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Court of Criminal Appeal 2 March 2012

Milne v R

[2012] NSWCCA 24

Fraud & dishonesty
CRIMINAL LAW APPEAL AGAINST CONVICTION MONEY LAUNDERING (S 400.3(1) CRIMINAL CODE (CTH)) FAILURE TO DECLARE CAPITAL GAIN MEANING OF "USED TO FACILITATE"

Citation: Milne v R [2012] NSWCCA 24
Court: NSW Court of Criminal Appeal
Date: 2 March 2012
Judges: Whealy JA, Latham J, Harrison J

Background

The appellant was convicted by a jury in the Supreme Court on two counts arising from a complex scheme to avoid capital gains tax (CGT). Through his private company, Barat Advisory Pty Ltd, he had acquired a significant parcel of shares in a listed company at negligible cost. He then established an offshore structure involving overseas entities, ostensibly to defer tax liabilities, but the Crown alleged he deliberately departed from the legal advice underpinning that structure in order to avoid CGT altogether.

The core of the scheme involved retaining beneficial ownership of the shares within Barat Advisory while purporting to transfer legal ownership offshore. When approximately 48 million shares were later exchanged for shares in another company in February 2005, the transaction was structured to conceal the resulting capital gain. The Crown alleged the true net capital gain was between $6.56 million and $7.57 million, generating a CGT liability of at least $1.9 million.

The second offence arose from the lodgement of a 2005 income tax return for Barat Advisory in November 2006. The return falsely declared the net capital gain from the share disposal as only $4,597. The Crown alleged the appellant had deceived his accountants in the process, providing false information that led to a substantially understated return. Johnson J sentenced the appellant to 7 years imprisonment for money laundering, and 3 years and 6 months for the dishonest obtaining offence, partially accumulated, with a non-parole period of 4 years and 9 months.

  • Whether there was sufficient evidence to support the money laundering conviction under s 400.3(1) of the Criminal Code Act 1995 (Cth), including whether the shares were "used to facilitate" the commission of a Commonwealth offence
  • Whether the trial judge erred in refusing a directed verdict of not guilty on the money laundering count
  • Whether essential jury directions were omitted, and whether any such omission caused a miscarriage of justice
  • Whether the jury's verdicts were unreasonable or unsupported by the evidence
  • Whether a capital gains event occurred in the relevant financial year (2004-2005) or in a later year, and whether this affected the conviction
  • Whether the sentencing judge erred in assessing the separate criminality of each offence and in applying totality principles
  • Whether the sentences resulted in double punishment for substantially overlapping conduct
  • Whether good character and facilitation of the course of justice were properly taken into account
  • Whether the sentences were manifestly excessive

Decision

The Court dismissed the conviction appeal on all grounds. It found that the evidence was capable of supporting the jury's conclusion that the appellant had dealt with the Admerex shares intending they would become an instrument of crime, specifically by being used to facilitate the obtaining of a financial advantage by deception from the Commonwealth. The meaning of "used to facilitate" was broad enough to encompass the role the shares played in the CGT avoidance scheme.

On the question of whether a CGT event occurred in the 2004-2005 financial year, the Court found the Crown's case on this point was adequately supported by the evidence, including expert testimony about the timing of the share swap and the characterisation of beneficial ownership. The trial judge's refusal to direct a verdict of acquittal was upheld. The Court also found no material error in the jury directions that would have produced a substantial miscarriage of justice.

On sentence, the Court rejected the argument that the two offences were so intertwined that punishing them separately amounted to double punishment. Although the offences were related, each involved distinct criminality: the money laundering count covered the share dealings designed to conceal the gain, while the dishonest obtaining count covered the false tax return lodgement and deception of the accountants. The sentencing judge had properly assessed the degree of overlap and applied totality principles accordingly.

The Court endorsed the sentencing judge's characterisation of the offences as serious examples of money laundering and tax evasion. It affirmed that firm custodial sentences are necessary to achieve general and specific deterrence in revenue fraud cases, citing the Victorian Court of Appeal's reasoning that courts must reflect community expectations that serious tax fraud will be met with stern punishment. The sentences were found to be within the range open to the sentencing judge and not manifestly excessive.

Orders Made

  • Appeal against conviction dismissed.
  • Leave to appeal against sentence granted.
  • Appeal against sentence dismissed.

Key Takeaways

  • The Court of Criminal Appeal confirmed that a share parcel can constitute an "instrument of crime" under s 400.3(1) of the Criminal Code Act 1995 (Cth) where the dealer intends it to be used to facilitate a Commonwealth deception offence, even where the facilitation relates to a future CGT avoidance scheme.
  • Retaining beneficial ownership of shares while purporting to transfer legal title offshore was capable of supporting a money laundering charge, where the purpose of the arrangement was to conceal a capital gain and avoid tax.
  • Two related offences arising from the same underlying scheme can nonetheless carry separate, substantially accumulated sentences where each involves distinct criminal acts and distinct elements of criminality.
  • In dismissing the sentence appeal, the Court emphasised that serious tax fraud warrants firm custodial sentences reflecting denunciation, general deterrence, and the protection of public revenue, regardless of an offender's prior good character or standing in the commercial world.
  • No error was established in the trial judge's refusal to direct a verdict of not guilty, where the evidence was capable of supporting the jury's findings on all elements of the money laundering count.

Legislation and Cases Referenced

Legislation:
- Criminal Code Act 1995 (Cth), ss 134.2, 135.1(1), 400.1, 400.3(1), 400.13, Division 400 of Part 10.2 of Chapter 10
- Crimes Act 1914 (Cth), s 16A(1)
- Criminal Appeal Act 1912 (NSW), s 6
- Evidence Act 1995 (NSW), s 184
- Foreign Evidence Act 1994 (Cth)
- Income Tax Assessment Act 1997 (Cth), ss 104-110
- Proceeds of Crimes Act 1987 (Cth), ss 81, 82

Cases:
- Ansari v R [2010] HCA 18; 266 ALR 446
- R v Ansari [2007] NSWCCA 204; 70 NSWLR 89
- Pearce v R [1998] HCA 57; 194 CLR 610
- Markarian v R [2005] HCA 25; (2005) 215 ALR 213
- Hili v R; Jones v R [2010] HCA 45; (2010) 272 ALR 465
- Doney v R (1990) 171 CLR 207
- M v R (1994) 181 CLR 487
- House v R (1936) 55 CLR 499
- Director of Public Prosecutions (Cth) v Gregory [2011] VSCA 145
- Nahlous v R [2010] NSWCCA 58; 77 NSWLR 463
- Bugmy v R [1990] HCA 18; 169 CLR 525
- Power v The Queen [1974] HCA 26; 131 CLR 623
- R v Gallagher (1991) 23 NSWLR 220
- Cahyadi v The Queen (2007) 168 A Crim R 41
- DAO v R [2011] NSWCCA 63
- R v Adler [2005] NSWSC 274