GOMES v Regina

SOLICITORS: Crown: S Kavanagh Applicants: P Hodges

LOWER COURT FILE NUMBER(S): 06/11/0929 06/11/0932

• 1 - IN THE COURT OF CRIMINAL APPEAL 2007/2906 2007/2907

TOBIAS JA HULME J HIDDEN J

Tuesday, 24 June 2008 Alfredo Julio GOMES v R Jose Manuel GOMES v R Judgment 1 TOBIAS AJA: I agree with Hulme J. 2 HULME J: Each of the Applicants for leave to appeal in the above matters pleaded guilty to 12 counts, the first of which was in terms that they:- "Being directors of a body corporate, namely Smartpak Australia Pty Ltd, did defraud Scottish Pacific Business Finance Pty Ltd, by factoring false invoice number 46155 in the name of Wolf Industries Pty Ltd for the amount of $55,065.12 to Scottish Pacific Business Finance Pty Ltd. 3 The other 11 counts took a similar form although the names on the invoices were commonly different and the amounts varied between about $12,000 and $46,000. The total of the amounts stated in the 12 counts was $378,144.72. 4 The offences arose under Section 176A of the Crimes Act and each rendered the Applicant liable to imprisonment for a period of 10 years. 5 The Applicants asked that a further 62 similar offences be taken into account. The total of the invoice amounts, the subject of the 12 counts and the 62 further matters was $2,044,664.72. The smallest amount involved in any offence was just over $7,000 and the largest just over $55,000. The 74 offences occurred over a period from November 2002 to June 2003. It would seem that the 74 offences were intended to be representative charges given that the statement of Agreed Facts placed before Mahoney DCJ indicated that there had been over 400 false invoices factored between November 2002 and October 2003. However, as the balance of these invoices were not the subject of charges, the Applicants could not be punished for any criminality involved in the use of these further invoices. 6 The sentences his Honour's remarks on sentence indicated he intended to impose were as follows:- AB 28-9, 65 Count Commencing Date Non-parole period or fixed term Full Term 6, 11 29.3.07 16 months fixed term 4, 5, 7, 9 29.09.07 69 weeks 23 months (about 17 ¼ months) 1, 2, 3, 8, 10 & 12 8.3.08 24 months 47 months

7 (In fact his Honour specified that the non-parole periods of the sentences imposed on counts 4, 5, 7 and 9 should end on 25 July 2008.) 8 Thus the effective sentence included a non-parole period 3 weeks short of 3 years and a full term of 4 years and a little more than 10 months. 9 His Honour's grouping of the offences reflected the amount of money involved in them. Each of counts 6 and 11 were in respect of invoices involving something over $12,000. The offences the subject of counts 4, 5, 7 and 9 involved invoices in amounts in the range of $20,000 to $30,000 and the remaining counts invoices in the range of $34,000 to $55,000. Unusually, his Honour took it upon himself to allocate the offences to be taken into account between the various offences charged but as counsel for the Applicant expressly disclaimed any complaint in that regard, I need not pursue this aspect further. 10 At the time of the offences, Smartpak had a legitimate business and a factoring facility agreement with Scottish Pacific. Under that agreement Smartpak sold to Scottish Pacific invoice debts owing by Smartpak's customers and received in return an almost immediate payment equal to a large percentage of any invoice and the balance, less the factoring fee, when payment was made by the customer to Scottish Pacific. The agreement provided for limits to Scottish Pacific's exposure. 11 The purpose of the factoring agreement was, so far as Smartpak was concerned, to improve its liquidity situation. The false invoices improved this further, at least in the short term. 12 Scottish Pacific did, of course, expect to receive payment of the amounts the subject of the false invoices and this in fact occurred. However, that payment was made, directly or indirectly by Smartpak or in some cases with funds provided by Smartpak, it was a necessary incident of any of the false transactions that, in consequence of the factoring fee charged by Southern Pacific the amount Smartpak received for each invoice was less than the amount which had to be paid. This fee equated to approximately 2½% per month (or 30% per annum) on amounts factored. 13 A common period for payment of the invoices was 90 days and given the period over which the falsification was occurring, it was obviously necessary that there be some reliable record keeping of it. This was effected the placing of a "dot" point after the product code on the false invoices. When data from such an invoice was entered into Smartpak's computer system, the system automatically saved the entries including the dot to a specially designed database and one different from those to which legitimate invoices were referred: To quote from the Agreed Facts document, "in this way the offenders were able to keep a record of how many invoices were fictitious and against which customers those invoices had been written, so that money transfers could be co-ordinated as between the various parties when the debts fell due for payment, so as to maintain the system of factoring false invoices." 14 In some cases, the offenders were assisted in the maintenance of the scheme by the cooperation of some customers who would seem to have been friends.. 15 The Grounds of Appeal are:- 1. The sentences imposed for the individual offences committed by the Applicants are in each case manifestly excessive having regard to the relevant facts and circumstances of the case for the purpose of sentence. 2. His Honour erred in the assessment of the objective criminality of the Applicants by rejecting the submission that there had been no loss sustained by Scottish Pacific in consequence of the offences committed by the applicants. 3. His Honour erred in the assessment of the objective criminality of the Applicants by referreing to the "value of the offences they committed as being $378,144.72 and $388,144.76 and as having a "total value" of $2,044,664.72 as if to imply this represented the amount of money that had been lost by Scottish Pacific. 4. His Honour erred by apparently taking into account evidence which was not evidence in the sentence proceedings for the Applicants, in particular an agreed statement of facts tendered in the case of Mr Bikhit (exhibit A) and an agreed statement of facts tendered in the case of Mr Baldini which both referred to a loss suffered by Scottish Pacific. 5. His Honour erred by negating the force of the evidence of the accountant employed by the New South Wales Police Force Mr John Fogarty as being "qualified" in its application by being "limited" to the offences charged and the matters taken into account on the Form 1 in relation to the applicants. 6. His Honour erred in rejecting the proposition that the fact that the prosecution of the Applicants followed upon their making disclosures under compulsory examination in the manner contemplated by s.177 of the Crimes Act 1900 was irrelevant in determining the nature of the punishment which should be imposed upon them.

Ground 1 16 Consideration of this ground may be deferred.

Grounds 2, 3, 4 and 5 17 It is convenient to consider these grounds together. 18 At the time of imposing sentence on the Applicants herein, Mahoney DCJ also imposed sentence on 2 persons Bikhit and Baldini who had been charged with being accessories after the fact to some of the offences charged against Messrs Gomes. His Honour's remarks on sentence refer to all four. The sentencing proceedings against Bikhit had occurred some weeks earlier than the proceedings against the other three. In the later proceedings the Crown evidence against Baldini was tendered separately - AB 233 - from that tendered against the Applicants and, as was adverted to at the time, - AB 233-240 - was not identical in all respects. Although the documents tendered against Bikhit and Baldini are not before this Court it appears that one difference lay in the fact that in, what may be inferred to be a statement of Agreed Facts tendered in Baldini's case, it was said:- "At present the victim in these proceedings has suffered a $1.3 million loss as a result of the alleged fraud committed by the Directors of Smartpak and the customers identified as being involved in the fraud." 19 The statement of Agreed Facts in the case of the Applicants stated the matter differently. It contained the following:- "24 The reconstructions (effected by chartered accountants) have indicated a large number of transfers of money between Smartpak and a number of their customers. It has been established that Smartpak at the time of liquidation had an exposure of approximately $1.6 million in factored invoices. 25 Bank investigators discovered over 400 invoices factored with Scottish Pacific Business Finance Pty Limited between November 2002 to October 2003, containing the "dot point" on the invoice after the product code. The reconstruction completed on invoices factored by Smartpak with Scottish Pacific Business Finance Pty Limited revealed that the sample of 77 invoices with a total of about $2 million and had been funded by Scottish Pacific where the invoices contained a "dot point" after the product code." 20 Liquidation occurred on 20 February 2004. - AB 74 21 An investigating accountant from the Police Fraud Squad gave evidence. That evidence, which was not contradicted or challenged, included that Scottish Pacific had in fact received payment of all of the amounts apparently due on the 74 invoices referred to in the indictment or Form 1 against the Applicants. The witness agreed also that it was likely that some of the advances from Scottish Pacific were used to repay earlier invoices - AB 216. 22 The Applicants also gave evidence. So far as is presently relevant that also was not the subject of challenge. Mr Alfredo Gomes conceded that repayment of Scottish Pacific for earlier advances from later ones was in fact "always the case" - AB 267 - and in fact that Smartpak could not have continued to operate without the fraudulent invoices. (The transcript includes the word "with" but the sense makes clear "without" was meant.) 23 It is also apparent from Mr Alfredo Gomes' evidence that Scottish Pacific was the only factoring company. He said that Smartpak had, during the period from November 2002 when the false invoicing started until 14 November 2003 when Receivers and Managers were appointed to Smartpak by Scottish Pacific, substantial difficulties in liquidity and that the false invoicing had continued until the end - AB 282. Mr Jose Gomes gave evidence that the extent of indebtedness to Scottish Pacific had however reduced in the latter part of 2003. 24 This may in part have been due to the fact that early in 2003 the Applicants did direct attention to the Smartpak liquidity problem with a view to solving it and because they were concerned at the impropriety of their conduct, and later in the year took a number of concrete steps, including re-financing of real estate, to overcome the difficulties. Mr Alfred Gomes gave evidence that was not challenged that in consequence of this re-financing some $580,000 was paid to the St George Bank and $300,000 was paid to Scottish Pacific. 25 What his Honour said relevant to the ground presently under consideration included the following. He referred to the "Total Value" of the offences the subject of the indictment and Form 1 as $2,044,664.72 and said later:- "Messrs Gomes, in their evidence in this court, and the legal representatives of all 4 accused presently standing for sentence, strenuously submit - with one exception that I will mention shortly - that Scottish had sustained no financial loss as a result of anything their respective clients had done with regard to transactions 1-24 (sic) inclusive. As I understand the submissions for the accused, this particular submission is also said to find support in some answers in cross examination by the Crown's forensic accountant, Mr John Fogarty. He did agree with a proposition to the effect that Exhibit 5 demonstrated that all moneys obtained by Smartpak had found their way back to Scottish. But he qualified his concession by confining it to the 74 invoices covered by Exhibits 5 and 6. Nor was he asked to agree that the moneys repaid to Scottish had not come from other moneys paid to Smartpak by Scottish in respect of other invoices. … Mr AJ Gomes elsewhere in his evidence also stated that all moneys paid to Smartpak by Scottish went straight into Smartpak's business. The effect of this would have produced a mingling of the funds from Scottish with funds Smartpak legitimately acquired. The exception mentioned above was the submission put on behalf of Mr Baldini that his involvement in the offences did not cause Scottish to suffer any loss… When asked to reconcile this submission with the agreed fact that Scottish had incurred a loss of $1,300,000, the explanation offered was in these terms:- "The loss is agreed but not due to the transactions, the subject of the charges." These submissions on behalf of all the accused are not sustainable in light of uncontested evidence in the case. The agreed facts in the case of Mr Baldini and Mr Bikhit expressly state that there was such a loss and that it was attributable to the actions of those offenders… The highest at which it could be put is that, in respect of the 74 transactions currently under review, Smartpak managed, some months later, to reimburse Scottish with an amount equal to that of which it had earlier defrauded Scottish. The evidence of Mr Gomes suggests that, to some degree at least, this was achieved with an amount of money equivalent to that of which Smartpak had defrauded Scottish at a time closer to the reimbursement. There is no evidence that all, or even any, of the funds which Smartpak arranged to have paid back to Scottish was money discretely different and separate from the moneys it had dishonestly obtained over time from Scottish."

26 Later, when referring to s3A of the Crimes (Sentencing Procedure) Act, which includes as one of the purposes for which a Court may impose a sentence "(g) to recognise the harm done to the victim of the crime and the community", his Honour observed:- "There is a need to make (the offenders) recognise the harm they caused to Scottish as their persistent claim that no loss was incurred by the victim indicates that they do not yet understand just what they have respectively done towards the creation of the admitted $1.3 million loss." 27 It is clear from a comparison of some of these passages with the evidence to which I have referred that his Honour erred. Although it is often appropriate to have sentencing proceedings involving co-offenders heard together, that does not make evidence admitted against only one co-offender admissible against the others. In judging the Applicants his Honour was not entitled to take into account the evidence contained in the "agreed facts in the case of Mr Baldini and Mr Bikhit". 28 Nor was there any other evidence that permitted his Honour in the sentencing of the Applicants to conclude that $1.3M or any other particular part of the $1.6M exposure to factored invoices was due to false invoicing. On the other hand it is may reasonably be inferred to the criminal standard that a substantial part of it was. It is in the highest degree unlikely that Scottish Pacific factored any after the appointment of Receivers and Managers on 14 November. A common period for payment of legitimate factored invoices was 90 days and, while one must recognise that some debtors pay later than they should, it seems likely that most legitimate factored invoices had been paid by the time of liquidation. Furthermore, there was Mr Alfred Gomes' evidence that the factoring of false invoices had continued until the end, a time that one may infer was very close to 14 November. 29 His Honour's statement that, "The evidence of Mr Gomes suggests that, to some degree at least, this (i.e. the reimbursement of the moneys advanced by Scottish Pacific on the 74 invoiced) was achieved with an amount of money equivalent to that of which Smartpak had defrauded Scottish at a time closer to the reimbursement." is also one not supported by the evidence. 30 Mr Gomes did not say so and while it seems certain that some of the monies used to pay the false invoices the subject of the charges came from the proceeds of later false invoices, until November 2003 Smartpak was continuing to operate and, as an incident of that operation, receiving money pursuant to genuine invoices. The dates on the 74 invoices the subject of the indictment and Form 1 fall within November 2002 and each of the months of January to June 2003. According to Mr Alfred Gomes about 70% of all invoices in the first half of 2003 were genuine but whether one accepts that evidence or not, given that Scottish Pacific continued factoring to November 2003, it is clear that Smartpac was receiving normal income in the months when the 74 invoices fell due for payment. The situation was clearly that reflected in an earlier statement of his Honour to the effect that there was a mingling of legitimately and illegitimately acquired funds and repayment of the 74 false invoices came from these mingled funds. 31 So much of his Honour's later statement as refers to the Applicants' "persistent claim that no loss was incurred by the victim" also misrepresents the contention that was being advanced. The contention was that Southern Pacific had incurred no loss on the 74 invoices the subject of the indictment and Form 1. As the evidence of the accountant made clear that contention was accurate. 32 What I have said is enough to indicate that I am of the opinion that the second, fourth and fifth grounds of appeal are made out. I would not however uphold ground 3. The fact is that the total values of the false invoices the subject of the charges and the Form 1 was as his Honour stated and the context of his Honour's remarks provides no foundation for the contention that he regarded these amounts as Southern Pacific's losses. The passage I have quoted from those remarks makes it clear he did not.

Ground 6 33 The factual background relied on in support of this ground is that, following Smartpak's liquidation, the Applicants were subjected to a compulsory examination in the Supreme Court in April 2004 in the course of which each admitted factoring false invoices and receiving money improperly. They were not charged with the offences under consideration until March 2006. Section 177 of the Crimes Act provides:- No person shall be convicted of any offence under any of the sections from section 165 to section 176 both inclusive in respect of any act or omission by the person, if, before being charged with the offence, the person first disclosed such act or omission, on oath, under compulsory process, in a proceeding instituted by a party aggrieved, or under compulsory examination in some matter in bankruptcy, or insolvency, or under compulsory examination in some matter in the liquidation of a corporation. 34 It was submitted that the conduct referred to in s176A was of the same general nature as that referred to in ss165 to 176 and that it was incongruous that s176A under which the Applicant were charged was not included in the sections referred to in s177. 35 It is unnecessary for me to set out these further sections. There is certainly some strength in the submissions, and it may be that when s176A was inserted in the Crimes Act, Parliament simply forgot to amend s177. However, the simple fact is that the operation of s177 is in accordance with its terms. It has no application to the charges against the Applicants and this ground fails.

Ground 1 36 The conclusion at which I have arrived in respect of grounds 2, 4 and 5 makes it unnecessary for me to consider this ground. However, any arguments that have been made under it are of course relevant to the issues that arise under s6(3) of the Criminal Appeal Act. What follows is principally directed to the result of that statutory provision which is in terms:- "On an appeal under Section 5(1) against a sentence, the court, if it is of opinion that some other sentence, whether more or less severe is warranted in law and should have been passed, shall quash the sentence and pass such other sentence in substitution therefore, and in any other case shall dismiss the appeal." 37 Virtually the only matters relied on on behalf of the Applicants in addition to the errors to which I have already referred was the fact that the offences charged or included in the Form 1 had not resulted in loss to Southern Pacific and that the Applicants had always intended to repay the monies obtained. I have no difficulty in accepting the factual accuracy of the last proposition and acknowledging that both arguments are of significance and entitled to weight. 38 However, as I put to counsel for the Applicant's during the hearing, the second of these not infrequently applies to bank clerks and the like who steal in order to fund a gambling addiction. They intend to repay, and sometimes do so at least in part, out of the winnings they hope to obtain. 39 Certainly, such an intention does carry with it lesser criminality than an intention never to repay and to permanently deprive the victim of the funds the subject of offending. However, the victims in such cases or in this are entitled to make the decisions as to what is to happen to their property, to assess what risks they find acceptable and not have those risks in fact determined by an offender. 40 Under the factoring arrangements to which Southern Pacific had agreed, it was to receive in respect of each invoice on which funds were advanced, the security of Smartpak's customer's indebtedness in addition to whatever rights it had against Smartpak. Those were the terms upon which Southern Pacific was willing to advance the money. The Applicants' actions meant that for each of the false invoices Southern Pacific had no such security. In effect the Applicants dictated the terms upon which Southern Pacific's funds were advanced. And those funds were by no means insignificant. Although it is clear that the amount outstanding at any one time was not the total of $2M odd to which reference has been made, the totals of the false invoices in each of February and March were something over $380,000 and $540,000 respectively. It may be inferred that at the end of March Southern Pacific had thus advanced over $900,000 without the security for which it had stipulated. 41 In judging the weight to be afforded to the fact that Southern Pacific in fact had been repaid the moneys advanced (and incidental charges) in respect of the 74 invoices it is appropriate to keep in mind that the Applicant's offences were complete no later than when the invoices were submitted and Southern Pacific's money received by Smartpak. It is also appropriate to recognise that although in respect of the 74 invoices Southern Pacific suffered no loss, and whatever may have been the ultimate impact of later events including Smartpak's liquidation on the Applicants, the repayments of the funds advanced on the strength of the 74 invoices were not effected out of funds that the Applicants provided at some cost to themselves. 42 It is proper to recognise also, as is clear from the evidence given in the case, that the motive behind the Applicants' criminality was to keep afloat a company in which they had a substantial investment and that, although they continued to offend, they recognised that what they were doing was wrong and took steps, short of stopping their offending, to overcome the need that inspired the offending by reorganising the company's finances and providing substantial funds in that regard. It is proper to recognise that they and their families have suffered through the company's liquidation and that, as Mahoney DCJ found, had Smartpak gone into liquidation when it should have, neither Applicant would have been in as parlous a situation as he now is. 43 Although it is unnecessary for the purposes of this appeal to specify all of the factors taken into account, others that Mahoney DCJ referred to included the fact that neither Applicant had any prior conviction or conviction of any significance, retained the support of their wife or partner, were remorseful and unlikely to re-offend. Both had pleaded guilty and his Honour remarked that they "seem to me to warrant a broad application of the 35% discount encompassing all matters". His Honour had expressed the view that any trial would have been lengthy and went on to say, "the discounts have been rounded to the nearest whole month". 44 Despite these factors that argue for a lighter rather than a longer sentence, the nature of the Applicants' offending must not be overlooked. Business or commercial dealing depends to a great degree on trust and honesty. The practicalities of life do not permit the checking by one party of everything that the other party to a transaction does and even when checking does occur, there are costs, commonly unproductive, that are incurred. The seriousness with which the legislature regards breaches of s176A is apparent in the 10 years sentence for which the section provides. 45 Each of the Applicants' offences involved not insubstantial amounts of money and, as has been said, those included in the indictment varied between about $12,000 and $46,000. Each offence amounted to conscious deliberate wrongdoing and most were repetition of previous similar conduct. Although, having regard to Mahoney DCJ's findings concerning the Applicants, personal deterrence, rehabilitation and protection of the community may have little part to play in the determination of appropriate sentences on the Applicants, general deterrence - the discouragement of others to repeat the Applicants' dishonesty - looms large. Nor is retribution - the community's entitlement to feel justice has been done - insignificant. 46 Of course, the factors to which the offences on the Form 1 are relevant are limited - see Attorney-General's Application under s37 of the Crimes (Sentencing Procedure) Act (2002) 56 NSWLR 146 at 42 - and only one of those factors, retribution, is of significant relevance here. Nevertheless, even accepting this limitation, a substantial total sentence was required. 47 Of course that is not the end of the matter for while a conclusion that the effective total sentence was erroneous would inevitable lead to the view that one or more of the individual sentences was, the High Court made clear in Pearce v R 194 CLR 610 at [49] that consideration must be given to the sentences imposed on the individual counts. 48 The sentences of 47 months imposed in respect of a number of the offences, when regard is had to the 35% discount applied by his Honour indicate a pre-discount sentence of 6 years. That is a relatively high proportion of the 10 years maximum provided for by s176A. Included in the offences for which this sentence was passed the first of the 74 offences, one involving just over $55,000. There is no persuasive evidence that this was not the first offence committed by the Applicants and, given their clean or virtually clean record to that time, a sentence I would regard as too high had no other offences been taken into account. 49 However, in connection with the offence the subject of count 1, Mahoney DCJ took into account 3 other offences 1, 4 and 6 on the Form 1, offences that involved respectively amounts of approximately $44,114, $45,678 and again $44,114. In these circumstances, I am not satisfied that some lesser sentence should have been passed. Similar considerations apply to the other charge offences occurring early in the Applicants' offending. 50 The later offences included in the indictment do not attract the same consideration of a prior good record as do the first few and I am also satisfied that the sentences imposed on them were not such as to justify this Court's intervention. 51 Nor is the total sentence one with which this Court should interfere at the instigation of the Applicants. Indeed, a sentence of approximately 5 years including a non-parole period of approximately 3 years for 74 offences involving the obtaining of $2M, even if it was repaid, could well be regarded as extremely lenient. 52 Accordingly, I would propose that the Court:- (i) Grant leave to appeal. (ii) Dismiss the appeal.

53 HIDDEN J: I agree with the orders proposed by Hulme J and with his Honour's reasons. I might not describe the total sentence as "extremely lenient", but I am satisfied that no lesser sentence was warranted.

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