R v Gregory [2010] VSC 121

Supreme Court of Victoria|2010-04-15|Before: WHELAN J

CRIMINAL LAW - Sentence - Conspiracy to dishonestly cause a risk of loss to the Commonwealth - Solicitor dishonestly assisted another to evade tax by remitting income overseas - Sentence of two years imprisonment, to be released on recognisance after serving 12 months.

1 Paul John Gregory, on 22 February 2010 a jury found you guilty of conspiring with Glenn Dawson Wheatley, Philip Egglishaw, Philip de Figueriedo and Strachans SA to dishonestly cause a risk of loss to the Commonwealth, contrary to sub-s 135.4(5) of the Criminal Code 1995 (Cth).

2 The maximum penalty for this offence is 10 years' imprisonment.

3 On 26 March 2010, I heard a plea in mitigation on your behalf.

4 The circumstances of your offending can be summarised as follows.[1]

5 By the mid 1990s you had been a successful and prominent solicitor for many years. In 1994 one your clients was the Australian subsidiary of an international sports and entertainment management organization called International Management Group or IMG. That subsidiary's name was International Management Group of America Pty Ltd. In 1994 you were an alternate director of that subsidiary. In that capacity you met the well known Australian promoter and entertainment manager, Glenn Wheatley. Mr Wheatley had financial troubles which had led him to take up employment with IMG. Another director of IMG's Australian subsidiary at that time was an accountant named William Baillie. You and Mr Baillie were the directors of a company associated with IMG named Complaw Pty Ltd.

6 At your trial Mr Baillie gave evidence about Complaw. He said that his recollection was that Complaw was set up as a vehicle for participation by a number of investors, including executives and associates of IMG, in a tour by the singer, Jose Carreras. You and Mr Baillie (directly or indirectly) were two of those investors. Mr Baillie's evidence was that profits from that tour were remitted by Complaw overseas to be held by an organisation called Strachans. I accept Mr Baillie's evidence as to Complaw with one qualification. His recollection that Complaw was set up for the Carreras tour is not consistent with IMG records, which reveal earlier activities. IMG's records are more reliable than Mr Baille's recollection, as he himself essentially accepted.

7 Strachans was a financial services organization which managed companies and trusts and which provided other specialised financial services. Strachans' corporate structure is not of relevance, save to say that at one point it was a firm of accountants in Jersey in the Channel Islands and that it then moved its centre of operations to Switzerland where a company named Strachans SA was the relevant operating entity. At all relevant times, Philip Egglishaw and Philip de Figureido were senior figures within the Strachans organization.

8 In early 1994 Mr Wheatley, as an employee of IMG, promoted a very successful tour by the entertainer, John Farnham, named the "Talk of the Town" tour. Mr Wheatley was entitled to a sum of money from IMG as a consequence of his involvement in that tour. Money owed to him by IMG in relation to that tour was paid through Complaw to Strachans and was held by Strachans for Mr Wheatley overseas in a manner whereby his entitlement to those funds was not apparent without recourse to Strachans' internal records. Mr Wheatley did not declare the amounts remitted to Strachans in his income tax returns for the years ended 30 June 1994 and 30 June 1995. At that time, Mr Wheatley was subject to arrangements under Part X of the Bankruptcy Act 1996 (Cth). He did not inform his trustee of the funds which had been remitted overseas.

9 On 6 July 2007 Mr Wheatley pleaded guilty to three counts contained in an indictment filed before the County Court that day. Two of those counts concerned tax evasion, and one was an offence under the Bankruptcy Act. The first offence concerning tax evasion related to the amounts remitted overseas arising out of the "Talk of the Town" tour and Mr Wheatley's failure to declare those amounts in his tax returns. The Bankruptcy Act offence also concerned the remission of those amounts. I will refer to Mr Wheatley's second offence concerning tax evasion shortly.

10 In the indictment filed in this proceeding against you, you were charged with two counts of defrauding the Commonwealth in relation to the remission of Mr Wheatley's funds from the "Talk of the Town" tour to Strachans. The jury found you not guilty on each of those counts. I proceed on the basis that you are innocent of any criminal wrongdoing in relation to those matters. The only findings I make concerning the events relating to the "Talk of the Town" tour are those I have set out above, together with a finding that as a result of your association with IMG and Complaw in the mid-1990s you were aware of Strachans and of the services they offered.

11 After working for IMG for approximately one year, Mr Wheatley returned to managing artists and promoting events as a principal through his own corporate entities.

12 In January 2003 Mr Wheatley promoted a boxing match between Kostya Tszyu and Jesse James Leija at the Telstra Dome in Melbourne. His promotion of this fight was undertaken in a joint venture with Melbourne Stadiums Ltd. The event was successful and the profits made were divided equally between Melbourne Stadiums Ltd and Tripicity Pty Ltd, a company which was the trustee of Mr Wheatley's family trust.

13 Mr Wheatley gave evidence at your trial about the entire course of his dealings with you, beginning in 1994 or perhaps 1993. If it were relevant, it would be necessary to assess Mr Wheatley's reliability on some of these matters, particularly those occurring many years ago. For present purposes, all that is relevant is his evidence concerning his dealings with you in relation to the Kostya Tszyu fight and the disposition of the proceeds of that fight.

14 Mr Wheatley said that you and he had discussions in relation to the Kostya Tszyu fight. He said that you told him that his share of the proceeds could be sent offshore and that he (that is Mr Wheatley) could then make up his mind whether he wanted to bring it back and pay tax or not. He said that you told him a company called Overseas Promotions would be set up and that that company would be paid money as a fee. He said what was discussed was that Overseas Promotions would basically do nothing but that it would appear that they did do something for the money. Mr Wheatley said an agreement was reached whereby $400,000 of his share of the proceeds of the fight would be sent to Overseas Promotions.

15 Mr Wheatley conceded under cross-examination that it was more than likely that Mr Egglishaw initially had the idea of using Overseas Promotions in this manner. Mr Wheatley's evidence that you had said Overseas Promotions would be set up was inconsistent with evidence which established that Overseas Promotions was incorporated long before March 2003. Overseas Promotions Inc was a company controlled by Strachans.

16 On 28 March 2003 you sent an email to Mr Egglishaw referring to your discussions with Mr Wheatley and then setting out in numbered paragraphs a series of steps which you said you had suggested to Mr Wheatley and with which Mr Wheatley was "comfortable". Those steps plot a sophisticated deceit. First, Mr Egglishaw was to write to Mr Wheatley claiming a payment of $700,000 in relation to the share of the proceeds of the Kostya Tszyu fight. Mr Wheatley was to respond purportedly disputing the amount claimed on the basis that he had made less profits and therefore the claim should be reduced. Then, Mr Egglishaw was to reject this, whereupon Mr Wheatley would write to Mr Egglishaw saying he was going to refer the matter to you for legal advice. You and Mr Egglishaw were then to negotiate a fee of $400,000. This amount would be transferred to Mr Egglishaw through your firm's trust account. After these numbered steps are set out, your email goes on:

"Client W is comfortable with the whole arrangement. I have confirmed to him that the tax will be 11%. I have also confirmed that you will charge him $US1,000 for the transaction. I explained to W that this was a substantial reduction on your normal fee but has been offered by you because of the relationship.

I will charge W a similar amount for the legal advice."

17 Mr Wheatley's evidence of his discussions with you cannot be accepted without qualification. He seems to be mistaken about you having said that Overseas Promotions would be set up. Otherwise, his account is supported by your own contemporaneous email, and I accept his account as being essentially accurate.

18 The steps which you set out in the email were undertaken. In April and May 2003, correspondence was exchanged between Overseas Promotions, Tripicity, and Dibbs Barker Gosling (the legal firm of which you were then Chief Executive Officer), which put into effect the plan you had set out in your email to Mr Egglishaw. At Dibbs Barker Gosling a file was created and maintained. Viewed in isolation, it appears to be a normal solicitor's file concerning a normal commercial dispute. Amongst other things, it includes hard copies of emails. The email you sent to Mr Egglishaw on 28 March 2003 is not on the file.

19 My conclusion is that you wrote the email of 28 March 2003 as part of a calculated deception so as to enable Mr Wheatley to evade his tax.

20 On 18 July 2003, an employee of Strachans advised you by email that an amount of $398,982.03 had been received. This amount was divided as follows:

(a) An amount of $1,543 was paid to Strachans as a transaction fee. This is consistent with the fee of $US1,000 referred to in your email of 28 March 2003.

(b) A further amount of $22,000 was paid to Strachans, and an amount of $22,000 was paid into an account maintained by Strachans for you. The total of these two amounts is $44,000. This is consistent with the 11% "tax" referred to in your email of 28 March 2003. It was not a tax. It was a fee. You received half of that fee.

21 In Mr Wheatley's tax return for the 2003 financial year, he claimed the sum of $400,000 which had been remitted to Strachans as an expense. There was no such expense. After Mr Wheatley had become aware of investigations in relation to these matters, including as a result of the execution of search warrants at his home and office, he declared the $400,000 as part of his taxable income. By not declaring it in the year in which it was earned, he evaded $194,000 in tax in that year.

22 I am satisfied that the purported negotiations, which you set out in your email of 28 March 2003 and in which you engaged thereafter, represented an elaborate deception set up to afford the remittance of the $400,000 with legitimacy which it did not possess and to enable Mr Wheatley to evade tax in the way in which he did.

23 Section 16A of the Crimes Act 1914 (Cth) sets out the matters to which I must have regard in determining your sentence. I have heard submissions on these matters from counsel on your behalf and from counsel on behalf of the prosecution.

24 The offence of which you have been convicted arises out of the same facts which were the basis of the second tax evasion charge to which Mr Wheatley pleaded guilty. For that offence, Mr Wheatley was sentenced to 12 months' imprisonment. For all three offences to which Mr Wheatley pleaded guilty, he received a total effective sentence of 30 months' imprisonment with an order that he be released on a recognisance after 15 months. As matters transpired, he served the last five months before his release on recognisance in home detention.

25 Mr Wheatley gave an undertaking to cooperate with law enforcement authorities and, in particular, to give evidence against others involved in the relevant matters, including you. Pursuant to s 21E of the Crimes Act, the sentence imposed upon him was less than it would otherwise have been because of this cooperation, and the sentencing judge indicated that, but for his undertaking, Mr Wheatley would have been sentenced to a term of 18 months' imprisonment, rather than 12 months, on the relevant charge. On your plea, counsel referred to this 18 month period as Mr Wheatley's "but for" sentence.

26 Senior Counsel on your behalf submitted that the "but for" sentence of 18 months was a useful starting point, but that there were three material differences between your position and that of Mr Wheatley's which were in your favour.

27 First, it was submitted that Mr Wheatley had benefited from the offending conduct to a considerably greater extent than you. Mr Wheatley's benefit was $194,000. The benefit you obtained was $22,000, being half of the 11% "tax", together with $1,000 in legal fees. You consented to a pecuniary penalty order in the sum of $27,441.57, which I made on 26 March 2010. I have taken into account your consent to that order on the basis that it constitutes cooperation for the purposes of s 320 of the Proceeds of Crimes Act 2002.[2] Senior Counsel made it clear, however, that your consent to that order was not a concession that you were party to any arrangement under which you received the $22,000. It was put on your behalf that there was no evidence to suggest that you knew that this benefit had accrued to you. Analysis of the relevant bank statements which were tendered in evidence reveals that the $22,000, whilst credited to an account maintained for you, was never drawn upon by you.

28 Secondly, your counsel referred to the effect of your conviction on your career. You surrendered your practicing certificate the day after your conviction. It was submitted on your behalf that you will never practice law again. It was also submitted that in some areas of professional activity, and in particular those in which Mr Wheatley works, a conviction of this nature is not fatal to the possibility of continuing a career, but, it was submitted, the law is not such a profession. You have enjoyed considerable success as a lawyer. Unlike Mr Wheatley, you have lost not only your reputation, but also your profession and your occupation.

29 Finally, it was submitted that whereas Mr Wheatley was convicted of multiple offences, your offending is confined to a single isolated incident.

30 Counsel on behalf of the prosecution also submitted that the "but for" sentence of 18 months was a relevant consideration, but submitted that there were two characteristics of your offending that warranted a higher sentence.

31 First, it was submitted that you have not demonstrated any contrition or remorse, in contrast to Mr Wheatley.

32 Secondly, it was submitted that the use of your position as a solicitor in the relevant offending conduct is an aggravating feature.

33 You are 61 years of age. You practised as a solicitor for over 39 years. Over this period, you achieved a great deal. You rose to positions of great responsibility and you earned the respect and regard of your clients and your colleagues. On your plea, a remarkable series of testimonials were tendered concerning your professional activities and your activities in the community. They reveal you to be a person who has been, and with many continues to be, held in the highest regard. It is truly tragic that such a career, built upon such hard work and dedication, is blighted by this offence.

34 On the other hand, I accept, as the prosecution submitted, that your position and role as a solicitor is itself an aggravating feature of the offence. The apparent legitimacy of the $400,000 payment was enhanced by your position and reputation. The deception perpetrated was made more credible and less likely to be exposed because of who you were and the position which you held.

35 On your plea, your counsel tendered a report from the psychologist, Ms Anita Duffy. I have had regard to the full contents of that report. In substance, you are suffering from levels of anxiety and depression which are consistent with your current circumstances.

36 Your counsel also tendered a medical report from Dr John Cummins. I have also had regard to that report and, in particular, to the heart condition from which you suffer, which I think can fairly be described as mild. On the plea, your counsel quite properly disavowed reliance upon your health, and upon issues of financial burden, as factors warranting special treatment.

37 You have no prior convictions. The prosecution conceded you have a previously unblemished character.

38 I have already referred to the testimonials tendered on your plea concerning your professional and community activities. I have also had regard to those testimonials concerning your personal characteristics. Honesty, diligence and generosity are common themes. Evidence to a similar effect was given on your trial. I am sure that the thought of defrauding some person or company, other than in a tax context, is one which you would have never countenanced and would, indeed, have found quite abhorrent. I can only conclude that you have, as have many other otherwise honest people, adopted a different set of values where the objective is taxation minimisation. The authorities make it clear that no such distinction is to be drawn.[3]

39 Indeed, the offence of which you have been convicted is a type of offence commonly committed by people of otherwise good character. In these circumstances, good character does not carry the same weight as it otherwise would.[4]

40 Under the relevant legislation, I must only impose a sentence of imprisonment if I am satisfied that no other sentence is appropriate in the circumstances of the case.[5] I am satisfied that I must impose a sentence of imprisonment here. Your counsel conceded such a sentence was inevitable. The reason why no other sentence is appropriate here is because the nature of the offence is too serious and the need for general deterrence too important for any other sentence to be appropriate.

41 I do not consider that there is a need for specific deterrence in your case. I do not consider that there is any realistic possibility that you will offend in the future. Your prospects of rehabilitation are excellent.

42 Ms Duffy's report and the letters written by your family members set out in some detail the close and loving relationship you have with your family. You are, understandably, very concerned about the effect which your imprisonment will have on your wife. Your adult children share your concern in that respect. You reside, as you always have, in New South Wales. Your children and your grandchildren all reside in New South Wales. You will be imprisoned in Victoria. Whilst prisoner transfers are possible, it cannot be assumed that a transfer will occur and such a transfer, if it ever did occur, would only occur after delay. Your imprisonment in Victoria will impose considerable burdens on your family and you. Contact will be more difficult. It seems to me that the sense of separation is likely to be greater. Possible dispositions, such as home detention, may be more difficult to obtain and, if obtained, may be more burdensome.

43 The most important sentencing consideration is general deterrence. Your conduct involved blatant dishonesty and the exploitation of your position as a solicitor. It is of the first importance that others similarly placed appreciate that the consequences of involving themselves in these sorts of deceptive manoeuvres will be severe.

44 A consideration of your position as compared with that of Mr Wheatley is also important.

45 There are some aspects of the matter where your positions do not seem to me to be relevantly distinguishable. You are both people who were previously of good character. You have both been subjected to public humiliation. You have both made reparation in relation to your gains. You both have families who have depended upon you and who have suffered or will suffer as a result of your convictions. You are both men in the latter part of your working lives.

46 The particular offence of which Mr Wheatley was convicted was contravention of subsection 135.1 of the Criminal Code which carries a maximum term of imprisonment of five years. I do not consider that there is any significance in this particular case in the fact that he was convicted of that offence whereas you have been convicted of an offence under s 135.4(5) where the maximum term is 10 years. The jury has found that the two of you were co-conspirators.

47 There are aspects of the matter which suggest you should receive a greater penalty than Mr Wheatley.

48 For these purposes, I leave aside the discount Mr Wheatley obtained for his cooperation. All counsel before me conceded that the relevant starting point is the 18 month "but for" sentence.

49 Mr Wheatley pleaded guilty and was entitled to a discount for that. Mr Wheatley was validly able to maintain that he was influenced by professional advisers, most notably you and Mr Egglishaw. Mr Wheatley demonstrated remorse and contrition.

50 There are also aspects of the matter which suggest that you should be treated more leniently than him.

51 The benefit derived by Mr Wheatley from the conduct was considerably greater in money terms than the benefit you derived. In this respect I do not accept the submission made on your behalf that I should not be satisfied you were aware that you would or had received the $22,000. These were commercial transactions. In the absence of some basis for drawing a contrary conclusion, a payment by one party to another in the course of a transaction of this nature must be made because that was the commercial arrangement between those parties. No evidence suggesting a contrary conclusion exists here. I am satisfied that $22,000 was your agreed share of the 11% "tax". This sum is considerably less than Mr Wheatley's benefit of almost $200,000.

52 I accept your counsel's submission that in contrast to Mr Wheatley you have been convicted of only one offence in relation to one matter. The period of Mr Wheatley's offending was considerably longer and concerned two matters.

53 The loss you have suffered in relation to your profession is more significant than that suffered by Mr Wheatley. The submission made on your behalf that your career in the law is finished seems to me to be well founded. I do not consider that a conclusion could be drawn that Mr Wheatley's career in sports and entertainment promotion and management is finished.

54 Finally, the burden of imprisonment in Victoria will be greater on you than it was on Mr Wheatley, given that your residence, your family, and most, if not all, of your social connections are in New South Wales.

55 When one considers these competing considerations, it seems to me that the sentence imposed upon you must be greater than the 18 month "but for" sentence imposed upon Mr Wheatley. In substance, I have reached this conclusion for two reasons. First, Mr Wheatley pleaded guilty and must have received a reduction in his sentence for that. Secondly, your use of your position as a solicitor in the relevant offending conduct means that your offence is, in my view, more serious than his, notwithstanding that his financial benefit was greater. In all the circumstances, it seems to me that the appropriate sentence is two years' imprisonment.

56 If you were a resident of Victoria, the period which I would order that you are required to serve before being released on a recognisance would be a period of 16 months. I have taken into account the fact that you reside in New South Wales and will have to serve your sentence in Victoria in reaching the conclusion that two years' imprisonment is the appropriate sentence, but I also consider that I should particularly have regard to that factor when fixing the period before which you may be released on a recognisance. Your incarceration in Victoria will, it seems to me, be more burdensome for the reasons which I have already mentioned. In the circumstances, I order that after you have served a period of 12 months, you may be released on a recognisance in the sum of $5,000 without surety to be of good behaviour for a period of 12 months.

57 I am required by the relevant legislation to explain this sentence to you.[6] The purpose of the sentence is to reflect the gravity of the offence, but also to spare you the need to serve the whole sentence in prison. I declare that you have served a period of 20 days in pre-sentence detention. You will now return to prison and serve a further 345 days. Thereafter, in March 2011, you will be released.

58 If you are of good behaviour over the ensuing 12 months that will be the end of the sentencing process insofar as this Court is concerned. If you are not of good behaviour, you will in all likelihood be brought back before this Court and, depending upon the nature and seriousness of your transgression, the Court may impose a fine up to $1,000; or extend the period of good behaviour; or impose a different penalty, for example, a Community Based Work Order; or revoke the recognisance release order and send you back to prison for the balance of your sentence of 12 months; or take no action.

Application can be made to this Court to discharge the recognisance or for a variation of its terms.

[1] I am bound to sentence the accused on a factual basis which is consistent with the jury's verdict. Otherwise, in relation to matters adverse to the accused, I must be satisfied of those matters beyond reasonable doubt, but I may take into account matters in his favour which are established on the balance of probabilities: R v Storey [1998] 1 VR 395 at 369; R v Olbrich (1999) 1999 CLR 270; R v Cheung [2001] HCA 67; (2001) 209 CLR 1; and R v Ramage [2004] VSC 508 at [25].

[2] I take account of the pecuniary penalty order only insofar as your consent to it constitutes cooperation to an action taken under the Proceeds of Crime Act 2002. I take no account of any restitution made pursuant to the order itself: s 320(d) Proceeds of Crime Act 2002.

[3] R v Whitnall [1993] FCA 271; (1993) 120 ALR 449, 457; R v Wright (1994) 74 A Crim R 152; Regina v Stitt (1998) 102 ACR 428.

[4] DPP v Bulfin [1998] 4 VR 114.

[5] Section 17A Crimes Act 1914 (Cth).

Bankruptcy Act 1996(Cth)

Proceeds of Crimes Act 2002

At a glance

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