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7
Court of Criminal Appeal 1 July 2014

Pratten v R

[2014] NSWCCA 117

Fraud & dishonesty
CRIMINAL LAW APPEAL AGAINST CONVICTION

Citation: Pratten v R [2014] NSWCCA 117
Court: Court of Criminal Appeal
Date: 1 July 2014
Judges: Meagher JA; Fullerton J; Hamill J

Background

The appellant was convicted on 13 June 2012 of seven counts of dishonestly obtaining a financial advantage by deception, contrary to s 134.2(1) of the Criminal Code Act 1995 (Cth). The convictions arose from the lodgement of income tax returns for the financial years ending 30 June 2003 through to 30 June 2009. The Crown alleged that the appellant, who held an interest in a Vanuatu-incorporated insurer, knowingly understated his assessable income each year by failing to declare payments made from Vanuatu trust accounts into his personal bank account or to third parties on his behalf.

The central factual dispute was whether those payments, totalling millions of dollars across the seven years, were income derived by the appellant (as remuneration or profit distributions) or were loans and other non-income receipts, as the appellant maintained. The jury returned guilty verdicts on all seven counts. The appellant appealed against conviction on multiple grounds; the Crown separately appealed against sentence, though that appeal became unnecessary once the conviction appeal succeeded.

Legal Issues

  • Whether the trial judge erred in failing to give a specific unanimity direction, requiring the jury to agree unanimously on the particular payment or payments that constituted income knowingly not declared before returning a guilty verdict on any count.
  • Whether lodging a tax return understating assessable income could constitute obtaining a "financial advantage" under s 134.2(1) of the Criminal Code Act, particularly after amended assessments, interest, and penalties had since been issued.
  • Whether the admission into evidence of amended notices of assessment from the Commissioner of Taxation caused the trial to miscarry.
  • Whether the trial judge erred in failing to direct the jury that, to find a financial advantage, it had to be satisfied beyond reasonable doubt that there were no deductible expenses associated with the undisclosed amounts.
  • Whether the verdicts were unreasonable or unsupported by the evidence.
  • Whether there was a miscarriage of justice because the Crown did not call the auditor of CPI's financial statements, Mr Kym Butler, as a witness.

Decision

Ground 1A: Failure to give a specific unanimity direction

The Court upheld this ground and ordered a new trial. For each count, the Crown relied on multiple disputed payments as evidence of knowingly undisclosed income. It was open on the evidence for individual jurors to be satisfied that different payments were income, without any shared agreement as to which particular payments formed the basis of the offence. Because the financial advantage alleged was the tax benefit derived from the non-disclosure of specific income, the advantage had to be found to flow from the same income that constituted the intentional deception. A finding of deception based on one payment could not sustain a conviction if the financial advantage found by other jurors was attributed to a different payment (at [53]-[54]).

The trial judge's directions did not make clear that jurors had to agree unanimously on the particular amount or amounts of income constituting the deception. Some directions expressly recognised that the jury might convict even if satisfied that only some of the disputed payments were income (at [65]-[76]). This created a real risk that jurors who disagreed on which payments were income nonetheless returned a unanimous guilty verdict (at [77]-[78]). The omission to give a proper unanimity direction was a departure from the essential requirements of the law going to the root of the proceedings, and the proviso in s 6(1) of the Criminal Appeal Act did not apply (at [81]-[82]).

Ground 2: Whether lodging a false return could constitute obtaining a "financial advantage"

The Court dismissed this ground. Upon lodgement of each return, the appellant was deemed to have received a notice of assessment based on the income disclosed. That created a debt to the Commonwealth that was less than it would have been had income been fully declared. That lesser liability was itself a financial advantage, regardless of subsequent amended assessments, interest, or penalties. The expression "financial advantage" is broad enough to include being subject to a lesser liability as a result of lodging a false return (at [89]-[93]).

Ground 3: Admission of amended assessments in evidence

The Court dismissed this ground. The amended assessments were admitted on a limited basis by agreement, subject to a direction that they could only be used to prove that the assessments had been made and issued, not as evidence of the Commissioner's opinion about the appellant's liability. Given those clear directions, the admission did not cause the trial to miscarry. Leave to raise this ground was also refused because the ultimate admission followed a considered forensic decision by the appellant's counsel to withdraw an earlier objection (at [97]-[102]).

Ground 4: Failure to direct on deductible expenses

The Court dismissed this ground. The trial judge's written directions and summing up adequately conveyed to the jury that when assessing financial advantage and dishonesty, it had to consider whether there were deductible expenses associated with any undisclosed income. Both parties addressed this in closing submissions, and the trial judge gave specific directions on it in relation to the helicopter, motor vessel, and director's fees (at [106]-[111]).

Ground 7: Unreasonable verdicts

The Court dismissed this ground. On an independent assessment of the evidence, including documentary evidence showing the appellant treating all relevant assets as his own with "nil" liabilities to CPI, and intercepted conversations in which the appellant acknowledged the likely characterisation of the payments as income, it was plainly open to the jury to be satisfied beyond reasonable doubt that the payments were distributions of CPI's profits rather than loans (at [136]-[141]).

Ground 8: Failure to call Mr Kym Butler

The Court dismissed this ground. Mr Butler had audited CPI's financial statements but was not a person with direct knowledge of the critical issue: whether payments to the appellant were made by way of loan or income. He could not give direct and admissible evidence on that question, and no request was made at trial for the Crown to call him or make him available. The Crown's failure to call him did not constitute a miscarriage of justice (at [152]-[153]).

Orders Made

  • The appeal against conviction is allowed.
  • The appellant's convictions are quashed.
  • There is to be a new trial of the appellant.

Key Takeaways

  • A conviction under s 134.2(1) of the Criminal Code Act 1995 (Cth) for dishonestly obtaining a financial advantage by deception requires jury unanimity not only as to the verdict, but also as to the particular conduct constituting the deception and the financial advantage flowing from it. Where multiple discrete payments are relied upon as separate possible foundations for guilt, the jury must be directed to agree on which payment or payments establish both the intentional deception and the resulting advantage (at [53]-[54], [77]-[82]).

  • Lodging an income tax return that understates assessable income constitutes obtaining a "financial advantage" at the moment of lodgement, because the taxpayer becomes subject to a lesser liability to the Commonwealth than would otherwise apply. The subsequent issue of amended assessments and the imposition of interest and penalties do not extinguish or negate that advantage (at [89]-[93]).

  • Where a unanimity direction is required but not given, and the omission goes to the root of the proceedings by depriving the accused of a chance of acquittal that was fairly open, the proviso in s 6(1) of the Criminal Appeal Act 1912 (NSW) will not cure the error and a new trial is the appropriate order (at [81]-[82]).

  • The Crown's failure to call a witness does not constitute a miscarriage of justice unless that witness could have given evidence that was significant to the resolution of a central issue. An auditor who expressed opinions on financial statements, but had no direct personal knowledge of the facts underlying disputed entries, does not necessarily meet that threshold (at [152]-[153]).

  • Documentary and intercept evidence obtained after the execution of search warrants, including a finance application in which a defendant declares "nil" liabilities and a testamentary email treating disputed assets as personally owned, can provide a cogent basis for a jury to reject a loan characterisation and find that payments were income distributions (at [136]-[141]).

Legislation and Cases Referenced

Legislation
- Criminal Appeal Act 1912 (NSW), ss 5(1), 6(1)
- Criminal Appeal Rules, r 4
- Criminal Code Act 1995 (Cth), s 134.2
- Evidence Act 1995 (NSW), ss 55(1), 136, 190
- Income Tax Assessment Act 1936 (Cth), s 204(1)
- Taxation Administration Act 1953 (Cth), Schedule 1, s 255-5

Cases
- AK v Western Australia [2008] HCA 8; 232 CLR 438
- Baiada Poultry Pty Ltd v The Queen [2012] HCA 14; 246 CLR 92
- BCM v The Queen [2013] HCA 48; 88 ALJR 101
- Cesan v The Queen [2008] HCA 52; 236 CLR 358
- Chapman v R [2013] NSWCCA 91
- Cheung v The Queen [2001] HCA 67; 209 CLR 1
- Cramp v The Queen (1999) 110 A Crim R 198
- Fermanis v The State of Western Australia [2007] WASCA 84; 33 WAR 434
- Gassy v The Queen [2008] HCA 18; 236 CLR 293
- Handlen v The Queen [2011] HCA 51; 245 CLR 282
- Hannes v Director of Public Prosecutions (Cth) (No 2) [2006] NSWCCA 373
- KBT v The Queen [1997] HCA 54; 191 CLR 417
- M v The Queen [1994] HCA 63; 181 CLR 487
- MFA v The Queen [2002] HCA 53; 213 CLR 606
- Mraz v The Queen (No 1) [1955] HCA 59; 93 CLR 493
- Pratten v Commonwealth Director of Public Prosecutions [2013] NSWSC 594
- R v Apostilides [1984] HCA 38; 154 CLR 363
- R v Beach (1994) 75 A Crim R 447
- R v Brown (1984) 79 Cr App R 115
- R v Clarke and Johnstone (1986) 21 A Crim R 135
- R v Holmes [2006] VSCA 73
- R v Isaacs (1997) 41 NSWLR 374
- R v Jo [2012] QCA 356
- R v Lievers and Ballinger [1999] 1 Qd R 649
- R v Mead [2002] 1 NZLR 594
- R v More [1987] 1 WLR 1578
- R v Vasic [2005] VSCA 38; 11 VR 380
- S v The Queen [1989] HCA 66; 168 CLR 266
- SKA v The Queen [2011] HCA 13; 243 CLR 400
- Walsh v R [2002] VSCA 98
- Weiss v The Queen [2005] HCA 81; 224 CLR 300
- Whitehorn v The Queen [1983] HCA 42; 152 CLR 657
- Wilde v The Queen [1988] HCA 6; 164 CLR 365