DPP (Cth) v Trainor & Cahir [2000] VSCA 249

Court of Appeal (Vic)|2000-12-22|Before: TADGELL, CALLAWAY and BATT, JJ.A.

CRIMINAL LAW - Sentencing - Defrauding public authority under Commonwealth - $750,000 postage avoided over 12 months - Delay and other special circumstances - 18 months' imprisonment with immediate release on recognisance not manifestly inadequate - Crimes Act 1914 (C'th), s.29D.

I shall invite Batt, J.A. to deliver the first reasons.

On 17 November 1998 the respondents, Anna Louise Trainor and Brett Michael Cahir, were charged on summons with offences of defrauding the Commonwealth contrary to s.29D of the Crimes Act 1914 (C'th). On 30 July 1999, following a 10-day contested hearing during which a number of prosecution witnesses were cross-examined, they were committed for trial and entered pleas of not guilty. On 29 March 2000 before his Honour Judge Barnett in the County Court at Melbourne the appellant filed an indictment containing one count of defrauding a public authority under the Commonwealth, namely, the Australian Postal Corporation (Australia Post), between 1 September 1995 and 15 August 1996 contrary to s.29D. The maximum penalty for that offence was a fine of $100,000 or imprisonment for 10 years, or both. The respondents were arraigned and pleaded guilty. Neither has any previous convictions. The matter was then adjourned for what was described as a "contested plea" to commence on 31 July 2000. The bail of the respondents, which had been granted by the magistrate, was respited.

A plea in mitigation of penalty was commenced on the last-mentioned date before another judge of the County Court and was concluded on the following day. Four character witnesses were called on behalf of the respondent Trainor and three on behalf of the respondent Cahir, and a number of testimonials and reports were tendered on behalf of each. Her Honour adjourned the matter to 11 August for sentence and respited the respondents' bail meanwhile. On that day her Honour sentenced each of the respondents to be imprisoned for a term of 18 months but ordered pursuant to s.20(1)(b) of the Crimes Act that each be released forthwith upon entering into a recognizance in the sum of $5,000 to be of good behaviour for a period of 18 months. Her Honour also ordered pursuant to s.21B of that Act that the respondents make reparation to Australia Post in the sum of $750,000.

4 On 7 September 2000 the Commonwealth Director of Public Prosecutions as appellant gave to each respondent notice of appeal, pursuant to s.567A of the Crimes Act 1958 and others powers enabling him to appeal, against the sentence passed by her Honour on that respondent.

Before the grounds of appeal can be considered it is necessary to summarise the facts both of the offending and of the offenders. In June 1994 the respondents commenced a business known as Direct Mail Corporation (DMC). It was registered as a proprietary company on 15 June of that year. The respondents were its directors and sole shareholders. At all presently material times it carried on business as a mailing house, its principal business activity being the preparation and lodgement of mail on behalf of others, such as businesses, charitable organisations and supporting clubs. The mail consisted of flyers, newsletters and catalogues as well as letters. The mail had to be folded and placed in envelopes, by hand, and then lodged with Australia Post for ultimate delivery. Australia Post accepted at post offices and mail centres, amongst other places, the lodgement of bulk mail by customers, bulk mail meaning 50 or more articles. The postage payable on bulk mail could be charged to an Australia Post charge account. DMC established such an account. It was a term of Australia Post's contracts with its bulk mail customers that a "mailing statement" showing the charge account number and the quantities and types of mail lodged together with any applicable discounts be provided by the customer at the time of lodgement of bulk mail in order that postal staff might check the details, calculate the postage payable and debit the amount to the customer in Australia Post's records. Although "full rate" mail lodged by companies such as DMC attracted no discount, Australia Post did offer discounts for a number of categories of mail, such as letters pre-sorted according to Australia Post guidelines, approved advertising material and approved periodical publications.

At all relevant times the principal place at which DMC lodged bulk mail was the Port Melbourne post office. DMC's business flourished to such and extent that the mail which it handled became voluminous and, because it was all done by hand, the work became almost unmanageable. DMC at times employed between 15 and 20 staff and enlisted the assistance of members of the respondents' families. Of its nature, the work was urgent and it was not unusual for staff to work into the early hours of the morning. One witness described DMC's premises as "a nightmare" and others as "chaotic". In about June 1996 the amount of mail had so increased that DMC's driver began delivering to the State Mail Centre as well as to the Port Melbourne post office, averaging two to three daily deliveries to the latter. Whilst he handed over paperwork at the State Mail Centre he did not do so every time he went to the Port Melbourne post office. No demand was made for paperwork and it seems that statements by the driver that it would be furnished later were acquiesced in. Video surveillance of the Port Melbourne post office between 18 July and 14 August 1996 showed that the DMC van normally delivered three times a day, dropping off the mail at the rear of the post office. The mail was not taken into the post office nor did it appear that anyone counted it. Within 15 to 30 minutes an Australia Post vehicle would come and collect the mail.

The gravamen of the respondents' offence was that, in respect of much of the huge volume of bulk mail lodged by DMC at Port Melbourne post office, they, as the controllers of DMC, failed to submit any mailing statements either at the time of lodgement of the mail or at all. As DMC was a charge account customer, Australia Post relied on the mailing statements in order to charge DMC the correct amount of postage on the mail lodged. It was agreed before her Honour that the amount of postage of which Australia Post was defrauded in the period the subject of the indictment was $750,000.

(Having closely read the transcript on the point at pp. 3, 4, 5 and 119, I do not accept the contention made to us for the respondents that the amount was "up to a ceiling of $750,000".)

DMC did submit some mailing statements. Those submitted correctly recorded the details of the lodgements they accompanied. An audit conducted by investigators which covered the period from 18 June to 2 August 1996 showed that the postage properly payable on the mail lodged by DMC during that period was $298,384.23, whereas, on the basis of the mailing statements lodged by DMC, it was charged only $50,197, so that there was a shortfall of $248,187. Thus, in that period only approximately one-sixth of the postage properly payable was paid by DMC.

The respondent Trainor kept a handwritten journal in which "meticulous records" (to use her Honour's words) were made, in relation to each job for each of DMC's customers, of the costs incurred by DMC, including postage, the amount invoiced to the customer and DMC's profit. In very many of the entries the column for postage costs has a dash, whilst in a large number of those cases the invoice to the customer listed in the journal shows that it was charged a substantial amount for postage claimed to have been paid on its behalf. The respondents are, naturally, not to be punished for defrauding DMC's customers, but the fact that customers were charged for postage which DMC had not paid goes to the system the respondents were operating and to their appreciation of the wrongfulness of the non-payment of postage to Australia Post.

On 15 August 1996 members of the Australian Federal Police executed a number of search warrants in relation to this matter. On 9 September of that year the respondents attended at Australian Federal Police headquarters with their solicitor to take part in a formal record of interview. They were separately interviewed and gave "no comment" answers. But, as I have already stated, it was not until 17 November 1998 that they were charged.

I turn to matters personal to the respondents. The respondent Trainor was born on 24 July 1970 and the respondent Cahir on 27 April 1969. Except for the present offending they were of unblemished character. Each had supported one or both of their parents physically and financially. Her Honour evidently accepted testimony that each was remorseful and contrite and had been distressed and anxious whilst the matters remained unresolved, as well as the opinion evidence of the psychiatrist, Dr Lester Walton, that each was somewhat naive or inexperienced in business, this being the first business venture on his or her on account for either of them, and that they had not paused in the urgency of the moment to consider the quality or effect of their conduct.

Both respondents consented to the reparation order which her Honour made and in addition they had jointly and severally agreed with Australia Post to make reparation in the sum of $400,000 of which $250,000 was payable and paid on 1 August 2000 and the balance is payable by instalments on 30 June and 31 December 2001. Australia Post for its part agreed to accept the sum of $400,000 so paid in full satisfaction of the reparation order.

In stating in summary form, as I now of necessity do, her Honour's reasons for imposing the sentences which she did I do less than justice to those detailed and careful reasons. It was conceded before her Honour that a sentence of imprisonment was an appropriate disposition in each case. The dispute was as to the length of the term and as to whether any part of it need to be actually served in the first instance. Her Honour, correctly in my view, rejected submissions for the respondents that the degree of their culpability was low and that, despite the quantum of the fraud, the nature and gravity of the offence was such that it sat at the lower end of the scale of offences of this kind. She considered that a lack of probity and integrity on the respondents' part was disclosed and said, again correctly in my view, that they stood convicted of a serious fraud of a magnitude of three quarters of a million dollars, committed in the course of almost 12 months, so that, irrespective of the manner in which they came to commit the crime and although it might be said to have been opportunistic and unsophisticated, it was nonetheless spectacularly successful in yielding significant profit to them and their company which would not have accrued to that degree had they acted honestly. Her Honour had earlier and, in my view, correctly described the bulk mail system as an honour system, saying that it was not disputed that it was Australia Post's obligation to audit the mail and render appropriate accounts, although it was the respondents' obligation to lodge the mail with the appropriate documents. Later she said:

"Whether it is that neither of you appreciated fully the ramifications of your conduct, or that you were reckless as to the consequences of your conduct, nonetheless if only because of the sheer volume of mail that you are processing through the Port Melbourne post office without cost to you, you must have been acutely aware at some point of the gravamen of your conduct, which was simply this: by evading the expense of what must have been at least a, if not the, substantial operating cost of your business, you were able to operate a successful and profitable business..."

It was those considerations that led her Honour to conclude that, given the nature and gravity of the offence, and the need to give due weight to general deterrence, to denounce the respondents' conduct and to punish them, a sentence of imprisonment was the only appropriate sentence in the circumstances.

Her Honour, however, was satisfied "compendiously" that the circumstances of the case amounted to "substantial mitigating circumstances" in respect of both respondents. Amongst those circumstances were the matters personal to the respondents which I have mentioned earlier. In addition, her Honour, amongst other things, took into account:

* The fact, as she found, that since the offending the respondents had continued to operate their business honourably and successfully and had retained the services of Australia Post as well as the custom of major businesses, such as Honda Australia, DMC's business by then being better organised and conducted in larger premises and much of the work being performed by automation;

* That the offences were old, having occurred in 1995 and 1996; that the respondents had not been charged until 1998; and that they had had to live with the anxiety of the matters being unresolved for a considerable period, which had adversely affected both of them;

* That both respondents were relatively young at the time of the offences;

* That the respondents' pleas of guilty and the consequential saving to the community of the possible expense of a lengthy trial (I note parenthetically that we were told that the committal hearing was contested in order "to define the boundaries" of the offending for the purpose of an ultimate plea);

* The matters relating to reparation mentioned earlier;

* That the respondents were overwhelmed by the rapid growth of their business and had acted naively upon the respite from expenses otherwise incurred;

* That each offence was to a degree opportunistic and that specific deterrence in this case carried less weight by reason of the aberrant nature of the offending, it being out of character for each of the respondents; and

* That the rehabilitation of each respondent was already under way.

It was the considerations which I have referred to and listed that led her Honour to suspend the sentences of imprisonment entirely or, more exactly, to order the respondents' release forthwith upon their entering into recognizances of the kind described earlier.

In each case the grounds of appeal are as follows:

"1. The sentence imposed on the Respondent is manifestly inadequate having regard to all the circumstances of the case and a different sentence should have been passed. 2. The learned sentencing Judge erred in imposing a sentence of 18 months imprisonment. 3. The learned sentencing Judge erred in ordering that the Respondent be released forthwith pursuant to section 20(1)(b) of the Crimes Act 1914 upon entering into a recognizance in the sum of $5,000 to be of good behaviour for a period of 18 months. 4. The learned sentencing Judge erred in imposing the sentence that she did and in ordering that the Respondent be released forthwith 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 of the Respondent as a principal offender; (c) the period over which the offence was committed; (d) the amount defrauded ($750,000.00); (e) the amount obtained by the Respondent and [the other Respondent] as a result of the offence; (f) the role played by the Respondent in the offence; (g) the need to pass a sentence that would be calculated to deter other persons disposed to commit similar offences from committing such offences. 5. The learned sentencing Judge erred in that she gave undue weight, either individually or in combination to: (a) the Respondent's personal circumstances, including [his/her] age and naivety at the time of the offence; (b) the Respondent's good character and lack of prior convictions; (c) the Respondent's plea of guilty; (d) the Respondent's effort in making substantial reparation; (e) the likely adverse effect of a period of incarceration on other members of the Respondent's family. 6. The learned sentencing Judge erred in that she concluded that substantial mitigating circumstances existed in respect of the Respondent."

It was explained that grounds 2 and 3 were together, in effect, explanatory of ground 1 and that grounds 4, 5 and 6 constituted particulars of grounds 2 and 3.

The principles applicable to the determination of Director's appeals are well known (see, for instance, R. v. Clarke[1]), and they have recently been confirmed by the High Court in Lowndes v. The Queen[2] and Dinsdale v. The Queen[3]. I do not in the circumstances in which these reasons are being given stay to rehearse the principles, save to point out that it is "basic" that "a Court of Criminal Appeal may not substitute its own opinion for that of the sentencing judge merely because the appellate court would have exercised its discretion in a manner different from the manner in which the sentencing judge exercised his or her discretion"; Lowndes[4]. Subject to a final overriding discretion to decline to intervene, a recent instance of which is R. v. Ramos[5], for the reference to which I am indebted to Callaway, J.A., the question is whether the sentence is quite outside the range of sentences open to the sentencing judge in the exercise of a sound discretionary judgment or whether the kind of disposition is quite inappropriate.

The determination of these appeals has occasioned me most anxious thought because the sentences imposed are merciful indeed, but in the end I have come to a clear conclusion.

In each case the appellant drew attention to the considerable time over which the fraudulent course of conduct was engaged in and to the fact that for the whole period the respondents maintained contemporaneous financial records detailing the fact and extent of their fraud. The appellant submitted that the conduct was deliberate, calculated and persistent, being constituted by numerous repeated acts of dishonesty; that it was opportunistic and systematic; that each respondent was personally enriched by it; and that there had been an obligation of disclosure upon the respondents. Having already said that I agree with her Honour's characterisation of the offences, I accept substantially those submissions. I do accept that the offending "snowballed" with the rapid and apparently uncontrolled growth of DMC's business and that the procedures of Australia Post were inadequate, but the volume of mail on which postage was not paid, the amount of that postage, the number of lodgements and the length of time over which the offending spread of themselves show that the offence was serious and that the culpability of the respondents was not at the lower end of the scale. All these matters of course relate only to the offences themselves.

Mr Holdenson for the appellant disputed the submission put to us for the respondents that the respondents' fraud did not commence with criminal intent but was rather seen by them as a fortunate respite from expenses otherwise incurred, and that only as the use without charge of the postal services continued was a criminal indent formed at some point, a point which, on inquiry from the Bench, Mr Richter for the respondents was unable to identify. Although her Honour did not say so directly, she probably accepted by implication a like submission for the respondents. The respondents, who could best have supported the submission by evidence, did not give evidence. The only evidentiary material supporting it were hearsay statements in Dr Walton's reports. The prosecutor below objected to those passages being used for that purpose, although he did not press for a ruling. Mr Holdenson was able to demonstrate that, as indeed her Honour accepted, from as early as 4 September 1995 the respondent Trainor was recording in the journal (read with the invoices it specified) the charging of postage to customers of DMC when the journal both showed that DMC had paid none and also recorded DMC's profit on the job. I am not prepared to act on the respondents' submission.

Nor do I accept the respondents' related contention to us that it was not disputed by the Crown before her Honour that the respondents' initial intentions were not criminal and that they did not set out to defraud. Her Honour accepted that that was not disputed. The passage relied on at p.144 of the transcript of the plea hearing does not, in my opinion, support the contention. Her Honour and the prosecutor had been discussing Mr Richter's reliance upon the Director of Public Prosecutions (Cth.) v. Carter[6], and in that context the judge referred to Mr Richter's submission that the respondents' intention was not initially a fraudulent one. This exchange then occurred:

"HER HONOUR: That's how I'm understanding him to be putting it; do you dispute that? [PROSECUTOR]: No, I don't at all, Your Honour, and perhaps then, accepting that ..."

He went on to say that the submission did not "get" his opponent "within Carter". The prosecutor, who had earlier pointed out that the respondents had not given evidence to support the submission, was, in my view, simply assenting to her Honour's understanding of how the submission was put for them. If there is any doubt as to the prosecutor's attitude in the passage relied on, the following page of transcript makes it clear beyond all peradventure that he was saying that he had tendered the journal in order to show that:

"From the outset [of the period counted] there were contemporaneous records of the fraud and that what I understand Mr Richter to be saying was that prior to the commencement of the indictment it [namely, lodging without criminal intent] may well have been happening ... The point is from 1 September they had contemporaneous records of the fraud". The emphasis is mine.

Mr Holdenson acknowledged that no ground of appeal directly covered these related points, but it is not a question of showing specific error but of understanding correctly the circumstances of the offences in order to determine whether the sentences were manifestly inadequate.

Notwithstanding that I respectfully differ from her Honour on the two points I have been discussing, I do not accept the submission for the appellant that it was not open to her Honour to order immediate release upon recognizance in the circumstances before her because immediate imprisonment for some period was required or the submission that the sentences were manifestly inadequate. It was, in my opinion, open to her Honour to be satisfied that the circumstances of the case amounted, in her Honour's words, to "substantial mitigating circumstances" in respect of both respondents. Besides features often present, this case had features not frequently found in prosecutions under s.29D, at any rate in combination. I have in mind particularly the following:

* the delay of more than two years between the interviewing of the respondents and the charging of them, which, though he offered a partial explanation of it, the appellant could not justify and during which the respondents' rehabilitation had progressed;

* the fact that the offenders had continued to carry on business with the public authority that had been defrauded, but honestly, successfully and with better organisation;

* the large measure of reparation agreed to be made, being reparation that was sufficient from Australia Post's point of view and had already commenced;

* the fact that the offending was completely out of character; and

* * the rehabilitation already achieved by each respondent and the excellent prospects of each for further rehabilitation, making the likelihood of re-offending in this manner highly unlikely.

In view of the foregoing and of the considerations relating to suspended sentences that are referred to in the case cited for the respondents, Director of Public Prosecutions v. Buhagiar & Heathcote[7], the appellant has not satisfied me that it was not open to her Honour, within the words of s.20(1) of the Crimes Act 1914, to "think fit" to direct that the respondents be released upon recognizance "forthwith". Nor, in view of the foregoing and of the terms of s.16G of that Act, has the appellant satisfied me that the terms of imprisonment of 18 months were outside the range open to her Honour.

If my conclusion becomes the decision of the Court, the decision should not be thought to be authority in favour of orders for the release forthwith on recognizance of persons convicted of defrauding a public authority under the Commonwealth. These were Director's appeals and the facts were very special. No case concerning sentences for the offence of defrauding a public authority was cited to us other than the decision of a County Court judge, but, putting aside minor offending, it may be said that ordinarily at least - and I stress that phrase - one would expect that some period of imprisonment must be actually served. The fact that the public authority operates as a commercial enterprise, if that be so, is not of great weight, for ultimately the defrauding prejudices the Consolidated Fund.

For the foregoing reasons I would dismiss both appeals.

In my opinion this is just the kind of case in which a Court of Criminal Appeal should not intervene. Her Honour's sentencing remarks contain a careful and discriminating assessment of the relevant facts and circumstances. Like the sentence in Dinsdale v. R.[8], the disposition below was "undoubtedly merciful",[9] but mercy does not necessarily betoken error. I refer to, without repeating, what Kirby, J. said in the same case[10]. It matters not that one or other of us might have imposed a different sentence had he been the sentencing judge.[11]

In my opinion the sentence imposed on each of the respondents was unduly lenient.

I cannot avoid characterising their relevant conduct as deliberate deceit over a protracted period and on a grand scale.

If the conduct began by way of making the most of an adventitious or inadvertent windfall, they persisted in it long afterwards by way of a designed exploitation of what should have been glaring shortcomings in the system of the postal authority.

I expressly reject the submission made for the respondents that they had no obligation to lodge mailing statements and that, because it was the obligation of the employees at the post office not to accept mail lodged without such statements and without verifying the amount of mail received, "the non-payment of postage evolved

and escalated over the period largely as a result of the conduct of Australian Post employees". The evidence came nowhere near suggesting so much. I wish also to say that I consider the respondents fortunate to have had a number of favourable findings of fact made by the sentencing judge about their modus operandi in the absence of any evidence upon it from them or, in truth, from any other acceptable quarter.

Sentences of imprisonment were inevitable. I would have imposed longer sentences upon the respondents and I would have regarded them as deserving of a measure of immediate incarceration.

Axiomatically, however, my opinion that the sentences were unduly lenient cannot by itself carry a conclusion that they were manifestly inadequate. Equally incorrect would be a conclusion that, even if the sentences should now be seen to have been manifestly inadequate when passed, this court should necessarily interfere with them, upon a Crown appeal, by setting them aside and substituting sentences which would earlier have been seen to be adequate.

Nevertheless, even allowing for the several factors of mitigation relied on, most of which have been referred to by Batt, J.A., I have concluded that the sentences of 18 months' imprisonment were manifestly inadequate in the light of the nature and quality of the offences committed. I would have allowed the appeals accordingly and re-sentenced the respondents to terms at least half as long again. Since that is a minority view I need not be more specific. It is, however, fair to say that having regard to all the circumstances I would not have been prepared to direct by way of re-sentence that any part of a term newly imposed should be immediately served. Factors that weigh with me in that connection, chiefly among others, are the long period that has now elapsed since the discovery by the postal authorities of the respondents' criminal conduct and their accusation of it and the ultimate delay in its prosecution. The respondents having avoided actual incarceration to this point, it would not be appropriate in the particular circumstances of the case to inflict it on them now.

In accordance with the opinions of the majority, the judgment of the Court in each case is that the appeal is dismissed.

The respondents may each take a certificate pursuant to s.15(1)(a) of the Appeal Costs Act 1998.

[9] At [18] per Gleeson, C.J. and Hayne, J.

[10] At [68]-[69]. See also R. v. Osenkowski (1982) 30 S.A.S.R. 212 at 212-213.

[11] See Lowndes v. R. [1999] HCA 29; (1999) 195 C.L.R. 665 at [15].

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