Hoy v The Queen [2012] VSCA 49

Court of Appeal (Vic)|2012-03-07|Before: Forrest J, Redlich JA, Nettle JA

[2011] VSC 95 (T Forrest J)

CRIMINAL LAW - Sentence - Application for extension of time within which to appeal - Principles applicable - Multiple counts of obtaining financial advantage by deception - $16 million stolen from small investors - $6 million stolen from financial institution - Total effective sentence 13 years and nine months' imprisonment with non-parole period of nine years - Individual sentences of nine years and eight years' imprisonment imposed on two counts for theft of $3.6 million and $2.15 million from financial institution - Individual sentences exceeded any previously imposed - Whether manifestly excessive - Categories of sentences fixed on basis of amount stolen - Broad-brush approach permissible - Unnecessary to distinguish between institutional victims and individual small investors - Structural objections rejected - Application refused.

1 I invite Redlich JA to deliver the first judgment.

2 This is the renewal of an application for leave to appeal out of time against a total effective sentence of 13 years and nine months' imprisonment with a nonparole period of nine years imposed on the applicant upon him pleading guilty to 34 charges of obtaining a financial advantage by deception (s 82(1) Crimes Act 1958), ten charges of obtaining property by deception (s 81(1) Crimes Act 1958), one count of carrying on a financial services business without a licence (s 911A(1) Corporations Act 2001 (Cth)), one count of engaging in dishonest conduct and carrying on a financial service business (s 1041G(1) Corporations Act 2001 (Cth)) and one count of dishonestly making an improper use of his position as a director with intent to gain advantage (s 184(2)(a) Corporations Act 2001).

3 A summary of the facts is set out in the applicant's written case but that, in my view, inadequately reflects the nature of the applicant's offending. For present purposes it is sufficient to refer to the facts set out in his Honour's sentencing remarks:

Over a period of 15 months the deceptions you practised upon the public garnered Chartwell nearly $16m of investor funds. During that period, and also as a result of your dishonesty, you procured for Chartwell credit from the Commonwealth Bank in the sum of $5.83m. Those figures alone give some indication as to the scale of your dishonest conduct but say little about the lives that you have diminished in the process.

The deception you practised on investors is sometimes known as a Ponzi scheme, named after the notorious criminal Charles Ponzi who operated an early example of it in the 1920's. In the agreed statement of facts it is so described at paragraph 9. You attracted money from investors by offering extraordinarily high interest rates. During the offending period the money was not used for investment at all. Some of it was used to make payments to existing investors of what was called 'interest' on their investments. Some of it was used to prop up the facade of Chartwell's prosperity and some of it was used to fund your lavish lifestyle. In the 15 month offending period Chartwell received nearly $22m from investors who were led by you to believe their money would be pooled and invested on financial markets. In reality only $429,130 was so invested. Ninety-eight percent of the funds Chartwell received were simply stolen from investors, and you, by your pleas admit responsibility for dishonestly dealing with nearly $16m of those funds.

It is apparent from the various witness statements that victims of your conduct were small family investors either attracted directly to the inflated returns offered or who were introduced to Chartwell through Syndicate Leaders who were so attracted. Typically a Syndicate Leader would be advised by you of even higher returns available if a really large sum were invested. He or she would then approach friends or family and their funds would be pooled in order for the investment to be made.

I have referred earlier to the returns that Chartwell offered. In cases where a fixed return was offered it was never less than 20% p.a.; more often 30% p.a. or more, and on several occasions 50% p.a. or above. These fantastic returns were given some verisimilitude by the outward signs of prosperity that Chartwell exhibited. The wages bill for a company that was not trading was enormous. During the offending period you employed approximately 40 market analysts who studied trends and made predictions. Charts were displayed on the walls. The room was alive with apparent activity. Prospective investors were shown through the trading room and they were told of the Chartwell system - that it was based on the methodology of W D Gann and that profits were high and assured regardless of market trends. In many cases investors were told that sophisticated risk management systems were in place. You made most of these representations. By your pleas you admit the falsity of the representations particularised in the indictment. I consider your conduct in this respect quite disgraceful.

I do not propose to set out the circumstances that surround each transaction or set of transactions. They are contained in the Agreed Statement of Facts. Throughout the offending period you knew that Chartwell was, in fact, not trading and yet your pursuit of new investment was relentless. To every new or return investor you made one core misrepresentation - the funds would be used for trading. To that core lie you would add, depending on the occasion, various other lies and inducements, not least of which were the astronomical returns available upon investment.

4 For the state offences, the applicant was sentenced to term of imprisonment ranging from two years and six months to nine years' imprisonment. The highest sentence of nine years, which became the base sentence on Count 31, of the count of obtaining financial advantage by deception. The second highest term of imprisonment was eight years imposed on Count 37 being another count of obtaining financial advantage by deception. On that count the sentencing judge ordered that 18 months be cumulative upon the sentence on Count 31. The total effective sentence is otherwise made up by modest orders for cumulation on Counts 1, 5, 8, 9, 27 and 28. Thus it can be seen that the bulk of the total effective sentence, namely ten and a half years, was the result of the sentence imposed on Counts 31 and 37. The chart in the applicant's outline does not accurately set out those sentences which were imposed.

5 The sole proposed ground of appeal is that the individual sentences of nine years' imprisonment on Count 31 and eight years' imprisonment on Count 37 with an order for cumulation of 18 months' imprisonment on Count 37 are each manifestly excessive. In oral argument, counsel for the applicant abandoned that part of the ground which complains as to the order for cumulation on Count 37.

6 The principles governing an extension of time are not in issue. There is an onus upon an applicant who seeks an extension of that time to place material before the Court that will persuade the Court to exercise its discretion in favour of granting the extension of time. Ordinarily that will require special is substantial reasons to do so. In addition, the Court, as a matter of practice, will need to be satisfied that any appeal is likely to succeed.[1]

7 The affidavit filed on the applicant's behalf does not satisfy these requirements but the applicant contends that the probability of success of the appeal constitutes alone a substantial basis upon which to grant the extension of time.

8 I turn then to the commendably brief submission in support of the proposed ground of appeal.

9 The facts concerning Counts 31 and 37 were described by his Honour in these terms:

Your dealings with the Commonwealth Bank in 2007/8 display a similar quality of dishonesty. In September 2007 the Commonwealth Bank approved a business loan to Black Swan Pty. Ltd. (a company you part-owned and controlled) in the amount of $3.68m. The bank required, inter alia, Chartwell's financial statements for 30 June 2006 before it would approve the loan. You caused to be supplied to the bank a false Chartwell Unit Trust Balance Sheet which claimed total assets of $19.05m and net assets of $100.00. The Chartwell Enterprises Balance Sheet claimed falsely net assets of $3.176m. The Profit and Loss account claimed again falsely an operating profit after tax of $2m approximately. The true position in July 2006 was one that I have referred to earlier. Chartwell Enterprises Pty Ltd had a net asset deficiency of over $28m and its net operating loss for that year was $2.754m. $3.68m was procured from the bank by this deception.

In January 2008, unbelievably, the Commonwealth Bank extended you further funds in the form of an increased overdraft to Black Swan. This time the false Chartwell accounts had been updated to purport to represent the 30 June 2007 position. You supplied to your accountants information that again vastly overstated the net asset position and told of a $2.3m operating profit when in fact the true picture was of an operating loss of $2.9m. The Commonwealth Bank extended your overdraft by a further $2.150m after being provided with these lies.

10 The applicant advances three contentions on this application. First, it is submitted that the individual sentences are well in excess of current sentencing practice. Two cases are relied upon, R v Fernandez[2] and R v Causer.[3] In the first case the offender received a head sentence of ten years with a nonparole period of seven years for obtaining by deception over $10 million in stamp duty payable to the state revenue. In the second case the offender received a base sentence of four years for a theft of $2.4 million.

11 In substance the argument is that the sentence of ten years in Fernandez was for misappropriation of a much larger amount than Counts 31 or 37 while Causer shows that for misappropriation of a similar order of funds to the present, four years was an appropriate term of imprisonment.

12 An attempt to demonstrate that there are worse cases which had attracted the same sentence or comparable cases that attracted much lesser sentences does not, as the Court said in Hudson v R[4] 'disclose whether the challenged sentence is unreasonable or unjust'.[5] It was also observed in Hudson that the practice of approaching sentence appeals by a search for and comparison with sentences passed in other cases is neither helpful nor justified by authority. Such cases can do no more than become part of a range for sentencing. The question on appeal will always be whether or not the sentence falls within a range of sentences that are appropriate to the objective gravity of the offence and the matters personal to the offender.

13 The Crown rightly drew attention to the fact that the applicant selected only two from 14 cases to which the sentencing judge was referred. Those other cases do not demonstrate that the sentences imposed were necessarily outside the range available to a sentencing judge.

14 In oral argument, counsel for the applicant, however, drew attention to a sentencing snapshot of March 2011 produced by the Sentencing Advisory Counsel in relation to the offence of theft. That snapshot showed that the sentences the applicant had received on the two counts were higher than any sentence previously imposed for such offences.

15 The second submission made by the applicant is that the sentences imposed on Counts 31 and 37, where the victim was the Commonwealth Bank of Australia, failed to distinguish between offending conduct against an institution and offending conduct against individual victims who were largely small investors. Thirdly, the applicant pointed to the categorised approach to the sentences which his Honour explained at the conclusion of his sentencing remarks, was based upon the amount stolen.

16 In oral submission the Court was invited to treat these criticisms as particulars of the ground of manifest excess.

17 When a sentencing judge is required to impose terms of imprisonment on a large number of counts, it has often been recognised that the sentencing judge may, within limits, adopt a 'broad-brush' approach to the fixing of sentence.[6] For example, such an approach may be appropriate where there was an ongoing fraudulent course

17 of conduct,[7] a single fraudulent or common enterprise[8] or where the criminal behaviour on counts was of a similar and repetitive nature.[9]

18 There is much authority to the effect that sentences imposed in such circumstances need only be roughly proportional to the gravity of the offences and the amount taken.[10] This is not the first time that it has been necessary to state that structural objections to the sentences imposed in such cases is to be discouraged unless they reveal error in the instinctive synthesis.[11] Where a judge is entitled to adopt a broad-brush approach, disconformity between sentences on particular counts will not usually provide a sufficient basis to impugn the instinctive synthesis.

19 In circumstances such as the present, the sentencing judge was not required to give the same level of attention to each of the sentencing considerations which bear upon the fixing of each individual sentence. Counts 31 and 37 were not committed in isolation. They were a necessary part of the applicant's scheme used to prop up the facade of Chartwell's prosperity. There was a detailed deception of the Commonwealth Bank involving the creation of false documents which entirely misrepresented the company's financial circumstances. The monies obtained from the CBA enabled the applicant to pursue individual investor victims and avoid calls being made on earlier investments.

20 While the effect of the crime upon an individual victim is a relevant sentencing consideration, it has never been said, nor do I think it correct to imply, that the sentence imposed for an offence against an institution should necessarily be less than a sentence to be imposed against an individual where the value of the theft is of the same order. As Gleeson CJ stated in Machtas,[12] general deterrence is an important consideration in relation to activities which cause a serious financial loss

to banks. His Honour rejected the submission that a matter to be taken into account was that the loss was to a large financial corporation. His Honour thought the better view was that it was the absence of an aggravating circumstance that there was no victim who was caused personal hardship. There are of course direct consequences for the institution and potential indirect consequences for many individuals where major fraud is committed against institutions. The need to deter those who would seek to commit such fraud remains a primary consideration.

21 In my view, the approach of placing the offences into categories according to the amount involved as part of a broad-brush approach and without regard to the differing consequences for different victims was well within a sound exercise of the sentencing discretion. The nature and gravity of the applicant's conduct justified the imposition of sentences which exceeded any sentence previously imposed for such an offence. I note that no contention was or could have been advanced that the total effective sentence was beyond that reasonably open to the sentencing judge.

22 No sufficient explanation has been provided for the undue delay in the filing of the notice of appeal. Had the applicant discharged this burden, I do not consider that the ground of appeal has any reasonable prospect of success. Accordingly I would refuse the application for an extension of time within which to appeal.

23 I entirely agree. I wish to add, however, that, in the course of submissions in support of the applicant's structural argument, counsel for the applicant relied on the decision of this Court in Day v R.[13] In that case, the sentencing judge adopted a broad-brush categories approach which evidently reflected not just the amounts of money involved but also, as it seemed to me at the time, his Honour's assessment of striking similarity of offending within categories and the level of the stress and inconvenience which it imposed upon victims. In rejecting an attack on the breadth of the judge's sentencing categories in that case, I observed that his Honour's

assessment of the stress and inconvenience to victims within categories was to some extent common.

24 So far, however, from that supporting the applicant's contention that the judge in this case should have reduced the sentences imposed on Counts 31 and 37, it runs directly counter to it. For evidently here, as there, the judge's perception of distress and inconvenience to victims within categories was that it was more or less the same.

25 Punctilious identification of distinguishing features as between offences doubtless has a role to play in some sentencing exercises. But, in cases like this, involving multiple counts of systematic and serious fraud, its utility tends to be limited.

26 On any reasonable view of the matter, the individual sentences and the total effective sentence imposed in this case were richly deserved.

27 The renewed application for leave to appeal out of time is dismissed.

[1] R v Darby (Unreported 2 May 1975); R v O'Keefe [1979] VicRp 1; [1979] VR 1, 5; R v Davis [2003] VSCA 173; (2003) 6 VR 538; Baltas v R [2011] VSCA 169.

[6] R v Fletcher [2002] VSCA 40; R v Nikodjevic [2004] VSCA 222; R v Albanus [2004] VSCA 236; R v Bosio [2005] VSCA 209; R v Fakar [2009] VSCA 5; R v Scott Harris [2009] VSCA 189; R v Luke [2010] VSCA 67; Jailani v R [2010] VSCA 276; Quarrell v R [2011] VSCA 125.

[7] Day v The Queen [2009] VSCA 243.

[8] R v Fletcher [2002] VSCA 40.

[9] R v Ash [2005] VSCA 43, [23]-[25].

[10] Yusuf v R [2010] VSCA 266; R v Shannon [2005] VSCA 143; R v Coukoulis [2003] VSCA 22; (2003) 7 VR 45.

[11] R v Belhaj [2006] VSCA 153, [10]; R v Albanus [2004] VSCA 236, [9].

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