Citation: R v Agius; R v Castagna (No 11) [2018] NSWSC 2043
Court: Supreme Court of NSW
Date: 22 March 2018
Judge(s): Adamson J
Background
Two accused faced charges on an indictment arising from alleged tax-related offending. One accused (referred to here as the consultant) faced counts 3 to 13, while the other faced counts 1, 2 and 13, all of which were conspiracy counts. Central to the Crown case was the allegation that payments made by a major bank to a UK-registered company under consultancy agreements actually constituted the income of the consultant personally, not the income of the company.
The consultancy arrangements were structured as tripartite agreements. The bank, the UK company, and the consultant were all parties. The services provided under those agreements were the consultant's personal skills and expertise, and the consultant had personally negotiated key terms of the contracts. The Crown alleged the UK company was essentially a nominee vehicle used to receive and on-forward the payments.
At the close of all evidence and prior to closing addresses, both accused applied for verdicts by direction, commonly known as "no case" submissions. The court was required to determine whether, taking the evidence at its highest, a jury could lawfully return a verdict of guilty on any of the counts.
Legal Issues
- Whether payments made to a company under consultancy agreements could, as a matter of law, constitute the income of the individual performing the services rather than the income of the company
- Whether the question of income attribution was a purely legal one (to be resolved by the court) or a factual one (to be resolved by the jury)
- Whether the evidence, taken at its highest, was sufficient to support a verdict of guilty on the conspiracy and alternative counts
- Whether the interests of justice under s 135.4(13) of the Criminal Code Act 1995 (Cth) required dismissal of the relevant charges
Decision
The accused submitted that, because the consultancy agreements expressly required the bank to pay the UK company, the payments could only constitute the company's income as a matter of law. They relied on the Full Federal Court's decision in Tupicoff v Commissioner of Taxation (1984) 4 FCR 505 for the proposition that no regard could be had to matters outside the four corners of the agreements, provided the agreements were not alleged to be shams.
Adamson J rejected that submission. Her Honour preferred the approach endorsed by the Full Federal Court in Baker v Federal Commissioner of Taxation (1989) 20 ATR 1706, which confirmed that the question of whether income belongs to an individual or a company must be determined by reference to the whole factual matrix. The terms of a contract are one relevant factor, but they are not the only one.
On that basis, the attribution question was properly one of fact for the jury, not a question of law for the court to resolve on a no case submission. The accused had conceded that, if the question was factual rather than legal, the evidence was sufficient to go to the jury. Given that concession, Adamson J did not need to undertake a detailed analysis of the Crown's evidence beyond noting its extent and nature.
On the separate argument under s 135.4(13) of the Criminal Code, her Honour found no basis to dismiss the charges in the interests of justice where the evidence was capable of supporting a guilty verdict and the determination of guilt was properly a matter for the jury.
Orders Made
- The applications by each accused for verdicts by direction were refused.
Key Takeaways
- The Supreme Court confirmed that the question of whether payments made to a company constitute the income of an individual performing services is a question of fact, not a question of law, to be determined by reference to all relevant circumstances.
- A finding that contractual agreements are not alleged to be shams does not, by itself, confine the income attribution inquiry to the four corners of those agreements. Broader factual circumstances remain relevant.
- Tupicoff v Commissioner of Taxation did not require a different result. Adamson J distinguished its application and favoured the approach taken in Baker v Federal Commissioner of Taxation, which endorsed a whole-of-matrix factual analysis.
- Under the test in Doney v The Queen (1990) 171 CLR 207, a directed verdict of acquittal is only available where there is a defect in the evidence such that, taken at its highest, it cannot sustain a conviction. Tenuous or inherently weak evidence is insufficient to warrant removal of a matter from the jury.
- Where a charge under s 135.4 of the Criminal Code could lawfully result in a guilty verdict on the evidence as it stands, s 135.4(13) does not operate to require dismissal in the interests of justice without additional reasons beyond those already considered.
Legislation and Cases Referenced
Legislation
- Criminal Code Act 1995 (Cth), Sch 1, s 135.4
- Income Tax Assessment Act 1936 (Cth), ss 19, 260
- Income Tax Assessment Act 1997 (Cth), s 6-5
Cases
- Baker v Federal Commissioner of Taxation (1989) 20 ATR 798
- Baker v Federal Commissioner of Taxation (1989) 20 ATR 1706
- Doney v The Queen (1990) 171 CLR 207
- Federal Commissioner of Taxation v Mochkin (2003) 127 FCR 185; [2003] FCAFC 15
- May v O'Sullivan (1955) 92 CLR 654
- Raftland Pty Ltd v Commissioner of Taxation of the Commonwealth of Australia (2008) 238 CLR 516; [2008] HCA 21
- Snook v London & West Riding Investments Ltd [1967] 2 QB 786
- Tupicoff v Commissioner of Taxation (1984) 4 FCR 505