R v Foster [2008] QCA 90

SUPREME COURT OF QUEENSLAND

CITATION: R v Foster [2008] QCA 90

PARTIES: R v FOSTER, Peter Clarence (applicant)

FILE NO/S: CA No 336 of 2007 / SC No 1018 of 2007

DIVISION: Court of Appeal

PROCEEDING: Sentence Application

ORIGINATING COURT: Supreme Court at Brisbane

DELIVERED ON: 18 April 2008

DELIVERED AT: Brisbane

HEARING DATE: 27 March 2008

JUDGES: McMurdo P, Mackenzie AJA and Chesterman J / Separate reasons for judgment of each member of the Court, each concurring as to the order made

ORDER: Application for leave to appeal against sentence refused

CATCHWORDS: CRIMINAL LAW – APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION – APPEAL AND NEW TRIAL – APPEAL AGAINST SENTENCE – APPEAL BY CONVICTED PERSONS – APPLICATIONS TO REDUCE SENTENCE – applicant pleaded guilty to money laundering where the value of the money was greater than $100,000 – applicant was sentenced to four and a half years imprisonment with a non-parole period of two years and three months – applicant organised the transfer of money into Australian bank accounts obtained fraudulently from the Bank of the Federated States of Micronesia – applicant laundered more than $300,000 over a period spanning a few months – applicant had long history of offences of dishonesty in many countries – sentence was not manifestly excessive / CRIMINAL LAW – JURISDICTION, PRACTICE AND PROCEDURE – JUDGMENT AND PUNISHMENT – ORDERS FOR COMPENSATION, REPARATION, RESTITUTION, FORFEITURE AND OTHER MATTERS RELATING TO DISPOSAL OF PROPERTY – REPARATION – applicant was ordered to pay reparation to the Bank of the Federated States of Micronesia of the outstanding amount of fraudulently obtained money – a reparation order is within the discretion of sentencing judge where loss to any person is a 'direct result' of the offence under s 21B(1)(d) Crimes Act 1914 (Cth) – each transfer of money by the applicant was capable of being a particular of the offences of fraud and money laundering – indictment charged money laundering only – the bank's loss was a direct result of the offence of money laundering – the sentencing judge had the power to make the reparation order / Acts Interpretation Act 1901 (Cth), s 22(1)(a) / Crimes Act 1914 (Cth), s 21B(1), s 21B(2), s 21B(3) / Criminal Code 1995 (Cth), s 4.1, s 15.2, s 400.1(1), s 400.2(1), s 400.2(3), s 400.4(1) / Ansari v The Queen (2007) 173 A Crim R 112; [2007] NSWCCA 204, considered / Fortuna Seafoods P/L as trustee for the Rowley Family Trust v The Ship "Eternal Wind" [2005] QCA 405; Appeal Nos 1125 and 2068 of 2005, 4 November 2005, considered / Kaplan v Lee-Archer [2007] 15 VR 405; [2007] VSCA 42, applied / Liaver v Errington [2003] QCA 5; Appeal No 210 of 2002, 31 January 2003, considered / R v Huang and Siu (2007) 174 A Crim R 370; [2007] NSWCCA 259, considered / Perre v Apand Pty Ltd (1999) 198 CLR 180; [1999] HCA 36, considered

COUNSEL: A J Glynn SC for the applicant / G P Long SC for the respondent

SOLICITORS: Legal Aid Queensland for the applicant / Commonwealth Director of Public Prosecutions for the respondent

McMURDO P: The applicant, Peter Clarence Foster, pleaded guilty on 7 December 2007 in the Brisbane Supreme Court to an offence under s 400.4(1) Criminal Code 1995 (Cth), namely money laundering where the value of money was greater than $100,000. The offence was committed between 2 August and 14 October 2006. He was sentenced to four and a half years imprisonment to commence from his detention in custody on 5 February 2007 with a non-parole period of two years and three months. He was also ordered to pay reparation in the sum of A$214,138.47. He applies for leave to appeal against that sentence and reparation order contending that the sentence was manifestly excessive and that the reparation order was made without power and should be set aside.

The sentencing proceeding

Antecedents

The prosecutor at sentence provided the following information about Mr Foster. He was aged 44 and 45 during the period of the offending.¹ He had a relevant criminal history in Australia, UK and the USA.

In 1987 in the Southport Magistrates Court he was fined A$1,000 for an offence concerning the management of Slimway Tea Company Pty Ltd whilst an undischarged bankrupt. In 1989 in the Municipal Court of Los Angeles, California he was dealt with for two counts of false advertising and one count of violating the Californian Health and Safety Code. The penalty was four months suspended imprisonment and three years probation. He was also ordered to pay restitution of US$228,000 and investigation costs of US$10,000 and prohibited from selling in California any tea or other products which purported to have health benefits. In 1994 in the Crown Court, Warwick, England, he was fined a total of £21,000 and ordered to pay £8,000 costs for five counts of offering to supply, and one count of supplying, goods to which a false trade description applied. In 1995 in the Crown Court, Liverpool, England, he was sentenced for conspiracy to supply goods to which a false trade description applied. On appeal, his sentence was reduced to 18 months imprisonment and the original recommendation for deportation was set aside.

In 1996 in the Southport Magistrates Court he was convicted and fined A$4,000 for again managing a corporation whilst insolvent. He was also sentenced to 18 months imprisonment to be released after five months for three offences of inducing a witness to give false testimony and to lesser concurrent terms of imprisonment for two counts of imposition and one count of possessing a falsified foreign passport. In 1998 in the Melbourne Magistrates Court he was sentenced to six months imprisonment to be released after serving 10 days for two counts of imposition, damaging Commonwealth property, escaping from lawful custody, two counts of assaulting police and one count of resisting arrest. In 2000 in the Crown Court, St Albans, England, he was sentenced to 33 months imprisonment and disqualified from being a company director in the UK for five years for three counts of using a false instrument.

On 2 February 2007 in Vanuatu he was sentenced for being a prohibited immigrant to six weeks imprisonment, fined A$15,180 and ordered to pay prosecution costs of A$632.50 or, in default, be imprisoned for an additional two months.

The statement of facts

The prosecutor at sentence handed up a statement of facts which included the following information.

In May and June 2006 Mr Foster negotiated a loan on behalf of Kai Viti Liku Beach Ltd ("the company") with the president of the Bank of the Federated States of Micronesia ("the bank") to develop land at Liku Beach, Yasawa Island, Fiji. The loan was to be secured by a mortgage over leasehold property owned by the company and which was the subject of the proposed development. The bank approved a commercial line of credit for US$580,000 on 29 June 2006. It sent Mr Foster a letter setting out the draw down program on the line of credit and stipulated that the loan funds were to be used by the company for land clearing, survey and infrastructure development (including service roads, power generation equipment, water desalination, cabling, drainage, satellite communications and a marina). The bank was concerned to ensure that Mr Foster did not have unfettered access to the funds. For that reason, it required proof from the directors of the company that each draw down would be used for the purpose of the loan prior to the funds being accessed. The bank and Mr Foster agreed upon a pro forma telegraphic transfer request to be signed by the directors. This was to be sent with each request for payment along with documentation from the third party payee.

Between 4 August 2006 and 13 October 2006 the bank acted upon Mr Foster's email requests to make a total of nine payments to entities purportedly performing work on behalf of the company as stipulated in the loan agreement. Mr Foster's requests were for the bank to place funds into the Australian bank accounts of Lightfoot and Korschenko, Now Pty Ltd and Savoir Faire Pty Ltd. None of these entities had in fact performed any work for the development within the terms of the loan agreement. Lightfoot and Korschenko operated a business on the Gold Coast but were not involved in business with the company. They were, however, the registered owners of premises rented by Mr Foster's then girlfriend. Mr Foster also resided at those premises for about a year. The money transferred into their account by the bank was used to pay rent owed to them by Mr Foster's then girlfriend. Now Pty Ltd was registered on 28 April 2004. Its principal place of business was the address of Mr Foster's then girlfriend. She was its sole director and shareholder. Savoir Faire Pty Ltd was incorporated on 25 August 2005. Its sole director and shareholder was Jill Foster, Mr Foster's sister. All moneys paid by the bank to the Australian bank accounts of the three entities were dissipated for items unconnected with the purpose of the loan.

By September 2006 the bank's president was concerned about the use to which payments were being put. To allay these concerns, Mr Foster reassured him that development was progressing and emailed him photographs. He falsely claimed the photos depicted the early stages of construction of the development. When an Australian Federal Police officer visited the development site the following April, no work had commenced.

The final payment made by the bank at the request of Mr Foster was US$70,000. The bank transferred that amount to the Australian bank account of Savoir Faire Pty Ltd on 13 October 2006. Mr Foster requested another payment of US$60,000 on 18 October 2006. By this time the bank suspected the transactions were fraudulent and arranged to freeze the funds in Savoir Faire Pty Ltd's Australian bank account. Mr Foster's sister acceded to the bank's request to return its final payment of US$70,000. All money otherwise forwarded by the bank (A$214,138.47) was spent by Mr Foster or those associated with him on items or expenses not associated with the company. A schematic diagram depicting the path of these moneys was attached to the statement of facts.

The prosecutor's submissions

The prosecutor at sentence relied on the statement of facts and made further written and oral submissions which included the following.

The legislature had identified the need to make money laundering an offence so as to prevent the movement of illegally obtained money and property, both domestically and internationally. The judge should impose a "sentence of severity appropriate in all of the circumstances of the case": s 16A(1) Crimes Act 1914 (Cth). General deterrence was of particular importance in the present case.

The offences occurred over a two to three month period. Mr Foster defrauded the bank through deceit and forged documents. He instigated this fraud. He knew the source of the defrauded funds and how they were to be used. He fully appreciated the nature, extent and seriousness of his offending. His plea of guilty is an acceptance that he believed the funds were proceeds of crime. His offending showed a high level of sophistication, planning and organisation. He had made no attempt to reimburse the bank for the bulk of the money received.

Mr Foster was arrested on 5 February 2007 and had been remanded in custody since, a period of 305 days. His committal hearing began on 8 August 2007 and was listed for three days. His solicitor advised that all Crown witnesses were required for cross-examination. Six witnesses were brought from overseas. On the morning of 8 August 2007, Mr Foster indicated he would consent to a full hand-up committal but for the president of the bank who was required for cross-examination. The indictment was presented in the Supreme Court on 5 November 2007 when he indicated that he would plead guilty. He had therefore entered a plea of guilty at the earliest opportunity in the Supreme Court. His cooperation, however, was not such as to save the community the expense of bringing witnesses from overseas for the committal proceedings.

Mr Foster's criminal history was significant. The penalty imposed should be sufficient to act as a personal deterrent.

Little assistance could be gained from determined cases in Queensland. Of more assistance were the New South Wales Court of Criminal Appeal decisions in R v Huang; R v Siu² and Ansari v The Queen.³ In Siu, the appellate court allowed the Commonwealth Director of Public Prosecutions' appeal against sentence and re-sentenced him. The court first established the head sentence justified by the offending, next determined what discount should be given to the head sentence for mitigating factors and then set the head sentence with a non-parole period at the half-way point. Huang and Siu and Ansari were distinguishable because Mr Foster was not involved in tax evasion or in organised crime like the drug trade but the general approach taken by the court in those cases was apposite.

The appropriate head sentence for the offending in the present case was between six and eight years imprisonment. Mr Foster's criminal history and the need for personal deterrence meant that it should be at the higher end of that range. There should then be a reduction of about 35 per cent for the plea of guilty, bringing the head sentence to about four and a half to five years imprisonment. The non-parole period should be 50 per cent of that head sentence. Both the head sentence and the non-parole period should date from 5 February 2007 to take into account the pre-sentence custody.

The prosecutor also sought a reparation order in favour of the bank under s 21B Crimes Act 1914 (Cth) for A$214,138.47. This was the unrecovered amount of the bank's money which was the subject of the offence.

Defence counsel's submissions

Defence counsel at sentence emphasised the following matters.

Mr Foster had not embarked upon an escapade designed to defraud others. He began this activity in a legitimate attempt to develop a holiday site on a Fijian island. He had many acquaintances and friends in Fiji. He genuinely believed in the tourism potential of the project. He spent much time and effort negotiating the lease of the land he hoped to develop with the local landowners (the Mataquali people). It was to be both a tourist site and provide for the sale of leasehold residential blocks to individuals. He had completed a preliminary stage relating to subdivision before he applied to the bank for finance. He had no experience in property or tourism development and no relevant business expertise. Before the bank advanced the money the subject of the charge, Mr Foster and his family personally expended large sums on the project. Some of the fraudulently obtained money was used to pay off credit card debts incurred through expenditure on the development. He had employed his then girlfriend as a graphic designer on a salary of A$7,000 a month. She was relying on his assurance of this salary to pay her rent but when she was not paid she could not meet these obligations. Mr Foster arranged for the bank to pay the fraudulently obtained money directly into the Australian bank account of her landlord (Lightfoot and Korschenko).

Mr Foster hoped, expected and intended to be in a position to fully repay his loan to the bank with interest at the end of the agreed 12 month period through individual sales of residential blocks in the development. A contract for the sale of a beachfront block of land for $1 million had been signed. His hopes came to nothing because of the combination of the political coup in Fiji and his being charged with the present offence. He was instrumental in having his sister return the last payment of US$70,000 to the bank. Had he approached the bank honestly about paying off his pre-existing debts arising from expenditure on the development, he may well have obtained the money from the bank legitimately. This last submission received some support from the cross-examination of the president of the bank at Mr Foster's committal.

During the coup Mr Foster escaped from Fiji, where he believed he was a political target, and entered Vanuatu unlawfully. He spent three weeks imprisoned there in squalid conditions. He then returned voluntarily to Australia and, as he expected, was arrested on arrival. He has been in custody since. He pleaded guilty at an early stage. He has been serving his custody in protection because the media had published that he had previously assisted the Australian Federal Police in undercover operations. He has also assisted English police in the past.

Despite the negative media publicity about him, Mr Foster had a healthy social conscience. He had assisted deserving Pacific islanders. He funded a student in Fiji through medical school to become a fully qualified medical practitioner. He had funded another student to study law in Vanuatu. He had paid for the transport costs for some native Fijians to obtain medical attention. He was now the sole financial provider for both his mother and sister. His mother was in her seventies and may have had early Alzheimer's disease and suffered a stroke in the recent past. His sister had been diagnosed with leukaemia and hepatitis C. His incarceration would cause them hardship.

Much of his prior offending was related to his promotion of a tea to lower cholesterol and the over-emphasis of its slimming properties, without disclosing that its effectiveness was dependent on appropriate diet and exercise.

Contrary to the prosecution submissions, the present scheme of offending was not sophisticated. Prudent enquiries from the bank would have ended it much earlier.

The only case of any assistance by way of comparison is Siu but it was much more serious. The amount involved in Siu was almost twice that in the present offence. Siu's money laundering related to the proceeds of crime and the forwarding of money to another country amounting to tax evasion of well over A$200,000. Tax evasion was not a factor in the present case. Siu's behaviour involved 59 separate transactions compared to Mr Foster's nine. Siu's enterprise was described as "very sophisticated"; Mr Foster's was not. Unlike in Siu, Mr Foster's intention was not to permanently deprive the bank of the money. Whilst Mr Foster had a worse criminal history than Siu, in all other ways Siu's offending required a much heavier penalty. Adopting the approach taken by the New South Wales Court of Criminal Appeal, the starting point in the present case was a sentence of five years imprisonment. As the prosecutor submitted, the plea of guilty required a reduction of that head sentence by 35 per cent. When the other mitigating features were also taken into account, including that he was serving his sentence in protective custody, this discount should be increased from 35 per cent to 50 per cent. The head sentence therefore should be two and a half years imprisonment with a non-parole period at the half way point, 15 months.

The sentencing judge's remarks

The learned sentencing judge indicated that he would impose a sentence of four and a half years imprisonment with a non-parole period of two years and three months.

After setting out the factual details of the offending, his Honour noted that Mr Foster's conduct was clearly dishonest. His Honour next referred to defence counsel's submission that Mr Foster's dishonesty was in not approaching the president of the bank honestly and that, had he done so, he may have obtained the money legitimately instead of fraudulently. His Honour considered that submission to be inconsistent with Mr Foster's previous convictions for offences of dishonesty in Australia, the USA and the UK; these suggested that he had not learnt from experience that he was required to operate his business in conformity with society's rules and regulations.

The judge noted the following. Mr Foster voluntarily returned to Australia knowing of his likely arrest. He had pleaded guilty after a committal hearing where only the president of the bank was examined briefly. Although some witnesses were required to attend from overseas, Mr Foster had indicated his plea of guilty at an early stage and saved the community the expense of a lengthy trial. Mr Foster was 44 years old when he committed the offence. He was serving his sentence in protective custody, had assisted Fijians in need and was the sole financial provider for his elderly mother and sister, who were both ill.

His Honour noted that Mr Foster had:

"… pleaded guilty to a charge which has a maximum penalty of 20 years, namely dealing with money being the proceeds of crime or shortly known as money laundering, but bearing with it, because it's transferred into Australia in circumstances where [he] knew [he] had obtained it fraudulently, it's a serious offence and seriously regarded by Parliament and the Courts. In this form as a Commonwealth offence it's a relatively recent offence and one which does not have many comparable sentencing decisions to assist me in reaching a proper conclusion about what I should do."

His Honour considered that the most relevant comparable matter was Siu, noting its applicable factors and defence counsel's submissions to distinguish it. His Honour considered that, unlike Siu, Mr Foster was acting as a principal and essentially to benefit himself and those associated with him. The judge noted that Mr Foster's contention that he intended to repay the money was one easy to express but harder to fulfil, especially when the money had been used for purposes other than those for which it had been intended by the bank. His Honour considered that despite the differences between Siu's and Mr Foster's offending, the two cases were broadly comparable.

His Honour next referred to the principal submissions made by the prosecutor at sentence.

His Honour concluded that, taking into account the matters in Mr Foster's favour, in particular his over-optimistic hope of repaying the bank and his plea of guilty, the appropriate sentence was at the lower end of the range submitted by the prosecutor of seven to eight years. His Honour rejected defence counsel's submission that the discount for the plea and other mitigating matters should be greater than 35 per cent and accepted both counsel's contention that a non-parole period should be set at 50 per cent of the head sentence. In this way, his Honour fixed a head sentence of four years and six months imprisonment with a non-parole period of two years and three months, the sentence to date from 5 February 2007.

His Honour made the further order sought by the prosecutor, without demur from defence counsel, that Mr Foster make reparation to the bank of A$214,138.47 under s 21B(1)(d) Crimes Act 1914 (Cth).

Mr Foster's submissions on appeal

Mr Glynn SC, who appears for Mr Foster in this Court, submits that the sentence imposed was manifestly excessive. He contends that: the judge erred in taking into account the circumstances of the fraud by which the money the subject of this offence was obtained; the judge considered that the fraud was the most serious aspect of the offending; the fraudulent conduct was not part of the offence of money laundering; the judge should have focussed solely on the offence to which Mr Foster had pleaded guilty, namely money laundering; this offence was at the lower end of the range of seriousness of the offence of money laundering and required a more lenient sentence than that imposed.

Mr Glynn further contends the judge erred in considering that Mr Foster's offending was broadly comparable to that of Siu. In Siu the illegal conduct was to disguise in a sophisticated manner the origins and destinations for illegally obtained money; there were more transactions and more money was involved.

Mr Glynn's primary contention in essence is that the judge erred in determining that the appropriate sentence for the present offence, before considering mitigating factors, was seven years imprisonment rather than between four and four and a half years imprisonment. Whilst agreeing that the judge applied the appropriate discount of 35 per cent for the mitigating factors and in ordering a non-parole period of 50 per cent, Mr Glynn submits the appropriate sentence after taking into account matters of mitigation was between two years and eight months and three years imprisonment with a non-parole period of between 16 and 18 months.

Mr Glynn's second contention is that the judge erred in ordering reparation to the bank of the unrecovered fraudulently obtained money the subject of this offence because, under s 21B Crimes Act 1914 (Cth); reparation can only be "in respect of any loss suffered … as a direct result of the offence". He submits that the bank did not suffer a loss as a direct result of Mr Foster's money laundering offence.

The respondent's submissions on appeal

Mr Long SC, who appears for the respondent, the Commonwealth Director of Public Prosecutions, supports the approach taken by the sentencing judge and submits it was appropriately consistent with that taken in Siu. He contends the sentence imposed was within range and the judge did not err, either in his general reliance on Siu or in taking into account Mr Foster's fraudulent conduct.

Mr Long contends that an integral element of the offence of money laundering is the importing of the proceeds of a foreign indictable offence into Australia. The loss to the bank through Mr Foster's offending is a direct result of the offence of money laundering. Proof of Mr Foster's commission of the offence necessitated proof of, or at least consideration of, his conduct relating to the commission of the foreign indictable offence (fraud) and, in this case, the loss he caused to the bank. The bank's loss was realised by the transmission of the money into the Australian bank accounts on Mr Foster's instructions where it was out of the control of the bank and was dissipated by Mr Foster or those associated with him. Mr Long contends that, for these reasons, the reparation order was appropriately made under s 21B(1)(d) as "a direct result of the offence".

Conclusion

A comparison to R v Siu

In determining whether Mr Foster's sentence was manifestly excessive, it is useful to begin with a consideration of Siu, which has featured in all counsel's submissions and which the sentencing judge found broadly comparable to the present.

Unlike Mr Foster, Siu pleaded guilty to an additional offence against s 31(1) Financial Transactions Reports Act 1988 (Cth) (dealing with money intending it become an instrument of crime). Like Mr Foster, he pleaded guilty to an offence against s 400.4(1) Criminal Code 1995 (Cth). The maximum penalty for the latter offence was, as in the present case, 20 years imprisonment. Unfortunately it is not possible to fully comprehend the extent of Siu's offending from the judgment but the following facts are evident. Siu conducted 59 transactions by approaching various bank branches in and around Sydney and depositing amounts of just under A$10,000. The total amount transmitted to Hong Kong bank accounts as a result of his involvement was A$556,400. He received a fee for each transaction, totalling less than A$3,000.

The sentencing judge in Siu found the following. The enterprise was "very sophisticated" but Siu's role was not complex. He was told what to do by the principal, although he knew he was involved in an illegal activity. At first he believed the monies were the proceeds of an abalone business. Before he left the enterprise he became aware that it was likely to involve something more serious and dangerous. He was 64 years old and on a disability pension. He had limited English and poor health so that prison would be harder for him than for a healthy younger man. His family resided interstate. He had a prior criminal record for illegal activities in relation to the abalone trade. He had pleaded guilty at an early stage. He originally gave assistance to police but later withdrew his preparedness to do so. A discount of 35 per cent for the guilty plea, remorse and subjective cooperation was appropriate. General deterrence was a "very important consideration".⁴ The primary judge ultimately sentenced him to two years and 11 months imprisonment with release on recognizance after 12 months.

In determining the Crown appeal against the sentence, the Court of Criminal Appeal (Simpson, Howie and Hislop JJ) cited with approval Howie J's earlier observations in Ansari v The Queen:⁵

"[119] The offences within … [Division 400 of Pt 10.2 Criminal Code 1995 (Cth)], therefore, apply to a large range of activity in relation to money or other property to be used in connection with, or arising from, serious crime. Not only is there a very wide ambit in relation to the conduct caught by the offences but there is also a substantial range of criminal activity to which the money or property could relate, being limited in effect to an indictable offence of the Commonwealth or a State or Territory. The offences are not concerned only with the source of the money or property that is dealt with but also its ultimate use. The offences cover money obtained illegally or to be used for illegal purposes or dealt with in a manner that is illegal.

…

[122] The legislation itself has attempted to structure offences to give some guidance as to the seriousness of the conduct by reference to the applicable maximum penalty for each offence. The scheme is that the greater the sum of money involved, the more serious the offence. But the legislation also takes into account the mental state of the offender, so that an offence involving the intentional dealing with proceeds of crime or instruments of crime is more serious than one where the state of mind is recklessness as to the criminal nature of the property. Therefore s 400.3(1), where the amount involved is more than a million dollars and where the offender believes that the property is the proceeds of crime or intends that it will become an instrument of crime, provides for the most serious of the money laundering offences carrying a maximum penalty of imprisonment for 25 years and/or 1500 penalty units."

The appellate court concluded that the sentencing judge erred in considering Siu's conduct as "one of the least serious" that could be encompassed by the section. His offence involved over half a million dollars and was committed for profit. His offending was "very substantial criminal activity and warranted a severe, deterrent sentence".⁶ The court's reasoning in resentencing was as follows. The lowest sentence available within the range should be adopted as it was a Crown appeal. A preliminary head sentence of eight years imprisonment reflected the seriousness of the offending.⁷ The mitigating factors warranted a discount of no more than 35 per cent. This reduced Siu's head sentence to five years imprisonment, "the very least that could be imposed upon [Siu] to reflect his criminality".⁸ A non-parole period of only one-third of the head sentence was manifestly inadequate to reflect his criminality and the significance of general deterrence. He should serve a minimum of one-half of the head sentence, two and a half years imprisonment. The court emphasised that because this was a Crown appeal, "the sentence imposed upon [Siu] is considerably reduced from that which ought to have been imposed"⁹ at first instance.

It is self-evident that Siu is not closely comparable to the present case. The sentencing judge in the present application appreciated the numerous pertinent distinctions. But, as his Honour noted, it was of more assistance than the few other appellate decisions concerning sentences for money laundering to which he was referred. His Honour noted the factors in Siu which made it more serious than Mr Foster's offending. His Honour also rightly observed that Mr Foster's conduct was more serious than that of Siu in that Mr Foster master-minded the offence and obtained a great deal more than did Siu, principally for his own benefit or for the benefit of those closely associated with him, and that Mr Foster's criminal history was worse than that of Siu. His Honour was right to conclude that Siu was a more serious example of money laundering but that some of the circumstances surrounding Mr Foster's offending were more serious than Siu's, so that overall the level of their criminality had some broad comparability.

The relevance of the fraud

Before discussing Mr Glynn's contention that Mr Foster's fraudulent conduct was irrelevant to the offence of money laundering, it is helpful to set out the terms of the relevant provisions of the Criminal Code 1995 (Cth). The offence of money laundering is created by s 400.4(1):

"400.4 Dealing in proceeds of crime etc. – money or property worth $100,000 or more

(1) A person is guilty of an offence if:

(a)the person deals with money … and

(b)…

(i)the money … is, and the person believes it to be, proceeds of crime;

…

(c)at the time of the dealing the value of the money … is $100,000 or more."

Penalty: Imprisonment for 20 years, or 1200 penalty units, or both.

The term "person" includes an incorporated body recognised by law as a person: Acts Interpretation Act 1901 (Cth), s 22(1)(a).

The expression "deals with money…" is relevantly defined in s 400.2(1) Criminal Code 1995 (Cth) as including "import[ing] money into … Australia … and … the money is proceeds of crime … in relation to an offence that is … a foreign indictable offence."

"Proceeds of crime" is relevantly defined in s 400.1(1) as: "any money … that is derived or realised, directly or indirectly, by any person from the commission of an offence that may be dealt with as an indictable offence…"

The term "import money … into Australia" is defined in s 400.1(1) as including the "transfer [of] money to Australia by an electronic communication".

The term "foreign indictable offence" is defined in s 400.1(1) as:

"an offence against a law of a foreign country constituted by conduct that, if it had occurred in Australia, would have constituted an offence against: … a law of a State … connected with the offence; that may be dealt with as an indictable offence …"

Under s 4.1 a "physical element" of an offence may be "…conduct". The term "conduct" is relevantly defined in s 4.1(2) as "an act".

It is not disputed that Mr Foster committed a fraud against the bank which constituted both an offence against s 603(1)(b) Revised Criminal Code Act (Federated States of Micronesia) and, had it been committed in Australia, an indictable offence under s 408C(1) Criminal Code 1899 (Qld).

Section 400.15 provided that s 15.2 (Extended geographical jurisdiction – category B) applied to the commission of the offence under s 400.4 so that it could be committed wholly or partly in or outside Australia.

The indictment to which Mr Foster pleaded guilty relevantly charged that he:

"… did deal with money being the proceeds of a crime, namely money realised directly from the commission of a fraud against the Bank of the Federated States of Micronesia, believing that the said money was the proceeds of crime and the value of the money was greater than $100,000".

It follows that Mr Foster's plea of guilty to the offence charged under s 400.4 constituted an admission to the following. He dealt with money (A$306,722.58) by importing it into Australia through its electronic transfer into Australian bank accounts controlled by Mr Foster or those associated with him. That money was the proceeds of crime, that is, it was derived or realised from the commission of the offence of fraud against the bank and that fraud was an offence against the law of the Federated States of Micronesia¹⁰ and, if committed in Australia, would have constituted an indictable offence against the Criminal Code 1899 (Qld).¹¹ Mr Foster believed the money was realised in this fraudulent way. The value of the money was greater than A$100,000. On the facts of the present case, the obtaining of the money by fraud was an essential element of the offence of money laundering

Mr Foster's offence of money laundering occurred over a two to three month period and involved nine particularised dealings with money realised directly from the commission of nine particularised frauds on the bank. Those nine acts of obtaining money by fraud and the dealing with that money were closely interwoven in the single indictment charging the offence of money laundering. This entitled the prosecution to place before the sentencing judge the details of the fraud by which the money came to be proceeds of crime under s 400.4 and the circumstances which showed that Mr Foster believed the money to be proceeds of crime.

His Honour recognised that he was not sentencing Mr Foster for fraud; that the offence to which he pleaded guilty was "shortly known as money laundering"; that it involved bringing into Australia money which was the proceeds of crime; this was, and was regarded by the courts and the legislature as, a serious offence. The learned sentencing judge did not err in taking into account the circumstances of the fraud making the money proceeds of crime in determining where the present offence sat in the scale of seriousness of money laundering offences.

In any case, it will ordinarily be relevant in determining the appropriate sentence to consider how the money dealt with is proceeds of crime, for example whether it was obtained by organised criminal activity such as drug-dealing, people-trafficking, child prostitution or terrorist-related activities. Also relevant will be the extent of the offender's belief as to or knowledge of how the money is proceeds of crime.

Manifestly excessive?

Mr Foster arranged for the amount of A$306,722.58, knowing it was the proceeds of crime, to be transferred into Australian bank accounts. His offending involved nine transactions in a little over two months; only A$92,634.11 was returned to the bank. Mr Foster's offending was in some ways unsophisticated in that its ultimate discovery was inevitable. It was, however, sufficiently devious to allow him to bring into Australia over a few months a great deal of money fraudulently obtained by him from an apparently regionally significant financial institution. General deterrence and, because of Mr Foster's concerning prior criminal history for offences of dishonesty, individual deterrence, were important considerations when determining the appropriate sentence for an offence against s 400.4.

A sentencing court should have regard to the circumstances of the offence from which the money was directly or indirectly realised. Also relevant is the amount of money involved, the offender's state of belief or knowledge and the relevant maximum penalty. The present offence was not the most serious example of laundering more than $100,000. The money was not obtained through organised crime which directly put people's physical well-being at risk such as terrorism, drug dealing, trafficking in people or child prostitution. The offence nevertheless had serious aspects. It involved defrauding a bank associated with a developing Pacific nation of a large amount of money, over A$300,000. As the learned primary judge recognised, parliament and the courts regard knowingly transferring money the proceeds of crime into Australia as serious anti-social behaviour. Mr Foster's present offending can rightly be categorised in this way. The maximum penalty was 20 years imprisonment and/or 1200 penalty units.¹²

Siu turned on quite different facts but was of some general assistance in determining the appropriate sentence for the present offence. The scheme in which Siu was involved was more elaborate and organised than Mr Foster's but Siu had a less serious criminal history and received much less personal gain from his offending. Siu's ultimate sentence was five years imprisonment with parole after two and a half years. The appellate court noted that this sentence was imposed in the context of a Crown appeal and was still considerably lower than should have been imposed at first instance.¹³

The mitigating factors pertaining to Mr Foster were well ventilated. Of by far the greatest significance was that he, like Siu, pleaded guilty at an early stage. The judge was entitled to give some recognition, as he did, to the fact that Mr Foster was serving his term of imprisonment in protective custody because of prior cooperation with the authorities and to the fact that he had some redeeming features, including his support of his elderly mother and his sister, who were both ill, and his generosity to individual Pacific islanders. The primary judge carefully assessed all relevant factors. Although it was not necessary to adopt the mathematical approach taken at first instance, his Honour's reasoning process was transparent and unflawed. The sentence imposed, four and a half years imprisonment (discounted by 35 per cent from the seven years he would otherwise have imposed) with release after serving 50 per cent (that is, after two years and three months) appropriately balanced the various competing considerations. The sentence is not manifestly excessive.

The reparation order

Without objection from defence counsel, the primary judge granted the prosecutor's application for an order under s 21B(1)(d) Crimes Act 1914 (Cth) requiring Mr Foster to make reparation in the sum of A$214,138.47 to the bank. Although it seems the reparation order is unlikely to be able to be met by Mr Foster, Mr Glynn contends that it was unlawful and should be set aside. He argues that the bank's loss was not a direct result of the offence of money laundering; it was a direct result of the offence of fraud; it was theoretically possible that Mr Foster could yet be extradited to the Federated States of Micronesia, convicted of fraud and as a consequence ordered to pay compensation in respect of it; for these reasons the reparation order should be set aside.

Section 21B relevantly provides:

"(1) Where:

(a)a person is convicted of a federal offence;

…

the court may, in addition to the penalty, if any, imposed upon the person, order the offender:

(c)to make reparation to the Commonwealth or to a public authority under the Commonwealth, by way of money payment or otherwise, in respect of any loss suffered, or any expense incurred, by the Commonwealth or the authority, as the case may be, by reason of the offence; or

(d)to make reparation to any person, by way of money payment or otherwise, in respect of any loss suffered by the person as a direct result of the offence.

(2) A person is not to be imprisoned for a failure to pay an amount required to be paid under an order made under subsection (1)."

Section 21B(3) allows any ordered reparation to be recovered as a civil debt by the filing of a certificate in a civil court.

In determining whether to make a reparation order and the amount of any order under s 21B, a court has a discretion which must be exercised judicially: Murphy v H F Trading Co Pty Ltd,¹⁴ Hookham v The Queen,¹⁵ Vlahov v Federal Commissioner of Taxation,¹⁶ Davies v Taylor¹⁷ and Liaver v Errington.¹⁸

The meaning of the words "by reason of the offence" in s 21B(1)(c) were discussed by Holmes JA (with whom Davies JA and I agreed) in Liaver v Errington.¹⁹ But neither Mr Glynn nor Mr Long have been able to refer this Court to any decided cases as to the meaning of the words "in respect of any loss suffered by the person as a direct result of the offence" in s 21B(1)(d).

Some assistance as to the meaning of these words can be found in the recent decision of the Victorian Court of Appeal in Kaplan v Lee-Archer²⁰ which considered the meaning of "as a direct result of the offence" in s 85B(1) Sentencing Act 1991 (Vic). That section allowed a court to order a person found guilty of an offence to pay compensation to a person who had suffered any injury "as a direct result of the offence". Buchanan JA (with whom Vincent and Nettle JJA agreed) observed that:

"… the requirement that the result be 'direct' does not mean that there can be no step between the cause and the consequence, [see Boiler Inspection and Insurance Co of Canada v Sherwin-Williams Co of Canada Ltd [1951] AC 319. See also Mardorf v Accident Insurance Company [1903] 1 KB 584 at 588 per Wright J] or that the consequence must be solely due to the cause.

…

… in my view the introduction of the adjective 'direct' is intended to exclude those results which are but tenuously related to crimes in that their contribution is a minor factor in the production of the injury. Examples of injuries which, in my view, are not the direct result of crimes are where the crime is merely part of the background, one of a large number of circumstances, and by no means prominent, which produces the injury, or where there is another, supervening cause which overshadows the commission of the crime.

…

… In my view the adjective ['direct'] was inserted to emphasise that the crime is to play a significant role in bringing about the compensable injury."²¹

Nettle JA added:

"I have therefore come to the view that when the draftsman of s 85B chose the expression 'as a direct result of the offence' he or she had in mind … an injury that is judged as a matter of fact, according to common sense and experience, to have been caused by the offence. [March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 at 515 and 522-3; Medlin v State Government Insurance Commission (1995) 182 CLR 1 at 6-7]"²²

It is clear enough from the terms of s 21B that for a court to make a reparation order under s 21B(1)(d) in favour of "any person" requires a closer connection between the offence and the loss than for a court to make a reparation order under s 21B(1)(c) in favour of the Commonwealth. The clear legislative intent in enacting s 21B(1)(d) is as follows. Federal offenders who through their offending have caused a loss to others should be liable to compensate those who have suffered that loss, where there is a sufficiently direct connection between the offence and the loss. Parliament intended that this should be done through the simple and cost-effective process of a court order made at, or shortly after, the sentencing proceeding.

In interpreting s 21B(1)(d) it is relevant that an order for reparation is not a penalty. A person cannot be imprisoned for failing to pay an amount of reparation. An order for reparation is recoverable as a civil debt. It is not therefore necessary to construe s 21B(1)(d) as strictly as when construing penal statutes where non-compliance would result in loss of liberty. It should be construed in the light of the legislative intention to enable those who have suffered loss arising from an offence to recover the loss from the offender by a simple and cost-effective method.

The legislature's use of the term "a direct result", rather than "the direct result" suggests it did not intend to limit the capacity to make a reparation order under s 21B(1)(d) to a single loss arising from an offence, if on the facts, there is more than one direct loss.

The clear words of s 21B(1)(d) suggest a legislative intention that where, as a matter of fact, there is a close or significant connection between the loss suffered and the offence which caused it, a reparation order may be made in favour of the person suffering the loss. When read together with s 21B(1)(c), those words also suggest that, where a secondary loss by way of a ripple effect occurs as a result of an offence, a reparation order could not be made under s 21B(1)(d) in favour of the person suffering the loss. By way of analogy, see McHugh J's observation in Perre v Apand Pty Ltd²³ and Fortuna Seafoods Pty Ltd v The Ship "Eternal Wind".²⁴ This construction of the words "any loss suffered as a direct result of the offence" in s 21B(1)(d) is consistent with the Victorian Court of Appeal's interpretation of an analogous phrase in Kaplan.

When determining what was the "offence" for the purposes of s 21B(1)(d) it is necessary to look at the conduct, that is, the act or acts, constituting the offence: see s 4.1(2) Criminal Code 1995 (Cth).

As I have explained,²⁵ the nine particularised acts of obtaining the money by fraud and dealing with it were closely interwoven in the single charge in the indictment of money laundering. It was undisputed at sentence that the money involved in the offence was the property of the bank and that the bank had not recovered A$214,138.47 of this money; this was because it was dissipated by Mr Foster or others associated with him after it was electronically transferred into the Australian bank accounts.

The nine particularised dealings with money involved Mr Foster importing fraudulently obtained money into Australia by having it electronically transferred from the bank's control into the Australian bank accounts associated with him. The precise details of the electronic transfers are not entirely clear, as none of this was controversial at sentence. I apprehend, however, that the nature of the electronic transfer meant that the bank suffered its loss when the money was electronically transferred from its control and into the Australian bank accounts controlled by Mr Foster or those associated with him. Mr Foster's arrangement of these nine electronic transfers of money was the gravamen of the conduct constituting the offence of money laundering. The nine particularised episodes of fraud and the corresponding particularised episodes of dealing with the fraudulently obtained money by arranging its electronic transfer into the Australian bank accounts were intrinsically interwoven into the single charged offence of money laundering. The moment the bank suffered each of its nine losses was the same (or virtually the same) moment as the money was electronically transferred into the Australian bank accounts. It follows that the bank's loss arose when Mr Foster dealt with the money by arranging its electronic transfer into Australia, his conduct at the heart of the offence of money laundering. The loss suffered by the bank was, as a matter of fact and in a common sense way, closely and significantly connected with his conduct constituting the offence of money laundering. In these circumstances, the bank's loss can be said to have been suffered as a direct result of Mr Foster's commission of the offence of money laundering.

Mr Glynn's concern about the hypothetical possibility of Mr Foster's extradition to the Federated States of Micronesia and subsequent conviction there for fraud, with related reparation or compensation orders in favour of the bank does not affect the meaning of s 21B(1)(d). As the essence of reparation or compensation is to make amends for an injury or wrong done, the bank is entitled to nothing more than what it has lost as a result of Mr Foster's unlawful conduct. Any reparation order purporting to compensate the bank beyond its loss would be without effect.

It follows that his Honour did not err in exercising his discretion to order under s 21B(1)(d) that Mr Foster make reparation to the bank in the sum of A$214,138.47.

The application for leave to appeal should be refused.

MACKENZIE AJA: I agree with the orders proposed by the President for the reasons she gives.

CHESTERMAN J: I agree that the application for leave to appeal against sentence should be refused for the reasons given by the President.

Footnotes

1. In fact, Mr Foster was aged 43 and 44 during the period of the offending. ↩

2. (2007) 174 A Crim R 370; [2007] NSWCCA 259. ↩

3. (2007) 173 A Crim R 112; [2007] NSWCCA 204. ↩

4. (2007) 174 A Crim R 370 at375; [2007] NSWCCA 259 at [15]. ↩

5. (2007) 173 A Crim R 112 at 142-3; [2007] NSWCCA 204 at [119]-[122]. ↩

6. (2007) 174 A Crim R 370 at 383; [2007] NSWCCA 259 at [46]. ↩

7. (2007) 174 A Crim R 370 at 382, 383; [2007] NSWCCA 259 at [44], [47]. ↩

8. (2007) 174 A Crim R 370 at 383; [2007] NSWCCA 259 at [47]. ↩

9. (2007) 174 A Crim R 370 at 383; [2007] NSWCCA 259 at [48]. ↩

10. Revised Criminal Code Act (Federated States of Micronesia), s 603(1)(b). ↩

11. Section 408C(1) "Fraud". ↩

12. Criminal Code 1995 (Cth), s 400.4(1). ↩

13. (2007) 174 A Crim R 370 at 383; [2007] NSWCCA 259 at [48]. ↩