DPP (C'th) v Rowson [2007] VSCA 176

1 I agree with Kaye AJA, for the reasons he has stated, that the appeal should be allowed and the respondent re-sentenced as his Honour proposes.

2 I agree with Kaye AJA that the sentences imposed on the respondent were manifestly inadequate. The respondent engaged in a carefully planned and sustained scheme to defraud the Australian Tax Office. His dishonest conduct was sustained for a period of almost two years. In his police record of interview the respondent said that it was "stupid" of the government to rely on self assessment of liability for goods and services tax. Despite the fact that his guilty plea indicates some remorse, in my view this requires considerable weight to be given to specific deterrence.

3 I agree with Kaye AJA that the respondent's psychological condition did not substantially reduce his moral culpability for these offences of dishonesty. Nor was it relevant to his sentencing in any of the other ways described in R v Tsiaras.[1]

4 For the reasons given by Kaye AJA, I would allow the Director's appeal and re-sentence Mr Rowson in the manner proposed by Kaye AJA.

5 This is an appeal by the Commonwealth Director of Public Prosecutions against sentences imposed on the respondent by a judge of the County Court on 11 September 2006.

6 The respondent pleaded guilty to one count of obtaining a financial advantage by deception from a Commonwealth entity, contrary to s 134.2(1) of the Criminal Code (Commonwealth) ("the Code"), and to one count of attempting to obtain a financial advantage by deception from a Commonwealth entity, contrary to ss 11.1(1) and 134.2(1) of the Code. After the presentation of a plea in mitigation of sentence, the judge sentenced the respondent to 30 months' imprisonment on count 1, and to 18 months and one day's imprisonment on count 2. It was ordered that the sentence on count 1 commence on 11 September 2006 and that the sentence on count 2 commence on 11 March 2008, making a total effective head sentence of 3 years and one day. The judge fixed a non-parole period of 18 months' imprisonment.

7 The two charges arose from a fraudulent scheme created and implemented by the respondent. By that scheme the respondent lodged Business Activity Statements with the Australian Taxation Office in relation to a sham non-existent business, and by which he claimed substantial refunds of goods and services tax. Those refunds were obtained by a company used by the respondent, Callards Pty Ltd ("Callards"). Count 1 related to business activity statements lodged by the respondent on behalf of Callards between 2 October 2002 and 25 March 2004 in respect of nine months between June 2002 and December 2003. As a result of the statements lodged during that period, the respondent dishonestly obtained refunds of goods and services tax totalling $2,453,102.22. Count 2 related to business activity statements lodged by the respondent on behalf of Callards between 28 June 2004 and 21 September 2004 in respect of four months between February 2004 and August 2004. By those statements the respondent attempted to obtain refunds of goods and services tax totalling $1,333,173.

8 The scheme hatched and implemented by the respondent involved a substantial degree of careful and detailed planning and organisation. The respondent used two fictitious identities for the scheme, in the names of Jonathan McCorriston and Andrew James Moffatt. He created false identification documents, including birth certificates and credit cards, for each of those two identities. He then purchased two shelf companies, Callards and Pavon Pty Ltd ("Pavon"), and registered both companies with an ACN number. The name of McCorriston was given by the respondent as the director/secretary and shareholder of Callards. The name of Moffatt was given by the respondent as the director/secretary and shareholder of Pavon. Using a false identification document, he then obtained a post office box with Australia Post in the name of McCorriston. He re-directed mail to that post office box, which had been addressed to Callards and Pavon. Using the name of McCorriston, he contacted Servcorp, and engaged it to provide "virtual office" services for Callards. Those services comprised answering McCorriston's telephone calls, and transferring calls to his mobile telephone at an offsite location. Using the false identification documents, he opened bank accounts in the name of McCorriston with the ANZ Bank and the Commonwealth Bank of Australia, and in the name of Moffatt with the Bendigo Bank.

9 In the meantime, identifying himself as McCorriston, the respondent engaged Deloittes to give advice in relation to business activity statements to be lodged on behalf of Callards, and to prepare those statements on behalf of Callards. At the same time, identifying himself as Moffatt, the respondent engaged PriceWaterhouseCoopers to give advice and assist in relation to Pavon. In his record of interview, the respondent stated that he engaged both of those prominent accounting firms in order to lend credibility to the scheme.

10 The respondent, in the name of McCorriston, then proceeded, on a monthly basis, to provide information to Deloittes to be used in the compilation of business activity statements to be filed on behalf of Callards. Acting on those instructions, Deloittes prepared and lodged with the Australian Taxation Office business activity statements over a two year period. The first set of statements, for June, July and August 2002, were lodged on 27 September 2002. The last business activity statement, for July 2004, was lodged by Deloittes on 23 August 2004. The respondent had advised Deloittes that the financial information, which was contained in the statements, related to a business conducted by Callards, by which it had acquired shipping containers and leased them back to Pavon. The statements claimed large amounts of goods and services tax refunds. Every second or third statement lodged on behalf of Callards purported to declare a small amount of goods and services tax owing by that company to the Australian Taxation Office. On two occasions the ATO queried the amounts that were contained in business activity statements. The queries were communicated by Deloittes to the respondent. In response, the respondent forwarded to Deloittes fake invoices between Pavon and Callards reflecting the amounts claimed in the business activity statements.

11 In reality there were no transactions at all between Callards and Pavon. There were no shipping containers. Callards did not conduct any business. All the information contained in the business activity statements was completely false. The Australian Taxation Office received and acted on the statements, and made payments totalling the sum of $2,453,102.22, which are the subject of count 1 on the presentment. The last payment, of a sum of $351,682.23, was made by the Australian Taxation Office on 25 March 2004, in respect of the Business Activity Statement lodged for the month of October 2003. The respondent continued to lodge business activity statements in 2004. In that year, statements were lodged in February, April, June and August seeking a total tax refund of $1,334,173. Those sums were the subject of count 2 on the presentment. By that stage the Taxation Office had become suspicious. Ultimately, a "sting" operation was organised, by which a very large tax refund cheque was forwarded to the respondent. The trail of that cheque was followed, and the respondent was arrested on 11 October 2004.

12 The refund monies received by Callards from the Australian Taxation Office had been credited to the bank accounts set up by the respondent. The respondent withdrew those funds from automatic teller machines, and deposited them in his personal account. He used five accounts to overcome daily limits on ATM withdrawals. He chose one particular ATM because it did not have 24 hour camera surveillance. Most of the money was paid into his personal account.

13 The respondent was interviewed by the Australian Federal Police on 22 October 2004. In the course of that interview he made comprehensive admissions. He described in detail how he had set up and implemented the scheme. The respondent stated that the purpose of the scheme was to inject $1.2 million into a business, Chemicals Plastics and Rubber Pty Ltd, and to pay for his expenses "along the way". Some of the money was used by him for overseas travel, and to entertain clients for the business. He said that he had conceived the idea of obtaining fraudulent refunds from the Australian Taxation Office because, when the goods and services tax was first introduced, he thought it was a "stupid system", as it was "a bit like the self assessment system which works on honesty". He stated that he chose the business of shipping containers because shipping containers are very difficult to track, as they could be anywhere in the world. He also chose that industry because shipping containers have a high value, thus enabling large claims to be made for GST refunds.

14 On the plea in mitigation of sentence, counsel for the respondent relied on the respondent's plea of guilty, his admissions to the police, and the fact that, apart from two previous convictions for .05 offences (which were irrelevant), he had no other previous convictions. Otherwise, counsel relied on matters relating to the respondent's background. The respondent was then 39 years of age. He had completed secondary education, but he had not completed his university course. After leaving school, he had undertaken a number of business ventures, including a live fish business and an information technology business. However, neither enterprise was particularly successful. At the time of the offending, the respondent was working long hours as a bar manager of a club in the city. He had previously been married and divorced, but had remarried. He had two children, aged 3 years and 11 months, by his second marriage. His relationship with his second wife was strained, and at the time of the plea the couple were living apart.

15 The respondent was the eldest of four sons. When he and his brothers were young, their parents' marriage was fraught, and was frequently marked by conflict. As the eldest, the respondent found himself in the position of intervening, particularly when the disputes between his parents became over-heated. The respondent's brother gave evidence that the period of difficulty between his parents had affected the respondent quite deeply. However, the family currently shared a good relationship, and had weathered an unfortunate period in their lives. A medical report was tendered on behalf of the respondent, which disclosed that he suffered from atrial fibrillation and associated high blood pressure. He had a history of smoking, and of excessive consumption of alcohol which made him a significantly high coronary risk.

16 In the course of the plea, the respondent's counsel related how the respondent had experienced periods of frenetic activity, and other periods of deep depression. A report was tendered from a psychologist, Ms Wendy Northey. Ms Northey had consulted with the respondent, and interviewed him on two occasions in August 2006, for a total of 4½ hours. In her report she related the respondent's background and history. She concluded that the respondent's background indicated a history of "long standing psychological problems". She stated that he had reported periods of feeling like a dynamo, after which he would "crash". Ms Northey considered that that pattern had similarities to a bipolar mood disorder, such as manic depression. She noted that the applicant used large quantities of alcohol to self-medicate when he felt depressed. She also noted that his history disclosed that he had significant anti-social traits, which had their origin in terms of an earlier state of "oppositional defiance". Ms Northey expressed the view that that history indicated the development of an enduring personality disorder, the aetiology of which dated back to the respondent's childhood. She stated that the respondent's behaviour fell short of psychopathy. He was driven by emotional factors, such as social insecurity, fear of failure and oppositional defiance. In light of the respondent's acute affective symptoms and behavioural history, she made a "provisional diagnosis" of mood disorder, possibly bipolar 1 disorder, with an axis 11 diagnosis of personality disorder which "may be warranted". Ms Northey stated that the respondent required medical and psychiatric back up as a matter of urgency, in order to monitor and clarify those issues with a view to appropriate treatment. Ms Northey expressed the view that, provided the respondent received adequate medical attention to address his physical and psychological conditions, he had the capacity to stabilise and rehabilitate himself, should he be placed in custody.

17 Towards the conclusion of the plea, the judge expressed the view that the respondent's history, and in particular his childhood, appeared to "underlie what's happened". She opined that there was a "clear link between the sorts of subterranean psychological problems, if you like, that he suffers in this offending ... ". Her Honour considered that it was necessary to distinguish between the offending, which was a product of the respondent's underlying problems, and offending by someone who was "simply callously offending out of greed". In discussion with the prosecutor, her Honour expressed the view that she was not saying that the respondent was a "Tsiaras", referring to the decision of the Court of Appeal in R v Tsiaras.[2] She considered that the respondent had "some form of mental illness", but she would not sentence the respondent in a more lenient fashion as a result of that condition.

18 The judge then reserved her decision, and pronounced her reasons for sentence three weeks later. In those reasons her Honour outlined the circumstances of the two offences, and expressed the view that the offending was a most serious form of offending, involving long-standing and systematic exploitation of the public purse at great profit to the respondent. Her Honour noted that the offending involved detailed and sophisticated planning and execution. She took into account the plea of guilty by the respondent, and also his admissions, although she also noted that the record of interview in effect represented an opportunity for the respondent to give to the police "a catalogue of [his] cleverness rather than make a truly contrite confession". Her Honour noted the report of Ms Northey and her provisional diagnosis. In conclusion, her Honour sentenced the respondent to the term of imprisonment to which I have already referred.

19 There are seven grounds of appeal set out in the Commonwealth Director's Notice of Appeal. However, as argued by counsel, two of those grounds were particularly prominent, namely, that the sentences were manifestly inadequate, and that the sentencing judge gave undue weight to the respondent's personal circumstances, and in particular his psychological profile as described in the evidence of Ms Northey. It was submitted that the respondent's moral culpability was particularly high in this case. The respondent was a man of mature age and intelligence. The scheme involved a significant degree of planning and preparation. It was a sophisticated scheme, and the respondent was brazen in implementing it. The execution of the scheme involved the lodging of 27 false business activity statements. The offending occurred over a substantial period of time. It was only brought to an end with the respondent's arrest. An aggravating feature of the offending was that the respondent involved other innocent parties in his wrongdoing, including the accounting firms and banks. The offending involved a large amount of money, and was motivated by greed. In addition, it was submitted that, on the other hand, the mitigating circumstances were not such as to warrant a significant reduction in the sentence, which would otherwise have been imposed on the respondent. It was submitted that the sentencing judge placed too much weight on the psychological evidence contained in the report of Ms Northey. Counsel submitted that the transcript of the discussion between her Honour and counsel at the plea revealed that the sentencing judge placed undue emphasis on the role, which the respondent's background and childhood had played in his involvement in the offences.

20 On the other hand, counsel for the respondent submitted that it had not been shown that there was any error in the sentencing discretion, and that the sentences imposed on the respondent were not manifestly inadequate. He contended that there were strong mitigating circumstances, including the early plea of guilty, the admissions made in the records of interview, the lack of any relevant previous convictions of the respondent, and the respondent's good prospects of rehabilitation. Counsel submitted that, on the basis of the report of Ms Northey, the respondent's psychological makeup was such as to reduce the moral culpability of his offending. In that respect, counsel relied on the recent decision of the Court in R v Verdins.[3] Counsel submitted that, at the plea hearing, counsel for the Crown had accepted the proposition that the respondent's offending had derived from his psychological problems. Reliance was also placed on the respondent's poor medical health. Finally, it was submitted that, if this Court were to conclude that the sentencing discretion had miscarried, the Court should only increase the head sentence applicable to the respondent, and should not interfere with the non-parole period set by the sentencing judge.

21 This being an appeal by the Director, it is important to recall the constraints which apply in such a case. Crown appeals should be rare and exceptional.[4] In R v Clarke,[5] Charles JA identified the type of circumstances which warrant the institution of a Crown appeal. His Honour's purpose in doing so was to ensure that such appeals are not brought as a matter of course and that they should only be brought to address a sentencing issue of particular importance.

22 In this case, the main ground of appeal is that the sentences were manifestly inadequate. In order that that ground be established, the Director must demonstrate that the sentences imposed were so manifestly inadequate that the appellate court can conclude that the trial judge made an error in the exercise of the sentencing discretion.[6]

23 In determining that question, the starting point is an appropriate assessment of the gravity of the offending in this case. The sentencing judge described the offending as "most serious". Counsel for the respondent recognised that the offending necessitated the imposition of a substantial term of imprisonment. In my view, those observations were well warranted. As submitted by counsel for the Director, and as demonstrated by the circumstances of the offences which I have summarised, the offending by the respondent involved careful and detailed planning, preparation and implementation. The respondent created and effected a sophisticated scheme, involving acts of deception on a number of levels. The offending took place over a substantial period of time. Throughout that period, the respondent had the opportunity to desist, had he wished to do so. Instead, he continued to exploit the scheme for his own financial benefit. The offending itself involved a number of repeated acts of dishonesty, involving the submission of 27 false business activity statements. It was only brought to an end when the respondent was detected and arrested. The amounts of money ultimately involved were substantial. The respondent was not motivated by any pressing financial need. Rather, his offending was designed to provide funds for a grandiose importing scheme, from which the respondent had hoped to derive very significant profits. The respondent used a sizeable portion of the money, which he obtained from the scheme, to pursue a lavish lifestyle, spending large amounts on expensive restaurants, nightclubs, hotels and air travel. An odious feature of the scheme was that the respondent involved other innocent parties in the wrongdoing, and sought to exploit the reputation of prominent accounting firms and financial institutions, in order to lend some credibility to his scheme.

24 It is well recognised that those who systematically defraud the public revenue of large sums of money over a substantial period should be sentenced to substantial terms of imprisonment.[7] The regime established for the collection of goods and services tax is basically dependent on the honesty of those participating in it. In cases such as this, considerations of general deterrence are given particular emphasis, and indeed prominence, in the sentencing process. The courts have a significant responsibility to protect the integrity of the revenue system, by imposing punishments, for deliberate and sustained fraud, which are likely to deter others who may be otherwise tempted to indulge in the type of conduct committed by the respondent.[8]

25 Accordingly, the sentencing judge was obliged to treat the offending in this case as conduct which called for the imposition of a substantial custodial sentence. The maximum sentence for each offence was 10 years' imprisonment. On their face, the sentences imposed on the respondent fall well short of sentences which could properly express the Court's denunciation of the respondent's conduct, or which could adequately act as a general or specific deterrent. The sentences do not reflect the serious aspects of the offending, to which I have already referred, and in particular do not reflect the scale on which the offending was undertaken, the planning and careful implementation of it, and the very significant amounts of funds which the respondent derived, and sought to derive, from the Commonwealth revenue by his fraudulent conduct.

26 It was submitted on behalf of the respondent that, nonetheless, in light of the mitigating circumstances accepted by the sentencing judge, the sentences imposed in this case were not manifestly inadequate. In my view, the respondent's plea of guilty, his admissions, and his lack of relevant previous convictions, were not of themselves sufficient to detract from the need in a case such as this to impose a substantial sentence. Indeed, it is not uncommon that offences of the kind which occurred in this case, which involve dishonest impositions on the revenue authorities undertaken over a prolonged period of time, are committed by those who otherwise have good previous records and who, on detection, readily admit their guilt.

27 The main mitigating circumstance relied on for the respondent concerns the evidence relating to the respondent's psychological condition. The sentencing judge seems to have been particularly persuaded by that evidence, as is evidenced by a number of remarks made by her Honour in the course of the plea. It was submitted on behalf of the respondent that counsel for the Crown, during the plea, had accepted that the offending was the product of the respondent's psychological malfunctioning, which itself had its origins in the respondent's experiences at an early age. I do not consider that counsel for the Crown did make that concession on the plea. The alleged concession took place immediately after her Honour had advanced a number of different propositions relating to the evidence concerning the respondent's psychological makeup. In its proper context, the response made by counsel for the Crown at that point did not contain the concession which was contended for before us.

28 The question, then, is whether the psychological condition of the respondent, as described by Ms Northey, could justify a significant mitigation of the sentence, which would otherwise have been required, to fulfil the important functions of sentencing of denunciation, specific deterrence and general deterrence. It is not entirely clear what use the sentencing judge made of that evidence. Certainly, as I have indicated, in the course of discussion with counsel, she expressed the view that the evidence, which had been adduced before her, did not bring the respondent within the principles discussed by the Court of Appeal in R v Tsiaras.[9] On the other hand, her Honour referred to the evidence in some detail in her sentencing remarks. Her Honour stated that she regarded the respondent's offending as fundamentally deriving from the experience of his teens. I infer from that part of the sentencing reasons, and also from the sentence imposed on the respondent, that her Honour thus accepted that the respondent's psychological condition was such as to reduce the moral culpability of his offending.

29 In R v Verdins,[10] the Court of Appeal discussed the manner in which an offender's psychological condition may impact on, and affect, the determination of the sentence to be imposed on that offender. The Court referred to the debate as to whether the decision in Tsiaras only applied to cases of serious psychiatric illness. The Court concluded:

"Where a diagnostic label is applied to an offender, as usually occurs in reports from psychiatrists and psychologists, this should be treated as the beginning, not the end, of the inquiry. As we have sought to emphasise, the sentencing court needs to direct its attention to how the particular condition (is likely to have) affected the mental functioning of the particular offender in the particular circumstances - that is, at the time of the offending or in the lead up to it - or is likely to affect him/her in the future."[11]

30 In the present case, apart from identifying an "enduring personality disorder", Ms Northey was unable to make any further definitive diagnosis of the respondent's condition. I accept that it may not be necessary for the psychiatrist or psychologist to attach a "label" to the condition identified by the expert. Nonetheless, as a matter of evidence, the expert must be able to identify and adequately describe the condition, on which the offender relies to mitigate the sentence. In this case, apart from ascribing to the respondent an enduring personality disorder, the psychologist, Ms Northey, was only able to make a "provisional diagnosis" of mood disorder (possibly bipolar 1 disorder), but added the caveat that the respondent required medical and psychiatric follow up in order both to monitor and also to "clarify" that matter. In my view, such a provisional, unsubstantiated diagnosis, as was proffered in this case, does not form an adequate basis upon which to apply the principles which had their origins in cases such as R v Anderson,[12] and which have been discussed at length by this Court in Verdins' case.

31 The conclusion by Ms Northey, that the respondent has an enduring personality disorder, the aetiology of which can be found in his childhood, may provide some explanation for the respondent's offending in this case. However, on a balanced view of that evidence, I consider that, at most, it could only operate to mitigate the moral culpability of the respondent to a relatively small degree. As I have stated, the offending involved detailed planning. The respondent not only deceived the Australian Taxation Office, but also practised calculated deceptions on banks, accounting firms, and other institutions such as the Post Office. The offending was cunningly contrived, and carefully executed. It occurred over a substantial period of time (two years), and was constituted by a series of dishonest acts. I do not consider that the personality disorder discussed by Ms Northey does other than to minimally mitigate the moral culpability of the respondent in respect of that category of wrongdoing. Nor do I consider that that disorder is such as to affect the application of the principles of general and specific deterrence.

32 Bearing those matters in mind, I do not consider that the mitigating circumstances relied upon on behalf of the respondent, both before the sentencing judge, and in this Court, are such as could justify any substantial reduction in the sentence, which should otherwise be imposed in respect of the offending in this case. I am therefore of the view that the sentences imposed on the respondent were manifestly inadequate, in the sense that the sentences fell so substantially short of what would have been proper and adequate as to bespeak error in the exercise by the judge of her sentencing discretion.

33 Accordingly, I consider that the Director's appeal should be allowed. It follows that it is for this Court to re-sentence the respondent. In doing so, it is important to give full weight to the principles of double jeopardy, bearing in mind that the substitution of a higher sentence on the respondent carries with it an added burden on him by reason of the expectations created by the sentence imposed by the sentencing judge. As I have already remarked, the offending, and in particular the manner in which it was carried out, requires the imposition of stern sentences. The pre-eminent sentencing consideration in cases of revenue fraud is that of general deterrence. The sentence to be imposed upon the respondent must be such as to send a clear message that those, who contemplate indulging in such conduct, run the risk of substantial terms of imprisonment, in the event that their offending is detected. Further, the nature of the offending by the respondent was brazen. I could detect no genuine remorse in the respondent's record of interview. Indeed, as the sentencing judge remarked, the respondent seemed to regard the record of interview as an opportunity to demonstrate his ingenuity to the police, rather than to make a truly remorseful confession. On the other hand, I take into account, as did the sentencing judge, the respondent's plea of guilty, his frank admissions, and his lack of any relevant previous conviction.

34 Taking those matters into account, and bearing in mind the principles of double jeopardy, I propose the following disposition of the appeal. The appeal should be allowed, and the sentences imposed by the sentencing judge be set aside. The respondent should be re-sentenced as follows. On count 1, the respondent should be sentenced to 4 years' imprisonment. On count 2, the respondent should be sentenced to 3 years' imprisonment. I would order that 12 months of the sentence on count 2 be served cumulative to the sentence on count 1, making a total effective sentence of 5 years' imprisonment. I would order that the respondent serve 3 years of that sentence before becoming eligible for parole. I would order that the sentence commence as from today's date. A declaration should be made as to pre-sentence detention.

[1] [1996] VicRp 26; (1996) 1 VR 398. See also R v Verdins [2007] VSCA 102.

[2] [1996] VicRp 26; [1996] 1 VR 398.

[3] [2007] VSCA 102, especially [20], [26].

[4] Everett v R [1994] HCA 49; (1994) 181 CLR 295, 299.

[5] [1996] VICSC 30; [1996] 2 VR 520, 522; see also R v O'Rourke [1997] 1 VR 246, 251.

[6] House v R [1936] HCA 40; (1936) 55 CLR 499, 504-5 (Dixon, Evert and McTiernan JJ); DPP v Low [2004] VSCA 250, [20] (Winneke P); DPP v Bright [2006] VSCA 147; (2006) 163 A Crim R 538, 542 (Redlich JA); DPP v Whiteside [2000] VSCA 142; (2000) 1 VR 331, 336.

[7] R v Nguyen & Phan [1997] 1 VR 386 at 389.

[8] DPP (Commonwealth) v Milne [2001] VSCA 93 at [12] and [13] (Winneke ACJ); Kovacevic v Mills (2000) 76 SASR 404 at [39] to [40]; DPP (Commonwealth) v Alateras [2004] VSCA 214 at [26] (Nettle JA); R v Alimic [2006] VSCA 273 at [26] (Nettle JA).

[9] [1996] VicRp 26; [1996] 1 VR 398.

[10] [2007] VSCA 102.

[12] [1981] VicRp 17; [1981] VR 155.