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Court of Criminal Appeal 11 March 2005

REGINA v Nikytas Nicholas PETROULIAS

[2005] NSWCCA 75

Also reported as (2005) 62 NSWLR 663 152 A Crim R 244
Fraud & dishonesty
CRIMES ACT 1914 (CTH) S29D CHARGE OF DEFRAUDING THE COMMONWEALTH TAXATION FRAUD RISK TO REVENUE PRIVATE RULINGS LOSS OF ABILITY TO LITIGATE

Citation: Regina v Nikytas Nicholas Petroulias [2005] NSWCCA 75
Court: New South Wales Court of Criminal Appeal
Date: 11 March 2005
Judge(s): Spigelman CJ, Mason P, Hunt AJA

Background

The accused was a former officer of the Australian Taxation Office charged, among other counts, with defrauding the Commonwealth under s 29D of the Crimes Act 1914 (Cth). The prosecution alleged that, while in his ATO role, he caused Private Binding Rulings and Advance Opinions to issue to taxpayers by dishonest means, thereby putting Commonwealth revenue at risk.

At first instance, Sully J granted a permanent stay of the criminal prosecution. The primary judge's reasoning turned substantially on whether the evidence was sufficient to sustain the charge, having regard to judicial decisions concerning the legal correctness of the tax rulings at issue, particularly the Federal Court's decision in Essenbourne Pty Ltd v Commissioner of Taxation.

The Crown, represented by the Commonwealth Director of Public Prosecutions, appealed the stay to the Court of Criminal Appeal. The Court of Criminal Appeal allowed the appeal and set the stay aside.

  • Whether a permanent stay of the prosecution was warranted on the basis that the accused could not receive a fair trial
  • What the Crown must prove to establish that private tax rulings "put the revenue at risk" (the second of three recognised categories of Commonwealth fraud)
  • Whether the arguability or legal correctness of the private rulings was a question of law for the trial judge or a question of fact (or mixed law and fact) for the jury
  • Whether the Federal Court's decision in Essenbourne precluded the Crown from proving the elements of the charge, or whether factual distinctions remained to be explored at trial
  • Whether the permanent stay should be set aside and the prosecution allowed to proceed

Decision

The Court of Criminal Appeal, with all three judges agreeing on the outcome, upheld the Crown's appeal and set aside the permanent stay. While the judges agreed on the result, Spigelman CJ and Hunt AJA wrote separately from Mason P to address how the relevant charge should be put to the jury at trial.

On the question of what the Crown must establish for the "putting revenue at risk" category of Commonwealth fraud, the Court confirmed that this sits between the most serious category (proving the rulings were actually wrong, resulting in actual loss) and the least serious (a mere lost opportunity to litigate the correctness of the rulings). For the intermediate category, the Crown must establish something more than the bare existence of a dispute but need not prove the rulings were definitively wrong. The Court preferred to express this in positive rather than negative terms, moving away from the phrase "arguably wrong" as an imprecise formulation.

The Court held that the first count in the indictment, read together with particulars N(iv) and N(v), adequately particularised the case the Crown was required to pursue. The two particulars could not be read in the alternative; they had to be read together to elevate the charge to the second category. The Crown was held to that particularised case and could not pursue a mere "lost opportunity" case.

As to the effect of Essenbourne, the Court of Criminal Appeal found that Sully J had erred. The earlier Court of Appeal judgments in Petroulias (No 1) and (No 2) had not established that Essenbourne resolved the legal questions in favour of the accused or rendered the private rulings clearly correct. Factual issues remained that could distinguish the schemes in Essenbourne from those covered by the accused's rulings, and those issues required exploration at trial rather than resolution by a permanent stay.

Orders Made

  • The appeal was upheld.
  • The permanent stay ordered by Sully J on 21 February 2005 was set aside.

Key Takeaways

  • The Court of Criminal Appeal confirmed that Commonwealth fraud by "putting revenue at risk" occupies a middle ground between proving actual revenue loss and proving only a lost opportunity to litigate: the Crown must show something more than a bare dispute but less than definitive legal error in the rulings.
  • Particulars to a charge of this kind carry significant legal weight: reading particulars N(iv) and N(v) together was essential to sustaining the second-category fraud charge, and the Crown was bound to that particularised case without the option of reverting to the lesser "lost opportunity" formulation.
  • A prior Federal Court decision favourable to a taxpayer's position does not automatically preclude a fraud prosecution based on similar rulings: factual distinctions between the schemes at issue remain live questions for the trial, not grounds for a permanent stay.
  • Permanent stays of criminal prosecution remain exceptional remedies; the Court confirmed they should not be granted where factual and legal issues remain genuinely open for exploration at trial.
  • The phrase "arguably wrong," used in earlier interlocutory proceedings, was acknowledged as imprecise for the purposes of framing jury directions; the Court preferred a formulation that expressed the risk issue positively and clearly on its face.

Legislation and Cases Referenced

Legislation:
- Crimes Act 1914 (Cth), s 29D
- Income Tax Assessment Act 1936 (Cth), s 170BB
- Taxation Administration Act 1953 (Cth), Pt IVAA
- Evidence Act 1995 (NSW), s 80

Cases:
- Peters v The Queen (1998) 192 CLR 493
- Wills v Petroulias (2003) 58 NSWLR 598
- Petroulias v Wills [2004] NSWSC 739
- Essenbourne Pty Ltd v Commissioner of Taxation [2002] FCA 1577
- PrideCraft Pty Ltd v Commissioner of Taxation [2004] FCAFC 339
- Walstern v Commissioner of Taxation [2003] FCA 1428
- Spotlight Stores Pty Ltd v Commissioner of Taxation [2004] FCA 650
- Jago v District Court of New South Wales (1989) 168 CLR 23
- MacLeod v The Queen (2003) 214 CLR 230
- Ahern v The Queen (1988) 165 CLR 87
- Subramaniam v The Queen (2004) 79 ALJR 116
- Vetter v Lake Macquarie City Council (2000) 202 CLR 439
- Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705
- R v Cassell (1998) 45 NSWLR 325
- The Queen v L (1991) 174 CLR 379
- Wai Yu-tsang [1992] 1 AC 269
- Board of Trade v Owen [1957] AC 602
- R v Terry [1984] 1 AC 374
- R v Withers [1975] AC 842