SUPREME COURT OF NEW SOUTH WALES

Petroulias v Wills

[2002] NSWSC 1190

Simpson J

16 December 2002 - Sydney

Simpson J. This is an application, pursuant to s 104(3) of the Justices Act 1902 (NSW), for leave to appeal against the decision of a Local Court Magistrate to commit the applicant for trial on 3 charges under the Crimes Act 1914 (Cth). Section 104(3) of the Justices Act 1902 (NSW) is in the following terms:

104(3) A defendant or an informant may appeal under this Division to the Supreme Court against any order that is made in relation to committal proceedings, on a ground that involves a question of law alone, but only with the leave of the Supreme Court.

2 On 24 March 2000 the applicant was charged under s 86A of the Crimes Act 1914 (Cth) with conspiracy to defraud the Commonwealth. Subsequently that charge was withdrawn and charges of defrauding the Commonwealth laid under s 29D of the Crimes Act 1914 (Cth), of unauthorised disclosure laid under s 70 of the Crimes Act 1914 (Cth), and of corruption as a Commonwealth officer laid under s 73(2) of the Crimes Act 1914 (Cth) were substituted. Over 36 days between November 2001 and June 2002 committal proceedings in relation to these charges were heard. On 17 July 2002 Miss D Sweeney, Local Court Magistrate, committed the applicant for trial on each of the 3 charges.

3 The Crown expressly conceded that the committal for trial amounted to an "order" for the purposes of s 104(3).

4 Sections 29D, 70(1) and 73(2) were, as they existed at the time of the alleged offences, and as applicable for present purposes in the following terms:

29D A person who defrauds the Commonwealth or a public authority under the Commonwealth is guilty of an indictable offence.

70(1) A person who, being a Commonwealth officer, publishes or communicates, except to some person to whom he is authorised to publish or communicate it, any fact or document which comes to his knowledge, or into his possession, by virtue of being a Commonwealth officer, and which it is his duty not to disclose, shall be guilty of an offence.

73(2) A Commonwealth officer who asks for or receives or obtains, or offers or agrees to ask for or receive or obtain, any property or benefit of any kind for himself or any person, on an understanding that the exercise by him of his duty or authority as a Commonwealth officer, will, in any manner, be influenced or affected, is guilty of an offence.

5 Two tests are imposed upon a magistrate in the hearing of committal proceedings. By s 41(2) of the Justices Act 1902 (NSW), a magistrate is required to reach an opinion whether, having regard to all the evidence, the evidence is capable of satisfying a jury beyond reasonable doubt that the defendant has committed an indictable offence. Where the magistrate reaches an affirmative opinion under subs (2), he or she is required to afford an opportunity to the defendant to adduce evidence or make a statement in response to the prosecution evidence, and, having considered all of the evidence adduced by the prosecution and by the defence, form an opinion whether, on the basis of all of the evidence, there is a reasonable prospect that a jury would convict the defendant of an indictable offence. Where the magistrate forms an affirmative opinion under subs (6), he or she is required to commit the defendant for trial.

6 In this case the magistrate formed affirmative opinions under both subs (2) and (6). It is of some significance to note the terms of the indictable offences, so far as she delineated them, as to which she formed her opinions. The s 29D indictable offence she identified was formulated as follows:

… that the defendant did defraud the Commonwealth, namely the Australian Taxation Office, in that while an officer of the Australian Taxation Office he did by dishonest means assist taxpayers to avoid the payment of tax. (Emphasis added.)

(This was the terminology of the charge as presented to her by the prosecution.)

7 Her Worship stated the s 70 offence in the following way:

… that between June 1998 and April 1999 being a Commonwealth officer with the Australian Taxation Office [the applicant] did publish to Richard Morgan, a person to whom [he was] not authorised to publish, documents which came into [his] possession by virtue of [his] being a Commonwealth officer in (sic) which it was [his] duty not to disclose.

8 In an earlier formulation of the statement of this offence, her Worship had specified the document the subject of the charge as:

a client list from the Australian Taxation Office titled "SIA - All Investors linked to Age".

9 Her Worship noted that Mr Morgan, the person to whom the applicant was alleged to have published the document, had said in a statement that he was given the document at a meeting at the Sheraton Hotel at the Sydney Airport on 25 July 1998, but that, when cross-examined during the course of the committal proceedings, he could not say when and where he had been given this document and could not say that it was in Sydney on 25 July 1998.

10 The magistrate formulated the s 73 charge as follows:

… that the [applicant] being a Commonwealth Officer with the Australian Taxation Office agreed to receive a benefit for himself on an understanding that the exercise by him of his duty as a Commonwealth officer would be affected.

11 Evidence was placed before me to the effect that documentary material occupying approximately 168 lever arch folders was before the magistrate. Very little of this material was tendered in evidence on the present application. Rather, I was provided with several volumes of the transcript of the committal proceedings, together with other material including the particularisation of the charges brought by the Commonwealth, and written submissions made to the magistrate by the parties. There was some other material, to which it will presently be necessary to refer. From this material, and from references made in both oral and written submissions by the legal representatives of the parties, I have attempted to discern the way in which the Crown put its case at the committal and proposes, on a trial, to put its case before a jury. I emphasise that what immediately follows is intended as an account of the case proposed to be made by the prosecution. Nothing in that account is intended to represent any finding of fact.

An outline of the Crown case

12 Between 1997 and 1999 the applicant held office in the Australian Taxation Office (the ATO). In September 1998 he became First Assistant Commissioner. His duties, presumably, concerned the administration of the various Commonwealth statutes concerned with the imposition of taxes and the collection of revenue. One such statute is the Taxation Administration Act 1953 (Cth) (the TAA). Another is the Income Tax Assessment Act 1936 (Cth) (the ITAA 1936).

13 Part IVAA of the TAA appears under the heading "Private Rulings". In general terms, it provides a system whereby persons may, by application to the Commissioner of Taxation (the Commissioner), clarify their obligation to pay tax of any of the kinds the administration of which lies in the hands of the Commissioner. By s 14ZAF:

A person may apply to the Commissioner for a ruling on the way in which, in the Commissioner's opinion, a tax law or tax laws would apply to the person in respect of a year of income in relation to an arrangement.

14 By s 14ZAL(1) the Commissioner is obliged to comply with an application for a ruling unless exempted from that obligation by s 14ZAN. Section 14ZAN catalogues circumstances in which the Commissioner is not required to comply with an application. By s 14ZAL(2), even where one of the catalogued exemptions applies, the Commissioner may (but is not obliged to) comply with an application. By s 14ZAQ the Commissioner may decline to make a ruling if he or she considers that the correctness of the ruling would depend upon assumptions made about a future event or other matter. It is only to this extent that any discretion to decline to make a ruling in response to an application exists. If none of the exemptions contained in s 14ZAN applies, and except where s 14ZAQ applies, the Commissioner is obliged to make a ruling where application is made to him or her to do so. Of course, the Commissioner has power to, and does, delegate his function under this Part to subordinate officers.

15 Although there appears to be no specific provisions to this effect, I was told, without dissent, that a private ruling made in accordance with Pt IVAA is regarded as binding on the Commissioner, and, indeed, in the evidence rulings were at times referred to as "private binding rulings" or "PBR's". The Commissioner abides by a convention to give effect to a private ruling made under the Part. The effect of that, as I understand it, is that, provided the factual circumstances are as specified in the application, the Commissioner is precluded, or regards himself as precluded, from challenging a person who acts in accordance with a ruling. Where the ruling is favourable to the applicant, the Commissioner is bound to treat any tax in question as not payable.

16 As I understand Pt IVAA, it allows for an assessment on behalf of the Commissioner of the applicability of taxation law; it is an interpretation of the operations of those laws, given in advance, to enable the person seeking the ruling to enter into arrangements with a degree of confidence about his/her/its taxation exposure. It is not conclusive in the sense that a curial adjudication is conclusive, but is an expression of the Commissioner's view of the effect of taxation law in relation to the particular set of facts and circumstances outlined in the application. It is not intended to confer on the taxpayer any benefit except certainty, and it certainly is not intended to operate as an exemption from tax properly payable. A ruling does not alter the effect of taxation laws, but rather acts as a predictor of the outcome of a hypothetical adjudication.

17 A ruling is individual: that is, it applies to the particular taxpayer who makes the application, in relation to the particular set of circumstances set out in the application and in the year of taxation specified. Rulings do, however, have some precedent effect. The ATO maintains records of the rulings given, and officers asked to give a ruling to one taxpayer will have regard to previous rulings in relation to comparable cases. But a ruling in one case does not bind the Commissioner to make a similar ruling in a similar, or even identical, case, and a taxpayer making an application can have no legitimate expectation that an earlier ruling in a different case will be followed.

18 One area of taxation the subject of applications for private rulings is a species of arrangements known as Employee Benefit Arrangements (EBA's). These came before the Commissioner (or his delegate) under Pt IVAA for the purpose of ruling on whether, inter alia, income tax or fringe benefits tax, under the Fringe Benefits Tax Assessment Act 1986 (Cth) (the FBTAA), were payable in the circumstances described in the application.

19 I was provided with a sample of one such ruling (exhibit 19). It concerned a "Productivity Incentive Trust Plan" proposed by a company, Morgan HR Pty Ltd. The ruling opened with a short statement outlining "what this ruling is about", which was identified as income and fringe benefits tax implications of a plan designed to encourage employees to remain in the employment of the company (Morgan HR Pty Ltd) and to act as an incentive for employees to become more productive and thus increase the profitability of the company. The details of the plan or arrangement (or scheme) were then set out. It is unnecessary to reproduce these. The outline of the plan was followed by a 19 paragraph ruling. Each paragraph consists of a statement of the liability either of the company or its employees to taxation of one species or another. For example, in para 4 the ruling explicitly stated that the plan would not expose the company to fringe benefits tax liabilities. In para 19 it was stated that Pt IVA of the ITAA 1936 and s 67 of the FBTAA "should have no application" provided that the dominant purpose of the arrangement was to retain and/or provide an incentive for key employees. The ruling was signed by Emanuel Aivoliates, an officer subordinate to the applicant who had authority to make rulings of the kind in question.

20 In short, the ruling was favourable to the company. In accordance with the convention that the Commissioner considered himself to be bound by the ruling, the company and its employees could regard themselves as safe from any demand for any tax of the kinds covered by the ruling. I assume, as I have suggested above, that the binding effect of the ruling depended upon the accuracy of the description of the plan or arrangement and its being carried out in accordance with that description.

21 Morgan HR Pty Ltd was in fact a company incorporated at the behest of an associate of the applicant, Richard Morgan. The function of the company was to market plans of the kind described in the application I have outlined above. The plan had been devised by the applicant. It was designed to create a set of circumstances in which benefits were provided to employees, but fringe benefits tax was not leviable. The applicant was to receive payment for each plan sold, amounting to one third of the amount paid by the purchasers. An elaborate arrangement was made for payment to be made to a bank account in Hong Kong, held in Morgan's name.

22 The plan was marketed to other companies, and, perhaps, individuals. Each submitted an application for a ruling. Each received the same favourable ruling as Morgan HR had received. The applicant ensured that these were dealt with in the section of the ATO that he controlled, and placed pressure upon Aivaliotes to issue favourable rulings, in accordance with views he said that he had already formed after due consideration of all relevant material. He took steps to ensure that these rulings were not subject to the ATO's usual audit and management procedures. The applicant's use of his position to ensure that favourable rulings were issued was dishonest.

23 There were other indicia of dishonesty which it is not necessary here to outline.

24 Prior to the committal proceedings, the applicant sought and was provided with particulars of the prosecution case. These were extensive and detailed. In a particular bearing the letter H, the Crown advised that it would allege that the applicant:

facilitated the issue of favourable (rulings) to taxpayers using the … scheme knowing the rulings were contrary to the view and policy of the ATO,

Later, in response to a further request for particulars, the Crown explicitly stated:

… it is not the prosecution case that the rulings were necessarily contrary to law, but they were issued contrary to the policy of the ATO and to the ATO view of the law in that the rulings did not require the payment of (fringe benefit tax).

The decision of the magistrate

25 Having considered the evidence, and very lengthy written submissions put before her by both parties, the magistrate undertook the twin exercises required by subs 41(2) and 41(6) of the Justices Act 1902 (NSW). She reviewed, briefly, some of the evidence and the arguments that had been addressed to her. She declared herself satisfied, in accordance with subs (2), that the evidence was capable of satisfying a jury beyond reasonable doubt that the applicant had committed each of the offences, although she reframed the s 70 charge by altering the date on which it was alleged the applicant had made the unauthorised publication. She gave the applicant the opportunity to put material before her but he declined to do so. Her Worship then briefly considered the additional matters relevant to the test imposed by subs 41(6) and reached the conclusion that there was a reasonable prospect that a jury would convict the applicant on each of the 3 charges. She accordingly committed him to this court for trial.

Grounds of the application

26 It is to be remembered that an appeal under s 104(3) of the Justices Act 1902 (NSW) lies to this court on a question of law only.

27 The grounds of the application are identified in the summons as follows:

(1) The learned Magistrate erred in law in finding that the evidence was capable of satisfying a jury beyond reasonable doubt that the Appellant (sic) defrauded the Commonwealth contrary to section 29D of the Crimes Act 1914 (Cth) and in particular erred in finding:
(i) That the Appellant's (sic) conduct caused imperilment to the Commonwealth's economic interest;

(ii) That the Appellant's (sic) conduct put the revenue of the Commonwealth "at risk";

(iii) That the Private Binding Rulings and Advance Opinions relied upon by the prosecution resulted in a "deferral of tax";

(iv) That the Appellant (sic) intended to imperil the Commonwealth's economic interest.

(2) The learned Magistrate erred in law in finding that the evidence was capable of satisfying a jury beyond reasonable doubt that at the time he was a Commonwealth officer, the Appellant (sic) published to a person to whom he was not authorised to publish, documents which came into his possession by virtue of him being a Commonwealth officer and which it was not his duty to publish contrary to section 70(1) of the Crimes Act 1914 (Cth).

(3) The learned Magistrate erred in law in finding that the evidence was capable of satisfying a jury beyond reasonable doubt that the Appellant (sic) had committed an offence of bribery and corruption of a Commonwealth officer contrary to section 72(2) of the Crimes Act 1914 (Cth).

28 The "questions involved" in the application are also listed in the summons, as follows:

(i) The meaning of "defrauding", and in particular the meaning of "imperilment" to the extent that those expressions remain undefined by the High Court in Peters v The Queen (1998) 192 CLR 493; 38 ATR 142;

(ii) Whether the prosecution were obliged to prove that the Private Binding Rulings and Advance Opinions were contrary to law and/or the policy of the Australian Taxation Office in order to prove imperilment;

(iii) Whether it was incumbent upon the prosecution to prove by evidence actual loss or imperilment to the revenue;

(iv) Whether there was evidence which was capable of proving that the Private Binding Rulings or Advance Opinions were contrary to law and/or the policy of the Australian Taxation Office in order to prove imperilment;

(v) Whether a deferral of tax in the sense argued by the prosecution could constitute imperilment;

(vi) Whether there was evidence upon which the Magistrate could conclude that the Private Binding Rulings and Advance Opinions resulted in a deferral of tax or whether such a consequence could be inferred as a matter of law;

(vii) Whether it was necessary to prove an intention to imperil and, if so, whether there was evidence of such an intention;

(viii) Whether the evidence was capable of proving that the Appellant (sic) did agree to receive a benefit for himself on an understanding that the exercise by him of his duty as a Commonwealth officer would be affected contrary to section 72(2) of the Crimes Act 1914 (Cth);

(ix) Whether the evidence was capable of proving that the Appellant (sic) was a Commonwealth officer at the time he published to a person to whom he was not authorised to publish, documents which came into his possession by virtue of him being a Commonwealth officer and which it was not (sic) his duty to publish, contrary to section of the (sic) 70(1) of the Crimes Act 1914 (Cth).

The s 29D charge

29 There is not the slightest doubt that, if the facts alleged by the prosecution are proven, the applicant was guilty of impropriety in his employment in a gross degree. The question is whether, if those facts are proven, they are sufficient to prove that his conduct is capable of amounting to defrauding the Commonwealth within the meaning of s 29D. If it is capable of amounting to defrauding the Commonwealth within the section, it will be a question for the jury whether it in fact does so. There is some significance in the manner in which the charge is particularised, that is the allegation made by the Crown is that the applicant defrauded the Commonwealth by "assisting taxpayers to avoid the payment of tax".

30 Both parties accepted that the question of "defrauding" is to be determined by reference to the decision of the High Court in Peters v The Queen (1998) 192 CLR 493 at 508; 38 ATR 142 at 150. In the joint judgment of Toohey and Gaudron JJ the following passage appears:

As has already been pointed out, there are difficulties in attempting an exhaustive statement of what is involved in the notion of defrauding or in the offence of conspiracy to defraud. Ordinarily, however, fraud involves the intentional creation of a position in which one person deprives another of money or property or puts the money or property of that other person at risk or prejudicially affects that person in relation to "some lawful right, interest, opportunity or advantage", knowing that he or she has no right to deprive that person of that money or property or to prejudice his or her interests. (Internal references omitted.)

31 The notion of "imperilment", to which reference is made in the stated grounds of the application, has been taken from the judgments in Peters.

32 Peters involved an allegation of a conspiracy to defraud and many of the relevant passages are directed to an offence of that kind. However, except where they are concerned specifically with concepts of conspiracy, they are applicable to a consideration of the meaning of "defrauding". McHugh J wrote:

Although most cases of conspiracy to defraud involve an agreement to use dishonest means which has the effect of inflicting economic loss on a third party, the infliction of such loss is not an essential element of the offence. It is sufficient that the conspirators intended to obtain some advantage for themselves by putting another person's property at risk or depriving another person of a lawful opportunity to obtain or protect property. It is also well established that a conspiracy to defraud may be established if the defendants agree to deceive a person into acting or refraining from acting contrary to his or her public duty. (At CLR 525; ATR 162-63, internal references omitted.)

33 A little later, his Honour said:

In some cases, it may be sufficient that the object of the agreement to use dishonest means concerns a non-economic right or interest of a person such as private reputation or personal status. But in the vast majority of cases, conspiracies to defraud concern rights or interests having an economic value. (At CLR 525; ATR 163.)

34 The passage in quotation marks in the first passage extracted above was drawn from the judgment of King CJ in R v Kastratovic (1985) 42 SASR 59. What King CJ there said was:

The essential notion of defrauding is dishonestly depriving some person of money or property, or depriving him of, or prejudicially affecting him in relation to, some lawful right, interest, opportunity or advantage which he possesses. (At 62.)

35 A little later, his Honour said:

I think that the intent to deprive a person of the opportunity of having a genuine dispute or a reasonably available defence properly adjudicated upon would be an intent to defraud for the purpose of the offences based upon obtaining money or property by dishonest or forbidden means. An intent by dishonest means to convince the supposed debtor that a defence which the accused believes the debtor to consider to be reasonably available to him, is without merit, and thereby to procure the payment of the claim would be an intent to defraud notwithstanding that the accused might genuinely believe that the defence should not be sustained and that his claim is just. (At 65.)

36 This passage was adopted by Toohey and Gaudron JJ in Peters at CLR 525; ATR 149, where their Honours said:

To take an example given by King CJ in Kastratovic, someone who believes that a person is indebted to him and that a defence which that person is genuinely asserting is without merit, nevertheless has an intention to defraud if he intends by dishonest means to deprive that other person of the opportunity of having the matter adjudicated.

37 The use of dishonest means is an essential element of the offence of defrauding. It is not, here, necessary to take time over this issue, because, on behalf of the applicant, it was conceded that there was evidence on which a jury might find that the applicant used dishonest means. This included the plain conflict of interest inherent in his involvement in the rulings on schemes in which he was a participant, and had an active, personal, and financial interest; the evidence of his attempts to conceal the rulings; and the evidence of pressure he had placed upon Aivaliotes to make rulings in accordance with this own stated views, and that furthered his own interests. There was also some evidence that, while the applicant was ensuring that taxpayers who had purchased the Morgan HR Pty Ltd scheme received favourable rulings, others with similar schemes or plans received either unfavourable rulings, or were declined rulings; and there was evidence that the applicant was actively promoting a view within the ATO that schemes along the lines of that under consideration failed to avoid fringe benefits tax.

38 A distinction is to be drawn between the element of dishonest means, which is essential to a charge under s 29D, and the element of defrauding as explained in Peters. What is in issue for the purpose of the present application is whether there was evidence sufficient to establish to the satisfaction of a jury to the requisite degree that the money or property of the Commonwealth was put at risk, prejudicially affected, or "imperilled". Plainly enough, if the prosecution could show that the rulings were contrary to law, and (by reason of the Commissioner's recognition of their binding nature) relieved the person using them from an obligation to pay tax that, on a proper construction of the relevant legislation, was properly payable, that would, in the circumstances, amount to defrauding the Commonwealth (assuming, of course, that "dishonest means" was also proved). If there were evidence upon which a jury could find that legally incorrect rulings, favourable to the persons seeking them, had been given, (again assuming evidence of "dishonest means") that would be sufficient to justify the applicant's committal for trial on the s 29D count. But that is not how the Crown put its case. At committal the Crown relied upon, and on a trial proposes to rely upon, the convention observed by the Commissioner of the binding effect of the rulings. The consequence of his observance of that convention is that the Commissioner was deprived of the opportunity to test, by adjudication in a court, the correctness of the views expressed in the rulings. Once the ruling was given, the employer and employees were safe from the imposition of taxation of the kinds the subject of the rulings. This was so whether or not curial adjudication of the issues involved would have resulted in a favourable decision for the taxpayer. What the Crown proposes to prove was "imperilled" by the applicant's dishonest conduct was its opportunity to litigate the effectiveness of the schemes or plans.

39 Initially, senior counsel for the Crown resisted any suggestion that it would be necessary also for the Crown to establish that the rulings were at least arguably wrong. However, after consideration, as I understood his ultimate position, it was that such evidence is available, although he never accepted that it would be necessary or even relevant to adduce such evidence.

The issues of law involved

40 Leave to appeal under s 104(3) will be granted only on a ground that involves a question of law alone. I have set out above the grounds upon which it is said, on behalf of the applicant, that the magistrate made errors of law in her decision to commit the applicant. The principal issue of law involved concerns whether, and if so, the extent to which, it will be necessary for the Crown to establish the invalidity or incorrectness of the rulings.

41 The Crown at all times set its face against attempting to demonstrate that the rulings were wrong in law and that the Commonwealth was, therefore, actually deprived of amounts of tax properly due and payable. It seems that the questions involved in the assessment of the efficacy of the schemes may have been finely balanced, and were questions on which reasonable and informed minds might have differed - and, indeed, upon which minds within the ATO did differ. A delegate of the Commissioner exercising the Pt 1VAA function may reasonably have concluded that, on their implementation, fringe benefits or other taxes were not payable - that is, that the schemes successfully avoided taxation. If this view were correct, no tax would have been payable. Another delegate may equally reasonably have come to a contrary view. If that view were correct, the companies would have been liable to tax. Indeed, mention was made of some evidence (to which I was not taken in detail) to the effect that a commonly held view in the ATO was that schemes of the type the subject of the rulings were effective legitimately to avoid the imposition of taxation, but that later another officer prepared a position paper expounding the opposite conclusion.

42 It was, presumably, for this reason that the Crown adopted the position set out in particular H. That is, the Crown recognised that it would have difficulty in establishing that the rulings were incorrect and that as a result the Commonwealth was deprived of taxation to which it was entitled. At that time it sought only to prove that the rulings facilitated by the applicant were contrary to "the view and policy" of the ATO. The consequence of this would be that once rulings were made, the Commonwealth had lost the opportunity to test the efficacy of the schemes. However, it seems that it subsequently resiled even from the position stated in particular H. The most it alleged, ultimately, was that the applicant published or acquiesced in rulings that were contrary to his own stated view of the law.

43 Both at committal, and in this court, the Crown adopted the position that Pt IVAA rulings, favourable to the person seeking the ruling, "had an impact" upon the revenue, and conferred an advantage on the taxpayer and a corresponding disadvantage on the Commonwealth. This represents a fundamental misunderstanding of the purpose and (proper) operation of Pt IVAA. It assumes that a favourable ruling does or might excuse the taxpayer from the payment of tax otherwise payable. As I have noted above, that is not, as I understand it, the purpose of Pt IVAA. The purpose of the Part is to allow the taxpayer to know if the Commissioner considers that under the arrangements he/she/it has put in place, tax is or will become payable. The rulings are a declaration of the law as interpreted by (or on behalf of) the Commissioner as applied to the set of circumstances stated in the application. The mere fact that a ruling is to the effect that, in the particular circumstances outlined in the application for the ruling, tax is not payable, does not confer any benefit except certainty on the taxpayer - unless the ruling is, or is arguably, wrong. It cannot be said that a ruling which correctly acknowledges that, in a particular set of circumstances, a taxpayer is not liable for the imposition of a particular tax, confers any benefit upon that taxpayer, or any corresponding disadvantage upon the Commonwealth.

44 In the absence of any ruling of a binding character, the Commissioner would have had the opportunity of obtaining an adjudication by the courts on the question of whether tax was payable in the relevant circumstances. Once, however, a favourable ruling had been given, its binding character deprived the Commissioner of that opportunity. What he was "defrauded" of, on the Crown case, was the opportunity to have the scheme subjected to curial adjudication. Implicit in this analysis is the notion that the schemes were, at least arguably, ineffective; the corollary of which is that the rulings were, at least arguably, incorrect. If the last proposition were not correct - that is, if the rulings were incontrovertibly correct, or if the correctness was not, as the Crown would have it, in question - the Commissioner would have been deprived only of a right to litigate that was of no possible value. I see nothing in Peters or Kastratovic that envisages defrauding where the subject of the alleged fraud is of no value. This, it seems to me, is consistent with what was said by McHugh J in Peters at CLR 525; ATR 163. I do not mean to imply that it is necessary that the prosecution be able to ascribe a monetary value to what is lost: McHugh J envisaged injury to reputation or personal status as being possibly the subject of a fraud. But it is necessary that the thing of which the Commonwealth is defrauded have some value. I do not see that a right to litigate a hopeless case is a right that has any value. In order to make out a case of defrauding the Commonwealth under s 29D, it was, therefore, essential to the prosecution case that tax was arguably payable under the circumstances detailed in the applications for ruling and that, by corollary, the rulings were arguably incorrect. That would necessarily mean that the right or opportunity to litigate the efficacy of the schemes was a right or opportunity having some value.

45 That raises one of the points made on behalf of the applicant in written submissions. That is that his counsel were, as a result of successful objection by counsel for the prosecution, prevented from cross-examining officers of the ATO on the correctness of the rulings. The cross-examination was rejected, after argument, on the basis that it was irrelevant. For the reasons I have given above I do not think it was. Rejection of the cross-examination demonstrates error of law. (Rejection of the cross-examination was not put on the applicant's behalf as a specific error of law, but, rather as illustrative of the fundamental error of law upon which reliance was placed.)

46 On behalf of the applicant it was also argued that it was incumbent on the prosecution to prove that there existed an obligation to pay tax and an avoidance of that obligation by a taxpayer. This was not because of the terminology of s 29D, but because of the terminology of the charge levelled against the applicant. (Of course, in the context of this application, it is only necessary that the prosecution adduce evidence which, if accepted by a jury, would have such a result. But that is a detail.) The proof of the charge under s 29D, having regard to Peters, does not necessarily require proof of an obligation to pay tax and an avoidance of that obligation. But that is not the basis on which the submission was put. The submission related to the formulation of the charge, firstly as it was put before the magistrate, and secondly as framed for the purpose of committing the applicant for trial. The charge as framed and on which the applicant was committed for trial does specify that the applicant assisted taxpayers to avoid the payment of tax. Cross-examination of the ATO officers on the correctness of the rulings was directly relevant to this point.

47 Having regard to the concept of defrauding as explained in Peters, it would be open to the Crown, in a charge under s 29D, to set out to prove (as it proposes to do) only that the Commonwealth had, by the applicant's dishonest actions, been deprived of the right or opportunity to litigate the efficacy in avoiding taxation of the schemes or plans. Providing it could establish, also, that it had some prospects of succeeding in such litigation, that would, in my view, be sufficient to establish fraud within the meaning of s 29D.

48 But that ignores the manner in which the s 29D charge is framed. The Crown has at all times formulated the charge as defrauding by "assisting taxpayers to avoid the payment of tax".

49 I am satisfied that, in order to make out that charge - as framed - it will be necessary that the Crown establish that tax was in fact payable, and was in fact avoided by the applicant's dishonest actions. The charge as framed is not apt to encompass, as the subject matter of the fraud - that is, the right or opportunity or valuable thing of which the Commonwealth was allegedly defrauded - the right or opportunity to litigate the liability to taxation of the person seeking the rulings.

50 During the course of argument, senior counsel for the Commonwealth specifically addressed this question. Referring to the formulation and particularisation of the charge, he put considerable store on the inclusion of the word "to" in the final phrase of the charge. It is as well to reproduce the submission that was made. It was:

… in so far as the particulars in the charge alleged that the defendant … assisted taxpayers to avoid the payment of tax, the word "to" is critical because we do not allege that the defendant assisted taxpayers avoid the payment of tax. So we have never alleged that there was an actual avoiding of tax as part of the particulars. It was always assisting them to avoid the payment of tax.

51 The distinction is not, in my opinion, well made. The word "to" adds nothing to the meaning of the charge. If, as I suspect, senior counsel intended to suggest that the allegation is that the applicant's dishonest actions assisted taxpayers in an (unfulfilled) intention or endeavour to avoid the incidence of taxation, the charge is not felicitously framed to reflect that allegation.

52 Further, while I have concluded above that rejection of the cross-examination in relation to the validity of the rulings demonstrated an error of law where the allegation pursued was that the Commonwealth was deprived of the right or opportunity to test the efficacy of the scheme, the error is more significant where, as I have also concluded, the charge is framed in such a way as to require proof of actual loss.

53 In the absence of evidence that the rulings were incorrect, and that tax would have been payable in the circumstances outlined in the applications, it was not open to the magistrate to commit the applicant for trial on the s 29D charge as formulated. To do so constituted error of law.

54 In the absence of evidence that the rulings were arguably incorrect and that tax may have been payable in the circumstances outlined in the applications, it would not have been open to the magistrate to commit the applicant for trial on a charge under s 29D that asserted, not that the applicant assisted taxpayers to avoid the payment of tax, but that the applicant's dishonest conduct deprived the Commissioner of the opportunity to litigate the liability of the taxpayers to tax. If the Crown wishes to pursue its case on this basis, it will be necessary that it reframe the charge. The charge as presently framed, in my view, requires proof of actual loss to the revenue, by the avoidance of tax properly payable.

55 So far as the magistrate's reasons for her decision are concerned, senior counsel was only able to point to one explicit asserted error of law. This was contained in a passage which reads:

The prosecution's position about the schemes is that tax deferred puts the revenue at risk.

56 The submission made in relation to this passage was that it was irrelevant, as there was no evidence of any deferral of taxation. This may be correct, but, so far as I am able to discern from the material before me, the submission was made by the prosecution, and accepted by the magistrate, in the context of an argument advanced on behalf of the applicant, to the effect that, while the rulings had the effect that fringe benefits tax was not payable, it may well also have been the case that, after a period of time, capital gains tax would be leviable and that this would have a balancing effect in relation to the fringe benefits tax not collected. It seems to me that the initial submission (made on behalf of the applicant) was quite irrelevant, and it was by this means that the notion of deferral of taxation was introduced. This was not a case concerning deferral or delay in the payment of taxation. However, if indeed it was an error of law on the part of the magistrate to make reference to the submission, it being irrelevant, it was not an error that had any operative effect upon her decision. It is not correct to assert, as is implied in the grounds of the application, that the magistrate found that the rulings resulted in a deferral of tax. That is not what she said, and she did not even go so far as to state that there was evidence which could satisfy a jury beyond reasonable doubt that payment of tax had been deferred.

57 There is one final matter to be addressed in relation to this charge. This was raised on behalf of the applicant only in oral submissions. It was asserted that there was no evidence before the magistrate that any of the schemes had in fact been implemented, or that any of the purchasers of the schemes had in fact taken any steps towards implementation. Senior counsel for the Crown did not point to any evidence in contradiction of this assertion.

58 This argument has caused me considerable difficulty. If it is correct that there is no evidence of implementation, the Crown case has to be seen in a different light again. The interest of the Commonwealth put at risk by the applicant's dishonest conduct would be the opportunity to litigate the schemes if and when they were implemented. There is a rather uncomfortable remoteness about this concept; however, I think it would be open to a jury to conclude that a favourable ruling did indeed imperil the interests of the Commonwealth in that it constitutes one early step in what might be the implementation of a scheme. Indeed, a favourable ruling would, one would expect, encourage a taxpayer to put into effect the arrangements proposed - and to set the taxpayer on the way to the possible avoidance of tax. The same remarks about the possible incorrectness of the rulings apply to this formulation of the case also.

The s 70(1) charge

59 The point taken in relation to the s 70(1) charge can be stated with brevity and simplicity. As noted in para 8 above, the document the subject of the charge which the applicant was alleged to have published in contravention of the subsection, was a client list. The person to whom it was alleged to have been published was Richard Morgan, who was the witness who gave the relevant evidence. According to the magistrate's reasons, Mr Morgan had given information in a statement about the place and date at which he claimed to have been given the document, but when cross-examined, his recollection of these matters failed him. The point, therefore, is that the evidence was not capable of proving that the applicant was a Commonwealth officer at the time of the alleged publication. If that were so, then it was not open to the magistrate to commit the applicant on this charge.

60 Although there was no direct evidence to this effect, I assume that Mr Morgan's statement was before the magistrate in accordance with Pt 4, Subdiv 7A of the Justices Act 1902 (NSW). The fact that he did not adhere to the statement in his oral evidence does not nullify the evidence given in that form. Accordingly, there having been evidence that, from the date specified by Mr Morgan in his statement (25 July 1998) the applicant was a Commonwealth officer, there was evidence on which it was appropriate to commit the applicant for trial.

The s 73(2) charge

61 By the third ground of the summons, the applicant challenges the magistrate's finding that the evidence is capable of satisfying a jury beyond reasonable doubt that he had committed an offence against s 73(2). The question involved is identified only as:

Whether the evidence was capable of proving that the appellant did agree to receive a benefit for himself on an understanding that the exercise by him of his duty as a Commonwealth officer would be affected contrary to s 73(2) of the Crimes Act 1914 (Cth).

62 The only written submission directed to this ground was as follows:

The allegation of the witness Morgan is that Petrolious (sic) was to be paid on the basis that Petroulias was the originator of the arrangement, the owner of the so-called intellectual property. Morgan also said he understood the arrangements were proper and legal. Morgan did not allege that the agreement at Campsie involved an understanding express or implied by Petroulias that his duty as a commonwealth (sic) Officer would be affected.

63 In response, the Crown relies upon "the compelling circumstantial case" and inferences a jury could legitimately draw from the whole of the evidence concerning an understanding that the applicant's performance of his function would be influenced or affected. I am satisfied that such a case is open and that there was evidence before the magistrate which justified the applicant's committal for trial on this charge.

Leave to appeal

64 An appeal under s 104(3) of the Justices Act 1902 (NSW) lies by leave only. I have previously observed that, pursuant to s 104(1)(b), leave would not ordinarily be granted merely because error may be demonstrated, but that something additional is required: State Rail Authority of NSW v Smith [2000] NSWSC 334, unreported, 19 April 2000. In this case I have concluded that there were errors of law but, having regard to the view earlier expressed, to which I adhere, that does not conclude the issue of leave. The Crown argued that, even if error of law is demonstrated, leave should be refused. It referred to the many authorities which indicate that the courts resist appellate interference in the criminal process: see, for example, Lamb v Moss (1983) 76 FLR 296; 49 ALR 533; Yates v Wilson (1989) 168 CLR 338; Castles v Briot (1989) 19 ALD 153. I accept that there is a reluctance to intervene during the interlocutory stages of the criminal process. However, s 104(3) does envisage such interference in an appropriate set of circumstances. I have already alluded to the extent of the documentary material and oral evidence that was put before the magistrate on the committal proceedings. I was told that a trial will be expected to be lengthy. This is obviously a trial of considerable significance - of a former senior officer of the ATO, charged with breaches of his duty to the ATO and to the Commonwealth. There is a complexity about the s 29D charge which is manifest from what I have said above. It would be quite wrong, in my opinion, to allow the matter to go a lengthy and expensive trial on the basis of identified errors of law. This is quintessentially a case of the kind to which s 104(3) was directed. Accordingly, I propose to grant leave to appeal.

Consequential orders

65 The conclusions I have reached make it necessary to consider the appropriate orders that follow. Section 109 of the Justices Act 1902 (NSW) sets out the orders that may be made. The section is in the following terms:

The Supreme Court may, after hearing an appeal, determine the appeal by dismissing the appeal or by doing any one or more of the following:
(a) confirming, quashing, setting aside or varying the conviction, order or sentence appealed against or any part of it,

(b) increasing or reducing the sentence appealed against,

(c) making such other orders as it thinks just,

(d) remitting the matter to the Magistrate who made the conviction or order, or imposed the sentence, to hear and determine the matter of the appeal.

66 I do not think it appropriate to set aside the order committing the applicant for trial on the s 29D count. However, I am conscious that, because of the erroneous view taken of the need for the Crown to prove that the rulings were, or were arguably, incorrect, a relevant issue has not been explored at committal. It may be that this deficiency can be rectified, either by remitting the matter to the magistrate for the purpose of permitting further cross-examination of witnesses; that may be remedied by a procedure of the kind envisaged in Basha v R (1989) 39 A Crim R 337.

67 I propose to give the parties an opportunity to be heard on what orders should be made as a result of the conclusion I have stated above.