Hargraves v The Queen

• Jurisdiction: Australia Federal only
• Court: High Court
• Judge: French CJ,Gummow,Hayne,Crennan,Kiefel,Bell JJ.,Heydon J.
• Judgment Date: 26 October 2011
• Neutral Citation: [2011] HCA 44,2011-1026 HCA B
• Docket Number: Matter No B28/2011
• Date: 26 October 2011

[2011] HCA 44

HIGH COURT OF AUSTRALIA

French CJ, Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ

Matter No B28/2011

Matter No B24/2011

Adam John Hargraves

Appellant

and

The Queen

Respondent

Daniel Aran Stoten

Appellant

and

The Queen

Respondent

Representation

J T Gleeson SC with P Kulevski for the appellant in B28/2011 (instructed by Robinson Legal)

B W Walker SC with J R Hunter SC for the appellant in B24/2011 (instructed by Peter Shields Lawyers)

W J Abraham QC with A J MacSporran SC and J G Renwick for the respondent in both matters (instructed by Commonwealth Director of Public Prosecutions)

Interveners

S J Gageler SC, Solicitor-General of the Commonwealth with G A Hill and R J Orr intervening on behalf of the Attorney-General of the Commonwealth (instructed by Australian Government Solicitor)

M G Sexton SC, Solicitor-General for the State of New South Wales with J K Kirk intervening on behalf of the Attorney-General for the State of New South Wales (instructed by Crown Solicitor (NSW))

W Sofronoff QC, Solicitor-General of the State of Queensland with A D Scott and A D Anderson intervening on behalf of the Attorney-General of the State of Queensland (instructed by Crown Law (Qld))

M K Moshinsky SC with C J Horan intervening on behalf of the Attorney-General for the State of Victoria (instructed by Victorian Government Solicitor)

Criminal Code (Q), s 668E.

Hargraves v The Queen

Stoten v The Queen

Criminal law — Trial — Directions to jury — Appellants convicted of charges arising from tax avoidance scheme — Appellants' dishonesty only issue at trial — Appellants gave evidence — Prosecution called appellants' accountant as witness — Appellants' counsel cross-examined accountant suggesting he tailored evidence to avoid own prosecution — Trial judge told jury they could evaluate credibility by considering a witness's ‘interest in the subject matter of the evidence’ including ‘self-protection’ — Whether misdirection causing miscarriage of justice — Whether direction deflected jury from need to be persuaded beyond reasonable doubt of appellants' guilt — Whether direction invited jury to test appellants' evidence according to appellants' interest in outcome of trial — Principles applicable to directions about evaluation of evidence.

ORDER

In each matter, appeal dismissed.

1 French CJ, Gummow, Hayne, Crennan, Kiefel AND Bell JJ. Phone Directories Company Pty Ltd (‘PDC’) produced local telephone directories. Until July 2001, the appellant Adam John Hargraves and his brother Glenn Luke Hargraves held all the shares in PDC. In July 2001, the appellant Daniel Aran Stoten and his wife, as trustees of a family trust, acquired a 10 per cent shareholding in PDC.

2 In January 2010, the two appellants and Mr Glenn Hargraves were presented in the Supreme Court of Queensland on an indictment charging each with one count of conspiracy to defraud the Commonwealth, contrary to s 29D and s 86(1) of the Crimes Act 1914 (Cth), between 18 June 1999 and 23 May 2001 and one count of conspiracy to dishonestly cause a loss to the Commonwealth, contrary to s 135.4(3) of the Criminal Code (Cth), between 24 May 2001 and 9 June 2005.

3 It was alleged that each of the appellants and others (including the other accused, Mr Glenn Hargraves) had conspired to defraud the Commonwealth by making false representations about the amount of allowable deductions that were to be made from the assessable income of PDC. That two counts were laid against each accused, one alleging an offence against the Crimes Act and the other alleging an offence against the Criminal Code, reflected the coming into operation of the relevant provisions of the Criminal Code1 on 24 May 2001 and repeal of s 29D of the Crimes Act2. It is not necessary to explore the differences between the two offences. It is enough to observe that both required 3 proof of dishonesty. It was the prosecution case that the appellants engaged in a dishonest scheme of tax evasion by which they knowingly claimed as deductions from the assessable income of PDC amounts that were greater than the amount of outgoings incurred by PDC in gaining or producing its assessable income.

4 After a trial before Fryberg J and a jury, at which the appellants gave evidence, each appellant was convicted of the offence charged in the second

count but acquitted on the other count. Glenn Hargraves was acquitted on both counts.

5 Each appellant appealed to the Court of Appeal of the Supreme Court of Queensland against his conviction. The Court of Appeal (Muir and Fraser JJA and Atkinson J) dismissed 4 each appellant's appeal against conviction. The Court of Appeal held that the trial judge had misdirected the jury about how to assess the appellants' evidence but held that the appeals should be dismissed because there had been no substantial miscarriage of justice 5.

6 By special leave, each appellant now appeals to this Court alleging that the Court of Appeal was wrong to conclude that there had been no substantial miscarriage of justice and further alleging that application of the proviso 6, at least in the circumstance of these cases, contravened the requirement of s 80 of the Constitution that ‘[t]he trial on indictment of any offence against any law of the Commonwealth shall be by jury’.

7 The respondent submitted that both grounds of appeal advanced by the appellants should be rejected. The respondent further contended that the Court of Appeal was wrong to conclude that the trial judge had misdirected the jury about how to assess the appellants' evidence.

8 These reasons will show that the respondent's contention that the Court of Appeal was wrong to hold that the trial judge had misdirected the jury should be accepted. There is no occasion in these matters to consider whether the proviso was correctly applied. The constitutional issue which the appellants sought to raise is thus not reached.

9 Before identifying that part of the trial judge's charge to the jury that was impugned, it is necessary to say something about some aspects of the trial and the evidence that was given.

Trial

10 At trial the appellants did not dispute that they had participated in a scheme which reduced the amount of income taxation that PDC paid. They contended that they believed that it was a legitimate tax minimisation scheme.

11 The scheme was said to have been devised by a Swiss accounting firm, Strachans. There was evidence that, in 1999, Mr Adam Hargraves was put in touch with Mr Philip Egglishaw, a representative of Strachans, by Mr John Feddema. Mr Feddema was an accountant who had done accounting work for PDC and both Mr Adam Hargraves and his brother, Glenn. The scheme that was proposed, and was implemented, was one in which QH Data, a Chinese company that PDC used to compile data for incorporation into PDC's products, rendered its invoices to Amber Rock Ltd, a company established in the British Virgin Islands by Strachans. Amber Rock would inflate the amount specified in QH Data's invoice by an amount fixed by one of the appellants, and would send an invoice issued by Amber Rock to PDC for payment of the inflated amount. PDC would pay Amber Rock's invoice and claim the full amount of the invoice as a deduction. From the amount paid by PDC, Amber Rock would pay QH Data its invoice and pay the balance to certain trusts administered by Strachans, which were trusts established under and governed by Jersey law. Distributions would then be made from the trusts to overseas bank accounts to which the appellants (and Glenn Hargraves) had access by withdrawing amounts from automatic teller machines. In this way, the appellants could and did withdraw substantial sums from the overseas accounts. In his evidence at trial, Mr Adam Hargraves said that he had withdrawn about $1.6 million over a period of ‘four or so years’. The appellants did not themselves declare the sums they withdrew from the overseas accounts as income.

12 The prosecution called Mr Feddema to give evidence at the appellants' trial. He gave evidence of his introducing Mr Adam Hargraves to Strachans and of what he knew about the scheme that was implemented for PDC. He gave evidence of various events and conversations that occurred at and after the time he first became aware of authorities investigating the matters that culminated in the charging of the appellants. In particular, Mr Feddema gave evidence of the execution of a search warrant at his home: a warrant in which it was alleged that there were reasonable grounds for suspecting that Mr Feddema had ‘aided and abetted Daniel Stoten, Glenn Hargraves, Adam Hargraves, Phone Directories Group or PDC Group’ to commit an offence against s 29D of the Crimes Act and an offence against s 134.2(1) of the Criminal Code.

13 Trial counsel for the appellants and Mr Glenn Hargraves cross-examined Mr Feddema at some length. In the course of cross-examination it was suggested to Mr Feddema that he knew more about the scheme that was implemented by and for PDC than he had revealed in his evidence, and that his evidence was tailored to avoid him being charged with an offence. The evident thrust of much of the cross-examination was to provide a basis for the appellants and Mr Glenn Hargraves to argue that their conduct in relation to the scheme was not dishonest because they were acting upon the advice of the company's accountant, Mr Feddema, about a structure that, so far as they knew, was to be lawfully established and operated overseas by expert specialists in whom they could have confidence: Mr Egglishaw and Strachans.

14 The prosecution called Mr Dirk Smibert to give evidence. He had been involved in PDC's business for many years, first as an independent contractor and later as an employee. Mr Smibert had first become acquainted with the Hargraves brothers when they, with...