R v Child [1999] NSWCCA 407 | Case summary

1 JAMES J: Paul Child and his son Justin Child have applied for leave to appeal against sentences imposed on them. 2 After a trial in the District Court before his Honour Judge Job and a jury, Paul Child was found guilty of three counts of fraudulent misappropriation, that is offences under s 178A of the Crimes Act, and one count of obtaining a financial advantage by deception, an offence under s 178BA of the Crimes Act. 3 On each count of fraudulent misappropriation, Judge Job sentenced Paul Child to a sentence of penal servitude for five years four months, consisting of a minimum term of four years to date from 30 April 1998, which was the date of sentencing, and an additional term of one year four months, the sentences to be served concurrently. 4 On the charge of obtaining a financial advantage by deception, Paul Child was sentenced to a fixed term of imprisonment of two years to date from 30 April 1998. 5 At the same trial Justin Child was found guilty of three counts of aiding and abetting the fraudulent misappropriations by his father. On each count he was sentenced to a sentence of penal servitude for three years four months, consisting of a minimum term of two and a half years to date from 30 April 1998, the date on which he was sentenced, and an additional term of ten months. 6 The maximum penalty for fraudulent misappropriation and for aiding and abetting fraudulent misappropriation is penal servitude for seven years. The maximum penalty for obtaining a financial advantage by deception is imprisonment for five years. 7 Each of the applicants was legally represented at the trial. However, each applicant has appeared in person on these applications for leave to appeal against sentence. 8 The facts of the offences were stated by the sentencing Judge in his remarks on sentence and the following is a brief summary of what his Honour said: 9 The applicant, Paul Child, was a superannuation consultant and was the director of a company called Directors Dividends, which carried on the business of assisting clients to set up self-managed superannuation funds. The company Directors Dividends failed, owing a large sum of money. Paul Child was made bankrupt. As a bankrupt he was disqualified from acting as a director of any company. 10 Two companies, International Fund Managers, to which I will refer as "IFM", and Self Managed Superannuation, to which I will refer as "SMS", were set up. 11 Paul Child's two sons, the applicant Justin Child and his other son Adam Child, became the directors of the companies. At the time they became directors Justin was only 21 years old and Adam was only 20 years old. Neither of them had had any real business experience. At the trial Paul Child claimed that, although he had acted as a consultant, he had taken no part in the running of the two companies. 12 The three counts of fraudulent misappropriation by Paul Child and the three counts of aiding and abetting fraudulent misappropriation committed by Justin Child were based on similar events. In each case moneys were paid by a client of IFM or SMS. These moneys, instead of being paid into a special account, were paid into a general bank account of IFM or SMS and were then disbursed in various ways, otherwise than in accordance with the terms on which they had been received. 13 In the first case a company Thermaline Scientific Equipment caused two cheques totalling $210,655.33 to be sent to IFM. Instead of the cheques being deposited into two bank accounts which had been opened specifically to receive the cheques, Justin Child deposited the cheques into the general account of IFM. After a representative of IFM had made inquiries about what had happened to the cheques, Paul Child, after initially denying that the cheques had been received, admitted that the cheques had been wrongly paid into the account of IFM. 14 Arrangements were entered into to repay Thermaline. $132,587 was repaid by the applicants. The balance of $78,068.33 was repaid by the bank at which the IFM account was conducted, the bank acknowledging that the cheques from Thermaline should not have been credited to IFM's account. 15 In the second case a company Master Ceilings Pty Ltd caused a cheque for $152,079.65 to be sent to SMS for the purposes of a superannuation fund. The cheque was paid into a general account of SMS. At the time the cheque was deposited, the balance of the account of SMS was only $14. An amount of $20,000 was ultimately repaid to Master Ceilings Pty Ltd, leaving an amount of $132,079.65 outstanding. 16 In the third case, 18 cheques totalling $463,228.47 payable to a Combined Trade Unions Retirement Fund were paid into the bank account of SMS. 17 In the case of the charge of obtaining a financial advantage by deception, Paul Child had advised a doctor about the rolling over of the doctor's existing superannuation fund. The sum of $80,328.48 was paid to SMS for the purposes of the roll over. 18 The total effect of the various transactions was summarised by Judge Job as follows: "The total amounts of money received by IFM and SMS subject to the charges was $906,291. Moneys repaid by the prisoners amounted to $152,587. The balance, if there is a balance, of $753,704 banks had refunded $541,296 due to the fact that they had wrongly allowed cheques to be deposited into the IFM and SMS accounts. However, the loss to the banks and to the clients of the companies amounted to over three-quarters of a million dollars." 19 The sentencing Judge devoted part of his remarks on sentence to making findings about how the moneys paid into the bank accounts of IFM and SMS had been applied. Large amounts had been paid out of the SMS account to other superannuation funds and his Honour concluded that those payments had been made because previously amounts belonging to those superannuation funds had been wrongly paid into SMS's account and had been spent. 20 At least $92,487 had directly or ultimately been received from SMS by a company called Esperanza Lodge Pty Ltd. Paul Child gave evidence at the trial that Esperanza Lodge Pty Ltd was a discretionary trust of which he was not a beneficiary and that Esperanza Lodge did not trade in any way. He gave evidence that he could not explain why Esperanza Lodge had received money from SMS. He said that he had not been involved in those transactions. An investigation of the affairs of Esperanza Lodge disclosed that substantial moneys had been paid by Esperanza Lodge out of moneys received from SMS for the purchase, upkeep, training, transport and agistment of show horses. 21 It was the Crown case at the trial that, although Justin Child was a director of IFM and SMS and did all the banking for the companies, it was Paul Child who had controlled the activities of both companies. 22 As I have already indicated, Paul Child gave evidence at the trial that, although he had acted as a consultant to both companies and had given advice to clients of both companies, he had taken no part in the administration of the affairs of the companies, that being left entirely to Justin Child. Paul Child claimed that he was unaware that Justin Child had deposited clients' funds in the bank accounts of IFM and SMS or how the moneys deposited in those accounts had been spent. 23 At the trial, Justin Child gave evidence supporting his father's version, to the effect that after he had become a director of the companies he had been responsible for carrying on the affairs of the companies. He said that he had done all the banking and had written all the cheques. He was unable to account for where the money had gone. 24 Paul Child maintained the position he had taken at the trial when he was interviewed by a probation officer for the purposes of a pre-sentence report. The sentencing Judge quoted extensively from the pre-sentence report as follows: "Mr Child absolves himself from any involvement in the offences, maintaining he 'withdrew' after being declared bankrupt and spent two years staying at home, working on his computer. He claims he did not wish to get involved at all with the company his son was operating. On the occasions when he did act as a consultant to prospective clients, he maintains he did so reluctantly. Mr Child is adamant he had no involvement in the clerical/administrative affairs of the company. When discussing the impact on the victims, Mr Child indicated that he believed all the people involved had been reimbursed by the appropriate financial institutions, aside from Dr Rodgers. As a result, he minimised the anguish the victims had suffered. Assessment and Sentencing Alternatives: Mr Child portrays himself as a benevolent individual with strong Christian values, whose long-term goal is to establish a Ministry where people can access support and respite. It is difficult to correlate Mr Child's offending behaviour with his stated personal values. Whilst the offender tends to place particular emphasis on his medical condition and related emotional difficulties as mitigating factors in his offences, this Service finds it difficult to accept. Through the establishment of his Ministry, Mr Child is actively seeking donations, bequests and gifts of materials, provisions or equipment, which illustrates the offender's lack of insight into the community's perception of his offences".

25 It is obvious from the jury's verdicts of guilty that the jury did not accept, and it is obvious from the sentences Judge's remarks on sentence that the sentencing Judge did not accept, the evidence given by Paul Child at the trial that he had taken no part in administering the affairs of IFM and SMS and that he did not know that the clients' funds had been deposited in the companies' accounts or how those funds had been spent. The sentencing Judge concluded that Paul Child was the dominant party in the commission of the fraudulent conduct. 26 A factor of some importance in the sentencing of both applicants was that each suffered from an hereditary brain condition known as multiple cavernous haemangioma. Justin Child also suffered from frontal lobe damage resulting from brain surgery he had undergone when he was 15 years old. 27 A consultant psychiatrist, Dr Bennett, had provided a report about Paul Child, part of which was quoted in the sentencing Judge's remarks on sentence as follows: "Mr Child has multiple cavernous haemangiomata in his brain and these have been associated with a life long anxiety and mood disorder. He became increasingly dysfunctional and eroded by the interaction of these with life circumstances in the 1980's and 90's, ending up with a major depression and panic disorder. These contributing majorly to business failure and a failure to supervise, assist his also damaged son Justin, who has a frontal lobe syndrome, in running the business when Justin tried to help. Like Justin he must be regarded as impaired, not criminal, e.g. his role in the business failure and mess. Afterwards the use of appropriate medication in adequate doses as well as the major change in life style to a quiet rural spiritual one has resulted in essential remission control of his disorders, that he has always the Sword of Damocles hanging over him as his haemangiomata could haemorrhage and cause death or major cerebral disability". 28 Dr Bennett had also provided a report about Justin Child, part of which was quoted by the sentencing Judge in his remarks on sentence as follows: "Clearly, Justin Child has had frontal lobe damage (as well as other areas of damage) since the age of 15 years and this has marred his development and personality with consequent multiple defects in behaviour, state and cognition and compensatory/adaptive attempts to cope/function despite these. The nature of his impairments and personality were such as to make inevitable the disaster he made of his role as director etc. when he tried to assist in the family business owing to his father's decline and Depression. In my view, it is impossible to exclude his impairments as major causal factors in the business issues that have led to charges of fraud etc. It is unfortunate that neither he nor his family had a proper knowledge or understanding of his impairment and that he can present so well on the surface to others. Thus, I found him adroit at one liners and this can give a false impression of his total intellectual function. Many times in my professional career of 35 years I've met superficially impressive/not unimpressive persons with frontal lobe damage/impairment who turn out disappointing in all their proposed changes in self, new starts, enterprises, relationships etc. basically owing to the lack of being able to sustain long-term stable behaviour, sequences of tasks/following through a (planned) course of action, living in a way that shows more than the superficial verbal insight expressed into the implications and consequences of their actions: full of apparent promise, scarce on delivery. There is more depth in Justin Child than many and he has improved even in the 8 months of my knowledge of him but he will have to live within the severe limitations his brain damage means". With respect to Dr Bennett's reports, Judge Job said: "I accept that Justin Child has suffered significant brain damage. However, I am sure that had Dr Bennett sat through the evidence given by both the prisoners at their trial, his opinion as to their responsibility for their actions would have been greatly modified." 29 As regards the other subjective circumstances of the applicants, the sentencing Judge noted that Paul Child was 49 years old at the time of sentencing, that Justin Child was 28 years old at the time of sentencing and that both applicants had no previous criminal convictions. His Honour found that Paul Child had not demonstrated any contrition. 30 His Honour decided to impose lesser sentences on Justin Child than on his father, because of his conclusion that Paul Child was the dominant party in the commission of the frauds and because of the significant brain damage which Justin Child had. 31 As I have already stated, each applicant appeared in person on the hearing of these applications. Each applicant referred to his medical condition. Each applicant informed the Court that since he had been imprisoned, he had gained greater insight into his conduct and now felt contrition for what he had done. Each applicant referred to various misfortunes which had befallen the family since the two applicants were sentenced. Each applicant also referred to a number of courses which each applicant has successfully completed while in custody. The courses have been courses in such subjects as computer studies, horticulture and, in the case of Justin Child, music. 32 The applications to this Court for leave to appeal against sentence cannot be upheld, unless some error in the sentencing process engaged in by Judge Job can be demonstrated. In general, in order to determine whether a sentencing Judge has erred, it is not legitimate to refer to events occurring after the applicant was sentenced. 33 In the present case the sentencing Judge was very conscious of the unusual medical condition from which both of the applicants suffered and referred to that medical condition at length in his remarks on sentence. As I have already indicated, his Honour incorporated into his remarks on sentence lengthy extracts from the reports by Dr Bennett. 34 Although it is commendable that each of the applicants has obtained greater insight into his conduct and that each of the applicants has undertaken a number of courses of study while in custody, I am unable to see how any of these matters can show any error by Judge Job in the exercise of his sentencing discretion. 35 I have already referred to the objective facts of the offences and to the subjective circumstances of the applicants. 36 In my opinion, no error has been demonstrated in the sentencing decisions made by Judge Job and the sentences cannot be regarded as manifestly excessive. I would propose that leave to appeal against sentence be granted to each applicant but that the appeals against sentence be dismissed.

R v Child

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