R v Gregory (No 2)
[2009] VSC 509
•11 November 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
CRIMINAL DIVISION
No. 1405 of 2009
| THE QUEEN |
| V |
| PAUL JOHN GREGORY |
---
JUDGE: | WHELAN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19 & 20 October 2009 | |
DATE OF RULING | 11 November 2009 | |
CASE MAY BE CITED AS: | R v Gregory (Ruling No 2) | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 509 | |
---
CRIMINAL LAW – Indictment with two counts of defrauding the Commonwealth and one count of conspiracy to dishonestly cause a risk of loss to the Commonwealth – Severance application – Judicial discretion to sever – Whether evidence on first two counts is admissible on the third count and vice-versa – No severance ordered.
Harriman v R [1989] 167 CLR 590, considered.
---
APPEARANCES: | Counsel | Solicitors |
| For the Prosecution | Mr N Robinson SC with Mr N Adams | Commonwealth Director of Public Prosecutions |
| For the Accused | Mr I Temby QC with Ms P Murphy | Sparke Helmore |
HIS HONOUR:
Introduction
On 14 July 2009 I heard an application on behalf of the accused to sever the indictment. That application was made on two grounds. First, it was submitted that joinder was not authorised under the applicable rule. Secondly, it was submitted that, if the charges had been properly joined in one indictment, an order should be made in the exercise of discretion severing counts 1 and 2 from count 3.
On 25 August 2009 I published a ruling in relation to that application.[1] In that ruling I set out the three counts and summarised the prosecution case, based upon a summary of prosecution opening which had been filed. This ruling assumes knowledge of the matters set out in that ruling. In my earlier ruling I rejected the submission made on behalf of the accused that the three counts had not been properly joined under the applicable rule. On the discretion to sever, I indicated that I needed to hear further submissions on the issue of cross-admissibility. On 19 and 20 October 2009 I heard those further submissions.
[1]R v Gregory [2009] VSC 358.
Pursuant to an agreement between the parties, argument on 19 and 20 October 2009 proceeded on the assumption that as at the date now fixed for the commencement of the trial, being 1 February 2010, the Evidence Act 2008 (Vic) would be in operation, and the submissions addressed admissibility by reference to the provisions of that Act.
Foreshadowed issues
In my earlier ruling I set out the prosecution case. On counts 1 and 2 the prosecution alleges that Mr Gregory, with Messrs Wheatley, Egglishaw and de Figueiredo, defrauded the Commonwealth in relation to a failure by Mr Wheatley to declare income from the John Farnham “Talk of the Town Tour” for the financial years ended 30 June 1994 and 30 June 1995. It is alleged that the conduct referrable to the first count occurred between January 1994 and 6 October 1995, and that the conduct referrable to the second count occurred between 1 July 1994 and 23 January 1996. On the third count the allegation is that Mr Gregory conspired with Messrs Wheatley, Egglishaw, de Figueiredo and an entity named Strachans SA to dishonestly cause a risk of loss to the Commonwealth by agreeing that an amount of $400,000 would be paid to a company named Overseas Promotions Inc (“OPI”), purportedly as an amount owed to OPI in relation to a boxing match between Kostya Tszyu and Jesse James Leija, but in fact as a device to conceal income from the tax authorities. The conduct the subject of the third count is alleged to have occurred between approximately 28 March 2003 and 26 May 2004.
Since my earlier ruling a defence response to the prosecution opening has been filed.
Amongst other things, the defence response asserts in relation to counts 1 and 2 that Mr Wheatley did defraud the Commonwealth and says that the relevant issue is “whether the accused … was a party” to that fraud. The response indicates that the central issue in relation to counts 1 and 2 will be whether the prosecution can prove beyond reasonable doubt that Mr Gregory’s involvement was other than that of a person playing a minor role without being party to any intended tax evasion.
In relation to count 3 the defence response states, among other things, “OPI is an actual company, and GDW [Wheatley] instructed PG [Gregory] to act in resolving a commercial dispute in a commercial manner, which PG did.” The defence response indicates the central issue will be whether the prosecution can prove beyond reasonable doubt that Mr Gregory was party, again, to a scheme of intended tax evasion, rather than innocently acting as a solicitor resolving a commercial dispute in a commercial manner on behalf of his client, Mr Wheatley.
The issue of the gap between counts 1 and 2 on the one hand and count 3 on the other
As I indicated in my earlier ruling, a significant point of difference between the parties concerns the connection, or absence of connection, between counts 1 and 2 on the one hand and count 3 on the other. The prosecution’s position is that there was a continuing corrupt relationship between the parties, being Mr Wheatley, Mr Gregory, Mr Egglishaw, and Mr de Figueiredo, which encompassed all three counts. Counsel for the accused, on the other hand, characterise the counts as being separated by a very substantial period of time, suggested to be at least eight years, and on one view in excess of nine years.
Mr Egglishaw and Mr de Figueiredo are associated with an organisation named Strachans. The precise nature of that organisation is not clear to me. It may not matter.
In the course of submissions on 19 and 20 October 2009, senior counsel for the prosecution took me through the documentation upon which the prosecution proposes to principally rely at trial. For the purposes of this application, counsel for the accused accepted that I should assume the authenticity and admissibility of this documentation. This approach reflects s 58 of the Evidence Act 2008. For present purposes, it is neither necessary nor desirable for me to canvass the material upon which the prosecution proposes to rely in detail, but it is necessary to review that material in relation to the issue of the connection, or lack of connection, between transactions and conduct referrable to counts 1 and 2 and that referrable to count 3.
The counts themselves state that the conduct referrable to counts 1 and 2 occurred between January 1994 and January 1996. The conduct referrable to count 3 is said to commence on approximately 28 March 2003. This is the date of an email from Mr Gregory to Mr Egglishaw which, on the prosecution case, sets out the scheme in relation to the proposed payment of $400,000 to OPI. It is necessary to review the evidence of the events in and between 1996 and 2003.
According to a statement of Mr Wheatley in the hand up brief, once the funds that were the subject of counts 1 and 2 had been secreted for him overseas, if he wanted access to that money he contacted Mr Gregory.[2] In his statement he gives one example of having done that and then says that in late 1995 he became aware that he had significant taxation obligations in Australia and that he needed about $150,000 to meet those obligations. According to Mr Wheatley’s statement, he contacted Mr Gregory in late 1995, who advised him that a finance company could be set up which would be “a vehicle” for the money to come to Mr Wheatley looking like a legitimate loan from an offshore finance company.[3] According to Mr Wheatley, after this discussion he received a loan agreement from an entity named Ambassador Discount Finance Company Limited (“ADFC”).[4]
[2]Volume 1, pages 170-171.
[3]Volume 1, page 171.
[4]Volume 1, page 171.
The relevance of the means by which Mr Wheatley accessed the funds the subject of counts 1 and 2 is obvious. It demonstrates that the money ought to have been declared as income to the Commissioner of Taxation. There was no suggestion that evidence on that matter was irrelevant. The defence response asserts that Mr Gregory had nothing to do with this loan agreement and had no involvement in any of the transactions purportedly relating to it.[5]
[5]Defence Response at [6].
A document which accords with the description of the loan agreement given by Mr Wheatley is held by the prosecution.[6] It is dated 31 January 1996 and is apparently signed by Mr Wheatley and Mr de Figueiredo.
[6]Proposed jury book, page 10-11.
According to documents upon which the prosecution proposes to rely, the funds the subject of counts 1 and 2 were held for Mr Wheatley overseas in an entity designated as “Erbacher Trust A/C 2864”.[7] According to documents held by the prosecution, a sum a little in excess of $150,000 was withdrawn from this account on 18 January 1996 with the withdrawal denoted as “To ADFC re Loan”.[8] The documents upon which the prosecution relies also indicate that a sum of $150,000 was paid into the trust account of Mr Wheatley’s accountant designated as emanating from “Ambassador Discount Finance” and that that sum was then used to meet obligations of Mr Wheatley and his wife to the Australian Tax Office and to meet an obligation owed to Deloittes. These obligations were met in March and April 1996. Documents proposed to be relied upon by the prosecution reveal that this purported loan was rolled over from time to time[9] and that what was described as interest was paid and was itself credited to Mr Wheatley’s Erbacher Trust account 2864.[10]
[7]Proposed jury book, page 9.
[8]Proposed jury book page 12.
[9]Proposed jury book, page 17.
[10]Proposed jury book, page 16.
If Mr Wheatley’s evidence were accepted, the funds which are the subject of counts 1 and 2 were accessed by him in transactions which occurred during the period between January 1996 and July 2002. The documents upon which the prosecution proposes to rely indicate that such transactions occurred. Mr Wheatley says Mr Gregory was personally involved in this. The defence response indicates that Mr Gregory denies any involvement in those transactions. As matters stand, it seems that the documents do not directly assist on that issue.
On the prosecution case, as at the start of 2002 funds from the transactions the subject of count 1 and 2 had been repatriated to Australia via the “bogus” ADFC loan and by other means. Pretend interest was being paid on the bogus loan which was being credited to the Erbacher Trust account 2864.[11]
[11]Proposed jury book, page 16.
Based solely upon the documents upon which the prosecution proposes to rely, that is, ignoring Mr Wheatley’s proposed evidence, the following events then occurred.
A meeting was held on 13 February 2002 between Mr Wheatley, Mr Egglishaw and Mr Wheatley’s accountant, Peter Sutton. Mr Egglishaw’s diary note of that meeting foreshadows repayment of the ADFC loan, and records that the trust will then have “$A150,000 less fees for which we will organise a debit card to exhaust the funds and close down the structure”. [12]
[12]Proposed jury book, page 22.
The purported ADFC loan was repaid in July 2002 but the funds were not earmarked by reference to the Erbacher Trust account 2864. They were instead denoted as funds held by an entity denoted as “4496” or “4496 Layton Trust”. As had been foreshadowed, those funds were then drawn upon using a debit card or debit cards.[13] Drawings from this 4496 designated fund by debit card continued throughout the second half of 2002.
[13]Proposed jury book, page 20.
In September 2002 Mr Gregory sent an email to Mr Egglishaw referring to a pending visit by Mr Egglishaw to Sydney between 25 and 29 November and saying: [14]
“I assume you will make your own contact with Client W to meet with him.”
Mr Gregory refers to Mr Wheatley in other documents as “client W”.[15]
[14]Proposed jury book, page 21.
[15]Proposed jury book, page 37.
On 26 November 2002 Mr Egglishaw met with Mr Gregory in Sydney. Three items were recorded by Mr Egglishaw in a note about that meeting.[16] They were that a copy of Mr Gregory’s will would be forwarded, that a “Corner Bank” visa card application would be sent to Mr Gregory, and that Mr Gregory may be booking a trip from Beijing to Moscow which “he may like us to pay for”. Mr Egglishaw established an entity or designation for Mr Gregory named “5122 Erbacher Trust – Gregory” after this meeting.[17]
[16]Proposed jury book, page 84.
[17]Proposed jury book, page 85.
The Kostya Tszyu fight was held in January 2003.
On 28 March 2003, just prior to leaving on a tour “to China and then on to Russia”, Mr Gregory sent Mr Egglishaw an email.[18] It referred to discussion with client W about the project he and Mr Egglishaw had been talking about, and it then set out in express terms what the prosecution contends is the scheme for the creation of false documents so as to give the appearance of a genuine claim by OPI for $700,000 which is settled after negotiation for $400,000.
[18]Proposed jury book, page 37.
There are other features of this email which, the prosecution says, reveal the nature of the association between Mr Wheatley, Mr Gregory and Mr Egglishaw at that time. References are made by Mr Gregory to previous discussions between he and Mr Egglishaw.[19] Mr Gregory describes a scheme in which all three of them will participate and which he says he is setting out for Mr Egglishaw, having already proposed it to Mr Wheatley and obtained his confirmation. Mr Gregory addresses the fee arrangements for both Strachans and himself in what may be seen as authoritative terms.[20] Mr Gregory refers at the conclusion of the email to a request from Mr Wheatley for a meeting with Mr Egglishaw in Sydney in April, to which (Mr Gregory says) Mr Wheatley would like Mr Egglishaw to bring a “current statement of affairs”. On the documents, the inference is open that those “affairs” would concern the funds held relating to counts 1 and 2.
[19]“As you know” … “that you and I have been talking about”: proposed jury book, page 37.
[20]“I have confirmed to him that the tax will be 11%. I have also confirmed that you will charge him $US1000 for the transaction. I explained to W that this was a substantial reduction on your normal fee but has been offered by you because of the relationship. I will charge W a similar amount for the legal advice.”: proposed jury book, page 37. See also page 40.
The email of 28 March 2003 is the document which the prosecution says initiates the transactions which are the basis for count 3. On the prosecution case, that document itself reveals a relationship which was both pre-existing and currently active, and, in part at least, was still based upon transactions the subject of count 1 and 2.
These inferences may be capable of being fortified by the evidence concerning events in late 2002 to which I have referred. Mr Gregory’s email in September 2002 suggests he had some involvement in Mr Wheatley’s affairs with Mr Egglishaw in September 2002, and, Mr Wheatley’s affairs with Mr Egglishaw at that time concerned funds referrable to counts 1 and 2 then being paid into and drawn from the entity denoted as 4496 Layton. On a personal level, the suggested existence of a close continuing association before March 2003 between Mr Egglishaw and Mr Gregory might be potentially fortified by the meeting on 26 November 2002 between Mr Egglishaw and Mr Gregory and the establishment of the 5122 Erbacher Trust for Mr Gregory. On the other hand, the personal arrangements made by or through Mr Egglishaw for Mr Gregory in November 2002 may suggest there was a significant change in the nature of their relationship at that time.
An email of 31 March 2003 from Mr Egglishaw to Mr de Figueiredo reveals that an 11% “tax,” which is referred to in the 28 March 2003 email, is a fee which is to be divided equally between Strachans and Mr Gregory.[21]
[21]Proposed jury book, page 40.
On the prosecution case, the scheme set out in the email of 28 March was put into effect in April and May of 2003 and the false documents supporting the false obligation were created. All relevant correspondence emanating from Strachans’ entities included the designation “4496” somewhere.
On 6 May 2003 Mr de Figueiredo sent a Strachans’ employee, Theresia Kleijn, an email requesting a receipts and payments summary for Mr Gregory.[22]
[22]Proposed jury book, page 45.
In July 2003 Strachans established a bank account at the Corner Bank, Lausanne, for Mr Wheatley which was designated as “Ferndale Worldwide Limited re 4496”.[23] The documents establishing that account described the origin of the funds as being “Result of John Farman[sic] Tour”. This description suggests an association with transactions referrable to counts 1 and 2. It will be recalled that the funds from the purported ADFC repayment were designated by reference to “4496”. There is a handwritten note on one copy letter to Corner Bank which reads:
“credit card appl.
form to PG
for Mr Wheatley.”
I was told the author of that note is unknown. The initials “PG” appear to be a reference to Mr Gregory. The documents reveal that credit cards were established for Mr Wheatley and his wife at the Corner Bank referrable to “Ferndale Worldwide Limited re: 4496”.[24]
[23]Proposed jury book, pages, 23, 78, 24-29.
[24]Proposed jury book, pages 79 and 80.
In July 2003, $400,000 was paid by one of Mr Wheatley’s companies in purported discharge of what the prosecution says was the concocted obligation. The documents indicate that sum was disbursed as follows:
· $A22,000 and $A1,543 was paid to Strachans.[25]
· $A22,000 was paid into a credit card account for Mr Gregory in the name Ferndale Worldwide Limited at Corner Bank, designated 5122.[26]
· $A354,289.09 was paid into Mr Wheatley’s Corner Bank account in the name Ferndale Worldwide Limited, designated as 4496.[27]
[25]Proposed jury book, pages 73, 82.
[26]Proposed jury book, pages 73-77, 86.
[27]Proposed jury book, page 81.
Thus, at that time, funds referrable to both counts 1 and 2 and to count 3 were being held, or had been held, for Mr Wheatley under the designation 4496.
In September 2003 Mr Wheatley, Mr Egglishaw and Mr Gregory exchanged emails seeking to arrange a meeting. [28] In those emails Mr Wheatley asked Mr Egglishaw when he could expect to receive “the new credit cards”, in response to which Mr Egglishaw replied:[29]
“The cards are with PG. The pin numbers are being currently sent.”
[28]Proposed jury book, pages 30-36.
[29]Proposed jury book, page 30.
A meeting was arranged for 31 October 2003. At Mr Gregory’s request a separate meeting between he and Mr Egglishaw, before the meeting with Mr Wheatley, was arranged.[30]
[30]Proposed jury book, page 34.
Late in September 2003, Mr Gregory and Mr Egglishaw exchanged emails about a trip Mr Gregory proposed to take to Antarctica.[31] Mr Gregory expressed gratitude for Mr Egglishaw’s offer to pay for the trip.
[31]Proposed jury book, pages 87-89.
A note dated 31 October 2003 by Mr Egglishaw records a meeting with Mr Gregory that day. The note is to Mr de Figueiredo and Ms Kleijn and includes the instruction:
“Please ensure the name of the client does not appear on the credit card statements.”[32]
[32]Proposed jury book, page 83.
What conclusions are open on the basis of the foreshadowed evidence, bearing upon the issue of the connection, or absence of connection, between counts 1 and 2 on the one hand and count 3 on the other?
It seems to me that the position is as follows:
1. Conclusions as to the existence of informal arrangements in relation to access to the funds the subject of counts 1 and 2 (other than via the ADFC loan) depend substantially on an assessment of the reliability and the credibility of Mr Wheatley’s account. There is documentary support for his account. The specific issue of personal involvement by Mr Gregory in these arrangements appears to depend entirely upon the evidence of Mr Wheatley.
2. The purported ADFC loan transaction which Mr Wheatley says was a means of repatriating funds from counts 1 and 2 is supported by documentation, but again Mr Gregory’s personal involvement in those transactions appears to depend upon the foreshadowed evidence of Mr Wheatley.
3. On the basis of the documents upon which the prosecution proposes to rely, without reliance upon the evidence of Mr Wheatley, it would be open to conclude that in 2002, prior to the transactions the subject of count 3:
· There was a continuing association between Mr Wheatley and Strachans which concerned funds the subject of counts 1 and 2.
· There was an association between Mr Gregory and Strachans concerning his personal affairs which involved both pre-existing arrangements (suggested by the request to pay for his China and Russia trip), and in November 2002 proposed new arrangements (the 5122 Erbacher Trust).
· There was at least some continuing association between the three men, Mr Gregory, Mr Wheatley and Mr Egglishaw, together (suggested by the reference to contact with Client W).
4. The email of 28 March 2003, which the prosecution characterises as the initiating document for the conduct which is the subject of count 3, may itself indicate the existence of both prior relevant dealings and a pre-existing relationship between the three men, Mr Gregory, Mr Wheatley and Mr Egglishaw.
5. There are some areas of documented overlap between transactions referable to counts 1 and 2 and transactions referable to count 3. The email of 28 March 2003 makes reference to “a current statement of affairs” which, it is open to infer, concerns the funds the subject of counts 1 and 2. The designated entity “4496” held funds referable to both counts 1 and 2 (the purported repayment of the ADFC loan), as well as funds which were the subject of count 3.
Submissions on this application
Mr Robinson SC, senior counsel for the prosecution, initially addressed the issue of cross-admissibility. He submitted that the case of Harriman v R[33] was of particular significance in this respect. He referred me to various the judgments in Harriman. He submitted that the overall effect of Harriman was that evidence that has a tendency element may be admissible for another legitimate purpose, and that such purposes include the purpose of showing a relationship such as the commercial relationship in Harriman, or in order to make it more likely that the events alleged by the prosecution are true, or so as to rebut the defence of innocent association.
[33](1989) 167 CLR 590. (“Harriman”.)
Over the course of his submissions Mr Robinson emphasised that such evidence may only be admitted where its probative value is greater than its prejudicial effect.
Counsel for the prosecution also referred me to the case of R v Quach,[34] which, it was submitted, was authority for the proposition that the evidence in Harriman was not tendency or coincidence evidence within the meaning of ss 97 and 98 of the Evidence Act 2008, and that therefore, as it was not being used as such, these two sections did not apply. On the basis of that authority it was submitted that, as the prosecution does not wish to use the evidence in this case for a tendency purpose, the “lower order test” for admissibility set out in sections 135 and 137 of the Evidence Act 2008 is what will be applicable here.
[34](2002) 137 A Crim R 345. (“Quach”.)
Mr Robinson referred me to a series of cases which, he submitted, set out principles relevant to the admission and use of evidence that has a tendency element but that may be admitted for a purpose other than tendency or coincidence.
Firstly, he referred me to the cases of Jacara Pty Ltd v Perpetual Trustees WA Ltd, [35] Trylow v Commissioner of Taxation[36] and R v Colby,[37] as dealing with evidence with a tendency element admissible for the purpose of proving system. He then referred me to R v Beserick[38] and R v Walters,[39] dealing with evidence with a tendency element admissible for the purpose of proving state of mind or knowledge.
[35](2000) 106 FCR 51. (“Jacara v Perpetual Trustees”)
[36][2004] FCA 446.
[37][1999] NSWCCA 261.
[38](1993) 30 NSWLR 510. (“R v Beserick”)
[39][2002] NSWCCA 291.
Mr Robinson submitted that the evidence on counts 1 and 2 in this case was admissible on count 3, and could be used for the following non-tendency purposes in relation to the later count:
(a)to demonstrate the nature of the relationship between the relevant parties, including between Mr Gregory and Mr Wheatley, and Mr Gregory and Messrs Egglishaw and de Figueriedo;
(b)to demonstrate criminal association;
(c)to rebut the defence of innocent association;
(d)to refute any claim that Mr Gregory was acting as a bona fide lawyer;
(e)to demonstrate use or knowledge of a system; and
(f)by showing a “continuum of contact and dealing” between the parties “from the first offence through to [the] period after count 3”, during which there was the acquisition of knowledge of a system or business method.
Mr Robinson also submitted that evidence in relation to events the subject of count 3 was admissible on counts 1 and 2. While admitting that in the normal course of human events the weight of the evidence of knowledge and dealings flows prospectively, Mr Robinson submitted that later events may properly be probative in relation to earlier events. Relying on Beserick, he submitted that, for example, evidence in relation to count 3 may be relevant to the accused’s state of mind and knowledge in relation to counts 1 and 2.
He suggested that, as there was a continuing period of association running over the period of all three offences, the evidence on count 3 was relevant on the earlier counts in a manner which may not have been the case if there had been a gap between the counts. He agreed with the suggestion that there was some gap between the two relevant periods.
He referred to the cases of R v Rhodes,[40] R v Wyatt,[41] Martin v Osborne,[42] and R v Ginies,[43] submitting that these were earlier examples of the principles expounded in Harriman.
[40][1899] 1 QB 77. (“R v Rhodes”)
[41][1904] 1 KB 188.
[42](1936) 55 CLR 367. (“Martin v Osborne”)
[43][1972] VR 394.
Mr Temby QC, senior counsel for the defence, submitted that while a satisfactory trial could be conducted without severance, it is desirable, for two reasons, that severance be ordered.
First, Mr Temby submitted that there was a real danger that the jury will ascribe to the count 3 evidence “excessive weight”, such that a conclusion adverse to the accused on count 3 will result in an adverse conclusion on counts 1 and 2. He submitted that this danger caused unfair prejudice to the accused and required severance. He also referred to the difficulty for the jury of “disentangling” the evidence relevant to counts 1 and 2 from that relevant to count 3.
He submitted that the jury could impermissibly and retrospectively reason from evidence on count 3 in relation to counts 1 and 2 in the following ways:
(a)If the prosecution seeks to use the evidence of counts 1 and 2 to show a “system” or “business method” that is co-extensive with count 3, a key issue will be whether Mr Gregory and Strachans or its related parties shared a fee or commission during 1994/5 and again in 2003. He referred to evidence of an 11 per cent fee charged and shared equally in 2003, and evidence of a possible 15 per cent fee, but no evidence of sharing, in 1994. He submitted this could lead to impermissible retrospective reasoning to the effect that because a fee was charged and shared in 2003, this was the case earlier on.
(b)As the nature of human relationships is inconsistent and constantly changing, it is impermissible to reason that on the basis of evidence on count 3, the relationship between the parties, and the conduct of the parties, was uniform extending backwards into the early 1990s. Instead, Mr Temby submitted, the opposite is true, as the evidence shows that there was a clear change in the nature of the relationship between Mr Gregory and Strachans in November 2002.
More generally, he submitted that it would be impermissible to reason retrospectively to say that evidence on count 3 relevant to either state of mind or the true nature of the conduct in 2003 was relevant to state of mind or conduct in 1994.
He submitted that the prosecution submission that there was “continuity” or “continuum” between the counts was unfounded. Instead, Mr Temby submitted that the manner in which the case was put by the prosecution revealed that it was both practical and appropriate for count 3 to proceed as a “stand alone” case. When asked how Mr Wheatley would begin his evidence on count 3 on a “stand alone” basis, Mr Temby submitted:[44]
“He would say that Gregory had been providing him with legal advice from time to time over preceding years and that he had a prior knowledge through Gregory of Strachans. On the basis that count 3 was tried alone, I confidently anticipate we would admit as a fact, that there was a prior business relationship between Strachans and Gregory. There is no need to prove the nature of that relationship in order to develop the case concerning the $400,000.”
[44]Transcript of directions hearing 20 October 2009, page 175.
With respect to cross-admissibility, Mr Temby agreed with the prosecution that where evidence of a tendency nature is tendered for a non-tendency purpose, the question of admissibility turns on whether the evidence is of a sufficiently high probative value.
In his response to the prosecution submissions on cross-admissibility, Mr Temby sought to distinguish the authorities relied upon by the prosecution. He did this on the following bases:
(a)The majority of authorities relied upon by the prosecution used prospective and not retrospective reasoning.
(b)Where there is authority endorsing reliance on subsequent rather than prior events, those authorities concern subsequent events which were immediately proximate in time, and which were connected by other features, such as the common advertisement in R v Rhodes. In these authorities, the temporal gap is always relatively short. The time frame involved in Harriman was only three or four months, as compared to the many years between counts in this case.
(c)Where evidence in other cases had been used to demonstrate relationship, the relationship between the relevant parties had been continuing and unchanged, as compared to the relationship between Mr Gregory and Strachans in this case, which, Mr Temby argued, was of a “waxing nature”, and which changed dramatically around November 2002.
(d)The facts in authorities such as Quach are so dissimilar that they are not useful.
He drew the Court’s attention to a particular excerpt from Harriman (also referred to by the prosecution) in which Dawson J stated that tendency evidence is ordinarily inadmissible not because it is irrelevant, but “because a jury is likely to regard it as proving too much and is for that reason likely to proceed upon prejudice rather than proof”.[45]
[45]Harriman at 597.
Mr Temby submitted that a jury is an “impressionistic body” that may, despite appropriate directions, give excessive weight to the evidence on count 3 in relation to counts 1 and 2.
Mr Temby submitted that in any event cross-admissibility should not be determinative of whether severance is granted.
The second broad basis for severance relied upon by Mr Temby was that the relevant area of law and the counts on the presentment are complex and will require very particular and complex jury directions. It was submitted that if severance was not ordered there may be failures of comprehension or application of the law by the jury, which in turn would result in detriment to the accused.
The particular submissions made in this respect were as follows:[46]
(a)In the first two counts, criminal liability depends upon proof of acts, and of some species of criminal intent, whereas the third count depends upon proof of physical acts and a fault element. These are conceptually different, and the jury would have to be told that.
(b)The essence of the third count is agreement, which has nothing to do with counts 1 and 2, and the jury would have to be directed on this.
(c)The element of “risk of loss” in count 3 and not in counts 1 and 2 is apt to confuse a jury and will require directions.
(d)There must be a direction as to overt acts by reason of s. 134.5 (9) (c) of the Commonwealth Criminal Code in relation to count 3, but not counts 1 and 2.
(e)There must be, as to count 3, a direction as to the mind of another, by reason of s. 135 (9) (b) of the Commonwealth Criminal Code. But on the first two counts the mind of another is either irrelevant or differently relevant, and the jury will be required to be directed on this.
(f)The dishonesty element is different as between the first two counts and the third count. There must be a direction consistent with Peters v The Queen[47] as to the first two counts, and a direction under s. 130.3 of the Commonwealth Criminal Code as to the third.
[46]Further Submissions for Accused on Severance Application at [5].
[47](1998) 192 CLR 493.
In reply, Mr Robinson for the prosecution submitted (amongst other things) that the counts cannot be separated as Mr Temby suggests, firstly because this would be misleading, and secondly because much of the evidence on counts 1 and 2 would nevertheless be admissible in a trial of count 3 alone.
With respect to the difficulties anticipated by the defence in the absence of severance, Mr Robinson submitted that such practical problems are not unusual in criminal trials, and that the court should assume that the jury will comply with the directions given.
Legal principles on severance
Section 372(3) of the Crimes Act provides as follows:
“Where before trial or at any stage of a trial the court is of opinion that a person accused may be prejudiced or embarrassed in his defence by reason of being charged with more than one offence in the same presentment or that for any other reason it is desirable to direct that the person should be tried separately for any one or more offences charged in a presentment the court may order a separate trial of any count or counts of such presentment.”
The judicial discretion under section 372(3) is a true discretion to order separate trials if the judge considers it necessary to do so,[48] notwithstanding that the criteria for joinder might be satisfied, as in this case I have already held that they are.
[48]R v TJB [1998] 4 VR 621 at 621 and 628-9. (“R v TJB”)
The relevant principles which apply to the exercise of the discretion here seem to me to be the following:
(a)Ensuring a fair trial for the accused must always be the dominant consideration governing the exercise of the discretion to sever.[49]
(b)One aspect of a fair trial is the taking of reasonable steps to prevent a jury from misusing evidence.[50]
(c)Where evidence on one count is admissible in proof of another count, there may be no point in ordering separate trials.[51]
(d)Where the evidence on one count is not admissible on another, it is still incumbent on the applicant for severance to satisfy the judge that there is a reason to order severance,[52] and in particular to demonstrate that it is both desirable and practicable to sever in order to ensure a fair trial. [53] The mere fact that the evidence on one count is inadmissible on another does not determine the question of severance; the judge must consider the prejudice to the accused which will arise and assess whether that prejudice can be removed by an appropriate direction to the jury against misuse of the evidence on one count in proof of another.[54] It is usually to be assumed that the jury will faithfully comply with any directions they are given by the judge.[55]
(e)When considering whether or not severance should be ordered, fairness to the accused and also to the prosecution and its witnesses should be considered.[56] A balance should be struck between the interests of the accused in avoiding prejudice due to the jury hearing evidence related to other charges on the one hand, and the public interest in the efficient allocation of judicial resources, consistency of verdicts, convenience of witnesses, and finality of litigation on the other.[57]
[49]R v Papamitrou (2004) 7 VR 375 at 388 per Winneke P.
[50]R v TJB at 630.
[51]R v CHS [2006] VSCA 19 at [74]. (“R v CHS”)
[52] R v CHS at [74]; R v TJB at 630..
[53]Ibid.
[54] R v CHS at [74]; R v Heinze (2005) 153 A Crim R 380 at [50]-[51]; R v Christou [1997] AC 117 at 129.
[55]R v TJB at 631; R v Christou [1997] AC 117 at 129.
[56]R v Christou [1997] AC 117 at 129.
[57]R v Reid [1999] 2 VR 605 at 621.
Prejudice occurs when there is a danger that evidence admissible on one count but inadmissible on another will be used impermissibly by the jury as corroborating that latter count.[58]
[58]See for example Sutton v R (1984) 152 CLR 528 at 542; R v TJB (1986) HCA at 627. Both of these are sex offence cases. The authorities on prejudice in severance applications often concern trials of multiple counts of sexual offences. The prejudicial effect the multiple counts of that kind can be very great. Such authorities must be treated with caution when dealing with fraud matters.
Lord Pearson in Ludlow v Metropolitan Police Commissioner[59] referred with approval to the following statement of when prejudice to the accused would be so great as to call for severance:[60]
“We do not think that the mere fact that evidence is admissible on one count and inadmissible on another is by itself a ground for separate trials: because often the matter can be made clear in the summing up without prejudice to the accused. In such a case as the present, however, it is asking too much to expect any jury when considering one charge to disregard the evidence on the others, and if such evidence is inadmissible, the prejudice created by it would be improper and would be too great for any direction to overcome.”
[59][1971] AC 29.
[60]At 41-2. Drawn from R v Sims [1946] KB 531 at 536.
Principles on cross-admissibility
Speaking broadly, under the existing law and under the Evidence Act 2008, evidence that has a tendency element which is tendered for another evidentiary purpose is admissible where its probative value outweighs any unfair prejudicial effect.
The High Court decision in Harriman is the leading relevant authority.
The facts of that case were as follows. In 1986 Harriman and another man, Martin, were directors of a company in financial problems. At the end of 1986 Harriman and Martin were involved in the sale of heroin in Australia. In 1987 the two men travelled to Thailand, met in Bangkok, and travelled together to Chiang Mai, where Martin, allegedly at Harriman’s instigation, bought heroin. They returned to Bangkok, and from there Martin flew to London and posted the heroin to Australia, again allegedly at Harriman’s instigation. The two were arrested upon their return to Australia, and were charged with knowingly being concerned in the importation of heroin. The motive alleged was to relieve the financial problems of their company.
The relevant issue before the High Court was whether the evidence of the former dealing in heroin in Australia by the two men was admissible on Harriman’s trial, at which Martin was the chief prosecution witness.
Brennan J held that no matter what the classification of the evidence, the test of admissibility is uniform, and depends on the satisfaction of the criterion that its probative force clearly transcends its merely prejudicial effect.[61] When deciding whether the prior evidence could support an inference of a later state of affairs, Brennan J said:[62]
“In determining whether or not evidence of participation can support such an inference [of continuing participation], regard must be had to the extent and duration of past participation, the proximity in time between the past participation and the offence charged and the whole of the circumstances of the case.”
[61]Harriman at 594.
[62]Harriman at 596.
Brennan J held the prior evidence “highly probative” and therefore admissible because it strengthened the Crown allegation of motive and tended to make it more likely that the relevant contacts between Harriman and Martin were for a guilty rather than innocent purpose.[63]
[63]Ibid.
Dawson J held that propensity evidence is generally inadmissible, but that there are the exceptions. Similar fact evidence, and evidence having a “strong probative force”, may be admissible. He held the case before the court to be one in the latter category.[64] His Honour referred to the requirement that the propensity evidence must have relevance independent of propensity, and said that then the “true test” was that the propensity evidence must “possess the requisite high degree of relevance or cogency to justify its admission notwithstanding its prejudicial effect.”[65] He held that the evidence of previous drug dealing with Martin was “cogent evidence” that Harriman’s reason for being in Chiang Mai with Martin was not because he was a tourist but was in order to obtain heroin.[66]
[64]Harriman at 597.
[65]Harriman at 599.
[66]Harriman at 602-603. When reading the judgements in Harriman it is necessary to be mindful of the fact that the requirement that there must not be a rational view of the evidence consistent with innocence is not the law in Victoria: Crimes Act 1958 (Vic), s 398A.
Toohey J said that the evidence in question was likely to demonstrate propensity, but that the evidence “went beyond that” as it was relevant to the character of the association between Harriman and Martin, and was relevant to the question of whether the two men acted in concert.[67] His Honour held that the relevance of the evidence with respect to the second aspect made it admissible.
[67]Harriman at 609.
Gaudron J stated that while mere propensity evidence is inadmissible:[68]
“[E]vidence which has a high probative value and raises, as a matter of common sense and experience, the improbability of the offence charged having been committed other than as claimed by the prosecution is admissible in a criminal trial, notwithstanding that it discloses prior criminal conduct or propensity to commit the offence.”
[68]Harriman at 613.
Her Honour held that the prosecution was entitled to call evidence in chief to negate the possibility that Martin had undertaken the importation independently of Harriman.[69] The probative value of the evidence in contention lay in the evidence “not being susceptible of rational explanation on a basis inconsistent with the guilt of the accused”.[70] Her Honour further held that such probative value as may exist “is to be assessed having regard to its effect ‘taken together with the other evidence’“.[71] On this basis she held that the evidence of Harriman’s prior dealings in heroin in Australia, including those done in conjunction with Martin, were properly admitted.
[69]Harriman at 612.
[70]Harriman at 614. See also footnote 70 above.
[71]Harriman, at 614.
McHugh J dealt with an issue not relevant here concerning res gestae evidence. On the issue relevant here, he held that such evidence could be admitted to show the nature of the relationship between the accused and another or others,[72] because it supplies motive or because it identifies the accused with the commission of the crime,[73] or because it corroborates the truth of part of a witness’ evidence.[74] The prior evidence was held to be admissible because “the probative force when considered with the other evidence…indicated to the point of near certainty that Martin and the applicant were acting in concert in Chiang Mai”.[75]
[72]Harriman at 630-1.
[73]Harriman at 631.
[74]Harriman at 632.
[75]Harriman at 635.
Harriman concerned what was referred to before me as prospective reasoning. The matters argued before me also concerned retrospective reasoning.
The authorities reveal that subsequent acts with a propensity element have been admitted to prove alleged prior acts in some cases. In the authorities they have been used to prove the nature of a business or system,[76] to show the nature of a relationship,[77] or to prove state of mind.[78]
[76]R v Rhodes.
[77]R v Ball [1911] AC 47.
[78]R v Beserick at 521.
The authorities suggest that it is often “safer”, and more natural or logical, to reason prospectively rather than retrospectively,[79] and that subsequent acts must therefore be used with caution.[80]
[79]Martin v Osborne at 400.
[80]Ibid; R v Beserick at 521.
The utility of subsequent evidence does diminish with time, as it grows more remote from the charged act.[81] For example, in R v Rhodes, a case of a theft of eggs by fraudulent advertisement, subsequent acts of theft were admitted, one 2 months after the charged act. The Court there held that, although the evidence was admissible, “the only difficulty” was the “long interval of time that elapsed between the acts charged and the other acts”.[82] The Court also held that had it not been for the connecting factor of the same advertisement being used in all the acts, the earliest transaction would have been too remote.[83]
[81]R v Beserick at 521.
[82]R v Rhodes at 84.
[83]Ibid.
In Martin v Osborne, Evatt J explained that subsequent acts may be used to substantiate plan or system. His Honour said:[84]
“It is true that, from the point of view of logical inference, it is easier to draw a conclusion as to the commission of a particular act if the general design is proved to have come into existence before the time when such commission is alleged. Consequently, it is often safer to rely upon prior acts than upon subsequent acts in order to prove the existence of a design at the time of the act charged against the defendant. But under certain circumstances there is no logical difficulty in inferring that the act charged was the first act in the general design.”
[84]Martin v Osborne at 400.
More recently in R v Beserick (a sex offence case), Hunt CJ in CL said:[85]
“It is but a very familiar principle of the law of evidence that subsequent behaviour may be regarded in order to indicate a state of mind which existed at an earlier time…Remoteness of the acts in time goes to the weight, not to the admissibility, of the evidence….and it matters not whether they precede the time of the offence charged…or succeed it…So far as its relevance to the issue of the existence of a guilty passion at the time of the offence charged is concerned, therefore, there is hardly any limit as to the time when the other sexual activity between the complainant and the accused may have occurred.”
[85]R v Beserick at 521.
Finally, in the civil case of Jacara v Perpetual Trustees, it was claimed by the first appellant that the respondent, by its agent, made misrepresentations inducing it to lease particular premises in a shopping centre. The appellant applied to admit affidavit evidence of statements made by the respondent’s agent to five other prospective tenants of other premises in the centre between four and 12 months after conversations between the appellant and the agent.
The Full Court of the Federal Court held the trial judge was correct in excluding the evidence on the basis that it was not sufficiently probative. Sackville J with (with whom Whitlam and Mansfield JJ agreed) said:[86]
“[E]vidence of conduct does not become relevant for a purpose other than proving a person had a tendency to act in a particular way merely by asserting the evidence tends to establish a system or business practice. Whether it is relevant for another purpose depends on whether or not proof of the tendency of a person to act in a particular way is a necessary link in the reasoning making the evidence relevant to a fact in issue.”
[86]Jacara v Perpetual Trustees at 67.
Should severance be ordered here?
My conclusion is that the application for severance should be dismissed. My reasons are as follows.
First, whilst I cannot reach any final conclusion on the issue of cross-admissibility, it seems to me that if the matter is to be determined in accordance with the Evidence Act 2008 on 1 February 2010, evidence admissible on counts 1 and 2 will also be admissible on count 3.
That evidence will not be admissible to prove tendency within the meaning of s 97 of the Evidence Act 2008. The prosecution does not seek to rely on it in that way. Section 101 will not apply.
Pursuant to s 137, it will be necessary to consider whether the probative value of the evidence is outweighed by the danger of unfair prejudice to Mr Gregory. On the material presently before me, my conclusion is that the evidence on counts 1 and 2 has significant probative value, independent of its tendency element, in relation to count 3 in establishing the nature of the relationship between Mr Egglishaw, Mr de Figueiredo, Mr Wheatley and Mr Gregory; in establishing the motive of Mr Gregory in entering into the transactions which are the subject of count 3; in establishing the system which the four men participated in operating; in establishing Mr Gregory’s state of mind; and, in meeting the suggestion that in the transactions the subject of count 3, Mr Gregory was merely acting as a solicitor engaged to resolve a commercial dispute. On the basis of the material I have set out I do not consider that there is such a “gap” between events and transactions referable to counts 1 and 2 and those referrable to count 3 so as to relevantly reduce the probative value of the evidence on counts 1 and 2 in relation to count 3.
There is a danger of impermissible tendency reasoning in allowing the evidence on counts 1 and 2 to be admissible on count 3 and to that extent there is a danger of unfair prejudice to Mr Gregory. The evidence is, however, highly probative on the issues which I have outlined and my conclusion is that its probative value outweighs the danger of unfair prejudice. It will of course be necessary to carefully instruct the jury that they must not engage in tendency reasoning. I proceed on the basis that the jury will understand and comply with that instruction.
Senior counsel for the prosecution submitted that the presentation of a “stand alone” case on count 3 in the manner suggested by senior counsel for the defence would be positively misleading. I agree. To describe the relationship between Mr Gregory and Mr Wheatley in March 2003 as being one in which Mr Gregory had provided Mr Wheatley with legal advice over preceding years would be, in my view, an inaccurate description of the material I have been taken to concerning their relationship and the transactions in which they were involved. Likewise, to describe Mr Wheatley’s relationship with Strachans as being “prior knowledge through Gregory” would not, in my view, accurately reflect the position.
In the circumstances a separate trial of count 3 would be likely to involve the tender of almost the same evidence as that which would be tendered on a trial of all three counts. This is a significant factor militating against severance.
Secondly, I remain unpersuaded that evidence in relation to count 3 will be inadmissible on counts 1 and 2. This is the aspect of the matter upon which Mr Temby focused. The weight of such evidence on count 3 as is admissible on counts 1 and 2 will necessarily be diminished, as such weight as it may have will involve retrospective reasoning.
It is unnecessary at present to finally determine this issue, and, indeed, it may not be possible to finally determine it until the evidence is led. The issue may be influenced by the manner in which Mr Wheatley is cross-examined. But even if it is assumed to be all inadmissible, I am not satisfied that the accused will suffer prejudice which cannot be adequately addressed by appropriate directions.
Thirdly, I do not accept senior counsel for the defence’s submission that the complexities of instructing the jury on all three counts are such as to warrant severance.
Senior counsel for Mr Gregory submitted that the essence of the third count was an agreement whereas that had nothing to do with counts 1 and 2. But this submission does not reflect the manner in which the Crown has indicated that it intends to proceed in relation to counts 1 and 2. The Crown proposes to proceed by way of proving that the four men named in the count were parties to an agreement to conceal Mr Wheatley’s income.[87]
[87]Crown’s Outline of Submissions as to Cross-admissibility of Evidence received 12 October 2009, [14(d)] and footnote 15.
Senior counsel for Mr Gregory suggested that the dishonesty element of the first two counts will be governed by the common law, and in particular Peters v The Queen,[88] whereas the dishonesty element of the third count will be governed by s 130.3 of the Commonwealth Criminal Code. Whilst this is true in theory, at the moment, I cannot detect the practical significance of the difference in this particular case.
[88](1998) 192 CLR 493.
There were other differences between the elements of the respective counts and the directions required in relation to the respective counts upon which senior counsel for the defence relied. It is true that, theoretically at least, there are many differences between the elements which the prosecution must prove on counts 1 and 2 and those the prosecution must prove on count 3, and it may be that different directions on the respective counts will be required. Whilst acknowledging those potential differences, I am unpersuaded that the practical difficulties are so great as to warrant severance.
It seems to me that it will be possible to give the jury appropriate directions of law on all three counts. If, contrary to this conclusion, it is eventually clear that that cannot be done then severance could be ordered during the trial and, given my conclusions as to cross-admissibility, it may not be necessary to discharge the jury in that eventuality.
The application for severance is dismissed.
I will hear the parties on the further directions necessary so as to ensure the trial is ready to proceed on 1 February 2010.
6
11
0