JUDGES:	MAXWELL P, BUCHANAN and WEINBERG JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING (IAN FERGUSON):	1 and 2 September 2008; 18 May 2009
DATE OF HEARING (GLENN SADLER AND STEPHEN COX):	1 and 2 September 2008
DATE OF JUDGMENT:	8 September 2009
MEDIUM NEUTRAL CITATION:	[2009] VSCA 198
JUDGMENT APPEALED FROM:	R v Cox and Sadler [2006] VSC 443 (Kaye J) R v Ferguson [2006] VSC 163 (Kaye J) DPP v Ferguson [2006] VSC 484 (Kaye J)

---

CRIMINAL LAW – Appeal – Conviction – Conspiracy to traffick heroin in not less than a commercial quantity – Whether evidence could be relied on to show consciousness of guilt – Adequacy of directions on conspiracy – Adequacy of directions on intention to traffick – Whether Browne v Dunn direction necessary – Whether separate trials necessary – Lengthy jury deliberation – Whether judge should have discharged jury – Whether verdicts unsafe and unsatisfactory – Whether material non-disclosure by Crown – Applications refused.

EVIDENCE – Expert – Opinion evidence – Financial betterment – Analysis of unexplained cash transactions and growth in assets – Whether admissible as expert evidence – Whether prejudicial effect outweighed probative value – R v Strawhorn [2008] VSCA 101 distinguished.

EVIDENCE – Corroboration – Whether evidence must tend to prove guilt of accused in order to be corroborative – Whether judge erred in directions as to which evidence could be treated as corroborative.

CRIMINAL LAW – Appeal – Sentence – Whether judge impermissibly brought to bear own assessment of harmfulness of heroin – Application refused.

CONFISCATION – Appeal – Pecuniary penalty order – Whether judge erred in calculating value of benefits derived in relation to offending – Confiscation Act 1997 (Vic) s 67(1)(c) – Appeal dismissed.

---

APPEARANCES:	Counsel	Solicitors
For the Crown	Mr J D McArdle QC with Dr S B McNicol	Solicitor for Public Prosecutions
For the Applicant Ian Ferguson	Mr D A Dann	C Marshall & Associates
For the Applicant Glenn Sadler	Mr L C Carter	Victoria Legal Aid
For the Applicant Stephen Cox	Mr B M Young with Mr C B Boyce	Tony Hargreaves & Partners Lawyers

---

TABLE OF CONTENTS

APPLICATIONS FOR LEAVE TO APPEAL AGAINST CONVICTIONS

I betterment evidence from forensic accountant

II Corroboration grounds

III Admissibility of KENNETH Lai’s EVIDENCE

IV refusal to discharge the jury (cox)

V THE Browne v Dunn DIREcTION (FERGUSON)

VI Ferguson’s Discrepancy Complaint

VII Admissibility of statements by Cox and Sadler

VIII Revelation of the Ferguson trial

IX Separate trials

X Consciousness of guilt

XI DIRECTIONS

XII DUTY OF DISCLOSURE (FERGUSON)

XIII AGGREGATE OF ERRORS

IV UNSAFE AND UNSATISFACTORY

APPLICATION FOR LEAVE TO APPEAL AGAINST SENTENCE (FERGUSON)

APPEAL AGAINST PECUNIARY PENALTY ORDER (FERGUSON)

Maxwell P
buchanan ja
weinberg ja:

On 4 January 2006, a Supreme Court jury found Ian Ferguson guilty of one count of conspiracy to traffick in a drug of dependence in a commercial quantity, and one count of money laundering. The same jury found his wife, Joanne Ferguson, not guilty of one count of money laundering.

On 28 April 2006, Ferguson was sentenced to 12 years’ imprisonment on count 1 and five years’ imprisonment on count 2. It was ordered that the sentence on count 2 be wholly concurrent with the sentence on count 1. A non-parole period of eight years was fixed. Ferguson seeks leave to appeal against conviction, sentence and a pecuniary penalty order (‘PPO’) made against him under the Confiscation Act 1997 (Vic) (‘Confiscation Act’).

On the conspiracy count, the presentment alleged that

between 1 April 1999 and 6 December 2002 [Ian Ferguson] agreed together with Stephen Cox and Glenn Sadler and others to pursue a course of conduct which would involve the commission of an offence by them namely trafficking in a drug of dependence namely heroin in a quantity that was not less than the commercial quantity applicable to that drug of dependence.

Stephen Alan Cox and Glenn Sadler were separately charged as participants in that conspiracy. They were tried jointly, but separately from Ferguson. Each was also convicted of the conspiracy count. On 24 November 2006, Cox was sentenced to seven years’ imprisonment, with a four year non-parole period; and Sadler was sentenced to 10 years’ imprisonment, with a six year non-parole period. They seek leave to appeal against conviction only.

In his application for leave to appeal against conviction, Ferguson relied on 12 proposed grounds of appeal;[1] Cox on 22 grounds of appeal;[2] and Sadler on 20 grounds.[3] As many of the grounds are common to all three applicants, all of the applications were heard together. Ferguson relied on three proposed grounds of appeal in relation to his application for leave to appeal against his sentence,[4] and two grounds in relation to the PPO.
[1]Of 17 grounds initially proposed, grounds 8, 9, 10, 13, 14 and 16 were subsequently abandoned and ground 7A added.
[2]Of 23 grounds initially proposed, ground 9 was subsequently abandoned.
[3]Of 27 grounds initially proposed, grounds 8, 14, 22, 24, 25, 26 and 27 were subsequently abandoned.
[4]Of four grounds initially proposed, ground 4 was subsequently abandoned.

The Crown case
(What follows is a summary of the Crown case as presented at the respective trials.)

In January 1997, Ferguson commenced duties as a senior constable in the Drug Squad of Victoria Police. At that time, the Drug Squad comprised three units. Ferguson worked in Unit 1. Cox and Sadler worked in Unit 3.

In March 1999, Cox and Sadler transferred from Unit 3 to Unit 1. Cox became the Sergeant-in-Charge. Ferguson remained at the Drug Squad until 5 November 2000, when he was seconded to the National Crime Authority. He returned to Victoria Police in February 2001, and joined the Organised Crime Squad.

The Crown case was that the three men conspired to use their positions in the Drug Squad to recruit traffickers as informers, before offering the informers heroin to on-sell to others for their mutual benefit. The Crown alleged that the men conducted their criminal activities under the guise of a legitimate investigation.

Kenneth Lai was one of the Crown witnesses. He gave evidence that Cox and Sadler had invited him to sell drugs on their behalf. According to Lai, Cox and Sadler told him that they were able to supply him at a lower price if he was willing to traffick on their behalf. They proposed that, in return, he would give them about 30 to 40 per cent of the profit that he made. They also told him that, if he helped them arrest more drug dealers, they would give him a portion of the drugs seized in any such bust. Lai assisted them in arresting Duy Le,[5] who was the key prosecution witness.
[5]See below.

Le’s history was as follows. In October 1998, Le was charged with aggravated burglary. In January 1999, he was arrested for trafficking heroin. He pleaded guilty and was sentenced to a wholly suspended sentence. He was subsequently set up by Lai, and in April 1999, while still on bail for the aggravated burglary charge and subject to the suspended sentence, he was arrested by the Drug Squad for trafficking heroin. Cox and Sadler were involved in his arrest. Sadler and Ferguson interviewed him in relation to the drug matters. Prior to applying for bail for the trafficking offences, Le was visited in custody by Sadler and his superior, Detective Robert Hill. An arrangement was reached between them whereby Le would give the Drug Squad information about drug dealers. The police did not oppose his bail application. Le was registered as a police informer.

On 2 August 1999, Le assisted the conspirators in a drug operation which took place in the vicinity of Kmart in Burwood.[6] He had arranged to buy seven ounces of heroin from two others, Eddie Cheung and Enrique Agbayani. The bust was successful and Cheung and Agbayani were arrested and charged. The following day, Cox provided Le with one ounce of heroin.
[6]See [123]–[124] below.

Subsequently, Le would purchase heroin for cash from one or more of Cox, Sadler and Ferguson. These transactions usually took place in the vicinity of the St Kilda Road Police Complex. On some occasions, Le’s girlfriend, Loan Tran, was with him and observed the transactions. Tran also gave evidence on behalf of the Crown.

On 25 May 2000, Le failed to appear in the County Court on his trial in relation to the April 1999 trafficking charges laid by the Drug Squad. In early June, he also failed to appear on the aggravated burglary charge from October 1998. Warrants were issued for his arrest.

Sadler subsequently told Le that they would refer to him as ‘Fred’ in future. Le also changed his name by deed poll to ‘Van Thi Nguyen’, on Ferguson’s suggestion that he choose a common Vietnamese name. He continued his association with Cox, Sadler and Ferguson. In addition to heroin transactions, he was also obtaining information from Sadler and Ferguson about police efforts to arrest him.

In November 2000, Le purchased a BMW from Juan Frangoudes. He then sold it to Ferguson, who paid in cash and drugs.

In April 2002, Le’s name was broadcast on Crime Stoppers. Tran informed him of this. Le rang Sadler for advice.

In November 2002, the Ethical Standards Division of Victoria Police questioned Tran in relation to the BMW which Le had sold to Ferguson. She rang Le, who then tried to contact Sadler and Ferguson for advice. (Le did not have a number for Cox.) Le could not get in touch with either of them, and so he sent Sadler an SMS saying ‘Right said Fred’. Sadler eventually contacted Le and told him to stay in Sydney. The following Monday, Cox – who had by then left the police force – phoned Le and asked what was going on.

Le was arrested in New South Wales on 6 December 2002. He was questioned by the CEJA Task Force.[7] He was induced to cooperate with the Task Force and, after extensive debriefings,[8] made statements implicating Cox, Sadler and Ferguson.
[7]The CEJA Task Force was established to investigate allegations of corruption and improper conduct by the Drug Squad.
[8]See [349] below.

APPLICATIONS FOR LEAVE TO APPEAL AGAINST CONVICTIONS
I betterment evidence from forensic accountant
Admissibility

In proof of Ferguson, Cox and Sadler having benefited from trafficking through Le, the Crown presented an analysis of their financial records and bank accounts. A forensic accountant, Gerard Curtin, gave expert opinion evidence that the assets of both the Fergusons and the Sadlers had, during the relevant period, increased by an amount significantly in excess of that which could be attributed to their known sources of income. (The assets of the Coxes had also increased substantially, but it was accepted by the Crown that the increase was explained by the large payment which Cox received on his retirement from Victoria Police in early 2000.) Curtin also gave opinion evidence as to amounts of cash deposits and payments which could not be explained by any identified source of income.

Curtin’s opinion evidence was an important part of the Crown’s circumstantial case against each applicant. The trial judge admitted the evidence over defence objections. Each of the applicants now contends that the evidence should not have been admitted, first, because it was not admissible as opinion evidence; and secondly, because it should, in any case, have been excluded in the exercise of the Christie[9] discretion, on the ground that its prejudicial effect outweighed its probative value.
[9]R v Christie [1914] AC 545.

For reasons which follow, we reject both contentions. It is necessary first to describe the nature of the evidence and the pre-trial challenges to it, which were the subject of two detailed rulings by the trial judge.

The nature of the evidence
(The following description of Curtin’s evidence is adapted from the judge’s second ruling and from Curtin’s reports.[10] The expert reports had, by that stage, been revised in the light of his Honour’s first ruling.[11])

[10]R v Coxand Ors(Ruling No 2) [2005] VSC 224 (‘Ruling No 2’).

[11]R v Coxand Ors(Ruling No 1) [2005] VSC 157 (‘Ruling No 1’).

Curtin’s opinion was prepared from financial records obtained upon the execution by police of search warrants and on subpoena. Records were obtained from each of the family units, and from financial and other institutions.

In each case, the applicant and his wife held their finances and assets jointly. Accordingly, Curtin treated each married couple as a single financial unit. His opinion evidence was contained in three reports - one relating to his examination of the financial position of Ferguson and his wife, Joanne; a second relating to Cox and his wife, Alexia; and a third relating to Sadler and his wife, Caroline.

Each report sets out the results of Curtin’s examination of cash deposits, cash payments and cash withdrawals, as reflected in the accounting documents for the family unit. This analysis was conducted for the specific purpose of determining whether cash deposits or cash payments exceeded available cash withdrawals. It involved offsetting cash payments and deposits against cash withdrawals. Curtin also analysed the household expenses of each family unit.

In each case, Curtin concluded that, for the period 1 January 1999 to 30 June 2002, there were cash deposits and cash payments which could not be accounted for, either from a source of income or from an antecedent cash withdrawal from an account of the family unit. They were as follows:[12]
[12]We note that the following figures, as presented in Mr Curtin’s reports, do not match exactly the figures quoted in the trial judge’s rulings. We consider the differences immaterial for the purposes of the three applications.

(a) Ian and Joanne Ferguson:
cash deposits   $478,372
cash payments   $237,505
TOTAL:   $715,877
(b) Glenn and Caroline Sadler:
cash deposits   $ 71, 852
cash payments   $ 92,988
TOTAL:   $ 164, 840
(c)Stephen and Alexia Cox:
cash deposits   $ 9,630
cash payments   $ 20,632
TOTAL:   $30,262

Curtin also prepared an estimate of financial position for the financial years ending 30 June 1999, 30 June 2000, 30 June 2001 and 30 June 2002 for each of the applicants. In relation to the Fergusons, Curtin identified an unexplained increase of approximately $697,000 in net assets; in relation to the Sadlers, it was approximately $190,000. The evidence in relation to asset betterment was not challenged. In relation to Ferguson and Sadler, the Crown invited the respective juries to infer ‘that there was such an increase in the assets … and/or that there was such an amount of cash transactions conducted by them during that period … that they were derived from the conspiracy alleged by the Crown’. In relation to Cox, the same inference was urged but in relation to the cash transactions only.

It is convenient at this point to dispose of a ground of appeal advanced by each of Cox and Sadler – that the financial betterment evidence in relation to the two other alleged conspirators was not admissible at his trial.[13] If the betterment evidence was otherwise admissible, the whole of that evidence was admissible against each accused to prove the existence of the alleged conspiracy.[14]
[13]Cox ground 4; Sadler ground 3.
[14]See [49] – [58] below.

Curtin’s methodology

In his reports, Curtin set out his methodology, including the assumptions made and criteria adopted. He also gave evidence before the judge as to the basis upon which he formulated the assumptions and criteria.

His first task was to identify monies coming into and going out of the consolidated accounts of the relevant family unit on a monthly basis. In doing so he adopted a cash flow basis of accounting, which he described as ‘a fundamental accounting technique’. He adopted a process of identifying, recording, classifying and summarising each transaction. This information was presented in Annexure 1 to each report. No objection was taken by the applicants to this part of Curtin’s opinion.[15]
[15]Ruling No 2 [2005] VSC 224, [24].

As stated above, the purpose of this part of Curtin’s report was ultimately to identify payments and deposits without an identified source. This first required him to eliminate those cash payments and deposits for which he could identify a source. The next step involved offsetting cash payments and cash deposits against cash withdrawals.

In his description of the methodology, Curtin states:

Following the consolidation of all accounts an examination of all transactions recorded was conducted on a line by line basis to identify transactions between accounts that were specifically related. Eg a mortgage payment by direct transfer from a savings account to a mortgage account. These transactions can be eliminated as they provide no additional cash flow …

Due to the nature of cash transactions and the limitations previously expressed all cash deposits and cash payments are unsourced.[16] All cash withdrawals are untraced. This could result in an overstatement of inflows and outflows as an unsourced cash deposit into an account or an unsourced cash payment could be directly related to a prior untraced cash withdrawal from another account …

A realistic approach to the cash flows estimates should recognise that an unsourced cash deposit into an account or an unsourced cash payment could be directly related to a prior untraced cash withdrawal from an account.

In order to minimise the limitations I adopted a method that would assist in eliminating transactions that could be “related” where specific information was not available. The method adopted is applied consistently throughout the analysis to ensure a uniform result.

[16]Note that in Ruling No 2 [2005] VSC 224, the trial judge ruled that Mr Curtin’s opinion was admissible with the rider that Mr Curtin could not ‘make unqualified use of the term "unsourced" in describing cash deposits and cash payments for which he [had] not been able to identify any source, either on the information available to him, or by application by him of the criteria and assumptions he [had] developed’.

Curtin relied on a number of assumptions and criteria which he developed. These assumptions and criteria were specified in his reports, and it is these which were the primary basis of the applicants’ attack on his evidence, both before the trial judge and in this Court.

Assumptions and criteria

Curtin adopted a two-stage process. The first stage consisted of an examination of each cash deposit or cash payment for which no source had been identified (for ease of reference, we will refer to these as ‘unsourced’ deposits or payments) against each prior untraced cash withdrawal, taking into account the following criteria:

·whether the unsourced cash deposit and/or cash payment was less than or equal to the untraced cash withdrawal;
·the amount of the unsourced cash deposit/payment;
·the proximity of the unsourced cash deposit/payment to the prior untraced cash withdrawal (the period was generally three to four days, however this was flexible);
·the proximity of the unsourced cash deposit/payment with other unsourced cash deposits/payments;
·the consistency of the prior untraced cash withdrawal with other untraced cash withdrawals;
·the source of the untraced cash withdrawals; and

·the denominations of the untraced cash withdrawal and the unsourced cash deposit/payment.

Using those criteria, Curtin was able to relate otherwise unsourced cash deposits and cash payments to otherwise untraced previous cash withdrawals. He offset those amounts and indicated the transactions which were offset in Annexure 1 by the use of colour coding.

Having undertaken that first stage, Curtin considered the remaining transactions which consisted of unsourced cash deposits and unsourced cash payments in excess of available prior untraced cash withdrawals. In respect of those transactions, he undertook a further analysis to determine whether there was any further information which might permit the offset, or reduction, of the unsourced cash deposits/payments. In doing so, he developed and used the following criteria:

·the amount of the unsourced cash deposit/payment;
·the consistency and proximity of the unsourced cash deposit/payment with other unsourced cash deposits/payments;
·the amount of the prior untraced cash withdrawal;
·the consistency of the prior untraced cash withdrawal with other cash withdrawals;
·other untraced cash withdrawals within the three to four day period (eg whether the aggregation of the withdrawals would offset the unsourced deposit/payment); and
·other transactions detected/not detected around this time considering the consistency of the transaction along with the overall context of the family unit’s transactions (eg household transport).

Where Curtin was able to obtain further information, the previous untraced cash withdrawal was allocated to offset or reduce the otherwise unsourced cash deposit or unsourced cash payment. Again the matching of the two transactions was appropriately colour coded in Annexure 1.

At the conclusion of that process, all cash deposits and cash payments which were not offset by Curtin were consolidated in chronological order on a monthly basis.

The first ruling

The trial judge ruled the first drafts of Curtin’s reports inadmissible.[17] This ruling followed extensive cross-examination of Curtin by counsel for Cox and counsel for Sadler over four days, and detailed submissions on their behalf. His Honour permitted a Basha[18] inquiry to be conducted on behalf of Cox and Sadler, as Curtin’s reports with respect to those two defendants had not been complete at the time of their committal proceedings.
[17]Ruling No 1 [2005] VSC 157.
[18]R v Basha (1989) 39 A Crim R 337. Legislation now provides for this type of inquiry: Crimes (Criminal Trials) Act 1999 (Vic) s 11.

The judge concluded that the draft statements were inadmissible on two grounds. The first was that Curtin had not made explicit the assumptions and criteria on the basis of which he had made judgments, and expressed opinions, about which cash payments and deposits were, and which were not, unsourced. His Honour said:

Unless Mr Curtin does specify and identify each of the criteria and assumptions relied on by him in respect of each cash payment and deposit, it would not be possible for the jury to assess, for itself, whether it should accept or reject the conclusion by Mr Curtin that a particular cash payment or deposit is unsourced, in the sense that it does not derive from a withdrawal by an accused person from one of his bank accounts. In its present form, the evidence of Mr Curtin, as to unsourced cash payments and deposits, simply contains conclusions but contains no information on which a jury could properly assess those conclusions for itself. Thus in its present form the evidence of Mr Curtin would usurp the role of the jury, and is thus inadmissible.[19]

[19]Ibid [18].

The second issue was whether, in any event, Curtin was entitled to give evidence – as an expert – as to the validity of the assumptions and criteria relied on by him in reaching those conclusions. His Honour said:

In order to be entitled to give that evidence, it must be established that the formulation of, and reliance on, such assumptions is a proper matter for expert evidence in the manner which I have discussed above. In other words, is the validity of the assumptions relied on by Mr Curtin a question upon which a jury, without the assistance of Mr Curtin, would be unlikely to prove capable of forming a correct judgment? Allied to this is another question, namely, whether in any event Mr Curtin, by reason of his background, studies and experience, is qualified to give “expert evidence” as to the validity and suitability of the criteria and assumptions upon which he has relied.[20]

[20]Ibid [21].

As his Honour noted, Curtin had been cross-examined about whether his methodology for determining whether cash payments could be ‘matched’ with prior cash withdrawals was based on any field of specialised knowledge or learning, in respect of which he himself was an expert. His Honour said:

The cross-examination revealed that Mr Curtin’s methodology, at least in respect of some cash payments and deposits, was based significantly on an assessment by him as to the likely spending behaviour of each of the accused and their wives. In particular, Mr Curtin’s methodology required him to assess whether a particular cash withdrawal made by an accused was likely to have been expended before that accused incurred a particular cash payment. The cross-examination further revealed that that process involved Mr Curtin making assumptions as to a “normal” person’s spending habits.^{- #[21]}

His Honour concluded that the evidence which Curtin proposed to give involved:
a significant component of judgment by him where he is required to determine whether a particular cash payment or deposit is matched by a previous cash withdrawal by the same accused. To a material extent those judgments by Mr Curtin involve assumptions made by him as to the spending behaviour of “normal” people. Mr Curtin has not been able to identify any particular specific training, or field of learning, on which those assumptions were based.[22]

[21]Ibid [22].

[22]Ibid [28].

In his Honour’s view, the assessment of whether – and when – an ‘ordinary’ person was likely to have spent funds previously withdrawn in cash was ‘essentially an assessment which a jury can make without the aid of an expert.’[23] His Honour pointed out that the essential role of a jury was to bring into the court’s adjudicative processes the qualities of ‘common sense, proportion and reasonableness of the normal person’, and that it was:

precisely those qualities which are called upon by Mr Curtin in making assessments in respect of some of the cash payments and deposits. In that respect the views of Mr Curtin are no more valid than the views of anyone else in our society including that of a juror. There is nothing in the evidence before me that suggests that those views are derived from a specialised area of learning or experience of Mr Curtin. Nor has it been shown to me that, where he has been required to make assumptions as to the ordinary spending behaviour of individuals, there is a specialised field of learning upon which an appropriately qualified expert might draw.[24]

For that reason, his Honour concluded, it would be inadmissible for Curtin:
to give evidence based on assumptions and assessments made by him relating to the spending conduct of “normal” individuals. Those assumptions have not been shown to me to be assumptions which are within the province of some specialised field of learning, experience or practice. Nor has it been proven to me that, in any event, Mr Curtin has any sufficient expertise to qualify him to give evidence as to the ordinary spending conduct of “normal” individuals.[25]
[23]Ibid [30].
[24]Ibid.
[25]Ibid [32].

The second ruling

Following the first ruling, Curtin revised his reports. The revised reports made explicit the assumptions and criteria which he had employed to reach his conclusions.[26] Giving evidence on a voir dire, Curtin gave a much more detailed account of his methodology and, in particular, of the basis upon which he had adopted the relevant assumptions and criteria. As the judge noted in his second ruling, Curtin referred specifically to an accounting standard published by the Institute of Chartered Accountants, entitled ‘Statement of Forensic Accounting Standards – APS 11’. Curtin referred to clause 23 of that Standard, which provides as follows:

During the course of providing forensic accounting services, members may be instructed, or may seek, to utilise estimates or make assumptions concerning past or future events, facts or amounts, in circumstances where more data is not available. In such circumstances, members should ensure that the use of such estimates or assumptions is:
(a) reasonable in the circumstances; and
(b) suitably qualified and disclosed.

[26]See [32] – [35] above.

(The further course of Curtin’s pre-trial evidence was described in the second ruling, as follows.) Curtin stated that that accounting standard, and in particular the reference to using the concept of ‘reasonableness’ in the development of assumptions, was no more than a codification of what had been the practice in accounting for a long time. Applying that Standard, and using his experience in preparing cash-flow analyses, he had developed the assumptions and criteria set out earlier. He himself had not, in the past, developed the particular assumptions and criteria he had relied on in this case, but the process of developing appropriate assumptions and criteria - based on the accounting concept of reasonableness - was something he had undertaken on a number of occasions, and was common to accountants in general.

Curtin answered the following question in re-examination:

COUNSEL:And the question I was trying to get to was this: that from your experience, training and background are you aware of other accountants using the same process as part of an accounting process?
WITNESS:In relation to the exact criteria, I am not sure; a general principle that I am applying is simply approaching an issue of an unknown quantity from the perspective of reasonableness. It happens every day in accounting in terms of trying to determine what is a reasonable approach to a specific issue that arises. It happens with respect to asset valuations. It happens with respect to determining liabilities. Assumptions have to be made and in this particular instance the issue that I was confronted with, and it is an issue that happens in nearly every cash flow that I have done, that the unknown is the cash withdrawals and the cash deposits. In a lot of the instances I have been involved with, cash deposits are known so it is the cash withdrawals and the application of those funds that are the unknown, and my process has always been to allow cash withdrawals to be offset against cash payments where it accounts for that transaction. I know that this process is adopted throughout [by] the accountants at the Major Fraud Group. As to other accountants using this, I’m not sure, but it is a general accepted practice to make assumptions in order to accommodate issues that are arising, as long as those assumptions are realistic and reasonable.

Similarly, in cross-examination, in answer to questions about the assumptions which he made, Curtin stated:

COUNSEL:What you have done in this analysis in order to plug the gaps is make a number of assumptions?

WITNESS: Yes.
COUNSEL:And those assumptions are still based on your perception about how a family unit save and spend their cash?

WITNESS: No.
COUNSEL: No?
WITNESS:The assumptions are based on accounting and my experience in preparing cash flows over the years.
COUNSEL:You say there is an objective standard that you apply to what is done with cash withdrawals?
WITNESS:What I have done is attempt to categorise a particular transaction, and that is a cash withdrawal being related to a cash deposit.
COUNSEL:In doing so you apply your opinion as to what a family unit would do with a cash withdrawal; for example, how long they would hold on to it before spending it?
WITNESS:That is based on my experience as to looking at transactions within accounts and the relationship between a withdrawal and a deposit within accounts; so it is not an assumption on what people do, it is based on what my experience is and what I believe is realistic and reasonable.

…
COUNSEL:Apart from accounting standard 11 which speaks of “reasonable in the circumstances”, there is no further definition or test to be used in the concept of reasonableness, is there?
WITNESS:I think it is just a general accepted concept of what reasonable is. It is applied throughout accounting, a reasonable approach to the evaluation of assets, a reasonable approach to anything; it is simply an approach that is based on the general meaning of what reasonable is.

Again, later in cross-examination he described his use of the concept of ‘reasonableness’ and the development of the assumptions and criteria on which he relied, as follows:

It is essentially based on the way I prepare cash flow analyses. This is not exclusive to this matter. For every cash flow analysis I have done, there are situations where there have been cash withdrawals, cash deposits and cash payments into various accounts and I use this process regularly. So it is simply based on my experience in the examination of accounts. … [I]t is not exclusive to this matter. It is something I have done. I have applied in many other instances where I have done cash flow analysis.

His Honour ruled that it was admissible for Curtin to give evidence of his opinions as to which of the cash payments and cash deposits were, and which were not, capable of being matched with a previous cash withdrawal. It was important, his Honour considered, that the tables recording all of the transactions within the relevant period were such that

a jury would, without guidance from the [expert], have considerable difficulty reaching any meaningful or appropriate conclusion relating to the cash payments and cash deposits which are identified in the accounts.[27]

[27]Ruling No 2 [2005] VSC 224, [27].

His Honour also considered it significant that, both numerically and in terms of the monetary amounts involved, only a minority of the transactions had been the subject of a ‘judgment call’ of the kind described by Curtin. His Honour said:

Certainly in monetary terms, the significant majority of the cash deposits and cash payments set out in Annexure 1 in each case do not have any possible relationship to a corresponding cash withdrawal. Yet if Mr Curtin were precluded from giving evidence identifying those transactions, the jury would be deprived of valuable assistance without which they might not be able to form the appropriate conclusion in relation to the “uncontroversial” transactions.[28]

Conversely, it was necessary as a matter of fairness to the accused that Curtin be able to identify transactions which he considered should be offset, and to explain the basis on which they were offset (and hence ‘removed them from the category of potentially unsourced cash deposits or cash payments.’[29]).

[28]Ibid [28].

[29]Ibid [29].

The most important conclusion, however, in the light of the first ruling, was as follows:

The evidence now before me on the voir dire does, I consider, establish that the development and application of the criteria and assumptions by which to assess whether a cash payment or deposit is to be off-set against a cash withdrawal is the product of the expertise and experience of Mr Curtin as a certified practising accountant. On the first voir dire, Mr Curtin did not satisfy me that the exercise which he had then performed was derived from or related to his expertise as an accountant. However the evidence now before me, and to which I have referred earlier in these reasons, does satisfy me that, in seeking to “match” cash deposits and payments with cash withdrawals, Mr Curtin has brought to bear the expertise which he has gained through his training and qualification as an accountant. In other words in conducting cash flow analyses Mr Curtin, and indeed other accountants, are required to develop and apply criteria, based on the accounting concept of reasonableness. While in each case different criteria and assumptions may be developed, nevertheless the accountant calls upon his or her experience and expertise in developing and applying those criteria, informed as he or she must be by the requirement of reasonableness. Accordingly, I accept that Mr Curtin was acting as an expert accountant, and using his expertise as such, in developing and applying the criteria and assumptions set out in his report.
Counsel for the accused have contended that the criteria and assumptions developed by Mr Curtin are no more than principles relating to the normal spending habits of family units. However, on analysis, it is clear that the exercise conducted by Mr Curtin was based essentially on an accountant’s methodology, and not based on any assumptions by him as to spending habits. For example, he was cross-examined as to why he would not off-set a smaller prior cash withdrawal against a larger subsequent cash deposit or cash payment in the same account. His response made it clear that as an accountant he would not off-set the two amounts without being provided with further information. Similarly, Mr Curtin stated that, in applying his criteria, he would not off-set a cash deposit against a cash withdrawal where both transactions occurred from the same bank account. As an accountant he considered he would not be at liberty to off-set the two transactions because they did not evidence a transfer of funds from one account to another. Each of those two responses, in my view, make it clear that, whatever similarity Mr Curtin’s exercise bears to an assessment of the ordinary spending habits of a family unit, nonetheless the exercise performed by Mr Curtin was based on an accountant’s methodology.
Thus, the giving of evidence by Mr Curtin as to the criteria and assumptions developed and applied by him would not usurp the role of the jury. This is because Mr Curtin would not be purporting to give evidence as to the normal spending habits of individuals. Rather, Mr Curtin’s evidence would be confined to evidence that, as a forensic accountant, by applying criteria and assumptions developed by him, he is able to off-set particular withdrawals against other payments or deposits in the accounts. …[30]
[30]Ibid [30]–[32].

The Curtin evidence was admissible

In our view, his Honour was correct to conclude that the Curtin evidence was admissible, essentially for the reasons which he gave. As appears from the two rulings, he scrutinised the proposed evidence very carefully – including by his own questioning of the expert – and assessed its admissibility by reference to the following questions:

1.Is the subject matter of the opinion evidence such that the tribunal of fact would not be able to form a correct judgment without the assistance of a suitably qualified expert?[31]
2.Is the assistance which the expert’s opinion can provide to the tribunal of fact a product of knowledge and experience which the expert possesses, but the tribunal of fact does not?[32]
3.Is the witness appropriately qualified to give expert evidence in the form of the particular opinion sought to be adduced?[33]

[31]Ruling No 1 [2005] VSC 157, [12], citing Clark v Ryan (1960) 103 CLR 486, 491 (Dixon CJ). See also R v Bonython (1984) 38 SASR 45, 46-7 (King CJ); R v BDX [2009] VSCA 28, [70]–[79] (Vincent and Weinberg JJA).

[32]Ibid [14], citing R v Silverlock [1894] 2 QB 766, 769.

[33]Ibid, citing R v Darrington & McGauley [1980] VR 353, 377 (Jenkinson J).

His Honour, in the second ruling, answered each question in the affirmative. His analysis was, with respect, unimpeachable. That these were the right questions is clear from the authorities which his Honour cited. The contrary was not suggested on the appeal. The answers to the first and third questions were not seriously challenged on the appeal. Nor could they have been. As Malcolm CJ said in Caratti v The Queen:[34]

It is well established that when a person’s books and accounts have been produced in Court, an expert witness, who has examined them, may give evidence of the result of his examination and as to the effect of their contents.[35]

Further:
Where a witness has acquired knowledge by lengthy and studious application to material which is itself admissible evidence and where to afford the jury the time and facilities to conduct similar research would be impracticable, it is legitimate to allow the witness to assist the jury by giving evidence of his opinion.[36]

[34](2000) 22 WAR 527, 575 [336].

[35]His Honour referred to Potts v Miller (1940) 64 CLR 282, 303 (Dixon J); and Re Montecatini’s Patent (1973) 47 ALJR 161, 169 (Gibbs J). See also R v Hally [1962] Qd R 214, 228 (Gibbs J).

[36]Caratti v The Queen (2000) 22 WAR 527, 576 [340], referring to Clare v Peach [1995] 2 Cr App R 333, 338 (Lord Taylor CJ); and Quick v Stoland Pty Ltd (1998) 87 FCR 371, 375 (Branson J) and 382-3 (Finkelstein J).

Although the jury might ultimately have been able to form their own conclusions as to which transactions were capable of being offset, an accepted role of an expert is to help a jury ‘to use the evidence of their own eyes’. [37] As Cussen J said in R v Parker:[38]

[T]hey are not, in one sense, speaking as experts at all, but are merely pointing out to the jury matters which the jury could determine for themselves – they are merely convenient helpers of the court.

[37]R v Parker [1912] VLR 152, 158 (Hodges J).

[38][1912] VLR 152, 160 (Cussen J).

The trial judge was clearly right when he said that the reports were likely to be of limited use to the jury unless they had assistance in their interpretation:

A perusal of Annexure 1 to each of the three reports persuades me that, to put such a document before a jury without any guidance from the evidence, would be to ask too much of a jury. Each of the documents contains a large number of transactions. Each line of the document contains a significant amount of information. Faced with such a document, a jury would, without guidance from the evidence, have considerable difficulty reaching any meaningful or appropriate conclusion relating to the cash payments and cash deposits which are identified in the accounts. In other words, on the face of the three documents it is self-evident that a jury would be unlikely to be able to form a correct or meaningful judgment on the accounts, as to the cash payments and cash deposits identified in them, without assistance from the witness who compiled the document.[39]

Moreover, by identifying those transactions which could be offset, Curtin simplified the task which the jury had to undertake.

[39]Ruling No 2 [2005] VSC 224, [27].

As to the second question, we think his Honour was clearly correct to conclude that the opinions which Curtin expressed in his reports were reflective of his expertise as a forensic accountant. This is apparent, in our view, both from the nature of the task which Curtin undertook and from the manner in which he carried it out. As described earlier, the subject matter of Curtin’s enquiry was whether, and to what extent, cash payments and deposits made by the relevant family unit could be offset against prior withdrawals of cash from the known resources of the family unit. The method he adopted was that of cash flow analysis, of which he had extensive prior experience.

In the majority of instances, the presence – or absence – of an identifiable source for a cash payment was clear. Only in a minority of cases did a judgment have to be made about whether there was an identifiable source for a particular payment. In making those judgments, Curtin brought to bear a variety of criteria and assumptions, clearly identified by him in his reports.[40] As his Honour said, both the identification of the relevant criteria for the task, and their application to particular transactions, were the product of Curtin’s expertise and experience.[41]
[40]See [32] to [35] above.
[41]Ruling No 2 [2005] VSC 224, [30].

What Curtin was doing was deciding whether an inference of connection – between a withdrawal and a subsequent payment – could properly be drawn. Expert assistance in the drawing of inferences ‘is an integral part of the common law trial processes’.[42] One of the criteria on which Curtin relied was the temporal ‘proximity’ of the relevant payment to the relevant withdrawal. It was this aspect of the analysis which, in the first ruling, was viewed as making the evidence inadmissible, since it was ‘based on assumptions and assessments made by [Curtin] relating to the spending conduct of “normal” individuals’.[43] Curtin had acknowledged under cross-examination that he had made assumptions about the likelihood of – for example – a person who withdrew an amount of $200 in cash on Monday still having that cash available for spending the following Friday.
[42]Andrew Ligertwood, Australian Evidence (4^th ed, 2004), [7.43].
[43]Ruling No 1 [2005] VSC 157, [32].

We agree with his Honour that this apparent difficulty was removed by the revised reports (which showed that temporal ‘proximity’ was only one of a number of criteria applied to the task), and by Curtin’s further evidence that the making of such assumptions was expressly authorised by the accounting standard referable to forensic accounting and that his assumptions were a product of his expertise and experience.[44] (The same approach applied, he said, to the audit function. ‘It is simply whenever an issue arises the accountant must apply an approach that is reasonable, realistic and justifiable.’)
[44]See [48] above.

Curtin had no access to the individuals who had participated in the transactions shown in the financial records. It is characteristic of forensic accounting that the expert accountant is confronted with ‘circumstances where more data is not available’ and where estimates and assumptions must therefore be made. As the accounting standard – and the law – required, all of his assumptions were disclosed in his reports.

Whether the assumptions were ‘reasonable in the circumstances’ was a matter which the jury could decide for itself. It was of course a condition of the admissibility of the evidence that the jury be able to determine for themselves the appropriateness of the assumptions adopted.[45] The fact that the jury could make judgments for themselves about the subject-matter of one of those assumptions – the likely speed of dissipation of an amount withdrawn in cash – did not render Curtin’s opinions inadmissible.[46] Moreover, an expert opinion does not lose its character as such merely because it is based on an assumption of fact concerning a matter which jurors would be capable of deciding for themselves.[47] The position might be different if the subject-matter of the opinion itself were a factual matter of that character. But that is not this case.
[45]Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705, 743–4 [85] (Heydon JA).
[46]Caratti v The Queen (2000) 22 WAR 527, 574 [333] and 577 [347].
[47]Ligertwood, above n 42, [7.58]–[7.59].

No error in the exercise of discretion

Having concluded that the evidence was admissible, his Honour addressed the defence submissions that Curtin’s evidence should be excluded in the exercise of his discretion. It was argued that:

[T]he probative value of Mr Curtin’s evidence is limited and … is significantly outweighed by the unfair prejudice which would be occasioned to each accused should Mr Curtin be permitted to give that evidence.[48]

His Honour rejected the arguments, and admitted the evidence.

[48]Ruling No 2 [2005] VSC 224, [41].

As to probative value, his Honour said:

It is clear that the exercise undertaken by Mr Curtin has its limitations, deriving from the limited amount of information available to him. Further, it is evident that the accuracy and validity of Mr Curtin’s analysis depends upon the appropriateness and validity of the criteria and assumptions utilised by him. Nonetheless, despite those limitations, the evidence does potentially have significant probative value. As I have already stated, a number of cash deposits and cash payments, characterised by Mr Curtin as “unsourced”, are unaffected by the assumptions and criteria which he has adopted. In other words, in respect of those transactions, there is no available cash withdrawal, or other source of income, which could conceivably account for those transactions. Thus in each case the report of Mr Curtin does identify a significant amount of cash transactions which, on their face, do not seem to be affected by the limitations to which Mr Curtin has adverted. Further, the limitations of information available to Mr Curtin potentially can work in both directions. It is true that the limitations on information available to Mr Curtin may mean that he is not in possession of information which might account for otherwise unsourced cash payments or cash deposits. On the other hand the same limitations mean that he may not have identified a significant amount of unsourced cash payments.
On the matters which were revealed on the voir dire, and on the basis of matters put in cross-examination, I do not accept that the probative worth of Mr Curtin’s evidence is slight or insignificant by virtue of the limitations and assumptions specified in his report. Ultimately an assessment of the weight of the evidence is a matter for the jury. However I do not conclude that the evidence can only be characterised as having slight probative worth. Further and importantly the evidence is directed to a central issue in the case. The Crown case against the accused is based on an allegation of a significant amount of trafficking in heroin over a three and a half year period. On the Crown case significant amounts of payments in cash were made to one or more of the accused Cox, Sadler and Ian Ferguson. In that context the identification by the accountant of cash payments and cash deposits, which are not accounted for by information available to him, or by cash withdrawals from the accounts of the accused, is particularly relevant.[49]

[49]Ibid [44]-[45].

We respectfully agree with his Honour’s analysis. The evidence had real and obvious probative value. Its value was enhanced, in our opinion, by the meticulous way in which Curtin had undertaken his task and by the clear and detailed form in which his assumptions, his methodology and his conclusions were set out in the reports.

As to prejudice, his Honour dealt with two arguments advanced on behalf of each accused. The first was that the effect of admitting Curtin’s evidence would be to reverse the onus of proof, by ‘in effect casting an onus on the accused to prove that the cash deposit was funded from the proceeds of the prior cash withdrawal’. His Honour rejected this argument, for the following reasons:

The effect of the accountant’s evidence is no more than that, applying his methodology and criteria, two transactions are not off-set or related. Such a proposition by the accountant does not cast any onus of proof on the accused. The adoption of those criterion means no more than that, as an accountant, Mr Curtin did not apply criteria which would permit the off-setting of the two transactions. However, essentially it is a matter for the jury whether they are satisfied beyond reasonable doubt that one transaction is not off‑set against another. The jury may or may not accept the methodology of the accountant. Indeed they may accept his methodology but not be satisfied beyond reasonable doubt that two transactions are not related. However in any event the adoption of the methodology and assumptions by the accountant is no more than that; it does not, contrary to the submissions of the accused, reverse any onus of proof in the case. [50]

With respect, this analysis was plainly correct. There was no reversal of onus. This was no different from any other case based on circumstantial evidence.

[50]Ibid [47].

The second argument was described by his Honour as ‘the main aspect of prejudice contended for’. There was, it was contended, an unacceptable risk that a jury would seize on the ‘bottom line’ figure of Curtin in each of his reports. His Honour summarised the argument as follows:

Thus the jury may take the view, particularly in a long case, that the figure derived by Mr Curtin is a figure arrived at by an experienced and expert accountant, and thus invest it with undue weight. It was submitted that this risk is particularly significant in this case because of the similarity of the criteria relied on by Mr Curtin to the type of assumptions a jury might itself make in determining whether particular transactions are related or to be off-set.[51]

[51]Ibid [48].

His Honour also rejected this contention:

There is, of course, always a risk that a jury, in any case, might be beguiled by any expert, and tend to give the views of that witness excessive weight simply because of the status of the witness as an expert. However, as in any case, I consider that such a risk can be appropriately counteracted by judicial direction, both during the trial, and in final directions, as to how the jury is to scrutinise and assess the evidence of the expert for itself.
In this case, the expert has now articulated each of the limitations to his report, and each of the assumptions and criteria adopted by him in determining whether or not particular transactions are “unsourced”. The jury will be instructed that they are to take into account all of the limitations specified by the accountant, and any other limitations revealed in evidence. Further, the jury will be instructed that it is for them to critically analyse and assess the criteria and assumptions relied upon by the expert. Further and importantly, if the evidence of Mr Curtin is to be admitted, it will be on the basis that the witness is not expressing views based on assumptions as to the spending habits of ordinary people. The evidence would be admitted on the basis that Mr Curtin, using his expertise and experience, was analysing the transactions as an accounting exercise. In other words, Mr Curtin would not be permitted to express views which might usurp the role of the jury. …[52]

[52]Ibid [49]-[50].

Once again, we are wholly in agreement with his Honour’s analysis and conclusion. The risk adverted to cannot sensibly be assessed pre-trial, since it very much depends upon the course of the trial. For example, if the defence by cross-examination – or by evidence – exposes flaws in the opinion, or in any of the assumptions on which it is based, the force of the ‘bottom line’ will inevitably be blunted. If at the end of the trial the risk remains, it can be addressed by appropriate judicial direction.

The decision in R v Strawhorn

On the appeal, counsel for each applicant relied heavily on this Court’s recent decision in R v Strawhorn (‘Strawhorn’)[53] to support an argument that the Curtin evidence was inadmissible because his conclusion that certain cash payments or deposits were without a known source, was ultimately based on ‘speculation’.
[53][2008] VSCA 101.

In Strawhorn, there were four counts of trafficking in pseudoephedrine, and one (count 5) of trafficking in a commercial quantity of pseudoephedrine. The applicant had been convicted only on count 5. Numerous grounds of appeal were argued on his behalf, of which only one is presently relevant.

As appears from the joint judgment, the prosecution had sought, as part of a general body of circumstantial evidence in relation to counts 1 to 5, to establish that the applicant was at relevant times in possession of unexplained cash.[54] Curtin also provided expert opinion in that case, in a largely similar format. His opinion was that, during the relevant period, there were seven unsourced cash payments totalling $13,099. Because of the timing of the payments and the dates of the alleged offences, the judge had directed the jury that the first three of the seven payments were capable only of corroborating the evidence on counts 1 to 4 (of which the applicant was acquitted), while the last four transactions were capable of corroborating the evidence in relation to all five counts. The applicant’s counsel submitted that Curtin’s evidence should not have been admitted. This Court agreed.
[54]Ibid [179].

The relevant part of this Court’s judgment is in these terms:

The jury clearly did not regard this evidence as significant in relation to counts 2 [scil 1] to 4. This was hardly surprising in the circumstances. The highest at which the evidence of Curtin could be put was that he was unable to ascertain the source of what were, after all, relatively small amounts of money and it is apparent that only through speculation could they be linked to the conduct alleged by the prosecution.
With regard to count 5, no adequate foundation existed for the inference that the unaccounted money in his possession after 19 April had not been received by him either much earlier or in a totally unrelated way. There is considerable force in the argument advanced on his behalf that this evidence could be seen to possess no probative value as part of the circumstantial case on count 5 or as corroborative of Paton and, accordingly, should not have been left for consideration by the jury.[55]

[55]Ibid [180]–[181].

The Court concluded, however, that there had been no miscarriage of justice. This was because the jury had acquitted the applicant on counts 1 to 4 notwithstanding Curtin’s evidence. The jury not having been influenced by the betterment evidence in relation to those counts, the Court said, ‘There is no reason to suspect that they may have placed any greater weight on the evidence applicable to count 5. It was clearly of no better quality.’[56]
[56]Ibid [181].

According to the appeal submission advanced on behalf of Cox, what the Court said in Strawhorn was to be viewed as a ‘determination’ to the effect that ‘this form of evidence [is] inadmissible … in consequence of it being devoid of probative worth.’ It was submitted, further, that Strawhorn was indistinguishable from the present

in terms of the construct and content of the evidence there in issue compared with the Cox “betterment” evidence. It is possessed of the same methodological shortcomings that render any ultimately expressed opinion less probative and any resultant drawn inference more untenable in a criminal trial.

With respect, this submission mischaracterises what was said in Strawhorn. The brief remarks in the joint judgment simply did not address the admissibility of ‘this form of evidence’. That question of principle did not arise. In contradistinction to the present case, there was no occasion for the Court of Appeal in Strawhorn to review the admissibility of the evidence as opinion evidence or, in relation to the exercise of discretion, to weigh the competing arguments as to probative value on the one hand and prejudice on the other.

The relevant ground of appeal in Strawhorn made no reference to the admissibility of Curtin’s opinion evidence as such. It contended instead that the trial judge had erred in admitting the evidence of the eight financial transactions ‘said to involve unexplained cash transactions’.[57] What was said in Strawhorn related to – and only to – whether the inference was open that the ‘relatively small amounts of money [were] linked to the conduct alleged by the prosecution’. The view of the Court was that ‘no adequate foundation existed for the inference’. Clearly, what was said there was not intended to be, and should not be taken as, a statement of general application.
[57]The relevant ground of appeal was ground 5A: Strawhorn [2008] VSCA 101, [3].

Submissions advanced on behalf of Cox

Counsel for Cox advanced a number of submissions attacking Curtin’s analysis and conclusions specifically concerning the Cox family unit. These submissions explicitly reiterated points which counsel had sought to make in cross-examination of Curtin on the voir dire and in pre-trial submissions on admissibility.

The argument on appeal was that:

The Cox financial profile also much more readily [than in Strawhorn] admits [of] reasonable plausible exculpatory hypotheses as to the alternate sources of the identified “un-sourced” funds. This likely reality could never have been negatived by the Crown, beyond a reasonable doubt.

On the voir dire, counsel had put to Curtin that he was ‘unable to say what the reservoir of funds available to the Coxes [was] as at May 1999’. Curtin replied:
The amount of funds available to the Coxes as at May 1999 is whatever was in their bank accounts and whatever access they had to their salary and wages. That is all I know. I don’t know if there was any cash anywhere else. I only know what we have been able to determine from the records.

Counsel suggested to Curtin that there were various possible sources of unrecorded cash, such as gifts, private loans in cash and gift vouchers, which might have accounted for payments and deposits which Curtin considered were without a known source. Curtin responded that he was unable to speculate on sources of cash other than those shown in the accounts held by the Coxes with various financial institutions. He said to defence counsel at one point: ‘… I can only go by what is the transactions in the account. If you know more, well, you know more.’

Curtin was aware that the Coxes had advertised certain items for sale in the Trading Post, but, except where payment had been by cheque, he had no information to indicate whether the items had been sold. He also acknowledged having made the assumption that amounts identified on debit card statements as supermarket debits were payments for groceries. He agreed that the statements did not disclose, and he was therefore unable to ascertain, whether any part of a particular debited amount represented ‘cash out’ at the cash register. He agreed that, theoretically, an amount of ‘cash out’ could have been the source of a subsequent cash outgoing, but said that he had seen no instance where a supermarket debit of this kind had been followed by an (unexplained) cash outgoing.

It was put to Curtin in cross-examination, and again argued on the appeal, that once Cox took up private detective work following his retirement from the police force in February 2000, some of the income of the business (which traded as Select Investigations Services Pty Ltd (‘Select Investigations’)) might have had ‘a cash component to it’. Curtin responded that he had assumed that the books of account (and tax returns) of Select Investigations disclosed all amounts of income received by it and, likewise, he had assumed that there had been ‘total honesty in relation to the listing of expenditures ... of the business’. With respect, these assumptions were unimpeachable.

What the pre-trial cross-examination revealed, in our view, was this. There were, of course, theoretical possibilities of the kind advanced by defence counsel but, in the absence of documentary or other evidence to substantiate them, they remained just that - possibilities. Curtin could not reasonably have been expected to make allowance for mere possibilities, nor could their omission have affected the admissibility of his reports. It was for the defence to determine how to go about substantiating one or more of those possibilities at trial, in order to raise for consideration by the jury alternative - innocent - explanations for the cash outgoings identified as being without a known source.

That is, of course, precisely what occurred. For example, the accountant for Select Investigations – called by the prosecution – was cross-examined about the ‘scope’ for some of the company’s work to have been paid for in cash and not disclosed in the accounts or the tax returns. And Alexia Cox, the applicant’s wife, was called by the defence to give explanations for outgoings said by Curtin to be without a known source. Mrs Cox said that the $5,000 deposited in March 2000 (see below) had been provided in cash, as a loan, by Cox’s father. She confirmed that she did take ‘cash out’ when using EFTPOS facilities, ‘if [she] needed some extra money or if [she] had bills to pay’. She also confirmed that sales through the Trading Post had produced ‘some measure of additional cash’. Ultimately, of course, it was for the jury to decide whether the Crown had excluded, beyond reasonable doubt, all other explanations consistent with Cox’s innocence.[58] The judge made this perfectly clear in his charge.
[58]R v O’Driscoll (2003) 57 NSWLR 416, 432 [78] (Spigelman CJ).

It was further contended on the appeal that, because both the total ‘betterment’ amount of approximately $30,000 and its constituent amounts were (relatively) small, the evidence of Curtin had ‘far less probative value’ in relation to Cox than it had in relation to, for example, the Fergusons, where the total exceeded $700,000. We reject that contention. The probative value of the evidence lay not only in the quantum – which in turn took its significance from the context – but also in the timing of the relevant transactions. The essence of betterment evidence is the identification of unexplained flows of funds and increases in wealth. As we suggested earlier, the probative value of the evidence in the present case was enhanced by the meticulous care with which the unexplained transactions were isolated. As Spigelman CJ said in Australian Securities and Investments Commissionv Rich,[59] the probative value of evidence of this kind depends critically on ‘the logical force of the process of reasoning based on the disclosed facts’.
[59](2005) 218 ALR 764, 800; [2005] NSWCA 152, [169].

The annexures to the report listed every recorded transaction of the Coxes over the entire period, and clearly identified those where an outgoing was matched with a withdrawal. The report itself identified precisely, and with supporting reasons, where Curtin had been unable to offset particular outgoings with withdrawals. Far from being ‘rubbery’, as counsel submitted on the appeal, the figures were rigorously precise.

As the table below shows, the unsourced outgoings were identified as either ‘cash deposits’ or ‘cash payments’. Importantly, the disclosed after-tax income of the Coxes was less than $40,000, except in the year ended 30 June 1999 when it was $43,197.[60] In that financial setting, unsourced cash payments exceeding $4,000 (January 2000) and unsourced cash deposits of $2,000 (February 2000) and $5,000 (March 2000) were capable of being viewed as quite significant. (Defence counsel acknowledged as much in the course of pre-trial argument, when he conceded that there were ‘about three’ outgoings which ‘just stick out’.) Likewise the fact that there was an unsourced cash payment and/or an unsourced cash deposit in 13 of the 19 months from December 1999 to June 2001.
[60]The combined taxable income for the year ended 30 June 1999 was $43,197; for the year ended 30 June 2001, $30,127; and for the year ended 30 June 2002, $25,136. For the year ended 30 June 2000 it was $141,557, but this included a superannuation payout of $140,844.

Coxes: unexplained outgoings

DATE

CP

CD

TOTAL

7/99 $350
             Year ended 30 June 2001 $13,038

12/99 $381

1/00 $4,025 $970

2/00 $2,000

3/00 $312 $5,000

7/00 $900
              Year ended 20 June 2001 $17,224

8/00 $370 $110

10/00 $10,000

11/00 $2,642

12/00 $277

2/01 $949 $300

4/01 $341

5/01 $351

6/01 $985
CP = cash payment    CD = cash deposit

The appeal submissions for Cox focused particular attention on what was said to be an unsourced cash payment of $10,000 in the month of October 2000. According to Curtin’s report, this amount related

to the payment of $10,000 for a Night Vision Camera by S Cox. The camera was provided to Select Investigations. Records of Select Investigations indicate[d] that payment was made for this item in cash by S Cox.

It was submitted that this was ‘a single, temporally very remote item [whose] very factual existence is highly conjectural and speculative’. In fact, the relevant evidence about this item was quite clear. As the Curtin report noted, the accounts of Select Investigations specifically recorded this item in the depreciation schedule, with the notation ‘paid cash per client’. At the trial, the prosecution called evidence from the then–accountant for the company, Ross Cooper, who said that he had been unable to match the stated value of $10,000 with either a cheque payment or a debit in the company’s bank account. He had then asked Cox about the item. Cox told Cooper that he had paid cash.

Under cross-examination, Cooper readily conceded that he had never seen the equipment and did not know if it in fact existed. Mrs Cox’s evidence was to similar effect, in that she denied knowing anything about the equipment or about any such expenditure. The defence evidently wished to suggest to the jury the possibility that no such equipment had ever been purchased and hence, that Cox had never made a $10,000 cash payment. Cox did not give evidence. In the face of Cooper’s sworn evidence, therefore, this necessarily remained (at best) a possibility. Moreover, as the prosecutor pointed out in his final address, the defence scenario assumed deliberate tax fraud on the part of Cox, involving blatant deception of the company’s accountant. Once again, it was for the jury to consider the plausibility of this scenario, in carrying out the task which the judge had defined for them.

Ferguson betterment evidence

Each of the applicants advanced a ground of appeal to the following effect:

The trial of the applicant miscarried in that the prosecution relied on an amount of $370,000 as part of the quantum of the unaccounted/unsourced “betterment” figure attributed to Ian Ferguson, when that amount had previously been alleged by the Crown to be referable to a separate count of theft, which had been the subject of an order for severance.[61]

[61]Ferguson ground 2; Cox ground 5; Sadler ground 4.

The essential complaint is that the Crown was simultaneously advancing two inconsistent propositions with respect to the amount of $370,000. The first proposition was that this sum was part of a total of some $700,000 of unsourced cash which, the jury were being urged to infer, represented the proceeds of the drug trafficking conspiracy. The second, and inconsistent, proposition was that this amount had been stolen by Ferguson from one Giac Nguyen on 30 August 2000. Ferguson had been committed to stand trial, and presented for trial, on a count of theft with respect to this amount. He had successfully applied to have this count severed and heard separately from the conspiracy and money–laundering accounts. The application for severance had been resisted by the Crown on the basis that funds derived from the theft may well have been used by Ferguson to purchase heroin pursuant to the conspiracy. In ordering severance, the trial judge ruled that an equally cogent possibility was that the proceeds of the theft were used for purposes of enriching Ferguson – and hence had no connection to purchases of heroin.[62]
[62]R v Cox and Ors (Ruling No 4) [2005] VSCA 255 (‘Ruling No 4’), [128]–[129].

The appeal submission for Ferguson was that

the approach of the Crown in this area created a fundamental unfairness in the applicant’s trial and highlighted the highly speculative nature of this part of the “Curtin” betterment evidence.

The argument for Cox, which counsel for Sadler adopted, was that
while the inconsistency in the Crown position obtained, the judge ought not to have allowed the Crown to rely on that part of Ferguson’s total betterment figure that was referable to, and provided the only evidential support for, count 6.

In our view, as at the date of commencement of Ferguson’s trial, there was no material inconsistency in the Crown’s position. By then, the trial judge had been told by the Crown that count 6 was not to be pursued; the Crown did not accept Giac Nguyen as an honest witness; and a nolle prosequi would be filed. His Honour ruled that the original count 6 was no more than an unproven allegation against Ferguson, in respect of which Ferguson was presumed innocent.[63] Accordingly, his Honour ruled, the Crown would be permitted to rely on the figure of $370,000 as betterment referable to the charged conspiracy.[64]
[63]R v Cox and Ors (Ruling No 8) [2005] VSC 368, [15]–[16].
[64]Ruling No 2 [2006] VSC 55, [20]–[24].

Reliance is placed by the applicants on the fact that the Crown did not, in fact, file a nolle prosequi at any time before these conspiracy trials had finished. This meant, so it was argued, that there was at least ‘formally’ a material inconsistency in alleging the full amount of Ferguson’s betterment in the conspiracy trials, without having formally abandoned count 6. We disagree. What mattered was the unequivocal declaration of the Crown’s position by the prosecutor before the Ferguson trial commenced. The judge was entitled to act on what he was told by the prosecutor, which had the effect of removing any inconsistency.

We reject this ground.

II Corroboration grounds
Ferguson – Ground 5

In the trial of Cox and Sadler, the judge ruled that evidence given by Lai, Le and Tran was such that the jury should be warned of the dangers of acting upon that evidence in the absence of corroboration.[65] The basis of that conclusion was not that these witnesses were accomplices, or were capable of being so regarded, but that their evidence was, in accordance with the principles laid down in DPP v Faure,[66] inherently suspect.
[65]R v Cox & Sadler (Ruling No 16) [2006] VSC 303 (‘Ruling No 16’).
[66]DPP v Faure [1993] 2 VR 497.

In the earlier trial of Ferguson, his Honour had ruled that no such warning was required in relation to the evidence given by Lai.[67] Ferguson complains in ground 5 of his notice of appeal of having been denied a Faure warning in relation to the witness Lai.
[67]R v Ferguson and Anor (Ruling No 15) [2005] VSC 471, [22]-[24].

In R v Cox & Sadler (Ruling No 12) (‘Ruling No 12’),[68] the judge set out his reasons for having declined to give a Faure warning in relation to Lai in the Ferguson trial, but determined that such a warning should be given in the Cox and Sadler trial. He noted in that ruling that there was no suggestion that Lai had ever had any dealings with Ferguson of the kind alleged in relation to Cox and Sadler. In fact there was no evidence that Ferguson had even been aware of the approach that Lai had allegedly made to Cox and Sadler. In his Honour’s view, in relation to Ferguson, Lai’s evidence was largely relevant as background only. In the Cox and Sadler trial, it was of paramount importance.
[68][2006] VSC 233.

In our view, the distinction that his Honour drew between the role played by Lai in the case against Ferguson, and his role in the case against Cox and Sadler, was both accurate and warranted. For the reasons that his Honour gave, it was unnecessary in the trial of Ferguson to give a Faure warning regarding Lai.

Ferguson initially complained of the directions given by the judge as to what evidence might be capable, in law, of corroborating Le and Tran (grounds 13 and 14). Those grounds were expressly abandoned, however, and nothing more need be said about them.

Cox – Grounds 12, 13, 14 and 22

Grounds 12, 13, 14 and 22 of the notice of appeal filed on behalf of Cox complain of various errors on the part of the judge in his directions to the jury regarding corroboration. Those grounds are in the following terms:

12.The learned trial judge erred in his directions to the jury concerning corroboration of the witnesses Duy Le and Loan Tran.
13.The learned trial judge erred by directing the jury that certain items of evidence were capable of corroborating the witness Duy Le and erred in permitting the jury to reason that the following pieces of evidence could amount to corroboration (see the Ruling at [2006] VSC 303R):
(a)Item A/5;
(b)Items A/6 – 8 ;
(c)Items A/9 – 11;

(d) Items A/12 – 14;
(e)Item A/16;
(f)Item A/18;
(g)Items A/22 – 26 ;
(h)Items A/27 – 28;
(i)Items A/29 – 41;

(j) Items A/43 – 49;
(k) Items A/51 – 62 ;
(l)Items A/68 – 80;
(m)Items B/12 – 16;

(n) Item 22.
14.The learned trial judge erred in his directions to the jury on the law of corroboration of witnesses who were accomplices and/or unreliable, and, in particular erred by inviting the jury to reason that while one piece of potentially corroborative evidence may not individually constitute corroboration, that piece of evidence may become corroborative “when taken in conjunction with other evidence” and that “the combined weight of a group of facts working together may be corroborative when individually each single one may not be”.

…
22.The learned trial judge erred in his directions/warnings to the jury concerning the evidence of Duy Le and Loan Tran, and, in particular the learned judge erred by inviting the jury to consider that in the event that they found these witnesses to be corroborated it would no longer be “dangerous” to rely upon their evidence in order to convict the accused.

In the trial of Ferguson, the judge initially contemplated giving the jury both a traditional accomplice warning and a Faure warning in relation to Le. Clearly, on the Crown case, it was open to the jury to conclude that Le was an accomplice. It was submitted on behalf of Ferguson, however, that it would be both prejudicial and unnecessary to give an accomplice warning in circumstances where a Faure warning was to be given as well. An accomplice warning would, it was submitted, be premised on acceptance by the jury of the existence of the very conspiracy for which the Crown contended.

The judge accepted that submission. Accordingly, his Honour gave only a Faure warning in relation to Le. He adopted the same course in relation to Tran.

Subsequently, in the Cox and Sadler trial, his Honour took precisely the same approach. For that reason, the jury were not directed to consider whether Le or Tran were, relevantly, accomplices.

Sadler – Grounds 11, 12, 13 and 20

The notice of appeal filed on behalf of Sadler also contains four grounds of appeal relating to corroboration. Grounds 11, 13 and 20 replicate grounds 12, 14 and 22 of Cox’s grounds of appeal.

Sadler’s ground 12 differs in both form and detail from Cox’s ground 13, but it covers some of the same ground. It is in the following terms:

12.The learned trial judge erred by directing the jury that certain items of evidence were capable of corroborating the witness Duy Le and erred in permitting the jury to reason that the following pieces of evidence could amount to corroboration (see Ruling at [2006] VSC 303R).
(a)The Operation Lulie arrests of 2 August 1999 and the alleged drug transaction on 3 August 1999 and in particular:
i.The Operation Lulie Report;
ii.The evidence of Robert Hill that the applicant told him at 12.45 pm that he was expecting 4 to 6 ounces of heroin to be delivered;
iii.Evidence that Stephen Cox failed to record the amount of heroin located in his daybook;
iv.The evidence of witness Cheung that one ounce of heroin was planted on him;

The latter issue was pursued in the cross-examination of Lai. The object of the questioning on this topic appeared to be to establish that there must have been a relationship of considerable trust between Lai and the police officers with whom he was speaking, in order for him to have felt safe in providing such sensitive information about major figures in the drug trafficking scene. Nothing further was made of this, however, in the cross-examination of Lai about his serious allegations against Cox and Sadler.

Counsel for Cox had Lai adopt as correct the evidence he had given at the Ferguson trial about the adverse effect on his drug dealing activities of being a suspected informer in relation to Le’s arrest. Both counsel for Cox and counsel for Sadler directly challenged Lai’s evidence about the alleged corrupt approaches, but the puttage was essentially formal. Certainly, there was no suggestion in cross-examination that the credibility of his evidence was affected by reason of the kind of information he had given to police in early 1999, either about his own dealings or about the activities of others.

Once again, therefore, we are wholly unpersuaded that the unavailability of the police documents to counsel for Ferguson had any material effect on the defence case as presented on his behalf. First, as already noted, the approach adopted by counsel for Ferguson, in order to attempt to discredit Lai, was to portray him as a small-time, low-level drug dealer. The police material would not have assisted that approach, which was evidently judged as being to Ferguson’s forensic advantage.

Secondly, there was no issue in the Ferguson trial about whether and to what extent Lai had otherwise been an informer. The uncontested fact was that police had secured Lai’s cooperation following his arrest, as a result of which he became an informer in relation to Le.

In any event, as the submission for the Crown pointed out, it is far from clear that there was any material non-disclosure in relation to these documents. At the committal proceeding, in which all three applicants participated and were represented by counsel, Lai was cross-examined about whether he was already an informer to the Asian Squad of the Victorian Police at the relevant time. It was put to him by counsel for Cox that ‘there are records which we have that indicate that you were already a registered informer to the Asian Squad.’ Counsel for Ferguson at trial was not the same counsel as had represented him at the committal, but this is of no consequence if, as appears, the relevant documents were available to (at least) defence counsel for Cox at that time. The matter having been raised in the cross-examination of Lai at the committal, the legal team for Ferguson were on notice that – if they did not already have them – such records existed and could be obtained.

This ground also fails.

XIII AGGREGATE OF ERRORS

Each applicant advanced a ground contending, in substance, that if none of the individual grounds of appeal was held to have caused a substantial miscarriage of justice, they should in combination be held to have caused such a miscarriage. The submission for Sadler, for example, was that ‘the combined force of the errors is such that the applicant has not had a fair trial according to law.’

For the reasons we have given, none of the grounds alleging specific error has been made out. It follows that the argument based on aggregation of errors must also be rejected. We would add that, having reviewed the transcript of the trials, we are satisfied that they were conducted with scrupulous fairness, according to law.

IV UNSAFE AND UNSATISFACTORY

Each of the applicants advanced a ground contending that the guilty verdict against him was unsafe and unsatisfactory. Although this is the conventional terminology, the ground of appeal actually invoked is that

the verdict of the jury should be set aside on the ground that it is unreasonable or cannot be supported having regard to the evidence …[154]

In the event, Ferguson abandoned this ground but it was maintained by Cox and Sadler.

[154]Crimes Act1958 (Vic) s 568(1).

Since the High Court’s 1994 decision in M v The Queen,[155] the approach required of appellate courts in considering the ‘unsafe and unsatisfactory’ ground has been clear.[156] The analysis involves the following steps:
[155](1994) 181 CLR 487.
[156]R v Vjestica (2008) 182 A Crim R 350, 369-70 (Maxwell P).

1. The court of criminal appeal must ask itself whether, upon the whole of the evidence, it was open to the jury to be satisfied beyond reasonable doubt that the accused was guilty.

2. In considering that question, the appeal court must bear in mind that the jury has the primary responsibility of determining guilt or innocence and has had the benefit of seeing and hearing the witnesses.

3. In most cases a doubt experienced by an appellate court will be a doubt which a jury ought also to have experienced.

4. It is only where a jury’s advantage in seeing and hearing the evidence is capable of resolving a doubt experienced by a court of criminal appeal that the court may conclude that no miscarriage of justice occurred.[157]

[157]See M v The Queen (1994) 181 CLR 487, 493-4 (Mason CJ, Deane, Dawson and Toohey JJ); Jones v The Queen (1997) 191 CLR 439, 451-2 (Gaudron, McHugh and Gummow JJ); MFA v The Queen (2002) 213 CLR 606, 614-5 (Gleeson CJ, Hayne and Callinan JJ), 623-4 (McHugh, Gummow and Kirby JJ); Weiss v The Queen (2005) 224 CLR 300, 316 (The Court); R v Tiburcy [2007] VSCA 124, [5] (Nettle JA).

In Libke v The Queen,[158] Hayne J (with whom Gleeson CJ and Heydon J agreed) said in relation to the ‘unsafe and unsatisfactory’ ground of appeal:

But the question for an appellate court is whether it was open to the jury to be satisfied of guilt beyond reasonable doubt, which is to say whether the jury must, as distinct from might, have entertained a doubt about the appellant’s guilt.[159] It is not sufficient to show that there was material which might have been taken by the jury to be sufficient to preclude satisfaction of guilt to the requisite standard.[160]

[158](2007) 230 CLR 559.

[159]His Honour cited M v The Queen (1994) 181 CLR 487, 492-3.

[160]Libke v TheQueen (2007) 230 CLR 559, 596-70. See also R v Tiburcy [2007] VSCA 124, [17] (Vincent JA).

In other words, the question ‘Was it reasonably open to the jury to be satisfied beyond reasonable doubt of the accused’s guilt?’ requires the court of criminal appeal to decide whether the state of the evidence was such as to preclude a jury acting reasonably from being satisfied of guilt to the requisite standard. To adopt some helpful metaphors from recent interstate appellate decisions, the question is whether there was a ‘solid obstacle to reaching a conclusion beyond reasonable doubt’[161] or whether, instead, the ‘path to a conviction is open’.[162]
[161]R v Shah [2007] SASC 68, [4] (Doyle CJ).
[162]Morabito v R [2007] NSWCCA 126, [34] (Mason P).

The submission for both Cox and Sadler was that the jury ought to have entertained a reasonable doubt as to whether

the applicant was party to one conspiracy to traffick in not less than a commercial quantity and that he intended pursuant to that conspiracy to traffick in an amount of heroin that was not less than a commercial quantity.

The submission for Sadler urged this Court to scrutinise closely the evidence of Le and Lai and Tran ‘mindful of the directions given to the jury on the evidence of each of these three witnesses’. The evidence of Le was said to be ‘vague [and] replete with inconsistency and implausibility.’ Reliance was placed on what was said to be a failure by the investigating police ‘to properly investigate all allegations made by [Le] and circumstances relevant to his veracity, including other sources of potential heroin supply to him, especially Ky Quoc Pham.’

The submission for Cox contended that, even if it was open to the jury to find that he trafficked in heroin to Le over a period in August 1999, it was not open to find that he agreed with either Ferguson, Sadler or both, to traffick in heroin. In oral argument, it was said to be ‘a matter of sheer speculation’ as to whether anything which occurred after May 2000 could have proved the existence of conspiracy to traffick a commercial quantity of heroin. It was argued that, although there was subsequent trafficking involving Sadler and Ferguson, the only evidence against Cox after May 2000 was the ‘linked phone calls’. According to the submission, the three men were close acquaintances, such that the fact that they ‘were on the phone to one another all the time’ supported a benign inference just as much as an adverse one.

In our view, neither the verdict against Cox nor the verdict against Sadler was unsafe and unsatisfactory. There was a substantial body of evidence on the basis of which it was open to the jury, acting reasonably, to convict each of them of participation in the charged conspiracy. Of course, as with any circumstantial case, there was scope for debate about the inferences to be drawn from the evidence. There was, moreover, ample scope for debate about the credibility of the Crown witnesses. All of these matters were exhaustively ventilated in the Cox and Sadler trial – in cross-examination, in final addresses and in the judge’s charge.

In respect of each component of the circumstantial case, the judge repeatedly reminded the jury that they could only draw the inferences which the Crown invited them to draw if they were satisfied that they were the only inferences reasonably available in the circumstances. The telephone records of conversations involving Cox provide a good example. As the judge carefully explained to the jury, Cox was recorded as making and receiving calls to and from Ferguson/Sadler/Le at various times in the period June 2000 – November 2002. His Honour summarised both the Crown and defence arguments as to the inferences which should be drawn from these records. And he emphasised that the jury could only draw the adverse inference if they were satisfied that it was the only reasonable inference available on the facts and circumstances of the case.

Whether guilt had been proved depended in each case on quintessential jury questions, about the credibility of witnesses and about the plausibility of inferences and explanations. The jury had the advantage of seeing the witnesses give evidence. It was for them to decide whether the Crown case had been established beyond reasonable doubt, and it was open to them to conclude – in each case – that it had.

APPLICATION FOR LEAVE TO APPEAL AGAINST SENTENCE (FERGUSON)

Ferguson was sentenced to be imprisoned for a term of 12 years on the count of conspiring to traffick in not less than a commercial quantity of a drug of dependence and for a term of five years on the count of money laundering. The terms were ordered to be served concurrently. The total effective sentence was 12 years’ imprisonment. The sentencing judge fixed a minimum term of eight years’ imprisonment before Ferguson was to be eligible for parole. Ferguson now seeks leave to appeal against the sentence.

The circumstances attending the commission of the offences appear from the Court’s reasons for disposing of the application for leave to appeal against conviction. The sentencing judge proceeded upon the basis that the conspiracy was on foot when Ferguson joined it; that he did not participate in the initial corrupt approach to Le; that his participation in the conspiracy commenced in late 1999 or early 2000; that from late 2000 he played the leading role in carrying out the conspiracy; that he gained at least $630,000 from his participation in the conspiracy; and that the sum of $630,000 represented the price of approximately 4.5 kilograms of heroin.

As to Ferguson’s personal circumstances, he is now 41 years old. He left school at the age of 15 years, having completed Year 10. He undertook an apprenticeship as a diesel mechanic and then worked as a tradesman with the State Electricity Commission. Ferguson joined Victoria Police in 1988. In 1997 he joined the drug squad and was promoted to Detective Senior Constable. In 2000 he was seconded to the National Crime Authority, where he remained for more than a year. He then served with the Organised Crime Squad. In September 2001, Ferguson was involved in a motor vehicle accident and sustained a serious injury to his lower back. He was confined to desk duties for some four months and then returned to the Organised Crime Squad. In September 2002, he underwent an operation on his back and remained off work until he was discharged from the police force in August 2005.

The sentencing judge observed that Ferguson had been very hardworking from an early age, working during holidays, at weekends and at nights. He built a house at Lara, where he conducted a farm. In his spare time he worked for long hours on the farm and also carried out transport and building work. In addition to the back injury, which continued to inflict pain upon him, Ferguson suffered from depression, requiring large quantities of antidepressant medicine.

Ferguson is married and has three school-age daughters. The sentencing judge accepted that he was a particularly devoted and committed father.

The grounds of Ferguson’s application for leave to appeal against sentence are as follows:

1.The sentencing discretion miscarried in that the learned sentencing judge had regard to the perceived harmfulness of heroin.
2.The sentencing discretion miscarried in that the applicant was sentenced on the basis that at least five kilograms of heroin had been trafficked.
3.The sentencing discretion miscarried in that the learned sentencing judge failed to sentence the applicant on the basis that all of his sentence would be served in protective custody.

Ground 3 was abandoned at the hearing of the application. A further ground, alleging manifest excess, was abandoned before the hearing.

The original outline of submissions filed by the Crown conceded that ground 1 was made out. At the hearing, the Court invited senior counsel for the Crown to review the concession, but proceeded to hear submissions from counsel for Ferguson about the matters to be relied on if the sentencing discretion were to be re-opened. It was submitted that this Court should impose a lower sentence than that imposed by the trial judge, having regard both to the sentences imposed subsequently on Sadler and Cox and to Ferguson’s health problems. The matter was adjourned for further hearing, to enable additional material to be filed on Ferguson’s behalf.

When the hearing of the sentence appeal resumed on 18 May 2009, senior counsel for the Crown informed the Court that the concession on ground 1 was withdrawn. For reasons which follow, it was correctly withdrawn.

Ground 1: harmfulness of heroin

In R v Pidoto and O’Dea (‘Pidoto’)[163] it was held that a sentencing judge erred if he or she imposed his or her own individual assessment of the perniciousness of the drug in question.[164] Nothing said by the Court in Pidoto was, however, directed at remarks of a general character about the harm caused by trafficking in a drug of dependence. When read in their full context, the remarks of the sentencing judge in the present case can be seen to have been essentially of that character:

The object and purpose of the conspiracy of which you were convicted, the trafficking of heroin in more than a commercial quantity, is of itself a most serious crime carrying a maximum of 25 years’ imprisonment. Illicit drugs such as heroin are an abominable social evil. They have a cruel and destructive impact on lives, on families and on society. The trafficking of drugs preys on the young, the weak and the vulnerable. It warps and degrades standards of decent civilised behaviour. It is a thoroughly twisted and despicable enterprise, conducted by greedy and callous individuals who have no regard for the trail of human misery which their trade creates.
Heroin is an addictive and potentially lethal substance. Its effects can be, and commonly are, devastating. It has been the melancholy experience of courts to witness all too frequently the tragic and appalling consequences arising from its consumption and abuse. As a member of the Drug Squad, you must have been fully aware of the suffering and harm which would be caused by the drugs which you conspired to traffick.
The crime of conspiracy to traffick heroin is every bit as heinous as the crime of trafficking itself. Indeed, this is reflected by the fact that the legislation prescribes the same maximum penalty as it does for the act of trafficking. The vice and gravity of the conspiracy lies, at least in substantial measure, in the combination by you with your fellow conspirators to achieve your nefarious end.
The offence of conspiracy to traffick drugs is fundamentally born of ruthless and callous greed. Those who embark on such enterprises expect to make significant profits. The role of the courts is to ensure that those persons are left in no doubt that when they are brought before the court for their crimes, they can expect no mercy whatsoever. The duty of the court is to impose a sentence of sufficient severity that it sends a clear message to the community that activity such as yours will not be tolerated. The principle of general deterrence is especially prominent in offences involving drug trafficking and it requires the courts to impose sentences which are sufficiently severe to deter would-be drug traffickers from succumbing to the lure of the profits of that trade.[165]

[163](2006) 14 VR 269.

[164]R v D’Aloia [2006] VSCA 237; R v Karafilowski [2007] VSCA 156.

[165]R v Ferguson [2006] VSC 163, [30]–[33] (emphasis added).

It can be seen that his Honour referred to the harmful effects of heroin addiction by way of exemplifying the general comments he had made about the ‘abominable social evil’ of illicit drugs. And the reference to heroin was followed by general remarks about ‘offences involving drug trafficking’. This case is thus quite different from Pidoto. In that case, the sentencing judge drew attention to the ‘really adverse behaviour’ and ‘significant mental health problems’ associated with the use of the drug in question (ecstasy) and said that, as a result, the offence for which he was imposing sentence ‘must be seen as trafficking in a very significant drug’.[166] The judge’s perception of the particular harms associated with ecstasy was thus brought to bear directly on the sentencing task. In the present case, by contrast, neither the sentencing remarks nor the sentence imposed suggest that the judge brought to bear on the sentencing decision any particular view of the harms associated with heroin. He was concerned with the evil of drug trafficking as a matter of generality.
[166](2006) 14 VR 269, 286.

In this context, the maximum sentence for the offence of conspiring to traffick in not less than a commercial quantity of a drug of dependence was 25 years’ imprisonment. The undoubted seriousness of the offence was to be viewed in the light of the fact that it was committed by a member of the Victorian police force who was working in that part of the police force charged with preventing and detecting trafficking in illicit drugs. As the judge said, Ferguson ‘flagrantly breached the trust’ which the community had placed in him and ‘unconscionably took advantage of his position’ to advance his criminal enterprise. Ferguson’s offending cast a shadow upon the work and lives of his fellow police officers. It was a ‘blight on the administration and enforcement of justice in this State’.

Money laundering is also a serious offence and in this case involved the proceeds of drug trafficking. We think, however, that his Honour dealt appropriately with the conviction on the count of money laundering by making the sentence wholly concurrent upon the sentence imposed on the count of conspiring to traffick in a drug of dependence.

As the sentencing judge observed, there were a number of mitigating factors upon which Ferguson could rely. His physical and mental health were likely to render a term of imprisonment more difficult for him than a person in good health and it would be more difficult for the applicant to reintegrate into the community and gain employment when he was released. As a devoted father, Ferguson would be punished by being deprived of the experience of helping to raise his young children. Ferguson was a man of previous good character. He had no prior convictions, he was a dedicated husband and father and a very good worker. Imprisonment would be more difficult for him, not merely because of his physical and mental health, but also because of his position as a police officer, which would require him to spend a significant amount of time in protective custody.

Overall, we are of the opinion that the gravity of the offending required a sentence no less than that which was imposed by his Honour, notwithstanding the mitigating factors to which we have referred. The sentence did not reflect a mistaken view of the gravity of the offence.

Ground 2: quantity trafficked

Pursuant to the second ground of the application, it was submitted that the evidence did not permit a finding that Ferguson trafficked in a specific quantity. His Honour’s estimate of the amount of heroin trafficked to Le during the time of the conspiracy was based upon Curtin’s assessment of the betterment in Ferguson’s financial position and a heavily discounted contribution from his co-conspirators. It was, as his Honour said, a conservative estimate, which in our view adequately allowed for a degree of imprecision in the figure produced by Curtin.

For the foregoing reasons, we are of the opinion that none of the grounds of the application for leave to appeal against sentence has been established. Accordingly, it is not necessary for this Court to deal with matters advanced as relevant to a re-sentencing of the applicant.

APPEAL AGAINST PECUNIARY PENALTY ORDER (FERGUSON)

Following Ferguson’s conviction, but before he was sentenced, the Director of Public Prosecutions (‘DPP’) made application for a PPO against him under Part 8 of the Confiscation Act, and for a declaration under s 70 of that Act. The application was eventually heard and determined in December 2006, by the judge who presided over Ferguson’s trial and passed sentence on him.

Both charges of which Ferguson was convicted were ‘automatic forfeiture offences’ under the Confiscation Act. His conviction on those charges enabled the DPP to apply for an order under s 59(1) that he pay to the State of Victoria a pecuniary penalty equal to the value of the benefits derived by him ‘in relation to’ the offences.

Section 67(1) of the Act provides in relevant part as follows:

(1) For the purposes of this Part, the value of the benefits derived by a defendant in relation to an offence may include—
(aa)any money actually received as a result of the commission of the offence, regardless of expenditures incurred in deriving that money;
(a)any property that was derived or realised, directly or indirectly, by the defendant or another person, at the request or by the direction of the defendant, as the result of the commission of the offence;
…
(c)any increase in the total value of property in which the defendant has an interest in the period beginning immediately before the commission of the offence and ending at some time after the commission of the offence that the court is not satisfied was due to causes unrelated to the commission of the offence.

In assessing the value of the benefits derived, the Court may take into account evidence given in the criminal proceedings. For that purpose, the whole of the transcript is admissible in evidence as if it were a record of evidence given on the hearing of the application.[167]

[167]Section 59(4).

The judge assessed the value of the benefits derived by Ferguson in relation to the conspiracy to be $995,000. He made an order under s 59(1)(b) of the Act that Ferguson pay that sum to the State. The sum of $995,000 was made up of two amounts. The first was an amount of $680,000 which the judge concluded was money received by Ferguson as a result of the offences.[168] The second was an amount of $315,000, which his Honour was satisfied represented an increase in the value of property related to the commission of the offences.[169]
[168]DPP v Ian Norman Ferguson [2006] VSC 484, [29].
[169]Ibid [38], [42]–[43].

Under s 142(3) of the Confiscation Act, there is a right of appeal against a PPO ‘in the same manner as if it were, or were part of, the sentence imposed in respect of the offence.’ The grounds of appeal challenge both elements of the judge’s calculation. We deal with them in turn.

Ground 1: calculation of money derived

The judge based his calculation of the amount of money received by Ferguson on the evidence of financial betterment given by Curtin at Ferguson’s trial. His Honour noted that, according to Curtin’s analyses, there had been an increase in the assets of the Fergusons amounting to more than $697,000, and unexplained cash transactions amounting to more than $710,000. His Honour said:

The Crown case at Ferguson’s trial was that the cash transactions of $710,000, and the growth of assets of Mr and Mrs Ferguson of almost $700,000, were funded by the proceeds of drug trafficking carried out by Ferguson pursuant to the conspiracy for which he was convicted. Thus, in this application, the Crown submits that that sum is the quantum of the money each received by Ferguson as a result of the commission of the offence, pursuant to s 67(aa) of the Confiscation Act.[170]

The judge concluded that Curtin’s basic methodology was sound. He took the cash figure of $710,000 as his starting-point for the calculation of the money received. After making deductions in Ferguson’s favour totalling $30,000, the judge concluded on the balance of probabilities that Ferguson had received ‘at least $680,000’ as a result of the offending.

[170]Ibid [15].

One of Ferguson’s principal grounds of appeal against conviction related to the admissibility of the betterment evidence given by Curtin. For reasons given earlier, we have rejected that ground.[171] It was conceded on behalf of Ferguson that, if the relevant ground of appeal against conviction failed, so too would this ground of appeal against the pecuniary penalty order. It follows that ground 1 must be rejected.
[171]See [49] – [58] above.

Ground 2: increase in value of property
In imposing the pecuniary penalty order the learned sentencing judge erred in his calculation of the period to which s 67(1)(c) of the Confiscation Act could apply.

The second amount represented the increase in value of a property in Bambra which Ferguson had purchased (in his wife’s maiden name) in early 2001. The property was purchased for the sum of $335,000. As at 10 March 2006, it was valued at $650,000. There was no dispute about the valuation. The judge accepted the DPP’s contention that the sum of $315,000, being the increase in value of the Bambra property between 2001 and 2006, was to be included in the value of the benefits derived by Ferguson, pursuant to s 67(1)(c).

The judge was satisfied that Ferguson was able to purchase the Bambra property by using some of the monies – that is, the $680,000 – which he had received as a result of the conspiracy. His reasons were as follows:

Throughout the relevant period Ferguson and his wife were living at 130 Branch Road, Lara, which they had purchased in December 1993. Until February 2001 that property was the subject of a mortgage to the Bank of Melbourne. At that time the debt, secured by the mortgage, amounted to $200,000. In late January 2001 Ferguson inspected the property at Bambra, and negotiated the purchase of it for the sum of $335,000. A contract was signed by Joanne Ferguson, in her maiden name Joanne Barrett, for the acquisition of the property on 1 February 2001. In February 2001 Ferguson applied to the Commonwealth Bank for a loan of $353,000 to fund the purchase (including the costs of purchase) of the Bambra property. The application for the loan was successful, and a mortgage was executed by the Fergusons to secure it over both the Bambra and Lara properties. In order to obtain that loan, Ferguson, on 8 February 2001, paid off the Bank of Melbourne mortgage debt over the Lara property, which then amounted to $199,218.
It is clear that Ferguson was able to pay off the Lara mortgage by accessing and using proceeds of the conspiracy. Between October 2000 and February 2001 cash deposits were made into the various bank accounts of the Fergusons totalling $350,000. At that time the trafficking of heroin to Duy Le reached its peak. That sum included $56,100 cash deposited in January 2001,and $221,393 cash deposited in February 2001. Between February 2001 and April 2001 Ferguson carried out a complicated series of transfers of funds, which had been deposited by him into those accounts, between the various bank accounts. Those transfers are depicted in a chart prepared by Mr Curtin. The effect of the transfers was to effect the discharge of the Bank of Melbourne mortgage over Lara. The purchase of Bambra settled on 31 March 2001. For that purpose Ferguson had obtained a loan, secured by mortgages over Bambra and Lara, in the sum of $353,000, from the Commonwealth Bank. The loan consisted of two components, a fixed loan for $200,000, and a home loan of $153,000. In April 2001 Ferguson transferred $140,000 from the Commonwealth Bank Streamline account, in the name of his wife and himself to the home loan account, thereby reducing the debt to some $13,000.

The first complaint advanced on behalf of Ferguson was raised during the hearing on 18 May 2009, convened to hear further argument on the application for leave to appeal against sentence. On that occasion, counsel for Ferguson contended that there had been impermissible double counting in his Honour’s calculation, first, of the monies received and, secondly, of the increase in value of the Bambra property. The double counting was said to have arisen because, as appears from the extract set out above, Ferguson used some $200,000 of the $680,000 received by him as money to pay off the mortgage on the Lara property. That property was then able to be used as (unencumbered) security for the borrowing necessary to enable the Bambra property to be purchased.

This complaint must be rejected. (We note that it was not included in the full statement of grounds of appeal against the PPO, filed on 10 July 2009). There was no double counting. The position would have been exactly the same if the $200,000 had been used as part payment for the Bambra property. This would have represented the conversion of part of the monies received from the conspiracy into a fixed asset, being the property. But, of course, the value of the property at the date of purchase is not counted for the purposes of s 67(1)(c), since the provision is concerned only with an increase in the value of the property.

Ground 2 concerns the period by reference to which the increase in value is to be assessed. The period is identified in s 67(1)(c) as ‘the period beginning immediately before the commission of the offence and ending at some time after the commission of the offence.’ As already noted, his Honour took the relevant period to be that between 1 February 2001, being the date of purchase, and 10 March 2006, being the date of valuation. The judge rejected a submission for Ferguson that the relevant period was between August 1999 and November 2002, a period in respect of which the Director had adduced no evidence.

As the judge explained in his reasons, the question was one of construction of s 67(1)(c). The argument for Ferguson was that, on its proper construction, the paragraph authorised the Court to take into account – and only to take into account – an increase in value (‘of property in which the defendant has an interest’) which occurred in the relevant period. The argument for the Director, which the judge accepted, was that the function of ‘the period’ was not to identify when the relevant increase in value must have occurred, but rather to identify the property whose (change in) value was to be scrutinised. On this approach, the property which falls for consideration under paragraph (c) is property

in which the defendant has an interest in the period beginning immediately before the commission of the offence and ending at some time after the commission of the offence.

His Honour’s reasons for preferring this construction were as follows:

Self-evidently, the construction contended for by [defence counsel] involves a restructuring of the sub-section (c), so as to transplant the temporal phrase, which I have quoted above, from its present position in the sub-section to a position immediately after the words “any increase”. There is no warrant for such a re-writing of s 67(1)(c). Further, such a restructuring of the sub-section would offend the clear purpose of s 67(1)(c). Section 67(1) is, on its face, designed to treat, as benefits derived by a defendant from an offence, not only direct funds received by the defendant, but also other consequential profits and benefits derived by the defendant. That is the clear purpose of sub-paragraph (a) (which treats as benefits any property derived or realised directly or indirectly as a result of the commission of the offence) and sub-s (b) (which treats as benefits any benefits, service or financial advantage provided for the defendant or any other person as a result of the commission of the offence). In that context s 67(1)(c) is designed to treat as benefits any increase in the value of the property in which the defendant has an interest in the period described in the sub-section, unless the defendant is able to establish that the increase in value was due to causes unrelated to the commission of the offence. In other words sub-s (c) creates, as it were, a presumption that the increase in the value of any property held by the defendant during the relevant period has resulted from the offending for which the defendant has been convicted. In that light it would make no sense for s 67(1)(c) to limit the increase in value, treated as benefits, to any increase sustained during the period offending.
Indeed, the construction contended for by [defence counsel] would render s 67(1)(c) nugatory in relation to any offending consisting of a single act occurring on one particular date, such as one large drug trafficking transaction. If [defence counsel’s] construction were accepted, then s 67(1)(c) would have no effect in such a case, since any increase in the value of the property of the defendant, in which the defendant then had an interest, could only occur after the completion of the offence. Accordingly I consider that, on its proper construction, s 67(1)(c) operates to treat as benefits the increase in the property in Bambra, as assessed by Mr Peart and Mr Blincoe, since Bambra was a property in which the defendant had an interest in the period beginning immediately before the commission of the offence and ending at some time after the commission of the offence.[172]

[172]DPP v Ian Norman Ferguson [2006] VSC 848, [41]–[42].

We respectfully agree. His Honour’s construction of s 67(1)(c) was clearly correct, for the reasons which he gave. This ground also fails, and the appeal against the making of the PPO must therefore be dismissed.

---

Details

AGLC: R v Ferguson [2009] VSCA 198
Case: [2009] VSCA 198
Decision Date: 8 September 2009

CaseChat Overview and Summary

In the case of R v Ferguson, the appellant was convicted for conspiracy to traffick heroin in a commercial quantity and was subsequently sentenced. The appellant appealed the conviction, sentence, and a pecuniary penalty order under the Confiscation Act 1997 (Vic). The issues before the court included whether evidence of financial betterment and unexplained cash transactions could be admitted as expert evidence, whether the judge's directions to the jury on conspiracy, intention to traffic, and corroboration were adequate, and whether the judge should have discharged the jury due to lengthy deliberations. The Crown argued that the judge should have given a Browne v Dunn direction, and that separate trials were necessary. The court was also asked to determine whether there was material non-disclosure by the Crown and whether the verdicts were unsafe and unsatisfactory.

The court examined the admissibility of expert evidence regarding financial betterment and unexplained cash transactions, distinguishing it from the case of R v Strawhorn [2008] VSCA 101. The court held that the evidence was admissible as it was relevant to the appellant's intention to traffic and consciousness of guilt. The court also found that the judge's directions to the jury on conspiracy, intention to traffic, and corroboration were adequate, and that no Browne v Dunn direction was necessary. The court held that separate trials were not required in this case. The lengthy jury deliberations did not necessitate the discharge of the jury, and the verdicts were found to be safe and satisfactory. The court also found no material non-disclosure by the Crown.

The court further considered the sentence imposed by the trial judge, holding that the judge did not impermissibly bring their own assessment of the harmfulness of heroin to bear on the sentence. Lastly, the court examined the pecuniary penalty order under the Confiscation Act 1997 (Vic) s 67(1)(c) and found no error in the judge's calculation of the value of benefits derived in relation to the offending. The appeal against the conviction, sentence, and pecuniary penalty order was dismissed.

No orders were made in relation to the appeal against conviction, sentence, or pecuniary penalty order. The appellant's conviction and sentence stood as imposed by the trial judge, and the pecuniary penalty order remained in place.

Orders