R v WILKIE [2008] NSWSC 739

Reported Decision : 68 ACSR 281

New South Wales Supreme Court

CITATION : R v WILKIE [2008] NSWSC 739

HEARING DATE(S) : 9-10 July 2008

JUDGMENT DATE : 17 July 2008

JURISDICTION : Common Law

JUDGMENT OF : Michael Grove J

DECISION : Stay of trial on indictment refused

CATCHWORDS : CRIMINAL LAW AND PROCEDURE - Acquittal of accused by direction at trial arising out of alleged misconduct as chief operating officer of insurance company (FAI General) - Further charge alleging different misconduct - Different co-accused on each set of charges - No abuse of process

LEGISLATION CITED : Crimes Act 1914 Royal Commissions Act 1902

CATEGORY : Separate question

Jago v District Court of NSW (1989) 168 CLR 23 R v Kite [1992] 60 A Crim R 226 CASES CITED : Ridgeway v The Queen (1995) 184 CLR 60 The Queen v Carroll (2002) 213 CLR 635 Walton v Gardiner (1992-3) 177 CLR 376 Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522

PARTIES : REGINA - Respondent/Crown Daniel WILKIE - Applicant/Accused

FILE NUMBER(S) : SC 2007/00002619

COUNSEL : A Macsporran SC; M Wigney SC; T Berberian - Crown L Robberds QC; M Thangaraj - Accused

SOLICITORS : Commonwealth Director of Public Prosecutions - Crown Speed & Stracey- Accused

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION CRIMINAL LIST

MICHAEL GROVE J

Thursday 17 July 2008

2007/00002619 - REGINA v Daniel WILKIE

JUDGMENT (On application for permanent stay of proceedings)

1 HIS HONOUR: On 14 September 2007 Daniel Wilkie (the applicant) and Ashraf Kamha were arraigned upon an indictment containing six counts, three counts being charged against each accused. Pleas of not guilty were entered and a trial was fixed to commence on 7 July 2008. On that date a fresh indictment was presented against Kamha. The single count in that indictment repeated what had previously been count 3 and, upon arraignment, Kamha pleaded guilty. Pursuant to the procedure in s 16BA of the Crimes Act 1914 he asked that there be taken into account on sentence a further offence which was similar in terms (with some variation in the particulars) to what had been count 5 in the previous indictment. Kamha has been remanded for a sentencing hearing at a later date. 2 It has been indicated that a fresh indictment against Wilkie will simply repeat what were counts 2, 4 and 6 and they will now be numbered counts 1, 2 and 3. In brief, count 2 (1) charges that being an officer of FAI General Insurance Company Limited (FAIG) he knowingly failed to act honestly in the exercise of his powers and duties with the intention of deceiving the Australian Stock Exchange (ASX). Count 4 (2) charges that as such officer he was privy to the fraudulent altering of a book relating to the affairs of FAIG, namely the AEGIS database. AEGIS was an electronic record maintained by FAIG to process and record premiums, payments, insurance details and case estimates. Once the lastmentioned estimates were made they were entered into AEGIS by authorized staff. Count 6 (3) charges that he committed an offence similar to that charged in count 1, the party deceived being Cooper and Lybrand Actuarial Services Pty Limited which were FAIG's external actuaries. For the purpose of a comparison I will later set out in full the terms of these counts. 3 Also on 7 July 2008 Wilkie moved the Court for a permanent stay of proceedings on the indictment and it is that with which I now deal. An alternative application for a separate trial from Kamha has become redundant. 4 The application is based upon a contention that the proceedings upon the indictment are an abuse of process. There is no doubt about the power of the Court to order such a stay where that is found to be the case. A perception of abuse may emerge from a variety of possible circumstances and situations: Ridgeway v The Queen (1995) 184 CLR at 60. Nevertheless it is a power that must be exercised with restraint and due recognition of the authority of a prosecutor to bring proceedings and have allegations determined by an appropriately constituted tribunal. In Walton v Gardiner (1992-3) 177 CLR 376 it was observed in the joint judgment (Mason CJ, Deane and Dawson JJ at 392) that a finding that continuation of proceedings would be "so unfair and unjustifiably oppressive" as to constitute an abuse of process was something of which a court would be satisfied only in an exceptional or extreme case. In R v Kite [1992] 60 A Crim R 226, Debelle J spoke to similar effect noting previous statements that the discretion would be exercised in rare cases. It is the nature of an order for stay that allegations do not proceed to determination. In testing whether continuation of proceedings would be unfair to an accused, his or her interests must be balanced against the right of the community to expect that persons charged with criminal offences are brought to trial: Jago v District Court of NSW (1989) 168 CLR 23 at 33. 5 It has not been disputed in this hearing that the power to order a stay should only be exercised in exceptional cases. The applicant submits that this is an exceptional case. It is accepted that what is involved is an appeal for the exercise of discretion but, if the grounds for it are made out, it should be exercised. I am content to approach the issues on that basis. 6 In a written submission counsel for Wilkie summarized their submission by contending that to require him to face these charges would be vexatious, oppressive and unfair, and, amount to bringing the administration into disrepute for these reasons: "(i) in the first trial the Crown alleged that by 5 December 1997, the applicant was aware that FAIG was under reserved in the International Book (T57\27-36; T58\33 – 51; T59\2 – 16. The under reserving the subject of the first trial, was under reserving in the International Book); (ii) in the first trial the Crown alleged that in June 1998 the applicant was at pains to ensure that the under reserving identified by a Mr Trahair in the International Book, was not disclosed to Coopers & Lybrand, because if it was disclosed to Coopers & Lybrand it would then have been disclosed to FAI's auditor (T1812\7 – 10); (iii) in this trial the Crown alleges that in December 1997 the applicant was aware of under reserving in the International Book. In this trial it is also alleged that the applicant took steps to ensure that the under reserving was not disclosed to Coopers & Lybrand (who at the time were involved in providing an actuarial assessment to be used for the FAI accounts for the six months ended 31 December 1997); (iv) on the Crown case in this trial, the 2 January 1998 deductions (which are referred to below) brought about under reserving. The Crown alleges that the applicant knew of that under reserving and took steps to ensure that Coopers & Lybrand did not know of it; (v) well before the commencement of the first trial, the Australian Securities and Investments Commission (ASIC) and the Crown were aware of the case which the Crown seeks to make against the applicant in this trial concerning the reductions made on 2 January 1998, the under reserving brought about by those deductions and the under reserving in the International Book; (vi) the charges in this indictment arise out of facts which were before the Court in the first trial ( R v Carroll 213 CLR 635 at [130] per McHugh J. See also Gleeson CJ and Hayne J at [47]); (vii) the charges the subject of the first trial alleged a series of offences of the same or similar character as the offences the subject of the indictment in this trial and the charges the subject of this trial should have been included in the indictment in the first trial ( Connelly v Director of Public Prosecutions [1964] AC 1254 at 1347 per Lord Devlin); (viii) on 2 July and 27 August 2001 the applicant was privately examined pursuant to section 19 of the ASIC Law at the premises of ASIC. The section 19 notices referred to an investigation into HIH Insurance Limited and subsidiaries; (ix) On 6, 7, 8, 11 and 12 March and 23 and 24 April 2002, the applicant gave evidence before the HIH Royal Commission; (x) the applicant ceased his employment after he gave evidence before the HIH Royal Commission on 12 March 2002 as a result of the publicity given to the Royal Commission and other than a short time in a family business, has remained unemployed since that time by reason of the Royal Commission, the first trial and this trial; and (xi) in November 2005 the applicant was acquitted on all three charges the subject of the first trial." 7 In a written response counsel for the Crown submitted that analysis would demonstrate that the applicant's case for a stay essentially depended upon three contentions namely: "(a) The charges in this indictment arise out of facts which were before the Court in the first trial involving the applicant. (b) The charges the subject of the first trial alleged a series of offences of the same or similar character as the offences the subject of the indictment in this trial. (c) The charges the subject of this trial could and should have been included in the indictment in the first trial." 8 It is the Crown submission that none of these contentions is correct. In his oral submissions Mr Robberds QC for the applicant submitted that the proposed trial involved unacceptable unfairness or injustice for three main reasons, first that two trials arise out of the same series of alleged events; second this use of the court's processes will bring the administration of justice into disrepute and, third, the applicant has been subjected to coercive powers of the State since 2001 as a result of which he has effectively remained unemployed. 9 It is therefore necessary to examine the issues at the first trial and to refer to some of the evidence therein for comparison with what is anticipated to be the case in the scheduled trial. It will also be necessary to refer to some of the sources of information concerning the alleged conduct of the applicant. 10 Beginning on 5 September 2005 the applicant (with others) stood trial (the first trial) upon an indictment charging, relevantly, three counts against him. Those counts were in these terms: "The Director of Public Prosecutions of the Commonwealth of Australia, who prosecutes in this behalf for Her Majesty, charges in the Supreme Court of New South Wales in its criminal jurisdiction at Sydney on 5th September 2005 that DANIEL WILKIE 1. Between about 1 March 1998 and 6 May 1998 at Sydney in the State of New South Wales, being an officer of FAI General Insurance Company Limited ('FAIG') knowingly did: (a) fail to act honestly in the exercise of his powers and the discharge of the duties of his office; (b) with the intention to deceive the auditors of FAI Insurances Limited; in that he caused FAIG to enter into a transaction with General and Cologne Reinsurance Australasia Limited ('GCRA') the substance and effect of which was that FAIG agreed to pay premiums totalling $67.5 million to GCRA in order to obtain a maximum reinsurance recovery from GCRA of $65 million but which transaction was structured in such a way to conceal its true substance and effect. And the said Director of Public Prosecutions further charges that DANIEL WILKIE 2. Between about 23 June 1998 and 26 June 1998 at Sydney in the State of New South Wales, being an officer of FAI General Insurance Company Limited ('FAIG') knowingly did: (a) fail to act honestly in the exercise of his powers and the discharge of the duties of his office; (b) with the intention to deceive the auditors of FAI Insurances Limited; in that he caused FAIG to enter into a transaction with General and Cologne Reinsurance Australasia Limited ('GCRA') that amended and extended a transaction entered into between GCRA and FAIG in May 1998 and the substance and effect of which was that FAIG agreed to pay premiums totalling $89.75 million to GCRA in order to obtain a maximum reinsurance recovery from GCRA of $87 million but which transaction was structured in such a way as to conceal its true substance and effect. And the said Director of Public Prosecutions further charges that DANIEL WILKIE 3. Between about 26 June 1998 and 9 September 1998 at Sydney in the State of New South Wales, being an officer of FAI General Insurance Company Limited ('FAIG') did permit the making available of information, namely information that FAIG had entered into a reinsurance contract with General and Cologne Reinsurance Australasia Limited ('GCRA') the terms of which were recorded in a document on GCRA letterhead and dated 26 June 1998 (the 'Contract'), to the auditor of FAI Insurances Limited ('FAI'), a company which controlled FAIG within the meaning of Chapter 2M of the Corporations Act, which related to the affairs of FAIG and which information to the knowledge of Daniel Wilkie omitted from it a matter or thing which rendered the information misleading in a material respect. Particulars of the Omission (a) that the substance and effect of the reinsurance arrangements entered into between GCRA and FAIG was not fully recorded in the Contract; (b) the substance and effect of the reinsurance arrangements included that in addition to paying the premium specified in the Contract, FAIG would pay premiums totalling $12.5 million in relation to six other reinsurance contracts under which contracts FAIG would not seek reinsurance recoveries; (c) the substance and effect of the reinsurance arrangements entered into between FAIG and GCRA included that FAIG would not seek reinsurance recoveries under one of the sections of the Contract, namely section 6." 11 By 14 November 2005 and by direction of the presiding Judge, Wilkie was found not guilty by the jury on each of those counts. 12 The present indictment charges (using the current numbering): "The Director of Public Prosecutions of the Commonwealth of Australia, who prosecutes in this behalf for Her Majesty, charges in the Supreme Court of New South Wales in its criminal jurisdiction at Sydney on 14 September 2007 that DANIEL WILKIE 2 Between about 1 January 1998 and about 20 February 1998 at Sydney in the State of New South Wales being an officer of FAI General Insurance Company Limited ('FAIG') knowingly failed to act honestly in the exercise of his powers and the discharge of the duties of his office with the intention of deceiving the Australian Stock Exchange('ASX'). Particulars He permitted the accounts of FAIG to be consolidated with the accounts of FAI Insurances Limited ("FAI") as at 31 December 1997, in circumstances where he knew that FAIG's accounts had a falsely inflated profit figure, that this would falsely inflate the profit in the consolidated accounts of FAI and that the accounts of FAI were to be released to the ASX.