R v Petroulias (No. 8)

Case •

[2007] NSWSC 82

•

15 February 2007

No judgment structure available for this case.
CITATION: R (Cth) v Petroulias (No. 8) [2007] NSWSC 82
HEARING DATE(S): 30 January 2007, 31 January 2007, 5 February 2007, 6 February 2007, 7 February 2007, 8 February 2007
 
JUDGMENT DATE : 
15 February 2007
JUDGMENT OF: Johnson J at 1
DECISION: The application of the Accused under s.138 Evidence Act 1995 to exclude evidence obtained pursuant to telephone intercept warrant and search warrants is refused.
CATCHWORDS: CRIMINAL LAW - admissibility of evidence obtained under telephone intercept warrants and search warrant - whether evidence improperly obtained under s.138 Evidence Act 1995 - defence contention that false and misleading information included in warrant applications - defence contention that senior Australian Taxation Office officer deliberately and intentionally provided false and misleading information to police officers making warrant applications - held that some information in warrant applications was inaccurate - held that inclusion of inaccurate information was not deliberate, intentional or reckless - whether inadvertent inclusion of inaccurate information was improper for the purposes of s.138 - held that impropriety not established - application refused
LEGISLATION CITED: Evidence Act 1995
Telecommunications (Interception) Act 1979 (Cth)
Crimes Act 1914 (Cth)
CASES CITED: R v Petroulias (No. 5) [2006] NSWSC 1155
R v Petroulias (No. 7) [2007] NSWSC 16
R v Petroulias (No. 6) [2006] NSWSC 1422
R v Petroulias (No. 9) [2007] NSWSC 84
R v Petroulias (No. 1) [2006] NSWSC 788
Robinson v Woolworths Limited (2005) 64 NSWLR 612
Briginshaw v Briginshaw (1938) 60 CLR 336
B v Medical Superintendent of Macquarie Hospital (1987) 10 NSWLR 440
Neat Holdings Pty Limited v Karajan Holdings Pty Limited (1992) 67 ALJR 170
Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419
Palmer v Dorman [2005] NSWCA 361
Ridgeway v The Queen (1995) 184 CLR 19
R v Cornwell (2003) 57 NSWLR 82
Director of Public Prosecutions v AM (2006) 161 A Crim R 219
R v Dalley (2002) 132 A Crim R 169
Flanagan v Commissioner of the Australian Federal Police (1996) 60 FCR 149
R v Turner (No. 14) [2001] TasSC 124
R v Petroulias (2005) 62 NSWLR 663
Goodrich Aerospace Pty Limited v Arsic [2006] NSWSC 187
PARTIES: Regina (Commonwealth) (Crown)
Nikytas Nicholas Petroulias (Accused)
FILE NUMBER(S): SC 2002/93
COUNSEL: Mr P Hastings QC; Mr C Hoy (Crown)
Mr R Sutherland SC; Mr G Walsh (Accused)
SOLICITORS: Commonwealth Director of Public Prosecutions (Crown)
Coadys (Accused)
LOWER COURT DATE OF DECISION: ---
LOWER COURT MEDIUM NEUTRAL CITATION: ---

      IN THE SUPREME COURT
      OF NEW SOUTH WALES
      COMMON LAW DIVISION
      CRIMINAL LIST

      Johnson J

      15 February 2007

      2002/93 Regina v Nikytas Nicholas Petroulias (No. 8)

      JUDGMENT (objection under s.138 Evidence Act 1995 to admissibility of evidence obtained pursuant to search warrants and telephone intercept warrant upon the ground that evidence was improperly obtained)

1 JOHNSON J: The Accused, Nikytas Nicholas Petroulias, objects to the tender of two classes of evidence upon the grounds that evidence was improperly obtained within the meaning of s.138 Evidence Act 1995.

2 The first class of evidence comprises six telephone conversations between the Accused and other persons between 3 September and 4 October 1999, all of which were recorded pursuant to warrant issued on 27 July 1999. I have already rejected a challenge to that warrant upon the basis that it is bad on its face: R v Petroulias (No. 5) [2006] NSWSC 1155. I have ruled that each of the six conversations are relevant and admissible and ought not be rejected under s.135(a) Evidence Act 1995: R v Petroulias (No. 7) [2007] NSWSC 16. The contents of each of the six conversations are set out in that judgment.

3 The second class of evidence comprises a range of documents and other material obtained as a result of execution of search warrants on 24 March 2000. Of particular significance to the Crown case is a range of documents and other materials obtained from a storage facility in Fitzroy, Melbourne, leased by the Accused in the name of Christopher Marriott (Exhibit VR7).


      Application for Voir Dire

4 The Accused sought a voir dire with respect to this objection. The Crown did not contend that this was an inappropriate matter for a voir dire. Submissions were made with respect to the nature and form of evidence to be received on the voir dire, given that a voir dire had been conducted, in aid of a similar objection, before Sully J in March 2005 in advance of the first trial. The principal witness called on the voir dire before Sully J was Mr Michael O’Neill, an Assistant Commissioner of Taxation. Mr Sutherland SC, for the Accused, submitted that the appropriate course was for the Court to receive the transcript of Mr O’Neill’s earlier evidence and to allow further limited cross-examination of Mr O’Neill. I acceded to this application: R v Petroulias (No. 6) [2006] NSWSC 1422.

5 In addition to the evidence of Mr O’Neill on the voir dire before Sully J and again before me, additional evidence was adduced by the parties which bears upon the present objection. There is some overlap with evidence adduced with respect to a separate objection under s.138 Evidence Act 1995 to the admissibility of the whole of the evidence of a Crown witness, Richard Llewellyn Morgan. This objection is addressed in a separate judgment to be delivered today: R v Petroulias (No. 9) [2007] NSWSC 84. The scope of evidence to be adduced on the voir dire with respect to that objection was also considered in R v Petroulias (No. 6).


      Ruling of Sully J on 29 March 2005

6 As mentioned earlier, the Accused made a similar objection under s.138 with respect to the admissibility of evidence obtained by execution of the warrants referred to.

7 I am not bound by the decision of 29 March 2005 of Sully J concerning this objection in advance of the first trial. In considering the objection, in due course, I will consider the evidence and submissions and make my own independent assessment for the purpose of ruling on the application. I will, however, have regard to the decisions of Sully J in my own process of decision making: R v Petroulias (No. 1) [2006] NSWSC 788 at [51]-[54].

8 There is a feature of the judgment of Sully J to which reference should be made. His Honour had the opportunity over three days, to observe Mr O’Neill giving evidence (PT509-665, 2005). A fundamental feature of the present objection is a challenge to the evidence of Mr O’Neill. As I observed in R v Petroulias (No. 6) at [5], Sully J made a credibility finding favourable to Mr O’Neill.

9 Mr O’Neill gave evidence before me on one day, 31 January 2007 (PT669- 730, 2007). I had an opportunity, albeit a more limited opportunity than Sully J, to observe Mr O’Neill giving evidence and to assess his demeanour. In approaching the submissions advanced by the parties on this application, I have regard to the fact that a senior and most experienced Judge of this Court observed Mr O’Neill giving evidence on similar issues on a prior occasion and reached a conclusion favourable to the witness, finding that his evidence “was credible” and “accorded with the objective probabilities”.

10 As observed, however, it remains for me to make my own independent assessment of the evidence, oral and documentary, for the purpose of ruling upon the present objection.


      Section 138 Evidence Act 1995

11 Section 138 Evidence Act 1995 is in the following terms:

          “ Exclusion of improperly or illegally obtained evidence

          (1) Evidence that was obtained:

              (a) improperly or in contravention of an Australian law, or

              (b) in consequence of an impropriety or of a contravention of an Australian law,
              is not to be admitted unless the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained.

          (2) Without limiting subsection (1), evidence of an admission that was made during or in consequence of questioning, and evidence obtained in consequence of the admission, is taken to have been obtained improperly if the person conducting the questioning:

              (a) did, or omitted to do, an act in the course of the questioning even though he or she knew or ought reasonably to have known that the act or omission was likely to impair substantially the ability of the person being questioned to respond rationally to the questioning, or

              (b) made a false statement in the course of the questioning even though he or she knew or ought reasonably to have known that the statement was false and that making the false statement was likely to cause the person who was being questioned to make an admission.

          (3) Without limiting the matters that the court may take into account under subsection (1), it is to take into account:

              (a) the probative value of the evidence, and

              (b) the importance of the evidence in the proceeding, and

              (c) the nature of the relevant offence, cause of action or defence and the nature of the subject-matter of the proceeding, and

              (d) the gravity of the impropriety or contravention, and

              (e) whether the impropriety or contravention was deliberate or reckless, and

              (f) whether the impropriety or contravention was contrary to or inconsistent with a right of a person recognised by the International Covenant on Civil and Political Rights, and

              (g) whether any other proceeding (whether or not in a court) has been or is likely to be taken in relation to the impropriety or contravention, and

              (h) the difficulty (if any) of obtaining the evidence without impropriety or contravention of an Australian law.”

12 In the present objection, the Accused contends that evidence obtained under telephone intercept warrant or search warrant was obtained improperly or in consequence of an impropriety for the purposes of s.138(1)(a) or (b) of the Act. The Accused does not contend that evidence was illegally obtained for the purposes of that section.

13 It is clear that the Accused bears the onus of establishing impropriety on an objection under s.138: Robinson v Woolworths Limited (2005) 64 NSWLR 612 at 621 [33], 632 [106].

14 Sections 141 and 142 Evidence Act 1995 provide as follows:

          “141 Criminal proceedings: standard of proof

              (1) In a criminal proceeding, the court is not to find the case of the prosecution proved unless it is satisfied that it has been proved beyond reasonable doubt.

              (2) In a criminal proceeding, the court is to find the case of a defendant proved if it is satisfied that the case has been proved on the balance of probabilities.
          142 Admissibility of evidence: standard of proof
              (1) Except as otherwise provided by this Act, in any proceeding the court is to find that the facts necessary for deciding:

                  (a) a question whether evidence should be admitted or not admitted, whether in the exercise of a discretion or not, or

                  (b) any other question arising under this Act,
                  have been proved if it is satisfied that they have been proved on the balance of probabilities.
              (2) In determining whether it is so satisfied, the matters that the court must take into account include:

                  (a) the importance of the evidence in the proceeding, and

                  (b) the gravity of the matters alleged in relation to the question.”

15 In R v Petroulias (No. 6), I noted at [21] that Sully J, in his judgment of 29 March 2005, approached the question of whether the Accused had discharged the onus upon him to establish relevant impropriety upon the basis that the seriousness of the matters alleged attracted application of the principles in Briginshaw v Briginshaw (1938) 60 CLR 336. Before Sully J, Mr Clelland SC accepted that the Briginshaw principle applied having regard to s.142 Evidence Act 1995 and the seriousness of the findings of intentional impropriety sought against Mr O’Neill (PT899-890, 2005). At one point in submissions before me, Mr Sutherland SC submitted that it was erroneous to import the Briginshaw principle to the application of an objection in a criminal trial to the admissibility of evidence under s.138 of the Act (PT840, 2007). Reliance was placed upon s.141 (reproduced above) in support of the submission that the Accused bears the onus on the balance of probabilities simpliciter.

16 Following an exchange between Mr Sutherland SC and myself, senior counsel for the Accused did not press this submission (PT841-842, 2007). Argument proceeded upon the basis that the Briginshaw principle did have application. In my view, this approach is correct. At common law, only two standards of proof exist - the ordinary civil standard of proof upon the balance of probabilities and the criminal standard of proof beyond reasonable doubt. However, the High Court in Briginshaw recognised that satisfaction as to the civil standard of proof does not involve a mechanical weighing of probabilities - satisfaction as to whether the civil onus had been discharged depended upon the gravity of the allegation and its consequences: B v Medical Superintendent of Macquarie Hospital (1987) 10 NSWLR 440 at 460-461 (per McHugh JA). The strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what is sought be proved. Clear or cogent or strict proof is necessary where so serious a matter as fraud is to be found. These statements should be understood as reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct, and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a person has been guilty of such conduct: Neat Holdings Pty Limited v Karajan Holdings Pty Limited (1992) 67 ALJR 170 at 170-171 (per Mason CJ, Brennan, Deane and Gaudron JJ).

17 Section 142(2) Evidence Act 1995 appears to import the Briginshaw principle in requiring a court, when considering whether it is satisfied on the balance of probabilities on a ruling concerning admissibility of evidence, to take into account the gravity of the matters alleged in relation to the question. It has been observed that s.140 Evidence Act 1995, including the reference to “the gravity of the matter alleged” in s.140(2)(c), is reflective of the law, including the Briginshaw principle, and provides for no new principle: Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419 at [61]; Palmer v Dorman [2005] NSWCA 361 at [40]-[47].

18 I am satisfied that the Briginshaw principle has application where objection is taken to the admissibility of evidence in a criminal proceeding under s.138 of the Act and it is contended that a person or persons have acted improperly or illegally. The need to take into account “the gravity of the matters alleged in relation to a question” in s.142(2)(b) invokes the Briginshaw principle. This is especially so where the allegation is that a person has consciously and knowingly acted in an improper way involving, as is contended here by the Accused, the making of fraudulent statements and misrepresentations which found their way into applications for warrants.

19 The Evidence Act 1995 does not define the concept of “impropriety”. The principles collected in Ridgeway v The Queen (1995) 184 CLR 19 remain pertinent and those principles ought to be applied when considering whether conduct constitutes “impropriety” in a particular case: Robinson v Woolworths Limited at 618-619 [22]-[24], 622-623 [36]-[37], 631-632 [102. In Robinson v Woolworths Limited, Basten JA (Barr J agreeing) said at 618-619 [23]:

          “It follows that the identification of impropriety requires attention to the following propositions. First, it is necessary to identify what, in a particular context, may be viewed as ‘the minimum standards which a society such as ours should expect and require of those entrusted with powers of law enforcement’. Secondly, the conduct in question must not merely blur or contravene those standards in some minor respect; it must be ‘quite inconsistent with’ or ‘clearly inconsistent with’ those standards. Thirdly, the concepts of ‘harassment’ and ‘manipulation’ suggest some level of encouragement, persuasion or importunity in relation to the commission of an offence: thus, in describing the first category of cases (at 39) the joint judgment in Ridgeway referred to offences being procured or induced.”

20 Basten JA (Barr J agreeing) made the following observations at 622-623 [36]-[37] concerning the minimum standards test:

          “In circumstances where there is no unlawfulness on the part of any law enforcement officer, mere doubts about the desirability or appropriateness of particular conduct will not be sufficient to demonstrate impropriety.

          Before leaving these broad principles, it is necessary to note the indeterminacy of the test identified by reference to inconsistency with ‘the minimum standards which a society such as ours should expect and require of those entrusted with powers of law enforcement’: Ridgeway at 36. Such a test invites assertion and counter-assertion, with no objective touchstone to assist in deciding which to accept and which to reject. It is at least doubtful whether a majority of the Australian community would have shared the High Court’s view of the ‘entrapment’ of Mr Ridgeway: see for example, the comments of McHugh J at 85. The answer is not necessarily to eschew the task, but to establish, in advance, standards of conduct against which a claim of impropriety can be assessed. Where no relevant pre-existing standard has been breached, it should be a rare case in which impropriety would lead to exclusion. (Of course, standards may themselves require scrutiny, but no relevant standard was identified in the present case.) And the test of such a case must involve judicial appraisal of all potentially relevant public policy considerations, being the task actually undertaken in Ridgeway . Appeals to ‘community standards’ will tend to substitute subjective reactions for careful analysis, albeit of ill-defined concepts.”

21 Hall J reached a similar conclusion in a separate judgment in Robinson v Woolworths Limited.

22 Both parties referred to the decision of Howie J in R v Cornwell (2003) 57 NSWLR 82 with respect to a s.138 objection alleging impropriety in the context of incorrect statements made in an application for a listening device warrant. Howie J said at 87-88 [20]-[21]:

          “I am of the view that, otherwise than when subs 138(2) or s 139 apply, the court should determine whether the section is engaged having regard to the particular facts and circumstances before it but with due regard to the seriousness of a finding that evidence was obtained improperly or as a consequence of an impropriety and the outcome of such a finding. Not every defect, inadequacy, or failing in an investigation should result in a finding that the section applies merely because it may be considered that, as a result of those defects, inadequacies or failings, the investigation was not properly conducted or that the police did not act properly in a particular respect. On the other hand the terms of subs 138(3)(e), which subsection requires the court to take into account whether the ‘impropriety or contravention was deliberate or reckless’, make it clear that the conduct need not necessarily be wilful or committed in bad faith or as an abuse of power.

          I am prepared to accept for present purposes that any misstatement of fact in an affidavit in support of a warrant for the use of a listening device on private premises may be an impropriety within s138, notwithstanding that the misstatement was not intended by the person preparing the affidavit to influence the officer who was to act upon that material in determining whether to issue the warrant. I accept the submission made by Mr Boulten that a person preparing an affidavit for the purposes of obtaining a warrant for the use of a listening device in a private home must be scrupulous to ensure that the contents of the affidavit fully and accurately set out the factual material relevant to the determination whether the warrant should be issued. The question of whether the misstatement was intentional, reckless, or inadvertent and the motive, if any, for the misstatement will be matters which are relevant to the gravity of the impropriety and the exercise of discretion to permit the Crown to lead the evidence notwithstanding that it was obtained improperly or as a consequence of an impropriety.”

23 In Director of Public Prosecutions v AM (2006) 161 A Crim R 219, Hall J at 228 [37]-[38], followed the decision of Howie J in R v Cornwell. Hall J said:

          “In Cornwell (supra), Howie, J. made a number of observations on the operation of s.138(1) including the following:-

          • The court in considering its provisions should determine whether the section is engaged, having regard to the particular facts and circumstances before it, but with due regard to the seriousness of a finding that evidence was obtained improperly or as a consequence of an impropriety, and the outcome of such a finding.

          • Not every defect, inadequacy or failing in an investigation should result in a finding that the section applies merely because it may be considered that, as a result of those defects, inadequacies or failings, the investigation was not properly conducted or that the police did not act properly in a particular respect.

          • On the other hand, the terms of s.138(3)(e), which subsection requires the court to take into account whether the ‘impropriety or contravention was deliberate or reckless’, make it clear that the conduct need not necessarily be wilful or committed in bad faith or as an abuse of power (at [20]).

          The test for determining whether evidence has been ‘improperly’ obtained is, accordingly, not necessarily dependent upon establishing in every case a state of mind indicative of ‘intentional’ conduct or a consciousness of impropriety.”

24 An imperfection or defect in procedures utilised by law enforcement officers will not necessarily equate to impropriety within the meaning of s.138, nor will all inappropriate conduct of a law enforcement officer necessarily be improper within the meaning of that term in s.138(1)(a): Director of Public Prosecutions v AM at 230 [45].

25 If impropriety is established by the Accused, it remains necessary, in the present context, for the Accused to establish that the impropriety resulted in the issuing of the relevant warrant or warrants and thus the obtaining of the telephone conversations or documentary and other material to which objection is taken. The Accused must satisfy the Court that there is causal connection between the impropriety and the obtaining of the impugned evidence: R v Dalley (2002) 132 A Crim R 169 at 186 [86]; R v Cornwell at 89 [25]. If the Court cannot be satisfied of that matter, s.138 has no application. A connection between the improper conduct and the obtaining of the evidence may be indirect. There could be a sufficient connection found between a misstatement in an application or affidavit in support of a warrant and the evidence obtained as a result of the issuing of the warrant so as to engage s.138(1) of the Act: R v Cornwell at 89 [25].

26 In the event that the Accused establishes the elements of impropriety and causation for the purposes of s.138(1), the evidence is not to be admitted unless the Crown establishes, on the balance of probabilities, that the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained. In considering this question, the Court is to take into account the factors identified in s.138(3) of the Act.


      Short Summary of Accused’s Contentions

27 Before moving to the facts, it is appropriate to state shortly the Accused’s contentions in support of this application.

28 Firstly, it is submitted that Mr Michael O’Neill, a solicitor and Assistant Commissioner of Taxation, was motivated by ill-feeling or animus towards the Accused in and after the time when Mr O’Neill became involved, in February 1999, in the investigation of the Accused. It was submitted that the evidence revealed that Mr O’Neill was motivated by an element of professional jealousy and a dislike of the Accused and, for these reasons, wished to do him harm.

29 Secondly, the Accused submits that Mr O’Neill provided to Australian Federal Police (“AFP”) investigators a picture concerning the tax consequences of the Accused’s alleged activities (“total tax wipe out”) and possible losses to the revenue, which were either knowingly false to Mr O’Neill at the time or, at least, were such that he could have had no honest belief in their genuineness at the time.

30 Thirdly, the Accused submits that this false and misleading information concerning tax consequences and possible loss to the revenue was relied upon by AFP officers in applications for telephone intercept warrants and search warrants, being incorporated in formal sworn affidavits for that purpose.

31 Fourthly, it is submitted that this allegedly false and misleading information was highly relevant to the question whether warrants, and in particular, telephone intercept warrants, would be issued by the relevant issuing authorities.

32 Fifthly, although the member of the AFP who swore the affidavit or made the application honestly believed that the information contained therein concerning tax consequences and possible loss of revenue was true and correct, that information was clearly wrong and Mr O’Neill knew that this false and misleading information would be used (or misused) in support of applications for warrants as part of the criminal investigation.

33 Sixthly, in acting in the manner alleged, Mr O’Neill acted improperly for the purposes of s.138. The Accused submits that this finding clearly arises if the Court accepts that Mr O’Neill was acting in a deliberately fraudulent fashion. Alternatively, the Accused submits that the Court should find that evidence was improperly obtained even if the finding does not extend to that height. The Accused submits that there was clearly incorrect and misleading information contained in warrant applications and that its origin was, at the least, reckless and was caught by s.138 of the Act.


      Some Factual Matters

34 To place the present arguments in a factual context, it is necessary to provide a sketch of some factual matters.

35 An Australian Taxation Office (“ATO”) internal investigation into the Accused was commenced in late 1998 following complaints made by various tax consultants who claimed unfair and improper treatment in the hands of the Accused and the ATO. On 27 October 1998, Mr Stephen Brown, a senior investigator in the Fraud Prevention Control Unit of the ATO, was asked to assist Mr Gregory Farr, the First Assistant Commissioner in charge of Corporate Services, to investigate the complaints.

36 Mr O’Neill is a solicitor and a career public servant in the ATO, which he joined in about 1985 at the age of about 20. He became professionally acquainted with the Accused in about 1997 when the Accused was retained as an external consultant to the ATO.

37 On 18 February 1999, Mr O’Neill moved across to the Strategic Intelligence and Analysis (“SIA”) section after the Accused was moved sideways from that function (PT669-670, 2007). Mr O’Neill was asked to prepare a report for the Commissioner of Taxation concerning the state of affairs in the SIA, with particular reference to tax avoidance schemes known as Employee Benefit Arrangements (“EBAs”). On 18 March 1999, Mr O’Neill provided a two-page memorandum on that topic to Mr Carmody, the then Commissioner (Exhibit VR3). A number of documents were annexed to that memorandum, including some in which the Accused played a part in their creation. Mr O’Neill’s memorandum did not propose a particular course of action adverse to the Accused.

38 It is noteworthy from the running sheets of Mr Brown’s internal ATO investigation (Exhibit VR2, Tab 1) that the office of the Commonwealth Director of Public Prosecutions (“DPP”) was being spoken to by ATO investigators well before Mr O’Neill became aware that an investigation was on foot (15, 22, 25 January 1999). A further meeting took place between Mr Brown and representatives of the DPP on 2 March 1999.

39 Mr Brown’s running sheets reveal that discussions took place between Mr Farr or Mr Brown and Mr O’Neill on 4 and 11 March 1999, during which matters concerning the Accused were discussed.

40 A note in Mr Brown’s running sheets records information provided by Mr O’Neill to Mr Brown on 18 March 1999, including the following:

          “No record found in SIA or the ATO of Global Growth Mgt’s advanced opinion. Appears that text of applicants request has been used to frame the opinion. GGM’s scheme seems to be total tax wipe out.
          O’Neill does not believe that all PBR’s and advanced opinions have been captured by his review team.”

41 On 23 March 1999, Mr Brown’s running sheets record information provided from Mr O’Neill concerning Global Growth Management Pty Limited and Ashley Cain. The running sheet includes the note “GGM still marketing scheme and putting through millions of dollars” and “TFN [tax file number] of GGM is shown as the TFN for Cain’s company on AO [Advance Opinion] application by Cain”.

42 On 23 March 1999, Messrs Farr and Brown, together with Mr Bowyer of the ATO, briefed AFP officers McDevitt and Forshaw.

43 On 29 March 1999, Mr Brown wrote a letter of referral to Federal Agent McDevitt concerning “suspected criminal behaviour within the Strategic Intelligence and Analysis (SIA) section of the ATO” (Exhibit VR2, Tab 4). The letter commenced in the following way:

          “At the centre of the suspicions are two SIA staff in the Sydney tax office, Nick Petroulias and Emmanuel Aivaliotes. Petroulias is a First Assistant Commissioner who reports directly to the Commissioner of Taxation. He is also the Director of SIA. Aivaliotes is a Senior Officer Grade C.
          For the past four months there has been an internal investigation into a range of allegations about Petroulias and SIA. This investigation has been the catalyst for uncovering the suspicions contained in this report.”

44 The report referred to suspected criminal behaviour and said “At present the estimated revenue loss from the aggressive tax schemes is in the vicinity of $155 million” (page 1).

45 The report stated that “the value to a promoter of obtaining a favourable tax ruling can be immense” and provided two examples in this respect (page 2).

46 Significantly for the purposes of the present application, Mr Brown stated:

          “2. Total Tax Wipe-Out
          Petroulias issued some rulings for schemes that were ‘total tax wipe-out’ arrangements, ie. clients who entered into the arrangements could avoid paying any tax on their income.
          Providing a favourable ruling for a scheme which is a ‘total tax wipe-out’ arrangement is diametrically ‘at odds’ with the underlying principles of taxation legislation and administration in Australia.”

47 Under the heading “ATO Assistance to Police Investigation”, Mr Brown said (pages 4-5):

          “ Resources
          The ATO will provide whatever assistance and resources that the AFP requires for an investigation into the suspected criminal behaviour by Petroulias and Aivaliotes.
          Taxation Information
          The ATO would be referring this matter to the AFP for investigation, therefore the AFP would have access to the taxation records necessary for the conduct of the investigation.
          Expert Evidence and Technical Assistance re: Taxation Law and Administration
          Tax counsel are lawyers employed by the ATO who are experts in taxation law and administration. They will provide investigative assistance and expert evidence on taxation law and administration as it relates to the schemes and favourable tax rulings.
          Tax counsel can provide information and expert evidence on the technical structures of the minimisation schemes and on the efficacy of the rulings issued by Petroulias and Aivaliotes. They can also provide evidence on the disregard of administrative procedures for the issue of PBR’s, advanced opinions and NFA letters.”

48 The formal referral to the AFP nominated four ATO contact officers (Mr Brown, Mr Farr, Mr Bowyer and Ms Bonthorne). Mr O’Neill was not nominated as a contact officer.

49 Mr O’Neill’s memorandum to the Commissioner of 18 March 1999 (together with annexures) accompanied the letter of referral to the AFP of 29 March 1999, together with a number of other documents.

50 It was Mr O’Neill’s evidence that he was unaware of the referral by Mr Brown to the AFP until after it had occurred. He said that he had played no part either in the instigation of the referral or in its terms (PT520, 2005).

51 On 23 April 1999, Federal Agents Wills, Wildman and Dametto met with Mr Brown concerning the investigation. Entries contained in the running sheets of Operation Focaccia (the AFP PROMIS case report) (Exhibit VR2, Tabs 2 and 9) were referred to in evidence and submissions.

52 On 28 April 1999, Mr O’Neill and Mr Cheetham from the ATO met with Federal Agents Wills, Wildman and others in the presence of Mr Brown. Recorded in the PROMIS running sheets is the following entry concerning that meeting (Exhibit VR2, Tab 2, page 8):

          “MICHAEL O’NEILL stated that there would be no circumstances under which the ATO would issue a PBR which would result in a total tax wipe out for a company. It appears that PETROULIAS has in fact issued PBRs which result in a total tax wipe out. O’NEILL can state that he has looked for and can not find the suspicious PBR applications. He is able produce [sic] documents which appear to have been compiled using cut and paste actions, with the above mentioned typographical errors, incorrect or recurring TFNs which suggest that PETROULIAS may have generated the PBRs.”

53 On 5 May 1999, Mr O’Neill was asked for an assessment of the impact and financial loss to the Commonwealth (Exhibit VR2, Tab 2, page 14).

54 Between February and May 1999, Mr O’Neill retained his offices in the ATO Centrepoint building, but spent time, from time to time, at the AFP building in Goulburn Street, Sydney. From May 1999, Mr O’Neill, and other ATO personnel, were located full time in offices in the AFP Goulburn Street building with respect to an investigation apart from Operation Foccacia. From time to time, he was called upon by AFP investigators in relation to issues arising in the Operation Foccacia investigation of the Accused (PT691-692, 2007).

55 On 17 June 1999, the first search warrants were executed as part of the Operation Focaccia investigation.

56 On 15 July 1999, Mr O’Neill met with Federal Agent Wildman and provided him with the draft document entitled “Estimate of Revenue Associated With Arrangements Considered by Nick Petroulias”. The PROMIS running sheet entry for that meeting records the following (Exhibit VR2, Tab 2, pages 40-41):

          “Between 4pm and 7pm Thursday 15 July 1999, F/A WILDMAN met with ATO First Assistant Commissioner O’NEILL at ERHQ. During that time his draft statement was continued with a view toward finalization. O’NEILL provided WILDMAN with a draft document entitled, ‘Estimate of revenue associated with arrangements considered by Nick PETROULIAS’.
          A summary of that document is as follows:
          In March 1999, the SIA advised the AFP that the total deductions was $500 million;
          Those figures were based on data for 1998 and during 1999 there has been increased marketing of these schemes; accordingly the figures could be much higher;
          Additionally, the promoters on which the figures were based are a subset of the total population;
          Based on an analysis of known promoters and the media, a reasonable estimate involves up to $2.5 billion in deductions;
          The revenue at risk is therefore harder to quantify, depending on the type of tax claimed on the schemes (ie: company @ 36% etc);
          In relation to rulings issued to Strong, Morgan, X & McLaren it is estimated that the deductions claimed would be in the order of $50-$100 million, similarly the revenue at risk is harder to quantify, depending on the type of tax claimed on the schemes (possibly $15-$30 million);
          If the X arrangement is included, the figures could be increased by $100 million and $30 million respectively.
          In conclusion, the estimated loss of revenue to the Commonwealth, due to the mass marketing of ‘copy cat’ schemes of original PBRs and AOs, could be between $600 million and $800 million. The direct loss of revenue from the actual PBRs and AOs issued by Nick PETROULIAS themselves is however, far less. It is the view of investigators that, with the level of knowledge possessed by PETROULIAS, there can by [sic] little doubt that he would not have foreseen the consequences of his actions and the associated full potential loss of revenue due to the flow on effect.”

57 On 27 July 1999, Federal Agent Dametto swore an affidavit in support of an application for a warrant under the Telecommunications (Interception) Act 1979 (Cth) (“TI Act”). On the same day, Dr Duncan Chappell issued a warrant to operate for a 90-day period (Exhibit VA1, Tab 3). As mentioned earlier, the six telephone conversations in September and October 1999, which are to be tendered by the Crown, were intercepted pursuant to this warrant.

58 The affidavit of Federal Agent Dametto included the following paragraphs:

          “5. The information set out below has been obtained from my own enquiries and from enquiries made by other officers of the AFP and officers of the ATO. I believe that the information is true and correct.

          6. The AFP is conducting an investigation into alleged offences by PETROULIAS and other divers persons whom it is believed are involved in a conspiracy to defraud the Commonwealth. This fraud is being accomplished by the provision to the promoters of certain tax minimisation schemes, favourable tax rulings or advance opinions, contrary to Section 86(2) (Conspiracy to Defraud the Commonwealth) of the Crimes Act 1914 and Section 29D (Defraud the Commonwealth) of the Crimes Act 1914. The alleged offences are class 2 offences for the purpose of the Telecommunications (Interception) Act 1979, in that the alleged offences carry penalties up to twenty and ten years imprisonment respectively and the particular conduct constituting the offences involves serious loss to the revenue of the Commonwealth.

          …

          9. On 29 March 1999, the AFP received a referral from the ATO regarding the suspected criminal activities of an employee, PETROULIAS. In brief, the referral indicated that the officer was suspected of having provided promoters of certain tax minimisation schemes with favourable tax rulings in the form of Private Binding Rulings or Advance Opinions. These rulings and opinions would not normally have been issued by the ATO as they effectively resulted in total tax wipeouts for the schemes. It is alleged that PETROULIAS may have had improper relationships with the persons promoting these tax minimisation schemes.”

59 The affidavit, which extended over 23 pages, then proceeded to provide a detailed explanation of rulings, opinions and tax minimisations schemes, including non-complying superannuation schemes. The affidavit (paragraph 13ff) then moved to the deponent’s grounds for suspicion concerning alleged improper relationships between the Accused and a number of persons, including Mr Panos, Mr Strong, Mr McLaren and Mr Morgan. The affidavit then turned (paragraph 15ff) to investigations by the ATO. Federal Agent Dametto deposes to the following in his affidavit at paragraphs 15.11-15.12 (Exhibit VA1, Tab 3, page 16):

          “Assistant Commissioner of Taxation, Michael O’NEILL, of the ATO, estimates that the amount of deductions claimed directly attributed to the PBRs and AOs issued to STRONG, MORGAN, CAIN and McLAREN is $100 million. The estimated loss of revenue to the Commonwealth associated with these deductions is harder to quantify, depending on the ultimate incidence of taxation and the applicable tax rate. However, the ATO conservatively estimates the loss to the Commonwealth to be between $15 million to $30 million in tax revenue.
          Michael O’NEILL, further estimates, based on an analysis of known promoters of the tax minimisation schemes, the mass marketing involved of these schemes and the media, that a reasonable valuation of such schemes involves up to $2.5 billion in deductions. This equates to an estimated loss to the Commonwealth of between $600 million and $800 million in tax revenue.”

60 The warrant contained the following recitals:


          “AND WHEREAS I, Duncan Chappell a nominated AAT member, (within the meaning of the Telecommunications (Interception) Act 1979), am satisfied, on the basis of the information given to me under Part VI of the Telecommunications (Interception) Act 1979 in connection with the application that:

          (a) Division 3 of that Part has been complied with in relation to the application;

          (b) there are reasonable grounds for suspecting that a particular person, namely Nick PETROULIAS, born 21 November 1967, of 18 Middleborough Road, Burwood, Victoria, is using, or is likely to use, the service:

          (c) information that would be likely to be obtained by intercepting under a warrant communications made to or from the service would be likely to assist in connection with the investigation by the agency that applied for this warrant of the following class 2 offences, in which that person is involved, namely conspiracy to defraud the Commonwealth contrary to section 86(2) of the Crimes Act 1914 and defraud the Commonwealth contrary to section 29D of the Crimes Act 1914, and

          (d) having regard to:

              (i) how much the privacy of any person or persons would be likely to be interfered with by intercepting under a warrant communications made to or from that service;

              (ii) the gravity of the conduct constituting the offences being investigated;

              (iii) how much the information referred to in paragraph (c) would be likely to assist in connection with the investigation by that agency of the offences;

              (iv) to what extent methods of investigating the offences that do not involve intercepting communications have been used by, or are available to, that agency;

              (v) how much the use of such methods would be likely to assist in connection with the investigation by that agency of the offences; and
              (vi) how much the use of such methods would be likely to prejudice the investigation by that agency of the offences, whether because of delay or for any other reason;
          and to no other matters;
          I should issue a warrant authorising such communications to be intercepted.”

61 As at 27 July 1999, the TI Act permitted the issue of telephone intercept warrants with respect to “class 1 offences” and “class 2 offences”. Section 5(1) TI Act provided that the term “class 2 offence” had the meaning given by s.5D of the Act. Section 5D(1) and (2) provided as follows (emphasis added):

          “5D Class 2 offences

          Class 2 offences
              (1) This section sets out the offences that are class 2 offences for the purposes of this Act.


          Serious offences etc.

          (2) An offence is a class 2 offence if:
                  (a) it is an offence punishable by imprisonment for life or for a period, or maximum period, of at least 7 years; and
                  (b) the particular conduct constituting the offence involved, involves or would involve, as the case requires :
                      (i) loss of a person’s life or serious risk of loss of a person’s life; or
                      (ii) serious personal injury or serious risk of serious personal injury; or
                      (iii) serious damage to property in circumstances endangering the safety of a person; or
          …
                      (iv) trafficking in prescribed substances; or
              (v) serious fraud ; or
                      (vi) serious loss to the revenue of the Commonwealth, a State or the Australian Capital Territory ; or
              (vii) bribery or corruption of, or by:
                          (A) an officer of the Commonwealth; or
                  (B) an officer of a State; or
                          (C) an officer of a Territory.”

62 The PROMIS running sheets note a further conversation between Mr O’Neill and Federal Agent Wills concerning the calculation of revenue at risk on 29 July 1999 (Exhibit VR2, Tab 2, page 44):

          “About 1:45pm Thursday 29 July 1999, First Assistant Commissioner Michael O’NEILL telephoned F/A G WILLS. The calculation of the revenue at risk as a result of PETROULIAS’ activities was discussed. There has been further changes to the stated figures of lost revenue. FAC O’Neill advised Mr Gordon Williamson, AFP Director Intelligence and Operations of these changes. At 3:00pm, a copy of the document forwarded to Mr WILLIAMSON was received from which details some of the considerations involved in calculating the revenue at risk and the revised figures. In summary:

          * The revenue at risk from all Employee Benefit Arrangements is estimated to be $1B;

          * The revenue at risk from the rulings under investigation by Operation FOCCACIA is $30M-$70M;

          * There appear to be many variables which could affect the calculation [sic] a correct figure.”

63 On 17 September 1999, an AFP/ATO meeting was held at the Eastern Region Headquarters of the AFP following the location of 44 extra rulings found on the LAN (Local Area Network) account for Mr Aivaliotes (Exhibit VR2, Tab 2, pages 58-59).

64 By affidavit sworn 8 October 1999, Federal Agent Dametto made application for a further warrant under the TI Act. Paragraph 8 of the affidavit again stated that “these rulings and letters would not normally have been issued by the ATO as they effectively resulted in total tax wipe outs for the schemes”. Paragraphs 73 and 74 were in similar terms to paragraphs 15.11 and 15.12 Federal Agent Dametto’s affidavit of 27 July 1999 (set out at paragraph 59 above).

65 On 8 October 1999, Mr Brian John McMahon, a member of the Administrative Appeals Tribunal, issued a warrant under the TI Act to be in force for a period of 90 days (Exhibit VA1, Tab 4).

66 On 14 December 1999, Federal Agent Donaldson, in the presence of Federal Agents Wills and Wildman, swore in Mr O’Neill and ATO Senior Investigators Steele and Gray as special members of the AFP (Exhibit VR2, Tab 2, page 91). The purpose of this was to permit Mr O’Neill and other ATO personnel to become aware of investigatory steps taken under the TI Act and information which had become available by use of telephone intercepts (PT520, 2005). Mr O’Neill was not aware until this time in late 1999 that the AFP were intercepting the Accused’s telephone calls (PT521-522, 2005).

67 On 17 March 2000, AFP and ATO investigators became aware that the Accused utilised a storage unit at Fitzroy, Melbourne in the name of Christopher Marriott. The following entry appears in the PROMIS running sheets (Exhibit VR2, Tab 2, page 131):

          “AT 0915 HRS FRIDAY 17/3/00, F/As BLOOMFIELD & BURNAGE OBSERVED NICK PETROULIAS DRIVE LIGHT GREY/BLUE BMW SEDAN, VIC. REGISTRATION NUMBER EZZ 006 INTO CITY SIDE SELF STORAGE, 200 ALEXANDRA PARADE FITZROY. F/A BURNAGE OBSERVED NICK PETROULIAS LEAVING THE FIRST FLOOR OF THE STORAGE SHEDS.
          F/A BLOOMFIELD AND BURNAGE SPOKE TO THE MANAGER OF CITY SIDE SELF STORAGE. THE MANAGER ALLOWED F/A BLOOMFIELD TO EXAMINE THE STORAGE RECORDS FOR 1999 AND 2000. THESE RECORDS REVEALED THAT SELF STORAGE FACILITY NUMBER 254 IS CURRENTLY LEASED IN THE NAME OF CHRISTOPHER MARRIOTT, OF 4/18 ORMOND ROAD, ELWOOD. CHRISTOPHER MARRIOTT IS A FALSE NAME USED BY ANGELO PETROULIAS TO CLAIM CENTRELINK BENEFITS. THE STORAGE FACILITY WAS LEASED ON THE 18 APRIL 1999 AND IS PAID UNTIL 24 APRIL 2000.
          THE STORAGE FACILITY IS ON THE SECOND FLOOR OF THE STORAGE SHED. IT IS SECURED BY A RED ROLLER DOOR AND IS PADLOCKED.”

68 On 23 March 2000, Federal Agent Duncan Tchakalian made application for search warrants to search various premises, including the storage unit leased by the Accused in the name of Christopher Marriott. The application was made pursuant to s.3E Crimes Act 1914 (Cth).

69 Paragraph 7 of the affidavit of Federal Agent Tchakalian was in the following terms (Exhibit VA1, Tab 5):

          “On 29 March 1999, the Australian Federal Police (AFP) received a referral from the Australian Taxation Office (ATO) regarding the suspected criminal activities of two of its employees, Nick Petroulias and Emmanuel Aivaliotes. In brief, the referral indicated that the officers were suspected of having provided promoters of certain tax minimisation schemes with favourable tax rulings in the form of Advance Opinions and Private Binding Rulings or No Further Action Letters. These rulings and letters would not normally have been issued by the ATO as they effectively resulted in total tax wipeouts for the schemes. It is alleged that Petroulias and Aivaliotes may have had improper relationships with the persons promoting these tax minimisation schemes, acting corruptly and defrauded the Commonwealth by using their authority to issue Advance Opinion and Private Binding Rulings that imperilled the revenue of the Commonwealth.”

70 The affidavit of Federal Agent Tchakalian stated later at paragraphs 29 and 33:

          “29. On 5 September 1997, and on 9 September 1997, Nick Panos from Coleman & Greig Solicitors submitted Advance Opinion requests on behalf of Productivity Incentive Australia. Productivity Incentive Australia is a company operated by Geoffrey Strong, with Panos being his advising solicitor. Those requests were forwarded to Australian Taxation Officers Lowman Chow and Michael Charles for an opinion on a [sic] Strong’s scheme named ‘Productivity Incentive Trust Plan’. The Scheme results in ‘total tax wipeouts’. That is the rulings support schemes that are non-complying with the law, where the investor incurs absolutely no tax liability.

          …

          33. On 25 November 1997 Nick Panos submitted an Advance Opinion Request on behalf of Morgan Human Resources. Morgan Human Resources being a company operated by Richard Morgan with Panos as his advising solicitor. The Advance Opinion request was forwarded to ATO Officer Jim Targett for opinion on a scheme also named ‘Productivity Incentive Trust Plan’. This Scheme it is asserted would result in a ‘total tax wipeout”.

71 The affidavit included the following at paragraphs 69 and 70:

          “69. Assistant Commissioner of Taxation, Michael O’Neill, of the ATO, estimates that the amount claimed directly attributed to the Private Binding Rulings and Advanced Opinions issued is $300 million. The revenue imperilled to the Commonwealth associated with these deductions is harder to quantify, depending on the ultimate incidence of taxation and the applicable tax rate, but would approximate $100 million.

          70. Michael O’Neill, further estimates, based on an analysis of known promoters of the tax minimisation schemes, the mass marketing involved of these schemes and the media, that a reasonable valuation of such schemes involves up to $2.5 billion in deductions. This equates to an estimated revenue imperilled between $600 million and $800 million in tax revenue.”

72 On 23 March 2000, warrants were issued under s.3E Crimes Act 1914 (Cth) (Exhibit VA1, Tab 5). The search warrants were executed on 24 March 2000 on a variety of sites in different places throughout Australia.

73 As mentioned earlier, execution of these search warrants, and in particular the search warrant executed on the Melbourne storage unit leased by the Accused in the name of Christopher Marriott, led to the discovery of a large number of documents which the Crown proposes to tender in the trial and which, the Crown submits, are powerful evidence implicating the Accused in the crimes alleged (Exhibit VR7).

74 Documents and other material obtained on execution of the search warrant at the Melbourne storage unit included a desktop computer, a laptop computer, ATO correspondence and letterheads and financial records (Exhibit VR2, Tab 2, page 132).

75 The Accused was arrested at Melbourne airport on 24 March 2000 and charged with conspiracy to defraud the Commonwealth contrary to s.86(1) Crimes Act 1914 (Cth) (Exhibit VR2, Tab 2, page 133).

76 On 24 March 2000, a search warrant was executed in Adelaide on premises associated with Mr Morgan. Federal Agents spoke to Mr Morgan on that day in a recorded conversation (part of Exhibit VR4). On 6 April 2000, Federal Agents Wills and Dametto spoke to Mr Morgan in Adelaide by way of an induced record of conversation (part of Exhibit VR4). The circumstances surrounding these conversations with Mr Morgan, and the objection taken by the Accused under s.138 Evidence Act 1995 with respect to the calling of any evidence from Mr Morgan, are the subject of my judgment R v Petroulias (No. 9) to be delivered today.

77 Mr Michael Robert Ingersoll of the ATO made a statement dated 20 December 2004 which contained a number of schedules and calculations (Exhibit VR2, Tab 7). Mr Ingersoll provided the following calculations and explanations for his calculations (paragraphs 5-13):


          “5. I am currently employed as Technical Leader, ATO Promoter Taskforce. I provide tax technical leadership and direction to Taskforce officers on matters related to compliance activities undertaken by the Taskforce. I have been performing these duties for two years six months.
          6. I have also maintained liaison with the SB Schemes Team of the ATO with regard to the investigation and treatment of Employee Benefit Arrangements. I have caused reports to be prepared on the status of taxpayers associated with EBAs and have accessed relevant information held by the ATO, including information contained on the Schemes Database (now called Aggressive Tax Planning Database). I have liaised with SB Schemes team for 5 years.
          7. Since giving the statement dated 29 April 2004 I have further reviewed ATO records concerning the status of taxpayers associated with EBAs. Annexed and marked ‘C2’, ‘D2’ and ‘E2’ are revised copies of schedules which show an update on the status of taxpayers who relied on PBRs and AOs issued by Nick Petroulias. The revised schedules also list amendments to the previous schedules annexed to the statement dated 29 April 2004. In the 29 April 2004 statement the corresponding schedules were annexed and marked ‘C’, ‘D’ and ‘E’. I have updated and amended the schedules by cross checking the information with the ATO audit files.

          8. The revised schedules contain an additional ‘Amendments’ column which is highlighted. This column explains any change in the deduction claimed amount or audit status in the schedules annexed to the statement dated 29 April 2004.

          9. The schedule annexed to my current statement marked ‘C2’ refers to taxpayers who have received PBRs regarding Employee Benefit Trust (EBT) arrangements issued by Nick Petroulias. The total amount of deductions claimed is $15,527,585.00.

          10. The schedule marked ‘D2’ lists the taxpayers who entered into EBT’s and lodged returns claiming deductions without having a PBR or AO and based on an AO or PBR issued by Nick Petroulias to other taxpayers or promoters. The total amount of deductions claimed is $17,398,277.00.

          11. The schedule marked ‘E2’ lists the taxpayers who entered into Controlling Interest Superannuation arrangements and lodged returns claiming deductions without having a PBR or AO and based on an AO or PBR issued by Nick Petroulias to other taxpayers or promoters. The total amount of deductions claimed is $9,301,553.00.

          12. The total amount of deductions claimed to date as a result of rulings issued by Nick Petroulias is $42,227,415.00.
          Audit activity
          13. The schedules and therefore the total amount of deductions claimed are based on the outcomes of audit activity conducted by the SB Schemes Team. This has required examination of the affairs of approximately 138 taxpayers, some of which are continuing.”

      Allegations Made Against Mr O’Neill

78 In his judgment of 29 March 2005, Sully J extracted a portion of the cross-examination of Mr O’Neill by Mr Clelland SC, then senior counsel for the Accused (Judgment, pages 6-7). The proposition put to Mr O’Neill was that he provided false information to AFP investigators “knowing these matters I am going to put to you were untrue and knowing that that information would be, or would likely to be used, in the preparation of affidavits in support of applications for warrants” (PT649, 2005). Thereafter, Sully J identified some 16 allegations put to Mr O’Neill based on that foundational proposition during cross-examination (Judgment, pages 7-12). Mr Sutherland SC informed me that these allegations were relied upon in the present application (PT856, 2007). The 16 allegations , and Sully J’s note as to Mr O’Neill’s response, may be summarised in the following way:


      (a) that Mr O’Neill had falsely represented to officers of the AFP that rulings given in respect of the Productivity Incentive Trust Plan entailed a “total tax wipe out” - Mr O’Neill denied the allegation;

      (b) that Mr O’Neill had falsely represented that the rulings relating to the Productivity Incentive Trust Plan would not normally have been issued by the ATO because they entailed “total tax wipe outs” - after discussion with Sully J, Mr Clelland SC did not follow through with the proposition as put originally to Mr O’Neill;

      (c) that Mr O’Neill had falsely represented that, as at July 1999, the Commonwealth had lost revenue in the order of $15 to $30 million, that loss being directly attributable to rulings and opinions issued to Messrs Strong, Morgan, Cain and McLaren - Mr O’Neill explained that he had told AFP investigators that a combination of rulings and arrangements had imperilled Commonwealth revenue in the stated estimated amount;

      (d) that Mr O’Neill had falsely represented that, as at July 1999, rulings in relation to the Productivity Incentive Trust Plan had put the Commonwealth’s revenue at risk to the extent of an estimated $600-$800 million - Mr O’Neill denied the allegation;

      (e) that Mr O’Neill had repeated, in about March 2000, that false estimate - Mr O’Neill denied the allegation;

      (f) that Mr O’Neill had falsely represented, in about March 2000, that the revenue loss that was directly attributable to the Productivity Incentive Trust Plan was about $100 million - Mr O’Neill denied the allegation;

      (g) that Mr O’Neill had falsely represented that the Accused would have foreseen the full potential loss to the revenue, being a loss quantified in the way suggested by the preceding propositions that had been put on that topic - Mr O’Neill denied the allegation;
          Sully J interpolated at this point Mr O’Neill’s explanation given in evidence (PT657, 2005):
              "The concept we were talking about was in the context of a defrauding. I was advised at some stage that there were two elements to a defrauding; an imperilment and a dishonesty certainly. So, the imperilment was the notion that we were discussing. We may have use words that were found loosely around that concept ...... I can't tell you exactly what words I used. I don't have any particular recollection, but I would have used synonyms for the word ‘imperilment' I suppose."


      (h) that Mr O’Neill had falsely represented that it was not, and never had been, part of the charter of the SIA section to issue private binding rulings - Mr O’Neill denied the allegation;

      (i) that Mr O’Neill had falsely represented that a particular ruling, the Bonnell ruling, should not have been issued because the ruling was contrary to law - Mr O'Neill's response was that he had no direct recollection of his actual words, but that he assumed that he would have expressed himself to the effect that there was an ATO view about non-complying controlling interest superannuation arrangements; that the Bonnell ruling was the first ruling to deal with such arrangements; and that the ruling differed from the then ATO view. Mr O'Neill denied that such an expression of opinion was then known to him to be untrue;

      (j) that Mr O’Neill had falsely represented that the Accused had issued Productivity Incentive Trust Plan rulings - Mr O’Neill denied the allegation and said that he always made it clear that the Accused caused such rulings to issue;

      (k) that Mr O’Neill had falsely represented that an ATO officer, Mr Targett, had claimed that he had been improperly pressured by the Accused to issue a ruling that was contrary to law and a “total tax wipe out” - Mr O’Neill accepted the initial part of the allegation, had no recollection of the second, but was adamant that “whatever I said to the AFP I believed to be true” (PT659.28, 2005);

      (l) that Mr O’Neill had deliberately refrained from telling AFP investigators that ATO Officers Chow, Charles and Targett had issued Productivity Incentive Trust Plan rulings in accordance with an established line of precedent in the ATO - Mr O’Neill denied the allegation, and explained that he would have explained his understanding to the AFP, that he was aware of divergent views in the ATO and that he was sure the AFP were aware of these matters (PT660, 2005);

      (m) that Mr O’Neill had deliberately failed to tell AFP investigators that rulings given in respect of the Productivity Incentive Trust Plan entailed a continuing liability for payment of both income tax and capital gains tax on distributions from the trust - Mr O’Neill denied this allegation;

      (n) that Mr O’Neill had deliberately failed to tell AFP investigators that the Bonnell ruling accorded with ATO precedents - Mr O’Neill denied this allegation and explained that he would not have done so because he did not believe the proposition to be correct (PT662-663, 2005);

      (o) that Mr O’Neill had deliberately failed to tell AFP investigators that, in the wake of the Bonnell ruling, the ATO view had changed - Mr O’Neill denied the allegation - he accepted that the had not put the suggested proposition because he did not believe it was correct (PT663, 2005);

      (p) that Mr O’Neill had deliberately failed to tell AFP investigators that any of the rulings that were under consideration provided protection only for the particular tax payer who was the subject of the ruling, and that the Commissioner of Taxation was not bound, as a matter of law, to apply the ruling to any other tax payer - Mr O’Neill denied this allegation.

      Submissions for the Accused

79 The principal thrust of the Accused’s objection will be apparent from the preceding account of submissions made before Sully J.

80 Mr Sutherland SC relies upon the written submissions dated 8 March 2005 and supplementary submissions dated 17 March 2005 of Mr Clelland SC and Mr Livermore. In addition, Mr Sutherland SC provided a brief outline of supplementary submissions dated 7 February 2007, to which he spoke at the conclusion of the pre-trial hearing.

81 To determine the present application, it is not necessary to rehearse in detail submissions made for the Accused. A range of issues were touched upon in support of an argument that Mr O’Neill had engaged in intentional wrongdoing in the provision of false information to be relied upon in warrant applications, or, at least, that he furnished such information with no genuine belief in the truth of the information provided.

82 It was submitted that applications for warrants, as part of a criminal investigation, require the applicant to provide accurate information in good faith to the issuing authority. Although an application to set aside the warrants was not maintained as part of this application, reliance was placed upon decisions which have held that a warrant obtained by fraud or misrepresentation will be vitiated: Flanagan v Commissioner of the Australian Federal Police (1996) 60 FCR 149 at 203, 213-217. It was submitted that a warrant is not saved because fraud or misrepresentation has been perpetrated through an innocent and unsuspecting applicant: R v Turner (No. 14) [2001] TasSC 124 at [97]. Silence as to a material fact may also vitiate a warrant: Flanagan v Commissioner of the Australian Federal Police at 217. Mr Sutherland SC submits that these principles provide an important starting point, given the solemn responsibility reposed in an applicant for a warrant which will, if granted, in one respect or another, intrude upon the privacy of a citizen.

83 It was submitted that Mr O’Neill had provided information to AFP investigators which was then relied upon by Federal Agents Dametto and Tchakalian in support of their applications for telephone intercept and search warrants. It was submitted that Mr O’Neill could not have honestly believed, at the time he provided such information, that it was true.

84 Mr Sutherland SC sought to emphasise the manner in which the tax consequences and potential loss to the revenue were characterised in the warrant applications in 1999 and 2000, in contrast to the manner in which the deprivation question was left at the first trial, namely, that the Commissioner of Taxation has an arguable case to put that the rulings were wrong, and that the risk to the revenue was such that the Commonwealth was in fact deprived of something of value: R v Petroulias (2005) 62 NSWLR 663 at 667 [11].

85 Mr Sutherland SC invited me to reach a different conclusion to that of Sully J with respect to the credibility and reliability of the evidence of Mr O’Neill. It was submitted that Mr O’Neill had intentionally understated the significance of his role in the investigation as a means of distancing himself from the information relied upon in the warrant applications with respect to tax consequences and potential loss to the revenue. It was submitted that an ATO officer of Mr O’Neill’s stature and position would not, and could not, have honestly believed that the contents of the affidavits in these respects were true and correct.

86 It was submitted that Mr O’Neill’s evidence was inconsistent with evidence of AFP investigators in significant respects. For example, Federal Agent Tchakalian believed that he had shown drafts of his search warrant affidavit to a number of persons, including Mr O’Neill, before swearing the affidavit on 23 March 2000 (PT863, 871, 872, 2005). Mr O’Neill said that he did not think he saw drafts, although he may have had discussions with the officers who drafted the search warrant application (PT522.14, 2005).

87 It was submitted that Mr O’Neill was not a credible or reliable witness and that his motive for giving false information to AFP investigators may flow from his alleged ill feeling towards the Accused.

88 Mr Sutherland SC submitted that impropriety had been established, together with a causal connection with the obtaining of impugned evidence. Accordingly, it was submitted that the Accused had discharged the onus on him under s.138. It was then submitted that consideration of relevant discretionary factors under s.138(3) ought lead to the rejection of the evidence. In particular, emphasis was placed upon the suggested gravity of the impropriety which was said to be deliberate or, at least, reckless: s.138(3)(d), (e) Evidence Act 1995.


      Submissions of the Crown

89 The Crown submitted that Sully J had heard evidence from a wider range of witnesses than were called before me and had a greater opportunity to form a view of the witnesses, particularly Mr O’Neill. Sully J formed the view that the attack on Mr O’Neill was ill founded and did not identify any impropriety on his part. The Crown submits that this conclusion remains the case, in the light of the evidence repeated in the course of the present application, and that no basis has been established for me to reach a different view to that of Sully J.

90 The Crown observed that what is alleged is that Mr O’Neill has been involved in improper conduct in providing false or misleading information to the AFP investigators. The Crown acknowledged that a misstatement of fact in an application for a warrant may be improper for the purposes of s.138, even if the deponent did not intent to mislead: R v Cornwell at 87-88 [21]. Whether conduct is improper depends upon the facts and circumstances of the particular case. The Crown submits that the task of demonstrating that the conduct of the witness who provides information used in an application for a warrant is improper is more difficult, particularly if the person is not specifically aware that the information will be used for that purpose. The persons responsible for the misstatements are the deponents, but the Accused in this case makes no allegation of impropriety by them.

      Revenue Figures

91 The Crown acknowledges Mr O’Neill’s concession that he may have provided to the AFP the amounts referred to in the warrant applications for estimated revenue loss.

92 The Crown acknowledges that, ultimately, the amounts referred to in the warrant applications may have been excessive. It was submitted, however, that this was undoubtedly due to the difficulties in formulating such estimates, particularly in the light of the lack of documentation concerning the number of rulings issued. The Crown pointed to Mr O’Neill’s evidence that ATO officers within the SIA section performed the calculations, and that Mr O’Neill did not contribute or add anything to the figures reached by these officers (PT672-673, 2007). Where the defence submission asserts the provision of false and misleading information concerning revenue estimates by Mr O’Neill to AFP investigators, the Crown submits that it is important to observe that the figures were not calculated by Mr O’Neill, but by other persons against whom no allegation of impropriety is made.

93 The Crown points to the PROMIS entry for 15 July 1999 (see paragraph 56 above) as indicating that the direct loss of revenue from the rulings issues by the Accused would be far less than the larger amounts being mentioned. The PROMIS entry for 29 July 1999 (see paragraph 62 above) gave a figure for revenue at risk from the rulings under investigation as $30-$70 million, but stated that this was subject to the proviso that there were many variables which could affect the calculation. The Crown submits that it has not been shown that the figures for direct loss from the rulings of the Accused were excessive as the statement of Mr Ingersoll shows that relevant deductions were as high as $42 million (see paragraph 77 above).

94 The Crown submits that there was no impropriety on the part of Mr O’Neill personally in having his team estimate revenue loss and then pass that information to the AFP. The Crown observes that the defence arguments constantly assert that figures were given for actual loss. However, the Crown submits that the word “actual” does not appear in any documents in evidence. The Accused’s submissions add a gloss to the information contained in the affidavits.

95 It was submitted for the Crown that the defence contention, which seeks to contrast the manner in which revenue at risk was dealt with in warrant applications with the way in which the Crown now puts its case, proceeds on a misunderstanding, namely, that it is no longer alleged that there was a substantial financial impact on the Commonwealth. The Crown submits that it has always been alleged, and is still alleged, that the Accused acted in a way which had a substantial financial impact on the Commonwealth. It is acknowledged that the Crown shies away from pointing to an actual loss, but that the same basis identified by Mr O’Neill when dealing with the AFP remains the premise upon which the case is being run by the Crown, that is, that the revenue at risk as a result of the rulings was substantial (PT874.43ff, 2007).

96 Even if the figures included in warrant applications were in the end excessive, the Crown submits that the revenue at risk was still substantial, and the character of the conduct of the Accused involved remained serious, and sufficiently grave to justify the issue of the search warrants and the telephone intercept warrants. In particular, The Crown contends that the requirement for a Class 2 offence, that the particular conduct constituting the offence involved serious fraud or serious loss to the revenue of the Commonwealth (s.5D(2)(b)(v), (vi) TI Act) was satisfied in this case, even if the estimated loss to the revenue expressed in the warrant applications was excessive.


      Total Tax Wipe Out

97 The Crown submission commences by noting Mr O’Neill’s concession that he used the term “total tax wipe out” in the course of providing assistance to the AFP (PT526, 2005). Mr O’Neill explained that the term is appropriate to the non-complying controlling interest superannuation schemes for which favourable rulings were issued (PT526, 2005). The Crown submits that Mr O’Neill made this clear in cross-examination at the pre-trial hearing before Sully J on 9 March 2005 (PT526, 548, 561-562, 2005). The Crown submits that Mr O’Neill maintained this position in his evidence before me on 31 January 2007 (PT708-714, 2007).

98 The Crown submits that an examination of the contemporaneous documentation reveals that Mr O’Neill has been consistent and accurate in relation to the use of the term “total tax wipe out”. Reference was made to the referral from Mr Brown to the AFP of 29 March 1999 (see paragraphs 43 to 49 above) in which reference was made to “some rulings for schemes” that were “total tax wipe out” arrangements. This information appeared to relate back to Mr Brown’s running sheet entry for 18 March 1999 concerning information from Mr O’Neill about the Global Growth Management Pty Limited scheme which seemed to be a “total tax wipe out” (see paragraph 40 above).

99 The Crown pointed to the PROMIS entry for 28 April 1999 (see paragraph 52 above) which attributes information to Mr O’Neill to the effect that “it appears that Petroulias has in fact issued PBR’s which result in a total tax wipe out”. The Crown submits that this factually correct.

100 Accordingly, the Crown submits that there was no impropriety in the information conveyed by Mr O’Neill to the effect that some rulings resulted in a total tax wipe out. Global Growth Management Pty Limited was one of the beneficiaries of a ruling for a non-complying superannuation fund. The Crown observed that Mr O’Neill has not been challenged on his assertion that non-complying superannuation fund schemes produced a total tax wipe out.

101 Mr O’Neill stated in evidence that the phrase “total tax wipe out” could also apply to employee benefit trusts in their application, but not as ruled upon (PT714.6, 2007).

102 The Crown concedes that paragraph 9 of Federal Agent Dametto’s affidavit of 27 July 1999 (see paragraph 58 above) included some inaccurate information. It was submitted, however, that this seemed “to be due to laxity of the author in correctly absorbing what Mr O’Neill had been saying about his observations about total tax wipe out” (PT870.6, 2007). The Crown submits that the statement was correct in part, but seemed “too broad to be precisely correct” (PT871.3, 2007).

103 The Crown concedes that inaccuracies appeared in paragraphs 7 and 29 of the affidavit of 23 March 2000 in support of the search warrant (see paragraphs 69-70 above) with respect to the term “total tax wipe out”. It was Mr O’Neill’s evidence that the Productivity Incentive Trust Plan could result in a total tax wipe out if it was implemented other than in accordance with the arrangements. Insofar as these paragraphs of the affidavit suggest that the Productivity Incentive Trust Plan could give rise to a total tax wipe out if implemented in accordance with the arrangements, then that statement was inaccurate (PT871-872, 2007). The Crown concedes that “technically that statement is not accurate and should have been the subject of greater particularity in order to embrace the instructions of Mr O’Neill” (PT872.4, 2007).

104 In summary, the Crown submits that the term “total tax wipe out” was apt to some of the schemes which were the subject of rulings (the non-complying superannuation trust schemes) and could extend to employee benefit trust schemes if the scheme was not implemented in accordance with the arrangements. To the extent that the statements made in the warrant applications did not make this distinction clear, the applications contained inaccuracies.

105 However, the Crown submits that allowance ought be made for the fact that Federal Agents Dametto and Tchakalian were setting out in the affidavits their understanding of a complex legal and factual position. There had been, in effect, some breakdown in communication between Mr O’Neill and ATO officers, on the one hand, and the AFP deponents, on the other, in conveying a complete and accurate understanding of a complex concept based, as it was at the time, on a developing understanding of what had occurred.

106 The Crown submits that this does not constitute a foundation for a finding of impropriety on the part of Mr O’Neill in the manner alleged by the Accused.


      Mala Fides

107 The Crown submits that there is no evidence of ill will on the part of Mr O’Neill towards the Accused. Mr O’Neill has denied on oath, on more than one occasion, that he had any animosity towards the Accused (PT511-512, 2005).

108 The Crown emphasised that the investigation into the conduct of the Accused by Mr Brown was well advanced before Mr O’Neill even met Mr Brown in February 1999. Mr Brown’s investigation had been on foot since October 1998. It was submitted that Mr O’Neill had no interest in taking over the position of the Accused as the officer in charge of the SIA. Mr O’Neill was a lawyer engaged in the Tax Counsel Network and did not stand to gain any increase in salary from a transfer to the SIA (PT516, 2005).

109 The Crown submits that the report written by Mr O’Neill for the Commissioner of Taxation on 18 March 1999 (see paragraph 37 above) cannot be construed as an effort to give momentum to the investigation into the Accused. Mr O’Neill compiled a two-page summary only, and the balance of the material was compiled by other officers in SIA, including the Accused. The Accused is not mentioned, directly or indirectly, in the summary prepared by Mr O’Neill or in any of the attachments (except as a participant in preparation of some of the documents).

110 It was submitted that Mr O’Neill played no part in the decision to refer the matter to the AFP, and was unaware that such a course had been followed until after the referral, a course which surprised him (PT519, 2005). Mr O’Neill played no part in preparing the referral letter sent by Mr Brown to the AFP on 29 March 1999.


      Difficulty in Formulating Instructions

111 The Crown pointed to Mr O’Neill’s evidence that the task of establishing the state of affairs within the SIA was “quite complex” as the records were in disarray with documents missing from files. The problem was compounded by the fact that the rulings were not on the computer system (PT517, 2005). The investigation did not locate an additional 44 rulings on the LAN backup system of the ATO until 17 September 1999. The Crown submits that the location of a significant volume of original documentation relating to the applications for the rulings in the Melbourne storage unit leased by the Accused in the name of Christopher Marriott, further serves to explain the difficulties encountered in attempting to formulate a picture of what had been happening in the SIA.


      Contribution of Mr O’Neill to Application for Warrants

112 The Crown points to Mr O’Neill’s evidence that he was unaware of the fact that telephone intercept warrants were being sought or utilised until he was sworn in as a special member of the AFP in December 1999 (PT520-522, 2005). The telephone intercepts which the Crown proposes to tender had already been recorded in September and October 1999 before Mr O’Neill even knew that a telephone intercept warrant was in place. The Crown submits that Mr O’Neill’s evidence ought be accepted and that he did not know, prior to December 1999, that affidavits were being prepared for telephone intercept warrants.

113 The Crown accepts that the AFP relied upon Mr O’Neill for technical assistance in relation to matters which were included in applications for warrants. However, the Crown submits that the Court should accept that Mr O’Neill had no direct involvement in settling the affidavits relied upon (PT522, 2005).


      Causation

114 It was submitted for the Crown that, even if impropriety was established, the Court could not be satisfied that evidence was obtained in consequence of any impropriety for the purpose of s.138: R v Cornwell at 89 [25]. The Crown submits that the issue in this case is whether the warrants were issued as a consequence of information provided by Mr O’Neill. It is clear, the Crown submits, that the information he provided was distorted, in some respects, in its inclusion in the affidavits.

115 The Crown submits that the unchallenged information, otherwise available in the affidavits, justified the issue of the warrants. The Crown submits that what was said in the applications about “total tax wipe outs” was, in large part, correct for the reasons given by Mr O’Neill. It was submitted that a similar conclusion ought be reached with respect to the revenue figures. As Mr Ingersoll’s calculations demonstrate, a very substantial sum had been the subject of deductions ($42 million) and the revenue had been seriously placed at risk.

116 The Crown submits that the revenue at risk was, on any view, sufficient to render the conduct a serious fraud, or to constitute a serious loss to the revenue, and that it is beyond dispute that some rulings resulted in a total tax wipe out and were thus contrary to ATO policy.

117 Accordingly, the Crown submits that, even if impropriety had been established, the Accused has failed to establish the relevant causal link.


      Discretionary Considerations

118 If the Crown submissions concerning impropriety and causation were rejected, the Crown submits that the Court should be satisfied, in the exercise of discretion, that the evidence obtained pursuant to the telephone intercept warrant and search warrants ought be admitted under s.138(1) and (3) Evidence Act 1995.


      Determination

      The Impropriety Issue

119 To constitute impropriety for the purpose of s.138(1), it is not necessary that a finding be made of deliberate or intentional wrongdoing. However, it is necessary to make findings with respect to the facts and circumstances of the present case to allow a conclusion to be reached as to whether impropriety is demonstrated in the sense recognised in Robinson v Woolworths Limited.

120 It is common ground that statements appeared in the affidavits sworn in support of the telephone intercept warrant application of 27 July 1999 and the search warrant application of 23 March 2000 which were factually inaccurate. Given the submissions made by the parties, it is necessary to consider how this came about.

121 Mr Sutherland SC’s first submission is that the Court should be satisfied that Mr O’Neill knowingly provided the AFP investigators with false and misleading information concerning the issues of total tax wipe out and the impact on the revenue of the Accused’s activities. It was submitted that the evidence calls for a finding that Mr O’Neill was affected by ill feeling and bad faith towards the Accused, so as to motivate him to provide knowingly false and misleading information to AFP investigators which he knew, at the time, would be used to the Accused’s detriment in support of the warrant applications.

122 I have carefully considered the evidence given before Sully J, and again before me, by Mr O’Neill and other witnesses called at the pre-trial hearings in 2005 and 2007, together with the substantial volume of contemporaneous documents comprising Mr Brown’s ATO running sheets and the AFP PROMIS running sheets of Operation Foccacia. I have considered the detailed submissions made in writing and orally on behalf of the Accused on this point.

123 I am not satisfied that Mr O’Neill was motivated by ill feeling or bad faith towards the Accused. In my opinion, tenuous submissions were made on behalf of the Accused, with respect to some actions of Mr O’Neill at various times, in an effort to attribute to him bad faith. In my view, the submissions fell very far short of demonstrating such a proposition.

124 The evidence points to Mr O’Neill providing assistance to Mr Brown’s ATO investigation, and then the AFP investigation, in a variety of ways which do not support a finding that he was motivated by ill will or animus towards the Accused. Accordingly, I reject the submission of the Accused to this effect.

125 What findings ought be made concerning information conveyed by Mr O’Neill to AFP investigators concerning the two topics which are presently significant, namely, total tax wipe out and impact on the revenue?

126 There is no dispute that Mr O’Neill and other ATO officers provided information to AFP investigators for the purpose of the investigation. This is entirely understandable given the elaborate and complex subject matter under investigation over an extended period of time. I accept the Crown submission that difficulties presented themselves in acquiring a full understanding of the scope and content of the activities of the Accused with respect to rulings and advance opinions. The state of documentation within the SIA contributed to this difficulty. This was not a case where all relevant documentation was immediately available to AFP investigators and ATO officers, including Mr O’Neill, so that a clear and complete understanding of the conduct under investigation could be acquired.

127 In my view, it is appropriate to keep in mind that this investigation was far removed from a fraud investigation where the amounts defrauded, or the extent to which the revenue of the Commonwealth, was imperilled, may be clearly and obviously identified. During the course of submissions, I raised with Mr Sutherland SC a number of scenarios where inaccurate information may find itself into a warrant application, intentionally or inadvertently (PT836-839, 2007). In my view, the present case presented substantial challenges, at the investigation stage, for persons attempting to identify or calculate, with any precision, the tax consequences or the extent of imperilment of the revenue resulting from the activities under investigation. Action taken in the investigatory stage, including statements made on these issues in warrant applications, must be considered in light of this practical reality.

128 I accept the Crown submission on the total tax wipe out issue. The contemporaneous documents contained in the PROMIS running sheets provide support for Mr O’Neill’s evidence, given in 2005 and 2007, that the total tax wipe out concept had application to the non-complying controlling interest superannuation schemes including, significantly, that of Global Growth Management Pty Limited.

129 I accept the evidence of Mr O’Neill that he was unaware that telephone intercept warrants had been sought and obtained until December 1999, when he was appointed a special constable for the purpose of perusing material obtained pursuant to warrants.


130 It is clear that material included by Federal Agent Dametto in the telephone intercept warrant application of 27 July 1999 was based upon information provided by Mr O’Neill concerning total tax wipe out. I accept Mr O’Neill’s evidence that he did not read a draft of the affidavit or settle the parts of the affidavit touching upon this issue. He did not know at that time that a telephone intercept warrant was being sought. Federal Agent Dametto utilised information concerning total tax wipe out which was, in some respects, accurate and, in other respects, inaccurate. I am satisfied that this occurred as a result of an imperfect understanding of a difficult topic.

131 I am satisfied that the information inserted in the affidavit concerning total tax wipe out appeared inadvertently, and without any intention to mislead the issuing authority. I am satisfied that Mr O’Neill was not aware of the formula of words contained in that affidavit at the time when the application was made for the warrant.

132 With respect to the revenue calculations issue, the Crown concedes and I accept that the figures utilised were excessive. I accept the evidence of Mr O’Neill that these figures were calculated by ATO officers within the SIA and were not calculated or varied by him. I accept that Mr O’Neill was acting in good faith in providing these calculations, from time to time, to AFP investigators. It is clear, however, from Mr Ingersoll’s statement, that deductions in the order of $42 million had been claimed as a result of the Accused’s rulings, and that the revenue of the Commonwealth was imperilled to a significant extent.

133 I accept the Crown submission that the defence have overstated the revenue figures issue by contending that claims of actual loss were being asserted. A fair reading and understanding of what Mr O’Neill and others were saying to AFP investigators indicates attempted projections of levels of deduction, and qualified estimates of the extent to which the revenue may be imperilled. Once again, it is necessary to view these steps in the practical reality of a difficult and complex investigation where parts of the picture were only revealed over time.

134 The Accused points to the contrast between the extent to which the Commonwealth was said to be imperilled financially in the warrant applications and the manner in which the Crown puts its case now on the element of deprivation on the fraud count. Once again, it is appropriate to observe that complex issues of fact and law have been involved in this investigation and prosecution since 1999 and 2000, culminating in the approach taken by the Court of Criminal Appeal in R v Petroulias (2005) 62 NSWLR 663 to this question. My judgment, R v Petroulias (No. 1) [2006] NSWSC 788, sets out the heavily litigated history of a number of issues in these proceedings, including imperilment of the Commonwealth’s revenue.

135 I accept Mr O’Neill’s evidence that he did not check Federal Agent Tchakalian’s draft application for search warrants dated 23 March 2000. Mr O’Neill acknowledges that he may have had discussions with the draftsman of the search warrant application (PT522, 2005). It is correct that the information contained in the affidavit emanated, in general terms, from Mr O’Neill. However, I accept that Mr O’Neill did not check and approve the precise wording used in Federal Agent Tchakalian’s affidavit. This conclusion does not involve a rejection of the evidence of Federal Agent Tchakalian.

136 In reaching these conclusions concerning the evidence of Mr O’Neill, I have had regard to the findings of Sully J concerning the demeanour and credibility of Mr O’Neill. I have formed my own view, as well, concerning these features of Mr O’Neill’s evidence, having observed him in the witness box. I agree with Sully J that Mr O’Neill’s evidence accords with the objective probabilities. This is a case where a favourable demeanour finding with respect to Mr O’Neill accords with other objective facts which fortify the conclusion reached: Goodrich Aerospace Pty Limited v Arsic [2006] NSWSC 187 at [28]ff. Like Sully J (Judgment, page 16), I am wholly unpersuaded that a body of evidence is present to support the strong findings of intentional impropriety sought by the Accused against Mr O’Neill.

137 In summary:


      (a) I am not satisfied that Mr O’Neill was motivated by ill feeling or animus towards the Accused when providing information to AFP investigators concerning the total tax wipe out and revenue estimate issues;

      (b) I am not satisfied that Mr O’Neill provided, or caused to be provided, to AFP investigators information concerning those two topics which was false or misleading to his knowledge;

      (c) I accept that some information included concerning these two issues in warrant applications was inaccurate, in the respects acknowledged by the Crown;

      (d) I accept that the inaccurate information concerning the total tax wipe out issue included in the warrant applications resulted from an imperfect understanding by AFP investigators of that which had been explained to them by Mr O’Neill - I accept that Mr O’Neill and AFP investigators were, at all times, acting in good faith in this respect;

      (e) I accept that the excessive figures included on the revenue calculation issue in applications resulted from calculations made by ATO officers, other than Mr O’Neill, in good faith and were included by AFP investigators in relevant applications likewise in good faith - this issue must be viewed against the background of the difficult task which presented itself in attempting calculations of deductions, and possible imperilment to the revenue, in the context of an incomplete understanding of the factual position, and the complex issues of fact and law which required consideration for that purpose at the investigatory stage.

138 Accordingly, I reject the defence submission that intentional or deliberate impropriety has been established. I accept that inadvertent inclusion of information, some of which is factually incorrect, has occurred in the applications for warrants in this case. I am not satisfied that this occurred recklessly. The information was inserted in warrant applications in good faith, after consideration had been given to the difficult issues involved by ATO officers and AFP investigators, in the imperfect and incomplete circumstances then prevailing.

139 Is impropriety established for the purposes of s.138(1) arising from these findings? It is necessary to apply the test of impropriety referred to in Robinson v Woolworths Limited. It is to be expected that applicants for telephone intercept and search warrants ought be scrupulous to ensure that the contents of an affidavit in support of the application fully and accurately sets out the factual material relevant to the determination whether the warrant should be issued: R v Cornwell at 87-88 [21]. This is relevant to a determination of the minimum standards which our society expects of persons entrusted with powers of law enforcement: Robinson v Woolworths Limited at 618-629 [23].

140 There is material contained in warrant applications in this case which is not fully accurate. However, I am not satisfied that the insertion of inaccurate information is the product of an intentional or reckless act on the part of Mr O’Neill or any ATO officer or AFP investigator. It was the consequence of a combination of factors, including inadvertence and an incomplete understanding on the part of the AFP applicants of some complex technical matters. In view of these findings, I am not satisfied that the conduct here was quite inconsistent with or clearly inconsistent with the relevant minimum standards: Robinson v Woolworths Limited at 618-619 [23]. Impropriety under s.138 is not established by pointing to the bare presence of some objectively inaccurate information in a warrant application. It is necessary to consider the circumstances under which the information came to appear in the application.

141 On all the evidence, I am not satisfied that the Accused has demonstrated that Mr O’Neill acted improperly with respect to the provision of information by him to AFP officers upon which reliance was placed in subsequent warrant applications. The test of impropriety, as explained in Robinson v Woolworths Limited, has not been established in this case.

142 Accordingly, I am not satisfied that the Accused has established the first and essential element of impropriety as part of the s.138 objection.


      Causation

143 If I were wrong in my conclusion that inadvertent inclusion of some inaccurate information in warrant applications did not constitute impropriety in this case, I would, nevertheless, not have been persuaded that the relevant causal connection had been demonstrated between the impropriety and the obtaining of the impugned evidence: R v Cornwell at 89 [25].

144 I accept the Crown submission that a substantial body of accurate information remained in the affidavits which was more than capable of supporting the issue of the relevant telephone intercept warrant and search warrants. I bear in mind that the statutory definition of a “class 2 offence” under s.5D TI Act required that the conduct constitute “serious fraud” or “serious loss to the revenue of the Commonwealth”. I am satisfied that the unchallenged portions of the affidavit of 27 July 1999 provided more than ample support for such a conclusion for the purpose of the issue of the telephone intercept warrant issued on that day. My observations concerning the term “serious fraud” in R v Petroulias (No. 5) [2006] NSWSC 1155 at [35]ff are apt.

145 Accordingly, had I found that impropriety was established, I would nevertheless have rejected the Accused’s submission upon the basis that the relevant causal nexus had not been established for the purpose of the s.138 objection.


      Discretionary Considerations

146 In these circumstances, it is unnecessary that I proceed to consider the discretionary issue under s.138(1) by reference to the factors in s.138(3) of the Act. If that point had been reached, however, I would have admitted evidence obtained under the telephone intercept warrant and the search warrants in any event.

147 I am satisfied that evidence obtained pursuant to the execution of search warrants, including the warrant executed upon the Christopher Marriott storage unit in Melbourne, possesses a high probative value and is of considerable importance in the proceeding: s.138(3)(a), (b). The nature of the offences charged against the Accused are serious: s.138(3)(c). Important public interests are involved in these prosecutions, in which a claim of serious misconduct is made against a person holding a very senior rank within the ATO: R v Petroulias (No. 1) at [36]; R v Dalley at 171 [3], 189 [102]. If impropriety had been established, my findings disclose, at the highest, the inadvertent inclusion of some inaccurate information in the context of a complex, difficult and protracted investigation. In these circumstances, I would not find that the impropriety was grave: s.138(3)(d). On the findings which I have made, any impropriety was not deliberate or reckless, but flowed from inadvertence in the context of a difficult and, as I have said, protracted and complex investigation: s.138(3)(e).

148 In exercising discretion under s.138(1) by reference, inter alia, to factors enumerated in s.138(3), I would have been satisfied that the desirability of admitting the evidence outweighs the undesirability of admitting evidence that had been obtained in the way in which this evidence was obtained.

149 With respect to the six conversations recorded pursuant to the telephone intercept warrant, the probative value and importance of the evidence to the Crown case is somewhat less than the search warrant evidence: s.138(3)(a), (b). Nevertheless, the telephone intercept evidence is of probative value and of some importance in the proceedings. I would reach the same conclusions with respect to the factors set out in s.138(3)(c), (d) and (e) with respect to the telephone intercept evidence, as those expressed above concerning the search warrant evidence.

150 If the point had been reached on this application, I would have been satisfied that the desirability of admitting the telephone intercept evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained and, accordingly, the evidence would have been admitted.


      Conclusion

151 I refuse the application of the Accused under s.138 Evidence Act 1995 to exclude evidence obtained pursuant to telephone intercept warrant and search warrants.

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Cited Sections