R v Thompson; R v Farrugia (No.3) [2019] NSWDC 332

District Court New South Wales

Medium Neutral Citation: R v Thompson; R v Farrugia (No.3) [2019] NSWDC 332 Hearing dates: 27-30 May, 4-28 June, 3-15 July 2019 Date of orders: 15 July 2019 Decision date: 15 July 2019 Jurisdiction: Criminal Before: Smith SC, DCJ Decision: In respect of Count 1 there should be a directed verdict Catchwords: CRIMINAL LAW – verdict by direction Cases Cited: R v Thompson; R v Farrugia (No.2) [2019] NSWDC 329 Smith v R (2017) 259 CLR 291 Category: Procedural and other rulings Parties: Regina (Crown) Ian Athol Thompson – Defendant Joseph Carmec Farrugia - Defendant Representation: Counsel: Crown: Mr L Fernandez with Mr C McGorey Ian Athol Thompson: Mr P Boulten SC with Mr A O'Brien Joseph Carmec Farrugia: Mr P Strickland SC with Mr S Wells

Solicitors: Crown: Commonwealth Department Public Prosecution Ian Athol Thompson: Clayton Utz Joseph Carmec Farrugia: McPherson Kelly File Number(s): 2017/305308 – Ian Athol Thompson; 2017/305247 – Joseph Carmec Farrugia Publication restriction: Nil

Judgment – DELIVERED EXTEMPORE AND REVISED 1. At the close of the Crown's case both of the accused joined an application for a verdict by direction on each of the three counts in the indictment. I made the decision to direct the jury to give a verdict of not guilty in respect of counts 2 and 3 but not in respect of count 1. 2. In my reasons for that decision I said relevantly at [9] and [10] that the real question in respect of count 1 was whether it was open to find that there was an ongoing agreement, that is, to find there was an agreement to adjust the EBIT on an ongoing, as needs basis from 7 or 8 November 2008 through to June 2011. 3. As I noted in that part of my judgment, one of the real difficulties facing the Crown in its case was the evidence of Ms Cousins (although I did not specifically refer to her by name) that there was, in fact, no ongoing agreement of that nature [1] . I will come to what her evidence was later in these reasons. The case then continued and each of the accused has given evidence and there has been other evidence given on their behalf. 4. At the close of the accused's case, the Crown referred to Ms Cousins' evidence, as well as that of Mr Raines, and said amongst other things, that they did not consider that they were part of an agreement and addressing the jury said [2] : "You might think that's very strong evidence that they weren't part of an agreement. And if you come to that finding, well, then the Crown hasn't been able to establish that fundamental aspect of the conspiracy, that is each of the people that the Crown alleges were not part of the agreement." 1. The Crown went on to say that Samantha Cousins and Glyn Raines in their evidence at relevant times were "talking about what they personally or subjectively believed was taking place between each of themselves and Ian Thompson, and Joseph Farrugia". What they were saying, rather, was that they did not feel at that time that their actions were part of an agreement. Later [3] , the Crown said to the jury that: "…when you look at the interaction between Ian Thompson and Joseph Farrugia, and Samantha Cousins and Glyn Raines, what you can actually see is an agreement, and then acts taken as part of that agreement." 1. The accused now both renew their application for a verdict by direction in respect of count 1. Although it was not the focus of the submissions in the earlier argument, the critical part of this argument was that the element of intention in the offence of the crime of conspiracy, cannot be made out in light of Ms Cousins' evidence but specifically submit in [31] of their joint written submissions [4] that the fact that Ms Cousins was not challenged on her evidence, and indeed that her evidence was accepted, that is, by the Crown, means that a properly instructed jury would be instructed to accept that evidence. 2. There was some argument about the impact of the fact that the Crown did not re-examine or seek to cross-examine Ms Cousins or Mr Raines on the particular evidence in question. The Crown raised a preliminary objection to the argument to the extent that the Court has made up its mind on the issue of count 1 in the indictment and it is now a matter for the jury [5] . 3. Counter to that it is argued that the Court is, up until the verdict or a discharge of the jury, seized with the legal questions in the matter and to that extent, the direction or the decision not to direct a verdict in respect of count 1 had no finality to it. I am satisfied on that preliminary matter that I do have jurisdiction to determine the re-agitated question of a verdict by direction in respect of count 1, essentially for the reasons outlined by Mr Boulten SC in his address as I briefly summarised. 4. Before proceeding to the law that is applicable, it is helpful to reiterate just what the evidence was that now informs the basis of this submission. Rather than reading all of the evidence, I will set out what is helpfully set out in the joint written submissions of the accused, in particular at [13]-[27]. "13. In relation to Mr Farrugia, she was asked generally: "Q. You never made an agreement with Joe Farrugia to falsify the books of Hastie Services whenever there was a gap between the EBIT forecast and the EBIT results, when that gap was too large, did you? Directly, no." T648.35-38 14. Specifically, Ms Cousins denied the existence of any agreement with Mr Farrugia in relation to a number of the overt acts. Example 1: 7-9 November 2008 (Reversal of bonus accrual and PDA depreciation) 15. The adjustments Ms Cousins made on 9 November 2008 after an exchange of emails on 7 November 2008, the day on which the Crown said in closing that the agreement was formed. In relation to that transaction Ms Cousins was asked the following: "Q. And I'm not going to ask you any details about that. But it's the truth, isn't it, that before you made those entries, you didn't have any discussion at all with Joe about making those entries, did you? A. Me personally? No. Q. And you made no agreement with Joe about making those entries, did you? A. Correct." T649.1-8 16. So far as Mr Thompson is concerned, Ms Cousins said: "Q. Okay. So when you did whatever it was you did in relation to these bonus accruals and these PDA depreciation items. A. Yes. Q. Had you set out on a course where you were going to rort the books, as and when required? A. No. Q. So this was not part of some grand scheme to continually make alterations in the books? A. No. T533.23-33 Example 2: Salaries for May (2009) 17. In relation to an email from Cousins to Thompson dated 7 June 2009 about a particular email relating to "Salaries for May [2009] [Ex 1 page 9], she said "Q. So it was something that you were presenting as an opportunity. Yes. Q. You're not suggesting here in the email that it's sort of sneaky or sinister or anything like that, apparently, though, are you? A. No, not in the email. No. Q. Well, you didn't at all to Ian about this transaction in particular I'm talking about was just one line item in the May profit and loss report, right? A. Correct. Q. You didn't make the suggestion as part of some covert agreement with Ian Thompson that you're going to change the books whenever you thought it was necessary, did he? A. No." T543.05-543.19 Example 3: No conspiracy as at June 2009 18. Ms Cousins gave further evidence that she had no intention to commit the overarching agreement in relation to driving the EBIT results higher in June 2009: [Exhibit 1 page 11]: "Q. So by 9 June 2009, were you involved in a systematic overarching agreement with Glen Raines to just drop the numbers whenever you felt like it, whenever you thought the EBIT gap was too big? A. No." T547.35-38 Example 4: $20,000 entry of your choice 19. On 9 July 2009, Cousins made an adjustment of $20,000 in the Hastie Services journal. "Q. Correct. And that can be seen. And you did that without any reference to Joe Farrugia, didn't you? A. Correct. Q. You didn't discuss that posting with him beforehand? A. No. Q. You made no agreement with him to post that figure, did you? A. No." T 653.44 - T654.3-4 20. And further: "Q. Now, you did that without reference to Ian Thompson, I suggest? A. Yes. Q. That he was not in on this arrangement, was he? A. Glyn's initial request, no. Q. You posted it before you told him about it, right? A. Correct. Q. And you told him what you'd done, right? A. Correct. Q. So he was not in agreement to it at the time you did it, right? A. Correct." T548.18-31. Example 5: write off of $137,500 per month 21. In relation to the write off of $137,500 per month per the May 2010 budget: "Q. Was this, for instance, part of an agreement that you had reached to put false entries in the books of the account whenever necessary in order to breach the gap with EBIT? A. No." T 575.34 – 575.37 Example 6: 8/12 July 2010 – Ex 1 page 122 22. On 12 July 2010, Ms Cousins made an entry in the Perth branch of WA in the sum of $150,000 in relation to the June 2010 monthly result. The Crown alleged that this entry was a result of an email from Glyn Raines to Samantha Cousins telling her to put "$200k back into the result". "Q. Could I ask you to go back to page 122. You've given evidence about this $150,00 that you yourself posted, based upon some emails that you were taken to back at pages 118 and 119, if you want to have a quick look at those. A. Yes. Q. You said that these posts were a result of those two earlier emails, correct? A. Correct. Q. You didn't discuss posting those entries with Joe before making them, did you? A. I didn't have a discussion with Joe, no. Q. You didn't make any agreement with him to make those entries, did you, on that page? A. On - no." T679.35-49 23. Whatever Ms Cousins did, she was not just randomly plucking something out of the air. She was looking for adjustments that she could justify and she potentially found things that were legitimate. Example 7: 9 November 2010 – Ex 1 page 177 24. On 9 November 2010, Cousins and Thompson exchanged emails about making up the shortfall for the October 2010 EBIT: "Q. Anyway, he's looking for opportunities to get the numbers right? A. Correct. He's asked the question about whether or not they've done recharges. Q. So even here, if I might go back to the same old question, you're not plucking random figures out of the air. The two of you are discussing areas where you might be able to focus on just squeeze a bit more into the-- A. Yes. Q. --into the items. A. Yes. Q. So this is not, as it were, an agreement between you and him or you and anyone else for that matter, to just put the numbers down randomly as part of a continuing, over-arching agreement to change the numbers whenever you thought it was necessary. A. Correct. Q. You agree with that? A. Yes." T599.37 – 600.07 Example 8: 3 April 2011: Ex 1 p 228 25. On 3 April 2011, Cousins and Thompsons exchanged emails about making adjustment for Far North Queensland in relation to the March 2011 forecast: "Q. And you answered that question, at the bottom of page 228, "We have no charge to FNQ this month for SS, shared services, and central management. Sorry, I know I'm not helping." So the answer, "No, we can't do that," right? A. Yep. Q. And then he went, "Hm. We don't need to make the year-to-date forecast but overall we need to make the March forecast EBIT for each centre," you see that? A. Yes. Q. That was an answer to your direct question, "Does that mean you're instructing me to change the number to equal the year-to-date forecast?" Answer: "No, we don't," right? A. Yes. Q. "But we are supposed to make the March forecast." A. Yes. Q. And then you said to him, "Okay, well it's about 35k off that number," you meant off the March forecast for EBIT? A. Correct. Q. "I'm just doing a detailed CQ budget at the moment." A. Yes. Q. And that was the budget for the following 12 months, you told us. A. Correct. Q. So no direction to hit the number irrespective, but you said you'd keep looking? A. I said that that's where it was, but-- Q. Well there was no agreement to just push the number in irrespective of the truth, was there? A. No. Q. And this was another example of the two of you under pressure to do what you can to meet the EBIT, and the two of you trying to get there within the balance of propriety, do you agree with that? A. This email? Yes." T618.29-619.18 Example 9: June 2011 handwritten notes: Ex 1 page 241 ff 26. In relation to the adjustments referred to in Mr Thompson's handwritten notes in the June 2011 Profit and Loss statements: "Q. Yes. But that's not really what I'm asking. Even assuming that you knew that what you were doing was wrong on this instance, was it because you had already agreed with somebody, Ian Thompson, Glyn Raines, or Joe Farrugia or one or more of them, that whenever you needed to put bodgie figures in the books, you just go and do it to increase EBIT? A. No. It always came via a discussion. Q. It was always an event by event discussion. A. Correct." [Underlining (removed and highlighted) added which gives the evidence application to the entire putative conspiracy] T631.20-28 27. And further in relation to Ex 1 page 270: Q. If you go to page 270, you didn't have any discussions about Mr Farrugia about those entries, did you? A. No. Q. Didn't make any agreement with him to make those entries, did you? A. I didn't speak to him about those entries, no. T685.38-39" (Emphasis in original, emphasis added) 1. As this is essentially a circumstantial case and the pertinent question is the intention of the parties to enter into an agreement, the case of Smith v R (2017) 259 CLR 291 provides the relevant law in the form of what the majority said were pertinent directions. Their Honours at [69(5)] said: "The accused cannot be regarded as having intended to do something unless it is established beyond reasonable doubt that he or she meant to do that thing." and then at sub-paragraph (7): "In order to draw an inference of intent, it is necessary to be satisfied beyond reasonable doubt of the facts and circumstances from which the inference of intent is drawn and that the inference of intent is the only reasonable inference open to be drawn from those facts and circumstances." 1. The Crown's case is that in spite of Ms Cousins' and indeed Mr Raines' evidence, it is open to the jury to find that there was an intention to enter into the pleaded agreement, by which I mean the overarching agreement particularised in the Crown's opening: that is, to falsify the books on an ongoing, as needs basis. 2. In order to reach that conclusion, the jury must be able to conclude that the agreement was the only reasonable inference that could be drawn from the facts and circumstances relied upon by the Crown. Those facts and circumstances, briefly summarised, are each of the seven critical elements around which the overt acts relied upon by the Crown are said to have existed. 3. Ms Cousins' evidence, to the extent that I have set it out above, stands in the way of that conclusion. I found in my earlier judgment that it was open from the later facts and circumstances to find that there was such an agreement. However, the question as refocused in argument is now whether it is rationally open to conclude beyond reasonable doubt that Ms Cousins' evidence was false, in other words that it did not provide a possible alternative hypothesis. 4. In my view, the later facts and circumstances relied upon by the Crown were consistent with both the existence of an agreement but also with an acceptance of Ms Cousins' evidence. While it was consistent as I said in my earlier judgment with the existence of an overarching agreement, it was also consistent with what Ms Cousins described as an agreement on a case by case basis. 5. On the basis of that conclusion, my view is that it is not rationally open to exclude beyond reasonable doubt Ms Cousins' evidence and therefore for the jury properly instructed, to reach a conclusion of guilt in respect of count one. For that reason, I will direct the jury to enter a verdict of not guilty in respect of count one.