DPP v Hussein; R v Hussein [2003] VSCA 187

Court of Appeal (Vic)|2003-11-24|Before: BUCHANAN and VINCENT, JJ.A. and HARPER, A.J.A.

Criminal Law - Defrauding the Commonwealth - Manufacture of tobacco on which excise duty not paid - Legal relationship between applicant and Commonwealth not an element of offence - Conduct of business of manufacturing tobacco over a period of time properly the subject of one count of defrauding the Commonwealth - Crimes Act 1914 (Cth)., s.29D.

The applicant seeks leave to appeal from his conviction on two counts of defrauding the Commonwealth contrary to s.29D of the Crimes Act 1914 in respect of excise duty on tobacco. The respondent has appealed against the sentences imposed on the applicant, contending that they are manifestly inadequate.

The collection of excise duty is regulated by the Excise Act 1901 and the Excise Tariff Act 1921. At the time of the events giving rise to the charges against the applicant s.35 of the Excise Act provided that only a person licensed to do so was to manufacture excisable goods, which included tobacco. There are six licensed manufacturers of tobacco. The applicant is not among them. It was common ground between the parties that tobacco is manufactured only when tobacco leaf is cut. Section 54 of the Excise Act provided that the manufacturer of excisable goods was liable to pay excise duty on the goods. Section 5 of the Excise Tariff Act, together with the Schedule to that Act, provided that duties of excise were thereby imposed upon tobacco "manufactured or produced in Australia."

In April 1999, the police obtained a warrant to intercept calls to the mobile telephone of one Christos Vellinos. A number of the intercepted calls were between the applicant and Vellinos. Their conversations related to the purchase of tobacco leaf by the applicant and the sale to Vellinos and others of tobacco after it had been cut. The conversations also related to sales by the applicant of uncut tobacco leaf. The applicant and Vellinos discussed prices of tobacco, payments and deliveries. On 13 May 1999, the applicant leased a factory unit in Williamstown. He gave the landlord a false address.

On 8 June 1999, a search warrant was executed at the applicant's residence in North Altona and at the factory unit in Williamstown and the applicant was arrested. The goods seized under the warrant included 169.390 kilograms of cut tobacco, 2,333.937 kilograms of tobacco leaf contained in 21 bales, two tobacco cutting machines, two tobacco presses, a large weighing machine and boxes of cigarette tubes.

The applicant was served with an indictment containing two counts. The first count alleged that on or about 8 June 1999 the applicant defrauded the Commonwealth "by manufacture of tobacco, in circumstances such as to avoid the assessment and payment of excise to the Commissioner of Taxation." The manufactured tobacco the subject matter of the count was the cut tobacco weighing 169.390 kilograms found at the applicant's house when the search warrant was executed. The second count alleged that between 24 April 1999 and 8 June 1999 the applicant defrauded the Commonwealth "by dealing with tobacco in such circumstances so as to prejudice excise revenue derived on the manufacture of tobacco." The maximum penalties for breach of s.29D were a term of ten years' imprisonment and a fine of $10,000. The applicant was arraigned in the County Court and pleaded guilty to count 1 and not guilty to count 2.

The Crown case in respect of the first count was that the applicant evaded the payment of excise that was due on the tobacco when it was manufactured by being cut. According to the Crown the applicant defrauded the Commonwealth by dishonestly and clandestinely processing the tobacco. Count 2 was said to have been constituted by the conduct by the applicant of an illegal and secret business of manufacturing tobacco for sale on the black market.

At the conclusion of the Crown case the applicant's counsel made a no case submission. The trial judge ruled against the submission. The applicant did not call any evidence and the jury returned a verdict of guilty on count 2. After a plea was made on behalf of the applicant, he was fined $3,500 on count 1 and was sentenced to a term of 12 months' imprisonment on count 2, but released forthwith upon entering into a recognizance to be of good behaviour for two years. The sentencing judge ordered that the applicant pay the sum of $39,838.83 by way of reparation as the amount representing the excise that was payable on the volume of cut tobacco found at the applicant's residence and made orders for the forfeiture of the tobacco manufacturing equipment seized by the police.

The applicant seeks leave to appeal against his convictions on both counts on the following grounds:

"1. The learned trial judge was wrong in law in ruling that the applicant was properly indicted on count 2 which alleged that he defrauded the Commonwealth by conducting an illicit business of manufacturing tobacco between 24 April 1999 and 8 June 1999 contrary to s.29D of the Crimes Act 1914 (`the Count 2 offence'). 2. The learned trial judge was wrong in law in ruling that the count 2 offence was not bad for duplicity in the circumstances referred to in ground 1. 3. The learned trial judge was wrong in law in ruling that the count 2 offence did not require proof of a legal relationship between the applicant and the Commonwealth as an element of that offence. 4. The learned trial judge was wrong in law in ruling that the count 2 offence did not require proof of the imperilment of an existing interest in the Commonwealth as an element of that offence. 5. The learned trial judge was wrong in law in ruling that proof of a legal relationship between the applicant and the Commonwealth was not required as an element of an offence of defrauding the Commonwealth on or about 8 June 1999 contrary to s.29D of the Crimes Act 1914 (`the Count 1 offence'). 6. The learned trial judge erred in the circumstances referred to in Ground 5 by refusing leave to the applicant to change his plea of guilty to the count 1 offence to a plea of not guilty."

While there is a strong public interest in limiting appeals against a conviction following a plea of guilty, such an appeal will be entertained in certain circumstances. Two of them were identified by Avory, J. in R. v. Forde[1]. His Lordship said:

"A plea of guilty having been recorded, this Court can only entertain an appeal against conviction if it appears (1) that the appellant did not appreciate the nature of the charge or did not intend to admit he was guilty of it, or (2) that upon the admitted facts he could not in law have been convicted of the offence charged."

Those alternatives are not exhaustive, at least in this state, where this Court has a duty to intervene if there has been a miscarriage of justice.[2] In the present case the applicant contends that upon the admitted facts count 1 could not have been established.

It is evident that the applicant committed offences against the Excise Act. Thus he manufactured excisable goods without a licence contrary to s.35 of the Act and he dealt in tobacco leaf without being registered as a dealer, contrary to s.27 of the Act. The maximum penalty for each offence was a fine of $5,000. The applicant also had in his possession manufactured excisable goods on which excise duty had not been paid contrary to s.117(1) of the Act. The maximum penalty was a fine not exceeding five times the amount of the unpaid duty or, where the court could not determine the amount of that duty, a fine not exceeding $50,000 (s.129). The penalties for offences under the Act appear not to have been sufficient in the eyes of the Crown, which resorted to s.29D of the Crimes Act. In one way or another the issues raised in this appeal are concerned with whether the applicant's conduct could be brought within the parameters of the crime of defrauding the Commonwealth.

Counsel for the applicant submitted that the applicant could not have committed the offence alleged in count 1 because on the admitted facts there was no legal relationship between him and the Commonwealth. Mr Tehan submitted that the applicant was in the same position as the appellant in Spies v. R.[3]. In that case, the director of a company was charged under s.176A of the Crimes Act 1900 (N.S.W.) with defrauding the company's creditors by causing the company to purchase his shares in another company and credit his loan account with the company of which he was a director. The appellant intended to prevent the liquidator of his company recovering the amount of his loan account. The prosecution contended that the outlay required by the purchase made it less likely that the creditors would recover their debts. The Court held that the prosecution case was misconceived. The majority said:

"The highest that the case against him can be put, so far as the creditors are concerned, is that his actions made it less likely that the company would be able to pay its debts to the creditors. But it would be a large step to hold that person A has defrauded person B, with whom A has no legal relationship, because A's dishonest conduct towards a third party makes it less likely that that third party will be able to pay B."[4]

Counsel for the applicant contended that had the applicant submitted a false document or made a false representation to the Commissioner of Taxation, a legal relationship would have been created, but simply being a citizen of the Commonwealth did not create the necessary legal relationship.

In my opinion, Spies v. R. did not add to the offence described in s.29D a requirement of a legal relationship between defrauder and victim. Section 176A of the New South Wales Act provided:

"Whosoever, being a director, officer, or member, of any body corporate or public company, cheats or defrauds, or does or omits to do any act with intent to cheat or defraud, the body corporate or company or any person in his or her dealings with the body corporate or company shall be liable to imprisonment for ten years."

The prosecution case relied on that part of the section that provided that a director committed an offence when he cheated or defrauded or did or omitted to do any act with intent to cheat or defraud any person "in his or her dealings" with the company. The Court held that the offence had to be committed in respect of a person's actual dealings with the company: it was not sufficient that the person defrauded was a creditor of the company. The prosecution was required to prove that the appellant used dishonest means to prejudice the rights of the creditors in their dealings with the company. In fact, however, the acts of the appellant did not take place in relation to the dealings of the creditors with the company.

Section 29D is not subject to the same limitations as the provision considered in Spies v. R. The prosecution in the present case was required only to establish that the appellant by dishonest means imperilled the Commonwealth's right to recover excise duty payable upon the manufacture of tobacco products. In Peters v. R.[5] Toohey and Gaudron, JJ. said:

"Ordinarily, however, fraud involves the intentional creation of a situation in which one person deprives another of money or property or puts the money or property of that other person at risk or prejudicially affects that person in relation to `some lawful right, interest, opportunity or advantage', knowing that he or she has no right to deprive that person of that money or property or to prejudice his or her interests."

"Although most cases of conspiracy to defraud involve an agreement to use dishonest means which has the effect of inflicting economic loss on a third party, the infliction of such loss is not an essential element of the offence. It is sufficient that the conspirators intended to obtain some advantage for themselves by putting another person's property at risk or depriving another person of a lawful opportunity to obtain or protect property. ... Thus, in most cases, a conspiracy to defraud arises when two or more persons agree to use dishonest means with the intention of obtaining, making use of or prejudicing another person's economic right or interest or inducing another person to act or refrain from acting to his or her economic detriment."[6]

The Commonwealth was entitled to be paid excise duty when the applicant cut the tobacco leaf.[7] Moreover, the Commonwealth was entitled to be paid by the applicant. As the owner of the cut tobacco leaf the applicant was obliged to pay the duty: s.153 of the Customs Act 1901. By cutting tobacco leaf in secret, outside the limits of the legitimate tobacco industry in Australia, the applicant, in my view, clearly imperilled the Commonwealth's right. It was not necessary in order to defraud the Commonwealth for the applicant to take another step such as lodging a document or making a false statement. Accordingly, I am of the opinion that it was open to the jury to find on the evidence before them that the applicant had defrauded the Commonwealth by manufacturing the tobacco found at his premises on 8 June 1999.

Count 2 was a more ambitious charge in that it was not confined to the manufacture of a particular quantity of tobacco but was based upon the conduct over a period of time of the business of manufacturing tobacco by the applicant.

The applicant's principal attack upon count 2 was that conducting the business of manufacturing tobacco did not amount to defrauding the Commonwealth because breach of s.29D was not a continuing offence. If cutting tobacco leaf amounted to an offence under the section, a separate offence was committed when each leaf was cut, and hence the count was duplex.

R. v. Giretti[8] concerned counts alleging trafficking in drugs of dependence between particular dates. The word "traffick" was defined in the Drugs, Poisons and Controlled Substances Act 1981 to include preparing, manufacturing, selling, exchanging, agreeing to sell, offering to sell and having in possession for sale a drug of dependence. While the definition referred only to single acts, the Court held that otherwise the term "traffick" connoted a continuing activity, for it meant the conduct of a trade. What was charged was one offence under each count. Crockett, J. said:

"I think, therefore, that the offences as charged in counts 2 and 3 were, as a matter of form, certainly not such as to render the presentment open to criticism on the ground of duplicity. Nor do I consider that the evidence admitted in relation to each count to establish the offences therein charged sought to prove multiple offences so that the prosecution should have been required to elect as to which particular offence it was upon which it was relying so that failure so to elect vitiated the convictions on those counts for uncertainty."[9]

Continuous offences are well known to the law, especially in cases of conspiracy, public nuisance, harassment and certain statutory offences such as living on the earnings of a prostitute.[10]

In the present case, count 2 did not allege isolated acts of fraud but the conduct of the business of manufacturing tobacco in such a manner as to deprive the Commonwealth of duty payable in respect of such a business. The Crown case was that the applicant's activities took place with the necessary degree of regularity and system to amount to the business of manufacturing tobacco in circumstances designed to evade the payment of excise duty. This is not a case where multiple acts, each constituting a separate crime, are so close in time and place that they may or may not be viewed as one composite activity.[11] Nor is this a case in which a false representation is maintained with the result that the representor receives a series of payments or benefits to which he or she is not entitled.[12] Rather, there was in the present case one offence which was continuing in nature. It was not possible to isolate one act or transaction as an identifiable offence of defrauding the Commonwealth. I do not think that one could sensibly say that throughout the period from 24 April 1999 to 8 June 1999 separate offences of defrauding the Commonwealth were committed by each cut of tobacco leaf or by the completed shredding of each tobacco leaf or even by the production of a particular quantity of tobacco ready for use. The Commonwealth was defrauded by the varied acts constituting the conduct of the business of manufacturing tobacco outside the legitimate, taxed regime of tobacco manufacture and hidden from the eyes of those in charge of that regime. Generally, the offence of defrauding the Commonwealth will involve an isolated act or acts. Section 29D, however, can embrace a continuing course of conduct where a Commonwealth right or interest is lost or imperilled by the end result of a variety of acts. In my opinion, the applicant's conduct, which was the subject matter of count 2, answered that description.

For the foregoing reasons, I am of the opinion that count 2 properly charged the applicant with a continuing offence and did not offend the rule against duplicity. I am also of the opinion that, just as the Crown case in respect of count 1 did not fail for want of the establishment of a legal relationship between the applicant and the Commonwealth or the imperilment of an existing interest or right, so the Crown case in respect of count 2 was not deficient in those respects.

I would refuse the application for leave to appeal against conviction.

The grounds of the appeal by the Director against the applicant's sentence were as follows:

"1. The sentence imposed on the respondent on each count was manifestly inadequate having regard to all the circumstances of the case and different sentences should have been passed on each sentence. 2. The conviction and fine of $3,500 imposed on the respondent in respect of count 1 was manifestly inadequate. 3. The sentence of 12 months' imprisonment imposed on the respondent in respect of count 2 was manifestly inadequate as a head sentence, as was the immediate release of the respondent pursuant to a recognisance in the sum of $5,000 to be of good behaviour for 2 years. 4. The learned sentencing judge erred in that she failed to give sufficient weight to:- (a) the nature, circumstances and gravity of the offence committed by the respondent (b) the culpability and role played by the respondent (c) the lack of remorse on the part of the respondent (d) the need for specific deterrence (e) the need to pass a sentence that would be calculated to deter other persons disposed to commit similar offences (f) the sentence imposed on others involved in this fraud and the need to impose a comparable sentence (g) the profit earned by the respondent (h) the total loss to the revenue resulting from the respondent's activities and the value of revenue imperilled by the respondent (i) the period over which the offending occurred and the continuous and ongoing nature of the business (j) the scale of the business and the secret and clandestine nature of the business. 5. The learned sentencing judge erred in finding facts in respect of count 2, that were inconsistent with the jury's verdict. 6. The learned sentencing judge erred in that he [sic] gave undue weight to: (a) the respondent's personal circumstances (b) the respondent's reputation and good character."

The applicant is now 36 years old. He was born in Lebanon and came to Australia with his family when he was nine years old. He left school in Year 8 when his parents returned to Lebanon and took him with them. Some two years later the applicant came back to Australia. The applicant married in Lebanon. He and his wife have five children. The applicant worked in a mixed grocery business in partnership with a brother-in-law, as a taxi driver and as a storeman. In the course of the plea a number of witnesses attested to the applicant's good character. The sentencing judge said that the applicant was devoted to his family, was hard-working, generous to others and was held in high esteem in the community. He had a prior conviction for wilful damage which the sentencing judge did not consider was relevant to the task before her. Her Honour said:

"I am also satisfied in all the circumstances that you have learnt your lesson and are unlikely to re-offend in the future."

The sentencing judge was referred to sentences imposed upon others engaged in the manufacture of tobacco. A number of the offenders received sentences which did not involve immediate incarceration. Vellinos, the person with whom the applicant dealt, was sentenced to a term of three years' imprisonment with a minimum term of 21 months' imprisonment. His business was on a larger scale than that of the applicant. Vellinos had 11 cutting machines and 11 presses and carried on business for 12 months. The judge sentencing the applicant noted:

"It is agreed that Vellinos was the principal offender in respect of the enterprise. I find that the scale and nature of your offending is of a lesser and more limited nature than that of Mr Vellinos ...."

Counsel for the Director submitted that the sentence imposed in respect of each count was manifestly inadequate and placed particular emphasis on the relatively lower penalty imposed in respect of count 1. In my opinion, the sentencing judge was entitled to treat count 1 as but a particular of count 2. The evidence of the tobacco found on 8 June 1999 was led in proof of the business of manufacturing tobacco over the period of six weeks leading up to and including 8 June 1999.

I think it is relevant to have regard, as the sentencing judge did, to the penalties which Parliament at the time thought appropriate for manufacturing tobacco without a licence, dealing in tobacco leaf without being registered as a dealer and being in possession of excisable goods on which duty had not been paid. The Crown was entitled in its absolute discretion to decide upon the particular charge to lay against the applicant. Nevertheless, it was appropriate for the sentencing judge to have regard to the fact that there were other and less punitive offences that were appropriate to the facts alleged against the applicant.[13]

I also think that the sentencing judge was entitled to have regard to the period of time that elapsed between the applicant's arrest and his trial. Her Honour said:

"That delay or part of that delay, that has been no fault of yours."

Under ground 5 it was submitted that the sentencing judge erred in failing to find that a substantial or a significant portion of the uncut tobacco found at the applicant's premises would have been used as raw material for manufacture by the applicant.

"... it is not possible to say how much of the 21 barrels of tobacco found at the factory would be used for manufacturing or how much would be used for dealing in tobacco."

Accordingly, her Honour made no estimate and used no adjectives to describe the quantity of tobacco that the applicant may have manufactured. She did say:

"However, I am satisfied that you did conduct a business in the way outlined for a substantial period between 24 April 1999 and 8 June 1999 and that was done in a commercial, deliberate and systematic way."

In my opinion, the sentencing judge was obliged to go no further in characterizing the scale of the applicant's manufacturing business. The evidence did not permit a finding of any particular quantity and nothing was to be gained by using vague terms such as "substantial" or "significant".

The Director faces the restraints imposed by the courts upon re-sentencing at the behest of the Crown. In my opinion, it has not been shown that having regard to the nature of the offending and the personal circumstances of the applicant, the sentences on counts 1 and 2 were sufficiently outside the accepted range of sentences so as to justify intervention by this Court.

I agree that the application for leave to appeal against conviction should be dismissed for the reasons given by Buchanan, J.A.

I also agree, and for the reasons advanced by him, that the appeal by the Director of Public Prosecutions against sentence should be dismissed.

I have had the advantage of reading, in draft, the judgment of Buchanan J.A. I agree with his Honour's reasons. I also agree that leave to appeal against conviction should be refused and that the appeal of the Director should be dismissed.

[2] Crimes Act 1958, s.568(1). See R. v. Tait [1996] VicRp 48; [1996] 1 V.R. 662 at 665-6 per Callaway, J.A.; R. v. El-Kotob [2002] VSCA 109; [2002] 4 V.R. 546 at 566-8 per O'Bryan, A.J.A.

[4] Above at 637 per Gaudron, McHugh, Gummow and Hayne, JJ.

[6] Above at 525. See also R. v. Kastratovic (1985) 42 S.A.S.R. 59 at 62; Spies v. R. at 630-1 per Gaudron, McHugh, Gummow and Hayne, JJ.; MacLeod v. R. [2003] HCA 24; (2003) 77 A.L.J.R. 1047 at [35]; R. v. Scott [1974] UKHL 4; [1975] A.C. 819 at 839 per Viscount Dilhorne.

[7] Section 5 of the Excise Tariff Act. See Liaver v. Errington [2003] QCA 5.

[11] See, for example, Jemmison v. Priddle [1972] 1 Q.B. 489; DPP v. Merriman [1973] A.C. 584. Cf. R. v. Ballysingh (1953) 37 Cr.App.R. 28.

[12] See R. v. Moussad [1999] NSWCCA 337; (1999) 152 F.L.R. 373; Walsh v. Tattersall (1996) 188 C.L.R. 77.

[13] See R. v. Liang and Li (1995) 82 A.Crim.R. 39; R. v. Whitnall [1993] FCA 271; (1993) 42 F.C.R. 512 at 520 per Drummond, J.

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