R v Bromley [2010] VSC 345

(a) 3 rolled up charges of dishonestly obtaining a financial advantage by deception from a Commonwealth entity contrary to s 134.2(1) of the Criminal Code 1995 (Cth); and

(b) 2 rolled up charges of attempting to obtain a financial advantage by deception from a Commonwealth entity contrary to ss 11.1(1) and 134.2(1) of the Criminal Code 1995 (Cth).

2 The 5 charges relate to fraudulent Goods and Services Tax ('GST') refund claims made by you in 186 separate business activity statements ('BAS') lodged with the Australian Taxation Office ('ATO') between October 2001 and 4 June 2008.

3 The fraudulent GST refund claims were made in the names of three separate companies under your exclusive control. They gave rise to 151 payments totalling $9,462,384.57 forming the subject of the first 3 charges.

4 The amount forming the subject of charges 4 and 5, being the attempt charges, is $172,173.

5 More specifically your offending involved the following elements:

• Between 26 October 2001 and 28 March 2008, 81 GST refund payments totalling $4,792,339.36 were obtained from the ATO in the name of Teebee & Associates Pty Ltd. The average refund payment in the name of this entity was $59,164.68 (charge 1).

• Between 12 September 2003 and 28 March 2008, 67 GST refund payments totalling $4,619,521.11 were obtained from the ATO in the name of Liner Transport & Trading Services Pty Ltd. The average refund payment in the name of this entity was $68,948.07 (charge 2).

• Between 28 September 2007 and 28 March 2008, three GST refund payments totalling $50,524.10 were obtained from the ATO in the name of Pacific Suppliers Pty Ltd. The average refund payment in the name of this entity was therefore $16,841.37 (charge 3).

• On or about 5 May 2008, another GST refund claim was lodged by you in the name of Liner Transport & Trading Services Pty Ltd seeking a GST refund payment of $62,166. This claim was not paid (charge 4).

• Between 24 April 2008 and 4 June 2008, you lodged three additional GST refund claims in the name of Teebee & Associates Pty Ltd effectively seeking further GST refund payments totalling $110,007. These claims were also not paid (charge 5).

6 Between September 2003 and March 2008 you were effectively obtaining over $100,000 per month (and up to $194,869 per month) from the ATO through a series of fraudulent GST refund claims made in the name of three separate companies.

7 In addition, between October 2001 and March 2008 you provided the ATO with numerous purported invoices and other documents (including bills of lading, contracts and bank records) which were submitted as supposed evidence of various sales and purchases detailed in your BAS claims. Many of the relevant invoices which were submitted were entirely fabricated or altered to include materially false information. The invoices related to the purported export of a wide range of commodities.

8 Your offending is characterised by the following aggravating circumstances:

(a) You are now 40 years old and were at the time of your offending between the ages of 31 and 38. Although evidence has been given as to your relatively immature personality (to which I shall return) the fact remains that you were not a young offender but someone in the prime of your adult life.

(b) Your offences occurred in the course of the conduct of a business which you controlled and in effect fabricated.

(c) Your conduct involved repeated and extended fraud.

(d) The amount obtained by you ultimately came to a huge total.

(e) You deliberately stole from the public purse and applied the proceeds for your own personal purposes.

(f) You gave false responses to a series of compliance inquiries made on some 23 occasions by officers of the ATO and deliberately fabricated false documentation to support these responses which were made between October 2001 and March 2008.

(g) You initially provided false information in response to an audit conducted in April and May 2008.

(h) Your conduct only ceased when you were apprehended.

9 On the other hand, when confronted with the fraud and false documentation in May 2008 you acknowledged that you had falsely obtained most of the refunds which had been sought for your companies.

10 You consented subsequently to the utilisation of a plea brief procedure and you pleaded guilty at a committal hearing before the Magistrates' Court on 21 May 2010.

11 You have made full admissions as to your offences and given the Crown significant co-operation since your apprehension. The Crown acknowledges that your co-operation has materially and significantly facilitated the course of justice and this is of course a matter which must be given due weight.

12 As I have said, you are now 40 years old. You have some prior convictions for driving offences but none for offences of dishonesty. You also have a subsequent conviction for a driving offence. I do not regard your traffic offences as materially relevant.

13 You are an only child and grew up in the northern suburbs of Melbourne. Your parents are honest and hard-working people who are still supportive of you and attended Court on your plea.

14 You attended school to Year 12 level but passed only accounting in Year 12. You went on to work for the Australian National Line Limited ('ANL') in Accounts and then in the Import/Export area.

15 A report from Ms Wendy Northey, an experienced psychologist, notes that although you have facility with figures you do not read well. You are numerate but not in any substantial sense literate. She observes that although you became involved in a complex web of business activities and enterprises over the years after you left school, you were ill-equipped for a business career in terms of real business and financial capabilities. Your ambitions over-reached your abilities.

16 In 1995, as a 21 year old, you married a 27 year old woman whom you had met at work. That marriage broke down and you separated from your wife after 10 years shortly prior to the birth of your second child in 2005. Your daughter is now aged 12 and your son is aged four.

17 Mr Hartnett, who made an eloquent plea on your behalf, outlined the principal features of your employment history. After initially working for ANL you went on to work for a series of other shipping companies in management capacities. You did so for some 13 years in total and it seems that you were a trusted and responsible employee, earning a good salary. In the latter part of this period you and your wife also ventured into business on your own behalf together with another couple, shipping household necessities to Nauru. This business was not unsuccessful.

18 In or about 2001 you, together with a partner, purchased and commenced to run 'Toeys', the old Balzac Bistro in East Melbourne. You set about renovating the restaurant but struggled to manage the finances of the business. In the course of this struggle your business partner left leaving a debt of some $600,000 with the restaurant only half renovated. You became increasingly desperate. You could not borrow easily because of a bad credit rating resulting from gambling activities. You state that it was in this context that you commenced to submit false BAS, fabricating fictional export transactions in order to set up claims for fictional credits. The evidence is not entirely consistent concerning the circumstances in which you commenced the offending conduct, but I accept that the greater part of your offending occurred in conjunction with your involvement in the unsuccessful restaurant venture which ultimately collapsed.

19 You now have little in the way of assets and I note that enquiries by the Crown indicate that you have travelled out of Australia on 50 occasions since your offending commenced in October 2001. It appears that you have engaged in grossly self-indulgent behaviour. Your counsel acknowledged that you adopted a dissolute lifestyle.

20 After your apprehension you returned to live with your parents and await the outcome of your expected prosecution. After a period of time however you obtained employment as a motor car salesman and demonstrated that you were able to work as a successful and trusted employee in that capacity over the period of a year. Mr Hartnett has tendered an impressive reference from your employer during this period.

21 You told Ms Northey that you now hope to qualify as a plumber and pursue an honest trade. In Ms Northey's view this is a realistic goal. Given the terms of the reference from your recent employer and your initial history of successful employment in the shipping industry, I accept that you do have positive prospects for future employment whether as a tradesman or in some other capacity.

22 In 2006, following a routine blood test, you were diagnosed with a chronic illness. Your condition is being successfully controlled by medication.

23 Ms Northey expresses the view that you developed dissociative tendencies from a young age as a means of escaping into an unreal world to avoid confronting painful realities. You have a substantial gambling record which is indicative of a long-standing impulse control disorder. In her view during the course of your offending, you would have satisfied the criteria for diagnosis of a gambling addiction. However much of your past behaviour is indicative of what she calls 'impaired limits' arising from spoilt entitlement rather than pathological mental illness requiring an aggressive intervention and therapy.

24 She goes on to conclude that it is your immaturity which has given rise to your serious offending. She states that your diagnosis with a chronic illness and your apprehension for the offences which bring you before this Court, have forced you to confront reality. In her view your prospects for rehabilitation are excellent. She does not regard you as having an entrenched criminal or anti-social personality despite the financial gravity of your offending. She expects you to continue to mature within a custodial setting, although you will, in her view, require monitoring for stress and fluctuating depression.

25 The Crown did not dispute this psychiatric evaluation, nor seek leave to cross-examine Ms Northey.

26 I accept that offending of the scale and duration in which you were involved must have been based upon fundamental elements of your personality. I also take the view that the brazen quality of your offending demonstrates very substantial naivety and a failure to think consequentially. The extent to which it was fuelled by compulsive gambling is unclear. Only a figure in the order of 15 per cent of the monies you obtained has been traced to bookmakers. Nevertheless it seems to me that your gambling is to be relevantly understood as tending to confirm that you were naïve and immature as Ms Northey says.

27 Because of the extent and duration of your offending there must be some doubts as to your prospects of rehabilitation. You are now 40 years old and you have left it very late to grow up. Nevertheless I accept that I should proceed on the basis that you have some real prospects for rehabilitation and that your full admissions and pleas of guilty are a significant starting point in this respect. The continuing support of your parents, your good work record as an employee - in particular over the past year - and the fact you have children to whom you still have some commitment also favour your prospects of rehabilitation.

28 In determining the sentence to be passed upon you I must impose a sentence that is of a severity appropriate in all the circumstances of the offence. That duty requires me to have regard to a series of considerations stipulated in the relevant legislation and any other relevant consideration. It is appropriate to say something sequentially about these matters.

29 I have already described the circumstances of your offences. The maximum sentence for each offence is 10 years.

30 In my view despite your pleas of guilty, admissions and lack of prior convictions, the Court must impose a substantial period of imprisonment in order to reflect the duration and gravity of your offending and for reasons of both general and specific deterrence.

31 In Director of Public Prosecutions (Commonwealth) v Rowson,[1] Kaye AJA, with whom Buchanan and Neave JJA agreed, stated:

It is well recognised that those who systematically defraud the public revenue of large sums of money over a substantial period should be sentenced to substantial terms of imprisonment.[2] The regime established for the collection of goods and services tax is basically dependent on the honesty of those participating in it. In cases such as this, considerations of general deterrence are given particular emphasis, and indeed prominence, in the sentencing process. The courts have a significant responsibility to protect the integrity of the revenue system, by imposing punishments, for deliberate and sustained fraud, which are likely to deter others who may be otherwise tempted to indulge in the type of conduct committed by the respondent.[3]

32 The sentence I impose must reflect the differences in order of quantum between charges 1 and 2 on the one hand and the remaining charges. It must also reflect that you did not obtain the benefit of the attempts comprising charges 4 and 5, and that to this extent the first 3 charges must be regarded as more serious.

33 Your offences constituted a continuing and deliberate course of fraudulent conduct. Whilst in one sense that course may be regarded as representing a unified whole, in another and more fundamental sense, it constituted a course in which your criminality was deliberately continued and escalated by material increments over more than six years. In so saying however, I must of course have regard to the principle of totality so you do not fall to be sentenced by way of the cumulative total of penalties appropriate for each of your offences.

34 The fact that your offending was directed to the Commonwealth of Australia does not excuse it. In an underlying sense you have robbed the people of Australia as a whole.

35 The loss resulting is equivalent to the cost of substantial public infrastructure. It is of a level which the Court, as the representative of the community, cannot be seen to tolerate or treat as less than very serious.

36 You have made no reparation of the monies taken and your plea is made on the basis that it is unlikely you will be able to do so. I record that Mr Hartnett indicated to the Court that you were prepared to continue to co-operate in any further investigations and efforts directed to the recovery of monies owing to you.

37 Although there is some controversy as to the manner of supply of information by you to the Crown since your apprehension, I accept that you have demonstrated remorse by your admissions and pleas of guilty. I further accept, as the Crown acknowledges, that your conduct has materially assisted the course of justice. Your pleas of guilty have facilitated the course of justice in the sense that they have resulted in an expedited and certain outcome to the proceedings against you. In so doing they have avoided the need for a complex and potentially lengthy prosecution.

38 The extent and duration of your offending, coupled with your age and the psychological profile put forward by Ms Northey, all support the view that there is a need for an element of specific deterrence in your sentence.

39 The Court must also denounce your conduct and impose a sentence which results in adequate and proportionate punishment for your dishonesty. These considerations mean that your sentence must comprise a substantial period of imprisonment.[4]

40 I have already addressed your personal background and the evidence as to your personality and psychology.

41 I have taken into account the evidence of Ms Northey and her opinion as to your prospects of rehabilitation. I do not accept that her opinion as to your mental functioning materially reduces your moral culpability or supports the conclusion that imprisonment will impose an unusually heavy burden upon you. In R v Verdins,[5] the Court of Appeal concluded:

Where a diagnostic label is applied to an offender, as usually occurs in reports from psychiatrists and psychologists, this should be treated as the beginning, not the end, of the inquiry. As we have sought to emphasise, the sentencing court needs to direct its attention to how the particular condition (is likely to have) affected the mental functioning of the particular offender in the particular circumstances - that is, at the time of the offending or in the lead up to it - or is likely to affect him/her in the future.[6]

42 Ms Northey recorded that you will need to be monitored and attended to within a custodial setting in respect of fluctuating depression and anxiety. You will also of course require ongoing support for your chronic illness. I take these matters into account.

43 Apart from the facts of your lack of relevant prior convictions, admissions as to your offending and pleas of guilty, I regard your prospects of rehabilitation as the most significant matter favouring mitigation of penalty in your case.

44 I also accept Ms Northey's view that this factor favours a somewhat longer potential parole period than would otherwise be appropriate.

45 It is likely your imprisonment will have an adverse effect upon your relationship with your two children and it will undoubtedly cause your parents distress. Nevertheless these effects are not exceptional so as to warrant some special discount in the sentence I must impose.

46 Mr Hartnett submitted that in addition to the above matters I should have regard to the fact that you have in effect been waiting for imprisonment for two years. I accept that this has caused you apprehension and anxiety. On the other hand it has enabled you to work successfully as a car salesman. As I have made clear I regard this history as a material factor bearing on your prospect of rehabilitation.

47 It follows that although the delay has in one sense been difficult for you, its consequences have on balance been beneficial and it is this benefit which I regard as more significant because of its relevance to your prospects of rehabilitation.

48 Mr Bromley, having regard to the above matters I propose to sentence you on each of charges 1 and 2 to 4 years imprisonment. On charge 3 I sentence you to 2 years imprisonment. On each of charges 4 and 5 I sentence you to 6 months imprisonment. I will order in effect that 2 years of the sentence on charge 2 be served cumulatively to the sentence on charge 1, that 1 year of the sentence on charge 3 be served cumulatively to the sentence on charge 2, that 3 months of the sentence on charge 4 be served cumulatively to the sentence on charge 3 and that 3 months of the sentence on charge 5 be served cumulatively to the sentence on charge 4, making a total effective sentence of 7½ years. I direct that you serve 5 years of that sentence before becoming eligible for parole. The relevant statutory provisions require me in effect to express cumulacy by way of orders for successive concurrency.[7] In order to create the cumulation upon the head sentence that I have referred to I sentence you sequentially as follows:

(a) I sentence you to 4 years imprisonment on charge 1 commencing today.

(b) I sentence you to 4 years imprisonment on charge 2 commencing on 9 August 2012.

(c) I sentence you to 2 years imprisonment on charge 3 commencing on 9 August 2015.

(d) I sentence you to 6 months imprisonment on charge 4 commencing on 9 May 2017.

(e) I sentence you to 6 months imprisonment on charge 5 commencing on 9 August 2017.

49 I declare that you have served three days by way of pre-sentence detention.

50 This results in a total effective sentence of 7½ years imprisonment. I fix a non-parole period of 5 years with respect to the whole period of the above sentences.

51 But for your pleas of guilty I would have sentenced you to a total effective sentence of 10 years with a non-parole period of 7 years.

52 I am required to direct you as to the effect of fixing a non-parole period of 5 years. The effect of fixing that period is that if a parole order is made you will be released into the community after that period on conditions relating to your conduct and ongoing supervision. If you breach the terms of those conditions or re-offend during the period of your parole, you will be liable to imprisonment for the balance of the sentence I have imposed, namely potentially a further 2½ years.

53 Lastly, the Crown seeks a reparation order on the basis that the evidence before the Court does not satisfactorily show that you will not have some capacity to make repayment of the monies which you have obtained as a result of offending. I accept this submission although my impression of the material before me is that there are only limited prospects of the recovery of any monies.

54 I order that pursuant to s 21B of the Crimes Act 1914 (Cth) you make reparation to the Commonwealth in the sum of $9,462,384.57.

55 Lastly, I direct that Ms Northey's report be forwarded to the prison authorities together these reasons.

[1] [2007] VSCA 176, [24].

[2] R v Nguyen & Phan [1997] 1 VR 386, 389, cited in ibid, [24].

[3] DPP (Commonwealth) v Milne [2001] VSCA 93, [12] and [13] (Winneke ACJ); Kovacevic v Mills (2000) 76 SASR 404, [39] - [40]; DPP (Commonwealth) v Alateras [2004] VSCA 214, [26] (Nettle JA); R v Alimic [2006] VSCA 273, [26] (Nettle JA); all cited in ibid, [24].

[4] Also see [31].

[5] [2007] VSCA 102; (2007) 16 VR 269.

[7] Crimes Act 1914 (Cth), s 19(2).