R v Healy [1999] VSCA 219

(a) the co-operation and assistance of the applicant;

(b) the promise by the applicant to assist the authorities in the future;

(d) the circumstances in which the monies (which were lost) were ultimately lost;

(e) the fact the applicant had no prior convictions;

(f) the fact the applicant did not take the money for his own personal use to enable him to live an enriched and luxurious lifestyle;

6. The learned trial Judge gave undue weight to general deterrence and insufficient weight to the other aspects of sentencing."

25. The applicant is now 51 years of age. He was brought up on a farm at Marnoo, and was educated at St. Arnaud and at St. Patrick's College, Ballarat. The sentencing judge found that while at school in Ballarat the applicant became involved in the St. Vincent De Paul Society and the Young Catholic Student movement and from that time forward he became actively engaged in charitable works. Upon leaving school the applicant returned to Marnoo where he participated in local community affairs, taking a leading role in the Young Farmers movement. Because he suffered from asthma the applicant was advised to move to the city. He did so and for the next 13 years was employed by finance companies before joining Standard Chartered Banking Corporation, where he became the Victorian state manager. When the bank failed in 1989 the applicant worked as a life insurance salesman until 1992, when he became associated with a Mr Quarrell, who promoted tax schemes.

28. In July 1994 Sentinel Financial Management Pty Ltd was formed. The applicant and Quarrell were the directors, and the trustee of the applicant's family trust and Quarrell were the shareholders. Other related companies were formed to carry out various functions in the business of financial management and advice conducted by the applicant and Quarrell.

31. Information as to the facts constituting the crimes is found primarily in the statement of facts agreed to by the parties and the statement by the applicant of the evidence which he promised to give at Quarrell's forthcoming trial.

34. The principal business of the Sentinel group of companies was to provide advice on taxation, superannuation and investment matters, and also to undertake investment and money management on behalf of the clients. Clients of Sentinel were urged to engage the company to establish private superannuation funds for the investment of moneys available to the clients. The applicant and Quarrell recommended that pending placement of the money in a longer term investment, it should be lent out at an interest of 12% per annum, which was later altered to 11% per annum. Clients of Sentinel were assured that their investments were secured by first mortgages or debentures or would take the form of term deposits operated by banks. It was on that basis that the applicant obtained the moneys the subject of count 1. The clients generally were nearing the end of their working lives. The moneys they entrusted to the applicant were intended to maintain or help to maintain them in retirement. When the moneys were lost, they were not likely to be replaced by future savings. In fact the investments were not secured in any way. Rather, the funds of the clients of the business were given to companies in the Sentinel group and used in speculative ventures, which failed. One such venture was described as follows in the statement made by the applicant. He said:

"At one stage Quarrell and I received a proposition to invest in a dinosaur exhibition that was to tour parts of Australia. Quarrell and I agreed that the dinosaur tour appeared to be an investment where large profits may be made. We had been told by its promoters that the expected return for our investment of about $1 million would be as much as $3,500,000. As we had funds in Guard Finance that had not been placed into any investments, both Quarrell and I decided to take funds from that company and invest them in the dinosaur tour under our own names. These funds, amounting to about $660,000 to $750,000 were viewed by Quarrell and I as a loan to ourselves. No documentation was ever created to record these transactions of loans. As a result of this investment in the dinosaur tour we were returned about $30,000 to $40,000. It was a complete disaster."

The companies in the Sentinel Group which received client moneys were engaged in various speculative commercial activities, including film production and property development. In his statement the applicant described the roles of himself and Quarrell as follows:

"Both Quarrell and I had a full and intimate knowledge of the operations of both companies and kept each other informed as to the funds received by each company and payments being made from the bank accounts of those companies. As Quarrell had accounting qualifications and more background in running a business, he took on more of an administrative role in their operation than I did. We jointly decided at an early stage of our association that he would look after the administration and management of the companies and I would concentrate on selling products and finding new clients for the business."

40. The applicant contends that the sentencing judge erred in calculating the head sentence of five years. It is said that as each of the sentences for counts 2 and 3 commenced on the expiry of the non-parole period of the sentence imposed on count 1, all that was added to the two year non-parole period was a two year sentence on count 2, thus making a total of four, not five years. Counsel for both the applicant and the respondent agreed that the total effective sentence was misstated by the sentencing judge. In a report to this Court the sentencing judge stated that he intended to "impose a sentence of five years with a non-parole period of three years". That intention could be effectuated by imposing a term of four years for the State offence and fixing a term of three years before the applicant is to be eligible for parole and imposing terms of two years and 12 months on counts 2 and 3 respectively, making those terms concurrent and directing that they commence as soon as the non-parole period on count 1 expires, and directing that the applicant be immediately released on a recognisance to be of good behaviour for two years.

43. Counsel for the applicant did not address a separate argument with respect to ground 1, but relied upon the cumulative effect of the remaining grounds to demonstrate that the sentence was manifestly excessive.

46. As to ground 2, it was submitted that the moneys the subject matter of count 1 were all included in counts 2 and 3, and as the dishonesty was part of one process of handling the money, the sentences imposed on counts 1, 2 and 3 should have been made wholly concurrent. While count 1 was a prelude to counts 2 and 3, the crimes related to different transactions and were constituted by different elements. Count 1 was concerned with procuring the payment of money by clients of the business of Sentinel by making false promises as to the use to which the money would be put. Counts 2 and 3, on the other hand, comprised the misuse of the moneys given to the companies in the Sentinel group, contrary to the terms on which the moneys were received. While it is true that the misappropriation of the moneys was the next stage after they were extracted from the clients of the business, the misappropriation represented a distinct offence which called for punishment on its own terms, and in my view it was within the sentencing judge's discretion to cumulate the sentences as he did.

49. Counts 2 and 3 were only separate offences because different corporations held the clients' funds. In my opinion that circumstance was accommodated by making the sentences wholly concurrent.

52. Grounds 3 and 4 concern a like complaint. Ground 3 alleges that the sentencing judge failed to give a proper discount for the applicant's co-operation with the authorities. The applicant supplied information as to tax avoidance schemes and promised to give evidence against Quarrell at his trial and against any other person who might be charged with offences arising out of the collapse of the Sentinel group. It is said in respect to ground 4 that the sentencing judge failed to adequately take into account that remissions did not apply.

55. The sentencing judge in express terms dealt with both co-operation and the absence of remissions. Indeed in respect of co-operation his Honour in accordance with the provisions of s.21E of the Crimes Act of the Commonwealth stated the sentence he would have imposed but for the reduction due to the applicant's promised assistance to the authorities.

58. Counsel for the applicant sought to meet the sentencing judge's apparent regard to these matters by submitting that working on a one-third reduction for remissions and adding it back to count 2, the head sentence was so great that the sentencing judge could not have given proper weight to co-operation with the authorities and the other mitigating factors that were present such as remorse, lack of prior convictions, prospects of rehabilitation and the pleas of guilty.

61. I do not consider that the exercise of working back to a sentence which the judge is supposed to have used as a starting point is entirely appropriate in dealing with what is, after all, not a mathematical equation but an instinctive synthesis. But even so I think that his Honour's supposed starting point was not in excess of the sentence that was appropriate to count 2 and the considerations which were personal to the applicant.

64. Ground 5 embraces a number of matters which are generally present upon the conviction of persons for crimes such as those the subject matter of these applications. People who defraud members of the public who entrust them with their money are able to do so because, like the applicant in the present case, they are apparently honest and trustworthy and well liked for qualities such as friendliness and interest in and thought for others in the community. The testimonials to the applicant's good character are extremely impressive. It is clear that the applicant was held in high esteem by a large number of people. It is also the case that the detection of the crimes, trial and conviction usually have a grave impact upon the future lives of offenders such as the applicant and upon their families.

67. The common characteristics of those convicted of fraudulent misappropriation of moneys entrusted to them explain why punishment that acts as a general deterrent is required and why personal deterrence is of relatively little significance. The punishment marks society's condemnation of their conduct and serves as a warning that those who abuse the trust of others by defrauding them will not escape because of their previous character and the effect of conviction alone upon their future lives. As the Full Court said in R. v. Moffatt (unreported, Supreme Court of Victoria, 4 December 1992), contrasting what it termed "white collar" crimes with crimes of violence and theft:

"A custodial sentence sends a salutary signal to all persons, no matter how unblemished their records, that depredation of trust monies, as a trustee, in significant sums warrants gaol. It is likely that many persons in the general community will be deterred from the commission of these offences if it is generally known that prison follows."

In D.P.P. v. Bulfin [1998] 4 V.R.114 at 131 Charles, J.A. noted that those convicted of white collar crimes usually have no prior convictions and are unlikely to re-offend and said:

"A further matter is that, in the case of white collar crime, the lives of the offenders and their families will frequently have been devastated by the consequences of discovery and punishment. The present case is a very good example. It would be difficult not to feel great sympathy for the respondent's wife and family and, indeed, for the respondent himself. But I think there is a serious risk that the consequences of discovery and punishment, and the havoc that a custodial sentence usually wreaks on the lives of the white-collar criminal and his or her family, may have a tendency to distract attention from the importance that general deterrence ought to carry in the imposition of sentences for crimes such as the present."

In my opinion the crimes committed by the applicant require a substantial term of imprisonment.

74. It was submitted on behalf of the applicant that this was not a case of a man who used the money of others to live luxuriously; rather it was a case of a group of companies that expanded too quickly, were under-capitalized and did not have an adequate cashflow.

77. I do not regard these matters as exculpatory. In effect the applicant enlisted his clients, who entrusted him with their savings, as participants in his business ventures. No doubt he hoped, even expected, that those ventures would succeed. If they did, his clients would recover the capital of their investments and interest at 11 or 12% while the applicant and his partner would reap all the rewards accruing to the owners of a successful business. In the meantime the clients were at risk. If the ventures, of which they knew nothing, failed, their funds would be lost. And for the most part they were. Accordingly in my opinion the fact that the applicant was not enriched because the ventures in which he risked his clients' moneys failed is not a mitigating factor. If he were not impecunious, the applicant would be required to make good the losses sustained by his clients.

80. I am of the opinion that the sentencing judge's intended disposition of a head sentence of 5 years' imprisonment and a minimum term of 3 years' imprisonment is entirely appropriate. Even if his Honour's failure to fix a head term of 5 years be regarded as an error serving to re-open the sentencing discretion generally, I do not consider a different sentence should have been imposed. I would vary the sentences in the manner previously described by the presiding judge and otherwise dismiss the application.

The application is granted. The appeal is treated as instituted and heard instanter and allowed. The sentences below are varied by -

(a) substituting a sentence of 4 years' imprisonment with a non-parole period of 3 years as the sentence on count 1;

(b) substituting for the direction that 12 months of the sentences imposed on counts 2 and 3 be served and that the applicant then be released on a recognisance of $1,000 for 2 years a direction that on the commencement of the sentences imposed on counts 2 and 3 the applicant be forthwith released on a recognisance in the sum of $1,000 to be of good behaviour for 3 years; and

(c) substituting 1 year for 2 years in the statement pursuant to s.21E of the Commonwealth Crimes Act of the part of the sentences imposed on counts 2 and 3 which would have been ordered to be served but for the undertaking of future co-operation.

103. The result will be that the total effective sentence for all three offences is 5 years' imprisonment, of which the applicant will be required to serve not less than 3 years in custody, as the judge intended.

106. The Court declares that the period of 186 days is, as of this day, the period to be reckoned as already served under the sentence and directs that the making of this declaration and its details be noted in the records of the Court.

109. The Court directs that the Director of Corrections make the explanation to the applicant required by ss.16F(2) and 20(2) of the Commonwealth Crimes Act and serve a copy of the order as required by s.20(4) of that Act.