (1991) 52 A Crim R 112 at 117. In the latter case the Court (Gleeson CJ, Priestley JA and Mathews J) said:
“…once it has been decided to inflict a significant gaol term, it is not likely to be useful, in fixing its precise length, to increase it by refusing to give due weight to factors such as a plea of guilty, previous good record, previous positive contribution to the community, real prospects of rehabilitation; the impact upon a prisoner’s family, and the heavy weight of punishment inevitably involved in the loss of professional position and livelihood. These matters should be given real weight;, and it is only in the sense that the need for general deterrence will not normally allow them to reduce the sentence below a significant period of incarceration that it is right to speak of giving ‘the greatest weight to the element of general deterrence’”.
146 Corbett highlights the need for balance when dealing with general deterrence. Other matters favourable to a prisoner should not be ignored.
147 The Crown submitted that the judge was entitled to find that the appellant was much more than a mere functionary and held a position of considerable responsibility as one of the senior executives subordinate only to Mr Goldberg. I doubt if there is a great deal to be gained in trying to attach labels. What is clear is that the appellant had to carry out Mr Goldberg’s instructions. This does not mean that she could not discuss matters with him, or use her own initiative. Her task was to obtain and maintain credit facilities in accordance with his instructions. He needed money to keep his companies going.
148 The Crown submitted that in making each of the three sentences concurrent the principle of totality was properly applied. The Crown emphasised correctly that general deterrence is of particular importance in sentencing for serious white collar crime. In the course of dealings seeking the provision of extremely large sums in credit facilities to a major corporate group, the banks were, the Crown contended, entitled to rely on the accuracy of the information which they received from the appellant in her capacity as a senior executive, subordinate only to Mr Goldberg. The appellant’s false statements constituted an egregious abuse of this position of trust: Pantano (1990) 49 A Crim R 328 at 330 and 338. I agree.
149 The Crown correctly pointed out that the offences involved very large sums of money as to both the subject of the false statements ($240 million recorded as cash in the accounts) and the financial advantage sought (new facilities of $10 million and $20 million and continuation of existing facilities of $20 million and $50 million): Hawkins (1989) 45 A Crim R 430 at 435. Further, these offences disclosed a deliberate, co-ordinated and recurring course of deception.
150 The Crown submitted that having regard to the matters outlined in the preceding three paragraphs it was open to the judge to find that the offences were among the worst examples of this class of criminal activity. It contended that the appellant’s subjective case was properly reflected in the finding of special circumstances and the proportional increase of the additional term.
151 The question of the correct sentence in the present case was and is a very difficult one. The materials leave me with the strong impression that the appellant was swept along by a dynamic entrepreneur with a dominating personality in a period of much activity and excitement. She had to do what she was told or resign. She became too pre-occupied with doing what he wanted, namely, to obtain money for his group of companies from the banks to achieve his personal ends. In this headlong rush, honesty and truthfulness were casualties. This is always a danger when the business methods employed sail too close to the wind. Her subordinate position was emphasised by her modest salary.
152 While the offences are serious I do not think they can fairly be regarded as amongst the worst type of offences of the kind in question warranting the maximum penalty. The setting in which they occurred, the dynamism and dominance of Mr Goldberg and the lack of any prospect of personal benefit or advantage cannot be ignored. There were also strong subjective factors. She had no prior convictions and was well thought of by people of good repute. She is now 50 years old, married with one child. Her career in the finance world has effectively been brought to an end. On the other hand credit facilities in large amounts were involved. The three offences occurred within a period of three months. General deterrence and the insistence upon honest conduct by company directors and executives is of prime importance.
153 I am persuaded that the sentences do not maintain the right balance between general deterrence and the other features of the case. To reflect the gravity of the offences which are a little below the worst type of cases a concurrent sentence of 4 years should be imposed on each count with a minimum term of two years three months. There are special circumstances. These include the appellant’s previous good character, the unlikelihood of further offences and this being the appellant’s first gaol sentence.
154 This case should stand as a stern warning to all company directors and company executives that they cannot simply go along with and implement the decisions of their superiors if their implementation involves them in dishonesty or making false statements to banks or others. Such directors and executives must refuse to engage in such conduct even if the result be that their services are terminated. Although that is hard, it is better than the alternative of a substantial period in gaol. The individual responsibility of each director and executive cannot be over emphasised. They should also realise that the Commonwealth Crown will prepare its case thoroughly making it hard to escape and that any trial is likely to be long and expensive.
155 I propose the following orders:
1. Appeal against conviction on each count dismissed.2. Leave to appeal against sentence granted.
3. Appeal against sentences allowed; sentences quashed.
4. In lieu of the sentences imposed, the appellant is sentenced on each count to a minimum term of 2 years 3 months starting on 2 October 1998 and ending on 1 January 2001 and an additional term of 1 year 9 months starting on 2 January 2001.
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