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Court of Criminal Appeal 25 October 2021

Pratten v R

[2021] NSWCCA 251

Fraud & dishonesty

Citation: Pratten v R [2021] NSWCCA 251
Court: NSW Court of Criminal Appeal
Date: 25 October 2021
Judges: Gleeson JA, Johnson J, Beech-Jones J

Background

The appellant was a business operator who had previously been involved in an Australian insurance company. After regulatory changes following the HIH Insurance Group collapse, he redirected business through an insurance broking company and an insurance company incorporated in Vanuatu. Premiums collected in Australia by the broking company, totalling over $19 million, were transferred to the Vanuatu insurer.

The Crown alleged that more than $4.5 million of those funds were returned to the appellant or transferred to third parties at his direction, and that these amounts constituted assessable ordinary income. By failing to disclose this income in seven successive tax returns (for the 2003 to 2009 financial years), the Crown alleged he dishonestly obtained a financial advantage by deception from a Commonwealth entity (the Australian Taxation Office), in breach of s 134.2(1) of the Criminal Code Act 1995 (Cth).

This appeal followed a retrial in which a jury convicted him on all seven counts on 9 September 2016. His earlier convictions had been quashed on appeal in 2014. He was ultimately sentenced, after a successful Crown appeal against the original sentence, to a total of 6 years and 4 months imprisonment with a non-parole period of 3 years and 9 months. He was released on parole in October 2019 and was self-represented before the Court of Criminal Appeal.

  • Whether evidence from an ATO officer that amended notices of assessment had been issued to the appellant was wrongly admitted, and if so, whether the trial miscarried as a result
  • Whether the trial judge's directions to the jury on the elements of "deception" and "financial advantage" were adequate
  • Whether the trial judge's directions on tax law, particularly concerning the derivation of ordinary income, were correct
  • Whether the trial judge erred in refusing to discharge the jury when the Crown relied on payments from a second Vanuatu company to rebut a defence submission, after having confined its case to payments from a different Vanuatu entity
  • Whether a Shepherd direction (requiring the jury to be satisfied of each intermediate fact beyond reasonable doubt) was required in relation to the appellant's control of the Vanuatu company
  • Whether the verdicts on all counts were unreasonable and unsupported by the evidence

Decision

Wrongly admitted evidence and the proviso. The Court accepted that evidence of the amended ATO assessments was wrongly admitted. However, applying the proviso in s 6(1) of the Criminal Appeal Act 1912 (NSW), the Court concluded that no substantial miscarriage of justice resulted. The remaining evidence, properly admitted, was sufficient to support the convictions, and the Court was satisfied that no different verdict would have been returned had the evidence been excluded.

Jury directions on elements of the offences. The Court found no reversible error in the trial judge's directions on "deception" or "financial advantage." Although no direction in the precise terms sought had been requested at trial, requiring the appellant to also obtain leave under the Criminal Appeal Rules, the Court was not persuaded that any misdirection caused a miscarriage of justice.

Tax law directions and ordinary income. The Court examined the trial judge's directions on when income is "derived" for tax purposes, including principles drawn from cases such as Arthur Murray (NSW) Pty Ltd v Federal Commissioner of Taxation. No error warranting a new trial was identified in the directions given to the jury on these questions.

Refusal to discharge the jury. The Crown had confined its case to payments made by the Vanuatu insurer (CPI/RGII), but later relied on earlier payments from a separate Vanuatu entity to rebut a defence submission. The Court found the trial judge did not err in refusing to discharge the jury. The use of the earlier payments was limited in scope and did not constitute a fundamental change in the Crown's case that would have rendered the trial unfair.

Shepherd direction and control of the Vanuatu company. The Court rejected the argument that a Shepherd direction was required on the question of the appellant's control of the Vanuatu company. The evidence of control, including a statement by the appellant himself that the company was "mine," was sufficiently strong that any omission did not miscarry the trial. The verdicts were not unreasonable and were open to the jury on the evidence as a whole.

Orders Made

• The application for apprehended bias is dismissed
• The appeal is dismissed
• The orders proposed by Gleeson JA are agreed to

Key Takeaways

  • The Court of Criminal Appeal confirmed that wrongly admitted evidence does not automatically invalidate a conviction: where the proviso in s 6(1) of the Criminal Appeal Act 1912 (NSW) applies, a conviction will stand if no substantial miscarriage of justice resulted and the remaining evidence was sufficient to support the verdict.
  • A distinction arises between cases where misdirections or wrongly admitted evidence are truly prejudicial and cases where the other evidence is so strong that no different verdict could reasonably have followed. This appeal illustrates the latter.
  • Amounts transferred to third parties at an accused's direction, as well as amounts paid directly to the accused, may constitute assessable ordinary income in the accused's hands where the accused controlled the paying entity.
  • A Shepherd direction, requiring the jury to be satisfied beyond reasonable doubt of each intermediate fact essential to guilt, is not automatically required for every factual inference in a complex case. Its absence will only warrant appellate intervention where the omission could have affected the verdict.
  • Where a Crown case is confined to a particular category of transactions during trial, limited reliance on evidence from outside that category to rebut a specific defence submission does not necessarily amount to a fundamental change in the Crown case requiring the jury to be discharged.

Legislation and Cases Referenced

Legislation
- Criminal Code Act 1995 (Cth), s 134.2(1)
- Criminal Appeal Act 1912 (NSW), ss 5(1)(b), 6(1)
- Criminal Appeal Rules (NSW), r 4; Supreme Court (Criminal Appeal) Rules 2021 (NSW), r 4.15
- Income Tax Assessment Act 1936 (Cth), ss 6(1), 19, 316(1), 340, 456(1), Pt X
- Income Tax Assessment Act 1997 (Cth), ss 4-15, 6-5(1), 6-5(4)
- Evidence Act 1995 (NSW), ss 55, 97, 101, 135, 136, 137
- Proceeds of Crime Act 2002 (Cth), s 37(1)
- Tax Administration Act 1953 (Cth), Pt IVC
- Legal Profession Act 2004 (NSW), s 728

Key Cases
- Director of Public Prosecutions (Cth) v Pratten (No 2) (2017) 94 NSWLR 194; [2017] NSWCCA 42
- Arthur Murray (NSW) Pty Ltd v Federal Commissioner of Taxation (1965) 114 CLR 314; [1965] HCA 58
- Bywater Investments Ltd v Federal Commissioner of Taxation (2016) 260 CLR 169; [2016] HCA 45
- Filippou v The Queen (2015) 256 CLR 47; [2015] HCA 29
- GBF v R [2020] HCA 40; (2020) 384 ALR 569
- Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63
- Gallagher v The Queen (1986) 160 CLR 392; [1986] HCA 26
- Crofts v The Queen (1996) 186 CLR 427; [1996] HCA 22
- BCM v The Queen [2013] HCA 48; (2013) 88 ALJR 101
- Federal Commissioner of Taxation v Mochkin (2003) 127 FCR 185; [2003] FCAFC 15
- Charisteas v Charisteas [2021] HCA 29