Criminal Law - Appeal and new trial - Appeal against sentence - Grounds for interference - Sentence manifestly excessive or inadequate - Computer-related fraud - False online betting credits of $756,000 - Loss of $495,000 - Gambling addiction.

R v Grossi [2008] VSCA 51; (2008) 23 VR 500, followed.

Judgment Number: [2011] TASCCA 9

2 Parole order made on 2 July 2010 varied to provide that the appellant is to be eligible for parole when he has served 21 months of his sentence.

1 I agree with the reasons of Blow J and the orders he proposes.

2 This is a sentencing appeal. The appellant pleaded guilty to 362 charges of computer-related fraud, contrary to the Criminal Code, s257B. These crimes were committed over a period of only 6½ weeks, from 25 November 2009 to 8 January 2010 inclusive. The appellant, who lived in Warrnambool, Victoria, found a flaw in an on-line payment system, sent 362 fraudulent computer messages to the Tote Tasmania web server, and obtained false credits totalling $756,914 to a TAB betting account in his name. On 2 July 2010 Tennent J sentenced him to 3½ years' imprisonment, with effect from 21 June 2010, and ordered that he was to be eligible for parole when he had served 2½ years of that sentence. He has appealed, and contends that both the head sentence and the non-parole period were manifestly excessive.

3 The flaw that the appellant found was not in Tote Tasmania's systems, but in the system of an intermediary known as POLi. POLi provided a service which allowed consumers to purchase goods and services from merchants without providing their bank account details to the merchants. In September 2009 the appellant found a way of causing POLi to send false information to a merchant's web server, stating that funds had been received when they had not. On 14 November 2009 he opened a Tote Tasmania betting account using that company's website. He made a number of unsuccessful attempts to create false credits in that account in the following days, and was eventually successful on 25 November. Having perfected a system for obtaining false credits, he made use of it, as I have said, on a total of 362 occasions over 6½ weeks. The false credits grew over time, starting out at $47.50 on each of the first three occasions, reaching $5,000 on the 312th occasion, on 1 January 2010, and remaining at or about that level for nearly all of the subsequent transactions. Tote Tasmania discovered what was happening and closed the appellant's account. Late in January 2010, Tasmanian detectives travelled to Warrnambool. The appellant was arrested and extradited to Tasmania.

4 The appellant used most of the fraudulently obtained credits to bet on the Tote Tasmania website. He had some winnings but, as one would expect, his losses substantially exceeded his winnings. He gradually increased his turnover in the hope of making good his losses, as gamblers often do. There were eight occasions when he withdrew money from his account. A total of $37,200 was transferred to his bank account as a result. He used some of that money to travel to Hobart and back with his girlfriend on 12 December 2009. He used some of it to bet with the Victorian TAB, and some to purchase items including a digital camera, a couch, and a laptop computer.

5 However the total loss that the appellant caused to Tote Tasmania was not $37,200 but $495,965.44. The bulk of that loss resulted from Tote Tasmania using falsely inflated figures as to the amounts bet by customers on races, and paying out dividends to successful punters that were calculated on the basis of its falsely inflated figures. Tote Tasmania pays out as prize money a fixed percentage of the pool of money received in relation to each race. As a result of the appellant's activities, it believed it had received more money than it really had, and therefore paid out more money than it should have. It should be noted that charges against the appellant related only to the obtaining of false credits, and not to the subsequent transactions involving betting and withdrawals.

6 The appellant was 23 years old when sentenced. He had no prior convictions. After completing year 12 at Warrnambool High School, he immediately obtained work as a printer's assistant with a local newspaper. He lost that employment three years later when the business closed down. His family moved to Ballarat, where he soon obtained employment at a service station. That business also closed down, and he became unemployed after nine months in that position. He was well regarded as an employee in both of the positions that he held. He had been unemployed for about 10 months when he started committing these crimes. During that time he had obtained a forklift licence and completed a security course.

7 He was introduced to gambling when he was working for the newspaper in Warrnambool. When he became unemployed, he increased his gambling in the hope of paying off credit card and loan debts, but was not successful. He became addicted to gambling, but had no insight into his addiction until after his activities were stopped in January 2010. Until then he had no idea of the total amount of the false credits that he had fraudulently obtained, nor of the amount that his activities had cost Tote Tasmania.

8 When he opened his POLi account, he did not attempt to conceal his identity. When he opened his Tote Tasmania account, he provided his full name, and sent copies of his birth certificate and his driver's licence.

9 After his arrest he made full admissions to the police. He co-operated to the extent of providing full details of all his fraudulent transactions. He alerted the police to the flaw in the POLi system that he had exploited, with the result that that flaw was rectified.

10 His counsel indicated that he would be pleading guilty at the time of his first appearance in the Magistrates Court. Strict bail conditions were in force for a period of about five months between his extradition and his pleas of guilty. Imprisonment in Tasmania is likely to be more unpleasant for him than for most Tasmanian prisoners because he has no family members in this State.

11 The appellant comes from a close and respectable family. They were devastated by what he had done. He was very much aware of the fact that he had let them down, but he had their full support. He was ashamed of himself, and conscious that he was considered as a dishonest person in the small communities of Warrnambool and Ballarat. Dishonesty was out of character for him. Throughout the weeks that he committed these crimes, he had intended to win enough money to make good all losses. He was genuinely remorseful and willing to do what he could by way of making restitution.

12 Offenders who are sentenced for frauds involving hundreds of thousands of dollars are usually in positions of trust. It is not uncommon for such crimes to be committed by accountants, solicitors, bank officers, or employees handling substantial funds. In such cases, an offender's breach of trust is a significant aggravating factor. Unusually, that factor is absent in this case. Another unusual factor in this case is that the fraudulent conduct ended after a very short period. Frauds by gamblers involving hundreds of thousands of dollars generally extend over years, or at least many months. The longer an offender persists in fraudulent conduct, the more culpable that conduct is. However the appellant's offending ceased after only 6½ weeks because of detection, not a decision to stop offending.

13 Much has been written as to whether, for sentencing purposes, a gambling addiction should be treated as a mitigating factor and, if so, what weight should be given to that factor. Redlich JA undertook a thorough review of the principal authorities in R v Grossi [2008] VSCA 51; (2008) 23 VR 500 at pars[47] - [57]. At the risk of oversimplifying, I think it can be said that the following principles emerge from his Honour's analysis:

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In the words of Redlich JA at par[52],"It would be an unusual case where evidence of addiction to gambling would have any significant effect upon the importance of the element of general deterrence." (See also R v Powell (2001) 81 SASR 9; Assi v R [2006] NSWCCA 257 at par[27]; Garnsey v Stamford [2002] TASSC 43; (2002) 131 A Crim R 427 (Underwood J (as he then was)) at pars[11] - [15].)

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Stealing because of a gambling addiction should be regarded as less morally culpable than stealing because of pure greed, or stealing in order to fund some other criminal activity: R v Grossi at par[51]; Vu v R [2006] NSWCCA 188 at par[74] per Hall J; R v Henry [1999] NSWCCA 111; (1999) 46 NSWLR 346 at par[225].

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Gambling addiction has been treated in the same manner as conditions induced by drugs or alcohol which, as a general rule, do not require any significant moderation of sentencing considerations such as denunciation and deterrence: R v Grossi at par[53].

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A gambling addiction, like any other mental condition, may or may not reduce moral culpability. Whether it should do so and, if so, the extent to which it should do so, will usually depend upon the nature and effect of the symptoms, its effect on the mental capacity of the offender, and the nature and seriousness of the offences committed: R v Grossi at par[55].

14 In this case the learned sentencing judge was not provided with a report from a psychiatrist or psychologist, though she was provided with a pamphlet that outlined some of the characteristics of a gambling addiction. However the facts as to the appellant's gambling activities during the relevant 6½ weeks spoke for themselves, and the Crown did not dispute an assertion by defence counsel that his conduct was attributable to a gambling addiction. In the light of R v Grossi and the cases referred to by Redlich JA, I do not consider that this Court should treat as mitigatory the fact that the appellant offended, and offended on a massive scale, because of a gambling addiction. However I do regard it as very significant that he had no insight into his gambling addiction, nor as to the extent of the losses he was causing, until after he ceased offending. There are a number of very powerful mitigating factors that are relevant in this case, but the gambling addiction, of itself, is not a significant one.

15 Although there was a powerful combination of mitigating factors that the learned sentencing judge was required to take into account, these were serious crimes. Having regard to the fact that, in round figures, this case involved a $750,000 fraud and a loss of nearly $500,000, I do not think it can be said that the head sentence of 3½ years' imprisonment was manifestly excessive. It may have been at the high end of the appropriate range, but I do not think it was too high. However I do not believe the same can be said of the non-parole period. The learned sentencing judge could have ordered that the appellant be eligible for parole after serving as little as half of his sentence: Sentencing Act 1997, s17(3). The non-parole period of 2½ years represents a little over 70 per cent of the head sentence. It is the non-parole period that one might expect for a young first offender sentenced to five years' imprisonment, but five years would have been a manifestly excessive head sentence in this case. Having regard to the relevant mitigating circumstances, particularly the appellant's age, his general good character and lack of prior convictions, and his attitude to his offending after it was detected, I think one must conclude that the order requiring him to be incarcerated for a minimum of 2½ years was out of proportion to his moral culpability to such an extent that his sentence was manifestly excessive.

16 In my view the head sentence should stand, but the non-parole period should be reduced to the minimum. I would allow the appeal, and vary the parole order of the learned sentencing judge to provide that the appellant is to be eligible for parole when he has served 21 months of his sentence.

17 I agree with the reasons for judgment of Blow J and with the orders which his Honour has proposed.