JUDGMENT No. Stk. / 21. , CATCHWORDS A Administrative Law - ee under Administrative Decisions (Judici aah Review) Act 1977 seeking order of review of decisions stipendiary magistrate - committal proceedings before magistrate - decisions by magistrate that there was sufficient evidence to caution accused under State law - appeal from decisions of trial Judge setting aside decisions of magistrate - whether decisions of magistrate made pursuant to Magistrates (Summary Proceedings) Act 1975 (Vic) were decisions to which the Administrative Decisions (Judicial Review) Act applies. Income Tax - implementation of tax minimization scheme - when tax becomes due and payable - whether Commonwealth has right to tax pending final determination of objection or appeal - whether necessary for magistrate to determine efficacy of scheme. Conspiracy to defraud the Commonwealth - conspiracy to prevent or defeat the execution or enforcement of a law of the Commonwealth - history and nature of common law conspiracy. Liability of a barrister when giving advice in professional Capacity. Administrative Decisions (Judicial Review) Act 1977 ss.3,5,9 Bankruptcy Act 1966 s.40(1)(c) Crimes Act 1914 ss.7A,86(1)(b)(e) Federal Court Rules 0.52 r.22 Income Tax Assessment Act 1936 ss.6,17,78(1) (a) (xxvii) ,166,174,177,201,204,206,208,209 Judiciary Act 1903 5.68 Magistrates (Summary Proceedings) Act 1975 (Vic) s.56(1)(b) Sales Tax Assessment Act (No. 3) 1930 RICHARD DENIS 0'DONOVAN v. JO MICHELE VER AND OTHERS V. Nos. G 86 and 87 of 1987 FOX, NORTHROP AND PINCUS JJ. 15 OCTOBER 1987 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) V. No. G 86 of 1987 ) GENERAL DIVISTON ) ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN : RICHARD DENIS 0' DONOVAN Appellant and JOHN MICHELE VEREKER and OTHERS Respondents COURT: FOX, NORTHROP AND PINCUS JJ. DATE : 15 OCTOBER 1987 PLACE: MELBOURNE MINUTES OF ORDER THE COURT ORDERS THAT: - 1. The appeal be allowed in part with costs by varying Order 2 of the orders made by the trial Judge hy deleting therefrom the words "in accordance with the reasons for judgment herein" and substituting the words "according to law." 2. The remaining orders of the trial Judge be affirmed. (Settlement and entry of orders is dealt with in 0.36 of the Rules of Court.) IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY yo.«6 V. No. G 87 of 1987 ) GENERAL DIVISION ) ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN: RICHARD DENIS 0' DONOVAN Appellant and NEIL HARRY MARK FORSYTH Respondent COURT: FOX, NORTHROP AND PINCUS JJ. DATE : 15 OCTOBER 1987 PLACE: MELBOURNE MINUTES OF ORDER THE COURT ORDERS THAT: ~ 1. The appeal be allowed in part with costs by varying Order 2 of the orders made by the trial Judge by deleting therefrom the words "1n accordance with the reasons for judgment herein" and substituting the words "according to law." 2. The remaining orders of the trial Judge be affirmed. 3. The cross-appeal be dismissed with costs. (Settlement and entry of orders is dealt with in 0.36 of the Rules of Court.) IN FED, co QF AUSTRALIA ) ) VICTORIA DISTRI ISTRY ) NO. VG 86 OF 1987 ) ) e G VIST ON APPEAL from a single judge of the Federal Court of Australia BETWEEN : RICHARD DENIS 0' DONOVAN Appellant AND: JOHN MICHELE VEREKER, TAN DOUGLAS SWANSSON, JOHN TERENCE BROWN, LESLIE EDWARD LITHGOW, and STEPHEN GERARD CONNELL Respondents NO. VG 87 OF 1987 BETWEEN : RICHARD DENIS 0' DONOVAN Appellant AND: NEIL HARRY MARK FORSYTH Respondent AND BETWEEN: NEIL HARRY MARK FORSYTH Cross~Appellant AND: RICHARD DENIS O'DONOVAN Cross-Respondent FOX, NORTHROP AND PINCUS JJ. DATE: 15 OCTOBER 1987 PLACE: MELBOURNE SONS FOR JUDGMENT FOX J. I have read the reasons of Northrop J. in these appeals and cross-appeal. He has set out the facts in some detail and dealt at length with the submissions made. I had myself produced a draft judgment but I do not think that there should be three full judgments, and will therefore content myself with adopting, with aratitude, his Honour's statement of the facts and relevant law and of saving that I agree in substance with what he has said. IT make some observations. In the first place I find that in a case such as the present the law as disclosed in Lamb v. Moss (1983) 76 F.L.R. 296 is apt to provide an undue and unsatisfactory interference with the administrative and judicial processes of the State in which the trial. if there is to bea trial, will take place. I would myself have declined in the exercise of the Court's discretion to entertain the present applications. However, the learned judge before whom they first came did proceed to hear them, and we must now consider his decision. The matter thought by his Honour to be of particular moment was the magistrate's reliance on what were called "interim rights". I understand these to be rights of the Commissioner to issue notices of assessment and recover tax even before their correctness is determined finally by a court or tribunal. I do not know that the magistrate relied upon the concept to the degree claimed by the present respondents, but in any event 1t was 'turned to in answer to a submission that there could be no intention to defraud unless some ascertained money sum (as on an assessment) was already involved. His Honour was of the view that the magistrate should determine the income tax liability himself. I do not think this is correct. Ali the magistrate had to find was evidence supporting a finding of a dishonest intention to deprive the Commissioner (acting for the Commonwealth) of such tax as might be assessed. In considering this matter he was entitled to look at the circumstances. and see what inferences could and should be draw. There were manv aspects, including not least of all the alleged "gifts", but it was clear from the evidence. as he saw it, that the participants themselves sawa clear risk that the CYP companies would be assessed, and correctly so. I would not therefore regard the alleged reliance on "interim rights" as meaningful, or such as to require any re-consideration by the maqistrate. The case of Forsyth is certainly arresting, because he was a Queen's Counsel at the time advising upon taxation, a subject in which he was expert. The learned magistrate (whose reasons occupy some 66 pages of the transcript, a burden which I suggest it is inadvisable and contrarv to the interests of justice to impose on a maqistrate hearing committal proceedings) dealt fully with his position, with due recognition of its favourable aspects. It is apparent that he took the view, which was supported by the evidence, that Forsyth was not simply advising whether the scheme was likely to be successful, or was lawful or unlawful. It was not simply a case of him being mistaken in his advice as to its lawfulness. There is evidence which supports the following findings of the maqistrate:- ' "a reasonable jury could be satisfied beyond reasonable doubt, in the absence of credible evidence from Mr Forsyth to explain and clear up the circumstances that: (iii) the advice given by Mr Forsyth in answer to question 6 of the Bexley brief, and the oral advice to Messrs Rice and Boerkamp that what MTS was doing was no way fraudulent and that they need not worry about criminal charges were not genuine opinions, but were given with the intent and purpose of persuading or encouraging Messrs Rice and Boerkamp to have the Bexley Corporation participate in the NIPAG scheme; I am satisfied that a reasonable jury could be satisfied bevond reasonable doubt that: (a) at the time of the Bexlev conference Mr Forsvth had actual knowledae of the essential elements and facts of the aaqreement which I have found that a reasonable jury could be satisfied was entered into bv Messrs Connell, Lithaow, Swansson, Vereker and Brown: (b) at the Bexley conference Mr Forsyth intended to persuade or encourage Messrs Rice and Boerkamp to have the Bexley Corporation participate in the NIPAG scheme and that, if Mr Forsyth did not thereby enter into the main agreement with Messrs Connell. Lithgow, Swansson., Vereker and Brown, he at least aided , abetted, counselled and procured them and MIS to carry out the unlawful agreement which I have previously stated could be found against them by a reasonable jury. As to whether Mr Forsvth's involvement through the Bexley conference involved dishonesty and dishonest means, I am satisfied that a reasonable jury could be satisfied beyond reasonable doubt that due to the general circumstances of the Bexley conference, the advice which Mr Forsvth qave at that conference, and his knowledge of the essential elements and facts of the aareement entered into by Messrs Connell, Lithgow, Swansson, Vereker and Brown, that there was dishonesty on the part of Mr Forsyth within the meaning of either the Ghosh or Salvo, Bonollo, Brow principles." The learned magistrate has yet to read the offences with which the respective defendants are to be charged (as to amendments see s.56(2) of the Magistrates (Summary Proceedings) Act 1975). The defendants may make statements (s.59) and, as I understand the practice, may give sworn evidence. 'There may or may not be committals. In my view the appeals should be allowed with costs, the orders of the learned trial fudge set aside. and in lieu thereof 4t should be ordered that the applications be dismissed with costs. The cross-appeal should be dismissed with costs. I certify that this and the four (4) preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Fox. Associate: S ot~_— Date: 15 October 1987 IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTO ISTRICT REGISTRY ) V. Nos. G 86 & 87 of 1987 ) ) GENERAL DIVISION ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA RICHARD DENIS 0' DONOVAN Appellant and JOHN MICHELE VEREKER and OTHERS Respondents COURT: FOX, NORTHROP AND PINCUS JJ. DATE : 15 OCTOBER 1987 PLACE: MELBOURNE REASONS FOR JUDGMENT NORTHROP J. These two appeals raise for consideration decisions made by Philip John Rodda, a stipendiary magistrate, ("the magistrate") on 23 June 1986 in proceedings being conducted by him being a preliminary hearing pursuant to the provisions of the Magistrates (Summary Proceedings) Act 1975 (Vic) ("the Summary Proceedings Act") in respect of informations for indictable offences contrary to the Crimes Act 1914 (Cth). Those proceedings are hereinafter called "the committal proceedings." Each of the respondents to these appeals had been charged by the appellant ("the informant") with the indictable offences and at the conclusion of the evidence against them, counsel on their behalf submitted to the magistrate that, in substance, there was insufficient evidence to support the charges. On 23 June 1986, the Magistrate announced that there was sufficient evidence before him to caution each of the respondents as required by Paragraph 56(1)(b) of the Summary Proceedings Act. At the same time the magistrate published his reasons for those decisions. The respondents Vereker, Swansson, Brown, Lithgow and Connell (hereinafter collectively called "the promotors"), as applicants, commenced proceedings in the Federal Court pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth), ("the Judicial Review Act") seeking an order of review of the decisions of the magistrate made on 23 June 1986. The magistrate and the informant were named as respondents to those proceedings. The respondent Forsyth, who is a Queen's Counsel, as applicant, likewise commenced proceedings seeking an order of review of the decisions with respect to him. These two proceedings came on for hearing before the Federal Court constituted by Jackson J..- The two proceedings were heard together. On 1 April 1987, the Court made identical orders in each proceeding, namely:- "1. The decisions of the first respondent (the magistrate) be set aside. 2. The matter be remitted to the first respondent for further hearing and determination in accordance with the reasons for judgment herein. * 3. The costs of this application be met by the second respondent (the informant)." At the same time, the Court published its reasons for judgment which applied to each proceeding before the Court. The informant appealed from the whole of each of those orders and the two appeals were heard together. By each notice of appeal, the informant is seeking an order:- "That the whole of the judgment appealed from be set aside and that the (promotors and Forsyth respectively) pay to the (informant) the costs of and incidental to this Appeal and the Application to Review the decision." There are deficiencies with respect to the orders sought and reference will be made later to this matter. In appeal V. No. G B7 of 1987, being the appeal in which Forsyth is the respondent, Forsyth has given notice of cross appeal. By that notice, Forsyth is seeking orders as follows:- "Ll. An order quashing or setting aside the said decision of (the magistrate). 2. An order that (Forsyth) be discharged out of custody as to the Informations before (the magistrate). 3. An order that (the informant) pay the costs of (Forsyth). 4. Such further or other orders, directions and relief as the Court shall deem fit." In the other appeal, V. No. G 86 of 1987, the promotors have not given any notice of cross appeal or notice of contention; see 0.52 r.22 of the Federal Court Rules. During the course of submissions, counsel for the promotors said he did not seek any variation of the order appealed from. Before considering questions of law, it is desirable that an outline of facts be set out. They relate to what has been called the "NIPAG" scheme. That scheme is extremely complex and it is not necessary to consider it in detail. The appeals concern the implementation of the Norfolk Island Public Art Gallery ("NIPAG") scheme, a tax minimization scheme, by a company known as Metropolitan Taxation Services ("MTS"). The promotors, other than Brown, were principals of MTS. Brown had effective control of the Norfolk Island Public Art Gallery. The scheme began to be implemented in 1979, following advice given by Forsyth, a barrister who specialises in taxation law. The steps in the scheme were as follows:- (a) The promotors of the scheme would procure persons who were willing to sell shares held by them in companies with both accumulated profits and current year profits ("CYP companies"). (b) Such shares would be purchased by "Q", a company controlled by MTS, for $900,000 (the figures used in detailing the scheme are the hypothetical figures adopted by Forsyth in his advice of 23 March 1979). (c) The cash at bank of the CYP company would be $1,000,000, so Q would actually purchase the shares at less than their true value. (d) The $1,000,000 would comprise $200,000 accumulated profits and $800,000 current year profits. The company would therefore have a potential taxable income of $800,000 in the year of income then incomplete. Pausing here, the vendor shareholders of the CYP companies would receive the $900,000 as a non-taxable capital gain, rather than a sum which is assessable income. Also, the actual business of the CYP company was not transferred to Q when the shares were sold. Q simply purchased the cash which the company had in hand at the date of the purchase. The business of the company was transferred to a new company with a substantially similar name and, presumably, the vendor shareholders would take up shares in the new company and continue to run the business as normal. (e) The $200,000 is immediately paid to Q by way of dividend. However, the $800,000, if declared as a dividend, would be subject to taxation at the company rate, and tax would therefore be assessed at approximately $400,000. Q has therefore paid $900,000 for a company whose assets are worth $1,000,000, but which are subject to a notional tax burden of $400,000. (f) It was therefore necessary to devise a method of dealing with the $800,000 so that it would not be subject to income tax. In the hands of Q this was to be achieved by the following steps:- (g) Q would sell the CYP company to P. for the nominal sum of $3, on the condition that P. agreed to cause the company to donate an agreed amount, namely $800,000, to the Norfolk Island Public Art Gallery. {h) By making such a donation to NIPAG, it was intended that P. would obtain a legitimate tax deduction for the entire $800,000, the Art Gallery being an institution, donations to which would be tax deductible pursuant to paragraph 78(1)(a)(xxvii) of the Income Tax Assessment Act 1936 (Cth) ("the Tax Act"). No tax would therefore be payable by the CYP company because it would achieve a lawful deduction of an amount equivalent to its taxable income. Pausing again, this would achieve the desired of having no tax payable on the $800,000. However, end the amount would be left in the hands of NIPAG. It was therefore necessary to get the money out of the hands of the Gallery and into the hands of the promotors. This achieved through the purchase and sale of artwork:- (1) It was anticipated that Q would purchase a painting for the small figure of $500. Q would then sell the painting to BS, an interposed entity acting in its capacity as trustee of an art acquisition trust, for $10 million. (J) BS would on-sell the painting to NIPAG for $10 million. Art was (k) (1) (m) (n) Prior to the sale by BS, Q makes an agreement with NIPAG that if NIPAG | purchases the painting for $10 million, Q will procure a gift of that amount to the Art Gallery (it would do so as a result of its agreement with P) or pay that sum itself. On the strength of this agreement, NIPAG purchases a painting worth $500 for $10 million. To enable it to make the purchase in the first Place, NIPAG receives $10 million by way of loan from an associate of MTS (probably from BS acting in its own capacity and not as a trustee), who, in turn, receives the money from Q. NIPAG therefore purchases the paintings from Q with money indirectly supplied to it by Q. The "gifts" received by NIPAG from the CYP companies would presumbly be utilized to repay the MTS associate and ultimately Q. The hypothetical gift payment was $800,000, whereas the artwork is purchased for $10 million - it would therefore be necessary for Q to purchase a sufficient number of CYP companies to ensure the donations equalled $10 million. Therefore, at the end of the day, it was intended that the scheme effectively achieve its three main aims, namely to give the vendor shareholders in the CYP companies a sum of money which could be characterised as a capital receipt; second, to reduce the taxable income of the CYP companies to nil and in so doing leave the companies with no assets; and third, to divest NIPAG of the $10 million and put it back into the hands of the promotors' companies without it having borne income tax. However, in the event that the Federal Commissioner disallowed the deductions, and the scheme did not achieve its ends, the assets of the CYP companies would have been stripped by virtue of them having no other assets after payment of the donations, and the Commissioner would not be able to recover any tax from the CYP companies. On 7 March 1979, Forsyth was briefed on behalf of MTS in respect of the NIPAG scheme and following discussions in conference, the scheme was set out in his advice dated 23 March 1979 in the terms outlined above but without the explanations and comments which have been added by me. On 31 May 1979, Forsyth attended what was described at the committal proceedings as the "Bexley Conference." Bexley Corporation (Aust.) Pty. Ltd. was a CYP company, and the vendor shareholders were concerned with the potential problems of the scheme. A conference was therefore arranged by MTS at which it was hoped that Forsyth would "sell" the scheme to the reluctant vendors. At the committal proceedings, Mr. Boerkamp, the company secretary of Bexley -~ 10 - Corporation, gave evidence that Forsyth said that what MTS was doing with Bexley was in no way fraudulent and that there was no need to worry about criminal charges. The Bexley conference assumed great importance in the context of the allegations of fraud made against Forsyth because according to the argument of counsel for the informant, the assurance given by Forsyth at the conference completed the process of making him criminally liable. One hundred and eighty-six companies were processed through the NIPAG scheme by 31 October 1979. The "donations" to the Art Gallery totalled $60 million, a sum equal to the current year profits of those companies. The paintings were purchased for $5,400 and sold to NIPAG for $60 million. In September 1984, the promotors were charged with offences under the Crimes Act, namely:- conspiracy to defraud the Commonwealth contrary to section 86(1)(e); and . conspiracy to prevent or defeat the execution or enforcement of a law of the Commonwealth of Australia, namely the Income Tax Assessment Act 1936 contrary to section 86(1)(b) of the Crimes Act. -~1ll- In July 1985, Forsyth was charged with the above two offences, and in addition with two further offences, namely:- . inciting, urging, aiding or encouraging others to conspire to defraud the Commonwealth contrary to 3.7A and 3.86(1)(e) of the Crimes Act; and inciting, urging, aiding or encouraging others to conspire to prevent or defeat the execution or enforcement of a law of the Commonwealth, namely the Income Tax Assessment Act 1936 in contravention of s.7A and paragraph 86(1)(b) of the Crimes Act. The committal proceedings against the promotors and Forsyth were heard together by the magistrate in the Magistrates Court at Melbourne. Paragraph 56(1)(b) of the Summary Proceedings Act provides that in committal proceedings, after the evidence for the prosecution is concluded, the justice (including, presumably, a stipendiary magistrate,) before whom the accused person is brought shall:- -12- "(b) if in the opinion of the justice (or if more justices than one are present if in the opinion of any one of those justices) the evidence is sufficient to ptt the accused person upon his trial for the indictable offence with which he is charged or if the evidence given for the prosecution raises a strong or probable presumption of the guilt of the accused person in respect of that charge - read the charge to him again and shall say to him these words or words to the like effect - 'Before asking you if you desire to plead guilty to this charge or make any answer thereto it is my duty to warn you that you are not obliged to plead or to make any answer at all. You have nothing to hope for from any promise of favour and nothing to fear from any threat which may have been held out to you to induce you to make any admission or confession of guilt; but whatever you say and, if you plead guilty, your plea, will be taken down in writing and may be used ag evidence upon your trial should you change your plea before sentence. If you Plead guilty you will forthwith be directed to be tried at the Supreme Court, (or, as the case may be, the County Court) at ...' The justice shall here name the Court at which the accused is to be tried if he pleads guilty and shall in addition say to the accused person 'Are you guilty or not guilty of the charge?'." The magistrate ruled that he was satisfied on both tests laid down in 3.56(1)(b) and accordingly he proposed to read the charges to the accused persons again and request them to plead to the charges. - 13 - One of the grounds of appeal contained in each of the notices of appeal in these two appeals was to the effect + that the decisions of the magistrate under paragraph 56(1)(b) of the Summary Proceedings Act were not decisions to which the provisions of the Judicial Review Act applied and that accordingly the applications under the Judicial Review Act should be struck out as being incompetent. During the hearing of these appeals, counsel for the informant abandoned this ground of appeal with respect to each appeal. Notwithstanding that abandonment, I desire to make some general observations with respect to that issue. On their face, the decisions of the magistrate made on 23 June 1986 are decisions made under a State enactment, namely the Summary Proceedings Act, and thus would not be decisions to which the Judicial Review Act applies; see definitions of "decision to which this Act applies" and "enactment" contained in 3.3 of that Act and s.5 of that Act. In Lamb v. Moss (1983) 49 A.L.R. 533, a Full Court of the Federal Court held that a decision of a magistrate similar to the decisions the subject of these appeals, was a decision "under an enactment" within the Judicial Review Act; see esp. pp. 559-64. In coming to that conclusion the Court held that the relevant enactment was the Judiciary Act 1903 (Cth) and in particular s.68 of that Act. In its reasoning, the Court, to some extent, relied upon the joint judgment of Bowen C.J. and Northrop J. in Parkes Rural Distributions Pty. Ltd. v. Glasgon (1983) 48 A.L.R. 601; see Lamb v. Moss at pp.563-4. -~ 14 - On 20 August 1984, after judgment had been given in Lamb v. Moss, the High Court upheld an appeal from the judgment in Glasson's Case; see Glasson v. Parkes Rural Distributions Pty. Ltd. (1984) 155 C.L.R. 234. At pp.240-1, the High Court comprising Gibbs C.J., Mason, Murphy, Wilson and Brennan JJ. expressed views which might lead to the need to reconsider the opinions expressed in Lamb v. Moss applicable to the issue of whether the decisions the subject of these appeals are decisions under an enactment under the Judicial Review Act. It is interesting to note that in both Connor v. Sankey C1976] 2 N.S.W.L.R. 570 and Sankey v. Whitlam (1978) 142 C.L.R. 1, proceedings had been commenced in the Supreme Court of New South Wales to review decisions made by a4 magistrate in committal proceedings with respect to charges brought under Commonwealth law, namely 3.86 of the Crimes Act. A nice question now arises whether, on the acceptance of the opinions expressed in Lamb v. Moss, s.9 of the Judicial Review Act deprives the Supreme Court of New South Wales of whatever jurisdiction it would otherwise have to make declarations affecting committal proceedings involving charges under Commonwealth laws. Normally a Full Court of the Federal Court is bound to follow an earlier decision of a Full Court; see Wood v. Lord Mayor, Councillors and Citizens of the City of Melbourne (1979) 41 F.L.R. 22, but in an appropriate case may reconsider an earlier decision; see per Northrop J. at -15- p.25.See also Pyneboard Pty. Ltd. v. Trade Practices Commission (1982) 57 F.L.R. 368 per Northrop, Deane and Fisher JJ. at p.371. In the present appeals, no submissions were made with respect to the correctness or otherwise of Lamb v. Moss and I express no opinion on that issue. However, I do draw attention to some of the difficulties arising from its application to decisions made in the course of committal proceedings. It is clearly established that normally it is not in the public interest to interfere with the normal course of criminal proceedings while they are being conducted. These Matters are discussed in Lamb v. Moss at pp.542-51. In addition, it must be remembered that if the promotors and Forsyth stand for trial, those proceedings will be heard in the Victorian State Courts and any appeal would be to the Pull Court of the Supreme Court of Victoria. In those circumstances, the State Courts and the Federal Court are not in the same hierarchy of courts with the result that any judgment of the Federal Court, whether constituted by a single Judge or by a Full Court, is not a binding authority on the court conducting the trial or the appeal court conducting an appeal from the orders of that court. If the opinion of the State Court differs from that of the Federal Court, the High Court would be the final arbiter of that difference. The doctrine of precedent is discussed in Viro v. The Queen (1978) 141 C.L.R. 88 and reference is made to what was said by Stephen J. at pp.129-30:- - 16 - , "The first duty of a court is to administer justice according to law. However in the case of an inferior court operating within a system where the doctrine of precedent applies, the existence of authority binding upon it determines for it what it must understand to be the law. It must accept the law to be as that precedent authority has declared it to be, whatever may be its own inclinations in the matter. The sanction implicit in the doctrine of precedent is simple and effective: if an inferior court fails to observe the doctrine the superior court will correct its decision on appeal. Thus the existence of an appeal is inherent in and essential to the doctrine. The position of a final court of appeal, its decisions subject to no appeal to a court superior to it, is otherwise. It too must administer justice according to law; as Isaacs J. said in Australian Agricultural Co. Vv. Federated Engine-Drivers' and Firemen' s Association of Australasia (1913) 17 C.L.R. 261, at p.278 'our sworn loyaity is to the law itself'. But it may neither surrender, nor be relieved of, its responsibility to find what is the law by any involuntary adoption of the decisions of any other court. It may impose upon itself a rule that it will accept as absolute the binding force of its own past decisions, a course which, for the several reasons referred to by Dixon J. in Attorney-General (N.S.W.) v. Perpetual Trustee Co. Ltd. (1952) 85 C.L.R. 237, at p.244 the High Court has not done. Subject only to that possibility, it must otherwise wholly accept the responsibility of itself declaring what it regards to be the law, even if the views of other tribunals, however respected, are to a contrary effect. Their views will, of course, be of great force in the formation of its own conclusion but at the end of the day what must prevail must be its own conclusion." See also the differences of opinion expressed in R. v. Parsons £19833 2 V.R. 499 with respect to whether State courts should follow decisions of a court in another State on a Commonwealth statute without considering the correctness of the decision of that court. - 17 - Apart from submissions directed to whether the trial Judge should have exercised his discretion to make an . order of review with respect to the decisions of the magistrate, these matters were not pursued at the hearing of these appeals. Accordingly, this Court should follow Lamb v. Moss as being a binding authority. In doing this, attention is directed to what the Court, constituted by Bowen C.J., Sheppard and Fitzgerald JJ., after dismissing the objections to competency of the application for an order of review and stating that the application should be heard by the Court constituted by a single Judge, said at p.564:- "Further, the judge to whom the proceedings are remitted will have a discretion to refuse relief as we have pointed out. The exercise of that discretion will not necessarily call for a full investigation of the merits: see Ward v. Williams (1955) 92 CLR 496 at 514. In our opinion, the authorities referred to above provide a sound guide with respect to the principles to be applied. The power to make an order of review under the Act in respect of committal proceedings should be exercised only in most exceptional cases, especially in respect of a decision in the course of proceedings." In his reasons for judgment, Jackson J. referred to Lamb v. Moss and the fact that the power to make an order to review in cases similar to the present should be exercised "only in most exceptional cases." His Honour then identified one matter which, in his opinion, gave rise to exceptional circumstances requiring him to consider whether the magistrate was in such error as to justify the Court to -~ 18 - exercise its power to make an order of review. This matter was identified as the "interim rights" approach and his Honour said of it:- ",.. there is one argument which has been advanced in both cases, and which if correct goes to the whole of the manner in which the (magistrate) approached the issues before hin. Because the error, if it was such, made by the (magistrate) would be fundamental, I think it is appropriate - bearing in mind the observations which I have earlier quoted from Lamb v. Moss (supra) - to enter upon the question of the correctness of the argument. Compare Murphy v. Director of Public Prosecutions (1985) 60 A.L.R. 299 at 304." The "interim rights" approach was described by his Honour as follows: - "What is meant by that expression for this purpose is that the (magistrate) did not enter upon the question whether the NIPAG scheme was or was not efficacious to obtain allowable deductions for the companies making the donations - in which case the companies (the CYP companies) would have no taxable income for the year in question - but rather proceeded on the basis that whether or not the NIPAG scheme was efficacious in the sense to which I have referred, its implementation had the consequence that if the Commissioner of Taxation were to assess income tax onthe basis that the NIPAG scheme was not so efficacious, and to insist on payment of the tax so assessed notwithstanding any pending objection, review or appeal, he would be unable to obtain payment because the company would have no funds with which to pay it." That description can be amplified. Under 3.17 of the Tax Act, income tax is levied and paid in each tax year commencing on 1 July upon the taxable income derived during the year of income by any person. Under s.166, the Commissioner of Taxation is required to make an assessment of - 19 - the amount of the taxable income of the taxpayer and of the amount of the tax payable thereon. In this context, the word "assessment" means the ascertainment of the amount of taxable income and of the tax payable thereon; see the definition of the word "assessment" in sub-section 6(1) of the Tax Act. Essentially the assessment comprises a calculation by the Commissioner exercising all the powers conferred upon him by the Tax Act. After an assessment is made, the Commissioner is required by 3.174 to give notice thereof in writing to the person liable to pay the tax. Part V of the Tax Act contains provisions relating to objections to and appeals from assessments and provides a scheme by which those objections may be determined by courts of law with the High Court being the final court of appeal. Part VI of the Tax Act contains provisions relating to the collection and recovery of tax. Under 3.204, income tax assessed is due and payable by the person liable to pay the tax on a date calculated in accordance with that section. When tax becomes due and payable it becomes a debt due to the Commonwealth and payable to the Commissioner, see 3.208; and any tax unpaid may be sued for and recovered in any court of competent jurisdiction by the Commissioner suing in his official name; see 3.209. The provisions of 3.177 should be noted. Under s.206, the Commissioner is empowered to grant an extension of time for payment of tax and in such a case the tax shall be due and payable according to the terms of the extension. Under 3.201, the fact that an appeal or reference is pending under Part V of the Tax Act does not affect the assessment the subject of the appeal or reference and income tax may be - 20 - recovered on the assessment as if no appeal or reference were pending. If the NIPAG scheme was efficacious in the sense that the payment made by a CYP company to NIPAG was, in due course, held to be a gift made by the taxpayer company to a public art gallery under paragraph 78(1)(xxvii) of the Tax Act that company would have had no taxable income and thus would not be liable to pay any income tax. Before the magistrate, the then counsel for the informant, contended that the respondents knew that the Commissioner would not allow the deductions under paragraph 78(1)(xxvii), that if an objection to the assessment was taken by a CYP company, the Commissioner would not grant an extension of time for the payment of tax, that because the CYP company could not pay the tax assessed the Commonwealth would be deprived of the benefit of having the tax paid pending final determination of any objection or appeal and that this would be the result even if ultimately the deduction was allowed. It was the deprivation of the use of the money between the time the tax was due and payable under 3.204 of the Tax Act and the ultimate determination of whether the deduction was properly allowable which was described as the "interim rights" approach. On this basis, the then counsel for the informant contended before the magistrate that the magistrate did not need to determine whether the NIPAG scheme was efficacious but that the charge of conspiracy could be based on the interim rights approach. - 21 - It is apparent from the reasons of the magistrate that he accepted and acted upon those contentions and that his decisions were based upon the acceptance of the "interim rights" approach. In his reasons for judgment, Jackson J., quite properly, concluded that in so doing the magistrate was in error and that that error constituted a most exceptional case justifying the granting of the application and the setting aside of the decisions of the magistrate. I agree with the opinion of Jackson J. on this matter. At the hearing of the appeals, counsel now appearing for the informant did not seek to challenge that conclusion of Jackson J.. In fact, counsel did not challenge those parts of the orders appealed from which set aside the decisions of the magistrate. They conceded that the matters should be remitted to the magistrate for further hearing and determination according to law. They did object to those parts of the orders which required the magistrate to determine the matters in accordance "with the reasons for judgment herein", since they contended that those reasons for judgment showed that the magistrate had to determine whether the NIPAG scheme was efficacious and that if he came to the conclusion the scheme was efficacious, then there could be no conspiracy and the respondents should be discharged out of custody as to the informations before the magistrate. It follows, therefore, that what the informant is seeking on the appeals is judicial advice with respect to the principles of law relating to the crime of conspiracy and the application of those principles to the facts of the participation of the - 22 - respondents in the NIPAG scheme. This illustrates further the unsatisfactory nature of this type of proceeding being e taken during the course of committal proceedings. Counsel for the informant contended that the trial Judge exercised his discretion wrongly in deciding to review the decisions of the magistrate. An appellate court does not interfere lightly with the exercise of a discretion and does so only in accordance with well established principles particularly if the discretion goes to a matter of practice or procedure; see Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Inc. (1981) 148 C.L.R. 170. In the present case, the trial Judge has expressed an opinion on a matter of law and has directed that the matter be remitted to the magistrate for further consideration in accordance with that opinion. Counsel for the informant do not dispute that the matter be remitted to the magistrate for further consideration but contend that the opinion of the trial Judge is erroneous. In those circumstances it is necessary for the Full Court to express its view on that opinion. To do otherwise would be to place an impossible burden upon the magistrate whose duties are sufficiently onerous without that unnecessary burden being placed upon him. However, the Full Court should not express an opinion on matters which do not arise directly from the judgment appealed from. Paragraphs 86(1)(b) and (e) of the Crimes Act in operation at the time the charges were laid, were as follows:- - 23 - "86. (1) A person who conspires with another person - . (b) to prevent or defeat the execution or enforcement of a law of the Commonwealth; -e. OF (e) to defraud the Commonwealth ... shall be guilty of an indictable offence. Penalty: Imprisonment for three years." Paragraph 7A(a) of the Crimes Act is set out:- "JA. If any person - (a) incites to, urges, aids or encourages; the commission of offences against any law of the Commonwealth ..., he shall be guilty of an offence. Penalty: Two hundred dollars or imprisonment for twelve months, or both." The classic statement of common law conspiracy as follows:- "conspiracy consists not merely in the intention of two or more but in the agreement of two or more to do an unlawful act or to doa lawful act by unlawful means." See Mulcahy v. R. (1868) L.R. 3 H.L. 306 per Willes J. is at P.317 quoting Lord Denman in R. v. Jones (1832) 4B and Ad. 345. * - 24 - The actus reus of the offence is the reaching of an "agreement." Difficulties may arise tn proving the actus reus. The offence is committed as soon as the agreement is made and continues so long as the combination persists; see Director of Public Prosecutions v. Doot £19733 A.C. 807. In addition to there being the actus reus, the requisite mental element or mens rea must be established. As Lord Hailsham gaid in R. v. Kamara (19747 A.C. 104 at p.119:- "...- Mens rea is an essential ingredient in the crime of conspiracy. This mens rea consists in the intention to execute the illegal elements in the conduct contemplated by the agreement, in the knowledge of those facts which render the conduct illegal." Conspiracy to defraud is a recognised category of the crime of conspiracy. In Scott v. Metropolitan Police Commissioner C1975] A.C. 819, the House of Lords rejected the view that in this context "to defraud" is to deprive by deceit and that in order to defraud a person, that person must be deceived. Viscount Dilhorne, speaking on behalf of the members of the House, said at p.839:- "One must not confuse the object of a conspiracy with the means by which it is intended to be carried out. ... I have not the temerity to attempt an exhaustive definition of the meaning of 'defraud.' As I have said, words take colour from the context in which they are used, but the words 'fraudulently' and 'defraud' must ordinarily have a very similar meaning. If, as I think, and as_ the - 25 - Criminal Law Revision Committee appears to have "thought, 'fraudulently' means 'dishonestly,' then 'to defraud' ordinarily means, in my opinion, to deprive a person dishonestly of somgthing which is his or of something to which he is or would or might but for the perpetration of the fraud be entitled." Difficulties arise in determining whether a conspiracy to defraud is proved where the substantial act, if performed, cannot amount toa crime. That question was considered in Director of Public Prosectuions v. Nock (£19781 A.C. 979. In that case, the defendants agreed to produce cocaine by separating it from other substances in a powder which they believed to be a mixture of cocaine and lignocaine. In fact, the powder contained no cocaine. They were convicted of having conspired to produce a controlled drug, namely cocaine. The question for consideration by the House of Lords is set out at pp.984-5 but was restated by Lord Scarman at p.994 as follows:- ",.. when two or more persons agree upon a course of conduct with the object of committing a criminal offence, but, unknown to them, it is not possible to achieve their object by the course of conduct agreed upon, do they commit the crime of conspiracy?". The House of Lords answered that question in the negative. Lord Scarman delivered the leading speech with which the other Law Lords agreed. It is interesting to note one passage from the speech of Lord Russell of Killowen who, at p.993, said:- ~ 26 - , "The important point to note is that the agreement that is said to have been an unlawful conspiracy was not an agreement in general terms to produce cocaine, but an agreement iff specific terms to produce cocaine froma particular powler which in fact, however treated, would never yield cocaine. In order to see whether there is a criminal conspiracy it is necessary to consider the whole agreement. The specific limits of the agreement cannot be discarded, leaving a general agreement to produce cocaine, for that would be to find an agreement other than that which was made: and that is not a permissible approach to any agreement, conspiracy or other." Lord Scarman considered the historical basis on which the crime of conspiracy is based. The rationale of the crime of conspiracy is to prevent the commission of the substantive offence before it reaches the stage of attempt. He restated the description of the offence at p.994:- "The classic description of the crime of conspiracy at common law is that it consists of an agreement to do an unlawful act or a lawful act by unlawful means: Mulcahy v. The Queen, L.R. 3 H.L. 306, 317. The agreement itself constitutes the offence. The mens rea of the offence is the intention to do the unlawful act: the actus reus is the fact of agreement." He was of the opinion that an agreement is a conspiracy to commit a statutory offence only if it is an agreement to do that which Parliament has forbidden. This was no more than the statement of the principle that an actus reus, as well as a mens rea, must be proved. - 27 - . On the facts of the present cases, the essence of the statutory offences charged is a conspiracy to prevent or defeat the execution or enforcement of the Tax Act and to defraud the Commonwealth of tax due and payable to it under the Tax Act. This means that if the Commissioner of Taxation, when making an assessment of the taxable income of a CYP company, disallows the deduction of the "gift" made by that CYP company to the Norfolk Island Public Art Gallery, that CYP company has no assets to pay the tax that, of necessity, will be assessed to be paid on that taxable income. The question of whether the CYP company has any assessable income for the relevant tax year cannot be decided until after the expiration of that tax year on 30 June and would depend upon whether the "gift" was properly deductible under 3.78 of the Tax Act. That would depend on whether the payment was a gift; cf. Leary v. Federal Commissioner of Taxation (1980) 47 F.L.R. 414; whether the Norfolk Island Public Art Gallery was a public art gallery within the meaning of sub-paragraph 78(1)(a)(xxviil) of the Tax Act and possibly on a number of other matters. In other words, the question of whether the CYP company had any assessable income during the relevant tax year would depend upon whether the NIPAG scheme was effective or not. It was because of the perceived difficulties arising from these problems that the then counsel for the informant developed the "interim rights" argument before the magistrate. Likewise, the trial Judge, in reliance upon Nock's Case, expressed the opinion that in determining the - 28 - matters in accordance with his reasons for judgment, the magistrate should determine whether the NIPAG scheme was effective with the result that none of the CYP companies had any assessable income during the relevant income tax year. It should be noted, however, that in Nock's Case at no time could the substantive crime have been committed, whereas, in the present case, the existence of the substantive crime depends upon an uncertain future event. In my opinion, the approach by the trial Judge was not correct. The magistrate cannot determine finally whether the NIPAG scheme is effective so as to result in the CYP companies having no taxable income during the relevant tax year. The Tax Act, by Part V, provides a scheme by which the amount of tax assessed to be paid by a taxpayer is to be determined. A taxpayer may object to an assessment. The Commissioner is required to consider the objection. The taxpayer, if dissatisfied with the decision of the Commissioner on his consideration of the objection, may have the decision reviewed by an administrative tribunal or have his objection heard and determined by a court. Thereafter, appeal procedures are provided under which the High Court is the final court of appeal. The decision of the administrative tribunal or the court from which no appeal is taken is the tribunal which determines finally the question of the taxable income of, and thus the tax to be paid by, a taxpayer with respect to any tax year. That determination depends upon the material placed before the tribunal or court in those proceedings. - 29 - Any decision by the magistrate in committal proceedings cannot determine whether the NIPAG scheme is effective to reduce the taxable income of a CYP company to nil. Likewise, any ruling by a trial court cannot determine that issue. Any opinion by the courts as to the probability of the NIPAG scheme being effective of necessity is irrelevant in conspiracy charges. At the same time, criminal proceedings cannot be deferred to await the final outcome of proceedings, if any, taken under Part V of the Tax Act. The law relating to conspiracy must be applied to the facts at the time of committal proceedings or, if the accused are committed for trial, at the time of the trial. The question whether the NIPAG scheme is effective to reduce the taxable income of a CYP company to nil falls to be determined in different proceedings between different parties (namely, the particular CYP company and the Federal Commissioner of Taxation) on the facts established in those proceedings under Part V of the Tax Act. Any opinion expressed by this Court on that issue in these proceedings would not only be speculative, but irrelevant to the criminal charges. The question of the probability of the success of the scheme is equally irrelevant. An essential element of the offence with which the promotors are charged is their intention to leave the CYP companies without assets irrespective of whether the companies have any taxable income or not. It is this intention which constitutes an element of the conspiracy to defraud the Commonwealth and conspiracy to prevent or defeat the execution or enforcement of a law of the Commonwealth of - 30 - Australia contrary to the Crimes Act. The question of whether the scheme will be effective or not is irrelevant to that intention. Further, at the trial, who would decide the issue of the probability of success for the scheme, the Judge or the jury? As appears later in these reasons, that issue does not arise as an element of the offences with which the Promotors are charged. It is necessary therefore, to consider how the law relating to conspiracy should be applied to the relevant facts put before this Court. At the hearing before this Court, counsel for the informant relied upon a contention not put to the trial Judge or the magistrate. In its application to the promotors, the contention can be summarised. The actual legal effectiveness of the NIPAG scheme is irrelevant to the issue of whether the agreement was a criminal conspiracy. It was foreseen that income tax may be payable on the CYP companies current year profits and one of the objects of the conspiracy alleged was to deprive, dishonestly, the Commonwealth of the income tax to which it would, on that contingency, be entitled. The dishonest means were that (a) the scheme itself was calculated, i.e. was likely, to conceal the fact that a genuine gift had not been made or (b) the CYP companies would be stripped of assets, so0 that no recovery of income tax could be made. Alternatively, it was contended that one of the objects of the scheme was, by the dishonest means set out in (a) or (b), to prejudice presently or jeopardise the - 31 - Commonwealth's right to collect income tax on the income of the CYP companies in the event that income tax was payable ry thereon. Optimistically, it was further contended that in any event, the scheme was unlawful because the purported gift was not a gift within paragraph 78(1)(a)(xxvil) of the Tax Act; see Leary's Case. That is the very thing which, in my opinion, this Court cannot decide in these proceedings and for the reasons previously expressed, that contention is rejected. For the purpose of considering these contentions, it can be assumed in favour of the promotors that they believed, on reasonable grounds, that the "gifts" made by the CYP companies to the Norfolk Island Public Art Gallery, could be deducted from the current year profits of the CYP companies for the relevant tax year and as a result, the CYP companies would have no taxable income for that tax year. That fact, however, was only a part of the NIPAG scheme. That scheme was designed to achieve a number of objects, one of which was that it did not matter if the scheme was not effective so to reduce the taxable income of the CYP companies to nil. In that event, the CYP companies would have no assets to pay the tax assessed to them. It is beside the point that the very act which deprives the CYP companies of taxable income is the making of the "gift" since that step is an essential part of the overall NIPAG scheme. - 32 - , It is interesting to note that counsel for the informant did not contend that the conspiracy consisted of an agreement to do an unlawful act. They contended that the conspiracy consisted of an agreement to doa lawful act by unlawful means. Implicit in that contention is the acceptance that the making of a gift under s.78 of the Tax Act which results in a taxpayer having no taxable income in any one tax year, is not, by itself, an unlawful act. The unlawful means adopted by the promotors, as contended for by counsel, can be identified as the concealment means and the contingency means. It follows, that counsel argued that even if the payment of the "gifts" by the CYP companies eventually were held to be valid, nevertheless the conspiracy had been established since the means used being either the concealment means or the contingency means or both constituted unlawful means to do a lawful act. Thus the conspiracy to defraud and the conspiracy to prevent or defeat the execution or enforcement of a law of the Commonwealth could be established. The concealment means, as developed by counsel, needs some further explanation. It was argued that the gifts were "dressed up" as gifts to the art gallery in order to give them the appearance of genuineness by virtue of the art gallery utilising the money for the purchase of art work. If the Commissioner went to the art gallery and asked whether it had received donations and if so, what it had done with them, the art gallery would say "Yes, we have received $10 million in donations, but we have spent it on paintings to the value ~ 33 - of $}0 million." The Commissioner would be deluded by the appearance of the genuineness of the purchase, when in fact the payments to the Norfolk Island Public Art Gallery were not made with the intention of benefitting the latter, but rather, with the intention of benefitting Q, from whence they came and to whom they were returned. The art gallery would therefore receive the money as a mere conduit for the purposes of getting it back to the promotors. In summary, counsel contended that the concealment means and the contingency means were separate dishonest ingredients of the total agreement, irrespective of the efficacy of the scheme and that these two overt acts were sufficient to found the conspiracy charges against the promotors. This was 30 despite the fact that it was the desire of the promotors to achieve lawful deductions and thus prevent assessable income arising. In developing their submissions counsel for the informant referred to and relied upon a large number of authorities dealing with the question of what constituted fraudulent preferences under legislation dealing with property and bankruptcy. In making those submissions counsel assumed that the conspiracy charges to defraud and to prevent or defeat the execution or enforcement of a law of the Commonwealth were sufficiently similar and that it was necessary that the unlawful means used to achieve a lawful object, the avoidance but not the evasion, of income tax were dishonest or fraudulent. They relied on the views expressed tee in those authorities that the intent "to defraud, defeat or -~ 34 - delay creditors" applied to future or contingent creditors. e They described this type of fraud as a "fraud on a contingency." They itllustrated the basis of the submission by a reference to what was said in Barton v. The Deputy Commissioner of Taxation of the Commonwealth of Australia (1974) 131 C.L.R. 370. There the High Court had to consider the application of paragraph 40(1)(c) of the Bankruptcy Act which, in substance, provided that a debtor commits an act of bankruptcy if, with intent to defeat or delay his creditors, he departs or remains out of Australia. At p.374, Stephen J., with whose reasons Menzies and Gibbs JJ. agreed, said:- "It may properly be assumed that on 28th August 1973 the appellant was aware at least of an impending liability to tax in a very substantial sum, if not of the fact that he had already been assessed to tax of some $77,000. This awareness of an impending liability is sufficient for the purposes of 3.40(1)(c). That Paragraph employs language very similar to the reference, in the Statute 13 Eliz. c.5, to conveyances made 'with intent to defraud, defeat or delay creditors' and it is well established that conveyances may fall within that Statute, although there existed no creditors at the date of conveyance, so long as the intent to defeat future creditors be made out - Mackay v. Douglas (1872) L.R. 14 Eq. 106; Re Mackay (1951) 16 A.B.C. 18, at p.28. In Ex parte Russell (1882) 19 Ch. D. 588, in which Sir Richard Malins' decision in Mackay v. Douglas (1872) L.R. 14 Eq. 106 was applied, the members of the Court of Appeal again referred to the Statute of Elizabeth as concerned with the protection of future creditors. In Williams v. Lloyd (1934) 50 C.L.R. 341, although the majority allowed the appeal, all the members of the Court treated the 'intent to defraud creditors' to which 3.37A of the Conveyancing Act 1919 (N.S.W.) referred as capable of being established despite undoubted solvency at the time of the challenged alienation of property (1934) 50 C.L.R., at pp.360-361, 372, 377. So too in the case of - 35 - -$.40(1)(c) there may, I think, be the requisite intent despite the absence of existing indebtedness. A fortiori, the intent may exist if the debtor, unaware of his existing indebtedness, nevertheless believes in some impending indebtedness. Moreover an intent formed in relation to only one such existing or anticipated creditor will suffice, the combined effect of $.23(b) of the Acts Interpretation Act (Cth) and of s.6 of the Bankruptcy Act producing this result." There is much to be said in support of the contentions of counsel for the informant on this aspect of the appeal. The facts of the NIPAG scheme, being the agreement forming the basis of the conspiracy charges, were not in dispute on the appeal. The substance of the allegation against the promotors was that the efficacy of the scheme depended upon its fraudulent nature, namely, that in the event of a CYP company becoming liable to pay income tax, the Commonwealth would be unable to recover that tax because the company had no assets. In their submissions on this aspect of the appeals, counsel for the promotors and for Forsyth respectively, contended that the charges of conspiracy required proof of an agreement by two or more persons who intend to deprive the Commonwealth by dishonest means of an entitlement to income tax. They contended that an agreement to deprive, even of a present existing right let alone a future uncertain right, was not fraudulent unless it was agreed to be done dishonestly and that this involved the absence of a claim of - 36 - right. They relied upon a number of authorities including Edwards v. Von Einem, Full Court of the Federal Court of Australia, 12 October 1984, unreported; Scott's Case, above; R. v. Landy (1981) 72 Crim. App. R. 237; Hardie v. Hanson (1961) 105 C.L.R. 451 and R. v. Salvo £1980] V.R. 401. They contended that the promotors entered into the NIPAG scheme and its implementation on the advice of a Queen's Counsel and that they belteved the scheme would result inthe "gifts" being lawful deductions from income under s.78 of the Tax Act. They contended that the charges could not be proved unless the informant satisfied the magistrate that the scheme was ineffective and that the "gifts" were not properly deductible. They contended that even if the scheme did not avoid liability to tax, nevertheless the charges could not be proved unless the informant proved that the respondents did not believe the scheme to be effective; cf. Churchill v. Walton 19673 2 A.C. 224. They contended that the contingency means was not sufficient to show unlawful means since the very object of the scheme was to prevent the contingent liability arising. They sought to distinguish Barton's Case on the basis that there events occurred after liability to pay tax arose, at least on the assessment by the Commissioner, and before proceedings under Part V of the Tax Act had been taken, and that in any event a liability to pay tax created by the assessment of the Commissioner was not final or conclusive. In the circumstances, counsel for the promotors were content to have the matters remitted to the magistrate for determination in accordance with the reasons for judgment of Jackson J.. - 37 - Counsel for the respondents contended further that the concealment means argument had not been made previously and that there was no evidence that the inflated price of the paintings was to conceal that the gift was not genuine. It seemed to be accepted that the justification for the inflated price was that it would ensure there was a mechanism for the Passing back of the moneys to the promotors. Unless that occurred, there was no point inthe NIPAG scheme. They contended that the scheme was so structured that it would satisfy the scrutiny of the Commissioner as well as_ the tribunals and courts under Part V of the Tax Act. It was contended the scheme was genuine and fully supported by the necessary documentation. In my opinion, the concealment means contention made on behalf of the informant should not be accepted. In order for the contention to succeed, the informant would need to satisfy the magistrate that the purpose of the purchase and the sale of the paintings at the inflated price was to deceive the Commissioner. On the facts referred to on the appeal, it appears that the inflated price was charged as a means of passing back to the promotors the moneys constituting the gifts to the Norfolk Island Public Art Gallery. That by itself, does not constitute an unlawful means but, as part of a larger scheme, could constitute part of unlawful means to achieve a lawful object. That will be for the magistrate to determine from all the evidence before him. - 38 - In my opinion, the contention by counsel for the informant that the contingency means 'constitutes unlawful means to achieve a lawful object is correct. Depending on the whole of the facts before him, and applying the legal principles set out above, it is open to the magistrate to he satisfied that the evidence discloses a dishonest means sufficient to establish the charges of conspiracy against the promotors so as to proceed to require him to caution them. He should not attempt to determine whether the "gifts" are properly deductible under s.78 of the Tax Act. He could find the criminal intent in stripping the CYP companies of all of their assets notwithstanding that the promotors may have believed that the "gifts" were properly deductible and thus there was no taxable income earned by the CYP companies during the relevant tax year. Efficacy of the scheme in this regard is immaterial. An honest belief that the scheme was effective and even a hope that the ""gifts" were properly deductible from income does not prevent the finding of a criminal intent. An essential purpose of the scheme was that in the event of tax becoming payable by a CY¥P company, that company would have no assets to meet that payment. In determining this matter, the magistrate will need to consider the whole of the evidence before him. ~ 39 - This view is supported by the opinions expressed by Lockhart J. in Edwards v. Von Einem, above. That case involved charges of conspiracy under paragraphs 86(1)(b) and (e) of the Crimes Act in relation to a scheme under the Sales Tax Assessment Act (No. 3) 1930. His Honour referred to the fact that there were various possible interpretations of the evidence open to the magistrate conducting the committal proceedings in that case for his consideration and that the magistrate was in a position to decide which of them, if any, he should accept. His Honour then propounded four possibilities, two of which are set out:- "One possible construction of the facts is that the participants in the scheme intended that no sales tax would be payable by anybody and that the intervention of companies A, Band C would achieve that object. If so, and if the scheme had successfully operated to achieve that object, there could be no question of any conspiracy to defraud the Commonwealth or to prevent or defeat the execution or enforcement of the sales tax legislation. ... A fourth possibility is that the participants may have intended the scheme to operate according to its tenor so that no sales tax would be payable by anybody, but thought that, at worst, if anyone were liable, it would be company C on the basis that the transfer of the property in the goods to it from companies A and B was the last sale by wholesale. We were told from the Bar table that company C was a company of straw. Hence, it may be that the participants thought that in these circumstances all the Commissioner would find at the end of the day would be a valueless shell. Smithers J. appears to have contemplated this last possibility in the closing stages of his reasons for judgment." - 40 - Later, his Honour said:- e "If the appellant hoped that the scheme would successfully avoid the payment of sales tax by anybody but intended that, if the hope be unfulfilled, then company C would be liable for the tax and the Commissioner would whistle for his money because company C was a company of straw (the fourth possibility), then a jury may find that the appellant's intent as promoter of the scheme was that sales tax would not be paid. The scheme may then be a blend of avoidance and evasion." The same analysis can be made in the present case. In appeal V. No. G 86 of 1987, being the appeal involving the promotors, I would allow the appeal in part with costs. I would vary order 2 by deleting therefrom the words "in accordance with the reasons for judgment herein" and substitute the words "according to law." Otherwise, I would affirm the orders made. It becomes necessary to consider the appeal involving Forsyth. This appeal and cross appeal involve important questions as to the liability of a barrister when giving advice in his professional capacity as a barrister. It igs not unusual for a barrister to be briefed to advise on questions which might involve the client engaging in conduct which possibly could constitute a crime. The primary submission of counsel for Forsyth was that at all times he was acting in his professional capacity as a leading barrister in taxation law and that advice so given could not constitute evidence of Forsyth having committed any of the crimes with which he is charged. They referred to what was - 41 - said by Street C.J., with whom Gordon and Ferguson JJ. agreed in R. v. Tighe and Maher (1926) 5.R. (N.S.W.) 94 at cf pp.108-9:- "It is expected of course of every solicitor that he shall act up to proper standards of conduct, that he shall give his clients sound advice to the best of his ability, and that he shall refrain from doing anything likely to mislead a Court of Justice; but, in the course of his practice he may be called upon to advise and to act for all manner of clients, good, bad or indifferent, honest or dishonest, and he is not called upon to sit in judgment beforehand upon his client's conduct, nor, because he does his best for him asa_ solicitor within proper limits, is he to be charged with being associated with him in any improper way. In acting for a client, a solicitor is necessarily assoctated with him, and is compelled to some extent to appear as if acting in combination with him. So he may be, but combination is one thing and improper combination, amounting to a conspiracy to commit aocrime or a civil wrong, is another thing. An uninstructed jury may easily fail to draw the necessary distinction between such combined action as may properly and necessarily be involved in the relation of solicitor and client, and such acts on the part of a solicitor, over and above what is required of him by his duty as a solicitor, ag may properly give rise to an inference of an improper combination. I. think, therefore, that it may be useful to point out the importance, in cases where a solicitor is charged with entering into an agreement with his client which amounts to a criminal conspiracy, of seeing that the jury are properly instructed as to a solicitor's duty to his client, and that it is made plain to them that, before a solicitor can be convicted of conspiring with his client to commit a wrong, it must be proved that he did things in combination with him, over and above what his duty as a solicitor required of him, which lead irresistibly and conclusively to an inference of guilt." In that case, the Court was speaking of a solicitor, but the same principles apply with respect to a barrister. -~ 42 - Counsel for the informant relied upon the submissions made with respect to the promotors. They then contended that Forsyth became a party to the conspiracy by the promotors when, knowing of its dishonest elements, essentially the purpose that in the event of tax becoming payable by a CYP company, that company would have no assets to meet that payment and that this formed an essential part of the NIPAG scheme, he aided the promotors by giving advice to the shareholders of one of the CYP companies, namely at the Bexley conference. They contended that by doing this Forsyth aided the promotors in their conspiracy and by doing so, in agreement with them, became a co-conspirator with then. They contended also, that the same facts were sufficient to support the charges under s.7A of the Crimes Act. The Bexley conference was held on 31 May 1979. Forsyth had been briefed on behalf of MTS, one of the companies controlled by the promotors, to advise in conference prospective vendors of a CYP company, Bexley Corporation. Messrs. Rice and Boerkamp, officers of that company, attended that conference. In his reasons, the magistrate found that, on the material before him, the conduct by Forsyth prior to 31 May 1979 would not have satisfied a reasonable jury that Forsyth had knowledge of the fact that MTS had implemented the NIPAG scheme or of tits manner of implementation. It will be recalled that the NIPAG scheme was the subject of the written advice given by Forsyth on 23 March 1979. However, the magistrate found that on the - 43 - evidence of what occurred at the Bexley conference, a reasonable jury could be satisfied that Forsyth had such knowledge by giving the advice he did. "In this regard, the magistrate found that at that time Forsyth ceased to act in his professional capacity only and had become involved in the implementation of the scheme. Further, the magistrate held that a reasonable jury could be satisfied that the advices given to Rice and Boerkamp were not genuine opinions but were given with the intention of persuading them to have the Bexley Corporation participate in the NIPAG scheme, and that Forsyth thereby entered into the main agreement with the promotors, or at least, aided, abetted, counselled and procured them and MTS to carry out the agreement constituting the conspiracy. At the hearing before this Court, counsel for Forsyth contended that it was not necessary for Forsyth to have knowledge of the manner of implementation of the scheme in order to give the advice he gave at the conference. It was argued that on 31 May 1979, the only additional knowledge that Forsyth had was that MTS had begun to implement the scheme in accordance with the steps laid down in the NIPAG opinion. He had no reason to believe the promotors had any other goal in mind than that the scheme would result in a lawful tax deduction. In so advising the Bexley officers, Forsyth never ceased to act ina legal capacity and did no more and no less than discharge his duty as a barrister in giving his opinion on questions of law. There was no -~ 44 - evidence, they contended, to suggest that his opinion was anything but genuinely held. In support of the cross appeal, counsel for Forsyth argued that this Court should discharge Forsyth as having no case to answer because once the Court came to the conclusion that the magistrate was incorrect in adopting the "interim rights" approach there were no other facts capable of supporting, as a matter of law, a finding of dishonest conduct on the part of Forsyth. In his reasons for judgment on this aspect of the application, Jackson J. said:- "T agree also that upon those parts of the evidence which I have seen there is no doubt much to be said for the view that the evidence did not show more than that Mr Forsyth was acting as a barrister ... ." However, notwithstanding this view, the learned trial Judge refused to direct that Forsyth be discharged as having no case to answer. He said:- ",.- but I am not inclined to take the course urged upon me, namely to set aside the (magistrate's) decision in respect of Mr Forsyth, but to decline to remit the matter to the (magistrate) for reconsideration. I am not inclined to adopt that course because I have seen only those extracts from the evidence which the parties have chosen to put before me and the question whether there is or is not evidence which could give rise to a satisfaction in terms of 3.56(1)(b) is primarily one for the (magistrate), who has seen all the evidence." - 45 - In fact, all the material before the magistrate was before the Court on the hearing of the.application and the parties were at liberty to refer to any part of the material. However, what counsel were submitting amounted to a no evidence point, namely that no magistrate, properly applying the law to the facts found by him, could have come to the opinion that the evidence was sufficient to put Forsyth upon trial for the indictable offences with which he was charged; see paragraph 56(1)(b) of the Summary Proceedings Act. There are a number of reasons why this Court should allow the appeal and not make the orders sought in the cross appeal. In his reasons for decision, the magistrate was in error in applying the interim rights approach. The matter is being remitted to the magistrate to consider the charges of conspiracy against the promotors according to law. This involves applying different principles of law. The magistrate has not considered the charges against Forsyth having regard to those different principles of law. Further, to grant the cross appeal on the no evidence point, it would be necessary for the Full Court to consider all the evidence and to determine that issue. This, essentially, is the duty of the magistrate. He has not yet done it. Further, the trial Judge has not done it. It is not appropriate that the Full Court should do it without having the benefit of the opinion of the trial Judge. ~ 46 - Finally, I have already expressed my opinions concerning this type of proceeding. The Federal Court has a discretion to refuse to grant relief in an application under the Judicial Review Act and should do so unless there exist most exceptional cases in respect of decisions of the type sought to be reviewed in this appeal. A review, of necessity, of the type being urged upon this Court, would involve a full investigation of the merits of the committal proceedings. In the exercise of the discretion referred to, I would refuse to enter upon that consideration. In the result, I would make the same orders in appeal V. No. G 87 of 1987 as I would make in appeal V. No. G 86 of 1987 and in addition dismiss the cross appeal with costs. I certify that this and the forty-five preceding pages are a true copy of the Reasons for Judgment herein of the Honourable Mr. Justice R.M. Northrop. Associate .. Storow. ? . Aco), ese eee 15 October 1987 (45) IN ERAL CO' OF AUS A ) VICTORIAN DISTRICT REGISTRY G DIVISION VIC G86 and G87 of 1987 —~ ON_APP) FROM A JUDGMENT OF A_ SINGLE JUSTICE OF THE FEDERAL COURT BETWEEN: RICHARD DENIS 0''DONOQVAN Appellant AND: JOHN MICHELE ER OTHERS Respondents BETWEEN: RICHARD DENN 'DONOV. Appellant AND: NEIL HARRY FORS Respondent CORAM: FOX, NORTHROP AND PINCUS JJ. DATE: 15 OCTOBER 1987 PLACE: MELBOURNE REASONS FOR JUDGMENT PINCUS J.: Q'DONOVAN v. FORS Despite the order in which proceedings mentioned in the title of these reasons were instituted, the Forsyth appeal was argued first, and I find it convenient to deal with it first. The nature of the proceedings in that appeal appears from the reasons of Northrop J. The case is an unusual one: in essence the respondent, a barrister, is charged with offences by reason of legal advices which he gave. It is said against hin that his advices gave approval to, and assisted in the carrying out of, a scheme which was illegal because fraudulent. Lawyers often have to express opinions on the legality of activities in which their clients propose to engage and to suggest means of avoiding illegality. If their opinions are erroneous, or thought by prosecuting authorities to be so, then, as this case illustrates, they may he in peril of being charged with offences along with their clients. That may occur, as is again illustrated here, even if there is no evidence that the opinions expressed were not truly held. Counsel for the appellant informed us that the respondent was "not necessarily dishonest in the ordinary sense". There is an "underlying principle of the common law that ..- @ person should be entitled to seek and obtain legal advice in the conduct of his affairs ... without the apprehension of being thereby prejudiced ..." (Baker v. Campbell (1983) 153 C.L.R. 52 at p-114 per Deane J.). That principle must be weakened if the entitlement is to consult lawyers who are under threat of prosecution if their advice turns out to be wrong and the acts done in reliance on the advice unlawful. In Baker v. Campbell concern was expressed that the proper functioning of the legal system might be inhibited by compulsory disclosure of legal advice; see in particular per Dawson J. at pp.127, 128. The prospect of imprisonment for giving advice held to be erroneous would no doubt be an even more potent inhibition. . The problem arises in a context hardly calculated to attract universal sympathy; the legal task in which the respondent was engaged was advising as to the efficacy and legality of highly artificial means to escape the impact of taxation. Nevertheless, the case has a bearing on an important right, namely that of freedom of communication between citizens and legal advisers. Attempts were made during the course of argument to suggest that the respondent had not truly acted as a barrister, for such reasons as that persons in addition to his clients were permitted to attend a conference; there seems to be nothing in that. The Prosecution is in essence one for giving legal advice, and its significance cannot be diminished by suggestions of such a kind. A general solution to the difficulty of reconciling the principle whose importance was emphasised by the High Court by Baker v. Campbell with the law as to the position of accessories and that as to criminal conspiracy was not put forward during argument, nor has any occurred to me. An analogous problem was dealt with in the House of Lords in Gillick v. West Norfolk and Wisbech Area Health Authority £19861] A.C. 112, a case concerning the legality of doctors' giving contraceptive advice to girls under the age of sixteen years (the age of consent). Lord Scarman thought the "bona fide exercise by a doctor of his clinical judgment must be a complete negation of the guilty mind which is an essential ingredient of the criminal offence of aiding and abetting the commission of unlawful sexual intercourse" (p.190). It is not clear whether a lawyer whose advice is said to have led to the commission of offences may find exculpation in such a principle. The appellant's notice of appeal raises as the first ground the contention that there was no jurisdiction in the primary judge to entertain the proceedings, but that ground was abandoned. His counsels' principal point was that the learned primary judge, in the course of correcting the reasons of the magistrate, himself made a legal mistake. Counsel initially sought to argue that the primary judge should not have exercised his discretion under the Judicial Review Act in such a way as to review the magistrate's decision, a course which, as this Court held in Lamb v. Moss (1983) 49 A.L.R. 533 at p.564, should be taken only in "most exceptional cases". It is not practicable to discuss the question of the correctness of the exercise of the learned primary judge's discretion, in the respect mentioned, in isolation. It is convenient to mention at this stage, however, that merely to allow the appeal on the discretionary ground and set aside the order of the learned primary judge would not seem to me a practical course; counsel for the appellant themselves appeared to concede that the magistrate fell into error, in a way discussed below, and the reasons of the primary judge also appear to contain anerror which requires correction. The respondent advised, as I have said, ona _ scheme which was intended to escape by artificial means the impact of income tax. The appellant's argument before us was that the scheme was not only legally ineffective (and his counsel said we should so hold) but fraudulent. The elements of fraud he identified were said to be inherent in the scheme itself and were two: firstly, the appellant said that the scheme was so designed that, whether it achieved the desired tax mitigation or not, the Commissioner of Taxation would have no practical means of recovering any tax lawfully exigible; secondly, it was argued that the scheme had a built-in element of concealment. The elements of the scheme are set out in the reasons of Northrop J. in detail; I merely give here a rough outline in which, for simplicity, the word "promoter" includes entities associated with the promoters. The idea was that a company having substantial profits earned in the current year (on which it would, in the ordinary course, have to pay tax) would, the profits standing in the form of cash, be sold to a promoter at a discount. The promoter would then sell the company on to another promoter on the basis that the purchaser would cause the company to donate to a charity a sum sufficient to eliminate the tax liability. The charity would not, however, really benefit by the sum "donated""; it would lose it by buying from a promoter a work of art at a grossly inflated price. It should be added that there is a dispute as to whether what I have called a charity was such a body as mentioned in s.78(1) of the Income Tax Assessment Act 1936; its participation in the scheme must raise doubts about that. A large number of companies were "processed" through the scheme in a few months, and the amount of taxation lost, if it were effective, was - or would but for the Taxation (Unpaid Company Tax) Assessment Act 1982 have been - many millions of dollars. Despite the extreme artificiality of the scheme, the respondent expressed the view in a written advice of 23 March 1979 that the current year profits company sold would obtain a deduction under s.78 of the Income Tax Assessment Act 1936 for the donation made under the scheme. Further, there was evidence that the respondent gave oral advice on 31 May 1979 to proprietors of a current year profits company, Bexley Corporation (Aust.) Pty. Ltd., to the effect that what was being done was not fraudulent and that the shareholders in that company would not incur a risk of criminal liability if it were sold into the scheme. It was that oral advice, according to the argument of counsel for the appellant, which completed the process of making the respondent criminally liable. Before venturing on an analysis of the magistrate's reasons, so far as relevant, it is desirable to mention the decision in the case of Edwards v. Von Einem and McDonald (unreported, 12 October 1984), in which this Court considered allegations of conspiracy to defraud the Commissioner of Taxation, in respect of a scheme to avoid sales tax. Davies J., in his reasons in that case, seemed clearly to be of the view that if the scheme were effective to achieve its tax avoidance purpose - i.e. if no sales tax were truly payable - then there could be no conspiracy to defraud. It may well be that it was because of a consciousness of his Honour's expression of view that the appellant, in pursuing the matter before the magistrate, put forward rather a narrow conception of the object of the alleged fraud. One might have expected it to be argued that if there was fraud, it lay in a dishonest attempt to deprive the Commissioner of the tax to which he was, or might be, ultimately entitled. But the case was apparently conducted by the prosecution before the magistrate on the basis that ultimate" entitlement was not the point, and that what mattered was the Commissioner's "interim rights". It was the use of that notion which counsel for the appellant before us described as following the "wrong track". To come, in nore detail, to an account of the magistrate's views, he said (at p.15 of his reasons) that he was - "... persuaded that the weight of the authorities support the submissions of Mr. Meldrum, and therefore, I am satisfied that the interests the Commissioner had at the time of commencement and during the currency of the agreement to operate the NIPAG Scheme was 'something which was his' or at least 'something to which he is or would or might be entitled' ..." The submissions of Mr. Meldrum (for the prosecution) there referred to were, in part, as follows: "... the rights of the Commissioner, although the funds of the company did not belong to him, the rights that he had included the rights of interim assessment and the rights to obtain a judgment and ensure that the funds were thus) secured and although he may not have owned them, that, we would say, would be ... something that was due to him as his right." The magistrate returned to that theme at p.62 of his reasons. He quoted Mr. Meldrum as saying, among other things, that the respondent joined in the conspiracy, helped to sell the scheme to a reluctant share vendor and aided the promoter to defraud the Commissioner - "because he'd have known in respect of this sale that no tax would be intended to be paid, that all the interim rights would be absolutely destroyed and that the question whether the Commissioner would in the end lose out would turn on whether he was right in his view that the scheme would work. »e». any interim rights would be a nullity because of the stripping of the company." The magistrate also found that there was evidence on which a jury could be satisfied that the defendants before him, including the present respondent, did not believe the scheme was certain to be efficacious (emphasis added), that the respondent knew there was a risk that the scheme would fail and that all the defendants knew that a "bare strip was fraught with criminal problems and that a scheme with the strip was similarly hazardous". The expression "bare strip" is a reference to the possibility of taking a company which was or might be liable to pay income tax and, by some means, denuding it of its assets. The reference to a "scheme with a strip" is to such an arrangement as was in issue before the magistrate: an artificial device supposed to create a deduction so as to get rid of the tax liability, in the course of which the company with the profits would lose all its assets - as it did here by the "donation". The magistrate also found as follows (at p.60 of his reasons): "The sole or dominant purpose of the scheme was to ensure that in the event that the Commissioner of Taxation disallowed the claims for the donation as a deduction, and that if any subsequent appeals to the courts against such allowances by the Commissioner failed, then any assessment issued and ° any steps taken to obtain or enforce their judgment based upon any such assessment would be a futile exercise." . It should be noted that counsel for the appellant before us did not really seek to support that simple view of the scheme's purpose. It appears clear that it has to be conceded that an important purpose of the scheme, so far as the vendors of the shares in the companies participating in the scheme were concerned, was to achieve a price for their shares not fully reflecting the company's potential tax liabilities and another purpose of the scheme was to attempt to obtain a deduction for the "donations", eliminating those liabilities. The magistrate went on to hold, reverting to the "interim rights" theme, that the evidence pointed to an agreement ",.. by dishonest means and dishonestly to deprive the Commissioner of Taxation of income tax which was payable by the companies processed through the NIPAG Scheme. Such tax being payable unless and until such time that the Commissioner allowed the deductions claimed as deductions, or upon disallowance by the Commissioner the court held the donations to be a lawful deduction, upon appeal by the companies." The magistrate made three further findings with respect to the respondent which should be mentioned. He held (at p.64) that the jury could be satisfied that a certain brief written advice given by the respondent, and that given in the conference of 31 May 1979 referred to above - 10. "... were not genuine opinions, but were given with the intent and purpose of persuading or encouraging Messrs. Rice and Boerkamp to have the Bexley Corporation participate in a NIPAG Scheme;" Counsel for the appellant argued, as to that finding, that the oral advice was not genuine because it did not include reference to qualifications and uncertainties which, according to the respondent's full written advice of 23 March 1979, might have affected the question whether the deduction was allowable; counsel made no criticism of the brief written advice. I do not well understand the criticism of the oral advice, because it included no assurance that a deduction would be allowable. As_ to the brief written advice, nothing was put forward in the magistrate's reasons, or suggested in this Court, to support the view that it was not genuine. Secondly, the magistrate said he was not prepared to hold that a jury could be satisfied that the respondent was a party prior to 31 May 1979, when he gave his oral advice, to the agreement into which the other defendants entered. Lastly, he held that a jury could be satisfied that due to the general circumstances of the conference in which the oral advice of 31 May 1979 was given, the advice the respondent there gave, and of the respondent's knowledge of matters related to the agreement entered into by the other defendants, that there was dishonesty on the part of the respondent within the meaning of the relevant principles. 11. ; On the application for an order of review under the Judicial Review Act, the learned primary judge held that there was a fundamental error in the magistrate's reasons, namely the "interim rights" approach, which is further discussed below. His Honour further held that - ",.. if what has been done has been to create a situation where a deduction has been lawfully brought into existence reducing taxable income to nil, it is impossible to regard it as dishonest not to keep available the funds necessary to pay an assessment based on the assumption that the deduction claimed will be wrongly disallowed." Counsel for the appellant challenged the view just quoted. Discretion As mentioned above, it was initially suggested that the primary judge was wrong in entertaining the matter at all, and although the contention was not pressed, in the end, it was said that on that ground the appeal should simply be allowed and the order of the primary judge set aside. Reference was made to the considerable delay which has been caused by the matter's coming to this Court, as an example of the inconvenience attending the exercise of discretion under the doctrine of Lamb v. Moss (1983) 49 A.L.R. 533. Despite the virtual abandonment of the point, it is one which requires consideration. A judge exercising jurisdiction under the Administrative Decisions (Judicial Review) Act should lean very heavily against 12. interfering with the ordinary course of criminal proceedings on the ground of an alleged legal error in reasons given by a magistrate. It has to be accepted that a discretion todo so exists, but it should be most sparingly exercised. However, we are not concerned here to determine whether we should accept an invitation to intervene; the intervention has already occurred. It is plainly a more difficult matter to upset on appeal the exercise of the primary judge's discretion, particularly on a procedural point, (see Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Inc. (1981) 148C.L.R. 170 at 177) than to put forward an objection to the exercise of the discretion at first instance. It does not appear that the primary judge made any error of principle in deciding to entertain the challenge to the magistrate's decision on legal grounds, and it is doubtful if it could be said that his Honour's decision to do so was so obviously erroneous that this Court could properly reverse it. The matter comes before us with counsel for the appellant contending that the learned primary judge himself made a legal mistake in dealing with the matter and one of some general importance: as mentioned above, it was argued that, contrary to the primary judge's opinion, the magistrate did not have to form a view as to whether or not deductions for the "donations" were legally allowable. Simply to set aside the order of the primary judge would leave the reasons of the primary judge with an uncertain status; it would not be clear whether the magistrate should be influenced by the view of the primary judge on the matter just mentioned or on the matter of "interim rights", in the magistrate's further consideration of the proceedings. 13. Further, the argument for the appellant before us raised important contentions, which do not appear to have been aired below, as to the legal basis of the alleged criminal liability of the respondent, counsel for whom complained of their novelty. It seems clear that this Court should at least give consideration to the new points raised. In the end, as will appear, I am of the view that this Court should not ultimately determine any factual issues, although elaborate argument was addressed to them on both sides, and should decide only the legal basis of the alleged criminality. Interim Rights The primary judge pointed out in effect that, the "interim rights" argument could lead to success for the prosecutor even if no tax at all was payable because the donations were proper deductions. It appeared to be put on behalf of the appellant, before us, that the contention in question was not really a critical part of the magistrate's reasons, but the repeated references to it therein suggest otherwise. Whether or not there could be a conspiracy to defraud the Commissioner of his right to receive and retain the tax between the date of assessment and the date of final determination of its correctness, to regard the alleged conspiracy on that basis is not only unrealistic but, with respect, a little fanciful. The companies were either properly taxable or they were not. The substantial allegation made was that the strip, as it is conveniently called, of the 14, current year profit companies' assets, was intended to deprive them of any ability to pay tax. Before us, senior counsel for the appellant put forward the analysis that the Commissioner's position was at least that of a future or contingent creditor. He argued that one may defraud such a creditor and the authorities bear out that contention: see Mackay v. Douglas £1872] L.R. 14 Eq. 106, referred to with approval by Stephen J. in Barton v. Deputy Commissioner of Taxation of the Commonwealth of Australia (1974) 131 C.L.R. 370 at 374 and Scott v. Metropolitan Police Commissioner [19753 A.C. 819 at 839C. Counsel described the case as one of "fraud on a contingency". He argued that there could be a conspiracy whether or not in the end the tax was held to be properly payable; the contention appears to be contrary to the view of Davies J. in Edwards' case (above), as well as to the view of the primary judge. One may cavil at the notion that the decision of the tribunal which ultimately decides the question of liability is a contingency; in truth, the liability to tax either exists or does not exist well before that point. But there is no satisfactory answer to the argument that there may be a conspiracy to defraud not only a certainly known creditor, but one who may or may not be or become a creditor. The primary judge referred to the decision of the House of Lords in Director of Public Prosecutions v. Nock C1978] A.C. 979 in support of the view that there cannot be a criminal conspiracy to do something unobjectionable. But the case before us is not one of an agreement to do something which is believed by those agreeing to be unlawful, but which is in truth 1s. lawful. The essence of the case put up against the respondent Forsyth is complicity in a fraudulent agreement; its tllegality, if any, consisted in its fraudulent ndture. That quality would remain whether or not, in the end, tax was held to be payable. While the "interim rights" concept is not a proper analysis, I am of the view that the argument of counsel for the appellant that it is possible to have an agreement to act fraudulently affected by a contingency, and in particular, affected by uncertainty as to whether tax is payable, is correct. Further, 1t is not an essential part of the prosecution case to prove that tax is in truth payable. Acceptance of that contention, however, should not be construed as carrying with it acceptance of all that counsel urged in support of it; in particular, counsel argued that it would be enough, in order to show fraud, that there was the slightest uncertainty (1% was mentioned) as to the deductibility of the "donation". It has to be kept steadily in mind that what is alleged is criminal fraud - @ grave matter which cannot depend upon such remote possibilities. Mens rea A question which recurred during the course of the long arguments before us was whether or not, within the meaning of s.86(1)(e) of the Crimes Act, there could be a conspiracy to defraud constructively, there being no actual dishonesty. Since the matter was persistently raised and the answer seems clear, it is desirable to deal with the point. In my view, constructive fraud is not enough. Counsel for the appellant suggested that 16. authorities such as Mackay v. Douglas (above), dealing with setting aside of settlements in civil proceedings, showed that a creditor could be criminally defrauded by a conspiracy, even if the participants from a subjective point of view acted quite honestly. Reference to the statute in issue in Mackay v. Douglas (above) shows the fallacy of the argument, so far as it is based upon that case. It was there sufficient to demonstrate that the creditor was defeated or delayed; actual fraud was unnecessary. It is true that in more modern statutes designed to achieve the same general purpose, such as 3.121 of the Bankruptcy Act 1966, fraud only is mentioned but the same construction adopted; however, it would need much stronger considerations than that to attribute to s.86 (1)(e) of the Crimes Act an intention to attach criminality to acts fraudulent only in a constructive sense. Further authority pointing in the same direction is provided by the decision of the High Court in Hardie v. Hanson (1960) 105 C.L.R. 451, especially at p.456 per Dixon C.J. and at p.463 per Kitto J. The latter judge spoke of the need for proof of an "actual purpose, consciously pursued, of swindling creditors ---", in the context of an allegation of fraudulent trading under the Companies Act. See also Reg. v. Sinclair (19681 1W.L.R. 1246 at p.1249, where the point went by concession. Reference was made, also, to a possible difference between the test of dishonesty set out in Req. v. Ghosh £1982] Q.B. 1053 and the strict notion of conscious dishonesty. Lord Lane C.J., dealing with an offence under the U.K. Theft Act 1968, referred at p.1064 to the possibility that a defendant might act 17. in a way which he knows ordinary people consider to be dishonest, even if he asserts or genuinely believes that he is morally justified in acting as he did." The Court of Appeal thought that state of mind enough to support a conviction under provisions of the Act. It appears to be unnecessary here to enter upon a consideration of the applicability of that concept, as opposed to the test of conscious fraud in the subjective sense, to the crime of conspiracy to defraud. The latter test appears to underlie the decision of the Full Court of the Victorian Supreme Court in R. v. Salvo (1980) V.R. 401; see also R. v, Bonollo (1981) V.R. 633. Here, the magistrate has expressed himself to be content to apply, in favour of the respondent, the Salvo test, as well as that in R. v. Ghosh, and consideration of the relevance of the Ghosh test in cases such as the present is therefore not needed for the disposition of this case. Factual Questions Counsel for the appellant urged upon us, as mentioned above, the view that a second element of fraud in the agreement charged was concealment. The basis of that contention appeared to be that an inherent characteristic of the scheme was that donations would be made which the donee could demonstrate, in response to any investigation, were expended in buying costly paintings. The suggestion was that the purpose of arranging for the purchase of the paintings at inflated prices was not, as one would think, to get the money back to the promoters, but to deceive the Commissioner. No finding on the point was made by the learned magistrate; the contention seems to be entirely new, 30 ~ 18. far as one may judge from his reasons. It was put forward as a major element of the appellant's case in chief, but the purpose of e doing so was unclear. Counsel for the respondent, on the other hand, argued that it should be held that there was no evidence of fraud against the respondent, and that the case against him should simply be dismissed. That contention was advanced by way of cross-appeal. The learned primary judge was also urged not to remit the matter for reconsideration, but refused to follow that course, saying that he had seen "only those extracts from the evidence which the parties have chosen to put before me ... Counsel for the appellant and cross-respondent urged us to adopt similar reasoning, but it does not appear to me that the ground upon which the learned primary judge dealt with this aspect of the matter is satisfactory. Before his Honour there was available the whole of the material the magistrate had, and counsel were, as the transcript before the primary judge shows, directed to refer him to such parts of the record as they saw fit. Similarly, in this Court, parties were free to refer us to such parts of the material as seemed to them helpful. If there was any material which the appellant's counsel contended supported the magistrate's conclusion that there was sufficient evidence that the respondent was guilty of dishonesty, it was for them to point it out. 19. In truth, despite the great volume of the evidence on other matters, the prosecution case against the respondent was essentially a short one, at least as found by the magistrate. An important aspect of his reasoning appears to have been that the brief written advice and the advice in conference, dealt with above, were not "genuine opinions". As to the former, that conclusion was not sought to be supported before us, and as to the latter, the meaning and foundation of the finding are both obscure. The appellant's counsel emphasised to us that there was no case made that the respondent did not believe in his opinion. Nevertheless, it seems to me that it would be inconsistent with the principles laid down by this Court in similar previous cases to interfere with the exercise of the learned magistrate's functions on this purely factual basis. That the allegation of fraud against the respondent Forsyth appears a tenuous one cannot be a justification for taking the determination of the adequacy of that case away from the magistrate. It may often occur that this Court holds a view, as to the proper inference from the facts found, differing from that of the committing magistrate; that cannot be described as making the point a "most exceptional" one, warranting interference by this Court under the Judicial Review Act. I have had the advantage, as mentioned above, of reading the reasons of Northrop J.; I have noted that Fox J. does not concur in the view of Northrop J. that the matter should be remitted to the learned magistrate. I concur, as to that, in the view of Northrop J. and also concur in: 20. (a) The opinion of Northrop J. that the "interim rights" approach of the magistrate was incorrect; (b) The acceptance by Northrop J. of the "contingency means" argument, namely that the charges could, as a matter of law, succeed on the basis that there was a conspiracy to defraud the Commissioner of Taxation of tax which might be payable; (c) The view of his Honour that the case just mentioned could succeed without a finding by the magistrate that the tax was certainly payable. I cannot, with respect, accept his Honour's view that the degree of probability of success of the NIPAG scheme is irrelevant in considering fraudulent intention. In my opinion, the magistrate may properly consider the question whether there was a "clear risk that the CYP companies would be assessed", as Fox J. says in his reasons, and to put the matter more generally, that he may properly consider the degree of probability, as it appeared to the participants in the scheme, that the companies would be correctly assessed. My view is that ina case of this sort the degree of risk of failure of the scheme, as seen by the participants, bears upon proof of fraud. I have noted that Northrop J. would allow the appeal in the Forsyth case in part with costs and would vary the second order made by the learned primary judge by deleting therefrom the 21. words "in accordance with the reasons for judgment herein" and substituting the words "according to law". I have noted that Northrop J. would also dismiss the cross-appeal with costs. I agree that the orders proposed by Northrop J. should be made. O'DONOVAN v. VEREKER The nature of the proceedings with which this appeal is concerned appears from the reasons of Northrop J. The charges against the respondents related to their participation in the carrying out of a scheme to escape the impact of income tax, being the art gallery scheme discussed in those reasons. The learned magistrate held that the respondents were uncertain as to whether the donations to the gallery would be held to be a gift within the meaning of the relevant provisions of the Income Tax Assessment Act and also - what amounts to much the same thing - that a jury could be satisfied that they did not believe that the scheme was certain to be efficacious. The magistrate also held that the respondent knew that a "bare strip" was fraught with criminal problems, and that a scheme with a strip was similarly hazardous. These expressions are explained in the reasons in the Forsyth appeal. Then, the magistrate said that - "the sole or dominant purpose of the scheme was' to ensure that in the event that the Commissioner of Taxation disallowed the claims for the donation as a deduction, and that if any subsequent appeals to 22. the courts against such disallowances by the Commissioner failed, then any assessment issued and any steps taken to obtain or enforce any judgment based upon any such assessment would be a futile exercise." As explained in the reasons in the Forsyth case, that finding was not fully supported in the argument before us, nor supportable. The scheme obviously had other important purposes, namely the obtaining of deductions to eliminate the current year profits in the companies in question and, from the point of view of the shareholders in the companies, their obtaining a high price for their shares by sale at a figure which did not fully reflect the companies' tax liabilities. The magistrate also said that the evidence pointed to the agreement between the parties as being one "by dishonest means and dishonesty" to deprive the Commissioner of tax, and that a jury could be satisfied that the respondents acted dishonestly and did not believe they had a legal right to deprive the Commissioner of tax by means of the scheme in question. In important respects, the issues in this case are the same as those in the Forsyth appeal. It is important to note, however, that these respondents did not cross-appeal. That is, the learned primary judge having ordered that the matter be remitted to the magistrate for further hearing and determination in accordance with his Honour's reasons, no formal challenge was made to that order by the respondents. 23. During the course of argument, counsel for the respondents urged upon us the view that, despite the absence of a cross-appeal, we should not merely dismiss the appeal against the order of the primary judge, but make an order having the effect that the respondents would be discharged. Counsel for the appellant objected to the issues being thus broadened and in my view their objection is good. Particularly as there is a considerable mass of factual material relevant to the case against these respondents, it would have been erroneous to require the appellant to argue as if there were a cross-appeal, his counsel not having prepared the case on that basis. The facts relating to the implementation of the scheme appear to be fairly complex and different factual considerations apply to various of these respondents. Confining attention, then, to the appeal and arguments relevant thereto, it is necessary to add little to the reasons given in the Forsyth appeal. The main point made on behalf of the appellant was that the learned primary judge was in error in failing to act on the view that the conspiracy, if there was. one, was an agreement dishonestly to deprive the Commissioner of the tax to which he was or might be entitled. His Honour appears to have decided the matter on the basis that the magistrate had to decide whether or not the deductions in question were truly allowable, and, if they were, hold that there was no conspiracy. In my view, for the reasons given in the Forsyth case, the appellant's contention is correct. ATTACHMENT A Title of Actions File Numbers Dates of Hearings Judgments Delivered Counsel for Appellant Solicitors for Appellant Counsel for Respondents Respondents' Solicitors Signed . Date 15 October 1987 « : RICHARD DENIS 0'DONOVAN v. JOHN MICHELE VEREKER AND OTHERS : V. Nos. G 86 and 87 of 1987 22,23,24,25,26,29 and 30 June, 'and 1 July 1987 15 October 1987 ; A.G. Uren Q.C. with N. Moshinsky : Director of Public Prosecutions 200 Queen St. Melbourne (Vereker ) J. Walker Q.C. with J. Judd (Porsyth) P.J. O'Callaghan Q.C. with A.J. Howard (Vereker ) " Phillips Fox 461 Bourke St. Melbourne (Forsyth) Arthur Robinson & Hedderwicks 535 Bourke St. Melbourne offered for sale at $9,990 because it "owed us too much money". However, I am not satisfied beyond reasonable doubt that Mr. Heffernan gave such an instruction. I believe that he probably stressed that every effort should be made to induce each customer who inquired about CLI 492 or another of the -advertised cars to buy another, more expensive, car. Because that was the result which he was exhorting the salesmen to achieve, Mr. Heffernan, was, in all likelihood, indifferent to whether CLI 492 was sold at the advertised price. However, it seems, on all of the evidence, that it was part of the sales technique being instilled at the advertising meetings, that the advertised base grade car of the relevant model should be shown, or at least described, to Prospective purchasers, in order, by comparison, to point up the virtues of more expensive vehicles in the defendant's stock. As I have already noted, Mr. Scott conceded that Mr. Heffernan had said that if all attempts to fob off purchasers inquiring after a particular advertised vehicle, and to divert them to others had failed, "Well, we would have to show it to them". I accept Mr. Deans' account of his dealing with Mr. Sest and, in particular, that Mr. Heffernan told him to tell Mr. Sest, untruthfully, that CLI 492 had been sold subject to a demonstration, and to try to "sell" Mr. Sest "up" to a new "Commodore". I am also prepared to assume that it was Mr. Heffernan to whom Mr. Hanson spoke before telling Mr. Snow, Li. on 27 August 1985, that the same vehicle had been sold on the previous day. However, the acceptance of those facts still leaves open a reasonable hypothesis which negatives a lack of any intention at all by Mr. Heffernan to offer the vehicle for sale at $9,990. The hypothesis is that Mr. Heffernan decided that Mr. Hanson and Mr. Deans who were both inexperienced salesmen, having had between them about two months' service with the defendant, should not attempt, at that stage of their training, to "sell" their respective prospects "up" from CLI 492 after indicating that vehicle to be available for sale and showing it to each prospect. Accordingly, on that hypothesis, Mr. Heffernan was prepared, for the sake of allowing Mr. Hanson and Mr. Deans to concentrate their energies on trying to sell other cars to Mr. Snow and Mr. Sest, to allow CLI 492 to remain unsold to those customers. I consider that hypothesis, although not the most likely one, to be reasonably open, because, as I have already indicated, Mr. Heffernan was probably indifferent to whether or not CLI 492 might be sold for $9,990. That indifference, however, does not entail a lack of intention that it should be sold at that price to a customer who insisted on purchasing it after resisting every attempt by an experienced salesman, like Mr. Van t'Hooft, to "sell" him or her "up" to another vehicle. Mr. Heffernan's response to a question at the advertising meeting of 26 August that, if a customer insisted on seeing an advertised car, "we would just have to show it to him" is one indication inconsistent with such a lack of relevant intention. Mr. Ginnane pointed to the facts that the vehicle CLI 492 had cost the defendant $10,001.69, being more than the price of $9,990 for which it was advertised for sale, that interest charges had been incurred in having it on the floor since April 1985, that it had been kept in stock contrary to the defendant's policy after it had travelled significantly more than 10,000 kilometres, and that more than $11,000 had been incurred by the defendant in advertising "expenses apportionable to it. However, I do not consider that any of those facts, or any combination of two or more of them, operates to exclude the hypothesis to which I have just referred. There is evidence that the defendant had, early in 1983, sold seventy Holden "Camira" cars at less than cost price as a means of achieving a "high profile" in the industry and attracting other, profitable, business. Accordingly, I am not prepared to infer that, when he advertised individual cars at or near cost price, Mr. Heffernan did not intend them to be sold at the advertised prices. Likewise, it is open to infer, contrary to the inference which Mr. Ginnane invited me to draw, that the is. length of time which CLI 492 remained in the defendant's stock incurring floor plan charges was attributable to laxity in applying the stock control policy and to the vehicle's lack of appeal to prospective purchasers exposed to intensive efforts by the defendant's sales staff to "sell" them "up" to -brand new "Commodores". It is clear that the defendant devised and expended its advertising budget with a view to generating "customer traffic" and interest in the whole of its stock. Consequently, the amount spent was out of all proportion to the value of the individually-featured cars, and the success of the advertising was not to be measured by whether or not, or how quickly, those cars were sold. However, those features of the defendant's advertising practices do not warrant a finding beyond reasonable doubt that the defendant did not intend to offer the cars featured in its advertisements for sale at the advertised prices. As well, Mr. Ginnane relied on the fact that the vehicle CLI 492, whilst it was at the defendant's premises, @id not bear the "K" or "L" forms required by the Victorian Motor Car Traders Act. In respect of that matter, I am disposed to accept the evidence of Mr. Richardson, who, in August 1985, was the defendant's new car manager. Mr. Richardson's evidence-in-chief, which remained unshaken by cross-examination, was as follows: 2u. "MR SCERRI: Are you familiar with the requirement to affix L forms and K forms to used cars? -~-- Used cars, yes. In August 1985, was it the practice of the company to affix such forms to demonstrator cars? --- We then did not put L forms to demonstrators or the new cars, it was only used cars in the used car lot. - What is the current practice? --- The current practice is any vehicle that is registered must have a L form affixed to the rear window. And when you say vehicle registered, you include demonstrators, I understand? --- Well, demonstrators, yes ~- registered. Why was it not the practice in August 1985 to affix such forms? --- I was not aware that it.had to be done. Have you since become aware that it is necessary? --- Yes." It was also submitted on behalf of the prosecutor that the relevant part of the advertisement of 26 August 1985 represented that the defendant had several "Commodore" six cylinder sedans for sale at a special price of $9,990 and that, if the primary contention of the prosecutor were rejected, the defendant did not intend to offer more than one car, CLI 492, for sale at that price. It is true that the advertisement is rendered ambiguous by the presence of the phrases "SL VK Commodore 6 Cyl Seds" and "All low Kms", which, standing alone, suggest that the defendant had more than one such car for sale and that all of them had been driven for only a low number of kilometres. However, that impression is contradicted by the use of the singular "demonstrator", and the reference to a single registration number, CLI 492. In my view, s.56(1) of the Act requires the court to have regard to the nature of the advertisement as a whole. It is also appropriate to take account of the class of consumers likely to read and respond to an advertisement of that nature. In the same context, the legal requirement imposed by Reg.403 of the Motor Car Traders Regulations 1974 (S.R. 499) as amended is not without relevance. That regulation provides: "(1) Subject to the provisions of sub- regulation (2), a motor car trader his servant or his agent who publishes or causes to be published any advertisement or statement shall also publish or cause to be published in such advertisement or statement the number of the licence of the Motor Car Trader concerned and where the advertisement or statement relates to a second-hand motor car any description or identification of such motor car shall - (a) include the registered number or where the motor car is unregistered, the engine number of motor car; and (b) a statement as to the cash price of the motor car. (2) Whenever a motor car trader advertises or causes to be advertised a batch of six or more second-hand motor cars of the same model on television, movie film or radio, it shall not be necessary to include the registered numbers or engine numbers as required in paragraph (a) of sub- regulation (1), but the number of the licence of the motor car trader, the cash price of each of the motor cars concerned and the place at which each of the motor cars is available for purchase shall be included. (3) In relation to an advertisement referred to in sub-regulation (2), the trader shall, if required to do so by any member of the Victoria Police or any member of the Committee, produce evidence that the number of motor cars referred to therein were in his possession at the place referred to in the advertisement at the time the advertisement was published." The advertisement in question complied with that regulation by stating the defendant's number as a licensed motor car trader, and by including the registered number CLI 492. I am not prepared, on balance, to interpret the advertisement as referring to more than one vehicle, thereby contravening the regulations in respect of vehicles other than CLI 492. In the result therefore the summons in VG 316 of 1986 must be dismissed. I propose to order the defendant to pay the prosecutor's costs without differentiating between VG 316 and vG 317 and I shall hear counsel on the question of penalty in relation to the later summons. I certify that this and the preceding twenty-one (21) pages are a true copy of the Reasons for Judgment of the Honourable Mr. Justice Ryan. Dated: 25 45064 "597 LPF Fel 1-0 KG Associate