DPP (Cth) v Gaw [2006] VSCA 51

1 In late September 2001 the respondent, who was born on 10th May 1953, pleaded guilty to an eight count indictment and requested that two further offences be taken into account pursuant to s.16BA of the Crimes Act 1914 (Cth). He had been operating an investment club for betting on horse races. The scheme was promoted through two corporations, but the respondent was a bankrupt who was prohibited from managing a corporation. Although the enterprise was a managed investment scheme within the meaning of s.601ED of the Corporations Act 2001 (Cth), it was not registered as required by that Act. Counts 1 to 4 related to the respondent's failure to register the scheme. Counts 5 to 8 related to the fact that investors were induced to subscribe by the respondent's knowingly and falsely stating that their investments were "fully guaranteed against loss". The further offending to be taken into account arose from the respondent's management of the two corporations whilst he was a bankrupt.

2 Judge Anderson imposed a total effective sentence for those offences of two years and four months' imprisonment but ordered that the respondent be released on recognizance after serving eight months. The respondent was so released on 28th May 2002 and the recognizance lapsed on 28th January 2004. In the meantime, in July 2003, he was charged with further offences. A co-offender, Melanie Louise Ash, was charged at the same time. A contested committal did not proceed and eventually both the accused pleaded guilty. In the respondent's case, that was three days before the trial was due to begin.

3 The 24 charges laid against the respondent in July 2003 were reduced to eight counts on the indictment, each of an offence against s.184(2) of the Corporations Act, and a further offence to be taken into account pursuant to s.16BA of the Crimes Act. That offence consisted of communicating instructions to a director of a corporation whilst being disqualified from managing a corporation[1]. The 28 charges originally laid against Ash were reduced to six counts on the indictment. Counts 1 to 6 charged that she dishonestly used her position as a director directly or indirectly to gain an advantage for herself or another. Counts 7 to 10 charged that the respondent was knowingly concerned in the offences the subjects of counts 1, 3, 5 and 6. Counts 11 to 14 charged that the respondent dishonestly used his position as a director directly or indirectly to gain an advantage for himself or another. On 30th June 2005 Judge Douglas sentenced the respondent to a total effective sentence of three-and-a-half years' imprisonment. Her Honour sentenced Ash to a total effective sentence of 28 months' imprisonment. She ordered that each of them be immediately released on recognizance.

4 The Director of Public Prosecutions for the Commonwealth of Australia appeals, pursuant to s.567A of the Crimes Act 1958 (Vic.), against the sentence imposed on the respondent on the following grounds:

"1. The order made by the learned sentencing judge for the respondent's immediate release upon a recognizance release order is manifestly inadequate having regard to the nature and gravity of the offences and all of the other circumstances.

2. In ordering the respondent's immediate release upon a recognizance release order the learned sentencing judge:

(1) erred in failing to take into account or to sufficiently take into account the principle of general deterrence;

(2) erred in failing to take into account or to sufficiently take into account the principle of specific deterrence;

(3) failed to adequately reflect the gravity of the offences;

(4) failed to give sufficient weight to the culpability of the respondent as the principal offender;

(5) failed to give sufficient weight to the respondent's antecedents."

5 The background to the offences was set out by the judge in the course of her sentencing remarks. Her Honour said:

"4. ... Crownstar International Pty. Ltd., which I will refer to as Crownstar was registered on 13 October 2000, having been prior to 13 March 2001, CLA Management Services Pty. Ltd. and CLA Travel Services Pty. Ltd. Ms Ash was the company's sole director, secretary and shareholder. Mr Gaw was the chief executive officer and the Crown say a defacto director, and that he was the person who directed the commercial enterprise at all stages. Consequently in relation to the criminal allegations the Crown case is that he had a more serious role than Ms Ash.

5. Crownstar used the merchant facilities of a company, CC Travel Pty. Ltd., which had been incorporated on 14 February 2001. On 9 March 2001 Mr Gaw became the sole director after the resignation of the director, Kevin Payne. Crownstar commenced trading around the middle of March 2001 and established the Crownstar International Holiday and Travel Club. The public were invited to sales presentations at various venues in Melbourne and in other states of Australia. The members were entitled to discount accommodation and other benefits which varied according to the class of membership purchased, which varied from $1980 per annum to $5990 per annum. Membership was to be life membership subject to the payment of an annual fee. Mr Thomson, who appeared on behalf of Mr Gaw, informed the court that the scheme was that options to buy unused blocks of tourist accommodation were to be purchased on behalf of the company, and accommodation would then be sold at heavily discounted rates to the members at a profit. Some of the members paid in a lump sum, and others paid by direct debit to the company by instalments on a monthly basis by credit card.

6. Ms Ash was in charge of member services and controlled all payments made by Crownstar, including payments to its staff and trade creditors. However, I accept that other than in relation specifically to counts 2 and 5, she committed these offences at the direction of Mr Gaw.

7. On 7 December 2001 the company was placed into provisional liquidation on the application of the Australian Securities and Investments Commission. On 31 January 2002 the company was placed into liquidation on the ground it was insolvent. An investigation revealed that Crownstar did not register for GST, never lodged business activity statements, never paid group tax, and did not make any provision for superannuation for its employees. ...

8. The Crown referred to a report made by a business adviser, Wendy Hancocks, who was engaged by Mr Gaw in June 2001 to conduct a review of the company. She set out in her report dated 27 June 2001 a number of major problems with the company. However, none of her recommendations or findings were implemented. She reported concern over the loan account to directors and associates of $108,000 after only three to four months of trading, failure to lodge business activity statements, or instalment activity statements, serious deficiencies with payroll, and that there were no payroll tax registrations or payments, and that company funds had been used to pay a deposit on a house. ...

9. The occasions when Ms Ash carried out transactions at the behest of Mr Gaw from which she did not financially benefit directly must be seen in the context that throughout the period they had a sexual relationship and that there were two children of that relationship born on 11 October 1997 and 24 November 2000. Throughout the period of counts 1 to 13 on the indictment Mr Gaw was living with his wife and daughter, and Ms Ash lived with her children. After Mr Gaw's release from prison they commenced to cohabit and that situation continued, so I am informed."

6 The Crown case was that the respondent and Ash used Crownstar members' funds held in the bank accounts of Crownstar International Pty. Ltd. and CC Travel Pty. Ltd. for their own personal use to the detriment of the companies' creditors. The offences may be grouped into four main categories. First, counts 1 and 7 related to payments to one Timothy Nolan. Mr Nolan and his wife had contributed to the investment scheme the subject of the counts before Judge Anderson. They lost their money, but it was agreed between Mrs Nolan and Ash that the money would be repaid. Those repayments, totalling $20,500, were made to the Nolans between November 2000 and September 2001 from Crownstar members' funds and were prayed in aid successfully before Judge Anderson as a circumstance of mitigation. We now know that it was a case of robbing Peter to pay Paul. Secondly, counts 3, 6, 8, 10, 13 and 14 related to the use of members' funds to pay a deposit and other amounts in connection with a house purchased at auction by the respondent and his wife in May 2001. Thirdly, counts 2, 4, 9, 11 and 12 related to the use of members' funds to pay legal fees incurred by the respondent and Ash that were not related to company business. Finally, count 5 related to Ash's use of $5,077 to pay for her 30th birthday party in June 2001.

7 No complaint is made of the sentence of three-and-a-half years' imprisonment, nor of her Honour's selection of a recognizance release order rather than a non-parole period.[2] The complaint is that the respondent's immediate release on recognizance did not reflect the gravity of his offending, his antecedents and the importance of general and specific deterrence. It is common ground that there were, and are, significant differences between him and Ash, so that parity is of little moment. Indeed, Mr Thomson argued that the difference between their sentences showed that the judge had properly taken the respondent's dominant role into account.

8 So far as the gravity of the offending is concerned, Mr Wraight emphasised that there were eight separate offences, including two rolled-up counts, which occurred over an 11 month period and involved the withdrawal of $142,789 from company accounts. The withdrawal of those funds involved blatant dishonesty and breach of trust and was made without regard to the interests of creditors and members when the companies were in financial difficulty.[3]

9 Turning to the respondent's antecedents, counsel concentrated on the offences dealt with by Judge Anderson[4]. Two weeks after beginning to serve Judge Anderson's sentence, the respondent began managing Crownstar International Pty. Ltd. from prison, despite having been disqualified from managing a corporation. Count 14 related to a payment on 17th October 2001, whilst the respondent was serving that sentence. Arrangements for the payment to be made by automatic debit from Crownstar International Pty. Ltd.'s bank account had been made on 7th September 2001, when the respondent was still on bail. The offences the subject of counts 10 and 13, and some of the conduct forming part of the rolled-up counts 7 and 9, also occurred when the respondent was on bail.

10 As we have seen, during the plea before Judge Anderson the respondent claimed credit for making restitution to the Nolans. That restitution was in fact made with company funds. Mr Wraight did not argue that that was a circumstance of aggravation in the technical sense, but he submitted that it was relevant to specific deterrence and the respondent's prospects of rehabilitation. I bear in mind that we are not hearing an appeal against Judge Anderson's sentence. The respondent is not to be punished twice, but his conduct, and his willingness to allow Judge Anderson to form a false impression, may properly be taken into account in the manner suggested by counsel.

11 There is no reason to think that Judge Douglas disregarded specific deterrence. It is clearly a relevant factor in the present case and would be an important consideration if the discretion were reopened. Little need be said about general deterrence. It is usually important when dealing with "white collar" crime and it should ordinarily impact on both the total effective sentence and the minimum term to be served before release on parole or recognizance.[5] Her Honour emphasized the importance of general deterrence but, Mr Wraight submitted, the respondent's immediate release demonstrated that insufficient weight was given to both those factors.

12 Mr Thomson's starting point was that this was not the kind of case that is appropriate for a Crown appeal. He referred to the statements of principle to be found in the judgments of Charles, J.A. in R. v. Clarke[6] and Maxwell, P. in Director of Public Prosecutions v. Josefski[7]. For reasons that will shortly appear, I am persuaded that the respondent's immediate release on recognizance was so manifestly inadequate to punish him and to effect general and specific deterrence as to reveal error of principle. This is, therefore, the kind of case appropriate for a Crown appeal. Whether the appeal should be allowed, taking into account double jeopardy, the Court's residual discretion and the circumstances that now prevail, is another matter.

13 It was properly conceded that the offences were serious, but the Crown did not allege that the scheme was set up by the respondent and Ash as a sham. It was not their intention to deceive investors and pocket the proceeds, nor was there an elaborate scheme to hide what they were doing. Most of the companies' employees knew that large sums were being withdrawn. The respondent ignored the opinion of the business analyst, referred to in [8] of the sentencing remarks[8], and deliberately chose to run his own race. Her Honour found that he made decisions based on an unreasonable optimism about his own ability.

14 The respondent pleaded guilty to offences for which the maximum custodial penalty is five years' imprisonment. He was not to be sentenced, and the appeal must not be determined, as if he had pleaded guilty to theft or to obtaining property by deception.[9]

15 Mr Thomson submitted that there were some mitigating factors. There was evidence that the respondent was involved in community projects, in particular at the school attended by his and Ash's children. At the time of sentence, it was more than three-and-a-half years since he had committed the offences and he had not been charged with any further offences. His convictions meant that he would not again occupy a responsible position in business, which bore on specific deterrence and the risk entailed in his immediate release. Importantly, by his plea, he had saved the State the cost of a three week trial and the witnesses the inconvenience of giving evidence.

16 Totality was, and is, an important aspect of this case. Mr Wraight conceded that that was so, but he submitted that the fact that Judge Anderson was misled about restitution to the Nolans moderated that principle. Mr Thomson, for his part, conceded that, if the respondent had been sentenced for all these offences in 2001, he would have been required to serve more than eight months in prison. The difficulties involved in sentencing an offender for contemporaneous or related offences at different times are exacerbated when the offender has been released, having served the sentence imposed on the first occasion. Sometimes it is necessary, on the second occasion, to impose a more lenient sentence than would otherwise have been appropriate.[10] If the respondent would have been required to serve (say) 18 months in prison if he had been sentenced for all the offences in 2001, it by no means follows that Judge Douglas should have required him to serve ten months when she sentenced him in 2005. Indeed, to have sentenced him on that basis would have betokened error.

17 The question is whether the principle of totality, together with all the other circumstances of the case, meant that it was open to the judge to adopt the disposition that she did, i.e. not to require the respondent to serve any additional time in prison. In my respectful opinion, giving full weight to the care with which her Honour approached her task, the immediate release of the respondent was not open. The offences were too serious, the antecedents too powerful a consideration and the circumstances of mitigation too slight for that to be so. The sentencing discretion is accordingly reopened.

18 In re-exercising the discretion, which might involve determining that no different sentence should be passed, the Court of Appeal takes account of the law in force now and the facts that are now established. That rule is important if the law changes between the time of sentence and the disposition of the appeal. It also permits the reception of evidence, on resentencing, that would not otherwise be admissible. As the Court of Criminal Appeal explained in R. v. Carroll[11]:

"The language of s.567A(4) is almost exactly the language of s.568(4) which deals with the duty of the court on an appeal against sentence by a person convicted. If a sentencing judge has fallen into error according to the law at the time when he passed sentence, this court has always regarded it as its duty to intervene. When it does so, it regards it as its duty to pass such sentence as it thinks fit in accordance with the law at the time when it substitutes its sentence for the sentence originally passed. This has been the invariable practice of the court. It is a practice which enables the court to substitute a different sentence when some event occurs between the original sentencing date and the date when this court has to decide an appeal which demands some alteration in the sentence imposed. In such a case there may be no change in the law, but simply a change in the relevant facts. The principle however is the same."

19 It was submitted that the incarceration of the respondent now would cause hardship to Ash and the respondent's children of a kind that we should take into account. Section 16A(2)(p) of the Crimes Act provides that a sentencing court must take into account "the probable effect that any sentence or order under consideration would have on any of the [offender's] family or dependants", but that has been held to be declaratory of the common law.[12] Hardship to an offender's family or dependants must be truly exceptional[13]. The evidence below did not establish exceptional hardship but, in conformity with the rule explained in R. v. Carroll, we received affidavit and other material bearing on that question, some of it filed by leave after the hearing of the appeal.

20 I do not think it necessary to refer to that material in detail but simply to summarise the salient points. Ash is an alcoholic. She is making progress in dealing with that problem but, not infrequently, relapses and fails to care for the children. She also suffers from anxiety and depression and is benzodiazepine-dependent. The children are now aged eight and five, having been born on 15th October 1997 and 24th November 2000. They would sometimes be at risk if they were left in Ash's care alone. She has no relatives able to care for them. The material is silent about the respondent's brothers, who were referred to on the plea. Not without hesitation, for the evidence is less than satisfactory, I am prepared to accept that the hardship to the children, if the respondent were imprisoned, is sufficiently exceptional to be taken into account pursuant to s.16A(2)(p).

21 Hardship, even exceptional hardship, to children or other dependants is not a passport to freedom. It is simply a factor to be taken into account. In some cases it is entitled to great weight, in others to hardly any weight at all.[14] I turn to other factors that may be entitled to as much, if not more, weight in the present case.

22 The last offence on the indictment occurred on or about 17th October 2001, having been set in train the previous month.[15] The respondent has not offended again. He has been at liberty since being released on parole pursuant to Judge Anderson's sentence on 28th May 2002. The fact that he was not required to serve any part of the sentence imposed by Judge Douglas does not disable the Court of Appeal from imposing an immediate custodial sentence,[16] but it is a relevant factor. The hope of liberty, once held out, is not to be disregarded. The respondent was not to be sentenced, and is not to be resentenced, as if he had pleaded guilty to more serious offences[17]. Any different sentence that we imposed would have to allow for double jeopardy.

23 In all those circumstances, of which hardship to the children is only one, I propose that the appeal be dismissed.

24 For the reasons given by Callaway, J.A., I agree that the order of the learned sentencing judge permitting the immediate release of the respondent on recognizance rendered the sentence manifestly inadequate. I am, however, persuaded, albeit with some hesitation, that when set against the backdrop of the principles relevant to a Crown appeal, the factors identified by his Honour as relevant to re-sentencing justify the disposition he proposes.

25 I agree, therefore, that the appeal should be dismissed.

26 I agree with Callaway, J.A. that the appeal should be dismissed, notwithstanding that the sentence passed at trial was manifestly inadequate. That said, the respondent can count himself very fortunate indeed that the question whether he should be re-sentenced arose in 2006, in the context of a Director's appeal.

[1] Corporations Act 2001, s.206A(1).

[2] Crimes Act 1914 s.19AB.

[3] I shall say no more about members, who were at best deferred creditors, because I am not satisfied to the requisite standard that the offences contributed to the companies' collapse.

[4] The second presentment referred to those offences and to another occasion, on 17th July 1997, when the respondent was found guilty in the Magistrates' Court of making a false document and using a copy of a false document, but no conviction was recorded. He was fined an aggregate of $2,000.

[5] See, for example, R. v. Brown [2002] VSCA 99 at [52].

[6] [1996] VICSC 30; [1996] 2 V.R. 520 at 522 - 523.

[7] [2005] VSCA 265 at [4] - [20]. See also [47] and [63] - [65].

[8] See [5] above.

[9] Crimes Act 1958 (Vic.), ss.74 and 81.

[10] See, for example, Mill v. R. (1988) 166 C.L.R. 59 at 67.

[11] [1991] VicRp 87; [1991] 2 V.R. 509 at 511.

[12] R. v. Sinclair (1990) 51 A.Crim.R. 418; R. v. Matthews (unreported, Court of Appeal, 20th March 1996); R. v. Togias [2001] NSWCCA 522; (2001) 127 A.Crim.R. 23.

[13] R. v. Holland [2002] VSCA 118; (2002) 134 A.Crim.R. 451; R. v. Mangione [2006] VSCA 34 at [10].

[14] Murder and serious cases of armed robbery are examples, ready to hand, of offences where hardship to dependants would ordinarily be entitled to little, if any, weight.

[15] See [9] above.

[16] Director of Public Prosecutions v. Ellis [2005] VSCA 105; (2005) 153 A.Crim.R. 340 at 350 [27] and [30].

[17] See [13] - [14] above.