SUPREME COURT OF QUEENSLAND

1. MUIR JA:  Introduction

The appellants, Adam Hargraves and Mr Stoten, and Adam Hargraves' brother, Glenn Hargraves, were charged with one count of conspiracy to defraud the Commonwealth^[1] between 18 June 1999 and 23 May 2001 (count 1) and one count of conspiracy to dishonestly cause a loss to the Commonwealth^[2] between 24 May 2001 and 9 June 2005 (count 2).^[3]

2. On 8 March 2010, after a trial in the Supreme Court, the appellants were acquitted on count 1, but convicted on count 2. Glenn Hargraves was acquitted on both counts.

3. On 8 June 2010, the appellants were sentenced to six and a half years' imprisonment with a non-parole period of three years and nine months.  The 93 days that the appellants had spent in pre-sentence custody was declared imprisonment already served under the sentences. 

4. The appellants appeal against their convictions and sentences. Before addressing the grounds of appeal, it is instructive to outline the particulars of the unlawful agreement alleged by the prosecution and the evidence before the jury.

Particulars of unlawful agreement

5. The appellants and Glenn Hargraves, were the directors and shareholders of Phone Directories Company Pty Ltd (PDC), a company which produced local phone directories. PDC used a Chinese company, QH Data, to compile data for incorporation into PDC products. Adam and Glenn Hargraves held all the shares in PDC equally between them until July 2001 when Mr Stoten and his wife, as trustees of the Stoten Family Trust, acquired a 10 per cent shareholding.

6. The alleged conspiracy "was an agreement to make false representations to the Commonwealth as to the allowable deductions of PDC and thereby prejudice the economic interests of the Commonwealth and/or deprive the Commonwealth of taxation monies".

7. This agreement was implemented by a scheme (the Scheme) which involved PDC entering into an arrangement in 1999 devised by a Swiss accounting firm, Strachans, to the following effect. Instead of rendering its invoices to PDC for the services provided by it to PDC, QH Data would render them to a British Virgin Islands incorporated company, Amber Rock Pty Ltd (AR).  AR would inflate the amount of each invoice by an amount specified by one of the appellants and forward the invoice to PDC.  PDC would then pay the total invoiced amount to AR.  AR would pay QH Data the amount invoiced by it and pay the balance into trusts from which distributions would be made into bank accounts held by the appellants and Glenn Hargraves.  The accounts would be accessed by the appellants and Glenn Hargraves through withdrawals from automatic teller machines in Australia. 

8. In its 2000-2004 tax returns, PDC claimed tax deductions for the inflated amounts.

9. The Scheme continued to operate until the appellants' homes and offices were raided by the Australian Crime Commission and the Australian Federal Police in mid-2005.

10. The defence case was that, based on professional advice they received, the appellants believed at all times that the Scheme was a legitimate means of tax minimisation, and therefore that their conduct was not dishonest. A critical basis for this belief was that the appellants did not have control over the structure and, in particular, the disposition of the moneys paid to AR and the trusts. The appellants gave evidence. Glenn Hargraves did not.

Relevant evidence

The setting up of the Scheme

11. Mr Feddema's accounting firm had done accounting work for PDC and for the Hargraves brothers. Mr Feddema, who had been involved in PDC, attended some of its board meetings. In early 1999, after PDC changed accounting firms, Adam Hargraves contacted Mr Feddema to arrange a meeting with a representative of 'Sovereign Capital'. At the meeting, the 'Sovereign Capital' representative proposed a tax minimisation scheme, involving setting up a company in Panama and sending money to a bank in Latvia.  An "indication" was given that debit cards would be involved and that funds could be withdrawn in Australia.  After the meeting, Mr Feddema told Adam Hargraves that if he "wanted to operate offshore [he] had to establish a legitimate business offshore".

12. Mr Feddema and Adam Hargraves discussed the possibility of establishing an offshore business to source printing paper. Mr Feddema said that "ideally", dealings should be with a third party unrelated to PDC, because if there was an issue with the prices being charged, the offshore profits would be considered legitimate. They discussed using debit cards to bring the money back into Australia.

13. On 7 June 1999, Mr Feddema sent Adam Hargraves a fax containing a copy Mr Philip Egglishaw’s business card and a letter addressed to Mr Feddema in respect of another client.  The letter explained the Scheme and likely costs involved in setting it up.  Mr Egglishaw was a representative of Strachans.

14. On 18 June 1999, Mr Feddema faxed Mr Egglishaw proposing the creation of an offshore paper brokering company and asking for an estimate of the likely costs. Mr Egglishaw responded in a letter dated 22 June 1999, advising that costs depended on whether the client was to have a British Virgin Islands company and/or an offshore trust.  He also raised the possibility of using an "in-house" company to avoid the costs of forming a company.  He asked for a copy of the client's passport, an indication of what the transactions were about and for a retainer of £2,500.

15. On 27 July 1999, Adam Hargraves sent a fax to Mr Feddema stating that the "Transactions involve the purchase of paper for printing purposes for our Australian operation" but that "Other transactions may include the purchase of listings information for telephone directory publications". Two diagrams of the structures proposed for the paper purchasing and listings transactions were attached to the fax. Mr Feddema forwarded the fax to Mr Egglishaw and asked for bank account details so that money could be forwarded to Strachans.

16. On 9 August 1999, Mr Feddema emailed Mr Egglishaw to confirm that the companies in Adam Hargraves' diagrams were Australian private companies. He advised that he would have Adam Hargraves advise Mr Egglishaw directly regarding "invoicing and value".

17. In an email to Strachans of 12 August 1999, Adam Hargraves wrote:

"…

We anticipate transactions to be limited to two areas, namely the purchasing of paper from Fletcher Challenge (F/C) based in New Zealand or possibly other paper suppliers; and the purchasing of telephone listings information from QH Data based in Beijing, China.

…

PS  Can you give me an idea on the rules and procedures associated with withdrawals of funds and the mechanics of how and where it all happens?"

18. By 22 September 1999, Amber Rock Ltd and the Gabriel Trust, which was to serve Adam Hargraves purposes, had been established. A "protector", who had the power to direct the conduct of the trustees, was appointed under the trust. The protector signed an undated letter stating that the signatory resigned as protector and appointed a successor.  The name of the appointee was not inserted in the signed letter which was given to Adam Hargraves.

19. Strachans advised as follows in an email to Adam Hargraves of 1 October 1999:

"…

By email of 22nd September to Cathy McGarry I confirmed the structure was in place with a Trust known as the Gabriel Trust established on 20th August 1999 owing a BVI company called Amber Rock Limited incorporated on 1st September 1999.

…

Gabriel Trust is a Trust governed by Jersey Trust Law having as Trustees our in-house Trustee company Roker Trustees (Jersey) Limited.  The named beneficiaries are international charities.  You do not have any overt connection to the Trust.  Control over the Trustees is exercised by a Protector, the first being one of our in-house companies.  However Philip Egglishaw will have available at your meeting a signed, undated letter of resignation for that Protector and appointment in blank of a successor Protector.  This will allow the client to replace the Trustees and ultimately control the overall structure.

…

Amber Rock Limited has been given a London address for cosmetic purposes and is effectively controlled from our office by the provision of directors and company secretary.  Again you will have no relationship with the company in any way and must not be seen to have any control.

All invoices produced by the company should be seen to be coming from the company and not from anywhere else.  I think we could easily operate a system whereby you e-mail us details for the invoice which we could then superimpose on a template final invoice and fax out from the London number.  It may well be that we could use the details from the purchase invoice with an agreed mark up to produce the sales invoice.

…"

20. Adam Hargraves responded to the 1 October email as follows:

"Philip, I have some further questions regarding the structure.

…

Q2 In Australia, the ultimate control of a trust rests with an appointor, is this the same as a protector?  If so the client becomes the protector/appointor.  Is that correct?

…

…The primary transactions will be the purchase of listings from a company in China by the name of Q-data.  They are up to speed with our requirements and are awaiting further instructions … I guess you could call the services rendered to Q-data by Amber Rock brokerage fees.

Q3 I am most interested in information on how the charge card works.  Once the security funds are deposited what are the withdrawal rules?  (Could you confirm the amount required in US $ for the security bond).

…"  (emphasis added)

21. Strachans wrote to Adam Hargraves on 2 October 1999 as follows:

"…

Q2 My understanding is that Appointor is similar to a Protector.  However I would not recommend the client in Australia being appointed as the protector.  This position could be argued to be that of quasi trustee which may cause adverse tax consequences.  The blank letter that Philip will have with him should only be used as a last resort situation in replacing the Trustees.

…

Q3 By the charge card I assume you mean a Standard Chartered debit card.  This is a normal visa debit card supported by a cash deposit account at the bank.  A standard card requires an initial deposit of £5,000 or US10,000.  For the gold card the amounts are £50,000 and US$100,000.  So long as there are funds in the account the card can be used to withdraw from bank cash machines with the visa symbol or normal retail point of sale transactions.

…

The card will only work as long as there are funds in the account.  This can be topped up from time to time.  I would stress that the card should not be used for retail transactions in the holder's country of residence as these transactions normally require a signature.  We advise that only withdrawals from automatic cash machines should be used in these cases.

…"

22. The Galaxy Trust was created for Glenn Hargraves. It had the same features as the Gabriel Trust and a similar protector letter was created and provided to Glenn Hargraves.

23. At a meeting between Mr Egglishaw and the appellants on 4 October 1999 it was agreed that:

• the Hargraves brothers would be the "two clients to the structure" and Mr Stoten would also be giving instructions;

• copies of wills and passports for the Hargraves brothers would be mailed to Strachans;

• Mr Stoten was to draft "an exclusive procurement agreement" between AR and PDC;

• Adam Hargraves or Mr Stoten would correspond with Strachans via email concerning the investment of funds;

• Adam Hargraves or Mr Stoten would correspond with AR via email concerning company transactions;

• two trusts would used, one for each brother.

24. On 5 November 1999, a draft agreement between PDC and AR was sent to AR by a PDC employee on behalf of Mr Stoten.  A number of emails regarding proposed amendments to the agreement followed.  A letter from AR to PDC dated 24 November 1999 purported to contain two copies of the executed agreement. 

25. A third trust, the Dunedin Trust, was created in respect of Mr Stoten in July 2000.  It had the same features as the other trusts and a similar protector letter was provided.

Operation of the Scheme

26. The first transaction under the Scheme is illustrative of how the arrangement was intended to work and of how it worked in practice. On 1 November 1999, Adam Hargraves emailed Strachans advising them that QH Data would fax Strachans an invoice.  He instructed Strachans to add US$100,000 to the invoice and forward it to PDC.  PDC was to transfer the amount to AR, which would pay the amount of the QH invoice into a nominated Chinese bank account, and the balance of US$100,000 would be the security for a gold Visa card for Glenn Hargraves.  In accordance with Adam Hargraves' instructions, QH Data forwarded an invoice to AR for US$6,019.81.  AR then forwarded an invoice to PDC for US$106,019.81.  On 17 November 1999, PDC transferred US$106,019.81 to AR and on 29 November 1999, QH Data's bank account was credited with a transfer of US$6,019.81 from AR.  On 1 December 1999, Standard Chartered Bank account of Jillete Co Ltd, as trustee of the Galaxy Trust, had a balance of US$99,783.36.

27. The Scheme resulted in PDC claiming the amounts paid to AR as a tax deduction in its 2000-2004 returns. The payments were described as "Directory Listings". Over this period, QH Data invoiced AR US$108,981.46 in respect of "Directory Listings". For the same period, AR had invoiced PDC US$3,148,346.29. PDC had over-claimed its outgoing by AUD$5,039,267, resulting in a tax shortfall of AUD$1,339,524.

28. For the 2000-2005 financial years, AR made the following distributions (AUD$):

• $2.87 million to the Gabriel Trust

• $2.4 million to the Galaxy Trust

• $1.29 million to the Dunedin Trust.

29. For the 2000-2005 financial years, cards associated with each of the trusts were used to withdraw (AUD$):

• $1.82 million from the Gabriel Trust

• $2.25 million from the Galaxy Trust

• $0.87 million from the Dunedin Trust.

12 April 2002

30. Mr Smibert, a director of PDC, gave evidence that in the course of negotiations in mid-2001 concerning the prospective purchase of a four per cent interest in PDC, Mr Stoten told him that his dividends would need to be received by withdrawals from an ATM or by cash payments.  In about April 2002, Mr Stoten again told Mr Smibert that it would be necessary for him to receive at least part of his dividends in cash through ATMs.

31. Mr Smibert wrote to the appellants and Glenn Hargraves on 12 April 2002 questioning "the ethics and legitimacy" of an arrangement whereby the moneys of PDC from which dividends were to be paid were sent, or were to be sent, to Jersey.  Mr Smibert said that he elected to pay tax on all his dividends but had learned "that [his] declaring the full amount of [his] dividend to the ATO [would] jeopardise [his] fellow shareholders standing with the Taxation dept".  He commented:

"One must ask, if indeed these are legitimate shares, why can't I legitimately declare them without implicating others?  And what if I chose one day to sell or bequeath my shares?  Would the buyer or beneficiary have to look over his shoulder each time he used an A.T.M. and not be able to bank the money he withdrew?  Ignorant as I may be, I cannot feel comfortable about going down that path."

32. Mr Smibert resigned as a director of PDC and related entities on the day of the letter. It was then agreed by the appellants that Mr Smibert would receive his entitlements by way of profit share from Adam and Glenn Hargraves rather than by way of dividends.

33. The prosecution case was that the appellants never genuinely believed the Scheme was legitimate and that any attempt to convince Mr Smibert of the Scheme's propriety was borne out of a need to protect their own precarious position with the ATO.  The only persons who informed Mr Smibert about the Scheme were the appellants.  He was not shown any scheme documentation, provided with any written material justifying the legitimacy of the Scheme, provided with any of the invoices or informed about the mark-ups.

14 February 2004 and events following

34. On 14 February 2004, Mr Egglishaw was detained by the authorities in Australia.  His laptop was seized.  He gave evidence in closed hearings of the Australian Crime Commission for five days.

35. Mr Feddema gave evidence that he received a call from Adam Hargraves and Mr Stoten on 14 February 2004 informing him that Mr Egglishaw had been detained in Melbourne.

36. On 17 February 2004, Mr Stoten sent an email to Strachans requesting balances for all accounts. On a QH Data invoice dated 1 April 2004 is written: "All communication needs to be done by phone only to DS mobile phone". The inflating of QH Data invoices continued and the giving of instructions as to the amount of the mark-up was effected by mobile phone rather than email, as in the past.  Adam Hargraves said in his oral evidence in relation to this change that he didn't "recall any specific discussion about it".

37. The appellants and Glenn Hargraves applied for, and were issued with, credit cards in the names of foreign nationals. The evidence of Mr Egglishaw was that this was "to provide a further level of protection or security".

38. The overt acts between after 14 February 2004 and 5 June 2005 which described contact between the appellants or between the appellants and their alleged co-conspirators were:

• a series of emails, faxes and one telephone conversation between Mr Stoten and a Strachans employee; and

• three receipts signed by Adam Hargraves acknowledging that Strachans had delivered some money to him on 9 November 2004.

39. The majority of alleged overt acts during this time were withdrawals of cash by the appellants.

5 June 2005 and events following

40. On 5 June 2005, search warrants were executed at the homes of the appellants and Glenn Hargraves and at the premises of PDC. Mr Stoten phoned Mr Feddema to tell him that his home and office had been raided.  The following exchange occurred:

"JFUm, you wouldn't have anything at home though would you?

DSUm, I've just, the only, nothing at home, the only thing they got was they got the -Mumbles- the fucking card.

…

JF Interference- (Wd) how did they, how'd they know about that?

…

JF Right but the person is offshore isn't?"

41. The following exchange occurred between Mr Stoten and the agent conducting the search:

"MFThe time is 8.20am, I am recommencing the tape because Mr Stoten has finished his conversation with his solicitor.

DS I know what it is, you guys don't think that that QH Data thing is real do ya.

MF QHR.

DS QH Data - our Chinese listings, I'll take you on a flight right now to Beijing and I'll go right now if you want.

MF Alright can you just explain it to me.

DS Yeah sure, we have a, our listings, we're a publishing company, we're a a publishing company that publish telephone books, our, there is no other company in Australia that does white page listings, just give my Mrs (wds), my Mrs is pretty freaked as you can imagine, freak people out.

MF No no worries.

DS No-one else in Australia other than Telstra do these listings, so we we were the only full independently publicing, publishing data full white pages listings and yellow pages listings.  We have to get this listings, we do different areas from everywhere else, we take them.  We get raw data from Telstra which is in absolute crap form and then what we did for many years until about 98, 99, is we did it in-house we had about twenty odd staff, we had a full floor at our, we had an entire floor at our (Niecon) tower office, which I am sure you know about and we did it all in-house, it took us, it was about one million and a half dollars plus in costs in trying to format these listings and the accuracy is about 98 - 99%, which is pretty crap for white pages, that means for about every hundred listings, one or two aren't too crash hot, which is not good for a phone book.

MF No.

DS So we looked around for other alternatives and we (wds), there is no-one else in Australia, you can't sort of knock on anybody else's door and say how do you do this, how do you do that and how do you do the formatting and particularly with our stuff cause it is completely different to everybody else.'

Phone ringing in background.

DS And anyway so we went through (Butterworths) New Zealand, I think were the ones that used, they were a legitimate and they.

MF At this point I should warn you that anything that you do say is being recorded and it may be used as evidence in court.

DS Ok, do you want me to not say anything.

MF No, no, I want you to understand that we are recording.

DS Ok I better not.

MF If you feel you can legitimately explain it.

DS All I know that it's our Chinese, the way in which we do it.

MF What's the name of the company in China.

DS The data company that, I guess they are some sort of relationship with Amber Rock, which is QH Data.

MF QH Data, ok I can honestly say that's not a company that I have ever heard of.  How is there relationship with Amber Rock.

DS (wds) I don't know they must, I don't know if they have some sort of part ownership in them or whether they've got some, whether it's just that Amber Rock use a whole bunch of different companies.

MF And what actually is Amber Rock.

DS Amber Rock is a brokerage company, they are the ones that source it all for us.

MF Owned by whom.

DS By a crowd from London, bunch of guys in London.

MF Ok, have you ever heard of the term the Galaxy Trust or the Dunedin Trust or the Gabriel Trust.  No.  What do Amber Rock do.

DS They do our brokerage, from the ground, I can show you the agreement, you'll see the agreement I'm sure."

42. While the search was underway Mr Stoten contacted Glenn Hargraves and asked "Did they get the card?", Glenn Hargraves replied that they did not, to which Mr Stoten said "good".  He also contacted Adam Hargraves.  When Adam said they had not found his card, Mr Stoten said, "they haven't really got nothin' there then …".  Mr Stoten received a call from Mr Egglishaw who said, "they're fishing now in Australia 'cause they can't get anything from my area".  Mr Stoten responded that, "they'll get bits and pieces from us, there's no doubt but they won't get much …".  Mr Egglishaw encouraged Mr Stoten to speak to a barrister.

43. There was no complaint by Mr Stoten to Mr Egglishaw concerning the appellants' present predicament regarding any advice received by the appellants. Nor was there any suggestion that the appellants, or Glenn Hargraves, sought confirmation from Mr Egglishaw or Mr Feddema that the Scheme was legitimate.

44. The next day, Mr Stoten's office manager informed him that she had found a book that she had thrown out the window during the search the previous day. He told her to destroy the book. He told another staff member to "wipe" data, stating "Anything even remotely connected to any of those names, get rid of [it]".

45. On 20 June 2005, the following exchange occurred between Mr Stoten and his wife:

"DS… I know it's really stupid and such a ridiculous situation considering what we, you know, that we thought, I mean what was the point of doing all that we did if we thought it was illegal.  What's the whole bloody point, you know the risk of-sending it overseas, you know all that sort of stuff.  The whole point of that was because we thought that's the way to do it so it's legal, and this is where it ends up, it's just really, it's absolutely just rocks my mind.

KS But how, how do we explain the credit card though?  Like I mean, if they say to me have I seen it, yes I've seen the credit card, and I mean it's in someone else's fricken name, I mean how fraudulent is that?

…

DS… it's the point that when we were told to use cards like that, the whole thing was that it was always about the fact that if we do it this way it will be legal, that's the whole point, that was the whole point, that was the whole point of JOHN FEDDEMA, the whole point of EGGLISHAW, the whole thing, it was about the fact that it was, it was okay to do all this because at the end of the day there was this loophole and it allowed us to get these funds through because we didn't have control over it, because it was legal."

46. AR did not at any time provide any services as a broker or otherwise unless one accepts as services, the process by which AR invoiced PDC in an amount specified by one of the appellants, received from PDC the amount of the invoice, paid QH Data the amount of its invoice, and paid the balance into accounts of the three trusts at the direction of PDC or the appellants or Glenn Hargraves.  Asked what AR did to justify the invoicing of PDC for $106,019.81, Adam Hargraves responded, "It's raising an invoice and reinvoicing PDC for those supplies, the data".  He admitted that the $100,000 by which this invoice was inflated related "to the amount needed to kick off [his] Gold debit card account".

47. Although Adam Hargraves withdrew from active participation in PDC's business from late 1999, he maintained an interest in the operation of the Scheme. He attended meetings with Mr Stoten and Strachans in relation to the operation of the Scheme on 4 October 1999, 11 September 2000, 23 November 2001 and 5 September 2003.  He was director of PDC throughout the charged period, signed the PDC tax return for the 2000 year and continued to withdraw scheme moneys from ATMs using cards in his own and other names.  He also collected foreign currency from Strachans on 8 and 9 November 2004, at which time he signed receipts certifying that it was his responsibility to notify the fiscal authorities.

48. The appellants did not inform their accountant, who was involved in the preparation of their [and PDC's] tax returns, of their participation in the Scheme. Nor did they discuss with him any matters relating to it.

49. Mr Stoten attempted to get his brother to obtain a disguise so that he, Stoten, could access and ultimately conceal the contents of a safety deposit box at the Commonwealth Bank which contained $40,000 in cash derived from the Scheme.  He failed in an attempt to empty it, as he saw police officers waiting outside the bank.

APPEAL AGAINST CONVICTION

The trial judge erred in ruling that the amounts paid by PDC to AR were not tax deductible

50. It was argued that the payments made by PDC to AR were deductible on the basis that the payments were made by PDC in carrying on its business for the purpose of producing assessable income and that the payments were made for something which was required to be paid for, namely, the services provided by QH Data. It was submitted, principally on the authority of Cecil Bros Pty Ltd v Federal Commissioner of Taxation,^[4] that it was irrelevant that PDC paid for the services rendered by QH Data more than it should have paid or that there was a purpose of benefiting AR by paying it on a re-invoice at an inflated price.  The fact that the Scheme may have been driven by tax avoidance or minimisation was also submitted to be irrelevant. 

51. Counsel for the appellants stressed that QH Data provided services of value which were used by PDC to produce assessable income. Reference was made to the following passage from the reasons of Owen J in Cecil Bros:^[5]

"The first submission made in support of the Commissioner's assessment was based upon s. 51(1) of the Income Tax and Social Services Contribution Assessment Act.  It was contended that, of the total payments of £230,000 made by the taxpayer to Breckler Pty. Ltd., the amount of £19,777 should not be regarded as an outgoing incurred in gaining or producing the taxpayer's assessable income.  That amount was paid, so it was argued, not as part of the purchase price of goods supplied but to provide Breckler Pty. Ltd. with income.  I do not agree with this submission.  The fact that the taxpayer paid more for its purchases than it would have paid had it dealt direct with the manufacturers or wholesalers in order that Breckler Pty. Ltd. might make a profit out of the transactions does not, in my opinion, prevent the amount which it in fact paid from being regarded, for the purposes of s. 51(1), as an outgoing incurred in gaining its assessable income.  It seems to me that the contention really is that the taxpayer paid more for its goods than it should have.  But 'it is not for the Court or the commissioner to say how much a taxpayer ought to spend in obtaining his income, but only how much he has spent'.  (Ronpibon Tin N.L. and Tongkah Compound N.L. v. Federal Commissioner of Taxation and the cases therein cited)."  (footnote deleted)

52. With reference to the above passage, counsel submitted that it did not count against deductibility that a structure was adopted so that AR obtained a profit notwithstanding that PDC could have obtained its services more cheaply. Before going to the reasons of Menzies J, counsel referred to the following observations of Dixon CJ:^[6]

"The facts of the case are sufficiently set out in the judgment of Menzies J. which I have had the advantage of reading and I shall not repeat them.  Upon those facts, once it was held that the payment of the amount received by Breckler Pty. Ltd. from the taxpayer company was paid for boots and shoes as stock in trade, there could, I think, be no ground for excluding any part of it from the allowable deductions from assessable income."

53. In his reasons Menzies J stated the relevant facts as follows:^[7]

"The appellant company is a retailer of boots and shoes, so that what it pays for its stock is an outgoing which s. 51 makes an allowable deduction.  Normally, in the sort of business carried on by the taxpayer company, the retailer buys at the best price available, but the taxpayer here chose not to do so.  It preferred to buy some of its stock from Breckler Pty. Ltd. interposed between it and its usual suppliers at prices higher than those that would have been charged to it by those suppliers.  The shareholders in Breckler Pty. Ltd. were the children, grandchildren and other relatives of the shareholders in the taxpayer company and what happened was that Breckler Pty. Ltd. made profits by buying the taxpayer company's requirements as ordered at the prices the taxpayer would itself have had to pay the suppliers and reselling what it bought to the taxpayer company at higher prices.  When I say that Breckler Pty. Ltd. was 'interposed' in this way, I am not suggesting that it was formed to be the intermediary between the taxpayer company and its suppliers.  In fact, it was formed before the taxpayer company and at a time when that company's business was carried on by a partnership for which it had bought and to which it had sold in the same fashion.  I use the term, however, to emphasize that it was at all material times open to the taxpayer company to buy directly from its usual suppliers at lower prices or to order its requirements from Breckler Pty. Ltd. at higher prices so that the latter could make profits.  When it bought from Breckler Pty. Ltd., therefore, it chose to pay more than was necessary for the purpose of allowing that company to make a profit."

54. A little later,^[8] Menzies J expressed agreement with Owen J's rejection of the Commissioner's argument that the deduction claimed "should not be regarded as an outgoing necessarily incurred in gaining or producing the taxpayer's assessable income".

55. Although counsel placed particular reliance on the reasons of Menzies J, it will be readily apparent from Menzies J's statement of the facts in Cecil Bros that it was a very different case to the present.  The interposed company, Breckler, actually purchased the stock from a third party which the taxpayer then acquired from Breckler.  As Dixon CJ observed, "Upon those facts, once it was held that the payment of the amount received by Breckler … from the taxpayer company … was paid for … stock there could … be no ground for excluding any part of it from the allowable deductions …".  In this case, the facts are very different.  QH Data was providing a service to PDC before the interposing of AR.  After the interposing of AR, QH Data continued providing the same services to PDC for the same fee structure.  All that changed was that QH Data rendered its account to AR which added an additional amount to the invoice which it rendered to PDC.  PDC paid the total sum to AR, which then met QH Data's invoice and distributed the balance.  The services for which PDC was charged were never rendered by AR.  There was never any suggestion of the existence of any agreement between AR and PDC whereby AR would render the services rendered by QH Data or whereby it would facilitate those services or otherwise assist in or contribute to their provision.

56. Section 8-1 of the Income Tax Assessment Act 1997 (Cth) relevantly provided:

"(1)You can deduct from your assessable income any loss or outgoing to the extent that:

1. it is incurred in gaining or producing your assessable income; or

2. it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income."

57. The markup by AR was not a sum incurred in gaining or producing PDC's assessable income. Nor was it necessarily incurred by PDC in carrying on a business for the purpose of producing its assessable income.  The markup was added at the direction of PDC or the appellants without consideration for it being given by AR.  It did not bear on the nature, extent or value of the services provided by QH Data or on the use of those services by PDC or on anything done or to be done by AR.  The mark up was not an outgoing which fell within either of paragraphs (a) or (b) of s 8-1.

58. It does not seem to me that John v Federal Commissioner of Taxation,^[9] on which counsel for Adam Hargraves also relied, assisted the appellants.  Reference was made to the following passage in the joint reasons in that case:^[10]

"But the cost of a step taken in the process of gaining or producing income must be regarded as an outgoing or taken into account in calculating the loss (if any) incurred, whatever purpose or motive may have attended all or any of the steps involved."

59. For the reasons just given, payment to AR did not give rise to "the cost of a step taken in the process of gaining or producing income" for PDC. It had been remarked earlier in the joint reasons that, "It cannot be seriously controverted that assessable income was produced as a result of the [subject] transactions".^[11]  That was plainly not the case here.  It was said in the judgment of the Court in Fletcher v Federal Commissioner of Taxation:^[12]

"The question whether an outgoing was, for the purposes of s. 51(1), wholly or partly 'incurred in gaining or producing the assessable income' is a question of characterization.  The relationship between the outgoing and the assessable income must be such as to impart to the outgoing the character of an outgoing of the relevant kind.  It has been pointed out on many occasions in the cases that an outgoing will not properly be characterized as having been incurred in gaining or producing assessable income unless it was 'incidental and relevant to that end'.  It has also been said that the test of deductibility under the first limb of s. 51(1) is that 'it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income or, if none be produced, would be expected to produce assessable income'. So to say is not, however, to exclude the motive of the taxpayer in making the outgoing as a possibly relevant factor in characterization for the purposes of the first limb of s. 51(1).  At least in a case where the outgoing has been voluntarily incurred, the end which the taxpayer subjectively had in view in incurring it may, depending upon the circumstances of the particular case, constitute an element, and possibly the decisive element, in characterization of either the whole or part of the outgoing for the purposes of the sub-section.  In that regard and in the context of the sub-section’s clear contemplation of apportionment, statements in the cases to the effect that it is sufficient for the purposes of s. 51(1) that the production of assessable income is 'the occasion' of the outgoing or that the outgoing is a 'cost of a step taken in the process of gaining or producing income' are to be understood as referring to a genuine and not colourable relationship between the whole of the expenditure and the production of such income."  (footnotes deleted)

60. Plainly, the taxpayer's motive in this case does not assist the appellants. It cannot be said either that the markup was "incidental and relevant" to matters stated in s 8-1(a) and (b).

The verdict was unreasonable having regard to the evidence

61. This ground of appeal was only advanced in respect of Adam Hargraves. The test to be applied is whether "upon the whole of the evidence it was open to the jury to be satisfied beyond reasonable doubt that the [accused] was guilty".^[13]

62. The alleged conspiracy was particularised by the prosecution as follows:

"PARTICULARS OF UNLAWFUL AGREEMENT

The conspiracy was an agreement to make false representations to the Commonwealth as to the allowable deductions of PDC and thereby prejudice the economic interests of the Commonwealth and/or deprive the Commonwealth of taxation monies. 

The agreement would be implemented by the following means:-

1. structures were to be established overseas to facilitate the carrying out of the agreement, which structures were designed to conceal the relationship between the accused and those structures;

2. income of PDC was to be reduced by knowingly, falsely claiming as deductions for business expenses, amounts paid to Amber Rock Limited for directory listing services, when to the knowledge of the accused, the only business expenses for directory listing services actually incurred by PDC, were those invoiced by QH Data;

3. from the amounts paid to Amber Rock Limited, once payments were made to QH Data in respect of its invoice for work which had been carried out for PDC for directory listing services, the remaining amounts were to be distributed in a manner as directed by the accused to accounts established to receive those amounts to which the accused would have access;

4. the accused would access the remaining amounts as mentioned in (iii) by the use of credit and debit cards linked to the accounts as mentioned in (iii), by making purchases overseas and repatriating cash to Australia by the use of ATMs;

5. money so repatriated to Australia as cash would not be disclosed to the Australian Taxation Authorities.

The dishonest means agreed to be employed by the accused are set out in (i) – (v) above and are detailed in the accompanying 'List of Overt Acts'."

63. Counsel for Adam Hargraves challenged the reasonableness of the verdict in relation to his client by examining the overt acts in relation to count 2 (post 14 February 2004) alleged by the prosecution.  He argued as follows.

A - signing of 2002 – 2003 personal tax return 30 April 2004

64. Mr Coote, whose firm was responsible for the preparation of the tax returns for PDC and its directors, swore that Mrs Stoten would take the raw data prepared by the accounts staff at PDC and produce documentation for Mr Coote's firm to prepare the relevant returns.  When the returns were finalised the accountants would put "sign here" stickers, or otherwise indicate where signatures were required on the returns, which would then be forwarded to the client for signing.  Mr Coote conceded that most clients did not read through the returns after they had been prepared but would merely sign where indicated.  The return was apparently lodged by an employee of the accountants and it related to a period well prior to 14 February 2004.  Consequently, it was argued, that this overt act could not rationally assist the prosecution case in relation to count 2.

B - Cash withdrawals by Adam Hargraves whilst in Geneva on 8 and 9 November 2004

65. No documentation was tendered on the trial establishing that Adam Hargraves had organised the transfer of any of the subject funds to Strachans.  The evidence did not go beyond showing that Adam Hargraves had signed the receipts for cash obtained by himself from Strachans while in Geneva.  That cash was obtained in November 2004 and, as such, would not have been declarable in any tax return prior to the year ending 30 June 2005.  The personal tax return of Adam Hargraves for the year ending 30 June 2005 was not put in evidence during the trial.  During Adam Hargraves' cross-examination it was pointed out to him that the three receipts each included the following statement:

"It is clearly understood that it is the responsibility of the recipient to make whatever declarations are required by law to the appropriate revenue authorities for the sum received."

66. He confirmed that his signature appeared on the receipts. His evidence was that he signed the receipts without reading the words on them and admitted that he did not declare the moneys received to any revenue authority. The prosecution referred to this evidence in addresses.  It was submitted that the cash funds were obtained directly from Strachans in Geneva, that this was no different to Adam Hargraves utilising ATMs in Geneva and that an ATM would have produced a similar receipt.  It was submitted also that the prosecutor did not suggest to Adam Hargraves in cross-examination that his evidence in this regard was fabricated or untrue.

C - Cancellation of Kerry Hargraves' debit card

67. A credit card was cancelled on or about 17 December 2004. The card had not been used between 14 February 2004 and 17 December 2004. Ms Kerry Hargraves gave evidence at the trial that she separated from Adam Hargraves on 13 December 2004.  She was unable to remember receiving the card but said that she had used cards to withdraw cash from ATMs.  It is submitted that this overt act cannot assist the prosecution case.

D - The Gry Marianne Stensen debit card

68. Adam Hargraves swore that some time after 14 February 2004, Mr Stoten told him that he had received advice from Strachans that they were to obtain a card in a foreign national's name.  An application was submitted in the name of Ms Stensen, a Norwegian citizen, with whom the Adam Hargraves had a romantic relationship and who subsequently became his wife.  A card was obtained in her name.  Adam Hargraves said that he had no concerns about the legitimacy of this, as his ex wife had had a card and he believed he could nominate whomever he wanted as a cardholder.  In cross-examination, Adam Hargraves agreed that after 14 February 2004 there was a change in procedure for the use of the cards in that the cards were to be in the names of foreign nationals.  He said that he had ceased using a debit card in his own name well prior to 14 February 2004 due to divorce proceedings between himself and his wife.  There was nothing impermissible in Adam Hargraves obtaining a card in his de facto wife's name when there was no evidence that the card was not obtained lawfully.

E - The use of credit and debit cards to withdraw cash from ATMs in Australia

69. On 18 occasions between 31 March 2005 and 18 May 2005, the card in Ms Stensen's name was utilised to withdraw cash to the value of f26,108.50 (Swiss francs).  Between 14 February 2004 and 9 June 2005, the only money withdrawn through the Gabriel Trust was by the use of this card.  The first withdrawal was on 31 March 2005 and the last on 18 May 2005, a period of 49 days.  These acts could not rationally assist the prosecution case in relation to count 2.

F - The obtaining of an account balance by Adam Hargraves

70. There is evidence that on two occasions on 1 June 2005 and on one occasion on 7 June 2005, Adam Hargraves attempted to obtain the balance of the credit card account.  It is submitted that these "overt acts" could not assist the prosecution case in relation to count 2.

G - Intercepted telephone conversations between Adam Hargraves and Mr Stoten on 9 June 2005

71. In one of the conversations Mr Stoten asked Adam Hargraves "if they got the card". In another conversation, Adam Hargraves discussed with Mr Stoten what was seized, including credit cards, and made arrangements to meet at Glenn Hargraves' house.  It was submitted that Adam Hargraves was cross-examined about these matters and about the 9 June 2005 raid.  His evidence was to the effect that he was not concerned about the police finding the cards.

H - Intercepted telephone conversations subsequent to 9 June 2005 involving Adam Hargraves

72. In one of these conversations, Stoten spoke about advices received that they could portray the situation on the basis that Mr Egglishaw is "Mr Big". In the other, Adam Hargraves discussed overseas funds and the timing of profit distribution. The conversations took place on 27 June 2005 and 4 October 2005 respectively, both after the last day of the charge.  In cross-examination concerning the transcript of the telephone conversation on 4 October 2005, the following exchanged occurred:

"I'm just drawing your attention to this to show that you believe that you had control and access to these funds overseas as you always had in the past years?--  I don't think it's in dispute that we had access through the cards.  That was the whole point of the exercise.  I don't think anybody is saying that.

But you wanted to distinguish access and control of the funds to control of the structure?--  I don't think that it's me that's making that distinction.  It's based on the advice that we were given and we were told that that was a critical primary distinction."

73. The jury's acquittal in relation to count 1 renders this evidence of no assistance to the prosecution concerning count 2, as these acts could not rationally assist the prosecution case in relation to count 2.

I - Schedule headed "Evidence of dishonesty of Adam Hargraves"

74. Items 1 to 4 of the Schedule are irrelevant as they are related to matters which occurred prior to 14 February 2004.

75. All the other items in the Schedule have either been dealt with above or relate to periods prior to 14 February 2004.

76. Some of the above points have substance but it was not only the post 14 February 2004 acts which were relied on by the prosecution.  It could, and did, rely on acts prior to that date to prove the alleged count 2 agreement as well as the state of mind of the appellants in relation to count 2.  And there is no valid reason why the acts and omissions of an appellant in relation to the Scheme before the period alleged in count 2 could not evidence the appellants' state of mind and the existence of the count 2 agreement.  The modus operandi and structure of the Scheme largely remained the same throughout except for refinements introduced for the obvious purpose of hiding the Scheme from the Commissioner of Taxation.

77. The following further observations are made in relation to the arguments just summarised:

B:This evidence showed the utilisation of the Scheme by Adam Hargraves.  It was thus relevant even if the wording on the receipts which he signed may not have had much probative value.

C: This overt act would not appear to advance the prosecution case.

D:The issuing and use of the card in the name of a foreign national assisted the prosecution case even though the cardholder was in a relationship with Adam Hargraves.  He admitted being told that the new cards were to be issued to foreign nationals.  The point of the exercise, as Adam Hargraves was aware, was to further mask any connection between the appellants and Glen Hargraves and the monies being withdrawn from the bank accounts of their respective trusts.

E:The withdrawals were within the period covered by count 2.  They were effected in the course of the operation of the Scheme and the modus operandi was plainly devised to keep the existence and working of the Scheme from the Authorities.

F:The subject conduct was within the charged period.  It showed Adam Hargraves' continued involvement in the operation of the Scheme and was relevant to his state of mind as to its legitimacy.

G, H & I:The evidence was relevant to the matters referred to in F.  The jury was entitled to reject Adam Hargraves' evidence.  It was hardly convincing.  The fact that the conversations in H took place after the last day of the charged period does not mean that they were irrelevant to establishing Adam Hargraves' state of mind at an earlier time.  This observation is relevant to I.

78. The prosecution attached particular significance to the concerns expressed about the Scheme by Mr Smibert, a person respected by the appellants, and their failure to properly inform him of the Scheme or attempt to provide any legal justification for it.  In this regard, reliance was placed on the failure of the appellants to raise Mr Smibert's concerns with their accountant.  After the Smibert dealings, Mr Stoten emailed Strachans expressing concern about the low limit on the access cards which limited the amount of money the appellants were able to use in Australia.

79. The evidence strongly suggests that Mr Stoten, who was most active in the operation of the Scheme in its later years, did not operate in a vacuum. He held fewer shares in PDC than Adam Hargraves.  The prosecution case was thus very strong.  It was submitted by counsel for the respondent that the most likely explanation for the acquittal on count 1 is that the jury gave the appellants the benefit of the doubt.

80. The evidence recorded above plainly establishes the existence of an agreement between the appellants to set up a scheme which was to operate as described in paragraph [7] above. Apart from the foregoing, the prosecution also set out to prove that such agreement was an agreement to make false representations to the Commonwealth as to the allowable deductions of PDC.

81. It may be inferred, readily, from the evidence, that the point of the agreement was to increase the deductions claimed by PDC in its tax returns by the addition to the amount of QH Data's invoices the sum which AR was to be instructed from time to time to include in its invoices to PDC in addition to the amount in QH Data's invoices.  Putting to one side for the moment, the questions whether the inflated amounts were not allowable deductions and whether the appellants understood that, the allegations in paragraphs (i) to (v) inclusive of the Particulars, were supported by ample evidence.

82. As for (i), the structures to be established overseas included AR, the three trusts, and the bank accounts for the trusts. Although AR was to act at the direction of PDC and/or the appellants, that was not able to be ascertained from any documentation to be provided to, or likely to come to the attention of the Commissioner of Taxation. The mechanism of distributing to the appellants their respective proportions of the moneys paid to AR less its payments to QH Data was also chosen, it may be inferred, so as to prevent those payments coming to the attention of the Commissioner of Taxation.  Particular (v) was thus established also.

83. Particulars (ii) and (iii), putting aside the questions of deductibility and knowledge of the appellants, are established by the evidence referred to in paragraphs [11]-[29] above. The same may be said of (iv).

84. The evidence showed the appellants and Glenn Hargraves participating in a highly artificial scheme in which AR, a company under their effective direction, was interposed between PDC and QH Data for the sole purpose of inflating the outgoings to be claimed by PDC for taxation purposes. In that regard it is significant that although AR was described at times as a broker or as a company which was to render brokerage fees, no attempt was made to cause it to enter into a contractual relationship with QH Data or to cause it to render any service to PDC, unless the receipt of an invoice from QH Data, the inflating of the amount of that invoice in its invoice to PDC (by an amount which greatly exceeded QH Data's account and which bore no relationship to anything done by AR) and the payment of QH Data's account from money received from PDC could be described as a service.

85. It strained credulity beyond breaking point to claim, as did Adam Hargraves, a successful businessman, and Mr Stoten, a businessman and lawyer, that they believed that such a scheme could be lawful.

86. The jury was entitled to have regard to the clandestine manner in which the Scheme was structured and the steps taken to prevent it from coming to the attention of the Commissioner of Taxation such as the invoicing system, the use of ATMs to access the money which was passed through AR, the change to the use of credit cards in the names of foreign nationals, and the change to the giving of instructions to AR concerning markups from email to oral directions by a particular mobile phone.

87. The appellants were given the opportunity to reflect on the bona fides of the Scheme when Mr Smibert questioned the ethics and legitimacy of it. He had been told that if he declared the amount of his dividend from PDC, he would jeopardise his "fellow shareholders’ standing with the taxation dept". Mr Smibert was shown no advice or any other written materials which justified the legitimacy of the Scheme.  He was not even informed about the markups.

88. Much was made by the appellants of their alleged lack of control. But it was always apparent to them that they had ultimate control, exercisable at any time through the "protector" device. It was also apparent that AR was designed to do and did precisely what PDC directed it to do with no review or interference by its director or directors or any third party.

89. The behaviour of the appellants when they became aware of investigations into the Scheme was also instructive as to their states of mind concerning the legitimacy of the Scheme. The Hargraves brothers and Mr Stoten were all concerned to hide from investigators the use of credit cards in the Scheme.  Mr Stoten took active steps to destroy information relating to the Scheme to keep it from investigators.  Mr Stoten lied to investigators.  He described AR as a brokerage company which did PDC brokerage and he denied knowledge of the three trusts.

90. The keeping by the appellants of their own accountant in ignorance of the Scheme is also difficult to explain, except by the belief on their part that the Scheme was unlawful. The absence of evidence that the appellants or Glenn Hargraves complained about advice received by them as to the legitimacy of the Scheme or sought confirmation from Mr Feddema or Mr Egglishaw as to its legitimacy, or sought to have either accountant explain the Scheme to the authorities, are further indicators of the appellants' lack of belief in the legitimacy of the Scheme.

91. It was also argued under this ground that: the primary judge erred in not determining that the accused could only have held an intention to make false representations as to allowable deductions if, on the evidence:

1. The accused knew of the disparity between the scheme they intended to implement and the Scheme in fact implemented; and

2. The accused knew that that disparity changed the taxation consequences to PDC.

92. It was submitted that there was no evidence from which inferences of both (i) and (ii) could be drawn beyond reasonable doubt. In that regard it was said that the accused were not taxation experts and it would have been an exercise in futility for the accused to have intentionally implemented the Scheme contrary to the way they had been advised which secured the desired outcome of taxation reduction.

93. The evidence going to non-deductibility had to show beyond reasonable doubt that the payments made by PDC and routed through to the accused were to them as shareholders, not as directors of PDC. It was submitted also that the prosecution evidence did not exclude beyond reasonable doubt that the subject payments were to be regarded as director's fees.

94. These submissions, apart from a fleeting reference to the directors' fees argument, were not addressed orally. The Scheme was adopted quite early in the piece and did not change in substance. The evidence does not show or tend to show that the appellants were labouring under any misapprehensions concerning the Scheme's mechanics or legitimacy. There is nothing to be served by comparing the Scheme with its precursor. The appellants were well aware that it was the Scheme which had been implemented, nothing else.

95. No taxation expertise was necessary to enable the appellants to appreciate that they were not involved in a legitimate scheme. They were not advised it was legitimate. They didn't ask for any such advice. They relied on hiding the true facts from the authorities, not on the mechanics of the Scheme.

96. For the above reasons and the reasons given in relation to the previous ground, the arguments lack substance.

The trial judge erred in directing the jury that, when assessing the credit of witnesses generally, they might have regard to their 'interest in the subject matter of the evidence' and 'self-protection'

97. In the course of his summing up, the trial judge informed the jury of "a number of techniques" which they could use in assessing credibility. His Honour invited the jury to "make notes of these techniques".

98. One of the techniques was identified as follows:

"Next, interest.  Does the witness have an interest in the subject matter of the evidence?  For example, friendship, self-protection, protection of the witness's own ego.  There are any number of personal interests which people have and which they sometimes try to protect in giving evidence."

99. Counsel for the appellants submitted that these observations contravened principles stated in Robinson v The Queen (No. 2)^[14] and Stafford v The Queen.^[15]  It was submitted that the primary judge's observation gave rise to an incurable defect and the primary judge was requested to discharge the jury.  The primary judge refused the request, explaining:

"In my judgment, the direction which I have given does not offend against the law as stated by the High Court.  I reach that conclusion for several reasons.  First, the direction which was given was not specific to the accused, it was completely general.  Second, the direction does not refer to taking an interest in the outcome of the trial into account as is required by the decisions of the High Court.  It does not do that directly or indirectly.  On the contrary, it refers to an interest in the subject matter of the evidence.  It points away from the outcome of the trial by referring specifically as examples to friendship, self-protection and protection of the witness's own ego.  Finally, the direction was shortly followed by a reference to the onus of proof which makes it crystal clear that the onus remains on the Crown.  It is to an implied reversal of the onus of proof that the High Court decisions are directed.

The circumstances of this case have a particular relevance in the case of the factor of interest.

An important Crown witness, indeed on the defence case a critical Crown witness, John Feddema, gave evidence the truthfulness of which was vigorously attacked by the defence, and attacked with some considerable success.  I shall be giving specific directions about Feddema's evidence, however it seems to me that to fail to inform the jury that in assessing his evidence his interest should be taken into account I would be running a grave risk of injustice to the accused.  That is the result which the reading of Stafford propounded by the applicants would produce.  Of course the applicants submitted that nothing in Stafford prevented me from giving a direction specifically limited to Feddema, but that is not what the decision in Stafford says.

Moreover, to give a direction specifically limited to Feddema would be to invite the jury to wonder what logical reason there could be for not adopting a similar approach in relation to the accused."

100. Counsel for the respondent contended that the direction did not offend the principles in Robinson.  Their submissions were to the following effect.  The judge gave the following reasons for rejecting the complaint: the direction was general, it referred to an interest in the subject matter and it was preceded and followed by a direction on the onus of proof.

101. The judge addressed the context in which the direction was given; being that Mr Feddema, who the defence argued was critical to the Crown case, was challenged by the defence and the failure to give such a direction "may run an injustice to the accused".

102. A trial judge may make reference in the summing up to the interest a witness may have in the outcome of the case.^[16]  It is also permissible to refer to a particular interest or purpose a witness may have in giving evidence in the proceedings.^[17]  The direction did not invite an assessment of credit by means of a comparison of interest in the outcome of the trial.

103. In Robinson, the trial judge, after referring in his summing up to a number of ways in which the jury could test the credibility of a witness, said:^[18]

"Still on the subject of witnesses, you might think that some of them have an interest in the outcome of this case.  Indeed you might think that one witness above all others has a greater interest than all the others in the outcome of the case.  You might say, 'Well, this witness has a particular interest in the outcome of his case.  We should look at his or her evidence closely, more closely than perhaps we would at others.'  That is a matter you have to bear in mind when scrutinizing a particular witness's evidence."

104. Towards the end of the summing up, he said:^[19]

"Another test was what interest does a witness have in the outcome of a case?  If you thought a witness had a large interest in the outcome you, as the judges of the facts, might well conclude that you should scrutinize that witness's evidence closely.  You might think – it is a matter solely for you – that the accused had the greatest interest of all the witnesses you saw and heard and that, therefore, you should scrutinize his evidence closely."

105. Counsel for the appellant did not complain about the directions, but sought a further direction in relation to the complainant's interest in the outcome of the case. The trial judge gave a further direction in response to this request, in which he referred to his earlier direction and observed:^[20]

"You might well conclude, it is a matter for you, that the complainant also has an interest in the outcome of this case.  I didn't intend to lead you to believe that you apply only the interest in the outcome of the case test to the accused only.  You apply it to all the witnesses if you believe that test is applicable."

106. After referring to these and other parts of the summing up, the Court concluded:^[21]

"Notwithstanding the correctness of his Honour's directions concerning the onus and standard of proof, however, it is impossible to escape the conclusion that the fairness of the trial was seriously impaired by the effect of his directions concerning the interest of a witness in the outcome of the case.  The jury could hardly escape the conclusion that the appellant had 'the greatest interest of all the witnesses' in the outcome of the case.  Indeed, his Honour had suggested to the jury that they might think that the appellant had a greater interest than any other witness in the outcome of the case.  If the jury accepted that suggestion, as they almost certainly would have, his Honour's directions had the effect that the evidence of the appellant had to be scrutinized more carefully than the evidence of any other witness, including the complainant, for no reason other than that he was the accused.  The unfairness of such a direction is manifest, particularly when the outcome of the trial inevitably turned upon the jury's preference for the evidence of the complainant against that of the accused.  Moreover, the directions virtually had the effect that the appellant was to be treated as a 'suspect witness' in the same way as an accomplice, a complainant in a sexual case and a young child have been treated as 'suspect witnesses', that is, as witnesses whose evidence is to be accepted only after the most careful scrutiny."  (footnote deleted)

107. It was then remarked that an express direction which had the effect of the trial judge's directions would have been a clear misdirection and that the directions "do not sit well with the presumption of innocence". In that regard it was said that:^[22]

"To hold that, despite the plea of not guilty, any evidence of the accused denying those acts is to be the subject of close scrutiny because of his or her interest in the outcome of the case is to undermine the benefit which that presumption gives to an accused person."

108. The explanation was followed by these observations:^[23]

"Nothing in the above is intended to suggest that the evidence of an accused person is not subject to the tests which are generally applicable to witnesses in a criminal trial.  Thus, in examining the evidence of a witness in a criminal trial – including the evidence of the accused – the jury is entitled to consider whether some particular interest or purpose of the witness will be served or promoted in giving evidence in the proceedings."

109. The reasons then addressed the perceived vice in a direction that evidence be evaluated on the basis of the interest of witnesses in the outcome of the case:^[24]

"But to direct a jury that they should evaluate evidence on the basis of the interest of witnesses in the outcome of the case is to strike at the notion of a fair trial for an accused person.  Except in the most exceptional case, such a direction inevitably disadvantages the evidence of the accused when it is in conflict with the evidence for the Crown.

It follows that, if, as we think was the case, the jury would have understood his Honour's directions as meaning that the evidence of the appellant had to be scrutinized more carefully than that of any other witness, there was a serious misdirection in the summing up which went to the fairness of the trial of the appellant and which undermined the presumption of innocence."

110. The scope and application of the preamble stated in Robinson was considered in cases including R v Wilson;^[25] R v Allen,^[26] a case decided in 1991, but reported in 1994; R v Roach,^[27] decided in 1992 but also reported in 1994; and R v Westropp.^[28]

111. There then followed, R v Stafford,^[29] in which the Court of Appeal adhered to the view expressed in Roach that "a more limited view of the ratio in Robinson is justified".  The subject direction was:^[30]

"You look to the interest of the person who is giving evidence.  A number of people in this case have an interest in the outcome of the matter.  The police have an interest in the outcome of the matter, of course, a professional interest in the matter.  They have charged the accused person with this offence and naturally they have an interest in it. The father and sister of the deceased child and so forth, you might feel, have some interest in the matter.

The accused man has an interest in the matter, a very important interest.  You don't overlook these things, but, for example, in respect to the accused man, it would be quite wrong for you to say, 'Oh, he has a very important interest.  I am not going to take any notice of what he has to say.'  Now, that would be depriving him completely of any opportunity of giving evidence in his own defence, if you were to adopt that attitude.  It would be artificial of you to fail to take into account that he has an interest in the matter, of course, but it would be, I repeat and urge upon you very strongly, quite wrong to say, 'I am not going to take notice of anything he says because he is charged with the offence.'  That would be quite wrong and you would be failing to do justice to him if you were to adopt that attitude.

You must seriously take into account his evidence and the prospect that what he says might well be true, and only take into account his interest in the matter to the extent that it is fair to do so, while still allowing, out of fairness to the man, the very important feature:  that he might well be telling the truth and he might well be innocent.

You see, what I am trying to tell you about that is this: to use your commonsense about the matter and to be fair to him.  It would be artificial, as I say, to disregard his interest, and that applies to every witness.  You don't discard people's evidence because they have an interest in the matter; you just fairly appropriate a factor that is just and proper in the particular case to that particular component.

You look, as I said, to the reliability of witnesses as you saw them.  You might think that some witnesses appeared to you to be more reliable persons than other witnesses, and you are entitled to take that into account, taking into account, as I say, your experience of the world, your judgment of people in general.  This is where your position as a body of 12 jurors is so important."

112. Although the trial judge’s direction was considered by the High Court to have contravened the principles stated in Robinson, an application for special leave to appeal from the Court of Appeal's decision was refused.  The Court, in Stafford v The Queen,^[31] comprised of Deane, Dawson and Toohey JJ, explained:

"It follows from the decision of this Court in Robinson v The Queen [No 2] (1991) 65 ALJR 644, that a trial judge should not direct the jury that the 'interest' of an accused in the outcome of his or her trial is a 'factor' to be 'taken into account in assessing his or her evidence.  Nor should a trial judge direct the jury to the effect that, in assessing the evidence of all the witnesses, they should take account of their relative interests in the outcome.  Any direction which directly or indirectly requires or invites an assessment of the reliability of the evidence of the accused or the relative reliability of the evidence of the accused and other witnesses by reference to interest or lack of interest in the outcome of the trial is likely to be understood by the jury as a direction or invitation to discount the evidence of the accused who will inevitably be seen as having a greater interest in the outcome of the trial than any other witness.  That is what the decision in Robinsonwas directed against." [emphasis added]

113. Their Honours then dealt with the contention that the direction was unobjectionable as being favourable to the accused. It was said in this regard:^[32]

"Ordinarily, and notwithstanding what is said by the Court of Appeal of Queensland in this case about 'an admission of impotence', it is preferable that a trial judge refrains from directing attention to the interest of the accused in the outcome of the trial as a relevant factor in assessing the reliability of his or her evidence.  If the circumstances of a particular case are exceptional and require some reference to the accused's interest in the outcome as a matter of fairness to the accused, it should suffice to inform the jury that they must approach the case on the basis that the accused is presumed innocent of the acts which are the subject of the indictment and that it would be wrong and unfair for the jury to discount the evidence of the accused simply for the reason that, as the accused, he or she has a particular interest in the outcome of the trial.

Viewed in isolation, the remarks of the learned trial judge about the 'interest' of the applicant and other witnesses in the present case would seem to be in conflict with what we have said above.  However, the Court of Appeal concluded that, in the special circumstances of the case, those remarks were favourable to the applicant."

114. Later in their reasons, their Honours remarked:^[33]

"Ultimately, the central question on any appeal in this case would be whether the Court of Appeal's assessment of the overall effect of the trial judge’s remarks was mistaken.  If it was not and those remarks were, in the particular circumstances, favourable to the applicant, it is apparent that there was no miscarriage of justice."

115. In Ramey v The Queen^[34] it was said in the judgment of the Court:

"There can, and should, be no mistake as to the application of the principle laid down by this Court in Robinson v The Queen [No 2] …. It is not to be eroded by Courts of Criminal Appeal nor, a fortiori by trial judges by failing faithfully to apply the prohibition against the giving of a direction to evaluate the evidence of an accused on the basis of the accused's interest in the outcome of the case."

116. The Court of Appeal in R v Brown^[35] held that insofar as the statements of Deane, Dawson and Toohey JJ in Stafford were inconsistent with the decisions of the Court of Criminal Appeal in Allen and Wilson and the Court of Appeal in Roach, those cases should no longer be followed.

117. In R v McMahon,^[36] the Court considered the following direction in a murder trial:

"You will recall that the accused gave evidence and when you are assessing his evidence, you apply exactly the same assessing techniques to that evidence as you do to all the other evidence in the case.  Is it honest, is it reliable, is it accurate?  Is there a motive to tell untruths?  The same sorts of application that I have already indicated to you.

…

In this case [the accused] gave evidence on oath.  He [did] not have to do that.  He could have declined to say anything ... Had he done so, no-one could have commented on it.  He has the right to remain silent ... In this case he chose to give evidence, and by doing so he took the oath and said that he was telling the truth as to what his version of the events were.  Were it not true, he could be prosecuted for perjury.  More importantly, he submitted himself to cross-examination by the Crown. ... There are two things that you have got to bear in mind about this.  First, a guilty person might well decide to brazen it out in the witness-box in the hope that he will be more likely to be believed if he takes the risk of being cross-examined than if he dodged it by staying in the dock and not giving evidence. ... Second, however, that an innocent person can do no more than giving evidence on his own behalf.  This is what I say happened, he says, and I [pledge] my oath to it, and you can cross-examine me about it.  That is ... what the accused did here.  You should weigh both these comments when considering what weight you should give to the accused's evidence, remembering that the accused may be under more strain than other witnesses because he is the accused, and remembering of course that, by going into the witness box, he does not assume any burden of proof.  The burden of proof still rests on the Crown.  He does not have to prove anything to you; he simply puts his evidence in with the evidence of all other witnesses ..."

118. After discussing Robinson, Winneke P, with whose reasons the other members of the Court agreed, said:^[37]

" It is, of course, trite to say that every case must depend upon its own peculiar circumstances; and that the impact of a judge's instructions to the jury upon the fairness of a trial will depend upon a range of circumstances, including the content of the directions, the context in which they were given, and the issues in the trial.  However, for my own part, I am left in no doubt that the directions which were given by the trial judge in this case were of such a nature, and given in such context, that they did not have the impact attributed to them by counsel for the applicant.  The essence of his Honour's directions to the jury was that the jury was to assess the applicant's evidence in the same way as they would assess the evidence of any other witness in the trial.  It was in that context that the jury was told that a witness's evidence could be tested by considering whether there was a motive to tell untruths.  In that context the jury was not being invited to treat the accused as a 'suspect witness', nor - in my view - was the judge saying anything which undermined the presumption of innocence.  Indeed, later in his charge, when reminding the jury of the cases made by the Crown and the accused, he again referred to the fact that the accused had the presumption of innocence on his side.  And, finally, at the very end of his charge, and as a matter of re-direction, his Honour told the jury, again, how they should approach the evidence of the accused, in terms which are conventional in this State and which, in my view, are unexceptionable and would leave the jury in no doubt as to their approach."

119. The Court in R v Brotherton^[38] considered the following direction:^[39]

"You have to assess in relation to each witness how honest was that witness, how accurate was that witness.  Was there some reason why a particular witness would not be inclined to tell you the truth?  In the case of the accused, for example, there is an obvious one, a very serious set of crimes he is charged with, but do you think, it is a matter for you, that affected his evidence?"

120. Hunt CJ,^[40] with whose reasons the other members of the Court agreed, said in respect of that direction:

"… There should not have been the express suggestion made to the jury (even when left with the qualification that it was a matter for them to decide) that an obvious reason why the appellant would be inclined not to tell the truth was that he had been charged with a number of serious crimes.  Such a suggestion would inevitably be understood as an invitation to evaluate the evidence of the accused upon the basis of his interest in the outcome of the case against him.  I can see no distinction between that invitation and the direction prohibited by the second passage which I have quoted from the judgment in Robinson v The Queen (No 2)."

121. The passage quoted by his Honour is that quoted at paragraph [106] above.

122. His Honour concluded that it was permissible to tell the jury that it could take into account the existence of any particular interest or purpose of any witness which will be served or promoted by giving evidence but that it was "not permissible to identify that particular interest as one relating to the outcome of the case, because that will inevitably disadvantage the accused".

123. His Honour then formulated a direction which, in his view, was permissible. It included the following:^[41]

"Yet others may have some particular interest to be served or some particular purpose to be achieved by giving evidence in the case.  Those are the matters which you may consider in assessing the significance of any conflicts in the evidence [material] in the case."

124. The Court of Criminal Appeal (NSW) in R v Asquith^[42] regarded the reasons in Stafford consistent with what was said in Brotherton.^[43]  In Asquith, the appeal was allowed as a result of it being held that submissions made by the Crown prosecutor infringed the principle expressed in Robinson.  The offending words, encapsulated in the judge's summing up were as follows:^[44]

"He said there was no motive for the officers to lie.  Can you say the same thing about the accused?  If the officers had a motive to lie the accused obviously had a motive to lie, he says, in giving evidence because he is charged with these serious offences."

125. In The Queen v Haggag^[45] Callaway JA, with whose reasons the other members of the Court agreed, in a passage referred with approval in Morris v The Queen,^[46] referring to Stafford and Ramey, said:

"Three points emerge from those judgments.  The first is that, when one speaks of evaluating the evidence of an accused person 'on the basis of' his or her interest in the outcome of the case, as in Robinson itself at 536; 321 and in Ramey in the judgment set out above, that does not mean solely or even mainly on that basis.  A trial judge should not direct the jury that the interest of the accused in the outcome of the trial is even a factor to be taken into account in assessing his or her evidence.  The second is that the prohibition is not confined to directions in the sense of injunctions to the jury that they must, or must not, do something.  It extends to an invitation by the judge to assess the reliability of the evidence of the accused, or the relative reliability of his or her evidence and that of other witnesses, by reference to interest or lack of interest in the outcome of the trial.  The third is that Robinson does not depend on its unusual facts but stands for a rigorous principle to be faithfully applied."

126. In my view the trial judge’s reference to "self protection", when and if considered in relation to the accused, would most probably have been taken to mean protection against conviction. That is the most obvious interest of an accused in a criminal trial. The direction thus arguably suggested that the interest of each accused in his acquittal was relevant to his credibility.

127. It is arguable also that the direction indirectly invited an assessment of the reliability of the evidence of "the accused … by reference to [his] interest … in the outcome of the trial".^[47]

128. There are matters which suggest that the principle in Robinson and Stafford was not infringed by the direction.  The direction did not single out the accused.  It was applicable to all witnesses and dealt with credibility in a general way.  And, as counsel for the respondent submitted, the direction was consistent with the observation in Robinson to the effect that the evidence of an accused person is "subject to the tests which are generally applicable to witnesses in a criminal trial".^[48]  Also, the direction, in my view, would not have been understood by the jury "as meaning that the evidence of [each] appellant had to be scrutinized more carefully that that of any other witness".^[49]  As well as being in general terms, the direction was the seventh point in a nine point treatise on the assessment of credibility.  That tended to accentuate the generality of the treatment and to ensure that the direction was unlikely to have been given much prominence by jurors.

129. However, and not without considerable hesitation, I have concluded that the direction did infringe the principle in Robinson.  As the foregoing discussion shows, recent authority favours a rigorous application of the Robinson principle.^[50]  Unlike the possible direction formulated by Hunt CJ at CL in Brotherton, the direction focuses attention, admittedly indirectly, on self protection in the context of the assessment of credibility.  As I mentioned earlier, "self protection" when considered in relation to an accused in a criminal trial was likely to be taken as meaning protection against conviction.  I have concluded that the direction breached the prohibition against the giving of a direction, directly or indirectly, to evaluate the reliability of the evidence of an accused on the basis of the accuseds' interest in the outcome of the trial.

130. Having regard to the other considerations mentioned earlier it may be doubted that the misdirection gave rise to a miscarriage of justice but, even if it were capable of doing so, this, as is explained below, is an appropriate case for the application of s 668E(1A) of the Criminal Code 1899 (Qld).

The trial judge erred in telling the jury that they did not have to, "make a choice between the Crown position and the defence position", and that there was "another possibility", namely that the prosecution witness Mr Feddema "knew from the start what was going on ... but said nothing about the legitimacy of the Scheme because he knew from talking to the accused that it was unlawful"

131. In his summing up, in addressing Mr Feddema's involvement in the Scheme after late 1999, the judge said:

"You don't have to select one or the other.  Another possibility, which neither side espouses, is that Feddema knew from the start what was going on, was giving informal advice, but said nothing about the legitimacy of the scheme because he knew from talking to the accused that they knew it was unlawful.  You could not make a finding to that effect, because the evidence in this case is insufficient to justify such a finding.  However, you may, if you see fit, reject both the Crown position and the defence position.  It's all a matter for you."

132. It was submitted that this direction was erroneous because:

i.It identified a basis for conviction that had not been argued; and

ii.Unfairly omitted any reference to the onus of proof.

133. It was further submitted that the possibility that there was an unspoken agreement between Mr Feddema and the appellants was never suggested by the Crown, and could not have been unless Mr Feddema was declared hostile.  It would have been objectionable if the prosecution had tried to make a case for the scenario suggested by the judge.^[51]  Guilt is the only inference available from the scenario suggested by the judge.  As identified by the judge, there was no evidence to justify a jury finding that an unspoken agreement existed; therefore the direction was completely unnecessary.

134. The judge correctly directed the jury that they did not have to accept the Crown position or the defence position in relation to Mr Feddema's evidence. Although the judge raised a further factual possibility, this did not identify a basis for conviction that had not been argued. The judge specifically directed the jury that there was insufficient evidence for them to make such a finding. The most that may be said about the direction was that it was rather pointless and that it would have been better if the judge had not speculated as he did. However, throughout his summing up the judge directed the jury clearly in terms of the onus and burden of proof and the presumption of innocence and the direction complained of could not have caused or contributed to a miscarriage of justice.

The trial judge erred in directing the jury that although the same verdict was expected on each count, a possible basis for differentiating between the counts was if they: "were satisfied beyond reasonable doubt that an accused acted dishonestly after about that 14^th February 2004 when the accused heard of Mr Egglishaw being searched, but were not so satisfied for the period before then …"

135. Counsel for the appellants argued that this direction failed to identify the need for the jury to be satisfied of the existence of a dishonest agreement after the date mentioned.

136. When the direction is looked at in context, as it must be, it is apparent that this submission lacks substance. The primary judge provided the jury with flow charts which explained the steps which would have to be taken by the jury before they could be satisfied beyond reasonable doubt of the appellants' guilt. In dealing with count 1 the primary judge said:

"The prosecution must prove beyond reasonable doubt that the relevant accused and at least one other party to the agreement intended that an offence of defrauding the Commonwealth would be committed pursuant to the agreement and must prove that the relevant accused knew of this intention.

…

So, the first step in proving it, to prove such an intention in the context of the present case, the prosecution must prove that both the relevant accused and the other party intended that pursuant to the agreement PDC would inflate the allowable deductions in its tax return, and that's question 5."

137. Referring to the flow chart, the primary judge said:

"The next steps involve the idea that the deductions would be inflated dishonestly and that the relevant accused and the other party knew that, and this is, like the previous question, right at the heart of the case.  This is the ground on which most of the case was fought. … [the primary judge went on to explain the concept of dishonesty]

The prosecution must satisfy you beyond reasonable doubt that the relevant accused and the other party knew that inflating the deductions in the tax return of PDC was dishonest by those standards; that is, the standards of ordinary people."

138. As was submitted by counsel for the respondent, the summing up proceeded to comprehensively canvass the prosecution and defence submissions as to the issues of belief and dishonesty relevant to both counts 1 and 2. The direction the subject of the complaint was given in the context of the primary judge's full, clear and careful directions concerning the necessity for and meaning of dishonesty.

139. This contention has not been made good.

Miscarriage of justice as a result of the cumulative effect of a number of matters

140. With reference to observations of Jackson CJ in Leary v The Queen,^[52] it was submitted that if each of the matters raised in the grounds of appeal would not warrant the setting aside of the convictions, their cumulative weight was such as to lead to the conclusion that the trial, as the whole, had miscarried.  Reference was made also to R v Ireland.^[53]  The first of the problem areas concerned the evidence of a witness, Ms Jay, an employed accountant with the Australian Tax Office, whose role was to assemble "a vast number of documents into schedules".  In an unresponsive answer to a question in cross-examination, Ms Jay said:

"You can say that that's just wrong but the financial statements that were prepared by Strachans in relation to these entities are full of falsehoods."

141. She later said:

"I don't want to say things I'm not supposed to say, but the whole purpose for this structure was to put up this front that this business, that this company [Amber Rock] and these trusts were carrying on business.  The reality was the structure was put in place to funnel income that was already assessable through the structure."

142. It was submitted that "such deliberate and pointed conclusions by a witness, clothed in the apparent authority of the Australian Taxation Office, were seriously prejudicial to the concept of a fair trial".

143. Junior counsel for Mr Stoten objected to this evidence and the objection was upheld. In his summing up the primary judge expressly directed the jury to ignore any opinions expressed by Ms Jay. There was no complaint about that direction and no redirection was sought.

144. The appellants also complain about the trial judge's instruction to the jury that "a willingness to lie about one matter may indicate a willingness to lie about other matters".  The primary judge, after making this observation, referred to the prosecution's submission that the evidence of Adam Hargraves and Mr Stoten contained a number of lies which the jury could use "in this way.  That is, as damaging to their credibility".  His Honour also referred to the defence submission that the evidence of Mr Feddema also contained a number of lies which could be used to detract from his credibility.  It was submitted that there was no submission by the prosecution that Adam Hargraves had told extracurial lies. 

145. Complaint is also made about the directions which were argued to contravene the principles in R v Robinson and Stafford v The Queen.  It was submitted that the appellants were friends and it was "trite to say that they had personal interests in protecting themselves and preserving their liberty".  It was contended that this direction in itself, particularly as it was linked with the direction concerning lies, was inimical to a fair trial.  After making the observations which are now being considered, the primary judge said:

"It is for you to decide how to assess the evidence of any one who's told lies but when you are doing so remember this: a lie does not prove the opposite of what was said in the lie.  A lie by an accused person does not prove guilt.  The Crown always carries the onus of proving the case even against a liar.  Because a witness says something was so and you find it to be a lie, that doesn't prove that the thing was not so.  It simply proves that you can't give any weight to what the witness said."

146. Subject to the findings concerning the Robinson principle, there is nothing exceptionable in the primary judge's observations.  They are entirely conventional.  Objection was taken also to the trial judge's observation in his summing up in relation to Glenn Hargraves in terms equally applicable to the appellants that:

"Mr Kimmins also referred to a number of other matters in support of Hargraves' honesty.  The charm and wealth of Egglishaw.  Well, yes, but you might ask yourselves why would the fact that he stayed in an exorbitantly expensive hotel suite create reassurance rather than alarm?"

147. Both appellants had given evidence that they understood and were told by Mr Feddema that Mr Egglishaw was a partner in a long-established, respectable firm of chartered accountants who had a large number of clients throughout the world.  They gave evidence to the effect that this veneer of legitimacy and substance was reinforced in their minds by the fact that on their first meeting with Mr Egglishaw in Brisbane he and his entourage occupied the Premier Suite at the then Sheraton Hotel.  They gave evidence that they had later travelled to Geneva to check out the offices of Strachans and were equally impressed and reassured by the fact that the offices were in the central financial district with seemingly appropriate grandeur.

148. In this context, it was argued, that the primary judge's comment which "clearly went to the critical issue of honesty, was made at a time when no response could be made by the appellants … was intrinsically unfair". It is also contended that the trial judge's raising as "a possibility" that "Feddema knew from the start what was going on … but said nothing about the legitimacy of the Scheme because he knew from talking to the accused that they knew it was unlawful" was unfortunate and added to the "aggregate of faults".

149. None of these complaints together or in aggregate have substance. It can be assumed that the judge's directions in relation to Ms Jay's evidence were followed by the jury.^[54]  The directions or comments in relation to lies were conventional and unexceptionable.  The primary judge was entitled to comment on the evidence concerning Mr Egglishaw.  A trial judge is permitted to make comment, even strong comment on the facts, as long as the comment does not give rise to unfairness.^[55]  There was no unfairness here.  The observation about Feddema's conduct was also well within the bounds of legitimate comment

The application of s 668E(1A)

150. Section 668E(1A) of the Criminal Code provides:

"However, the Court may, notwithstanding that it is of the opinion that the point or points raised by the appeal might be decided in favour of the appellant, dismiss the appeal if it considers that no substantial miscarriage of justice has actually occurred."

151. In Weiss v The Queen,^[56] it was said in the judgment of the Court that there were three fundamental propositions relevant to the application of the proviso:  the appellate court had to decide itself whether a substantial miscarriage of justice had actually occurred; the appellate court's task was an objective one and the standard of proof was guilt beyond reasonable doubt.

152. Their Honours expanded on the fundamental propositions, explaining that the appellate court's task must be undertaken on the whole of the record of the trial "including the fact that the jury returned a guilty verdict". It was observed that, "the fact that the jury did return a guilty verdict cannot be discarded from the appellate court's assessment of the whole record of trial". It was further explained:^[57]

"That task is to be undertaken in the same way an appellate court decides whether the verdict of the jury should be set aside on the ground that it is unreasonable, or cannot be supported having regard to the evidence.  The appellate court must make its own independent assessment of the evidence and determine whether, making due allowance for the 'natural limitations' that exist in the case of an appellate court proceeding wholly or substantially on the record, the accused was proved beyond reasonable doubt to be guilty of the offence on which the jury returned its verdict of guilty."  (footnotes omitted)

153. Counsel for the appellants argued that the proviso could not apply in circumstances in which there had been a direction in breach of the principles stated in Robinson.  Particular reliance was placed on the observation in Robinson that, "Except in the most exceptional case, such a direction inevitably disadvantages the evidence of the accused when it is in conflict with the evidence of the Crown". 

154. Stafford is authority for the proposition that a direction which breaches the principle in Robinson is not necessarily fatal.  The question is whether the misdirection occasions a miscarriage of justice.^[58]

155. The strength of the prosecution case is explained above. The Scheme in itself was always one which was too good to be true. That the appellants understood this was made abundantly plain by their behaviour. Right from the outset, they took pains to keep the existence of the Scheme from the authorities.

156. The jury acquitted on count 1. The period covered by that count was a period a little under two years from the inception of the Scheme.  That period did not include the Smibert incident or the conduct evidencing guilt in February 2004 and June 2005.  Nor did it include the change from email communications to those made by a particular mobile phone and the issuing to and use of credit cards in the names of foreign nationals.  In this context, therefore, no great significance can be attributed to the acquittals.  It may even be, and I consider it likely, that the jury gave the accused the benefit of a scintilla of doubt by returning a "merciful verdict".

157. It is relevant that the jury did not accept the evidence of the appellants in relation to count 2 but regard must be had to the fact that the jury's evaluation of the evidence of the appellants was made in the light of the subject misdirection.

158. Although the appellants gave evidence of their respective states of mind, there was a wealth of evidence from which their states of mind could be objectively assessed.  That evidence demonstrated clearly that the appellants’ evidence about their respective states of mind could not be accepted.  For the reasons given in relation to the unsafe or unsatisfactory grounds, it is impossible to conclude rationally that after 14 February 2004 at the latest, the appellants did not believe that the Scheme was unlawful and that it was being used by them to dishonestly cause a loss to the Commonwealth.  The evidence strongly suggested that the appellants had such a state of mind throughout, but the prosecution case after 14 February 2004 was overwhelming.

159. Applying the principles stated in Weiss v The Queen, I have concluded that the accused were proven beyond reasonable doubt to be guilty of the offence the subject of count 2.  I am of the opinion that no miscarriage of justice, substantial or otherwise, has actually occurred.

APPEAL AGAINST SENTENCE

The sentence was imposed on a factual basis that was inconsistent with the verdict of the jury and which in any event was not properly open on the evidence

160. The primary judge had directed the jury that:

"We would expect that for any one accused the verdict would be the same on each count, whether guilty or not guilty, although there is an exception to that.  If you were satisfied beyond reasonable doubt that an accused acted dishonestly after about the 14^th of February 2004 when the accused heard of Egglishaw being searched, but were not so satisfied for the period before then, then differential verdicts on the two charges would theoretically be possible."

161. When the appellants were convicted, counsel for the prosecution stated:

"Your Honour, we had prepared submissions which we have distributed to our friends but they were on the basis of a different verdict, as it were.  So realistically - I think my friends agree with this - we will need time just to reconfigure our submissions with the outcome.  It's clearly, one would think, based upon the 14 February '04 events.  That makes a significant difference in the penalty." (emphasis added)

162. This was consistent with the approach the prosecution had adopted at an earlier trial where prosecution counsel said:

"… it would be possible for the jury as a matter of - on the evidence not being satisfied beyond reasonable doubt that the - although the agreement was in place, that there is insufficient evidence that there was dishonesty or intent to defraud until after 14 February 2004, just a matter of evidence, and to say that after that date, they were satisfied that the agreement that had been formed earlier of - the combination between the parties to operate this structure, remained in place, but by that time, it had become evident that it was for a dishonest - or was implemented in a dishonest way, or it used dishonest means in its execution.  So, it's simply a matter of evidence.  The jury could quite legitimately acquit on that basis of count 1, but convict on count 2 and there would be no inconsistency."

163. It was first suggested that the offending commenced prior to 14 February 2004 in the prosecution's outline of submissions on sentence, filed 19 March 2010.  The appellants challenged these submissions and the sentencing judge stated:

"As you may have detected, I am unimpressed with the notion that the jury's verdict should be interpreted in any other way than in accordance with the direction that they were given."

164. The sentencing hearing continued on the basis that the appellants' offending occurred no earlier then 14 February 2004.

165. Counsel for the appellants received an email on 12 and 13 May 2010 from the judge's associate, advising that, after further consideration in relation to the date of onset of dishonesty, "his Honour now feels that his summary exclusion of a possible finding of April 2002 may be have been an error".  Counsel for the appellants filed written submissions in response.  The prosecution did not file any further material.

Counsel for the appellants’ submissions

166. In imposing sentence, the judge found that the appellants' dishonesty commenced on 12 April 2002, when a fellow director of PDC, Mr Smibert, delivered a letter to the appellants expressing his concern about the "legitimacy" of the arrangement and refusing to participate in it.^[59]  The judge upheld the prosecution's objection to any cross-examination of Mr Smibert as to what he meant by "legitimate".

167. Although Mr Smibert did not communicate with Mr Feddema about the Scheme, and the appellants did not advise him to do so, he was informed that Mr Feddema's advice was that the Scheme was legal.  Mr Smibert's evidence was that he was uncomfortable with what was being proposed.  He did not say that he thought the Scheme was dishonest, nor did he say that he told the appellants or Glenn Hargraves that he thought the Scheme was dishonest.

168. If the factual basis on which the appellants were sentenced had been identified during the trial a special verdict could have been sought.

169. If the jury had regarded Mr Smibert's 12 April 2002 letter as a significant event, they would have convicted Glenn Hargraves. It is plain from the evidence that Glenn Hargraves received the letter. In his evidence-in-chief, Mr Smibert was asked about the letter:

"Now, what was the purpose of writing the letter to them at that time?--  I think the purpose was - I wrote to the three of them just so that they all knew together how I felt, that I wasn't telling one and not the others."

170. Later in cross-examination, Mr Smibert was questioned about the letter being addressed to the appellants and Glenn Hargraves:

"You didn't want anyone to miss out, as such, on what your thoughts were, is that a fair way of putting it?‑‑ Yes.

The reason it was addressed to all three was because all three were directors at that stage; that is correct?‑‑ Yes.

After the letter was delivered to all three, was it fair to say that your primary discussions from that point on were with Daniel and Adam?‑‑ Yes, probably primarily Adam.

Adam.  Can I suggest this to you:  that after the letter was delivered you didn't speak to Glenn about it as such, it was primarily Adam?‑‑ I may have referred to it but not to seek any resolve."

171. The prosecution's closing relied heavily on the terms of the 12 April 2002 letter and not on the discussions that occurred regarding the letter. Therefore, the differentiation between the appellants and Glenn Hargraves was not made at trial and is a "post-hoc attempt to justify an untenable and … unfair position".

172. The sentencing judge identified the 14 February 2004 scenario as an "exception", a means to depart from a process that would otherwise produce identical verdicts on both counts.  In Cheung v The Queen,^[60] the Court said:

"… the required consistency is with the verdict, ie. the decision of the jury upon the issue or issues joined for trial.  It is at this point that the distinction between issues, facts relevant to an issue, and evidence, is important.  Failure to observe that distinction is apt to cause confusion and error.  If, as in the present case, a jury returns a general verdict upon a single count in an indictment, the resolution of issues which is express, or necessarily implied, in that verdict, is binding upon the sentencing judge.  But the judge does not know the approach taken by the jury, or individual members of the jury, to particular facts relevant to the issues, or to the evidence of particular witnesses, except to the extent to which, by necessary implication, that is revealed by the verdict."

173. Due to the specific direction given to the jury in this case, the verdict reveals the "approach taken by the jury … to particular facts relevant to the issues". Therefore, imposing the sentence referable to conduct on 12 April 2002 is inconsistent with the jury's verdict.

Counsel for the respondent’s submissions

174. It was open to the sentencing judge to find as he did. The guilty verdict on count 2 shows that the jury was satisfied beyond reasonable doubt that between 24 May 2001 and 9 June 2005, the appellants agreed to dishonestly cause a loss to the Commonwealth.

175. The sentencing judge's direction to the jury regarding differential verdicts concerned matters of fact and not law. The sentencing judge correctly directed the jury that matters of fact were for them to decide. The jury was not bound by the direction and was not confined to considering whether the appellants were either guilty of both counts or only guilty of count 2 after 14 February 2004. In oral submissions, senior counsel for the respondent stated that although the respondent’s counsel had used the term "direction" in their submissions, what the judge said to the jury regarding differential verdicts was merely a factual comment.

176. The sentencing judge determined the appellants' sentence on a view of the facts that was not inconsistent with the verdict of the jury.^[61]  His reasoning was correct and persuasive.^[62]  The prosecution case relied heavily on Mr Smibert's evidence and his letter of 12 April 2002 in attempting to establish the appellants' knowledge of dishonesty.  In sentencing proceedings, the prosecution submitted the letter was a factual basis for sentencing.

177. Argument concerning the prosecution's objection to cross-examination of Mr Smibert regarding what he meant to convey to the appellants in his letter occurred in the presence of the jury.  The judge then directed the jury that the relevance of Mr Smibert's evidence to the Crown case was to provide "a point where certain words were placed before the [appellants], and you can make an assessment of dishonesty … on the basis of what they did when faced with those words".  The correctness of that direction is not challenged by counsel for the appellants.

178. When the appellants became aware of concerns about the legitimacy of the Scheme, they continued to implement it. They did not seek advice regarding Mr Smibert's concerns, nor did they raise their concerns with their accountant.  The jury would have understood the significance of this evidence, particularly given that the majority of the case concerned the appellants' knowledge of dishonesty.

179. There is no inconsistency between the jury's guilty verdict on count 2 based on the evidence of Mr Smibert and the acquittal of Glenn Hargraves. Mr Smibert gave no evidence of having discussed his concerns with Glenn Hargraves.  Although the letter was addressed to the appellants and Glenn Hargraves, there was no evidence that Glenn Hargraves either received or read the letter.  This provided a rational basis for the jury to distinguish between the appellants and Glenn Hargraves regarding count 2.

180. It was also submitted by counsel for the respondent that the verdict does not reveal the jury's approach and that the sentence was not imposed on a basis inconsistent with the verdict.

Consideration

181. The judge addressed the factual basis for sentencing at paras [8] – [18] of his sentencing reasons:

"The case was long and complex; and the jury appeared diligent and attentive.  In my judgment they would at least have considered the question of honesty in terms of the direction.  In other words, they would have considered whether the conduct of the accused was dishonest after 14 February 2004.  However, in doing so they would have taken into account evidence of events occurring up to the time stated in the direction (including receipt of the Smibert letter).  They would not have considered evidence of subsequent events.  On the other hand they may have considered the question on the basis initially proposed by the prisoners; the direction referred to the date in the terms of approximation.  In doing so they would have taken into account evidence of events occurring up to and including 24 March 2004.  In short the jury might, consistently with its verdict, have considered that the onset of dishonesty occurred in April 2002, on or about 14 February 2004 or on or about 24 March 2004.  It is impossible to say on what basis the jury made its decision.  Each is consistent with the jury's verdict.  I hold that it is open to me to decide it on any of the bases already discussed without inconsistency.

The date has some importance in the sentencing process because it affects the magnitude of the fraud the object of the conspiracy.

The Crown submitted that it was unlikely that the jury would have made their finding only on the basis of the (precise) date suggested in the direction because the direction specifically stated that the result was only a theoretical possibility.  It also submitted that if this were the basis of the verdicts, the co-accused Glenn Hargraves would also have been convicted.  In my judgment neither reason is convincing.  'Theoretically' in the context of the direction related to the possibility of differential verdicts; it was not used in the context of distinguishing among the various possible dates for the onset of dishonesty.  The acquittal of Glenn Hargraves could have been on any number of bases.  I reject these submissions by the Crown.

The earliest of the three possible events was the receipt of the Smibert letter.  The letter was sent in relation to a decision which had been made to issue shares in PDC to Mr Smibert…”

182. His Honour then quoted the letter and analysed the evidence in relation to it in detail.

183. In my respectful submission the sentencing judge erred in departing from his direction which was, in effect, that the only basis on which different verdicts would be justified for counts 1 and 2 would be if the accused acted dishonestly after about 14 February 2004 when the accused heard of Egglishaw being searched. 

184. Counsel for the respondent argued that the direction concerned matters of fact and not law and that the jury had been directed that matters of fact were for them to decide. I consider it doubtful; however, that the jury would have appreciated that the primary judge was doing no more than expressing a view of the facts. To my mind the more obvious conclusion to draw from the second sentence of the direction was that the trial judge was not raising one of many theoretical possibilities but stating the only basis for a differential verdict and that such basis was not strong: it was more theoretical than real.

185. The conclusion is supported by the fact that the situation described in the second sentence of the direction was presented in the first sentence as “an exception” to the expectation that the verdicts on each count would be the same.

186. I am fortified in the above conclusions by the fact that the trial judge’s view on the sentencing hearing was that he had given the jury a direction and that the verdict should be interpreted in accordance with it. The prosecution also considered, until the trial judge signalled a change in his approach, that the different verdicts were “clearly, one would think, based upon the 14 February '04 events”.  The uniform understanding of the judge and of counsel for the defence and the prosecution shortly after the trial regarding the direction is likely to provide a surer guide to the meaning and effect of the direction than a later analysis divorced from the atmosphere of the trial.

187. The trial judge later came to appreciate that there could well have been other reasons which might lead a jury acting reasonably to return different verdicts. By this time, however, it was too late to sentence on a factual basis inconsistent with the direction. The direction was not challenged by either party. It was consistent with the way in which an earlier trial had been conducted. A similar direction had been given at that trial. More importantly, it is to be assumed that the direction was followed by the jury.^[63]  Accordingly, the primary judge erred in sentencing on a basis other than that the offending commenced on or after 14 February 2004 and the sentencing discretion falls to be re-exercised by this Court.

The appropriate sentence

Counsel for the appellants' submissions

188. Even if the April 2002 scenario is accepted as the basis for sentence, the term of imprisonment imposed is excessive. The head sentence and the custodial component of the sentence do not properly reflect:

"a)the full reparation of the outstanding tax and the payment of substantial penalties;

b)the fact that the applicants embarked upon the scheme honestly;

c)the extent to which their conduct in proceeding to trial was vindicated by the verdicts."

189. The primary judge sentenced the appellants on the basis of a loss to the Commonwealth of approximately $2.2 million, this includes amounts referable to Glenn Hargraves, for which the sentencing judge found that the appellants were responsible. This amount has been repaid, with interest. The total amount that has been repaid is $9.2 million; this includes $3.2 million in penalty tax.  Excluding penalty tax paid by Glenn Hargraves, the amount of penalty tax paid was $2.3 million.

190. There is a substantial difference in moral culpability between a scheme that is dishonest from the outset and one that is embarked upon honestly. While the sentencing judge took reparation and the appellants' initial honesty into account,^[64] he did not do so sufficiently.  The sentencing judge should have indicated what the sentence would have been but for the appellants' reparation.

191. The sentencing judge made adverse comments regarding the appellants on the issue of remorse.^[65]  These comments did not acknowledge the appellants' acquittals on count 1.

192. A sentence of three years imprisonment with a non-parole period of 18 months should have been imposed, having regard to comparable cases, namely: Director of Public Prosecutions (Cth) v Goldberg,^[66] Pearce v The Queen,^[67] R v Hart,^[68] R v Wall,^[69] Ramanah v The Queen,^[70] R v Ronen^[71] and R v Wheatley.^[72]

Counsel for the respondent's submissions

193. There is no basis for the assertion that the sentencing judge did not give appropriate weight the appellants' reparation and to the fact that they embarked on the Scheme honestly.

194. Reparation had only limited relevance as a mitigating factor in the circumstances of this case. In Director of Public Prosecutions v Hamman, the court stated:^[73]

"While undoubtedly it is a matter to be taken into account, it is, in my opinion, of small account, that when caught out the offender pays the tax due and additional tax by way of penalty for which the offender is liable to a greater or lesser extent, according to the Commissioner's discretion, whatever the reason for non-disclosure.  Past integrity and good character, devotion to family and work and contributions to the community impeccable though they have been, carry little weight against the confession by a plea of guilty that over a period of three years which ended only when the respondent was caught out, the respondent knowingly on three occasions understated his income by very large amounts for his own benefit or advantage."

195. The sentencing judge was not required to indicate what the sentence would have been but for the appellants' reparation.^[74]

196. The fact that the appellants began the Scheme honestly has little relevance in mitigation in the circumstances of this case. After the appellants realised that their conduct was dishonest in April 2002, they persisted with the Scheme and took steps to prevent detection. The Scheme continued until mid-2005 when the appellants' homes and offices were raided.  These circumstances make the appellants' conduct a serious example of this type of offence.  Appropriate weight must be given to the principle of general deterrence.

197. The appellants' acquittal on count 1 should not be regarded as vindication of the appellants having proceeded to trial, and thus a mitigating factor. The prosecution of count 2 alone would have involved a consideration of the same evidence relevant to both counts.

198. The sentencing judge correctly found that the appellants had not demonstrated remorse.

199. The sentence imposed is not manifestly excessive, having regard to comparable cases, namely: R v Peterson,^[75] Ramanah v The Queen,^[76] R v Ronen^[77] and R v Wheatley.^[78]

Consideration

200. In Goldberg, the offender had a money-laundering scheme whereby, for a commission of between two and six per cent, he transferred clients' money into Israeli and Swiss bank accounts.  The scheme was sophisticated, with the accounts set up in a way that avoided AUSTRAC scrutiny.  The operation gave the appearance of being used for charitable purposes.  Over a period of seven years, the Commonwealth was defrauded of approximately $20 million.  The offender pleaded guilty of two counts of conspiracy to defraud the Commonwealth.  His offending was motivated by a desire to appear as a person of value within his community.  He was sentenced at first instance to five years' imprisonment with a non-parole period of two and a half years.  The sentence was increased on appeal to seven years with a non-parole period of four and a half years.

201. Although there was a plea of guilty, the period of offending was much longer; it aided organised crime and involved a much greater loss to the revenue.

202. The appellant in Pearce was a senior manager at an accounting firm.   He devised a scheme which induced taxpayers to purchase a franchise by means of a no recourse loan.  Had the scheme worked as intended, taxation rebates totalling about $20 million would have become available.  However, after an initial amount of $1,589,540 had been paid out by the Australian Taxation Department, the scheme was detected and stopped.  The appellant was convicted after a trial and sentenced to five years' imprisonment with a release on recognisance after 18 months.

203. Application for leave to appeal was refused and the sentence was described as "far from manifestly excessive" and as "entirely appropriate". The loss to the revenue was $1.6 million and there was no suggestion of reparation.

204. In Hart, the appellant accountant was convicted of nine counts of defrauding the Commonwealth and one count of fraud.  He devised an "Employee Retention Plan" which he sold to his clients.  Clients purchased insurance bonds to be held in trust for particular employees, contributing about 13 per cent of the purchase price, with the balance to be borrowed from a bank.  It was explained that if the purchases were completed by the end of the financial year, the clients could claim a tax deduction for the full price of the bond.  The appellant held the money he received from his clients on trust.  When he realised that the loans would not be approved by the end of the financial year, he set up an arrangement whereby a company he controlled lent the clients the money.  Although no bonds were ever actually purchased, the clients claimed a tax deduction in that year for the full price of the bonds through the appellant's firm. 

205. The appellant used the money provided by his clients to purchase the bonds to pay wages incurred by a company he controlled. He created false documents to mislead tax office investigators when his misconduct was detected. He was in a position of trust in relation to his clients.  He misappropriated their funds for his own benefit, and caused his clients significant difficulties and loss by knowingly lodging false tax returns.

206. The immediate loss to the revenue caused by the appellant's misconduct was $650,000. There were also tax consequences for his clients, with the tax and penalties levied against them totalling $2,053,902.74. The appellant was sentenced to seven years' imprisonment with a non-parole period of two years and nine months. However, the sentence should be regarded as equivalent to a sentence of seven years with a non-parole of three and a half years, because the appellant had a conviction for other offences quashed.  He had served some time in custody in relation to those, and was given credit for this time in the fixing of the non-parole period.

207. The offender in Wall understated the income of a unit trust of which he was a beneficiary by at least $1.2 million by understating the value of some vehicles, causing a loss to the revenue of "tens, if not hundreds of thousands of dollars".  When the Australian Tax Office made enquires about the matter, he provided forged documents.  He was convicted after a trial and sentenced to three years' imprisonment with a release on recognisance after six months on the basis that some of the lost tax may have been able to be recouped through the sale of the vehicles.  On appeal, it was held that the three year term was at the bottom end of the range.  The period of actual custody was held to be disproportionate and was increased to 12 months.

208. The appellant in Ramanah was a tax agent who fraudulently amended clients' returns to claim rebates for himself.  As a previous employee of the tax office, he used his knowledge of audit procedures to facilitate the scheme.  There were 184 separate acts of dishonesty over a period of eight years.  The amount of money involved in each act ranged from $2,000 to $30,000, resulting in a total benefit to the appellant of approximately $1.5 million.  His clients had their entitlements incorrectly calculated as a result of the amended returns.  The appellant's motivation was maintenance of his lifestyle.  He cooperated with authorities, pleaded guilty and was sentenced to nine years' imprisonment with a non-parole period of four and a half years.

209. The offending conduct was described by the Court as having been assiduously planned and managed.

210. In Ronen, the offenders, who were convicted after a trial, were the directors and shareholders of a number of clothing stores.  They concealed a substantial proportion of the stores' income by creating false records and banking no more than 10 per cent of the cash takings.  Between $15 and $17 million worth of income was sent overseas without being declared.  The scheme involved what was described as a decade of persistent fraud and was dishonest from inception.  Taxes and penalties were paid after conviction but prior to sentence.  The offenders were sentenced to eight and a half years' imprisonment with non-parole periods of either four and a half or five and a half years' imposed for the various accused.

211. The offenders displayed contrition and remorse, with the sentencing judge noting "the realisation of their wrongdoing came home to each offender in a markedly emphatic manner".^[79]

212. The offender in Wheatley offended against both the revenue and his trustee.  He had entered a deed of arrangement and had not informed the trustee of his income for the relevant year.  The amount of tax evaded was $318,000.  The offender repaid $416,000, which included $100,000 in penalty.  He was sentenced to two and a half years' imprisonment with a non-parole period of 15 months.  The court said that but for his undertaking to give evidence in another case his sentence would have been three years and nine months with a non-parole period of two years.

213. In Peterson, the applicant offender, who pleaded guilty, registered for GST as the operator of a non-existent business and received refunds of GST totalling $722,309.  When the offender was audited, he supplied the auditor with forged documents which purported to evidence payments made to suppliers of stock for his business.  He was declared bankrupt and the payments could not be recovered.  He was a mature offender with a criminal history of offences of dishonesty.  He was sentenced to seven years' imprisonment with a non-parole period of three years and six months.

214. Keane JA observed:^[80]

"None of the decisions to which the applicant referred contains any suggestion that a sentence of seven years imprisonment is outside the range of a proper sentence for a sophisticated and persistent fraud carried out over several years and resulting in profit to the fraudster of nearly three-quarters of a million dollars".

215. The appellants were sentenced on the basis that the conduct of the appellants and Glen Hargraves which resulted in the lodgement of the fraudulent tax returns for the 2002, 2003 and 2004 years had caused a loss to the Commonwealth of about $2.2 million.  For the above reasons, the period of offending was 16 months, which was shorter than the period found by the trial judge.  The loss to the Commonwealth resulting from the reduced period of offending was agreed by counsel for both parties to be $1,284,315.

216. The offending conduct in Goldberg and Ronen caused far greater loss to the revenue than the appellants' offending and the offending occurred over a substantially longer period.  Those sentences are not of assistance except insofar as they show appropriate sentences for offending involving a far greater degree of criminality than that of the appellants.

217. The offending conduct in Ramanah took place over more than eight years and involved 184 offences.  The conduct was carefully thought out and its implementation required the offender’s attention "on an almost daily basis".  The scheme also caused inconvenience, loss and distress to the offender’s clients.  Also, it did not appear that any of the lost revenue was likely to be recovered and there was no suggestion that penalty tax had been paid.

218. Although the loss to the revenue in Hart was less than involved here, the offender’s criminality was greater.  The scheme was elaborate and the offender abused a position of trust to the substantial detriment of many of his clients. 

219. The offending conduct in Wall arose out of the lodgement of a false tax return.  The sum involved was considerably less than the amount involved here.  The fraud was far simpler and was given effect by one act: the lodgement of the fraudulent tax return.  The Chief Justice, with whose reasons the other members of the Court agreed, considered that the appropriate range for the head sentence was three to five years. 

220. The magnitude of the loss in Peterson was rather less than the loss in this case but the loss was not recouped, the offender had a relevant prior criminal history, and the offending occurred over a period of several years.

221. The tax evaded in Wheatley as a result of conduct engaged in, in 1993, 1994 and 2003, was far less than the sum evaded here but the offender in Wheatley also caused substantial loss to creditors under a deed of arrangement.  Part of the offending arose out of the utilisation of a fraudulent tax scheme developed and operated by Strachans.  However, the offender pleaded guilty and it was accepted that he had shown genuine remorse.

222. Adam Hargraves was aged about 34 at the time of the offending. Mr Stoten was aged about 33. Neither had any relevant criminal history. Both were successful in business and active contributors to charities and to the community generally. The sentencing judge concluded that the prospects of rehabilitation of each offender were good. He was not satisfied that "a lengthy period of imprisonment for the present offence would add to the level of personal deterrence". I agree. It does not seem likely that the appellants will re-offend.

223. It is not disputed that general deterrence is of particular significance in sentencing for offences of this kind and that a substantial term of imprisonment is warranted. Nor was it submitted that the primary judge erred in sentencing on the basis that the appellants had embarked on the Scheme honestly. In determining an appropriate sentence it is necessary also to have regard to penalty taxes of well over $1 million paid by the appellants in the subject tax years. The "payment of penalty tax is a form of punishment that has been imposed upon the offender in addition to that which the Court imposes by way of sentence".^[81]  Other significant considerations are the relatively short duration of the offending conduct, the absence of a prior criminal history, the jury’s finding (inferentially) that the appellants’ did not set up an unlawful scheme intentionally and the fact that the appellants did not abuse a position of trust.

224. Having regard to the considerations discussed above I would, in the case of each appellant:

• order that the appeal against conviction be dismissed;

• grant leave to appeal against sentence;

• allow the appeal against sentence;

• set aside the sentence;

• order that the appellant be sentenced to a term of imprisonment of five years with a non-parole period of two years and six months;

• declare that the time spent in pre-sentence custody between 8 March 2010 and 23 November 2010, a period of 260 days, be imprisonment already served under the sentence.

225. The following explanation which, with consequential amendments to that provided by the primary judge in his sentencing remarks, is given to the appellants in compliance with the requirements of Crimes Act 1914 (Cth)^[82]:

226. Service of your sentence will entail a period of imprisonment of two years and six months or slightly less. The Attorney-General must at the end of that period order your release from prison on parole, regardless of your behaviour in the meantime, provided you accept the parole conditions. Unless you are then serving a sentence under a State or Territory law, you will be released pursuant to that order. You will complete the service of your sentence in the community. The parole order will be subject to the condition that you must, during the parole period, be of good behaviour and not violate any law and may be subject to other conditions imposed by the Attorney-General. If the Attorney-General proposes that you be subject to supervision for any part of the parole period, the order will specify the day on which the supervision period ends, and in that case the order will be subject to a condition that you must during the supervision period be subject to the supervision of a parole officer or other person specified in the order, and must obey all reasonable directions of that officer or other person.  The order will be a sufficient authority for your release if and only if you indicate your acceptance of its conditions in writing on the order or a copy of it.  The Attorney-General may at any time before the end of the parole period vary or revoke a condition of the order or impose additional conditions in it.

227. The order may be revoked by the Attorney-General at any time before the end of the parole period if you fail to comply with a condition of the order or there are reasonable grounds for suspecting that you have failed to comply.  If you are sentenced to imprisonment for more than three months for an offence committed during the parole period, the parole order will be taken to have been revoked upon the imposition of the sentence and you will become liable to serve in prison the period unserved as at the date of revocation.  If the order is revoked by the Attorney-General, you will be liable to arrest without warrant and if it is revoked because you are sentenced to imprisonment of three months or more, the sentencing court will issue a warrant for your detention.  If the parole period ends without the order being revoked, you will be taken to have served the part of the sentence that remained to be served at the beginning of the parole period and to have been discharged from imprisonment.

228. FRASER JA:  I have had the advantage of reading Justice Muir’s reasons for judgment.  I agree with those reasons and with the orders proposed by his Honour.

229. ATKINSON J:  I agree with the orders proposed by Muir JA and with his Honour’s reasons.