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Court of Criminal Appeal 8 September 2009

R v Hay; Hay v R

[2009] NSWCCA 228

Fraud & dishonesty
CRIMINAL LAW APPEALS CONVICTION APPEAL REMARKS OF CROWN PROSECUTOR WHETHER DIRECTIONS TO JURY ADEQUATE APPEALS

Citation: R v Hay; Hay v R [2009] NSWCCA 228
Court: NSW Court of Criminal Appeal
Date: 8 September 2009
Judge(s): Young JA; Hidden J; Latham J

Background

The appellant was a filmmaker who, together with his accountant, structured a series of film investment partnerships to fund the production of several of his films. Investors, most of whom were clients of the accountant, joined separate partnerships for each film. The scheme was designed to exploit tax deductions available to investors in Australian films under the Income Tax Assessment Act 1936 (Cth).

The Crown's case was that investors were offered inducements whereby they would contribute a sum to the partnership but claim a tax deduction substantially exceeding that amount. The mechanism involved "loans" or "subsidies" from the filmmaker that artificially inflated the deductible amount, while the actual money available to fund film production was only the sum genuinely invested. The Crown alleged that the loans formed part of a "round robin of cheques" that did not represent real expenditure on film production.

The filmmaker was convicted by a District Court jury on five counts of being knowingly concerned in defrauding the Commonwealth. The jury returned its verdicts after a three-week trial. Following sentence, three appeals came before the Court of Criminal Appeal: the filmmaker appealed against conviction and sentence, and the Crown separately appealed against the adequacy of the sentence.

  • Whether the Crown Prosecutor's use of the word "sham" during the trial improperly inflamed the jury, rendering the conviction unsafe
  • Whether the trial judge's directions to the jury were adequate in the circumstances
  • Whether the verdict was unsafe and unsatisfactory having regard to the evidence
  • Whether the sentence of three years and six months was manifestly inadequate (Crown appeal)
  • Whether the same sentence was manifestly excessive (appellant's appeal)

Decision

The primary conviction ground centred on the Crown Prosecutor's use of the term "sham" during the trial. The Crown Prosecutor had, during the course of the proceedings, abandoned any case of "technical" or "legal" sham, conceding that the partnership documents were intended to have legal effect and that the bank transactions were not artificial. Despite this, the prosecutor continued to use "sham" and similar emotive language in addresses to the jury before the trial judge directed that the word not be used. The Court of Criminal Appeal reviewed the trial as a whole and found that this conduct did not establish the ground of appeal.

On the adequacy of the jury directions and the safety of the verdict, the Court was similarly unpersuaded. The conviction appeal was dismissed.

On the Crown's sentence appeal, the Court acknowledged that the sentencing judge had treated dishonesty as commencing only from mid-January 1998, effectively treating the offending as spanning three years rather than five. This was noted as inconsistent with how the jury must have approached the matter. However, the Court found that this discrepancy affected counts one and two by only approximately six months and was not of sufficient significance in the overall sentencing exercise to render the sentence manifestly inadequate. The sentencing judge had also taken into account that the Commonwealth probably suffered no loss, and the Court accepted this was a permissible consideration. The Crown appeal was dismissed.

On the appellant's own sentence appeal, the Court noted his good character and the delay between offending and prosecution. It accepted that he received benefits from the scheme in being able to produce his films for a profit, and found that the financial hardship arising from his incarceration was not a weighty factor when balanced against all relevant sentencing considerations. The appellant's sentence appeal was also dismissed.

Orders Made

  • The appeal against conviction is dismissed
  • The Crown appeal against sentence is dismissed
  • Leave is granted to the appellant to appeal against sentence
  • The appellant's appeal against sentence is dismissed

Key Takeaways

  • In dismissing the conviction appeal, the Court of Criminal Appeal confirmed that the improper use of emotive language by a Crown Prosecutor does not automatically vitiate a conviction; the trial as a whole must be examined to determine whether the conduct caused actual prejudice.
  • A sentencing court may properly take into account that the Commonwealth suffered no proved financial loss from a tax fraud, even in the context of white-collar offending where general deterrence carries significant weight.
  • Where a discrepancy exists between the sentencing judge's view of the period of criminality and the jury's apparent approach, the question is whether that discrepancy materially affected the outcome; a relatively minor temporal difference did not here rise to the level of manifest inadequacy.
  • Subjective factors, including age, good character, the role of professional advisers in guiding the offending, and personal financial hardship, remain relevant in sentencing for fraud but do not displace the primacy of general deterrence in white-collar crime cases.
  • Under s 29D of the Crimes Act 1914 (Cth), a person who is "knowingly concerned" in another's fraud on the Commonwealth is taken to have committed the principal offence, even where the person did not personally lodge the false tax returns.

Legislation and Cases Referenced

Legislation:
- Crimes Act 1914 (Cth), ss 5, 16A, 20BA, 29D, 86(1)
- Criminal Appeal Act 1912, s 6(1)
- Criminal Code Act 1995 (Cth), Div 134
- Income Tax Assessment Act 1936 (Cth), Divs 10B, 10BA, ss 124ZAB, 124ZAC

Cases:
- M v The Queen [1994] HCA 63; 181 CLR 487
- Everett v The Queen [1994] HCA 49; 181 CLR 295
- Griffiths v The Queen [1977] HCA 44; 137 CLR 293
- Raftland Pty Ltd v Federal Commissioner of Taxation (2008) 82 ALJR 934
- Commissioner of Taxation v Lau (1984) 6 FCR 202
- Commissioner of Taxation v Faywin Investments Pty Ltd (1990) 22 FCR 461
- Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; 218 CLR 471
- Snook v London and West Riding Investments Ltd [1967] 2 QB 786
- R v Kopa; Ex parte Director of Public Prosecutions (Cth) (2004) 206 ALR 197
- Pearce v R (2005) 216 ALR 690
- Quinlan v R [2006] NSWCCA 284