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District Court 27 October 2023

R v Bigatton (No 4)

[2023] NSWDC 458

Fraud & dishonesty
CRIMINAL STAY APPLICATION ABUSE OF PROCESS MISCARRIAGE OF JUSTICE FOREDOOMED TO FAIL NO ADMISSIBLE EVIDENCE

Citation: R v Bigatton (No 4) [2023] NSWDC 458
Court: District Court of New South Wales
Date: 27 October 2023
Judge(s): Newlinds SC DCJ

Background

The accused faced two counts on an indictment arising from the promotion in Australia of an opportunity to invest in the cryptocurrency scheme known as "BitConnect." Count 1 alleged operation of an unregistered managed investment scheme contrary to the Corporations Act 2001 (Cth). Count 2 concerned a separate but related alleged contravention.

The accused applied for a permanent stay of both counts, arguing that proceeding to trial before a jury would constitute an abuse of process amounting to a miscarriage of justice. This was the fourth interlocutory judgment in the matter, and the third from the presiding judge.

The application raised a significant question of statutory construction: whether a scheme that, beneath its apparent features, operated as a Ponzi scheme could ever qualify as a "managed investment scheme" as defined in section 9 of the Corporations Act.

Legal Issues

  • Whether Count 1 was "foredoomed to fail" because the Crown had no admissible evidence to prove the existence of a managed investment scheme, particularly the "pooling" or "common enterprise" requirements in the section 9 definition
  • Whether the Full Federal Court's decision in National Australia Bank Limited v Norman (2009) 180 FCR 243 established that a Ponzi scheme can never satisfy the definition of a managed investment scheme
  • Whether the Crown's foreshadowed decision not to call Glenn Arcaro (a scheme participant in the United States) and its failure to produce FBI documents would cause such forensic prejudice as to constitute an abuse of process
  • Whether Count 2 was unacceptably burdensome and oppressive given the number of potential cases the Crown's particulars could be said to generate

Decision

Issue 1: Whether Count 1 is foredoomed to fail on the law

The accused argued that Norman established that a Ponzi scheme, operating by stealing investor funds rather than genuinely pooling them, can never meet the statutory definition of a managed investment scheme. The court rejected that reading (at [43]-[53]). The court found that Norman, as a matter of fact, involved a finding that no scheme at all existed and that the Full Court's observations did not amount to binding authority for the broad proposition the accused advanced. The court preferred the analysis in Baskerville v Skene [2023] QSC 31, finding that it correctly interprets Norman as confined to its own facts (at [45], [51]-[53]).

Whether a scheme constitutes a managed investment scheme is a question of fact, to be judged in totality by reference to all the evidence. A finding that a scheme was or became a Ponzi scheme is relevant to that factual assessment, but it is not necessarily fatal to the Crown's case (at [56]). The court also observed that the accused had addressed only the "pooling" limb of the section 9 definition, not the alternative "common enterprise" limb, which the Crown intended to rely upon (at [30]-[31]).

Issue 2: Whether there is admissible evidence of the managed investment scheme

The court was not satisfied that the Crown's available evidence would be wholly inadmissible (at [76]). An email written by the accused to a promoter of the scheme, explaining how it operated, was found to be admissible as an admission and potentially as a business record. It was open to a jury to infer from that email both an intention to pool funds and the existence of a common enterprise (at [68]-[71]). A mission statement document found on the BitConnect website was also found to be admissible as a business record, with the accused having declined to argue that none of the hearsay exceptions applied (at [72]-[74]). Investor statements using the words "pool" or "pooling" were identified as potentially admissible at trial (at [75]). Pooling can be inferred from the totality of the evidence without direct proof (at [58]).

Issue 3: Glenn Arcaro and the FBI documents

The court declined to find that the Crown's decision not to call Arcaro, or to produce FBI documents, constituted an abuse of process (at [90]-[91]). Arcaro's evidence about the BitConnect scheme in the United States would not shed light on what the accused did in Australia, and the Crown could not compel his attendance in any event (at [81]-[82], [85]). The trial would not be unfair in his absence because the accused already had voluminous material, including Arcaro's plea bargain documents, that would likely be admissible and would establish Arcaro's account of the scheme's character (at [88]-[89]).

Issue 4: Count 2 and alleged oppression

The accused contended that the Crown's particulars exposed him to 768 potential separate cases, rendering Count 2 unacceptably oppressive. The court declined to revisit its earlier reasoning in R v Bigatton (No 3) [2023] NSWDC 290, noting that a notice of appeal had been filed in relation to that judgment and the Court of Criminal Appeal was already seized of the question (at [94]). In any event, the court was not persuaded the arithmetical exercise reflected the practical reality of the defence task: the Crown's case fell within understandable silos that did not require a line-by-line analysis, and no oppression or unfairness was established (at [97]-[98]).

Orders Made

  • The accused's application for a stay of proceedings is dismissed.

Key Takeaways

  • Whether an alleged scheme constitutes a "managed investment scheme" under section 9 of the Corporations Act 2001 (Cth) is a question of fact to be assessed by reference to the totality of the evidence. A finding that the scheme was or became a Ponzi scheme is relevant but not automatically determinative (at [56]).

  • The District Court found that National Australia Bank Limited v Norman (2009) 180 FCR 243 is not authority for the broad proposition that a Ponzi scheme can never satisfy the definition of a managed investment scheme, and preferred the interpretation of Norman set out by Freeburn J in Baskerville v Skene [2023] QSC 31 (at [43]-[53]).

  • Pooling of investor funds, as required by one limb of the section 9 definition, can be established by inference from the totality of the evidence and does not require direct proof (at [58]).

  • A permanent stay is a drastic remedy available only in extreme or extraordinary cases where a fundamental defect cannot be remediated. An accused who invokes the "foredoomed to fail" ground bears a high burden and must demonstrate with near certainty that no admissible evidence supports the Crown's case (at [19]-[20], [55]).

  • The Crown's decision not to call an overseas witness is not automatically an abuse of process. Where the witness's likely evidence concerns events in a foreign jurisdiction and does not bear directly on the domestic elements of the offence, and the accused already has access to material establishing what that witness would say, the absence of that witness does not render the trial unfair (at [81]-[82], [88]-[89]).

Legislation and Cases Referenced

Legislation
- Corporations Act 2001 (Cth) , ss 601ED(5), 91(B)(1), 1311(1)
- Mutual Assistance in Criminal Matters Act 1987 , s 39A

Cases
- Australian Securities and Investments Commission v Comcash Pty Ltd & Ors [2004] QSC 479
- Australian Securities and Investments Commission v Great Northern Developments Pty Ltd [2010] NSWSC 1087
- Australian Securities and Investments Commission v MyWealth Manager Financial Services Pty Ltd (No 3) [2020] FCA 1035
- Australian Securities and Investments Commission v Takaran Pty Ltd
- Baskerville v Skene [2023] QSC 31
- Brookfield Multiplex Limited v International Litigation Funding Partners Pty Limited (No 3) [2009] FCA 450
- Burton v Arcus [2006] WASCA 71
- Dupas v The Queen (2010) 241 CLR 2
- Ho v R [2023] NSWCCA 245
- Jago v District Court (NSW) (1989) 168 CLR 23
- LCM Funding (2022) 292 FCR 169
- National Australia Bank Limited v Norman (2009) 180 FCR 169
- R v Bigatton (No 3) [2023] NSWDC 290
- R v Blackett [2018] NSWCCA 114
- R v Glennon (1992)
- R v WRC (2003) 59 NSWLR 273
- RM v The Queen (2012) 221 A Crim R 465
- Subramaniam v The Queen (2004) 79 ALJR 116
- Tony Strickland (a pseudonym)& Ors v Commonwealth Director of Public Prosecutions [2018] HCA 53
- Walton v Gardiner (1993) 177 CLR 378
- Williams v Spautz (1992) 174 CLR 509