R v Charter [2002] VSCA 214

Court of Appeal (Vic)|2002-12-19|Before: PHILLIPS, C.J., CHARLES and VINCENT, JJ.A.

Criminal law - Sentence - Making improper use of position as officer of corporation to gain advantage - Plea of guilty - Contested plea hearing - Allegation that trial judge did not approach proceeding with open mind - Findings made open on the evidence - No reasonable suspicion of bias or closed mind - Vakauta v. Kelly (1989) 167 C.L.R. 569 - Galea v. Galea (1990) 19 N.S.W.L.R. 263.

The applicant, on 4 June 2002, pleaded guilty in the County Court sitting at Melbourne to one count of making improper use of his position as an officer of a corporation to gain advantage for himself or another, contrary to ss.232(6) and 1317FA(1) of the Corporations Law (as taken to be included in the Corporations Act 2001, by s.1401 of that Act). More specifically the count asserted that, being an officer of Kiss Corporation Pty. Ltd., he dishonestly used his position to gain an advantage for a company known as Cotham Audio Pty. Ltd. by facilitating the diversion of a Citibank cheque for $402,500 payable to a similarly named company, Gotham Audio Pty. Ltd., into a National Australia Bank account in the name of Cotham Audio Pty. Ltd.

The applicant admitted that he had been previously convicted in the District Court of New South Wales at Sydney, on 6 March 1981, on two counts of imposition, two counts of engaging in conduct with intent to defraud and three counts of making false representations, in respect of which he was released without sentence being imposed upon entering into a recognisance to be of good behaviour for a period of four years. He also admitted having been convicted at the Central Court of Petty Sessions in New South Wales, on 28 May 1981, on eight counts of obtaining benefit by fraud. On that occasion sentencing was deferred upon the applicant entering into a recognisance to be of good behaviour for a period of three years.

Finally, he admitted that he had been convicted at the District Court of South Australia, on 3 March 1982, on two counts of false pretences in relation to which he was sentenced to serve imprisonment for a period of nine months on each count with a non-parole period of three months, the service of the sentence being suspended upon the applicant entering into a recognisance to be of good behaviour.

At the outset of the plea hearing, counsel then appearing for the applicant indicated that the prosecution summary of facts and circumstances provided to the Court was not accepted as accurate by his client. In particular, the role ascribed to him in the commission of the offence was disputed. Accordingly, he submitted that the matter should proceed as a contest on this aspect. With reluctance, the learned sentencing judge agreed to the adoption of this course. A hearing, in the course of which a substantial number of matters relevant to the determination of a proper sentence were canvassed, proceeded over five days, being 4, 5, 6, 7 and 11 June 2002. Two witnesses were called by the respondent; three gave character evidence on behalf of the applicant who, himself, gave evidence over the course of two days.

On 24 June 2002, her Honour imposed a sentence of 18 months' imprisonment, directing that the applicant be released upon entering into a recognisance in the sum of $500 to be of good behaviour for two years after the service of nine months of that term.

Although the notice of application for leave to appeal against sentence, filed on behalf of the applicant, contains a number of grounds, reliance has been placed upon only two of them in the written and oral submissions presented to the Court. Those grounds read:

"1. The sentence imposed was manifestly excessive. 3. The Learned Sentencing Judge exhibited bias in the conduct of the proceedings and in passing sentence. That bias included but was not confined to:- (a) the inferences which the Learned Sentencing Judge said should be drawn from the corporate structure of the applicant's business; (b) the treatment of the evidence relating to the respective roles of the applicant and the co-offender Winters; (c) the view formed by the Learned Sentencing Judge of the Applicant's character; (d) the view formed by the Learned Sentencing Judge in relation to the applicant's role in the offending."

In the circumstances, it is not necessary to address the abandoned contentions contained in the other grounds.

Having regard to the nature of the complaint made in relation to the approach and conduct of the sentencing judge set out in ground 3, it is nevertheless appropriate to draw upon the non-controversial parts of the description of the circumstances relating to the commission of the applicant's offence set out in her sentencing remarks.

The applicant and a woman named Chess Winters were directors of a company known as Kiss Corporation Pty. Ltd. It was a multi-media corporation that operated from premises in Chapel Street, South Yarra. Ms. Winters, it appears, held the sole interest in this company.

In February 1997, Kiss Corporation offered to purchase a business trading as Gotham Audio under a terms sale arrangement with a deposit of 5% being payable on 10 April 1997. Negotiations in respect of this purchase were conducted by the applicant and, on 5 April, another company Magi Sabu Pty. Ltd. was substituted as the would be purchaser. Ms Winters was the sole director and shareholder of that company also. A loan was sought and secured from GE Capital Australia in the sum of $1m. to finance the purchase, satisfy some outstanding obligations and to provide ongoing working capital. The loan was supported by personal guarantees executed by both Ms Winters and the applicant.

It was never indicated to the finance providers, who were asked to and did provide the whole of the purchase moneys, that the purchase was to be effected on a terms sale basis. The loan was provided, on 9 April, in the form of four cheques, payable as follows:

1. Peppercorn Associates - $135,305.50. (This, it seems, related to outstanding obligations.)

2. Esanda Finance - $314,606.62. (Also it seems to cover debts outstanding to that company.)

3. Kiss Corporation Pty. Ltd. - $147,587.88. (This was to represent part of the working capital.)

4. Gotham Audio Pty. Ltd. - $402,500. (The full purchase price for that business. It was this cheque that was diverted.)

Also on 9 April, an application was made to change the name of a company known as SGI Computers Pty. Ltd., of which both Ms Winters and the applicant were directors and the applicant was the company secretary, to Cotham Audio Pty. Ltd. On 10 April, the cheque for $402,500 payable to Gotham Audio Pty. Ltd. was deposited into an account that had been opened shortly before in the name of Cotham Audio. On the same day an amount of $365,000 was withdrawn from that account and placed into the accounts of Kiss Corporation and an associated company Kiss Music Pty. Ltd. The balance of the loan moneys, $37,191.73, was withdrawn five days later and also placed into the Kiss accounts. The funds obtained were disbursed mainly to creditors of those corporations in respect of pressing debts. The sentencing judge accepted that Kiss Corporation was in severe financial straits at the time and the device of fraudulently obtaining funds was accepted by the applicant as the only means by which the organization could be kept afloat. A large number of cheques were signed by the applicant and many by his co-offender, Ms Winters. The endeavour proved to be unsuccessful and on 26 March 1998 an official liquidator was appointed to the company. The offences then came to light.

At the commencement of the proceeding before the sentencing judge, counsel for the applicant informed her Honour that the matter was not to proceed as a trial and that his client would plead to the count set out above. Then, as earlier mentioned, he stated that the prosecution summary of the circumstances was not accepted as accurate, indicating that his client was concerned about the role attributed to him. The sentencing judge responded that "I'm not a great fan of contested pleas." It appears from later remarks of her Honour that she had on an earlier, unrelated occasion been involved in a contested plea hearing that occupied 77 days. She did not wish to repeat what she regarded as a lengthy, unproductive experience. She then perused the summary and pointed out that it was not there asserted that the applicant had played some dominant role in relation to the criminal activity involved. As I understand her remarks, she expressed the view that in the absence of appropriate evidence to that effect, she would not so conclude. A little later, the following exchanges took place:

"HER HONOUR: Well, they're both officers of the corporation. COUNSEL: Yes, they are. HER HONOUR: They both have duties. COUNSEL: Yes, they do. HER HONOUR: They have both breached them. I'm not really - I don't think I'm going to be terribly impressed one way or the other as to who came up with the idea in the first place. They both became involved in it. COUNSEL: Yes. HER HONOUR: Both participated in the accruement (sic) of a fraud on GE and it would seem to me that both deserve to be punished for it accordingly. Now if someone wants to persuade me otherwise, I'll certainly listen, but that's pretty much my initial reaction to it. Now you're not going to try and persuade me, I understand that, [counsel]. COUNSEL: I'm content enough with that position. HER HONOUR: I'm sure you are. COUNSEL: I may - my learned friend may not be; I don't know. PROSECUTOR: No, he's not, Your Honour. I've certainly heard what Your Honour had to say about contested pleas, but there is a serious factual issue, sentencing issue, between [counsel] and myself. The Crown - - - HER HONOUR: How do you say that as the offence - - - PROSECUTOR: It doesn't alter the guilt, but it alters the culpability, in my submission, of the respective roles of each of them and Miss Winters did indeed plead guilty to what is Count 1 in the Magistrates' Court and was dealt with on the basis of the Crown saying that she was a lesser player in the scheme and the Crown would submit to Your Honour that there is material - - -

. . .

PROSECUTOR: ... The Crown certainly doesn't accept the assertion by my learned friend that it was her idea and that the accused man was an unwilling participant. The Crown case essentially is that he masterminded this and had set up the transaction in March when he was negotiating the purchase of the equipment on terms that were never going to be for cash, but were always going to be on instalments and left the door open for the diversion of the cheque.

. . .

PROSECUTOR: ... Your Honour, it has to be said that if there's a factual dispute, and the Crown calls the co-director and there's cross-examination of her and if the accused man gives evidence on the point, it won't be a short gorgeous plea contest, Your Honour, and the Crown is keen to avoid that, but at the same time roles are a significant sentencing matter and the Crown doesn't accept what's being put on behalf of Mr Charter in this case. HER HONOUR: Well I suppose at that rate it will be your call. PROSECUTOR: It is, Your Honour. HER HONOUR: All right. How much time do you need then?"

During the course of further discussion and in this context, counsel for the applicant endeavoured to set out the history of the companies involved and the extent of the beneficial interest held by Ms Winters in them. The judge responded:

"HER HONOUR: [Counsel], you can talk about that possibly with some other people. Let me tell you that I consider that incorporation of companies is basically a fraud on our society. They are a veil behind which people hide things. Now you're [not] going to get, I assure you, anywhere talking with me about the legal owners of this - - - COUNSEL: I don't want to be technical about it - - - HER HONOUR: No, no, it's not about technical - I'm just telling you, it is not an argument that will ever work with me. Most frauds I have ever seen and most corrupt business I have ever seen has been done behind the skirts of companies. COUNSEL: Your Honour, I understand that and it's a very sensible way of looking at things. I was simply saying to you that part of the fact that - - - HER HONOUR: The fact that she is the owner of Firestar is not going to impress me one iota. COUNSEL: All right. Well, what I want to put is that she was an experienced businesswoman - - - HER HONOUR: Yes, they're experienced business people. COUNSEL: And her claim that she didn't understand financial matters and that was all Mr Charter's doing is contested."

The somewhat startling dismissal of the legitimacy of corporations generally which is suggested by her Honour's statements was obviously directed to the abuse of the corporate veil, as the following passage from her sentencing remarks indicates:

"Business and companies have a right to be protected from people who prey upon them, hiding behind company structures to try to prevent their wrongdoing becoming evident, and accordingly, the law recognises that those who use their position as an officer or a company, to commit fraudulent offences, deserve appropriate punishment. You had been in business for many years and you must have understood what you were doing and the probable consequences of your action."

Mention should also be made in this context of the fact that when a complaint was made by counsel for the applicant during the hearing about her Honour's early utterances on this aspect, the judge responded that she was simply making a general point about the use of such devices and had not at that stage expressed any concluded view about the particular matter before her.

Counsel, clearly concerned about the level of responsibility attributed to his client by the prosecutor as the "mastermind" of the offence, proposed to endeavour to refute this allegation by demonstrating that Ms Winters was an experienced business woman, who was actively involved in the affairs of the companies as well as the intended ultimate beneficiary of the deception. As I understand the argument, he submitted that when regard was had to the totality of the circumstances, the applicant's claim that he was an unwilling participant in a scheme devised by his co-offender was, at least, credible. The judge was being invited, in effect, to accept that, within a matter of hours of receipt of the cheque at most, the applicant had agreed unwillingly to participate in and commenced to implement a clearly illegal scheme, that involved the change of the name of a company of which he was a director and the secretary and the opening of a bank account into which the cheque was to be diverted. Unsurprisingly, her Honour regarded this explanation as highly implausible. The following exchange then occurred:

"COUNSEL: Yes, up until the time that it was apparent that Mr Colbeck arrived with the cheque, at the back of the premises with the cheque for $402,000, up until that time my client's position is that he believed that Gotham Audio were going to be paid out in full, despite the terms contract, because they could be. HER HONOUR: All right, so, what, just on that time at that second he was convinced to enter into a $400,000 fraud. COUNSEL: No, no. It was after the cheque was in their possession, as it were. HER HONOUR: 'And then we've decided, OK, let's go create a new company and do this fraud.' [Counsel], I mean, it's pretty amazing stuff to ask us to believe, isn't it? COUNSEL: Why is that, Your Honour? HER HONOUR: Because it is so highly improbable. COUNSEL: Well, Your Honour, what my client says is that having been in the position, that in other words Ms Winters' position was, 'Let's take advantage of the terms now the cheque's come to us, let's take advantage of the terms and pay them out according to the terms instead of paying them out now.' HER HONOUR; And your client says, 'OK, we two will create a new company, we'll do this this afternoon, we'll create a new bank account, we'll put it in, we'll pay out all our creditors.' ...

. . .

HER HONOUR: [Counsel], I have done a number of things to do with company frauds over the years and fairytales don't impress. Now this is - so far - - - COUNSEL All right, can I tell you some more of the fairytale, if that's the way you're putting it, Your Honour?"

It is apparent that the judge considered that it was much more likely that the decision to secure funds through the diversion of the loan moneys must have been made some time earlier and that, as experienced business operators, each must have been well aware of the significance of their conduct and were prepared to participate in the commission of a serious criminal offence. Regarded from that perspective, her Honour was reluctant to embark unnecessarily upon what she perceived was highly likely to be a protracted time-wasting exercise.

On the basis of the various comments outlined above and others to a similar effect made by the judge, counsel for the applicant made an application that she disqualify herself from further hearing the matter. He contended that her remarks suggested pre-judgment in relation to an issue which had yet to be determined in the proceeding. Her Honour rejected this application, stating:

"I have no intention of disqualifying myself in respect of this matter. We were having discussions. I have always and will continue to express attitudes, continue to ask questions and none of that at any stage ever indicates a final attitude or a closed mind. I would consider that was part of the duty of a judge, is to in fact participate in conversations with counsel. I think it is much easier for counsel to actually conduct a plea if they have a judge who is responsive and is indicating to them areas they see as difficult, areas that need to be dealt with. I am not about to change that style on the basis that someone might see it as biased. Very well. Let's move on."

At that stage, and as earlier mentioned, a number of witnesses, including the applicant, gave evidence a deal of which was directed to his role. The evidence of the applicant was basically directed to this question, occupying a substantial amount of time and a large number of pages of transcript. At one point during cross-examination of him by the prosecutor the learned judge remarked:

"... At the moment I could happily say to the Crown if you are dealing with cross-examination on the basis of dealing with the credit of this man you don't need to do it any further. I have found him to be an incredibly unimpressive, evasive, untruthful witness."

Following the presentation of evidence and in the course of presenting submissions to the sentencing judge, counsel for the applicant adverted to an exchange which took place between her Honour and the applicant when he was in the witness box. Counsel suggested that the judge may have misunderstood what his client was endeavouring to convey. This misunderstanding, he said, may have impacted upon her perception of his evidence and his reliability, and led in part to the development of an adverse view of him. Her Honour rejected this suggestion stating:

"My assessment of your client as a witness is based upon the totality of his evidence, his inability to answer questions in any remotely straightforward way, his prevarication, his what I perceive to be untruthfulness, and his desire to blame every other single person except him. Now that's the basis on which I made those comments."

In addressing this aspect, I do not consider that I need refer in detail to the evidence given by the applicant as recorded in the transcript. It is sufficient, I think, to state that it has a number of unsatisfactory features, not the least significant of which is the inherent implausibility of his version to which the learned judge referred and I have adverted. There is clearly a sufficient basis in the material to support the finding made by her Honour on this aspect and, of course, the judge had the advantage of observing the applicant over an extended period. In other words, when regard is had to the transcript, the findings of the judge are not of themselves suggestive of error or the presence of a closed mind and it must also be remembered that her Honour had an opportunity for observation and assessment that we do not.

In her sentencing remarks, the learned judge stated that she did not accept that the deception was conceived entirely by Ms Winters and found that the applicant was "eager" to keep the corporation afloat. She stated that she had reached that conclusion after reading the material and hearing the evidence, and that she had formed the opinion that the applicant was actively involved in the arrangement and by no means could be described as a reluctant participant. The fact that he personally guaranteed the loan provides powerful support for this conclusion. Her Honour went on to remark that "If anything I find that you were more involved in the organizing of this transaction than Miss Winters."

Whilst it has not been disputed that these findings could have been made on the basis of the material before the learned judge, the argument has been advanced that her statements in the course of the hearing suggest that she did not approach the matter with an open mind. Clearly, it is central to the proper performance of a judge's role, that matters are approached impartially and with a preparedness to consider properly the relevant evidence and considerations applicable to the just determination of the issues raised. The relevant question to which this Court must direct attention is whether in the present circumstances the parties or the public, on the basis of the matters in respect of which complaint has been made, might reasonably suspect that the judge did not approach the issues that she had to determine with a fair and unprejudiced mind.[1] However, it is important to remember that it does not follow, from the requirement that judges remain sensitive to their obligations in this respect that they must sit silent and inscrutable, as if carved of stone or perhaps, more appropriately clay, wood or butter; refraining from comment or giving any indication of their responses to evidence or argument placed before them. "On the contrary, a silent judge is nowadays regarded, more often than not, as a menace".[2] As Brennan, Deane and Gaudron, JJ. remarked in Vakuata v. Kelly[3]:

"It seems to us that a trial judge who made necessary rulings but otherwise sat completely silent throughout a non-jury trial with the result that his or her views about the issues, problems and technical difficulties involved in the case remained unknown until they emerged as final conclusions in his or her judgment would not represent a model to be emulated. On the other hand, there is an ill-defined line beyond which the expression by a trial judge of preconceived views about the reliability of particular ... witnesses could threaten the appearance of impartial justice. In the passage in his judgment in Watson to which we have referred, Jacobs J. pointed to the undoubted fact that `it is confidence in his own integrity which supports [a judge] not only in his judgment but in all his words and conduct'. Knowledge of his or her own integrity can sometimes lead a judge to fail to appreciate that particular comments made in the course of a trial may wrongly convey to one or other of the parties to the litigation or to a lay observer an impression of bias."

Clearly, a judge must take care to avoid the creation of any impression of pre-judgment or partiality. However, the position of a judge in a jury trial creates a need for even greater sensitivity in this respect. The accepted integrity of the judge in that situation may influence the deliberations of the jury adversely to the party against whom the words or actions were directed.

The question whether a reasonable suspicion of prejudgment might exist is generally to be answered by reference to the number and nature of the judge's interventions, considered within the context of the whole proceeding. As Kirby, A.C.J. stated in Galea v. Galea[4]

"A judgment of the loss of impartiality and neutrality would not be made from a short and emotional exchange taken out of context and then weighed in isolation. Judges like witnesses, are human. Despite their professional training they are, in varying degrees, likely to show the range of emotions to which humanity is heir. Whilst patience is a judicial virtue, so also is a concern about justice, the efficient conduct of proceedings, and the avoidance of unnecessary delay, including to other litigants awaiting their hearing.

Although I regard a number of the remarks made by the sentencing judge in the course of conducting this matter as regrettably intemperate and inappropriate given the nature of her role, I am not persuaded that anything in the material that has come before this Court is capable of supporting a reasonable suspicion that she may have possessed bias, either actual or perceived, against the applicant or that she approached her task with a closed mind. The findings at which her Honour arrived were not only open on the evidence but on the basis of the material before her it would have been surprising had she arrived at different conclusions.

In support of this ground the contention was advanced that by reason of what had been claimed was the incorrect approach of the judge to the task of sentencing, an unduly harsh sentence was imposed. I have been unable to detect any specific error of commission or omission upon perusal of her Honour's sentencing remarks and it is apparent that proper attention was given by her to the relevant sentencing considerations and principles. I do not understand counsel for the applicant in this Court to have suggested that any such error has been committed. Nor has it been contended that given the findings of the judge the sentence can be seen to fall beyond the range available in the circumstances. I have clearly addressed those findings. On the basis of the evidence and material before her Honour I consider that she imposed a sentence which could be appropriately described as lenient, particularly when regard is had to the appellant's prior history of dishonesty. I consider that this ground must also fail.

Accordingly, I would refuse this application.

[1] The Queen v. Watson ex parte Armstrong [1976] HCA 39; (1976) 136 C.L.R. 248 at 264; Vakauta v. Kelly (1989) 167 C.L.R. 569.

[2] Chow v. The Director of Public Prosecutions & Anor. (1992) 28 N.S.W.L.R. 593 at 606.

[3] (1989) 167 C.L.R. 569 at 571. See also The Queen v. O'Brien [2001] VSCA 157 at [26].

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