R v Chalabian (No. 3)

1. [1]

   JOHNSON J: The Accused, Sevag Chalabian, is charged on an indictment containing a single count under s.400.3(1) Criminal Code (Cth) in the following terms:

2. [2]

   The trial is scheduled to commence at the Supreme Court in Sydney on 21 February 2022.

3. [3]

   The parties have undertaken case management steps in accordance with what was said by the Court of Criminal Appeal in Roach v R (2019) 344 FLR 429; [2019] NSWCCA 160 at [128]-[141].

4. [4]

   In advance of the trial, the parties have complied with case management orders including undertaking a pretrial conference under s.140 Criminal Procedure Act 1986. In accordance with s.140(8) of that Act, the Court has been provided with a Certificate dated 16 December 2021, signed on behalf of the Crown and the Accused, reporting upon the outcome of the pretrial conference (see [20] below).

5. [5]

   I will return to outstanding issues, to be considered in this judgment, after providing a brief description of the Crown case against the Accused.

Brief Overview of Crown Case Against Accused

1. [6]

   Broadly speaking, the Crown case is that between 1 February 2017 and 18 May 2017, the Accused, a practising solicitor in the firm Lands Legal, dealt with $24,244,740.64 by receiving into his law firm trust account, and disposing of, money derived from the commission of blackmail offences, fraud or conspiracy to commit fraud offences and/or money laundering or conspiracy to commit money laundering offences said to have been committed by Daniel Hausman, Daniel Rostankovski, Adam Cranston, Dev Menon, Jason Onley and others. These various offences arise, directly or indirectly, from what has been called the Plutus tax fraud.

2. [7]

   The Crown will allege that the Accused was acting substantially on the instructions of, and to benefit, Daniel Hausman and Daniel Rostankovski, who had engaged in blackmail offences directed to Adam Cranston, Dev Menon and Jason Onley arising from the Plutus tax fraud.

3. [8]

   A principal issue in the trial will be whether the Crown has proved beyond reasonable doubt that the Accused believed the money he dealt with was the proceeds of crime. The Crown case as to the Accused’s knowledge is, in part, circumstantial.

4. [9]

   An Amended Crown Case Statement (“ACCS”) dated 20 August 2021 sets out in detail the way in which the Crown puts its case against the Accused. It is not necessary, for the purposes of this judgment, to set out in detail the various components of the Crown case.

5. [10]

   The Crown case includes the calling of Mr Hausman, Simon Anquetil and others, to give evidence together with the tender of a wide range of documents and electronic recordings of conversations captured by surveillance device or telephone intercept, as well as emails and other electronic communications, including WhatsApp messages.

6. [11]

   The Crown alleges that, on 30 January 2017, the Accused sent Mr Hausman a WhatsApp message containing the Accused’s legal firm’s trust account details (paragraph 39, ACCS).

7. [12]

   Thereafter, it is alleged that there were various communications to and from the Accused concerning his trust account, including WhatsApp messages between the Accused and Mr Hausman on 1 February 2017 in which the Accused was told by Mr Hausman that his client would be Anthony Palumberi with a direction that the Accused was not to mention Mr Hausman. Mr Palumberi was one of a number of “straw” or “shadow” nominal directors of second-tier companies utilised for the purpose of the Plutus tax fraud.

8. [13]

   The Crown anticipates that Mr Hausman will give evidence that he sent the WhatsApp messages to provide “the cover up details for the blackmail” by providing a version of events for the Accused to use when dealing with others about the identity of his client and whom he was representing for the purpose of receiving money in his trust account as, according to Mr Hausman, Mr Palumberi was not the real client (paragraphs 44-45, ACCS).

9. [14]

   The Crown says that, between 1 and 15 February 2017, the sum of $4,822,278.38 was received into the Lands Legal trust account operated by the Accused’s legal firm (paragraph 91, ACCS).

10. [15]

    The Crown says that, between 16 February 2017 and 26 April 2017, a total of approximately $19.4 million was deposited into the Lands Legal trust account with this money said to have been derived as proceeds of crime (paragraph 136, ACCS).

11. [16]

    The Crown alleges that the total sum of $24,244,740.64 credited to the Lands Legal trust account constituted the proceeds of crime flowing from the Plutus tax fraud and two blackmail offences committed by Mr Hausman and Mr Rostankovski.

12. [17]

    The Crown alleges that, on 16 February 2017, Mr Hausman sent the Accused a message confirming that the Accused would be paid $20,000.00 for each million dollars received in the Lands Legal trust account (paragraph 147, ACCS).

13. [18]

    It is the Crown case that the Accused made disbursements from the Lands Legal trust account on the instructions of Mr Hausman, and with the agreement of Mr Rostankovski, from February 2017. The destination of the funds disbursed by the Accused involved entities which Mr Hausman, Mr Rostankovski or the Accused controlled or were connected with, including overseas entities. No monies were paid from the Lands Legal trust account to the Australian Taxation Office in payment of any outstanding tax obligations of the second-tier companies (paragraphs 154-159, ACCS).

14. [19]

    The Crown alleges that, by the date that the Accused received funds into the Lands Legal trust account (and in any event by such times as he was to receive an amount exceeding the statutory threshold of $1 million), he believed that the money was the proceeds of crime. The Crown will seek to establish that the Accused knew the following facts:

Areas of Agreement and Dispute Arising from the Pretrial Conference

1. [20]

   The Certificate dated 16 December 2021 signed by the parties reported the following matters to the Court arising from the pretrial conference:

The Pretrial Hearing on 14 December 2021 and 1 February 2022

1. [21]

   The principal issue requiring determination by the Court relates to the manner of presentation to the jury of information concerning the operation of a solicitor’s trust account and the legal duties of a solicitor in that respect.

2. [22]

   The remaining issue for decision relates to the Crown’s proposal to edit certain recordings and transcripts of telephone intercept conversations between Mr Hausman and Mr Rostankovski, principally on the grounds of relevance. The Court heard submissions on 14 December 2021 concerning this topic.

3. [23]

   At the commencement of the hearing on 14 December 2021, a further controversial issue related to the Crown’s proposal to edit, on the grounds of relevance, the recording and transcript of discussions which took place on 1 February 2017 at the office of Clamenz Lawyers (Mr Menon’s firm) between a number of persons including Adam Cranston, Jason Onley, Dev Menon, Daniel Rostankovski, Stephen Barrett, Simon Anquetil and others. This discussion (which occupied some three hours) was recorded under a surveillance device warrant issued to officers of the Australian Federal Police as part of the investigation of the Plutus tax fraud.

4. [24]

   Following submissions made to the Court on 14 December 2021, having had an opportunity to hear submissions from Mr Brady SC, for the Accused, as to the suggested relevance of the parts of the 1 February 2017 transcript under debate, the Crown withdrew its submission that those parts should be omitted for the purpose of the trial (PT48). Part of the recording and transcript of 1 February 2017 is to be deleted by agreement between the parties (PT46-47, 50). Accordingly, there is no remaining controversy with respect to that issue for the Court to determine.

5. [25]

   It remains necessary for the Court to rule on Crown objections to parts of conversations between Mr Hausman and Mr Rostankovski recorded under telephone intercept warrants. Subject to certain exceptions, the Accused submitted that the entirety of the conversations ought be admitted with the Crown submitting that parts ought be rejected on the ground of relevance under s.55 and s.56 Evidence Act 1995, or in the exercise of discretion under s.135 of that Act.

Duties of Solicitors Concerning Trust Accounts

1. [26]

   The Crown submitted that proof of the Accused’s knowledge at trial (as an element of the charged offence) is informed by his status as a solicitor and knowledge of his duties and obligations as a solicitor. With this in mind, the Crown proposed initially to call as witnesses at the trial:

2. [27]

   Mr Lean has made a statement dated 21 August 2020 and Mr Sofiak has made statements dated 20 August 2020 and 17 August 2021.

3. [28]

   In the Crown submission, the evidence of Mr Lean and Mr Sofiak is relevant because it outlines the contents of pertinent solicitor’s duties known to the Accused which bear upon his knowledge that the money received into and disbursed from his trust account was the proceeds of crime. In particular, it was submitted that the knowledge of the Accused of those duties is relevant to prove that he was not acting for, or on the instructions of, any legitimate client in dealing with those funds and that he knew this to be the case.

4. [29]

   As an alternative to calling Mr Lean and Mr Sofiak at the trial, the Crown sought to have directions of law given to the jury as to the content of relevant laws regarding solicitors’ duties. In this respect, the Crown proposed that directions be given to the jury in the following form (Annexure A, PTMFI 1):

5. [30]

   It was submitted for the Accused that it was premature to determine the scope of any directions to be given to the jury so that the defence opposed the giving of detailed directions as sought by the Crown, certainly at an early point in the trial.

6. [31]

   In response to a request from the Court made in the course of submissions on 14 December 2021 (PT34-35), counsel for the Accused furnished on 16 December 2021 a document containing what the Accused submitted the jury could be told early in the trial by way of “ground rules” concerning trust accounts (PTMFI 5):

7. [32]

   The Crown submitted that the defence proposed directions in PTMFI 5 were inadequate and insufficient for the purposes of the trial. On 12 January 2022, the Crown provided alternative draft directions (PTMFI 6), which were amended in a further draft provided by the Crown on 28 January 2022 (PTMFI 9) which stated:

8. [33]

   Further oral submissions were made at the resumed pretrial hearing on 1 February 2022 with respect to the competing drafts of directions to be given to the jury concerning the role of a solicitor, including with respect to trust accounts.

9. [34]

   The Crown submitted that, at an early point in the trial, the jury ought be given directions, either orally or in writing, in terms of PTMFI 9 (see [32] above). Mr `Williams, counsel for the Accused, submitted that the directions to be given to the jury after opening addresses ought be confined to the matters contained in PTMFI 5 (see [31] above).

10. [35]

    After discussion with counsel in the course of submissions on 14 December 2021 and 1 February 2022, it was the common position of the parties that the Court ought give certain directions to the jury early in the trial concerning these topics, with the question of what further detailed directions ought be given to the jury to be considered later in the trial after the evidence had been given. In this respect, counsel for the Accused accepted that the proposed directions identified by the Crown in Annexure A to PTMFI 1 (PT78) were accurate as a matter of law. The defence position was that some of these directions may not arise in light of evidence to be adduced at the trial so that the Court should not determine, before the trial has commenced, that all these directions should be given to the jury.

11. [36]

    The remaining question is what should be said by the Court to the jury, at an early point in the trial, to introduce the concepts of the role of a solicitor and trust accounts in brief and uncontroversial terms.

12. [37]

    It was accepted that it was appropriate for the Court to give the jury certain directions in this respect after opening addresses, where a number of these concepts may have been mentioned by counsel, so that the directions from the Court, whether delivered orally or in writing, may serve the purpose of providing early assistance to the jury concerning this issue.

13. [38]

    It may be observed that there is significant overlap between the Crown and the defence draft directions. The particular areas of controversy lie in paragraphs 3, 4 and 5, 10(a) and (b) and part of paragraph 11 of PTMFI 9.

14. [39]

    Mr Williams did not submit that any part of these directions was wrong. Rather, the submission was that there was prejudice to the Accused as directions of this type, when introduced to the jury early in the trial, may be argumentative or tendentious in their operation in limiting the attention of the jury to these particular concepts. It was submitted that, if these particular concepts are relevant to issues in the trial, then the directions could be given later in the trial after the evidence was complete so that the directions would be understood by the jury against the background of the evidence adduced in the trial.

15. [40]

    The Crown submitted that paragraphs 3, 4, 5, 10(a) and (b) are accurate and are clearly relevant to issues in the trial. It was submitted that these directions are not controversial and would arise in the opening address for the Crown and perhaps the opening address for the Accused, so that there would be some context for the direction or explanation to be provided by the Court after opening addresses on these matters.

Decision Concerning Directions About Solicitors and Trust Accounts

1. [41]

   It is the responsibility of the trial Judge to give directions to a jury concerning issues of law arising in a criminal trial.

2. [42]

   It was common ground between the Crown and counsel for the Accused that the jury ought be given certain directions concerning the role of a solicitor and trust accounts with those directions being based upon law, including the Legal Profession Uniform Law (NSW) and the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015.

3. [43]

   Given the offence charged and issues in the trial concerning the use of a solicitor’s trust account, I accept that legal directions on these topics are relevant to issues including the mental element of the offence charged against the Accused.

4. [44]

   The present question involves directions to the jury concerning domestic law, namely the law of New South Wales with respect to solicitors and trust accounts. Section 143 Evidence Act 1995 states:

5. [45]

   The Australian Law Reform Commission (“ALRC”), in Report 26, “Evidence”, 1985, paragraph 973, stated that the proposal upon which s.143 is based “reflects existing law but simplifies it”.

6. [46]

   In ALRC Report 102, “Uniform Evidence Law”, 2005, s.143 was considered in paragraphs 17.7 and 17.8:

7. [47]

   Clearly, no proof (in the evidentiary sense) of domestic law is required: Le v McElwee [2008] ACTSC 55 at [34], [44]. The provision in s.143(2) for the Judge to inform himself or herself about matters in any way that the Judge thinks fit makes clear that the rules concerning admissibility of evidence do not apply, and that the Court may proceed to inform itself concerning domestic law subject to compliance with procedural fairness: Attorney General (Cth) v Foster (1999) 84 FCR 582 at [35]; Le v McElwee at [44]; cf Director of Public Prosecutions v El Mawas (2006) 66 NSWLR 93; [2006] NSWCA 154 at [74].

8. [48]

   The Crown does not seek to tender the evidence of Mr Lean and Mr Sofiak as expert opinion evidence. I observe that the Accused does not object to certain parts of Mr Lean’s statement touching on issues other than the present topics.

9. [49]

   With respect to paragraphs 3, 4 and 5 of PTMFI 9 (at [32]), I accept that these paragraphs contain accurate and uncontroversial propositions concerning the role of a solicitor. The Court understands that an issue in the trial will be the identity of the “client” of the Accused and the circumstances in which the “client” could provide instructions to the Accused.

10. [50]

    It does not seem to me that paragraphs 3, 4 and 5 give rise to any prejudice to the Accused in the context of this trial. The Court would inform the jury, either orally or in writing, after the opening addresses that these are not controversial propositions and are some of the concepts which will be referred to in the trial, as to which further and more detailed directions would be given later in the trial. An explanation of that type, provided after the opening addresses, will assist the jury in understanding this aspect of the trial without, in my view, giving rise to any prejudice to the Accused.

11. [51]

    I propose to include in any early direction or explanation to the jury, the matters contained in paragraphs 3, 4 and 5 of PTMFI 9.

12. [52]

    The parties agree that the opening part of paragraph 10 of PTMFI 9 is appropriate to be stated to the jury, but with the Accused submitting that the explanation should cease after the word “trial” and with the Crown submitting that the particular features concerning trust accounts set out in paragraph 10(a) and (b) ought be included as well.

13. [53]

    Clause 147 of the Legal Profession Uniform Law (NSW) provides (PTMFI 2, page 24):

14. [54]

    The term “permanent form” is defined in Clause 128 of the Legal Profession Uniform Law (NSW) as follows (PTMFI 2, page 16):

15. [55]

    Mr Williams submitted that there was tension between the words “permanent form” and the requirement in Clause 147(2)(d) of the Legal Profession Uniform Law (NSW) for trust records to be retained for a period of seven years. In response, the Crown drew attention to the definition of “permanent form” in Clause 128.

16. [56]

    I do not see any prejudice to the Accused in the explanation being given to the jury as contained in paragraph 10(a) of PTMFI 9 using the definition of “permanent form” in place of those words. In this way, paragraph 10(a) would provide:

17. [57]

    This would see a clearer explanation of the legal requirement in Clause 147 being provided to the jury in circumstances where that concept is pertinent to issues in the trial and is otherwise uncontroversial.

18. [58]

    With respect to paragraph 10(b) of PTMFI 9, it is appropriate to note the terms of Clause 138 of Legal Profession Uniform Law (NSW) which states (PTMFI 2, page 21):

19. [59]

    It will be observed that paragraph 10(b) of PTMFI 9 uses the language of Clause 138(1). Paragraph 10(b) is an accurate statement of the law and the concept is relevant to issues in the trial. I do not consider that the Accused will be prejudiced by giving the jury an explanation of this sort at an early point in the trial. I am satisfied that it is appropriate to provide a direction or explanation to the jury, after opening addresses, in the terms of paragraph 10 of PTMFI 9.

20. [60]

    Paragraph 11 of PTMFI 9 is agreed between the parties except for the words “but may be relevant to” as inserted by the Crown (see [32] above). Mr Williams submitted that it is not necessary to insert those words. He argued that it is sufficient to state that the question of compliance with the rules does not determine the question whether a person believed that the funds in question are the proceeds of crime. The Crown submitted that it is appropriate that the jury receive a direction or explanation which states that, although not determinative, material of this type may be relevant to the question whether the Accused had the necessary state of mind by way of a belief that the funds in question are the proceeds of crime.

21. [61]

    In my view, the Crown formulation is accurate and not controversial. It states that the question whether rules have been complied with is not determinative, but may be relevant to a trial issue concerning the state of mind of the Accused and the existence of a belief that the funds in question are the proceeds of crime.

22. [62]

    The jury will receive directions early in the trial concerning the elements of an offence under s.400.3(1) Criminal Code (Cth) which will include the necessity for the Crown to prove that the Accused believed the money to be proceeds of crime. There is no prejudice to the Accused in stating that the question of compliance may be relevant to the question whether the Accused had the necessary mental element for the charged offence.

23. [63]

    I propose to include the Crown formulation in paragraph 11 of PTMFI 9 in any direction or explanation to be given to the jury after opening addresses.

24. [64]

    The effect of this ruling is that a direction or explanation in accordance with PTMFI 9 (with the modification to paragraph 10(a) at [5] above) will be given to the jury after the opening addresses. I will hear counsel further as to whether the direction should be given in writing or orally, a topic to which counsel can give attention in light of the present ruling.

25. [65]

    The parties are aware that more detailed directions concerning the role of a solicitor and trust accounts may be given to the jury later in the trial, drawing upon relevant parts of Annexure A of PTMFI 1 in light of the evidence adduced at the trial.

26. [66]

    It will be a matter for the Court to rule upon what directions ought be given at that stage of the trial in circumstances where there is no expectation that the Crown would be required to adduce evidence of these matters. As s.143 Evidence Act 1995 makes clear, evidence of the law in this respect is not required (see [43]-[48] above).

Objections by Crown to Parts of Conversations Recorded by Telephone Intercept

1. [67]

   The Crown objected to parts of conversations recorded by way of telephone intercept warrants as contained in Volume 1 of PTMFI 3 as follows:

2. [68]

   It will be observed that the conversations between Mr Hausman and Mr Rostankovski took place in late 2016, prior to the offence alleged to have been committed by the Accused between about 1 February 2017 and about 18 May 2017. The parties accept that the conversations are relevant for the purposes of the trial subject to particular areas of objection.

3. [69]

   In this case, it is the Crown which objects to parts of these conversations upon the grounds of relevance (s.55 and s.56 Evidence Act 1995) or seeking discretionary exclusion under s.135 Evidence Act 1995.

4. [70]

   I take as a starting point that the mere fact that a conversation took place, upon which the Crown seeks to rely in part, does not render the entire conversation admissible. The test of relevance is to be applied to parts of the conversation, keeping in mind that a conversation may be fluid in content so that a bright-line test of relevance cannot be applied easily. A range of topics may be discussed in a conversation which includes matters relevant to the trial and entirely extraneous matters. Where objection is taken as to relevance, the Court should have regard to the material to which objection is taken, applying relevant principles in determining whether the evidence should be allowed.

5. [71]

   Sections 55 and 56 Evidence Act 1995 state:

6. [72]

   Sections 135 Evidence Act 1995 states:

7. [73]

   The term “probative value” is defined in the Dictionary to the Evidence Act 1995 as meaning “the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue”.

8. [74]

   The test of relevance is a relatively undemanding one. The enquiry for the purpose of s.55 concerns how the evidence might affect findings of fact. The possible use to which the evidence might be put is to be taken at its highest: IMM v The Queen (2016) 257 CLR 300; [2016] HCA 14 at [43]-[44]. No assessment of the credibility or reliability of the evidence is required: IMM v The Queen at [39].

9. [75]

   Evidence which is relevant according to s.55 and admissible under s.56 is, by definition, probative. But neither s.55 nor s.56 requires that evidence be probative to a particular degree for it to be admissible. Evidence that is of only some (even slight) probative value will be prima facie admissible: IMM v The Queen at [40].

10. [76]

    Section 135 is based upon an assumption that the evidence is otherwise admissible. It confers a power to refuse to admit such evidence if the particular statutory opinion is formed. A discretionary process is involved, with the formation of the relevant opinion requiring a balancing exercise. The power to reject evidence will only be engaged if the probative value of the evidence is “substantially outweighed” by a “danger” of the kind identified in s.135(a), (b) or (c): Dyldam Developments Pty Limited v Jones [2008] NSWCA 56 at [78].

11. [77]

    In considering the objections taken by the Crown to parts of these conversations, I have had regard to the submissions made at the hearing on 14 December 2021 by the Crown (T16-23), by Senior Counsel for the Accused (T41-46) and by the Crown in reply (T49-50).

12. [78]

    In oral submissions, Mr Brady SC acknowledged that a number of areas of these conversations were susceptible to objection where the conversation strayed into areas concerning what he described as “social issues” or “social aspects” (T43). With respect to other parts of the conversations where the names of persons were mentioned, Mr Brady SC submitted that there was sufficient relevance noting that a number of the names that were mentioned in the conversations between Mr Hausman and Mr Rostankovski were also persons involved (or mentioned) in parts of the conversation on 1 February 2017.

13. [79]

    I propose to deal with these objections in a short-form fashion, noting my rulings as to relevance.

14. [80]

    With respect to the conversation on 16 November 2016 between Mr Hausman and Mr Rostankovski, I propose to allow that part of the recording contained in pages 58-62 of Volume 1, PTMFI 3. Although the conversation is somewhat rambling, there is reference to persons mentioned elsewhere in recordings to be admitted including “Jay”, whom I take to be Jason Onley. There is some force, as well, in the defence submission that the following part of that conversation (to which the Crown does not object) is of a similar type to that which has drawn the objection.

15. [81]

    With respect to the next part of the conversation to which objection is taken (pages 63-66), Mr Brady SC acknowledged that the subject matters being discussed were remote from the issues in the present trial and I am not persuaded that that portion satisfies even the relatively low threshold of relevance contained under the Evidence Act 1995. That portion will be rejected.

16. [82]

    With respect to the conversation between Mr Hausman and Mr Rostankovski on 14 December 2016, I am not persuaded that the parts objected to at pages 157-158 are relevant, with topics being discussed which are far removed from the subject matter of this trial.

17. [83]

    In light of the submissions of Mr Brady SC, I accept that the matters contained in pages 159-162 are sufficiently relevant to be admitted as evidence in the trial. Parts of this conversation shed some light upon the business dealings of Mr Hausman and Mr Rostankovski, with reference to names of persons which feature elsewhere, so that the evidence ought not be excluded and will be allowed.

18. [84]

    With respect to the same conversation, I propose to allow the conversation at pages 165-175. Although the precise subject matters being discussed may be less than clear at times, there are references to “Adam” (Adam Cranston) and “Dev” (Dev Menon) so that, in my view, the relatively undemanding test of relevance is satisfied.

19. [85]

    With respect to the final part of this conversation to which objection is taken by the Crown, I accept that pages 184-193 are sufficiently relevant with references being made to a number of persons including “Dev” (Dev Menon) and “Balls” (apparently a nickname for Adam Cranston). Although the subject matter is not of clear and direct relevance to the subject matter of the trial, Mr Hausman and Mr Rostankovski are discussing a range of business issues in a manner which, I am satisfied, is sufficiently relevant and ought not be excluded. I have considered whether the probative value of parts which are relevant is substantially outweighed by the danger that the evidence might be “misleading or confusing” or “cause or result in undue waste of time” for the purpose of s.135(b) and (c). I am not persuaded that the Court should reject parts which are otherwise relevant on either or both of these bases under s.135.

20. [86]

    In making these rulings, I have kept in mind that parts of the conversations are to be relied upon by the Crown and that the parts to which objection is taken by the Crown are capable of shedding some light upon the relationship between Mr Hausman and Mr Rostankovski and their business interests, even if some of the subject matters under discussion appear somewhat remote from the context of the present trial.

21. [87]

    The effect of these rulings is that the Crown objections are overruled with the exception of the objections to pages 63-66 and 157-158 of PTMFI 3, where the objection is upheld.

Conclusion

1. [88]

   In summary: