R v Cerullo No. Sccrm-02-330

R v CERULLO
[2003] SASC 185
Court of Criminal Appeal: Prior, Bleby and Sulan JJ

PRIOR J: The appellant was convicted by a jury of having in his possession a prohibited import reasonably suspected of being imported into Australia in contravention of the Customs Act 1901 (Cth). The prohibited import the subject of this charge was some 219 kgs of pure cocaine in 476 compressed white powder discs, located in a locked trailer at premises at 2/17 James Street, Prospect on 16 August 2000.
In this appeal, the appellant seeks to have his conviction set aside and a retrial ordered. He complains of evidence being wrongly admitted by the trial judge, failures to direct the jury on permissible and proper use of evidence admitted and errors with respect to directions given on the burden of proof and about the use of lies as evidence of consciousness of guilt. A further complaint relates to the direction given on the element of the offence that requires that the prohibited import be reasonably suspected of being imported into Australia contrary to the provisions of the Customs Act. The appellant also says that the trial miscarried by reason of the cumulative effect of the errors referred to in the grounds of appeal.
On 16 August 2000, police went to a flat in James Street, Prospect after they had detained the appellant at a Marine showroom on the Main North Road at Blair Athol. The appellant had been searched. He was found to have about $5000 in cash on him, two mobile telephones and a number of keys. He had two wallets with him. One contained money and papers in his own name, the other also money and papers. The papers in the other wallet were in the name of one Gary Dettman.
The Commodore car in which the appellant arrived at the showroom had Victorian number plates. Cocaine was later detected in the front and rear of that car. In the car were documents and other items including a lease for the James Street unit. The lessee was named as Gary Dettman.
The police wanted to search the appellant’s house. The appellant had given his address as 16 York Street, Wingfield. At that address there was no house. It was a block of land enclosed by a cyclone fence. There was a shed on the property. It was divided into a workshop and an office. Amongst some apparently brand new equipment, were three large blue plastic barrels. At the back of the shed were a number of large blocks of stone. Cocaine was later detected in a sample of white powder, taken from the tray of a utility then there.
Police went to the James Street address. There they located, in the kitchen, just over $300000 in cash. In the garage was the locked trailer. A key found in the appellant’s trousers fitted the lock, as did one found in the Commodore car. The trailer carried the same registration number as the car. Within the trailer police found a number of blue barrels containing the 476 discs. The barrels were similar to those found at the Wingfield address. The weight of the discs was over 300 kgs. The value of the 219 kgs of cocaine was said to be between about $38m to more than $100m, depending upon the level in the drug hierarchy in which it is sold. The prosecution’s case was that the appellant used the name Gary Dettman to obtain the lease. Neighbours and the landlady’s husband identified the appellant as the sole occupant of the unit referred to in the lease. The evidence was that the appellant introduced himself as Gary Dettman and paid about $6000 in cash for six months rent in advance.
The first ground of appeal includes a complaint that the trial judge wrongly admitted evidence of the cash, found when the unit at James Street, Prospect was searched. It is also said that the trial judge wrongly admitted evidence of cash transactions made by the appellant.
Over a period of some four weeks, the trial judge heard evidence on the voir dire, with respect to the admissibility of this evidence and evidence about what was described as “Ladian imports”.
In April 2000, an officer of the Australian Customs Service was alerted to the importation of some shipments of stone from Columbia by Ladian Pty Ltd, a company which owned a Fasta Pasta franchise at Glenelg. The officer suspected that the shipments contained narcotics, based on the country of origin and those involved in the importation. The officer believed that the contact person organising the importation was one T Cerullo, the appellant’s daughter. When the officer contacted a Customs broker, he was given a contact telephone number. The appellant was the subscriber of that number. However, at this time the officer believed the appellant still to be overseas. His evidence was that he did not therefore immediately associate the telephone number with the appellant but rather with his daughter, Toni. The Customs broker had been employed by the appellant to attend to the necessary documentation and payments to clear shipments of stone from Columbia by Ladian.
The broker’s evidence was that after the first two shipments arrived in April 2000, the appellant told him that there were going to be four more containers coming in a later shipment. The first consignment was cleared by Customs after the appellant paid duty on the consignment by cheque. The second shipment arrived in the middle of May 2000. The appellant paid over $1000 cash for that delivery to Wingfield.
The prosecution claims that the appellant mostly paid cash for transactions associated with the importation of the stone. Once cleared by Customs, the appellant arranged for the delivery of the stone and its unloading at the Wingfield address. These premises were leased by the appellant from 1 May 2000. There was evidence that the appellant told the land agent negotiating for the lease that he wanted the lease arrangements kept as secret as possible because of Family Court proceedings between him and his wife.
Also admitted was evidence about instructions the appellant gave to an accountant. He was told by the appellant that he was a stonemason with a contract to build head stones at the Enfield Cemetery. The accountant said the appellant told him that he wanted to set up businesses in a way that his wife would not find out about because of Family Court proceedings. A company was set up. One of the directors was identified as the appellant’s friend, Gary Dettman.
The accountant also spoke of being told that the appellant wished to conduct transactions in cash, again because of Family Court proceedings and not wanting his wife to know about it. The accountant gave evidence of instructions from the appellant not to bank cash given to him in amounts above $10000. Any banking of an amount of cash above $10000 requires reporting. There was evidence of cash transactions received by the accountant and banked in six deposits of less than $10000. Other evidence admitted with respect to cash transactions included the purchase of equipment for which over $30000 cash was handed over to one particular company, Total Trade Supplies. The equipment so purchased was found at either the Wingfield or Prospect premises. Other cash transactions were introduced into evidence including $30000 for a boat. There was also the cash deposit of $6000 for the purchase of a farming property near Truro in July 2000. A further $40000 cash was handed over when settlement of the sale occurred.
All this evidence was said to be irrelevant to the particular charge against the accused.
The argument was that the appellant was only charged with being in possession of the cocaine located in the trailer at Prospect. Thus, the evidence of those other matters was not relevant to that charge. The appellant’s counsel submitted to the trial judge that the various cash purchases and cash found on the premises suggested the commission of other criminal conduct and was therefore prejudicial to the appellant and lacking probative value. As for the evidence of the so-called Ladian imports, again, the submission was that that evidence was not relevant to the charge against the appellant. He was not charged with importation. In any event, no cocaine was located in the Ladian shipments. The evidence as to these shipments was highly prejudicial but not relevant to the charge against the appellant. It should therefore be excluded.
The trial judge ruled that the cocaine located at James Street was of substantial value and clearly part of a large commercial transaction. In her Honour’s view, evidence that a large sum of cash was located in the premises rented by the appellant, together with evidence as to large cash transactions being made by him over a number of months, as well as the importation by him of sandstone from Columbia, being the country from which cocaine is sourced, were all matters which, in her opinion, “were relevant and admissible to illustrate the scale on which the appellant was living and the context in which the offence (was) alleged to have occurred”. Her Honour’s view was that the evidence of those matters could properly be placed before the jury to support the prosecution case that the appellant was knowingly in possession of the cocaine located at James Street. Any prejudicial effect of that evidence was outweighed by its probative value.
The Crown’s case was that the cocaine found at James Street on 16 August was secreted in some way in the imported stone blocks, removed at York Street, Wingfield and later stored at James Street. However, the evidence before the jury did not support that assertion. The two shipments to Wingfield before August 2000 were cleared by Customs after sensitive tests for drugs were negative.
I think the trial judge was right to admit the evidence objected to. That evidence tended to prove a fact in issue, the appellant knowingly possessing the cocaine. The evidence was so related to that issue it made probable the existence of the fact in issue, the appellant’s criminal possession of the prohibited import.[1]
[1]Goldsmith v Sandilands (2002) 76 ALJR 1024; 190 ALR 370 at [31]; Palmer v The Queen (1998) 193 CLR 1 at [55]
The appellant denied that he was in possession of the drug. The prosecution had to prove that the appellant was in possession. The appellant’s possession of and activities with cash were consistent with the appellant not only being in possession of the drug but also being involved in a commercial activity which the prosecution sought to prove was veiled by the trappings of a modest residence, the use of an alias and the use of cash in the various ways identified in the evidence. So too the importation of stone from a known source of cocaine. Thus, the prosecution was entitled to adduce the evidence objected to.
The evidence being before the jury, the trial judge had to give directions as to the use to which it could properly be put and the use to which it could not be put. In my opinion, the trial judge failed to do this. Particularly, the evidence about the Ladian imports could only be considered in conjunction with the other circumstantial evidence. That other evidence could be said to be stronger than that, given that the suspicion that the cocaine was in the stone was not confirmed by the searches and tests of the stone imported and delivered to Wingfield. Nevertheless it was evidence which, with the other evidence, could exclude what the prosecution had to exclude, all reasonable hypotheses consistent with innocent possession.
The other circumstantial evidence, particularly the presence of so much money in cash together with the use of a false identity with respect to the premises, did not prevent the prosecution having the benefit of the other evidence objected to if it be relevant and its probative value not outweighed by any prejudicial effect.[2] The evidence objected to was for the jury to consider using to negate the absence of knowledge and “induce the conclusion”[3] that the appellant did have possession of the cocaine. It could be said that the probative value of the Ladian import evidence was low and that the time, convenience and cost of proving it hard to justify. The evidence could have been excluded in the proper exercise of a judicial discretion.[4] It being admitted, however, the proper use of that evidence had to be spelt out to the jury.
[2]        cp Wilson v The Queen (1970) 123 CLR 334 at 340
[3]        Wilson v The Queen (1970) 123 CLR 334 at 337
[4]        cp Palmer v The Queen (1998) 193 CLR 1 at [55]
Very little was said by the trial judge. After referring to the evidence of the appellant about the possibility that he might at some time in the future grow marijuana on the Truro property and that such a plan might well explain some of the appellant’s activities and purchases in the period leading up to his arrest the trial judge said:-
“There was also evidence about such matters as the large sums of money which the accused brought into Australia various cash transactions conducted by him and the use, by him, of a false identity. Some of those matters might lead you to think that the accused has been involved in offending apart from the charge which is currently before you. You might also be suspicious of just what the accused was up to in getting about the place, and making so many purchases in cash and keeping large amounts of money at James Street. I must therefore make it clear to you that he is not charged with any offence relating to the growing of marijuana, or breaching currency regulations, or anything else other than the possession of the cocaine found at James Street.
I must therefore warn you to carefully guard against reasoning that just because the accused might have had plans to grow some marijuana at some time in the future, or that he might have committed some other offences, or that he might even have been engaged in a few dodgy business deals at the relevant time, that he is likely to be the sort of person to have committed the offence with which he is now charged. Such a process of reasoning is quite impermissible.”
The trial judge referred to the jury having heard quite a lot of evidence about the Ladian imports when giving some directions about alleged lies told by the appellants. She then said that the jury had to remember that the appellant was not charged with importing cocaine. Her Honour also gave general directions about circumstantial evidence. However she never told the jury the basis upon which she had ruled evidence admissible nor specifically directed them about the impermissible use of that evidence. The risk of improper use of that evidence was substantial. Particular directions were required especially after what was said about that evidence in the final addresses.
It was submitted to us that the trial judge was required to give the jury directions consistent with the reason she gave when ruling the evidence admissible. In the course of her directions the trial judge referred back to submissions put to the jury by counsel. In opening to the jury, the prosecutor referred to this evidence being only there to negate any suggestion of innocence or unknowing possession of cocaine. The jury should have been told that by the trial judge herself in her final charge to the jury. In his final address, the prosecutor told the jury that it was important not to use the possession of the cash to speculate about how the appellant came by it and if he came by it by way of any sort of offending to reason that he was in possession of money by ill gotten gains and therefore the sort of person who would possess cocaine. He properly identified that as simply an impermissible form of reasoning. He then spoke of permissible and impermissible ways of using evidence and that the trial judge would be giving “quite clear directions about uses of that evidence”.
After repeating again that the jury could not reason in the impermissible way identified, the prosecutor told the jury that it was able to reason with respect to the cash evidence that it suggested the sort of scale or capacity of the man. Similar submissions were then put with respect to the $300000 found in the kitchen of the appellant’s premises. The prosecutor said he was “at pains to say don’t reason that if he didn’t declare this money when he came in from Italy that that’s a crime and therefore he is more likely to possess cocaine”.
With respect to cash transactions, the prosecutor again referred to impermissible and permissible uses of information. As to this he said that the evidence was “not led to demonstrate that (the appellant) is a dishonest person and therefore committed the offence of possessing cocaine. It’s not to demonstrate that he is hiding things and, in some cases, goes directly to a cover‑up of what he is doing. It’s to demonstrate the scale of his dealings”.
Later in his address, the prosecutor properly told the jury that the prosecution had not charged the appellant with importing cocaine. However, the prosecutor again spoke of the possibility of the cocaine being in the rock delivered in the second shipment to Wingfield, maintaining that it was possible, if one knew what one was doing, to put the cocaine in the stone as one of the prosecution witnesses maintained and believed throughout his evidence.
I reject the submission that the only direction the trial judge could give would be a direction reflecting the terms of her own ruling. Directions consistent with the language of counsel could well have sufficed. However, the prosecutor’s address is no substitute for the need for directions from the trial judge on the proper use of evidence admitted for a limited purpose. The course of the trial called for directions consistent with what occurred within it. That included the use of the evidence about the Ladian imports by the defence as well as the use sought to be made of it by the prosecution.
It is plain that the circumstantial evidence admitted was before the jury to enable them to have the alleged possession established as part of a course of conduct otherwise lacking comprehension, seeming unreal and a not very intelligible event for a person otherwise appearing to be in the modest suburban circumstances that would otherwise have been presented to the jury.[5] This evidence was admissible to have the jury consider whether those circumstances they found proved explained the act charged, that act being placed in a context by the admitted circumstantial evidence, and assisting the jury to a better understanding of what would otherwise be surprising or unlikely.[6] To have directed the jury in the language used by the trial judge in her reasons for ruling would not have met the expectations referred to by the Chief Justice in R v Nieterink.[7] The trial judge had to identify the precise manner in which it was suggested that the circumstantial evidence could be used. To refer to the context in which an offence is alleged to have occurred is not as specific as is desirable.
[5] O’Leary v The King (1946) 73 CLR 566 at 577
[6] R v Nieterink (1999) 76 SASR 56 at [41]
[7] (1999) 76 SASR 56 at [45 – 46]
Equally important are directions as to the improper use of evidence. The prosecutor said more than the judge on this. There was no direction from the trial judge with respect to how the jury were not to use the evidence as to the possession of cash at James Street, the purchase of the boat for cash and some of the purchases of equipment for cash. Likewise, there was no direction as to how the evidence could be used. Those omissions suggest that the trial was fatally flawed and that the conviction cannot stand.[8] A fundamental irregularity occurring, the power to dismiss the appeal on the ground that no substantial miscarriage of justice has actually occurred does not arise.[9] The appeal must therefore be allowed upon this ground alone.
[8] R v Dolan (1992) 58 SASR 501 at 503 and 518
[9] Glennon v The Queen (1993) 179 CLR 1

The other grounds of appeal include objections to directions given on the burden of proof and the use of lies as evidence of consciousness of guilt.
With respect to directions given on the burden of proof the complaint is that the trial judge misstated the issue for the jury’s determination in a way that relieved the prosecution both of proving its case beyond reasonable doubt and excluding beyond reasonable doubt all rational hypotheses consistent with the innocence of the appellant. The appellant claims that in the directions given to it, the jury was in effect directed that before it could acquit the appellant it had to affirmatively find that there was a reasonable possibility that the appellant had no knowledge of the cocaine because someone else had stored it in his trailer without his knowledge.
In her summing up the trial judge told the jury:
“The defence in this case is fairly and squarely a denial by the accused of being in possession of the cocaine. The accused told you that he did not have any knowledge of it. He said it was not his. He did not know it was in the trailer and he did not know how it got there. If, therefore, you accept, as a reasonable possibility, that the accused did not know that the cocaine was in the garage, then he could not be said to be in possession of it and you would have to find him not guilty. If, however, you were satisfied that the prosecution had proved the four elements which I have just mentioned to you, then you would have to find the accused guilty.”
In summarising to the jury the appellant’s evidence about other persons who had access to the Prospect premises the trial judge told the jury that on the defence case any one of those persons had an opportunity to store the cocaine in the garage at James Street unbeknown to the accused. Having said that the trial judge told the jury, “if you accept that as a reasonable possibility, then the accused could not be found in possession of it”.
The trial judge then told the jury that the accused was not obliged to prove anything and in particular that he did not have to prove that someone put the cocaine in the trailer without his knowledge. Her Honour then said:
“As I have said, if you accept as a reasonable possibility that is what occurred, the accused could not be said to be in possession of the cocaine and you would have to acquit him of this charge.”
A little further on in the summing up the trial judge again referred to the fact that, on the defence case, there were two very likely candidates who could have stored the cocaine at James Street without his knowing about it. As to that, Her Honour said that if that was a reasonable possibility that would provide a rational explanation consistent with the innocence of the accused.
Her Honour then reminded the jury of what had been put by counsel in the course of their addresses. She reminded the jury that this was a circumstantial case and that therefore before the jury could be satisfied that the accused was guilty on the basis of circumstantial evidence the jury had to be satisfied not only that his guilt was a rational inference from the evidence but the only rational inference that the circumstances the jury found proved enabled them to draw.
Her Honour said that on the prosecution case the jury should have no difficulty in inferring from all the proven facts that the appellant was in possession of cocaine at James Street. Her Honour then said that the defence said that when all the evidence relating to the cocaine was carefully examined, as opposed to something else, such as marijuana, there was very little evidence to connect the appellant with the cocaine and there was a possibility that the cocaine was left there by someone else without the knowledge of the appellant. Her Honour told the jury that if that was a reasonable possibility then, on that basis, the jury would have to find the appellant not guilty of the charge.
The jury retired to consider its verdict soon after that. Three hours later there was a request for some evidence to be read. That took about half an hour. The jury retired again. Two and a half hours later the trial judge received a question. Her Honour was asked to explain what she meant by “must be the only rational hypothesis to produce a verdict of guilty”. After discussing the question with counsel the trial judge redirected the jury by reference to the four elements that had to be proved beyond reasonable doubt and told the jury that when a case was based on circumstantial evidence it could not return a verdict of guilty unless the circumstances were such as to be inconsistent with any reasonable hypothesis other than the guilt of the accused. Her Honour said to the jury that before it could be satisfied that the accused was guilty it had to be satisfied not only that his guilt was a rational inference to be drawn from the evidence but that it was the only rational inference that the circumstances the jury found proved enabled it to draw. Within the hour the jury were allowed to separate overnight.
The following morning the trial judge informed counsel that a further question had been received. The question was typed. It read:
“Your Honour, I would appreciate some direction as to the law on the following.
‘Assume in a particular case there are two hypotheses, H1 (leading to a guilty verdict) and H2 (leading to a not guilty verdict). H1 is considered significantly more probable than H2. However, H2, although more unlikely than H1, is nonetheless, consistent with the evidence in the case and if accepted would allow a not guilty verdict.
My dilemma is this: on the evidence a reasonable person, based on probability, would infer that hypothesis H1 described the correct sequence of events. However, the alternative hypothesis H2, although less probable, is a reasonable hypothesis based on the evidence. In terms of the law as to the definition of “reasonable” in a case based on circumstantial evidence should; hypothesis H1 be accepted because I, as a reasonable person, would infer this to be true, or should the alternative hypothesis H2 be accepted because I consider H2 to be a reasonable alternative possibility?’”
After discussions with counsel the trial judge gave a further direction to the jury in response to the question. Her Honour said that she was going to try to answer the question as simply as she possibly could. Her Honour then said:
“I think I should start off by reminding you that the question you have to answer in this case is whether it has been proved beyond reasonable doubt that the accused was in possession of a prohibited import. That is the charge against him.
As I told you yesterday, a reasonable doubt is simply a doubt that you, the jury, are prepared to entertain in the circumstances of the case. It is no more complicated than that. The same applies to what you might call a reasonable or rational hypothesis.
In a case where there is a rational or reasonable hypothesis which is consistent with innocence, the accused is entitled to the benefit of that rational or reasonable hypothesis because that would amount to a reasonable doubt.
That situation applies notwithstanding that there might be another competing hypothesis which points to guilt, and notwithstanding that – what I might call – the guilty hypothesis, is the more likely of the two.
As I have said, proof is proof beyond reasonable doubt.
If therefore, upon the evidence, there remains a rational or reasonable hypothesis consistent with the innocence of the accused, he is entitled to an acquittal.
So, in this case, as I told you yesterday, if you consider, on all of the evidence, that there is a reasonable possibility that the accused did not know whether the cocaine was in his garage, then he would be entitled to a verdict of not guilty.”
In Murray v The Queen[10] the High Court identified the risk of misleading juries when talking of accepting a version of events favourable to an accused in the course of directions on the burden of proof. There is no room for comparison of alternatives. Rather, juries must be clearly directed that the prosecution must prove all elements of an offence beyond reasonable doubt. This requires no comparison between alternatives other than being persuaded and not being persuaded beyond reasonable doubt[11]. The issue for the jury is not whether it should accept the appellant’s version but whether the prosecution has negatived it as a reasonable possibility.
[10] (2002) 76 ALJR 899; 189 ALR 40
[11] Gummow and Hayne JJ in Murray at [57]
In this case, I do not think that the trial judge used the word “accept” in the way that it was used in Murray. It was not left in the sense of accepting one version of events over another. Rather, the trial judge was leaving it to the jury to consider whether they accepted a version of the facts to be a reasonable possibility on the evidence. If that were so, the jury had to acquit. I do not think that the trial judge invited the jury to decide which of two competing versions they would accept.
The answer to the jurors’ question could have been briefer. The answer could simply have been that if the jury considered H2 a reasonable possibility the accused would be found not guilty. Nevertheless, what was put to the jury fell short of the error identified in Murray. I am not persuaded that the directions went “at least part of the way” to transferring to the appellant an onus of establishing a reasonable hypothesis consistent with innocence[12]. The trial judge properly told the jury that a verdict of guilty could only be returned if the circumstances found proved were inconsistent with any reasonable hypothesis other than the accused’s guilt[13]. It was not erroneous to also tell the jury that if there remained in the minds of the jury a reasonable possibility that there existed a state of facts consistent with innocence, the jury could not be satisfied that an inference of guilt was the only rational inference that could be drawn and a verdict of not guilty had to be returned.
[12] Callinan J adopting McPherson JA in Murray at [132]
[13] Peacock v The King [1911] 13 CLR 619 at 634
I think there are deficiencies in the directions given by the trial judge with respect to lies. The prosecutor put to the jury that the appellant had lied to it and misrepresented things as they were. He told the jury that some lies were minor and just damaging a persons credit, whilst others pointed to a cover-up or hiding of things for the purpose of hiding that which was true, namely that the appellant well knew that he had cocaine in his garage. Five lies were then identified. However, after both counsel had addressed the jury and before the summing-up, counsel were given the opportunity to comment upon the trial judge’s proposed directions. The prosecutor then said that the prosecution only relied upon three lies as capable of being lies going to a consciousness of guilt. In her directions to the jury, the trial judge gave directions with respect to the three lies, not the five referred to in the address to the jury by the prosecutor. The appellant says that the trial judge was under a duty to ensure that the jury was clearly directed that it could not use any lies told by the appellant as evidence of a consciousness of guilt other than those three that were the subject of particular directions in the course of the trial judge’s directions. It was submitted that, in the directions given, the trial judge did not so direct the jury. Thus, it was submitted that there was a risk that the jury had engaged in a process of reasoning for which the prosecution did not ultimately contend.
Whilst the directions given by the trial judge were consistent with the directions called for by the High Court in Edwards v R[14], there appears to have been a risk of confusion or doubt as to the way in which the prosecution put its case with respect to some lies given the exchange which occurred between the trial judge and the prosecutor after the prosecutor’s address. The prosecution could have been understood by the jury to have been identifying more than the lies that finally attracted the trial judge’s proper directions. In those circumstances, I think the trial judge’s direction should have been more specific than it was and should have despatched all but three lies as going only to credit.
[14] (1993) 178 CLR 193
Finally, the appellant complained of a direction given by the judge with respect to the fourth element of the charge. In essence it was said that the trial judge directed the jury that the drugs the subject of the charge had to be reasonably suspected by someone other than the jury of being imported into Australia contrary to the provisions of the Customs Act. Suffice it to say that whilst the trial judge wrongly told the jury that the fourth matter to be proved was that someone must reasonably suspect that the cocaine alleged to be in the possession of the appellant was imported into Australia contrary to the Customs Act when she should have told them that it was for the jury itself to reasonably so suspect, there was no dispute in the trial about the evidence of an expert that the cocaine originated from South America. The trial judge told the jury that if they accepted that uncontested evidence the jury could be satisfied that the cocaine the subject of the charge was imported into Australia and the fourth element therefore proved. The misdirection preceding that proper direction can therefore be ignored and does not, of itself, warrant any interference with the conviction.
The conviction must be set aside and a retrial ordered.
BLEBY and SULAN JJ
Prior J has recited the relevant facts. We will not add to them except where necessary to deal adequately with the points under discussion.
The Admissibility of the Evidence
We have considered the question of the admissibility of the evidence of the finding of cash, the cash transactions and the Ladian imports. For the reasons which follow we are of the opinion that the evidence of money found at the James Street premises and cash transactions was correctly admitted. We consider that the evidence of the Ladian imports should have been excluded.
Evidence is generally only admitted if it tends to prove a fact in issue or a fact relevant to a fact in issue. There are some exceptions to this principle but it is unnecessary to deal with them here. In Goldsmith v Sandilands & Others (2002) 76 ALJR 1024; 190 ALR 370 at [31], McHugh J said:
“Under the common law rules of evidence, evidence is generally admissible only if it tends to prove a fact in issue or a fact relevant to a fact in issue. A fact is relevant to another fact when it is so related to that fact that, according to the ordinary course of events, either by itself or in connection with other facts, it proves or makes probable the past, present, or future existence or non-existence of the other fact.”
In Palmer v The Queen (1998) 193 CLR 1 at [55], McHugh J said:
“In general, evidence of a relevant fact is excluded only when it infringes some policy of the law, one of which (even in civil cases) is that evidence of a relevant fact is not admissible if the probative value of that fact is so low that it cannot justify the time, convenience and cost of litigating its proof.” See Evidence Act 1958 (Vic), s 37(b).
Cash and Financial Transactions
On the 16 August 2000, police officers searched the premises at James Street. An amount of $19,800 in cash was concealed in a box of Mt Lofty spring water on a kitchen bench. An amount of $70,000 in cash was discovered in the top of the pantry. In a bag in the bottom of the pantry police discovered $209,770 in cash. In the period leading up to his arrest the appellant was involved in a number of large cash transactions which included the purchase of a boat for the sum of $30,000 and the purchase of land at Truro for $130,000.
The Ladian Imports
The evidence of Ladian imports can be summarised as follows. There were four shipments of sandstone from Colombia by the appellant. The first contained two containers which were examined by customs officers including the witness Deane Bawden (Bawden) on 7 April 2000 and 10 April 2000. Bawden gave evidence that he inspected the shipment, and carried out various tests looking for the presence of cocaine. None was found. There was a shipment of four containers which arrived in Melbourne on about 23 April 2000 containing two blocks of stone per container. They were examined on 9 May 2000 and no evidence of cocaine was found. The third shipment of three containers each containing two blocks of stone landed in Melbourne and was examined in July 2000. No cocaine was found. A fourth shipment of three containers containing seven blocks of stone was seized by customs officers. This shipment has not been released by the Customs Department. No evidence of cocaine was found. Customs officers attended at the appellant’s premises at Wingfield and seized eleven blocks of stone. They were examined in August 2000 and subsequently destroyed. No cocaine was found. A number of blocks of stone which had earlier been examined by customs officers were no longer accessible.
There was expert evidence that a source of large quantities of cocaine is Colombia. The evidence of the customs officers was that many hours had been spent examining the contents of the containers. Sophisticated equipment was used to examine the stone for the presence of cocaine. Some of the stone was broken up and some destroyed. Despite the thorough examination of the stone no cocaine was discovered.
The Ruling on the Voir Dire
The trial judge ruled the evidence admissible. In ruling that the evidence of cash found at James Street, the financial transactions and the Ladian imports was admissible, she said:
“Similarly, Mr McEwen argued that the evidence of the Ladian imports was not relevant to the charge against the accused. The accused was not charged with importation and in any event no cocaine was located by ACS in the Ladian shipments.
The defence therefore argued that the evidence as to the shipments, although highly prejudicial, was not relevant to the charge against the accused and should be excluded.
These two matters can be conveniently dealt with together. The cocaine located at James Street was of substantial value. It clearly was part of a large commercial transaction. Evidence that a large sum of cash was located in the premises rented by the accused together with evidence as to large cash transactions being made by him over a number of months as well as the importation by the accused of sandstone from Colombia, being the country from which cocaine is sourced, are all matters which in my opinion were relevant and admissible to illustrate the scale on which the accused was living and the context in which the offence is alleged to have occurred. I considered that the evidence of those matters could properly be placed before the jury to support the Crown case that the accused was knowingly in possession of the cocaine located at James Street. Any prejudicial effect of that evidence was outweighed by its probative value.
The application to exclude the evidence as to those matters was therefore refused.”
It is unclear exactly what Her Honour was referring to when she spoke of “the context in which the offence is alleged to have occurred”. Mr Barrett QC for the Crown submitted that it is highly relevant that someone who has $30 million worth of cocaine in a trailer in a garage attached to premises which he has rented, also has large amounts of cash hidden in those premises. He submitted that someone who has large amounts of cash readily available is more likely to be in possession of a very large quantity, in value, of a prohibited import. He contended that that is what Her Honour was referring to when she spoke of “the scale and context in which the offences are alleged to have occurred”.

In our view the presence of large amounts of cash hidden in the flat adjoining the garage in which the cocaine was found could lead to an inference that the occupier of the flat is more likely to be in possession of a large quantity of a valuable prohibited drug. Those who deal in drugs also deal in cash. The appellant gave evidence that he was unaware of the presence of the cocaine and it must have been put in the garage by others. The evidence of the cash and the cash transactions is relevant to rebut the appellant’s explanation. Further, a person who has conducted a large number of significant cash transactions in the months before the cocaine was discovered may be considered to be more likely to be in possession of a very large amount, in value, of a prohibited drug.
In his submission Mr Barrett QC sought to articulate the basis upon which the Crown submitted that the evidence of the Ladian imports was admissible. He said:
“We say that it is relevant to show that this man is a trader of commercial goods from overseas to establish the sort of level of operation, the scale of his operations. Only by leading evidence of that sort can you rebut what would otherwise be a perfectly predictable and reasonable suggestion that this was a modest living man who no-one would expect to be in possession of $30 million worth of cocaine, quite different from a small quantity of cocaine which might be left with a trader, an importer, with anyone, but someone who is in possession of this amount. So this amount of cocaine is someone who is operating at a different level and evidence to rebut what would otherwise be an obvious submission has already been led.”
We cannot agree with Mr Barrett’s submission. It seems to us that the evidence was led for the purpose of inviting the jury to infer that the appellant was in possession of cocaine because he was an importer of stone from Colombia, which was a major source country for the illegal importation of that drug. In his opening address Mr Barrett QC invited the jury to infer that the cocaine might have come into Australia in the stone. He said:
“While the Crown cannot produce evidence of how the cocaine came to be at James Street on 16 August, the inference is that it was somehow secreted in one or more of the stone blocks which were imported from Columbia (sic). It was removed from the stone or stones at York Street and was packaged and later stored at James Street.
Now, the accused is not charged with importation. He is charged with being in possession of a commercial quantity of cocaine. That evidence is only there to negate any suggestion of innocent or unknowing possession of cocaine.”
He returned to the subject in his final address. He said:
“The Crown has not charged the accused with importing cocaine. He is not charged with that. No part of your process is to decide whether he is guilty or not guilty of processing stone. It is just that, I suggest, you have lies and misrepresentation about an aspect of the importation and disposition of stone from Colombia.
If the cocaine was in the rock that was delivered in the second shipment and delivered to Wingfield on 16 May, then it was no longer in the stone by the 17^th. It was out of it because the stone had then been destroyed and shortly afterwards it was removed.
I can’t avoid the question because it will be a part of my learned friend’s quite justified comments on the issue of whether or not the cocaine could ever possibly have been in the stone that was worked on in May. I suggest that it is possible, but there will be calculations made about the thickness of stone and how you could fit the 476 discs of cocaine in three of the stones. You will consider that. But I suggest that it would have been possible if you knew what you were doing, to put it in the stone, as surmised by Mr Chantrell under cross-examination, about his suspicions. He was invited to explain why he had his suspicions and what his suspicions were. They remained his suspicions.
That doesn’t mean to say you have to make a finding on that at all. The accused is not charged with importing cocaine. It is a suspicion, and nothing else, of one of the Crown witnesses, and a suspicion probably of more than just the Crown witnesses, but that is not the issue that you have to decide, as my friend will also be at pains, quite rightly, to point out to you.
Look at the photographs of the stone, P163, the photographs which have pictures of stone, not all, nowhere near all, that was imported by Ladian Pty Ltd. The ones which plainly had ‘Ladian’ painted on the side.”
Mr Barrett QC conceded that the Crown could not establish that the cocaine was imported in the stone. The relevant fact that the cocaine was part of the Ladian imports could not be proved. The inference the prosecution sought to draw was not open on the evidence. The mere fact that the appellant was a large importer of stone from Colombia, in our view, has no relevance to the issue of whether he was knowingly in possession of cocaine. The use the prosecution sought to make of the evidence was impermissible. The evidence was not relevant for any other purpose and should not have been admitted.
Even if it could be demonstrated that the evidence has some relevance based upon the proposition that a businessman who has a significant business as an importer is more likely to be in possession of a large quantity of an illegally imported drug, we consider the evidence should have been excluded on the ground that its prejudicial effect outweighs its probative value. In Festa v The Queen, Gleeson CJ discussed the exercise of a judicial discretion to exclude evidence on the ground that to admit it would create unfair prejudice to an accused. He said:
“But prejudice does not arise simply from the tendency of admissible evidence to inculpate an accused. It is unfair prejudice that is in question. Where evidence is relevant and of some probative value, prejudice might arise because of a danger that a jury may use the evidence in some manner that goes beyond the probative value it may properly be given. If there is relevant prejudice of that kind, it lies in the risk of improper use of the evidence, not in the inculpatory consequences of its proper use.” (2001) 208 CLR 593 at [22], referring to McHugh J in Papakosmous v The Queen (1999) 196 CLR 297 at [91] - [97]
A significant portion of the trial was devoted to the Ladian imports, what was done to them and what became of them. There was a real risk that a jury might have considered that it was the appellant who imported the cocaine in one or more of the shipments and therefore he was knowingly in possession of the cocaine. That, in our view, would be impermissible reasoning. Even if the judge had directed the jury in strong terms that the only relevance of the Ladian import evidence was that a large importer was more likely to be in possession of a very valuable commercial quantity of a drug which had been imported into Australia than someone who has little financial strength or ability to trade, there was a significant risk that the jury would reason in an impermissible way. In our view there was a real risk that the jury would have concentrated much of their deliberations on what we regard as a collateral issue in the case and that improper use would be made of the evidence.
We consider that unfair prejudice would result from the admission of the evidence and it should therefore have been excluded.
The trial Judge’s directions regarding the contested evidence
We agree with Prior J, for the reasons that he gives, that the directions regarding the use that the jury could make of the evidence of the cash found at James Street, of the cash transactions and of the Ladian imports were defective. It was important that the jury should be told how they could use that evidence, as well as how not to use it. The directions in that regard were inadequate.
Directions as to the burden of proof
The trial Judge, early in the summing up, gave the usual and emphatic direction that the burden of proof in all matters and at all times lay on the prosecution to prove the elements of the charge beyond reasonable doubt, and that if she used the expression “satisfied” or some similar expression she meant satisfied beyond reasonable doubt.
The Judge later gave directions as to the several elements of the offence which the prosecution was required to prove beyond reasonable doubt, and that failure to prove any one of them beyond reasonable doubt must result in a verdict of not guilty. The Judge then continued:
“The defence in this case is fairly and squarely a denial by the accused of being in possession of the cocaine. The accused told you that he did not have any knowledge of it. He said it was not his. He did not know it was in the trailer and he did not know how it got there. If, therefore, you accept, as a reasonable possibility, that the accused did not know that the cocaine was in the garage, then he could not be said to be in possession of it and you would have to find him not guilty. If, however, you were satisfied that the prosecution had proved the four elements which I have just mentioned to you, then you would have to find the accused guilty.”
When expanding on the concept of possession the trial Judge said:
“In this case, if the accused did not know, or there is a reasonable possibility that he did not know that there were drugs in the trailer at James Street, then he could not be said to be in possession of them and he would have to be acquitted.”
The Judge then explained that the prosecution case was based on circumstantial evidence, and gave a comprehensive direction on the nature and use of circumstantial evidence. That part of the direction has not been criticised. Having given an illustration of the use of circumstantial evidence and how it might leave a reasonable doubt in one’s mind as to who had committed a particular act, her Honour continued:
“So it is in this case, the defence suggested to you that on the evidence there is a reasonable possibility that someone other than the accused, and without his knowledge, placed the cocaine in his garage. The obvious candidates raised on the evidence are, of course, Con Atsikbasis, Jim Soukoulis and/or some of their men.”
A little later the Judge continued:
“On the defence case, therefore, any one of these people had an opportunity to store the cocaine in the garage at James Street unbeknown to the accused. If you accept that as a reasonable possibility, then the accused could not be found to be in possession of it.
Ladies and gentlemen, I remind you that the accused is not obliged to prove anything. In particular, he does not have to prove that Atsikbasis or Soukoulis or anyone else put the cocaine there without his knowledge. As I have said, if you accept as a reasonable possibility that is what occurred, the accused could not be said to be in possession of the cocaine and you would have to acquit him of this charge.”
Later, having clearly put the defence case to the jury the Judge concluded:
“On the defence case therefore, there are two very likely candidates who could have stored the cocaine at James Street without the accused knowing about it. If that is a reasonable possibility that would provide a rational explanation consistent with the innocence of the accused.
Ladies and gentlemen, I have not gone through every single matter that counsel put to you in the course of their addresses, but I do ask that you take into account everything that they had to say in this matter. I remind you that this is a circumstantial case and, as I told you earlier, before you can be satisfied that an accused person is guilty on the basis of circumstantial evidence, you must be satisfied not only that his guilt is a rational inference from the evidence, but it is the only rational inference that the circumstances you find proved enables you to draw.
On the prosecution case, you should have no difficulty in inferring from all the proven facts that the accused was in possession of the cocaine which was located at James Street. The defence say, however, that when you carefully examine all of the evidence which relates to the cocaine, as opposed to something else, such as marijuana, there is very little evidence to connect the accused with the cocaine and there is a possibility that the cocaine was left there by Atsikbasis, Soukoulis or someone else and without the knowledge of the accused.
If that is a reasonable possibility then on that basis you would have to find the accused not guilty of this charge.”
After the jury had retired for some time they came back with a question:
“Can you please explain what you mean by ‘must be the only rational hypothesis to produce a verdict of guilty’?”
In answer, the trial Judge said:
“….. You will remember that this morning I told you that in order to find the accused guilty, there were four elements which the prosecution had to prove beyond reasonable doubt. I also told you, when I was discussing the phrase ‘beyond a reasonable doubt’ that that phrase had its plain English meaning. It is simply a doubt that you, the jury, are prepared to entertain, in the circumstances of the case. It is no more complicated than that. It is not appropriate for me to try and define it more than that.
I went on to explain to you that when the prosecution seeks to prove a matter by way of circumstantial evidence, you have to have regard to the possibility that the evidence does not necessarily point to guilt. That is when I said to you, in a case based on circumstantial evidence, you cannot return a verdict of guilty unless the circumstances are such as to be inconsistent with any reasonable hypothesis other than the guilt of the accused.
Then I explained this; I said to you, in other words, before you can be satisfied that the accused is guilty, you must be satisfied not only that his guilt is a rational inference to be drawn from the evidence, but that it is the only rational inference that the circumstances you find proved enables you to draw. I then went on to give you some examples.”
The next day, after the jury had been allowed to go home overnight, the Judge received the following question:
“Your Honour, I would appreciate some direction as to the law on the following.
‘Assume in a particular case that there are two hypotheses, H1 (leading to a guilty verdict) and H2 (leading to a not guilty verdict). H1 is considered significantly more probable than H2. However, H2, although more unlikely than H1, is nonetheless, consistent with the evidence in the case and if accepted would allow a not guilty verdict.
My dilemna (sic) is this: on the evidence a reasonable person, based on probability, would infer that hypothesis H1 described the correct sequence of events. However, the alternative hypothesis H2, although less probable, is a reasonable hypothesis based on the evidence. In terms of the law as to the definition of ‘reasonable’ in a case based on circumstantial evidence should hypothesis H1 be accepted because I, as a reasonable person, would infer this to be true, or should the alternative hypothesis H2 be accepted because I consider H2 to be a reasonable alternative possibility?’”
The trial Judge’s response was as follows:
“I think I should start off by reminding you that the question you have to answer in this case is whether it has been proved beyond reasonable doubt that the accused was in possession of a prohibited import. That is the charge against him.
As I told you yesterday, a reasonable doubt is simply a doubt that you, the jury, are prepared to entertain in the circumstances of the case. It is no more than complicated than that. The same applies to what you might call a reasonable or rational hypothesis.
In a case where there is a rational or reasonable hypothesis which is consistent with innocence, the accused is entitled to the benefit of that rational or reasonable hypothesis because that would amount to a reasonable doubt.
That situation applies notwithstanding that there might be another competing hypothesis which points to guilt, and notwithstanding that – what I might call – the guilty hypothesis, is the more likely of the two.
As I have said, proof is proof beyond reasonable doubt.
If therefore, upon the evidence, there remains a rational or reasonable hypothesis consistent with the innocence of the accused, he is entitled to an acquittal.
So, in this case, as I told you yesterday, if you consider, on all of the evidence that there is a reasonable possibility that the accused did not know whether the cocaine was in his garage, then he would be entitled to a verdict of not guilty.”
In each of the passages quoted the emphasis has been added.
The appellant criticises particularly the use of the phrase “accept … as a reasonable possibility” by the Judge on three occasions in two of the passages set out above, and the subsequent references to phrases such as “if that is a reasonable possibility ….”. It is argued that this amounts to a reversal of the onus or burden of proof. It is also argued that, by using these expressions, the Judge was saying that proof of the prosecution case was to be weighed against an “acceptance” of the defence case, and that in so doing the trial Judge misstated the issue for determination by the jury. It is suggested that those impressions were carried through to the answers given by the Judge to the jury’s questions.
It is of primary importance that the jury should not have been left with any impression that an onus lay on the appellant to prove that he was not in possession of the cocaine. Compare, for example, the situation discussed in R v Anderson (1997) 94 A Crim R 335 at 337-338. It is of equal importance that the jury should not have been directed that they must choose between one version of events over another: Murray v R (2002) 76 ALJR 899; 189 ALR 40 per Gaudron J at [23], Gummow and Hayne JJ at [57] and Callinan J at [132].
As to the first point, we do not consider that the directions in question suggested that there was an onus on the appellant to prove anything. The prosecution case was based largely on circumstantial evidence. The nature of the direction to be given by the jury in those circumstances is well settled. In Barca v The Queen (1975) 133 CLR 82, Gibbs, Stephen and Mason JJ said, at 104:
“When the case against an accused person rests substantially upon circumstantial evidence the jury cannot return a verdict of guilty unless the circumstances are ‘such as to be inconsistent with any reasonable hypothesis other than the guilt of the accused’: Peacock v The King (1911) 13 CLR 619, at 634. To enable a jury to be satisfied beyond reasonable doubt of the guilt of the accused it is necessary not only that his guilt should be a rational inference but that it should be ‘the only rational inference that the circumstances would enable them to draw’: Plomp v The Queen (1963) 110 CLR 234 at 252; see also Thomas v The Queen (1960) 102 CLR 584 at 605-505. However, ‘an inference to be reasonable must rest upon something more than mere conjecture. The bare possibility of innocence should not prevent a jury from finding the prisoner guilty, if the inference of guilt is the only inference open to reasonable men upon a consideration of all the facts in evidence.’ (Peacock v The King (1911) 13 CLR at 661). These principles are well settled in Australia.”
See also Knight v The Queen (1992) 175 CLR 495 at 502-503; 509-510.
A direction in those terms was clearly given by the trial Judge to the jury. It is not inconsistent with such a direction to tell the jury that if, after considering all the circumstances, there remains in their mind a reasonable possibility that there existed a state of facts consistent with innocence, they could not be satisfied that an inference of guilt was the only rational inference that could be drawn, and that they would have to return a verdict of not guilty.

In the passages under challenge, we consider that the trial Judge was doing no more than that. There is no suggestion in any of the passages concerned that the appellant bore any onus of disproving possession. Indeed, the Judge was at pains to point out on a number of occasions that the appellant did not bear such an onus. The use of the word “accept”, on the several occasions that the Judge used it, was perhaps unfortunate. However, in the circumstances, it seems reasonably clear that what was intended was no more than that if the jury considered that there was a reasonable possibility that a state of facts existed which was consistent with innocence, they must acquit. In the several contexts in which the word was used by the trial Judge, we believe that that is how the jury would have interpreted what the Judge said. In other passages, when making a similar point, the Judge did not use the word “accept”.
As to whether the jury was left a choice to prefer the appellant’s version over another version of the facts, we do not consider that there was a misdirection.
The direction that was successfully challenged in Murray v The Queen (2002) 76 ALJR 899; 189 ALR 40 was as follows:
“Turning to the charge of murder, the Crown has to prove that the accused intended to kill or to do grievous bodily harm. The question is whether he had that intent at the time of the act which caused Celap’s death. ……….
What was his intent? Was it just to frighten Celap and drive him out of the house rather than to kill him or to cause him grievous bodily harm? If you find that his intent was just to frighten him and drive him out of the house, then you should find him not guilty of murder. ……….
If you accept the accused’s version of what happened that night, in whole or in part, you are going to have to evaluate his conduct and decide whether it was conduct such as to amount to criminal negligence. ………
One factor which you may consider in deciding upon whether you accept the accused’s evidence is how much, if any, did the accused really know about the faults in the gun?”
However, as was observed by all the Judges in the passages to which we have previously referred, the jury was left in that case with a choice whether to prefer one version of the events over another. The jury was left with a comparison which they had to make. As Gaudron J said, at [23]:
“(A)s the issue for the jury was not whether it should accept the appellant’s version but whether the prosecution had negatived it as a reasonable possibility, that direction mis-stated the issue for determination in a way that relieved the prosecution of proving its case beyond reasonable doubt.”
As we have said, the trial Judge in this case used the word “accept” on three occasions, but not in the sense of accepting one version of events over another. In each passage criticised by the appellant the Judge was inviting the jury to consider not whether they accepted the appellant’s version of the facts, as opposed to the prosecution’s version of the facts, but whether they accepted a version of the facts to be a reasonable possibility on the evidence. The direction effectively meant no more than that if they considered that version of the facts to be a reasonable possibility open on the evidence, they were to acquit. That does not amount to an invitation to decide which of two competing versions they will accept. It does not amount to a misdirection.
The answer to the jury’s first question was unexceptional, and repeated the classical direction in relation to circumstantial evidence. The second question, as formulated by the juror concerned, indicated that the juror was under no misapprehension about his or her function. That is demonstrated by the use of the word “consider” where it was used, rather than the word “accept”. The answer to that question could have been more simply expressed. It merely required an answer: “In those circumstances you would be obliged to find the accused not guilty because you consider hypothesis H2 to be a reasonable possibility”, or words to that effect. The answer did not amount to a misdirection.
We do not consider that this ground of appeal has been made out.
Lies
We agree that the directions as to lies were deficient for the reasons expressed by Prior J.
Fourth element of the offence
We also agree that there was a misdirection with respect to the fourth element of the charge, but in the circumstances that was of no consequence and of itself, could not affect the result.
Conclusion
We agree that the appeal must be allowed, the conviction set aside and a retrial ordered.
JUDGMENT CITATIONS
LISTED IN ORDER OF APPEARANCE IN JUDGMENT
1.Goldsmith v Sandilands (2002) 76 ALJR 1024; 190 ALR 370 at [31]; Palmer v The Queen (1998) 193 CLR 1 at [55]
2.     cp Wilson v The Queen (1970) 123 CLR 334 at 340
3.     Wilson v The Queen (1970) 123 CLR 334 at 337
4.     cp Palmer v The Queen (1998) 193 CLR 1 at [55]
5.     O’Leary v The King (1946) 73 CLR 566 at 577
6.     R v Nieterink (1999) 76 SASR 56 at [41]
7. (1999) 76 SASR 56 at [45 – 46]
8.     R v Dolan (1992) 58 SASR 501 at 503 and 518
9.     Glennon v The Queen (1993) 179 CLR 1
10. (2002) 76 ALJR 899; 189 ALR 40
11.    Gummow and Hayne JJ in Murray at [57]
12.    Callinan J adopting McPherson JA in Murray at [132]
13.    Peacock v The King [1911] 13 CLR 619 at 634
14. (1993) 178 CLR 193

[2003] SASC 185

17 June 2003