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  4. R v Bakunowich & Dalgleish (No. 2) - [2022] QDC 189

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R v Bakunowich & Dalgleish (No. 2)[2022] QDC 189

R v Bakunowich & Dalgleish (No. 2)[2022] QDC 189

DISTRICT COURT OF QUEENSLAND

CITATION:

R v Bakunowich & Dalgleish (No. 2) [2022] QDC 189

PARTIES:

THE QUEEN

v

STEPHEN BRENDAN BAKUNOWICH

(defendant)

and

KELLIE JEAN DALGLEISH

(defendant)

FILE NO:

32/2021

DIVISION:

Criminal

PROCEEDING:

Contested Sentence

ORIGINATING COURT:

Ipswich District Court

DELIVERED ON:

19 August 2022

DELIVERED AT:

Ipswich

HEARING DATE:

4 June 2021 and 20 May 2022

JUDGE:

Horneman-Wren SC DCJ

ORDER:

The defendants are to be sentenced on the basis that the Crown has failed to establish a commercial purpose to the possession of the cannabis the subject of Count 2 on the indictment

CATCHWORDS:

CRIMINAL LAW – SENTENCE – SENTENCING PROCEDURE – FACTUAL BASIS FOR SENTENCE – where the defendants plead guilty to producing and possessing dangerous drugs in excess of 500g – where possession for a commercial purpose is alleged by the Crown and contested – where large quantities of cash found in the defendant’s home – where Crown submit that as indicia of commercial purpose – where Crown also relies on presence of growing instructions, grinder and fertilisers as evidence of commerciality – where defendants provide evidence – whether other explanation for presence of cash and other materials is available on the evidence – whether commerciality is proved.

LEGISLATION:

Evidence Act 1977 (Qld) s 132C

CASES:

R v Field [2017] QCA 188

COUNSEL:

Mr C Wallis for the Crown

Ms D Holliday QC for the defendant Bakunowich (4 June 2021)

Mr A J Glynn QC for the defendant Bakunowich

(20 May 2022)

Mr J R Jones for the defendant Dalgleish

SOLICITORS:

Office of the Director of Public Prosecutions for the Crown

Robertson O'Gorman, solicitors for the defendant, Bakunowich

Potts Lawyers for the defendant, Dalgleish

The background so far

  1. [1]
    On 15 October 2021, the Court published reasons (the ‘earlier reasons’) as to why a two-stage process for fact finding under s 132C of the Evidence Act 1977, as proposed by the parties, was ill conceived and to be rejected.  The continued hearing of the sentencing proceeding had been listed for 14 December 2021.  That hearing could not proceed due to the border closure between Queensland and New South Wales as a result of the Covid 19 pandemic, the defendants being residents of New South Wales.  It was listed for 20 May 2022.  On that occasion, each defendant indicated that they would not go further into evidence.[1]
  2. [2]
    Some further relatively brief submissions were made by all parties.  At the conclusion of that hearing, the court having said in the earlier reasons that for reasons explained in R v Field,[2] its reasons for findings of fact should be given at the time at which the finding of fact is ultimately made, and that this could not occur until the court was aware of all the evidence which it was to consider in making those findings, adjourned to consider what it then knew to be the full extent of the evidence.  The further hearing of the sentencing proceeding was listed for 25 August 2022.  These findings and reasons will inform that further hearing.

The status of the affidavit

  1. [3]
    As set out in the earlier reasons, Mr Bakunowich went into evidence by way of an affidavit by his solicitor, Mr Kurz.[3] As noted in the previous reasons, that affidavit exhibited material relevant to the legitimate knife business conducted by the defendants, the 2019 tax return for Ms Dalgleish, and the statement by Ms Murphy, the accountant who prepared the tax return.  At the resumed hearing, I sought submissions from the parties as to the status of the affidavit generally, and the statement of the accountant exhibited to it in particular.
  2. [4]
    Mr Glynn QC who appeared for Mr Bakunowich on that occasion did not rely upon the affidavit or the statement exhibited to it saying, rather, that he relied on the agreed facts set out in Exhibit 2.  He said that I should ignore the affidavit because it was advanced upon a basis that was rejected in the earlier reasons, that is, as part of the ill conceived two-stage process.  At one point, Mr Glynn submitted that although it was in evidence, “effectively” it was not in evidence because of the earlier ruling and that in light of that ruling “there was no basis for tendering that”.
  3. [5]
    Mr Jones for Ms Dalgleish accepted that the affidavit is evidence in the proceeding, including the hearsay statements contained in the accountant’s statement attributable to his client as to why she had retained the $80,190 cash found at the property.  He was, as he put it, “stuck with it”.  He submitted, however, that little weight would be given to those statements attributable to his client as to her state of mind.
  4. [6]
    Mr Wallis for the Crown also submitted that the affidavit was in evidence for the proceeding, but also made submissions as to the weight which might be given to the affidavit.
  5. [7]
    In my view, the approach advocated for by Mr Glynn QC of ignoring the affidavit and its exhibits because it was tendered on an ill-conceived basis ought be rejected.  That the particular purpose for which the affidavit was tendered was ill-conceived does not alter the fact that it is evidence in the proceeding.  What is more, ignoring the affidavit and all its exhibits in preference for a consideration only of agreed facts set out in Exhibit 2 would deprive the defendants of the court’s consideration of evidence contraindicating the finding of possession for a commercial purpose sought by the Crown.  For reasons which will be developed, to the extent that Exhibit 2 seeks to distil facts from documents exhibited to the affidavit it does so imprecisely, incompletely and inaccurately.
  6. [8]
    Far from the defendants being “stuck” with evidence contained within the affidavit, much of it undermines the analysis urged upon the court by the Crown to support an inference that the possession of the cannabis was for a commercial purpose.  Although no such analysis was performed on behalf of the defendants, nor submissions made on their behalf concerning the Crown’s analysis, other than at the highest level that the cash was explained by the legitimate knife business, that should not distract the court from itself performing the analysis necessary properly to consider the evidence.

The parties’ submissions

  1. [9]
    As set out in the earlier reasons,[4] the indicia upon which the Crown relied to have the court find, by inference, the alleged fact of commerciality were:
  • the quantity of the drugs found at the defendants’ property being the number of plants and the yield from them;
  • the recording and documentation of fertilizers and growing instructions;
  • the lack of indicia of either defendant being themselves users of cannabis;
  • the location of cash totalling $81,190; and
  • the unauthorised possession of two firearms.
  1. [10]
    In written submissions, Mr Jones on behalf of Ms Dalgleish identified the absence of a number of matters which might be indicia of a commercial purpose.[5] Those matters were:

“(a)tick sheets;

  1. hydroponic and heat equipment, which would allow for a greater production;
  1. a nexus between the money and the cannabis;
  1. evidence of unexplained wealth (i.e. a forensic opinion/report);
  1. evidence of actual sales;
  1. evidence of actual supply;
  1. evidence of a lavish lifestyle, such as cars, jewellery, clothing, substantial dwelling beyond the means of the owner or excessive travel;
  1. a multiplicity of mobile phones;
  1. scales, clip seal/resealable plastic bags and a Cryovac machine;
  1. drug related text messages;
  1. evidence of suggested value of cannabis; or
  1. informants/customers; the search warrant having been made on an accidental discovery during a bush fire evacuation.”
  1. [11]
    In his oral submissions at the resumed hearing, Mr Glynn QC effectively adopted those matters on behalf of Mr Bakunowich.  Similar but less extensive matters had been identified by Ms Holliday QC on behalf of Mr Bakunowich in her written submissions.
  2. [12]
    In addition to those matters, Mr Jones submitted that “the cash found is explained by a business run by Ms Dalgleish.”[6]
  3. [13]
    As set out in the earlier reasons,[7] an agreed fact is that the defendants were at the relevant time conducting a legitimate business of importation and sale of knives.  It was further agreed that the knife business sales were conducted in cash and by bank transfer (including PayPal) and that at the relevant time the business income for the defendants was from that business.[8]
  4. [14]
    Mr Jones further submitted that “the set up is largely explained by the former horticultural business run by Ms Dalgleish.  The equipment largely being repurposed after experiencing a drought”.[9]
  5. [15]
    As also set out in the earlier reasons,[10] it is agreed that the defendants had previously conducted a legitimate horticultural business.  More particularly, it is agreed that the business was registered in 2003 and included the cultivation and sale of “legal” plants.  As such, the defendant’s possession of the quantity and type of horticultural equipment cannot be said to be solely as a result of, or exclusively connected to, the production of cannabis.[11]
  6. [16]
    Mr Jones also submitted that the quantity of cannabis is of little moment in and of itself.[12]  Similarly, Ms Holliday QC had submitted at the earlier hearing that the amount found was consistent with personal use.
  7. [17]
    Although the Crown submits that even if the Court did not find that the cash found in the possession of the defendants was linked in any way to the possession of the cannabis, that would not preclude a finding of possession for a commercial purpose, a considerable part of the Crown case seeking to establish commerciality related to the cash.  In summary, some of the matters to which the Crown points as indicating that the cash does assist in drawing an inference as to commercial possession are: the substantial sum itself; the fact that the denominations of the notes did not correlate with the cash sales recorded in three documents which, together totalled $80,190 but which included sales suggesting that there should be $5 notes and $2 and $1 coins; that the cash was found in March 2020 when the relevant cash sales were said to have been made in August 2018, February 2019 and June and August 2019; that most of the cash was located in a cupboard behind undergarments; that $5,540 of the cash was found in Ms Dalgleish’s bag upon the defendants’ return to the property on the day of the search.  The Crown also submitted that it was not necessary for the Court to find that all of the cash was solely attributable to the drugs.
  8. [18]
    In order to consider the Crown’s submissions, it is necessary to set out some of the evidence and agreed facts relating to the cash and the legitimate knife business.

The relevant evidence

  1. [19]
    Exhibits RMK4, 5 and 6 to the affidavit of Mr Kurz are schedules of sales.  RMK4 and 5 each relate to sales said to have been made at two trade shows on, respectively, 4 and 5 August 2018 and 16 and 17 February 2019.  The Schedules record sales said to have been made by cash transactions and by PayPal transactions.  RMK4 records total sales of $38,281.33 of which $32,315 were cash sales.  RMK5 records total sales of $36,410.72 of which $31,050 were cash sales.  RMK6 records cash sales totalling $15,000 to one customer on 2 June 2018 and five sales to two other customers totalling $1,825 on various dates from 22 August to 30 August 2019.
  2. [20]
    RMK7 was said to be the 2019 tax return for Future Garden Design.  That is inaccurate.  It is in fact the individual tax return for Ms Dalgleish in which is included income from the business Future Garden Designs; but it is not that entity’s tax return.
  3. [21]
    RMK8 comprises the statements of a bank account held in the name of Ms Dalgleish trading as Future Garden Designs spanning the period 18 April 2018 to 17 April 2020.  Those statements have been hand annotated by the defendants identifying various entries as being for knife sales.  There are other annotations which describe the source of funds deposited on various dates.
  4. [22]
    RMK9 is a bundle of invoices.  Many of the invoices exhibited fall outside of the 2018-2019 financial year.
  5. [23]
    RMK10 is the statement of the accountant, Ms Murphy, referred to earlier.  There are a number of matters set out in that statement which are noteworthy.
  6. [24]
    At paragraph 8 Ms Murphy says that she was engaged to prepare and submit the year ending 2019 tax return in relation to the knife sales business operations.  She says that she was provided by Ms Dalgleish with three spreadsheets which are said to be the schedules of transactions which are exhibits RMK4, 5 and 6 referred to above.  She says that she was provided a “cash ledger” combining the cash sales in those three spreadsheets and invoices.
  7. [25]
    In his affidavit, Mr Kurz says that the annexures to Ms Murphy’s statement “have been excised, they replicating those annexures already included in this affidavit”.
  8. [26]
    At paragraph 10 of her statement Ms Murphy says:

“As a result of receiving this material I prepared and submitted a tax return on behalf of FGD.  That return was submitted on 29 May 2020.  My understanding is that ALL income reported within actually arose from AKS’s operations.”

  1. [27]
    There are a number of inaccuracies in what Ms Murphy says in paragraphs 9 and 10 of her statement; some patent, some latent.
  2. [28]
    The first patent inaccuracy is that, as already noted, the tax return which she prepared and submitted was not a return on behalf of FGD.  It was a return on behalf of Ms Dalgleish in which business income from FGD was included as part of Ms Dalgleish’s income.
  3. [29]
    This leads to identification of the second patent inaccuracy.  Contrary to Ms Murphy’s statement, all income reported within the tax return did not actually arise from AKS’s operations.  The income reported in the return includes under the heading “Australian Government Pensions and Allowances” payments totalling $5,823 being “parenting payment single”.  Clearly, this is income of Ms Dalgleish, not FGD.  Although Ms Murphy says that it was her “understanding” that all of the income arose from AKS’s operations, this would be, fundamentally, a misunderstanding.
  4. [30]
    The first latent inaccuracy is that she prepared the tax return “as a result of receiving this material”.  If what is meant by that statement is that she prepared the return from the material she identifies at paragraph 9 of her statement, that cannot possibly be correct.  The tax return includes a “business worksheet” in which sales of $252,308 are recorded.  On no combination of the income recorded in the material identified by Ms Murphy as having been provided to her could that figure of overall sales have been calculated.  There must have been other material.
  5. [31]
    The second latent inaccuracy is that Ms Murphy’s statement suggests that all the material provided, including the income disclosed, was relevant to the preparation of the 2019 tax return.  Clearly it was not.  It includes sales totalling $1,825 made after the close of the 2019 tax year in the spreadsheet which is RMK6.  It includes sales from the 2018 and 2020 tax years in the invoices which are Exhibit RMK9.  One assumes that these were the invoices provided to her because of the stated basis for their excision from the affidavit deposed to by Mr Kurz.
  6. [32]
    In her submissions, Ms Holliday QC submitted in relation to the inclusion of income outside of the 2019 financial year that, “There are a number of accrual and other systems that operate that complicate a straightforward process.  What is before the court here is that the accountant who knew of those dates, who knew of the period of time that the tax return was being lodged has stated at paragraph 14 the fact that it can occur in any tax lodgings.  That’s what’s before the court”. That submission invited the court to simply put to one side clear inaccuracies and accounting absurdities simply because an accountant has said it in a statement. The court should not.
  7. [33]
    One readily accepts that a cash basis and an accruals basis are both entirely acceptable accounting methods.  However, there are several reasons why this suggested explanation cannot be correct.  First, an entity adopts one basis or the other; not a combination of both.  For FGD it is clear that the other sales were being accounted for on a cash basis.  Secondly, the sales concerned are all cash sales. There are no credit sales.  No issue of accrual accounting can possibly arise.  Thirdly, even where an accruals basis is adopted, it will never bring to account as income in Year 1 a sale made in Year 2.  Accrual accounting may see a sale made in Year 1 recorded as income for that year even if payment is not received until Year 2.  Cash accounting may see a sale paid for a Year 2 recorded as income in Year 2 even though the sale was actually made in Year 1.  But under neither method will a sale neither made nor paid for in a particular year be recorded as income in that year.
  8. [34]
    There is simply no basis for inclusion of sales made in the 2019-2020 financial year in the 2018-2019 tax return.  I am not prepared to act on the basis that income earned, either on an accruals or cash basis, in 2020 would be included by an accountant as income earned in 2019.
  9. [35]
    These are important considerations.  Only upon a correct understanding of the income reportedly earned by the knife business in 2019 can an accurate analysis be made of what, if any, of the physical cash said to be attributable to the cash sales recorded in RMK4, 5 and 6 formed part of that income.  Only upon that accurate analysis can the Crown’s submission that the cash is indicative of a commercial purpose to the possession properly be considered.
  10. [36]
    Before turning to that analysis, something further ought be said about the agreed facts.
  11. [37]
    The agreed facts record that Exhibits RMK4, 5 and 6 to Mr Kurz’s affidavit “were some of the documents provided to the accountant, Ms Annette Murphy”.[13]  The only other document identified as having been provided to Ms Murphy was the cash ledger said to combine those three other documents and which was not replicated in Mr Kurz’s affidavit.
  12. [38]
    The agreed facts go on to record that:[14]

“Ms Murphy accepted the figures provided to her by Ms Dalgleish and did not engage in any forensic accounting, nor make any enquiries beyond that which she was provided.  The figures and documents provided by the defendants to Ms Murphy were used to complete the 2019 tax return in RMK8.”

  1. [39]
    From these agreed facts it is unclear whether “the figures provided to her by Ms Dalgleish” refer only to those contained in RMK4, 5 and 6, or other figures.  If the former, it repeats the first latent inaccuracy as appears in paragraph 9 of Ms Murphy’s statement to which I have already referred.  For the reasons explained earlier, the figures contained in RMK4, 5 and 6 could not, without more, result in the declaration of $252,308 of business income for the 2019 tax year.  For those reasons it may be inferred that the figures provided by Ms Dalgleish went beyond those in RMK4, 5 and 6.  That would also seem consistent with a submission made by Ms Holliday in the first hearing.  When asked “so has anyone done the maths as to the $252,308 in income?  Is that able to be discerned from the documents?” – Ms Holliday answered “So she wasn’t provided with the bank statements.  She was provided with the spreadsheets and then a number, as I understand it.  So she wasn’t provided with all the bank statements that are annotated with knife sales and she had to add it up”.
  2. [40]
    When pressed further as to the $252,308 income figure in the tax return Ms Holliday said that the accountant “was provided with that figure”.
  3. [41]
    From this it may be inferred, or assumed, that Ms Dalgleish, or another, provided a figure or figures beyond those contained in RMK4, 5 and 6 which informed the declared income figure of $252,308 set out in the tax return.  What that figure was, or figures were, and any basis for their ascertainment remains wholly undisclosed and unexplained from the agreed facts.
  4. [42]
    The agreed facts next record that the bank statements which are Exhibit RMK8 show:[15]

“That in the 2019 financial year (1 July 2018 to 30 June 2019) the Future Garden Design bank accounts recorded $249,425 of total credits entering the account.  Of that amount some $57,863 of those credits have been identified by the defendants (by handwritten annotation) to be knife sales.  These transactions were solely via bank transfer and not the result of cash sales.”

  1. [43]
    The agreed facts next record:[16]

“The defendants did not, on instruction, annotate RMK8 in a similar way to reflect any sales said to be conducted via PayPal.  The defendant stated that PayPal transactions in RMK8 relate to AKS.

For the 2019 financial year the combined value of RMK4, 5 and 6 (including the 5 outside of the 2019 financial year) and RMK8 (where knife sales are hand annotated) is $152,486.”

  1. [44]
    A number of observations should be made about these agreed facts.
  1. [45]
    First, the agreed fact that the total of $57,863 credits hand annotated to be knife sales were solely via bank transfers and not the result of cash sales is, strictly, inaccurate.  I have had some difficulty in reconciling the figure of $57,863.  On my calculations, the hand annotated knife sales total $59,453.  However, that figure includes $5,000 credited to the account on 14 June 2019.  Although annotated as “knife sale”, it was in fact a direct credit from PayPal.  It was not a bank transfer of the same kind as the other knife sales annotated.  It appears to have been annotated in error.  None of the other direct credits from PayPal had been annotated in that way.  Indeed, that is what the further agreed fact that the defendants did not annotate any sales conducted by PayPal in RMK8 is intended to establish; but the annotation of the 14 June 2019 transaction demonstrates that this agreed fact is also, strictly, inaccurate.
  2. [46]
    Furthermore, the agreed fact that the “knife sale” hand annotated entries were solely via bank transfer and not the result of cash sales is, strictly, inaccurate in another respect.  A number of the credits are by way of cash deposits made at various branches rather than by bank transfer.  The distinction which it would seem that this agreed fact seeks to make is between transactions where monies are paid into or transferred into the bank account in payment for knife sales as opposed to those where the cash was paid directly into the hands of the defendant. 
  3. [47]
    I note at this point, that there appears to be a credit which has not been annotated as a “knife sale” but which would appear to have been so.  On 25 February 2019, there is a $435 credit by means of a transfer from Robert Etheredge.  The entry also has a reference of “ZT Knifes”.  There is an earlier recorded transaction for Robert Etheredge on 1 January 2019.  It was a credit $355 which has been annotated as a knife sale.  It has the reference of “ZT Folding Knife”.  From this I would infer that the failure to identify the 25 February 2019 credit as a knife sale was an oversight.
  4. [48]
    The slight differences in my calculation of the total knife sales from the annotations can be put to one side.  What is relevant is that, on any calculation, in order to get to the figure of $57,863 included in the agreed facts, it must include the $5,000 PayPal credit from 14 June 2019.
  5. [49]
    Next, assuming the figures set out in subparagraph 2(d), (e) and (f) of Mr Kurz’s affidavit to be correct, the agreed fact that the combined value of RMK4, 5, 6 and the annotated knife sales in RMK8 is $152,486 is inaccurate.  Mr Kurtz’s affidavit has totals for RMK4, 5 and 6 as, respectively $38,281.53 (incorrectly recorded as $38,281.33), $36,410.72 and $16,825.  The sum of those amounts is $91,517.25.  Accepting the knife sale figure in the agreed facts of $57,863, the total sum is $149,380.25. If only the cash payments from RMK4 and 5 are included, the total is $138,053. 
  6. [50]
    Next, for reasons already explained, the inclusion of the five transactions in RMK6 which fell in the 2020 financial year is inappropriate.  Any use of RMK6 in calculating income for the 2019 year should be limited to the $15,000 which fell in that year.
  7. [51]
    Finally, but most importantly, the figure of $249,425 total credits entering the bank account in 2019 financial year is, of itself, correct.  However, it is a figure which is irrelevant and meaningless to any proper analysis of the figures material to this fact-finding exercise. 
  8. [52]
    Those total credits include parenting payments over the entire year totalling $14,260.78.  It is to be recalled that Ms Dalgleish declared income in the form of parenting payments of $5,823.  This suggests that there were parenting payments being paid into the account which were an entitlement of a person other than Ms Dalgleish.  This is consistent with the fact that more than one payment, usually two, were made fortnightly to the account.  Each of the payments had a different identifying number.  One payment was consistently larger than the other.  There is nothing at all improper about the bank account being the repository of funds paid to a person other than Ms Dalgleish.  The point is, simply, that parenting payments, whether payable to Ms Dalgleish, Mr Bakunowich or anyone else, having been credited to the account make the overall total figure of credits meaningless to analysis of the business earnings for the year.
  9. [53]
    The same can be said for the inclusion of other credits in the overall credits.  There are pension payments totalling $6,118.44.  These pension payments were paid in the first half of the year, the last being paid on 21 December 2018.  Again, they would not appear to be pension benefits paid to Ms Dalgleish because they are not declared by her as income.  Again, that is not to the point.  What, again, is to the point is that the inclusion of that figure in the total credits renders the overall credits figure meaningless to an analysis of the business income.
  10. [54]
    The same can be said for credits of $4,520 on 16 August 2018, $5,000 on 22  November 2018 and $5,325 on 19 February 2019.  Those credits have handwritten annotations identifying them as having been for, respectively, “ride on mower”, “business savings” and “money from landscaping Designs Future Garden”.  Their inclusion also renders the overall credits figure meaningless to an analysis of the business income for the year.
  11. [55]
    This, seemingly, was recognised in the Crown’s submissions on the first hearing.  Mr Wallis, having identified the total credits figure, acknowledged that there were pension payments, single parent payments and other deposits leading him to describe the overall figure as “that’s just total bland credits through the account in that financial year”.
  12. [56]
    However, when addressing the overall credit figure (rounded to $249,000) in his submissions at the second hearing Mr Wallis made the following submission:

“So that’s about a quarter of million dollars has gone through in credits through their bank account. Only $152,000 of those deposits was regarded as knife sales, with a hand annotation made by one or both of the defendants. Yet, they claimed total business income of $252,000 for that financial year. So immediately, there’s a discrepancy between the bank account and the claimed total. And one might say, well, that might be the knife sales because the – the cash sales, because that’s not reflected in the bank statements. But its simply only $3,000. We’re now being told that their business, it would seem, was profitable so far as cash sales were concerned, because that is the subject of the agreed assertion at 18 through 20.

Because see, paragraph 15 of the document through to paragraph 28 requires recourse to be had back to the affidavit because it’s reflected as RMK8, and the spreadsheets attached and the like. So they do constitute evidence because of the agreed position, as your Honour rightly recognised. But what we know is that cash sales, they say, were a significant portion of their business. The $80,000 located was said to be the product solely of knife sales. That’s from the two events in August 2018, February 2019 and the miscellaneous sales, and then additional $16,000 of miscellaneous sales, $15,000 of which was to one customer who extraordinarily on one day purchased $15,000 worth of knives. That’s paragraph 27.

But ultimately, what we know then is that we take the $152,000 that is said to be knife sales of the bank accounts and add to that, if one accepts just for present purposes, the $80,000 that was also in that period from knife sales, we still don’t get to $252,000. And if that were the position, where’s the extra $100,000 that goes through the bank account coming from, if it’s not income?”

  1. [57]
    Those submissions reflect an incorrect understanding of the relationship between credits in the bank account and income earned and a consequentially flawed analysis of what may, or may not, be discerned from the evidence.
  2. [58]
    The reference to credits of “about a quarter of million dollars” having gone through the bank account is a reference to the $249,425 total credits previously identified.  However, as previously explained, that total figure includes, at least, $35,224.78 for credits for pension payments, parenting payments and sundry items entirely unrelated to the business.
  3. [59]
    The reference to there being a “discrepancy” between the bank account and the business income of $252,000 disclosed in the tax return proceeds from the false premise that they should be in accord.  They should not.  Any comparison of credits in the bank account with disclosed income in the tax return requires the exclusion of credits irrelevant to business activities.
  4. [60]
    The submission that in so far as the knife sales in cash might account for the “discrepancy”, “but it’s simply only $3,000” proceeds from the same, flawed analysis.  The $3,000 is the difference between the (rounded) $249,000 in credits and the (rounded) $252,000 in disclosed income.
  5. [61]
    The reference to “only $152,000 of those deposits was regarded as knife sales, with a hand annotation by one or both of the defendants” is also flawed analysis.  The (rounded) $152,000 comes from paragraph 25 of the agreed facts which is said (albeit inaccurately) to be the sum of amounts set out in RMK4, 5, 6 and 8.  But $80,190 of those amounts are said to be the cash found at the defendants’ premises.  That amount (at least), on any view, never formed the part of the credits in the bank account.  The PayPal transactions recorded in RMK4 and 5 may, indirectly, have been reflected in the credits; but the cash in RMK4, 5 and 6 never was.  This error is both demonstrated, but repeated, in the concluding submission where it is said that “if we take the $152,000 that is said to be knife sales in the bank accounts and add to that … the $80,000 that was also in that period from knife sales, we still don’t get to $252,000”.  To perform that arithmetic would be to double count the $80,000; it already being part of $152,000 erroneously identified as having all been bank credits. 
  6. [62]
    The erroneous analysis culminates in the rhetorical question at the conclusion of the submission: “and if that were the position, where’s the extra $100,000 that goes through the bank account coming from, if it’s not income?”.
  7. [63]
    That rhetorical question is again based, erroneously, upon $152,000 being sales reflected in bank credits.  Despite this false premise, it might in any event be answered, at least in part, by saying “from the pension, unrelated parenting payments and sundry items”.

A proper analysis of the financial evidence

  1. [64]
    The only proper analysis, to the extent one is able to be performed, on the material and evidence and as agreed, of the extent to which the $258,308 of business income is reflected in RMK4, 5, 6 and 8 requires inclusion of all knife sales income in the bank credits, not just those annotated as knife sales.  As earlier observed, PayPal transactions recorded in RMK4 and 5 may, indirectly, be reflected in bank credits in RMK8.  I say, indirectly, because there are no bank credits attributable to PayPal on any of the dates of those sales recorded in RMK4 (4 and 5 August 2018) or RMK5 (16 and 17 February 2019).  However, there are substantial PayPal credits, which exceed the PayPal sales made on each of those occasions, which enter the account shortly afterwards.  On 7 August 2018 there is one PayPal credit of $1,000 and another of $13,400.  On 19 February 2019 there is a PayPal credit of $10,000.  The $13,400 and $10,000 credits are the two largest single PayPal credits in the financial year.  They suggest significant sales in the period preceding them which would be consistent with increased sales at trade shows such as are said to be reflected in RMK4 and 5.
  2. [65]
    A proper analysis of business income reflected in bank credits requires all PayPal transactions to be included in order to test the defendants’ statement, as recorded in the agreed facts, that PayPal transactions in RMK8 relate to the knife sales business.  In bringing those credits to account, it must be noted that PayPal credits to the bank account do not precisely correlate with sales which must have generated the revenue.  Whereas the knife sales by way of bank transfer and cash deposits appear to reflect amounts directly attributable to one or more sales, PayPal transfers are credited in what might be called round amounts; multiple hundreds or thousands of dollars.
  3. [66]
    There is no evidence before the Court as to how these transfers from PayPal occur, but it might be inferred from the way individual PayPal transactions are recorded in RMK4 and 5 and the rounded whole amounts that are credited to the bank account from time to time, that the business has a PayPal account to which sales made are credited with a subsequent transfer of funds, whether by arrangement or direction, at a later time to the bank account.
  4. [67]
    This, necessarily, means that credits appearing in the bank account will account for some part of the total sales, but not the precise amount.  That precise amount of total sales would only be able to be ascertained by reference to the PayPal ledger.  That ledger is not in evidence.
  5. [68]
    On this understanding of what is required for a proper analysis of the financial evidence the following is established.
  6. [69]
    Total credits into the bank account by way of bank transfers or cash deposits referrable to knife sales total $54,453.  This figure excludes the PayPal direct credit of $5,000 on 14 June 2019 annotated as a knife sale which was evidently included in the erroneous credits figure of $57,863 in the agreed facts.  It includes the $435 transfer by Robert Etheredge on 25 February 2019 which is evidently for a knife sale but which had been overlooked in the annotation of the bank statements by the defendants.
  7. [70]
    The total credits into the bank account by way of PayPal direct credits is $157,200.  This figure includes the $5,000 credited on 14 June 2019 erroneously included in the $57,863 in the agreed facts.
  8. [71]
    It is again necessary to note that this figure is the total of PayPal direct credits into the account.  For the reasons explained above, it is unlikely to be the total of payments made by PayPal by customers utilising PayPal in the financial year as the transfers are in figures which would not appear to be referable to the precise amounts of actual sales.  It is also possible that it includes income from sales made in the 2018 financial year but not transferred from PayPal until the 2019 financial year.  Particularly, the first PayPal transfer in the 2019 financial year was $4,800 on 3 July 2018.  Similarly, it might not include sales made by PayPal in the 2019 financial year the funds from which were not transferred until after the commencement of the 2020 financial year.  The first PayPal transfer into the account in the 2020 financial year was $7,000 on 10 July 2019.
  9. [72]
    Nonetheless, with these qualifications and limitations, calculating the total of those PayPal transfers into the account is the best means of performing the analysis necessary in this fact-finding exercise.
  10. [73]
    The sum of credits to the account by way of bank transfers, direct cash deposits and PayPal credits referable to knife sales is thus $211,653.
  11. [74]
    Therefore, contrary to the Crown’s submissions, the difference between the declared business income ($252,308) and the total credits in the bank account referable to knife sales ($211,653) is not “simply only $3,000”: it is $40,655.
  12. [75]
    When it is identified that the difference is not some marginal $3,000 but $40,655, the rhetorical question becomes: “what can account for $40,655 of disclosed income in the tax return but which is not reflected in the bank account?”
  13. [76]
    On the evidence before the court there are only three possible answers to that question.  The first, and in my view most probable, is that it is income by way of cash sales where the cash has not been deposited in the bank account.  Of the $80,190 cash found at the defendants’ premises, $78,365 is attributable to sales which RMK4, 5 and 6 disclose to have been made in the 2019 financial year.  For this analysis, that is revenue received against income disclosed, it is necessary to adjust the cash figure found at the home to that said to have been received for sales in the relevant year.  That the total cash on hand is augmented from sales in the subsequent period is not to the point.
  14. [77]
    On this analysis, the business income declared in the tax return would include $40,655 of the $78,365 cash received for sales in the 2019 financial year retained as cash by the defendants.  Of course, on this analysis, $37,710 in cash attributable to sales in 2019 set out in RMK4, 5 and 6 has not been included in the declared income for the business for 2019.  However, the exercise that the Court is performing here is not one of auditing the defendants’ compliance with their taxation obligations.  It is an exercise in identifying whether cash found in their possession can be explained by their business activities.
  15. [78]
    The fact that RMK4 and 5 also include PayPal sales which, on the analysis performed above, appear likely to have been transferred, at least in part, in PayPal transfers shortly after the identified sales dates, also, in my view, points towards an acceptance of the bona fides of the sales as recorded in those schedules, including the cash sales.
  16. [79]
    The second explanation for the $40,655 of income declared in the tax return, but not reflected in the bank account, available upon the evidence before the Court is that it has been paid to the credit of the business in the accounts of PayPal, but not transferred.  In my view, particularly considering the regulatory of PayPal transfers to the bank account and the absence of any evidence which would suggest why it might be that the defendants would retain earnings of in excess of $40,000 in a PayPal account, that is a highly improbable explanation. Furthermore, there is no evidence to suggest that Ms Murphy was informed of such matters in preparing the tax return.
  17. [80]
    The third possible explanation for the declaration of $40,655 of income not reflected in the bank account is that the defendants declared at least a large part, more than 50 per cent, of cash earned from illegal dealing in cannabis.  The extreme level of improbability of this explanation is self-evident.
  18. [81]
    For those reasons, on the evidence before the Court, the most probable explanation for the income declared in the tax return exceeding the transactions reflected in the bank account is that there were cash knife sales the proceeds of which were retained in cash in the defendants’ possession.  I cannot, therefore, be satisfied that the cash found in the possession of the defendants is a matter which assists the Crown in proof of the fact that the cannabis was possessed by the defendants for a commercial purpose.

Conclusions as to commerciality

  1. [82]
    Given the centrality of the cash to the Crown case that there was a commercial purpose to the possession of the cannabis and the concessions made, the other indicia relied upon may be disposed of shortly.
  2. [83]
    The recording and documentation of fertilizers, particularly when it is conceded that the defendants’ former horticultural business may explain the presence of fertilizers, does not, in my view, point more to commercial possession than possession for private use.  So too, growing instructions are, in my view, at least and perhaps more, consistent with growing cannabis (and thus being in possession of it) for personal rather than commercial reasons. Commercial growers may well be thought to need less instruction than those growing it for personal use.
  3. [84]
    The lack of indicia that the defendants were themselves cannabis users must be considered in light of the concession that police only searched for indicia consistent with use by smoking and not consumption of cannabis oil.  It is said that there was a grinder capable of being used in the production of cannabis oil.  Of course, if the production of oil was commercial, the possession of the cannabis for its production would also take on that commercial complexion.  However, it seems that police were not looking for items which might have suggested oil production on any scale or for any purpose.  There is some evidence of Mr Bakunowich having previously used cannabis oil prior to the search of the property.  A letter from his doctor dated 19 May 2022[17] refers to him having disclosed this on 18 May 2022.  That disclosure, of itself, may be thought to be a self-serving statement.  However, the letter also refers to a 15-year history of chronic back pain following an injury, bilateral hand pain, anxiety, depression and insomnia.  Those matters could be consistent with his using cannabis to manage those problems consistently with his recent disclosure.
  4. [85]
    The quantity of the drugs and number of plants really do not take matters too far.  Whilst the quantity may appear large, there is no evidence to inform the court of, for example, what the yield of cannabis oil from plants is likely to be. It might well take a large volume of plant to produce only a little oil.
  5. [86]
    I would place little weight upon the presence of the unauthorised weapons.  Much was sought to be made in the Crown’s submissions of the fact that the weapons were co-located with the cash.  Mr Wallis put it that “the inference is unassailably one that they are tangentially and by their very location connected with the cash itself and that’s an inference, or a circumstance from which your Honour could draw the inference of commerciality – one of the circumstances”.
  6. [87]
    When the cash itself as an indicative circumstance falls away, so too does the presence of the firearms.  Even if the presence of the firearms was connected with the cash, it was not for a purpose associated with commercial possession of cannabis.
  7. [88]
    Had the cash remained as a factor relevant to the consideration of other indicia it may have tended to give one or more of them, whether alone or in any combination, a complexion consistent with the possession of the cannabis having a commercial purpose.  In the absence of the cash as one of the indica, I would not view them in that light.  I am even less inclined to do so when the absence of other indicia pointed to by the defendants is also taken into consideration.
  8. [89]
    This, of courses, does not amount to a finding that the cannabis was not possessed by the defendants for a commercial purpose: it is a finding that I have not been satisfied to the high standard required by s 132C that it was.
  9. [90]
    The defendants are to be sentenced on that basis.

Footnotes

[1]  Each of the defendants had previously gone into evidence; Mr Bakunowich by reading an affidavit and Ms Dalgleish by tendering documents.

[2]  [2017] QCA 188.

[3]  At [20].

[4]  [18].

[5]  At para 4.

[6]  Paragraph 5 of his written submissions.

[7]  (at [19]).

[8]  Exhibit 2, paras 11 and 12.

[9]  Paragraph 6 of his written submissions.

[10]  [19].

[11]  Exhibit 2, para 9.

[12]  Paragraph 7 of his written submissions.

[13]  Exhibit 2, para 22.

[14]  Exhibit 2, para 22.

[15]  Exhibit 2, para 23.

[16]  Exhibit 2, paras 24 and 25.

[17]  Exhibit 5.

Close

Editorial Notes

  • Published Case Name:

    R v Bakunowich & Dalgleish (No. 2)

  • Shortened Case Name:

    R v Bakunowich & Dalgleish (No. 2)

  • MNC:

    [2022] QDC 189

  • Court:

    QDC

  • Judge(s):

    Horneman-Wren SC DCJ

  • Date:

    19 Aug 2022

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
R v Field [2017] QCA 188
2 citations
Jump To
Cite 1 - [2017] QCA 188
Cite 2 - [2017] QCA 188

Cases Citing

No judgments on Queensland Judgments cite this judgment.

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