Ground 2: manifest inadequacy
55On behalf of the respondents, it was accepted that the quantum of defalcation is relevant to the assessment of the objective gravity of the offences. It was therefore urged that the quantum involves the tax shortfalls, as set out above, and not the significantly larger amounts of the assessments made by the ATO. It was also urged that each respondent should be held liable in respect of only half of the amount of the defalcation by Concept.
56While I would accept the former proposition, I have difficulty with the second. It seems to me that each respondent is equally liable in respect of the whole amount of the defalcation by Concept. I do not think this makes a significant difference to the assessment of objective criminality. It was also argued that, on one view, the losses to the Commonwealth were less than the raw figures above would suggest, because, had the respondents conducted their taxation affairs in a lawful fashion, there would have been an entitlement to various deductions which would have reduced their liability.
57The Director appeared to accept that that was the position. I also accept it, but, again, I do not think it makes a significant difference to the assessment of objective seriousness. It is impossible to quantify what the respondents' true tax liability would have been had they conducted their affairs honestly.
58The nub of the Director's case under this ground is that, while acknowledging the uniform line of authority to the effect that offences of tax evasion call for sentences that include a significant component reflecting general deterrence and that, generally, that can only be achieved by the imposition of sentences of full time imprisonment, his Honour did not apply those principles.
59At least since 1996, when Brooking JA said:
"The seriousness of the offence of defrauding the Commonwealth of a large sum of money by not declaring assessable income has in the past, perhaps, not always been sufficiently reflected in the sentences passed. Those who systematically defraud the Revenue of a large sum over a substantial period must in general expect a substantial custodial sentence. The deterrent and punitive effects of that sentence should not be unduly diminished by allowing release from custody at an unduly early stage." ( R v Van Nhan Nguyen; Huu Duc Phan (1996) 86 A Crim R 521 at 525),
appellate courts have consistently insisted that tax evasion offences ought to attract significantly deterrent sentences. This, properly, puts tax evasion in to the same class of offending as social security fraud, which has an even longer history of insistence on custodial sentences.
60The earlier occasions on which social security fraud has been treated as an offence calling for significantly deterrent sentences are catalogued in the decision of this Court in R v Mears (1991) 53 A Crim R 141 pp 145-146. Lee J quoted from the judgment of Street CJ in R v Luu (unreported, NSWCCA 7 December 1984):
"The courts of this State have uniformly sought to make plain to persons who abuse the system of social welfare that they must expect to face heavy penalties. The introduction into the administration of that system of overly meticulous preliminary checks before benefits are paid could result in real hardship to persons whose need for benefits is urgent and immediate. Thus it is that such susceptibility is open to abuse, which results in persons who do abuse it receiving salutary penal consequences at the hands of the Court."
To the same effect is the decision of this Court in R v Purdon (unreported, NSWCCA, 27 March 1997). This approach to social security fraud cases has been consistent in this State and others: see eg R v Medina (unreported, NSWCCA 28 May 1990); R v Carroll [1991] 2 VR 509; R v Cameron; R v Simounds (unreported, SACCA, 19 July 1993); Kovacevic v Mills [2000] SASC 0106; 174 ALR 77.
61As long ago as 1985, Olsson J, in the Supreme Court of South Australia, distilled four propositions from then existing authorities. These he stated as:
"(1) Offences of this type of now prevalent. The offence is difficult to detect and penalties should reflect a concern for the protection of the revenue.
(2) Frauds of this kind must be viewed seriously because they threaten the basis of the social security system which is designed to provide financial security for those in the community who are in need. A deterrent penalty is called for.
(3) It is relevant to regard a continuing series of frauds of this type as increasing the moral blameworthiness of the offender's deceits by way of contrast with single or short term offences.
(4) Whilst it may be proper in cases of first offences of this type accompanied by mitigating circumstances to impose a fine, nevertheless a custodial sentence may well be appropriate in the case of serious frauds unaccompanied by substantial mitigating circumstances." ( Laxton v Justice (1985) 16 A Crim R 46)
62Perhaps the strongest statement of principle is to be found is to be found in R v Cameron; R v Simounds (supra) in 1993. Two unrelated cases of social security fraud were before SA Court of Criminal Appeal. King CJ described the offences therein in question in the following way:
"In the case both of these respondents the offending amounted to a systematic, deliberate and sustained fraud over a substantial period of time. The fraud involved planning and sustained implementation. The offenders, it is true, have no other convictions but that is of little significance when one is faced with such a sustained course of conduct of a criminal nature. This was not a case of person with no prior convictions succumbing to temptation and being entitled, therefore, to rely upon the previous good record to secure the leniency of the court. Both of these offenders not only engaged upon a deliberate course of fraudulent conduct, but persisted in it over a long period of time.
The crimes committed are serious crimes. The social security system is the method by which society provides an income to those of its members who, due to misfortune, are not able to provide an income for themselves. ... Abuse of the social security system jeopardises the system itself and therefore the welfare of all those who depend for their livelihood on the system. It is the duty of court to protect the social security system against this type of abuse by making orders which operate as an effective deterrent. Not only does a fraudulent abuse of the system jeopardise the system itself by placing an undue burden upon the taxpayer and therefore, on society at large, but it also is a great injustice to all those welfare recipients who abide by the system, conduct themselves honestly and have to subsist on what is by no means a handsome income ... it is a great injustice to those people if others are able with impunity to double their incomes by a fraud.
For these reasons the court has a great responsibility to protect the integrity of the social security system by imposing punishments for deliberate and sustained fraud which are likely to operate as a deterrent to others who may be tempted. It is necessary to acknowledge and to appreciate that recipients of social security benefits are, almost without exception, subject to great financial pressures. ...
[His Honour then referred to personal circumstances of the two respondents which, he said, excited considerable sympathy.]
Nevertheless, in cases of this kind, that is to say of sustained and deliberate fraud over a period of time, the deterrent purpose of punishment must be paramount. The necessity of protecting the integrity of the social security system by deterrent penalties is to take priority over other considerations." (italics added)
63These observations, and particularly the italicised paragraph, came under consideration by the same Court, constituted by five judges, in Kovacevic v Mills (supra). Four of the five judges considered that the italicised paragraph overstated the correct position, apparently by placing excessive emphasis upon deterrence. Their Honours said:
"39. We agree that in cases of deliberate and sustained fraud, deterrence must loom large in determining the appropriate sentence. But other matters, especially rehabilitation, must still be considered. We do not agree that deterrence should take priority over all other considerations, at least if that statement means that there is no scope for the court to be influenced by considerations of rehabilitation in finally arriving at the sentence to be imposed. ...
40 In our opinion the proper approach to sentencing is better reflected by saying that in a case of the type referred to by King CJ an order for imprisonment, with at least some of the imprisonment actually to be served, is ordinarily likely to be required. This is because the commission of a number of offences of fraud over a period of time makes imprisonment appropriate even for a first offender, because of the seriousness of the offending. The same matters may require that at least part of that term of imprisonment actually be served, even in the case of a person with no previous convictions. But there is still a need to consider all aspects of the matter, and to consider the interests of society and of the offender in the rehabilitation of the offender. Also, in an appropriate case, there may be room for the exercise of mercy and leniency ...
...
43. In our view in the more serious cases of sustained and deliberate fraud, deterrence is very important, imprisonment is likely to be required, but all mitigating circumstances and the rehabilitation of the offender must still be considered. Substantial mitigating circumstances, and in some cases considerations of mercy and leniency may lead to the conclusion that a sentence of imprisonment is inappropriate or that such a sentence is appropriate, but that the imprisonment need not be served."
64The Court then referred to a submission made in that case concerning relative sentences in cases of taxation fraud and social security fraud and added:
"47. Our firm view is that there is no reason for the courts of this State to take a less strict approach to revenue fraud [ie tax fraud] than is taken to social security fraud. If anything, cases of revenue fraud are likely to attract heavier penalties because often the fact of poverty or pressing need, found in a number of cases of social security fraud, will be absent."
65The last observation, while obiter dicta , is consistent with observations I made in 1999 in R v Hart , NSWCCA, unreported, 23 July 1999.
66The statements of principle concerning social security fraud set out above are not different from the statements of principle to be found in cases involving fraud on the revenue by means of the taxation system. Their application in the latter class of case may have been somewhat less rigorous.
67With respect to taxation offences, the rationale for the imposition of severe sentences has been stated in a number of different ways. See, for example, R v Caradonna [2000] NSWCCA 398 at [24], where it was pointed out that tax fraud is a fraud on all other taxpayers. In DPP (Cth) v Goldberg [2001] VSCA 107, at [51], Vincent JA, with whom Winneke P and Batt JA agreed, said:
"The maintenance and integrity of the revenue collection systems, upon which the administration of government and the provision of a wide range of necessary services to the community are dependent, is vitally important to the proper functioning of our society. It hardly needs to be emphasised, from whatever perspective this conduct is approached, the activities in which the respondent engaged over a number of years, must be regarded as extremely serious indeed and his level of personal culpability as very high. ... Those who engage in the type of activities pursued by the respondent must anticipate the penalties properly reflective of the criminality involved will be imposed upon them. The principle of general deterrence assumes considerable significance in the determination of an appropriate sentence in such cases."
68I observe at once that the scale of offending in the present case does not come anywhere near the scale of offending in Goldberg . In that case, the offender had been the vehicle by which other, mostly unidentified, individuals evaded tax amounting to a total of $20 million or more. But that does not affect the principles stated. Earlier in the judgment, Vincent JA had cited, with approval, the remarks of the sentencing judge in that case, to the following effect:
"Tax evasion is not a game, or a victimless crime. It is a form of corruption and is, therefore, insidious. In the case of brazen tax evasion, honest citizens begin to doubt their own value and are tempted to do what they see others do with apparent impunity. At the very least, they are left with a legitimate sense of grievance, which is itself divisive. Tax evasion is not simply a matter of failing to pay one's debt to government. It is theft, and tax evaders are thieves. [The offender's] money laundering was therefore a corrupt activity. ..."
69It is something of a curiosity, that in the face of these, consistent, statements of principle, the appeals (as in Goldberg ) are frequently brought by the Director of Public Prosecutions, reflecting, perhaps, a recognition of principle, but a failure of application. That is, notwithstanding the recognition of the seriousness of the conduct, and the need for strongly deterrent penalties, sentencing judges find it difficult to impose sentences that reach the high level which they have, in theory, accepted as being appropriate.
70That may be illustrated by a decision close to the present case: R v Wheatley (supra). That offender pleaded guilty to three charges, two of which were defrauding the Commonwealth and acting with the intention of dishonestly obtaining a gain from the Commonwealth. The first carried a maximum penalty of imprisonment for 10 years; the second, of imprisonment for 5 years. The circumstances of the offending are fully set out in the Remarks on Sentence; it involved loss to the revenue of almost $320,000. The offender had given an undertaking pursuant to s 21E of the Crimes Act to give future assistance. The combined sentence ultimately imposed was of imprisonment for 2 years and 6 months, the offender to be released on recognizance after 1 year and 3 months. This was a reduction in the sentence which would otherwise have been imposed of about one-third.
71The appellant, the offender, appealed against the sentences; however, on being cautioned by the Victorian Court of Appeal that it could increase the sentences, he abandoned the appeal.
72Another decision is that of Gregory (supra). The offender in that case was a solicitor who advised Wheatley and was involved in Wheatley's tax evasion. He was convicted after trial and sentenced to imprisonment for 2 years, to be released after serving 1 year. The custodial portion of the sentence that would otherwise have been imposed (16 months) was reduced by 4 months because the offender was a resident of NSW, but would be required to serve his sentence in a Victorian prison. The Victorian Court of Appeal held that that sentence was manifestly inadequate, and that a head sentence of 4 to 6 years' imprisonment would have been appropriate. The Court further held that the reduction of 25% by reason of interstate service of the sentence was "excessive and unjustifiable". It held that the appropriate range of imprisonment to be served before release was between 3 and 4 years' imprisonment.
73Notwithstanding that, on a Crown appeal, the court exercised its residual discretion and declined to interfere. Some of its statements of principle, however, are of some importance. The court noted the passage in Nguyen and Phan which I have extracted above. It commented on "white collar crime", and said:
"53. In seeking to ensure that proportionate sentences are imposed the courts have consistently emphasised that general deterrence is a particularly significant sentencing consideration in white collar crime and that good character cannot be given undue significance as a mitigating factor, and plays a lesser part in the sentencing process. In the case of taxation offences general deterrence is also given special emphasis in order to protect the revenue as such crimes are not particularly easy to detect and if undetected may produce great rewards. 'Deterrence looms large' as the present process of self-assessment imposes on the taxpayer a heavy duty of honesty. Moreover, general deterrence is likely to have a more profound effect in the case of white-collar criminals. White-collar criminals are likely to be rational, profit-seeking individuals who can weigh the benefits of committing a crime against the costs of being caught and punished. Further, white-collar criminals are also more likely to be first time offenders who fear the prospect of incarceration.
54. In many if not most cases, imprisonment will be the only sentencing option for serious tax fraud in the absence of powerful mitigating circumstance. A sophisticated degree of planning accompanied by a lack of contrition should ordinarily lead to a more severe sentence of imprisonment ..." (internal references omitted.)
Some may find it difficult to reconcile the statements of principle with the outcome.
74Finally, in Hili and Jones , the offenders were engaged in an arrangement similar to that of the present respondents. The tax evaded was about $400,000 (Hili) and over $360,000 (Jones). The sentencing judge, having allowed a reduction of 50% in each case in respect of the pleas of guilty and assistance, sentenced each offender to imprisonment for 18 months with a recognizance release order to take effect after 7 months. This Court upheld a Crown appeal, and sentenced each offender to imprisonment for 3 years with a recognizance release order to take effect after 18 months: R v Jones; R v Hili [2010] NSWCCA 108. The High Court upheld those sentences: see [68].
75The High Court observed that the chief considerations which pointed to the inadequacy of the sentences at first instance were the nature of the offending, and other sentences that were closely comparable. The majority in the High Court said:
"63. The applicants' offending was sustained over a long time. It was planned, deliberate and deceitful, requiring for its implementation the telling of many lies. The applicants acted out of personal greed. The amount of tax evaded was not small. Detection of offending of this kind is not easy. Serious tax fraud, which this was, is offending that affects the whole community. As was pointed out in Ruha [ R v Ruha, Ruha v Harris ex parte the Commonwealth DPP ] [2010] QCA 10 at [45], the sentence imposed had to have both a deterrent and a punitive effect, and those effects had to be reflected in the head sentences and recognizance release orders that were made."
Those observations transpose precisely to the present case.
76Social security fraud and tax evasion are two sides of the same coin. In the passage from Gregory extracted above (at [53]), the Victorian Court of Appeal made some observations about common features of "white collar criminals". I may be permitted some similar generalisations about social security fraudsters. In contrast to "white collar criminals" social security fraud is usually committed by those who have access to the social security system. They are, by definition, almost universally less privileged, less prosperous, less educated, in possession of fewer resources, intellectual and otherwise. That is the sort of thing the SA Court of Criminal Appeal had in mind in paragraph [47] of Kovacevic extracted above. But in social security cases the courts have shown less reticence in imposing severe sentences than they have in tax fraud cases. Attention was drawn to this anomaly by the Queensland Court of Appeal as long ago as 1994: see R v Wright (1994) 74 A Crim R 152, at 156-159. Attached to the judgment of Davies JA and Oliver J is a table showing sentences imposed by Queensland courts in respect of social security fraud, to 1994, involving more than $60,000. Analysis of the sentences imposed in respect of social security frauds in other states, often after Crown appeal, supports their Honours' conclusion. I will refer to sentences actually imposed, but note that accurate comparison is not possible. That is because, in many of the cases, the applicable maximum penalty is not stated and, of course, there are invariably circumstances particular to each case that affect the result. With those limitations in mind, however, I note the following sentences.
77In Luu (supra, a NSW case), the offender was charged with three counts of imposition of the Commonwealth; a further 18 counts of the same kind were taken into account. The imposition was claiming and receiving social security payments to which he was not entitled. The amount involved was $62,000. In respect of those offences, he was sentenced to terms of imprisonment of 2 years. However, that case was complicated because those sentences were accumulated upon sentences for forgery and uttering, unrelated to the Commonwealth offences. Undoubtedly, the principle of totality had a bearing on the sentences imposed. This Court dismissed an appeal against sentence.
78Carroll (supra, Vic) is another case with its own complications. The offender was convicted on seven counts of imposition on the Commonwealth, involving $220,000. The maximum penalty applicable is not stated. At first instance, he was sentenced to imprisonment for 3 years and 6 months, with a minimum term of 2 years and 6 months, together with an order for restitution. The Victorian Court of Appeal, in a judgment dated 15 October 1990, allowed a Crown appeal and substituted an effective term of 5 years and 6 months with a minimum term of 4 years. It was then discovered that an error had been made in the application of relevant Commonwealth legislation concerning the allowance to be made in respect of sentences imposed in states where remissions of sentence were not available ( Crimes Act 1914, s 16G). In R v Carroll , the court reversed its earlier ruling and revoked the non-parole period of 4 years, substituting a period of 2 years and 8 months.
79In Medina (supra, NSW, 1990) the sum involved was $45,000. The offence was of false pretences with intent to defraud. The maximum penalty applicable is not stated in the judgment. At first instance a lengthy remand was imposed, with a view to permitting the offender to effect reimbursement. On a Crown appeal this Court held that a custodial sentence was called for and imposed a sentence of 2 years with a minimum term of 18 months.
80In Mears (supra, NSW, 1991) the offender was charged with six counts of being knowingly concerned in social security frauds, committed by members of his family. Three were offences carrying a maximum penalty of imprisonment for 5 years; three were of offences carrying a maximum penalty of 2 years. At first instance the offender was sentenced to a total period of imprisonment of 3 years with a non-parole period of 12 months. A Crown appeal was allowed, and an effective sentence of 4 years, with a non-parole period of 2 years, was imposed.
81In Cameron and Simounds (supra, S.A.), the offenders, who were not associated with one another, were convicted of similar offences, of multiple counts of imposition on the Commonwealth. In the case of Cameron , the period of offending was three years and ten months; the amount defrauded was $26,000. Full reparation had been made by members of the offender's family.
82Simounds also pleaded guilty to multiple charges of imposition, involving a total amount of just under $18,000, obtained over a period of almost three years. He was aged only 19 years at the time of the "substantial part" of the offending.
83At first instance Cameron was sentenced to imprisonment for 2 years and 6 months, Simounds for 2 years. An immediate release order was made in respect of each.
84On a Crown appeal, Cameron was sentenced to imprisonment for 2 ½ years, to be released after 9 months, and Simounds to imprisonment for 2 years, also to be released after 9 months.
85In Purdon , (supra, NSW, 1997) the fraud had been committed over a period of seven years and eight months, the offender receiving social security benefits to which she was not entitled. The amount so obtained is not stated in the judgment. At first instance the offender was made subject to a good behaviour bond; after a Crown appeal, a sentence of imprisonment for 9 months was imposed, to be served by way of periodic detention.
86These sentences may be contrasted with those imposed on the tax fraud cases to which I have referred above, supplemented by the following. In R v Morris [1993] 2 VR 192, the Victorian Court of Criminal Appeal had under consideration a Crown appeal following the sentencing of a barrister who had failed to declare, over a nine year period, significant amounts of income, resulting in the non-payment of an equally significant amount of tax. The charges were brought under s 29B of the Crimes Act 1914 , with a maximum penalty in respect of each offence of imprisonment for 2 years. At first instance he was sentenced to a total of imprisonment for 2 years; however an order was made directing his release forthwith (upon giving appropriate security). The offender had made significant payments by way of penalty and reparation, meaning that, as it then happened, the Commonwealth did not suffer any actual loss.
87On a Crown appeal, the sentences were set aside, and the offender was sentenced to imprisonment for 18 months to be served concurrently, but an order was made that the offender be released after 6 months of imprisonment.
88In Hamman (unreported, NSWCCA, 1 December 1998) a barrister in this State pleaded guilty to five counts, three of which were of imposition (contrary to s 29B of the Crimes Act , carrying a maximum penalty of imprisonment for 2 years), and two of defrauding the Commonwealth (contrary to s 29D of the Crimes Act , carrying a maximum penalty of imprisonment for 10 years). All offences were committed by the understatement of income, over a period of three years. At first instance he was sentenced to imprisonment for 2 years, to be served by way of periodic detention. Both the Crown and the offender appealed. This Court unanimously held that such a sentence was manifestly inadequate, and that a term of full time imprisonment ought to have been imposed (pp 24, 26 and 29).
89However, by majority (Sheller JA and Levine J), the Court exercised the residual discretion it retains in Crown appeals and dismissed the Crown appeal. The principal reason appears to have been delay in the prosecution. Their Honours then held that error had been made by the sentencing judge in failing to take into account the effect of s 16G of the Crimes Act , and reduced the sentence to one of imprisonment for 14 months, to be served by way of periodic detention. Barr J, who dissented on the outcome of the Crown appeal, would have imposed a sentence of imprisonment for 6 months. In reaching that sentence, he took into account the mitigating circumstances, as well as the principles that then applied in relation to Crown appeals. Six months was, therefore, the minimum term his Honour considered ought to have been imposed.
90In R v Whitnall (1993) 120 ALR (Full Court of the Federal Court, on appeal from the Supreme Court of the ACT) the offender had, over a 2 ½ year period, furnished false tax returns in his own name, and in the name of a company he controlled. The amount involved was almost $75,000. The charges were of fraud, carrying a maximum penalty of imprisonment for 10 years. At first instance, he was sentenced to imprisonment (the judgments on appeal do not disclose the term), which was fully suspended, together with some community service. The Full Federal Court, while acknowledging and endorsing the strong statement of principle concerning sentencing in respect of taxation fraud, dismissed the Crown appeal.
91The contrast in sentences actually imposed in respect of social security frauds and tax frauds demonstrates that what was said by Davies JA and White J in Wright was, and remains, fully justified. Notwithstanding strong statements of principle, tax offenders are treated more leniently than are social security offenders.
92I now turn to a consideration of the relevant circumstances in the present cases.
93Two features of the respondents' offences strongly suggest more, rather than less, severe sentences. These are the period of time - seven years - over which they continued, and the amounts involved.
94Other features point in the opposite direction. These include the health problems of each respondent (although these are far from being at the high end of health problems to be taken into account on sentencing that are seen in this and other courts); their prior good character (although it is well established, as is stated in some of the extracts above, that this is of less significance in offences of this nature); that the applicants have made, or will be obliged to make, reparations (see R v Gay [2002] NSWCCA 6 at [14] and [18]); and the delay in bringing the proceedings to a conclusion (also the subject of consideration in Gay ). I note that a somewhat less benign view of the relevance of reparations was taken by Sheller JA in Hamman : see p 17 of that judgment.
95Counsel for both respondents urged that significant weight be given to the circumstance that the respondents were inveigled, or lured, into the scheme by an apparently highly qualified, professional, accountant and that their participation was not initiated by themselves. Had the fraudulent conduct ceased on, or soon after, the respondents' realisation of its true character, this circumstance may have had some weight. Given that the conduct continued for another seven years after that realisation, its significance is diminished to almost nothing.
96There is undoubtedly a pathos about the prospect of two middle aged men, of prior good, even exemplary, character, each with some health issues, who have expressed remorse for their conduct, being sentenced to imprisonment. That pathos cannot be permitted to overshadow the objective seriousness of the offences: two middle aged men, intelligent, professionally successful, financially secure, prosperous, over a seven year period defrauded the Australian community of very significant sums of money, leaving others, less financially able to do so, to bear the burden of financing the many services government provides. The community cannot afford for judges to be squeamish about discharging their duty, however personally painful it may sometimes be. To fail to sentence middle class offenders commensurately with social security offenders risks bringing the administration of justice into disrepute as perpetrating class bias.
97Careful reading of the authorities discloses that there is, at times, disparity between statements of principle - Caradonna, Phan and Nguyen , Gregory - and what happens in practice. The language of L Vogel & Son Pty Limited v Anderson, Minister of State for Customs and Excise for the Commonwealth of Australia [1968] HCA 90; (1967) 120 CLR 157, quoted at [14] of Jones and Hili [2010] NSWCCA 108, is apposite:
"The duty evaded has now been paid, and I understand that when the evasions were discovered the defendants gave the Customs every assistance in their investigations. But when all the considerations relied upon by the defendants have been given due attention the case still cannot be regarded as other than a serious one. Not only are the defendants guilty of a sustained course of conscious wrongdoing, but the offences are in a field in which punishments for deliberate offences must be severe. The Customs laws represent the judgment of Parliament upon an important aspect of the economic organization of the community, and the object of the penal provisions is to make that judgment as effective as possible. It is important to remember that Customs officers have of practical necessity to rely extensively upon the information supplied to them by importers, for the flow of commerce could not be maintained if every importation had to be fully investigated. Moreover, detection of frauds is not always easy. No doubt ordinary conceptions of honesty and of civic responsibility suffice to ensure a great deal of fair dealing with the Customs, but for some people little seems to matter but fear of the consequences of discovery. The Customs Act [1901-1960 (Cth)] makes those consequences potentially drastic. It is for the courts to make them, in suitable cases, drastic in fact, for otherwise traders who are not saved by qualms of conscience from willingness to defraud their fellow citizens may weigh the profits they hope for against the penalties they have cause to fear and find the gamble worthwhile." (per Kitto J, upheld on appeal, italics added)
98A direct parallel is to be found between the obligations of disclosure in Customs matters, as referred to in that passage, and the obligations of honesty and accurate disclosure of taxation matters central to the self-assessment system currently operating, and of which the two respondents took unconscientious advantage.
99I move from statements of principle and historical data to examination of comparable sentences that have recently been imposed. I am fully conscious of the limitation of the use of historical sentencing data: Hili and Jones , HCA, at [54].
100The first question to be addressed is whether the sentences of 2 years (however to be served) were manifestly inadequate. A proper answer to that question is obtained by factoring in the 50% reduction that was allowed in respect of assistance to authorities, pleas of guilty, and delay in finalisation of the proceedings. That means the starting point was a head sentence of 4 years. This was in respect of offences perpetrated by a continuous and repeated course of conduct over a seven year period, involving tax evasion in large amounts. These were not offences that, once begun, proceeded of their own momentum. On each occasion that the respondents paid a fraudulent invoice, and on each occasion that they received the return of their payments designated as loans, and on each occasion that they signed income tax returns containing the fraudulent information, they acted consciously in perpetuation of the frauds. I refer again to the remarks of Olsson J in Laxton v Justice (supra). It is, as I have indicated above, of little moment that the respondents were initially drawn into the scheme by a persuasive, even forceful, professional: these were professional, intelligent men who, by 1997, recognised that what they were doing was dishonest. The evidence concerning their attitude, at that time, to their wrongdoing was unimpressive and weak. In his statement, Boughen said that "alarm bells" began to ring in 1997, and that he began to worry. Cameron (at para 97) said that he had "serious concerns" and that he discussed the matter with Boughen, but that they were nervous about the accountant and felt "vulnerable". Neither, apparently, considered it appropriate either to cease participation, or to take alternative advice on their positions. Nor is there any evidence that recognition of the wrongdoing occasioned any particular distress, anxiety, or concern above what has been mentioned. Notably absent from their statements, and their oral evidence, is any mention of conscience.
101The position is encapsulated in Hili and Jones , HCA, at [63] extracted above.
102In terms of comparable offences, those committed by Messrs Hili and Jones most approximate the present. This Court considered the sentences imposed at first instance (sentences of imprisonment for 18 months, with recognizance release orders to take effect after 7 months) to be manifestly inadequate, and substituted sentences of 3 years, subject to recognizance release orders to take effect after 18 months. These sentences were imposed after reduction of 50% referrable to assistance and pleas of guilty. This Court, with reservations, maintained that quantum of reduction, and this was not interfered with by the High Court. The starting point, therefore, of those sentences was 6 years, which the High Court held was appropriate.
103Another decision of some relevance is that in Gregory . The offender in that case was a prominent solicitor, who was convicted, after trial, of two counts of defrauding the Commonwealth and one of conspiracy dishonestly to cause a risk of loss to a Commonwealth entity. The fraud involved the concealment, by a client of the solicitor (the offender in Wheatley ), of $400,000 in income. The sentence imposed at first instance was of imprisonment for 2 years, with a recognizance release order after 12 months. This sentence was held to have been manifestly inadequate. The Victorian Court of Appeal accepted that a head sentence of 4 to 6 years, with a non-parole period of 3 to 4 years, was appropriate. Nevertheless, for stated reasons, the court exercised its residual discretion and declined to re-sentence.
104In this case, I am satisfied that the proper application of principle, as stated unanimously in the various authorities to which I have referred, and reference to the sentences imposed in Hili and Jones , (and, more importantly, the reasons given by the High Court for upholding those sentences) establish beyond doubt that sentences with a starting point of 4 years were manifestly inadequate. The starting point ought to have been 6 years. Applying a 50% reduction means that the sentences ought to have been imprisonment for 3 years.
105However, the Crown has challenged, not the reduction allowed in respect of the assistance and pleas of guilty, but the 10% allowed in respect of the delay in the proceedings. I accept that this reduction exceeded what was justified in the circumstances. His Honour overstated (as four years) the length of the delay, which was as I have set out above at [17]. It is not usual to quantify the reduction allowed in respect of delay, and, in my opinion, it is better that delay be taken into account on the overall assessment of a sentence. In proposing a starting point of 6 years, I have given what I consider to be the appropriate weight to that delay.
106In my opinion, in each case, Ground 2 must be upheld and the Crown appeal must be allowed.
107That, of itself, necessitates a conclusion that the orders that the sentences be served by way of Intensive Correction Orders were in turn erroneous. Only a sentence of 2 years or less may be served in that fashion (s 7, Sentencing Procedure Act ).