R v Hart
[2010] QDC 296
•5 August 2010
DISTRICT COURT OF QUEENSLAND
CITATION:
R v Hart [2010] QDC 296
PARTIES:
R
(plaintiff)
v
STEVEN IRVINE HART
(defendant)FILE NO/S:
Indictment 1150/09
DIVISION:
Criminal
PROCEEDING:
Application pursuant to s 590AA of the Criminal Code of Queensland for a permanent stay of proceedings relating to indictment 1150/09
ORIGINATING COURT:
District Court
DELIVERED ON:
5 August 2010
DELIVERED AT:
Brisbane
HEARING DATE:
2 and 3 August 2010
JUDGE:
Andrews SC DCJ
ORDER:
Order that the indictment is permanently stayed
CATCHWORDS:
CRIMINAL LAW – JURISDICTION, PRACTICE AND PROCEDURE – STAY OF PROCEEDINGS – where 10 year delay – where prejudice to defendant – where prosecution responsible for significant delay – where prosecution has no excuse – where crucial evidence lost – where case weak – whether direction to jury will suffice – whether permanent stay appropriate
Criminal Code of Queensland s 590AA
Jago v District Court of NSW & Others [1989] 168 CLR 23
Page v The Central Queensland University [2006] QCA 478
R v His Honour Judge Kimmins ex-parte A-G Queensland delivered 21 June 1996 appeal 103 of 1995
Johansen & Chambers (1996) 87 A Crim R 126
Salmat Document Management Solutions P/L vR [2006] WASC 65
COUNSEL:
G McGuire for the applicant defendant
D Kent for the respondent
SOLICITORS:
Guest Lawyers for the applicant defendant
Office of the Commonwealth Director of Public Prosecutions for the respondent
The defendant applies pursuant to s 590AA of the Criminal Code of Queensland for a permanent stay of proceedings relating to indictment 1150/09. The trial is due to commence on 23 August 2010 and to run for four weeks.
The indictment charges the defendant with one count of fraud. The count relies on s 408C(1)(e) of the Criminal Code(Qld). The count is that “Between the twenty-ninth day of June 2000 and the fourth day of July 2000 at Brisbane in the state of Queensland and elsewhere in Australia Stephen Irvine Hart dishonestly caused a detriment to Harts Australasia Limited”.
Harts Australasia Limited is referred to as Harts or as HAL in various material which will be extracted. I will refer to it as Harts. The defendant is referred to by me as Mr Hart though he is referred to in various material extracted herein as Hart.
s 408C(1)(e) of the Criminal Code provides:
408C Fraud
(1) A person who dishonestly—
(e) causes a detriment, pecuniary or otherwise, to any
person;
…commits the crime of fraud.
The prosecution case
The for the purpose of the application the prosecution case at trial was accepted to involve an attempt to prove facts contained in a statement of facts supplied by the prosecution to the defence. Those facts follow:
“Cardinal
Cardinal Financial Securities Pty Ltd (“Cardinal”) was incorporated in 1993 and since that time has been the trustee in relation to various trust schemes. In May 2000 Cardinal’s managing director was Edward Russell. The shares in Cardinal at that time were held by the company Cargill Pty Ltd as trustee for the Cargill Trust. Russell was the director of that company and beneficiary of the trust. Also in May 2000, IOOF Australia Trustees Limited was the trustee of a trust known as the Wessex Multi Strategy Trust (“WMST”). The Trust was managed by Wessex Funds Management Limited. The shares in Wessex Funds Management Limited were owned by Cardinal.
Cardinal held various licences through ASIC which it required to operate its business. Specifically, Cardinal required a licence to be the responsible entity for three specific trusts, one of which was the Cardinal Property Fund No. 1. It was a condition of that licence that Cardinal maintained $5M in net tangible assets (“NTA”).
HAL
HAL was a public company incorporated on 10 February 2000. A prospectus was lodged on 27 March 2000 and $30M was raised in the public float. HAL was listed on the ASX on 24 May 2000.
Steven Irvine Hart (Hart) established the business of HAL when his companies commenced operations in Brisbane in 1979. The original business focussed on provision of traditional accounting services to the small to medium business market. The HAL business expanded its services and operations through amalgamations and alliances with other financial service providers with the establishment of offices around Australia. HAL expanded into New Zealand in the late 1990s. HAL operated under a number of different groups of unlisted entities until July 1999.
The float of HAL enabled the company to purchase various accounting practices across Australia, including what then became known as the “Harts Group”.
The listed HAL Group offered accounting, finance services and insurance. The HAL prospectus stated that the major revenue earner for the Group was to be the Financial Services Division which was referred to as “the Property Division”. This Division, which was based in Sydney, promoted acquisition of residential property for negative gearing purposes. The Division relied on aggressive telemarketing to find clients.
In the minutes of the meeting of the directors of HAL held on 19 June 2000 is the following notation under the heading of “Strategic Plan”:
“Steve Hart advised with respect to funds management negotiations were in place with a funds manager by the name of Cardinal in Sydney with an estimated cost of $4m and a net profit of $800,000.
Any acquisition will be subject to due diligence and in the case of the funds manager the use of Clarke and Kann, specifically John Toigo, will be undertaken.”In these minutes there was no record of a resolution by the Board to purchase Cardinal.[1]
[1]B00051388
In June 2000 Jim McCullagh (Manager of Finance – Administration for HAL) received an email from Hart’s personal assistant requesting that he transfer $5m from Hart’s float account held with the ANZ to another company. At that time McCullagh was one of three signatories (together with Hart and Ian Stevens) on the Hart’s float account which held the $30m raised in the public float.
McCullagh queried Hart as to what the money was for and was told by Hart that the $5m was to enable the purchase of Cardinal. McCullagh asked Hart if there was a “heads of agreement” in place and was told by Hart that there wasn’t any. Hart then told McCullagh that he had Board approval for the purchase of Cardinal. McCullagh declined to transfer the $5m on the basis that the money was going to a company outside the Harts Group and there was no security coming back to HAL.
The next day Hart again approached McCullagh and told him that the money was going on deposit to the National Australia Bank in Sydney and instructed him to transfer the $5m to an HAL account with the NAB in Sydney. Hart provided him with the details of this account. McCullagh then signed the transfer request and the funds were transferred to the HAL account with the NAB in Sydney bearing account number 48820 3556.
This particular account had been established in June 2000 as a result of a telephone call made to Mark Germyn from NAB by an existing client of his by the name of Hamish Watson (“Watson”). Germyn was the business banking officer for Watson. Watson told him that he and Hart of HAL would be opening an account with the NAB in the name of HAL. Germyn told Watson that Hart would need to contact Germyn concerning the opening of the account. Hart subsequently contacted Germyn and completed the necessary documentation to open the account. The signatories for access to the account were Hart and Watson. The contact address for the account was 12 Farnell Street, Curl Curl in Sydney which was one of Watson’s addresses.
This account received a deposit of $5m from the HAL ANZ account on 30 June 2000. Subsequently on Monday 3 July 2000, Germyn received facsimiles from both Hart and Watson authorising the transfer of the $5m from the HAL NAB account to an account with Macquarie Bank in the name of IOOF Australia Trustees (NSW) Limited. The account number for that account was 119-2559-844. After receiving the required authorisations from both Hart and Watson, Germyn arranged for the transfer of the $5m to the IOOF Australia Trustees’ account that same day.
The minutes of the Board of Directors of HAL held on 27 July 2000 under the heading “Cardinal acquisition” is the following notation:
“Update – Clarke and Kann undertaking legal due diligence and reviewing the scope of the licence:
Financial due diligence undertaken by Executive Deputy Chairman has proved satisfactory:
Indemnities are in place: should settle 4 August: composition of Cardinal’s Board still to be ratified:”In these minutes there is no mention of Hart’s advising the Board that $5m was transferred from the float monies of the company to an account with the NAB in Sydney on 30 June 2000 purportedly concerning the acquisition of Cardinal[2] despite the fact that contained in the papers for the Board meeting of 27 July 2000 is a document entitled “HAAL Term Deposit Reconciliation” that shows a sum of $5m as having been transferred to an NAB account in New South Wales.[3]
[2]B00051390
[3]B00051397
In the minutes of the meeting of the directors of HAL held on 24 March 2000 it was resolved that Hart be given approval to himself authorise expenditures for all acquisitions of $1m or less and all capital expenditure of $100,000 or less. Acquisitions or capital expenditure exceeding these amounts required Board approval.[4]
[4]B00056874
The non-executive directors of HAL were unaware that Hart had transferred $5m from the float account of HAL to the NAB in Sydney until sometime in 2001. They all state that they would not have authorised such a transfer to a bank account where one of the signatories to that account was a person unrelated to the HAL Group.
The due diligence report on Cardinal was completed by Clarke and Kann on 24 July 2000 and on that date John Toigo notified Hart by email of the completion of the report and sent him an electronic copy of the report.
As part of the due diligence process Toigo had a number of conversations with Hart. In the period of 26 and 27 June 2000 Hart told him that HAL was going to put $5m into Cardinal which would be invested with Watson who had a management agreement with Cardinal through his company Watson Benefit Services Pty Ltd.
HAL subsequently acquired Cardinal on or about 22 August 2000 by payment of $500,000 in cash and $3.5m of shares in HAL with a deemed issue price of $1.00.
The minutes of the Board of Directors of HAL held on 5 September 2000 record at item 2.5 the fact that Hart advised the Board that the acquisition of Cardinal had been finalised in late-August 2000.[5]
Hart did not inform the Board on this occasion that he had transferred $5m from the HAL float account purportedly to support the NTA of Cardinal. There was also no documentation supplied to the Board regarding the transfer of the $5m.”
[5]B00017810
Change to the dishonesty particulars
The facts of the case which the prosecution proposes to prove at trial changed during the course of submissions. On the second day of the hearing the prosecution discovered that a prosecution witness[6] had materially changed his statement. The argument began with the prosecution submitting as a central fact in its case that:
“Without Board approval, he (Mr Hart) arranged the transfer of $5m to a bank account in Sydney …”
[6]James McCullagh
There was a particular of dishonesty that derived from a statement supporting that fact being a statement of James McCullagh dated 24 April 2003. Because of the change of statement the particular was abandoned. The particular was significant for the case of dishonesty. The abandoned particular was:
“In seeking authorisation of the removal of $5m from Hart’s Australasia Limited (HAL), the applicant, when queried by James McCullagh (Manager, Finance and Administration), originally said (falsely) that he had Board approval;”
It was abandoned during argument when Mr McCullough’s statement of 27 May 2010[7] was discovered by the prosecution to have been obtained for pending civil proceedings by someone assisting the Commonwealth Director of Public Prosecutions. In that later statement Mr McCullagh recalls Mr Hart to have advised him at the relevant time in June 2000 to the effect that he would get board approval. It follows that Mr McCullagh was recanting the statement that Mr Hart said he had board approval. There was no need for board approval for a transfer of $5M between Harts’ bank accounts. There was a need for board approval to pay more than $1M for the purchase of Cardinal. Board approval for the purchase was obtained.
Particulars of the charge
[7]Exhibit 3 paragraph 6
Other particulars of the dishonesty have been given. They were set out in the prosecution’s outline of submissions. The first was deleted orally to reflect the changes by Mr McCullagh. I have renumbered the remaining particulars of dishonesty from (ii) to (iv) to (i) to (iii). The amended particulars follow:
“The circumstances of dishonesty are that:
(i) When the applicant raised it again[8] with McCullagh he said that the money was going to a new Hart’s Australasia Limited account which he had opened in Sydney and (falsely) that he was the sole signatory to that account;
(ii) The applicant sought to hide the transaction by arranging for the funds to be placed in an account styled in the name of Hart’s Australasia Limited but which had no relationship with the company and of which a co-signatory was an unrelated person being Hamish Watson; and
(iii) The applicant led the company secretary, Ian Stevens, to believe that the $5m was in a Hart’s account in Sydney and was available to Hart’s, something which was not true from the moment the money was transferred into the account to which a non-Hart’s person was a signatory, and was further aggravated on 3 July when money was transferred (with Hart’s knowledge and participation) out of the NAB account, to entities completely outside the Hart’s Group.”
[8]An authorisation he sought from McCullough for a withdrawal of $5M from Harts’ bank account or accounts
Particulars of the detriment were set out in the prosecution’s outline of submissions as follows:
“The detriment suffered by Hart’s was that it was public float monies which were being used and that $5m was a significant proportion of the $30m raised. Furthermore, the unauthorised removal by the applicant of the funds placed those monies outside the control of Hart’s.”
Further particulars were set out in the prosecution’s outline of submissions as follows:
“It is the Crown case that it was the applicant’s deliberate actions which armed Watson with the access to the funds, thus putting them at risk (a risk which eventuated). However, as the Crown is not privy to the arrangements between Hart and Watson, the Crown does not accept that Watson was the sole cause of the loss.”
The prosecution further explained that “applicant’s alleged intentions to acquire Cardinal, or whatever else may have been the eventual intention, is not of central relevance to the prosecution case. The essence of the fraud is the dishonest removal of the money from the company’s control.” Prosecuting counsel accepted that the prosecution case does not allow for a guilty verdict unless it proves a dishonest removal of funds from the account and accepts that depends upon the recollection of Mr Germyn that on 3 July 2000 he received a facsimile from Mr Hart allegedly authorising the transfer of the $5m from the Harts’ NAB account to an account with Macquarie Bank in the name of IOOF Australia Trustees (NSW) Limited.
Delay
In respect of the prosecution’s conduct of this matter, a short chronology follows:
·June/July 2000 alleged offending conduct
·2001 ASIC investigations were being conducted and ASIC was aware of the evidence which is the now the basis of the charge.
·12 July 2001 – Sally Stephens of National Australia Bank sent facsimile message to ASIC investigator K Law advising with respect to the Harts’ account with the NAB in Sydney and the transfer from that account on 3 July 2000 that “the Business Banker for this account is unable to locate the original fax for the transfer but is able to supply the following details: … the funds were transferred to an account in the name of Cardinal Financial Services. This transfer was completed after a fax authority was received. My source of information has only been from an e/mail received from the Business Banker of Harts Australasia Limited.”
·26 July 2001 – Ms Stephens of NAB wrote to K Law of ASIC advising that she had spoken to Mr Germyn, an NAB business banking officer for Harts Australia, to advise that ASIC will be serving him with a notice to produce further information regarding the account and that he “advised that he is still unable to locate the original file in regards to this company and has limited knowledge without this file.”
·2 August 2001 – Mark Germyn was interviewed by ASIC and the interview was to be tape recorded. The tape malfunctioned.
·May 2003 – A statement was taken from Mr Germyn. It was the first statement recorded after the malfunction of a tape in August 2001. The statement provided, inter alia “I am unable to locate the original file for this customer. I recall that this account was established in June 2000 as a result of a telephone call I received from an existing NAB client, Hamish Watson. I was the business banking officer for Hamish Watson … I later received a telephone call from Mr Hart and I told him that in order for HAL to open an account he would need to supply NAB with the following information:
(a) business registration form;
(b) certificate of incorporation;
(c) record card signed by those persons who had access to the account.
I recall that I subsequently received the abovementioned documents and an account was opened in the name of HAL … I recall that the contact address for HAL was given as 12 Farnell Street Curl Curl … Some time on the afternoon of 30 June 2000 I received a telephone call from Hamish Watson. During this conversation I told Mr Watson that a transfer of funds from (the) account … would need to be authorised in writing by both himself and Steve Hart. On Monday 3 July 2000 I received facsimiles from Mr Hart and Mr Watson authorising the transfer of $5M from the HAL account … to an account with Macquarie Bank in the name of IOOF Australia Trustees (NSW) Limited…”
·November 2007 – Mr Hart charged with the offence the subject of this application.
·21 December, 2007 - Matter listed for Committal to commence 21 April, 2008.
·8 April, 2008 - Defence applied for adjournment (not opposed) as Hart would be unrepresented. Matter relisted for 4 June, 2008.
·30 May, 2008 - Defence applied for, and granted, adjournment for further preparation (late service by Crown of some documents). Matter relisted for 16 June.
·16 June, 2008 - Defence sought further adjournment. Matter listed for 2 days, 7 and 8 August, 2008.
·9 July, 2008 - Hart’s solicitors withdrew. Matter now estimated to take up to 5 weeks as Mr. Hart is now unrepresented.
·Matter later set down for 10 days to commence 12 January, 2009.
·7 January, 2009 - Adjournment granted as Mr. Hart is now to be represented and matter to be Hand-up.
·Mr. Hart makes submission dated 10 February, 2009.
·23 February, 2009 - Committed for trial.
·6 May, 2009 - Mr. Hart advised submission unsuccessful.
·11 May, 2009 - Indictment presented in Brisbane District Court.
·10 June, 2009 - Listed for trial to commence 6 April, 2010.
·13 October, 2009 - Relisted to commence 16 August 2010 (after application by Mr Hart).
·14 July 2010 – Further statement from Mr Germyn that “I recall that Hamish Watson rang me several times on 30 June 2000, wanting to know when the $5m had been credited to the Harts Australasia Limited (HAL) account. I advised Watson when the money arrived late in the afternoon of 30 June 2000. I advised Watson that the funds could not be transferred that day as it was too late in the day and an authority from each signatory to the account was required. … I recall seeing the authority from Hart which was faxed as it was preceded by (07). … When an account is closed all the relevant documentation is sent to the storage centre for NAB at Regent’s Park, Sydney. Once a file is sent to Regent’s Park no individual employee of NAB can access those files. It can only be accessed via a request from head office (this at least was the practice whilst I was at NAB. Once I was aware the file could not be located I continued to look for it on a regular basis over a 12-14 month period.”
·26 July 2010 – A further statement was taken from Mr Germyn: “I recall that there were two signatories to the account; there was only one record card which was signed by both Hart and Watson. I recall that as Watson was in Sydney it was easier for him to sign it first then it was sent up, signed, to Hart’s offices. … The signatory card, which had been signed by Watson, was sent up to Hart and was returned back via fax, signed, together with the 100 point identification.”
·Matter later relisted for 23 August 2010 (on Crown application).
It is not suggested that the delay by the DPP is unlawful, deliberate or tactical but Mr Hart’s counsel seeks to take advantage of the absence of explanation for it. The prosecution concedes that it was possible to charge Mr Hart between 2001 and 2003 and ideally, it should have charged him then even if it meant delaying the prosecution of this matter while it proceeded serially with other matters against Mr Hart. It submits the delay in charging Mr Hart is understandable given the complex and varied nature of the litigation involving Mr Hart and the collapse of Hart’s Australasia Limited. The relevance of the collapse of Harts to the delay in charging Mr Hart or otherwise to the delay in prosecution of this matter was not explained. The other litigation with Mr Hart was significant.
In May 2004 Mr Hart was convicted of tax fraud charges which involved allegations from 1996. He was sentenced to four years imprisonment. He appealed. His conviction was quashed on appeal and he was released from prison after having served nine months. The prosecution was not continued.
In June 2005, Mr Hart was sentenced to seven years imprisonment to serve three and one-half years in relation to another matter.
There was another matter in respect of which Mr Hart was prosecuted (but not convicted) involving Hart’s. This was a complaint issued in 2006; an indictment presented in 2007; a jury unable to reach a verdict in 2008; and a nolle prosequi entered on 19 January, 2009.
Delay can affect the fairness of a trial. Memory degrades and witnesses may compensate by reconstructing events. The consequence of delay upon memory and fairness was recently considered in a civil appeal by Keane JA as his Honour then was in Page v The Central Queensland University [2006] QCA 478 at [24]:
While it is true to say that the court will be reluctant to deny a litigant with an arguable case the opportunity for a fair trial of his or her claim, it must be emphasised that the opportunity in question is the opportunity for a fair trial. The court is not in the business of preserving the opportunity to conduct solemn farces in which parties and witnesses are invited to attempt to reconstruct recollections which have long since disappeared. Such a trial would not be fair for either party.
The prosecution submitted: “The Crown takes on board the counsel of perfection advanced by my learned friend to the effect that what should have happened is that in 2001, or perhaps it was 2003, the prosecution should have charged Mr Hart with everything and then spend the next number of years prosecuting him seriatim. That's not what happened. The only thing pointed to by the prosecution is that a number of other matters, as your Honour outlined in discussion with my learned friend, were occupying the minds of the investigators and this one just wasn't done because it seems likely that they were doing other things until 2007.”
When did ASIC complete its investigation? Defence counsel submitted it was complete at least four years before Mr Hart was charged. He also submitted “this matter was firmly within the knowledge of the authorities in 2001. I mean, Ms Law is seeking documents in 2001. The investigation is started in 2001”. The prosecution did not dispute the accuracy of these matters.
The prosecution’s further submission that the delay in charging Mr Hart is understandable was not a submission that the delay was justified or reasonable. The prosecution did not call evidence that or argue that the delay was based upon a need for time to consider the evidence gathered, or to further investigate, or to find more evidence or to take advice or that there was any basis consistent with reasonable expedition. It conceded that 10 year delays in prosecutions of sexual offences committed against minors are not considered “extraordinary” in that context but that outside the context of prosecutions for sexual offences, shorter delays can be “extraordinary”. It submitted that to find the delay in this case “extraordinary” would be harsh. Despite this, the prosecution offers no explanation for why the charge was not made in 2001 to 2003. The prosecution presented no evidence as to what would be considered a reasonable delay in the circumstances of this case.
Mr Hart was charged in about November 2007.
Evidence essential to the prosecution case
Two witnesses’ recollections are central to the prosecution case of dishonesty, Mr McCullough’s and Mr Germyn’s.
The matter crucial to the prosecution which Mr Germyn recollects is his receipt of a facsimile which Mr Germyn alleges had the appearance of being sent by Mr Hart on 3 July 2000 to him authorising the payment from the National Australia Bank account of Harts in Sydney to an account with Macquarie Bank in the name of IOOF Australia Trustees (NSW) Limited. The facsimile allegedly received by Mr Germyn is lost. A sender’s copy cannot be found among the documents copied by investigators from Harts’ documents held by its liquidators. Computer searches do not reveal it.
That evidence of Mr Germyn is the essential, factual basis of the particular of dishonesty against Mr Hart which is at (iii) and of the component of that particular “money was transferred (with Hart’s knowledge and participation) out of the NAB account”.
The matter crucial to the prosecution which Mr McCullagh recollects is that Mr Hart told him in June 2000 that Mr Hart was the sole signatory to the Harts’ account with the NAB in Sydney.
That evidence of Mr McCullagh is the essential, factual basis of the particular of dishonesty against Mr Hart which is at (i) and of the component of that particular that Mr Hart “said that … he was the sole signatory to that account”.
It is particulars of dishonesty (i) and (iii) which are the primary particulars of dishonesty.
Particular (ii), while apparently different from (i) is dependent upon proof of the same evidence by James McCullagh to establish the component of particular (ii) that Mr Hart sought to hide the transaction. It cannot be suggested that Mr Hart sought to hide the transfer of $5M to the account in Sydney. There is no dispute that Harts was, subject to due diligence, proposing to purchase Cardinal. Mr Hart asked Mr McCullagh to authorise the transfer to that account. The matter implied in dishonesty particular (ii) that Mr Hart sought to hide Mr Watson’s existence as a co-signatory is based primarily upon proof of a lie to McCullagh that Mr Hart was the sole signatory.
The balance of particular (ii), that the account had no relationship with Harts, is a separate and distinct matter which might be material if it was supported by the evidence. It is not consistent with the evidence. The proper inference is that the account did have a relationship with Harts. To open the account Mr Germyn required documents relating to Harts and proving its incorporation and opened the account in the name of Harts and did not regard the account as belonging to some other entity using the name Harts Australasia Limited as an alias. It is a reasonable inference that the bank required an authority purporting to be from Harts authorising Mr Watson as a co-signatory to the account. Had it so chosen, Harts could have instructed the National Australia Bank and Mr Germyn at any time that the authorisation given for Watson to act as a co-signatory was withdrawn. The evidence is that Mr Watson was regarded by the bank as only a co-signatory with respect to the account and that the bank would not transfer funds from the account upon his authority alone but would also require the authority of the other co-signatory Mr Hart. The account was not in Mr Watson’s control without fraud by him. It may arguably have been under the control of Mr Watson and Mr Hart and therefore not under the exclusive control of Harts unless and until Harts advised the bank that its authority to Watson was withdrawn. That is not the basis upon which the prosecution uses particular of dishonesty (ii). It is in those circumstances that I find that particular of dishonesty (ii) does not provide a basis for the prosecution case which is independent of particulars (i) and (iii).
Prosecuting counsel helpfully explained that with respect to particular (ii) of dishonesty that it had been poorly expressed but that really it focuses on the concealment of the co-signatory rather than the concealment of the account and to that extent it does not add much to particular of dishonesty (i).[9]
Strength of the prosecution case
[9]T2-40 lines 32 to 38.
This court does not have discretion to stay a prosecution on the sole ground that a case is weak.[10] The defence submits that the prosecution case is very weak and that weakness is a relevant consideration relying upon authority.[11] The application is not brought on the basis that it is so weak that it should not be left to a jury. It is accepted by the prosecution that weakness of the prosecution case is a factor relevant to consider with other matters relevant to the exercise of a discretion.[12] I proceed on that basis.
[10] R v Ferguson; ex parte A-G (Qld) [2008] QCA 227 at [62] and [64]
[11]Salmat Document Management Solutions P/L vR [2006] WASC 65 at [44] and R v Noyes [2003] QCA 564
[12]T2-53 l 2
The first weakness in the Crown case which is relied upon by the defence requires an understanding of matters relating to Mr Hamish Watson. The $5 million deposited into the Harts’ account with the NAB in Sydney was transferred from that account on 3 July 2000. Mr Watson had been telephoning the NAB officer Mr Germyn on Friday afternoon of 30 June 2000 concerned about when the funds would arrive. The transfer of the funds from the account was initially to a bank account of IOOF Australia as trustee for the Wessex Multi-Strategy Trust which was managed by Wessex Funds Management Limited. Mr Watson was not related to IOOF Australia. Within days, Mr Watson was least partly responsible for removing IOOF Australia as trustee and for the appointment of Cardinal as trustee. Cardinal by that time was being managed by Mr Watson and a Mr Russell. By 7 July 2000, the funds had been transferred to a bank account in Cardinal’s name and Mr Watson had some access to the funds in Cardinal’s account.
In a letter sent by ASIC dated 2 September 2002 it was asserted that “evidence obtained by ASIC indicates that Watson thereafter used a large proportion of the money for his own use and without the knowledge of Steve Hart.”
Though Watson was investigated by ASIC by 8 July 2003 he was not charged with a criminal offence but was banned from acting as a financial advisor for a period of three years. In a press release of 8 July 2003, advising of the ban, ASIC noted:
“ASIC found that Mr Watson represented to the directors of Cardinal that $5 million invested by Harts in a registered fund by Mr Watson had been placed in secure blue chip shares, when in fact this was not the case. ASIC also found that in late 2000, Mr Watson, via two private companies associated with him, Blackshort Pty Ltd and Watson Benefit Services Pty Ltd, created the appearance of active trading in Harts shares, through washed or matching orders.”
The defence identifies as a weakness in the Crown case, a plausible argument that Mr Watson fraudulently authorised Mr Germyn on 3 July 2000 to transfer funds to IOOF Australia as trustee. He arguably had motive, propensity for forgery and a unique capacity to take advantage of the opportunity.
It is accepted by prosecuting counsel that documents within exhibit 1 are copies of evidence which tends to show that Watson and others perpetrated a fraud on the directors of Cardinal, and by extension, Harts Australasia Limited, by falsely representing that Watson had invested $5 million in Cardinal and that the funds had been invested in blue chip shares. It was accepted by prosecuting counsel that other documents within exhibit 1 allowed for an inference that the purpose of the fraud was to falsely claim that the value of nett tangible assets of Cardinal was a figure of $5 million and that therefore Cardinal was an attractive proposition for Harts Australasia Limited to purchase for about $4M.
There is other evidence within exhibit 1 which the prosecution concedes is evidence that Watson and possibly others committed a fraud on another company Advan and that as part of that fraud documents were forged.
The prosecution concedes that the documents referred to show Watson to be a dishonourable man capable of forgery, or at least that that is an available inference from them.
The prosecution is not calling Mr Watson as a witness at the trial. It was explained by prosecuting counsel that “the Crown tends to call people that can be believed and so if the defence would have it that he’s the crook that they’re alleging, they can hardly complain if the Crown doesn’t call such a person.”
Defence counsel submitted that Watson’s fraudulent activities led to the loss of the $5 million by Harts. He submitted that Mr Hart was the largest shareholder of Harts and that the failure of Harts led to the personal bankruptcy of Mr Hart. These submissions of fact were not objected to by the prosecution. It was submitted, with respect to the strength of the Crown case, that Mr Hart, as a shareholder of Harts, had an interest in preventing such a fraud.
The second weakness in the Crown case which is relied upon by the defence is the weakness of the evidence of the witness Mr Germyn. The evidence of Mr Germyn is the primary evidence upon which particular of dishonesty (iii) is based. Without Mr Germyn’s evidence that on Monday 3 July 2000 he received a facsimile from Mr Hart authorising the transfer of $5 million from the account, there would be no Crown case. The prosecutor explained that the essence of the fraud alleged against Mr Hart is the dishonest removal of the money from the company’s control and that that depends upon proof that Mr Hart sent the fax.
Mr Germyn’s recollection of a receipt of a fax from Mr Hart is secondary evidence of a lost document. The original facsimile, if it was received by Mr Germyn, would have been placed in a bank file. The file cannot be found. The liquidators of Harts provided access to ASIC of any documents from Harts. There is no record among the documents or computers from Harts of a document transmitted by facsimile to Mr Germyn. Mr Germyn ought not to have authorised a transfer of funds from the account unless he received authorisations from both Mr Watson and Mr Hart. To concede the possibility would be to concede the possibility of negligence by him.
The defence has identified several matters which cast doubt upon the reliability of Mr Germyn’s recollection. A document which has not been lost with the file was an electronic document being a request which Mr Germyn sent to the transfer department of the bank on 3 July 2000 authorising the transfer of the funds to Macquarie Bank. That contemporaneous document notes “By order of Harts Australasia Limited (Hamish Watson)”. The significance is that it did not also refer to Mr Hart. Another feature of that internal document is that it requests that a fee of $35.00 be debited to the account of Blackshort Pty Ltd. That is a company related to Mr Watson.
On 12 July 2001 Sally Stephens from NAB wrote to ASIC referring to details she obtained from “the Business Banker for this account” and saying that person was able to supply details that “this transfer was completed after a fax authority was received.” That is inconsistent with the later recollection of Mr Germyn included in his statement namely that there were two facsimile authorisations received. A further feature of the same letter by Ms Stephens to ASIC is that the details she was supplied by the business banker included the detail that the transfer was to an account in the name of Cardinal Financial Services. The transfer on 3 July 2001 was not to an account of Cardinal Financial Services but was to an account of IOOF Australia with Macquarie Bank. A transfer was made subsequently from the Macquarie Bank account of IOOF Australia to Cardinal.
It was advised by Ms Stephens on 26 July 2001 that Mr Germyn “advised that he is still unable to locate the original file in regards to this company and has limited knowledge without this file.”
The statement obtained from Mr Germyn on 14 July 2010 adds the feature which is particularly relevant that “I recall seeing the authority from Hart which was faxed as it was preceded by (07).” Mr Germyn was not examined before me. I am unable to say whether the addition of this detail after the passage of 10 years makes his evidence more reliable or less. The fact that he recalls it was from Mr Hart because of its area code is disconcerting. It suggests either that the reason he recalls it to have been from Mr Hart is something other than the name of the purported sender or that he is seeking to argue for the accuracy of his recollection by a detail which he lately recalls without explanation.
It was demonstrated that it is easily done to make a facsimile received bear a telephone area code which is different from the area code from which the facsimile was actually sent. Whatever significance is to be given to Mr Germyn’s late recollection of the area code “07”, it is not conclusive proof that a facsimile, if it was received by him bearing that area code, was sent from Queensland or from Mr Hart.
A third weakness in the prosecution case identified by the defence is the reliability of the evidence of Mr McCullagh. Mr McCullagh in 2003 omitted to include in his statement the significant detail that Mr Hart told him that Mr Hart would get board approval. In 2010 Mr McCullagh remembered that significant detail. The detail was so significant that it has now caused the Crown to abandon its first particular of dishonesty. The prosecutor accepted that the change in the statement was material and that it further weakens the prosecution case.[13]
[13]T2-42 l21 and T2-44 l47.
The crucial evidence of Mr McCullagh which is the basis for particular of dishonesty (i) is his recollection, unsupported by any note, that Mr Hart told him that he was the sole signatory to the account in New South Wales. The case depends upon the jury accepting the accuracy of the conversation recalled from 10 years earlier, perhaps with the refreshing of memory from a statement made in 2003.
I accept that the prosecution case is weak because of its dependence upon the 10 year old recollection of Mr Germyn of the contents of a file in circumstances where other documents created in 2000 and 2001 and his improving memory in 2010 each will cause concerns for the reliability of Mr Germyn and of his memory. It is also weak because it incidentally depends upon the 10 year old recollection of Mr McCullagh of a conversation with Mr Hart in circumstances where his memory has changed in a material respect in 2010. This adds to the concern as to the reliability of his memory. The prosecution accepts that a forceful attack can be made on the memory of Mr Germyn. It did not submit that its case is not weak.
The missing bank file
The file maintained at the branch of the NAB in Sydney relating to the account of Harts has not been located. The prosecution submitted that the evidence indicates that the file has been irretrievably lost, probably in the bank’s Regent’s Park storage facility. I was not referred to the evidence relied upon but assume it to be based upon the evidence of Mr Germyn extracted and set out by me in the short chronology above. There is no evidence before me of a request having been made to the controller of the Regent’s Park storage facility or of the controller’s opinion as to the difficulty involved in retrieving the file. The defence did not take issue with the prosecution submission about what the evidence indicates. If I assume the correctness of the submission that the file is irretrievably lost, I have no evidence as to when that occurred, and whether it occurred before the prosecution ought to have charged Mr Hart. The possibility remains that the file was retrievable at some time between 2001 and November 2007.
The defence submitted that it seems that the file has been lost. The defence did not attempt to prove its loss or refer to evidence of its loss. That issue is one upon which the prosecution will bear an onus if it is to rely on the secondary evidence of its contents which would be given by Mr Germyn.
The prosecution concedes that the applicant raises the valid argument that the absence of the file means that the applicant is denied the opportunity of exploring its contents and making use of whatever advantages they may have provided.
The defence submits that by the loss of the file the defence has lost the possibility of proving:
· that there was no facsimile on file purporting to be from Mr Hart and authorising the transfer of funds from the account on 3 July 2000;
· that Mr Germyn is mistaken;
· that if such a document was within the file, that it was a forgery;
· whether the facsimile number on the alleged facsimile from Mr Hart was a genuine number;
· that there was a document signed by two persons from Harts authorising the appointment of Mr Watson as a co-signatory to the account. That evidence would show that Mr McCullagh or perhaps some other person at Harts knew that Mr Watson was a co-signatory, weakening the prosecution case that Mr Hart dishonestly told Mr McCullagh that he was the sole signatory to the account;
· that someone other than Mr Hart authorised an address at Curl Curl in Sydney to which Mr Watson had access as the address for the account.
In accepting the nomination of Mr Watson as a co-signatory for the account the bank required an authority from Harts to that effect. It was the practice at Harts for two persons to sign an authorisation such as this. This was evidence given from the bar table without protest from the prosecution. Evidence was given from the prosecution from the bar table, without protest from the defence, that Mr Germyn would not have concerned himself if only one person from Harts had purported to authorise Mr Watson as a co-signatory with Mr Hart at Harts though he could not rule out that the form contained the name of a second officer from Harts purporting to authorise Mr Watson to be a co-signatory to the bank account. It is uncontentious that a form from Harts was on the file and that it authorised Watson to be a co-signatory.
Prosecuting counsel accepted that the absence of the file is central to the application and that its loss is significant. In his written submissions he accepted that there was prejudice to the defendant in respect of the delay. In argument I raised the possibility that prejudice caused by loss of the file might not be caused by the prosecution. Following that, in oral submissions prosecuting counsel submitted that the prejudice arising from loss of the file was not one specifically associated with the delay in charging Mr Hart but was associated with the loss of the file.
As there is very little evidence to support the contention that the file is lost and no evidence as to when the file was lost matters of onus of proof are relevant. In R v His Honour Judge Kimmins ex-parte A-G Queensland[14] in the judgment of the Court it was relevantly observed:
“An application for a stay is, like most other matters in our courts, an adversarial proceeding. The onus lies upon a person seeking a stay (presumably, an accused) to place before the Court evidence sufficient not only to enliven the judge’s discretion but also to warrant its exercise. The evidence before the judge in the present case was sufficient in both respects. An accused in such a situation does not have any onus to place all possible evidence which might exist before the Court – that would be absurd. If the Crown asserts that there is other evidence in existence which bears upon the issues, it carries an evidentiary onus to tender it. That is particularly so in a case such as the present where the principal person who could have given the relevant evidence was the complainant. Under no circumstances does the trial judge have a responsibility to enquire into the evidence, and nothing in Jago suggests that he does. His task is to exercise his discretion on the totality of the evidence placed before him by the parties.”
[14]A decision of Davies JA McPherson JA and Fryberg J delivered 21 June 1996 appeal 103 of 1995.
I proceed with the awareness that the prosecution intends to prove the content of the bank file by the recollection of Mr Germyn. A premise for that is that the Crown will establish that the file is lost because it is impossible or impractical to retrieve it from the bank’s storage facility to which it was sent. Onus of proof of these matters is upon the Crown. It is likely that the Crown has knowledge of the evidence relating to proof of loss of the file. It is appropriate that the prosecution bear an evidentiary onus to support its contention that the prejudice suffered by the defendant by the loss of the National Australia Bank file was caused independently of the delay in charging Mr Hart. When I come to consider the exercise of the discretion, I will do so on the basis that the prosecution’s delay in charging Mr Hart may be a cause of the prejudice to the defence arising from the file’s loss. That is, I will do so on the basis that the file’s loss may have occurred at some time after the prosecution ought to have charged Mr Hart and that it may not have been lost if the charge had been brought earlier.
Other relevant prejudice
The defence submits that it is prejudiced by the effect of the delay on the reliability of the memories of witnesses. The submission was combined with a reference to the potential for a warning such as a Longman direction.[15] Implicit in the submission is a submission that it is difficult for the defendant to assemble his own witnesses to contradict the evidence of Mr Germyn and Mr McCullough and that the defence will have difficulty in testing the alleged recollections of those two witnesses and that the difficulties arose because of the delay between 2001 and November 2007 when Mr Hart learned that he was being charged in respect of the events between 29 June and 4 July 2000.
[15]Longman (1989) 168 CLR 79.
The defence submits that the prejudice is worse because of the involvement of Watson and the Prosecution’s failure to call him. I accept that.
Principles and their application
The power of a Court to stay criminal proceedings, in similar cases was considered in Jago v District Court of NSW & Others [1989] 168 CLR 23. At page 30 Mason CJ observed –
“In essence then, the power to prevent an abuse of process in this context is derived from the public interest, first that trials and the processes preceding them are conducted fairly and, secondly, that, so far as possible, persons charged with criminal offences are both tried and tried without unreasonable delay. In this sense, fairness to the accused is not the sole criterion when a court decides whether a criminal trial should proceed.
His Honour also affirmed what was said in Maevao v Department of Labour [1980] 1NZLR 464 @ 482 –
“The yardstick is not simply fairness to the particular accused. It is not whether the initiation and continuation of the particular process seems in the circumstances to be unfair to him. That may be an important consideration. But the focus is on the misuse of the Court process by those responsible for law enforcement. It is whether the continuation of the prosecution is inconsistent with the recognized purposes of the administration of criminal justice and so constitutes an abuse of the process of the Court.”
At pages 33 – 34 his Honour observed (references deleted)–
“The test of fairness which must be applied involves a balancing process, for the interests of the accused cannot be considered in isolation without regard to the community’s right to expect that persons charged with criminal offences are brought to trial: … At the same time, it should not be overlooked that the community expects trials to be fair and to take place within a reasonable time after a person has been charged. The factors which need to be taken into account in deciding whether a permanent stay is needed in order to vindicate the accused’s right to be protected against unfairness in the course of criminal proceedings cannot be precisely defined in a way which will cover every case. But they will generally include such matters as the length of the delay, the reasons for the delay, the accused’s responsibility for asserting his rights and, of course, the prejudice suffered by the accused… In any event a permanent stay should be ordered only in an extreme case and the making of such an order on the basis of delay alone will accordingly be very rare: Re Cooney.
To justify a permanent stay of criminal proceedings, there must be a fundamental defect which goes to the root of the trial “of such a nature that nothing that a trial judge can do in the conduct of the trial can relieve against its unfair consequences”: Barton, per Wilson J”
Prosecuting counsel nicely described some relevant matters: “I might pause to summarise so far by saying that in these kinds of cases, as in all kinds of cases dealing with principle and the application of principle, there is a continuum and really, it's a matter for the Court's decision at the end of the day where on the continuum this particular matter falls, whether it falls short or past the line on the continuum which compels a stay. Now, I'm attempting to delineate the Crown's position about it all. As I concede in my outline, the circumstances are far from ideal and as I've already conceded today, there's been a change in circumstances during the hearing of this case which my learned friend is correct to say further weakens the Crown case.”[16] He submitted that the circumstances could be addressed by robust direction
[16]T2-44 L 35
Before considering the extreme remedy of a stay courts must consider whether there are other ways to address unfairness to a defendant, including by robust directions. The defence submitted that the unfairness cannot be remedied by a direction given to the jury. In Salmat[17] McKechnie J observed that it may be too optimistic a picture of judicial skill to suggest that forthright directions to a jury can virtually eliminate unfairness where there has been lengthy delay and important material no longer exists. Prosecuting counsel accepted that his Honour’s view was realistic,[18] but submitted that in the continuum of cases where courts must intervene to prevent unfairness to a defendant, that it is only at the extreme end when a trial judge cannot adequately protect a defendant with robust directions. No protections other than a permanent stay or a robust direction were suggested.
[17]Op. cit.
[18]T2-45 L35.
The prosecution submitted that the problem of fading memories was greater for it as the onus bearer. I accept that to be so. That prejudice is one for which the prosecution is primarily responsible. The defendant is not responsible. The fairness of the trial from the defendant’s viewpoint is impaired because on the crucial issue of dishonesty Mr Germyn will be relying on his memory of a two documents seen 10 years before and Mr McCullagh upon a sentence spoken ten years before. No matter how honest they are, the possibility of reconstruction after 10 years seems great. It does recall to mind the description of a “solemn farce”.
I turn attention to the four factors which were said by Mason J to generally be included in the proper matters for consideration in applications for a stay.[19]
[19] Jago op. cit at p. 33
The delay relied upon is the period from 2001 until November 2007. The reasons advanced by the prosecution in this case are set out above. The delay is effectively unexplained. The defendant is not to be blamed for the prosecution’s delay. It was not submitted that he bears responsibility for delay before he was charged in November 2007. He was serving a sentence of imprisonment at that time. He has not been criticised for his part in delay since November 2007. The prejudice of fading memories is a problem of the prosecution’s making. It cannot be blamed on a complainant’s failure to come forward and has not been attributed to complexity or evidence gathering. The defendant can emphasise this problem by cross-examination and in address. That will not make the memories more reliable.
The problem of fading recollections and other prejudice resulting from delay in trials affects fairness but only in exceptional cases does it result in a stay. It is exceptional that the responsibility for the initial delay is the responsibility of the prosecuting authority. It is relevantly a delay of about four to six years from 2001 or 2002 or 2003 until November 2007. I refer to the delay from when the defendant should have been charged. It is exceptional that the reasons for the prosecuting authority’s delay are unexplained and more so where prejudice arising from the delay is conceded.
The lost opportunity to prepare a defence at an early time and the attendant prejudice is also a problem of the prosecution’s making. It is a problem which is often the subject of directions by a trial judge. I am pessimistic that as trial judge in summing up after a 4 week trial of this matter I can effectively apprise the jury of the forensic disadvantage faced by the defence with respect to the crucial evidence of Mr Germyn and Mr McCullagh because of the delay in bringing a charge to the notice of the defendant. The possibility for a jury being distracted from the issues of forensic disadvantage and reliability of witnesses must increase in a long trial about financial and company activities. The prejudice caused by loss of the bank file is significant and overcoming that prejudice is made more difficult because of the delay. The loss of that file may have occurred during the period of the prosecution’s unexplained delay and it may not have been lost if the charge had been brought earlier and attention focussed upon its critical importance.
A fifth important matter is the public interest in conviction of persons guilty of crime. The public has an interest also in ensuring fair trials and that judicial processes are not abused and that innocent persons are not convicted and that public confidence in the administration of justice is maintained.[20]
[20]Johansen & Chambers (1996) 87 A Crim R 126 at 131 per Fitzgerald P
The adjectives appropriate to describe the delay have been the subject of submissions. “Extraordinary” is said to be too harsh. Unexplained and prejudicial and lasting for 4 to 6 years after the defendant should have been charged are each apt descriptions and relevant to the exercise of the discretion.
The prosecution accepts that default on its part in pre-trial procedures is relevant. It accepts that its failure to know until this application was being argued that its material witness, Mr McCullagh, had provided another statement in 2010 to a different litigation team concerned with a pending civil trial and that the statement was inconsistent with the first particular of Mr Hart’s dishonesty is properly called a default in pre-trial procedure. That does not warrant the remedy of a stay. I regard the prejudice caused by and during the delay as more relevant.
I accept the prosecution submissions that improper purpose and impropriety are not established against it. That is relevant but neither is an essential prerequisite for the grant of a stay.
Conclusion
The prosecution has a weak case with respect to dishonesty. The case depends upon the reliability of the memories of two witnesses of events of a week in mid 2000. The delay has impaired that reliability. The prosecution was assembling evidence from 2001. It should have charged the defendant between 2001 and 2003. It waited until November 2007. It offers no explanation for waiting. The defendant has had less opportunity to gather useful evidence because of the delay. The more important of the two prosecution witnesses, Germyn, is to give secondary evidence of the contents of a bank file to prove a fax from the defendant authorising a transfer of funds. The receipt of a genuine fax from Mr Hart is an essential premise of the prosecution case without which it fails. Germyn will also give secondary evidence of an authorisation in that file. It was from Harts authorising one Watson as a co-signatory to the bank account. The defendant’s ability to challenge the existence of the fax or its authenticity is prejudiced by the loss of the file and the effect the delay has had on Germyn’s memory. The file may have become lost after the prosecution should have charged the defendant. The prosecution’s delay may have been a cause for the parties’ inability to access this crucial evidence. The prosecution called no evidence to show when the file became lost and it is a matter it could be expected to have evidence about. The defendant’s ability to challenge the evidence of the second witness, McCullagh, on the essential sentence he recalls is prejudiced by the loss of the authorisation from Harts of Watson as a co-signatory to the bank account and by the effect the delay has had on McCullagh’s memory and prejudiced by the late notice to the defendant of the charge. The defendant’s best opportunity to challenge the evidence of McCullagh was by reference to the lost file. There is evidence of Watson’s defrauding parties at the material time and of forgery. His fraudulent forgery of the fax from the defendant is to be argued at trial by the defence. He is not being called.
The prejudice to the defendant cannot be adequately compensated for by a direction to the jury at the end of the proposed trial. The trial will not be a fair one from the defendant’s point of view. The unfairness has arisen largely from the delay by the prosecution in charging the defendant. The prosecution is primarily responsible for the prejudice. It offers no excuse for its failure to charge.
A permanent stay of the indictment is appropriate.
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