R v Mereb; R v Younan

R v Mereb; R v Younan - [2014] NSWCCA 149 - NSWCCA 2014 case summary — Zoe

The sentencing judge erred by taking into account as "a significant extra curial punishment" the past payment of tax and interest and the possible future payment of interest and penalties.
The sentencing judge erred by imposing a single non-parole period of 2 years without having regard to the provisions of Pt 1B of the Crimes Act 1914 (Cth) and in particular the requirement in s16A to make an order of a severity appropriate in all the circumstances of the offence having regard to general sentencing principles.
The sentence imposed is manifestly inadequate. Factual Background 4The respondents operated a successful electrical business, PHY Electrical Contractors Pty Ltd (PHY). They were clients of an accounting firm known as Owen T Daniel & Co (OTD). Owen T Daniel (Daniel), an accountant, and Robert Agius, an accountant based in Vanuatu, promoted an illegal scheme to clients of OTD. 5The accountant from OTD who dealt directly with the respondents was Carol Abibadra (Abibadra). The respondents did, however, also deal with Daniel and Kevin Zerafa (Zerafa). 6In about August 2000 at a meeting with Daniel and Abibadra, the respondents were offered an opportunity to participate in an offshore "round robin" scheme. The intention behind the scheme was to evade payment of company and personal income tax. The respondents agreed to enter the scheme. 7In summary, the respondents transferred money from PHY's account to New Zealand bank accounts of companies controlled by Agius and others. Following further transfers of most of those moneys into other accounts in New Zealand, the moneys were transferred back to PHY, initially, and then directly to accounts operated by each of the respondents. False claims were made in the income tax returns of PHY, those claims matching the amounts transferred overseas. In 2003 and 2004 false claims were made for future expenses (based on the accrual system) and then moneys were subsequently transferred overseas (and received back) to match those claims. 8Each year "preliminary" accounts were prepared for PHY by OTD staff, including Abibadra and Zerafa. In each of the relevant years, those preliminary accounts revealed the expected profit for PHY. The respondents met with Daniel, Abibadra and later Zerafa to discuss those figures. On the basis of those figures, the accountants and the respondents agreed on the value of the false claims to be included in the upcoming income tax return for PHY. 9The period of offending in the indictment was between 24 May 2001 and 11 April 2006. The first date is the date of the commencement of s11.5 of the Criminal Code (Cth). Her Honour found that the respondents had agreed to participate in the "illegal dishonest scheme" from about August 2000 and continued to participate in the conspiracy through to the lodgement of the final false return in April 2006. 10The respondents made 19 international transfers of money. The first payment into the scheme by the respondents was made on 8 September 2000. The last payment into the scheme by the respondents took place on 11 April 2005. Between those dates, the 19 international transactions resulted in the transfer of a total of approximately $1.74 million dollars to companies operated by and on behalf of Robert Agius. Of those amounts, approximately $1.66 million was returned to the accounts of PHY and the respondents. 11The first false income tax return was lodged with the Deputy Commissioner of Taxation on 24 May 2002. The final false income tax return was lodged on 11 April 2006. The resultant tax shortfall for PHY was $860,859 and for the respondents of the order of $140,000. Her Honour sentenced the respondents on the basis that they were jointly responsible for an overall tax shortfall of approximately $1 million. 12The Crown noted that this scheme had been considered by the courts on a number of occasions. R v Hili; R v Jones [2010] NSWCCA 108 - Crown appeal against inadequacy of sentence upheld. Hili v R; Jones v R [2010] HCA 45; 242 CLR 520 - Appeal to High Court dismissed. R v Boughen and Cameron [2012] NSWCCA 17 - Crown appeal against inadequacy of sentence upheld. R v Stephen Victor Hawkins [2013] NSWCCA 208 - Crown appeal against inadequacy of sentence upheld. R v Kevin Zerafa [2013] NSWCCA 222 - Crown appeal against inadequacy of sentence upheld. R v Liles [2012] NSWSC 1249. R v Sakovitis [2013] NSWSC 464. Proceedings in District Court 13Her Honour made a number of findings, some of which have been challenged by the Crown. In relation to their complicity, her Honour found: "While I accept Mr Mereb and Mr Younan relied on Owen T Daniel it is one thing to rely on one's accountant to prepare the company's accounts and tax returns, it is another to cede control of your business to him and permit him to make arrangements for the company without your knowledge and agreement. There is no rational reason why Owen T Daniel's staff would perform illegal acts on the company's behalf to obtain benefits for the company without the knowledge and agreement of Mr Mereb and Mr Younan. I am satisfied beyond reasonable doubt that Owen T Daniel and his staff had Mr Mereb's and Mr Younan's knowledge and agreement to participate in the illegal dishonest scheme from the 2000 meeting and throughout the period specified in the indictment. I have no difficulty accepting that Owen T Daniel suggested the arrangement to them. Mr Mereb and Mr Younan seemed to be essentially decent hard working men who agreed to become involved in the scheme Owen T Daniel was promoting for the financial benefit of their company paying less tax than it should properly and lawfully have paid. As part of the scheme there were 19 transactions in which the offenders sent money from PHY's bank account to bank accounts in New Zealand of companies controlled by Robert Agius, the scheme's promoter. The moneys were sent overseas to give the appearance of payments of legitimate business expenses which were then claimed in the company's tax returns. The first transfer of money occurred on 8 September 2000, the last on 11 April 2005. Only one amount of just over $2,000 was sent in June 2003 and no moneys were transferred in 2004. (ROS 7.6 - 8.4) ... In assessing the objective seriousness of the offences, the amount of financial loss to the Commonwealth is a relevant factor though not determinative of sentence, as is the time over which their offending conduct continued, being almost five years although with a break of over two years in 2003 and 2004. I also take into account the part played by the offenders in the conspiracy by attending to the money transfers, each on a number of occasions. The scheme was essentially simple, although putting it into effect required preparation of false invoices and other documents, as well as false accounts, to provide a screen of legitimacy to the money transfers and false expenses claimed. The creation of those documents was done by others, although with the concurrence of Mr Mereb and Mr Younan. The offending was planned and sustained, although much of the planning and implementation was done by Owen T Daniel's staff and others." (ROS 9.4 - 9.9) 14Her Honour found: "Although Mr Mereb and Mr Younan dispute the precise amounts of the tax shortfalls for them personally it was agreed I could proceed on the basis that the total tax shortfall is approximately $1 million. Mr Mereb and Mr Younan have repaid the total tax shortfall from their offences, having repaid, on their count, $1.12 million and on the Crown's calculation $1.17 million. There are significant amounts of penalty tax and interest owing, in a similar amount to that already paid. Each of Mr Mereb and Mr Younan said in evidence they will pay the penalty tax and will have to sell their homes to do so. I accept their evidence to that effect. The past and intended future repayments are a significant extra curial punishment and I have taken them into account to reduce the sentence I have imposed on each offender." (ROS 12.5 - 12.9) 15Her Honour noted that the Crown had conceded that the respondents co-operated with the police during the investigation and that their conduct at the trial in consenting to the tender of the documents in the Crown case and requiring only a few of the proposed witnesses to give evidence, greatly shortened the time taken to conduct the trial. Her Honour took their co-operation in those respects into account. 16Her Honour also took into account the delay of more than 7 years between the end date of the offences and the sentencing of the offenders. That having been said, her Honour accepted that there was a need for a lengthy period of investigation and to assemble the evidentiary material. In that regard, she noted that much of the delay was due to decisions by the respondents. However, their first trial had ended with the jury not being able to agree upon a verdict and her Honour had adjourned the sentence proceedings for two months in September 2013 because of the demands of another trial. Nevertheless, her Honour accepted "that the offenders and their families have been in suspense and experienced high levels of anxiety in that period". Factual challenges 17The Crown disputed her Honour's finding that "the time over which their offending continued, being almost five years, although with a break of over two years in 2003 and 2004". The Crown submitted that there was no break of over two years in 2003 and 2004. This was because the period was in fact 15 months and during that time a number of false documents were filed pursuant to the scheme including PHY's taxation return for the financial year ended 30 June 2003 and misleading correspondence had been sent by the respondents to the ATO during that time. 18It was incorrect of her Honour to say that there was a "break of over two years in 2003 and 2004". Clearly fraudulent activities associated with the scheme took place during that time. Nevertheless, looking at her Honour's remarks on sentence as a whole, it is not at all clear that this factual finding had any effect on the sentences which her Honour passed. 19This is particularly so when one has regard to her Honour's specific finding at ROS 7.8 that "I am satisfied beyond reasonable doubt that Owen T Daniel and his staff had Mr Mereb's and Mr Younan's knowledge and agreement to participate in the illegal dishonest scheme from the 2000 meeting and throughout the period specified in the indictment, i.e. 24 May 2001 - 11 April 2006." Accordingly, although looked at in isolation it was not correct to say that there was "a break of over 2 years in 2003 and 2004" I am not persuaded that this had any effect on the sentencing process. 20The Crown noted that in her Honour's remarks on sentence she did not refer to the fact that each of the respondents took steps to ensure that their bookkeeper recorded moneys returned to their accounts as loaned and that payments out were recorded as expenses. It is correct that her Honour did not set out each step taken by the respondents to implement the scheme. Her failure to specifically refer to that matter does not mean that her Honour did not take it into account nor does it mean that her Honour did not have regard to the whole of the scheme as disclosed by the evidence at trial. Ground 1 - Extra Curial Punishment 21In written and oral submissions the Crown refined this ground of appeal to a submission that while her Honour was entitled to have regard to the imposition of additional penalties following the failure to pay tax as extra curial punishment and therefore a matter which could be properly taken into account by way of mitigation, her Honour had given too much weight to that factor. The Crown submitted that the respondents had not fully disclosed their personal financial positions and as such, it was impossible to determine the exact extent to which any penalties would impact upon them. It submitted that as a result, it was not open to her Honour to characterise these potential payments as "significant" extra curial punishment. Consideration 22There are a number of difficulties with that submission. The first is a factual one in that the respondents said that they would have to sell their homes in order to pay the penalty tax. That evidence was accepted. That of itself would indicate considerable hardship and family disruption for the respondents. 23Another and perhaps more fundamental difficulty with the submission is that referred to in R v Lamella [2014] NSWCCA 122 where Price J (with whom Garling and Bellew JJ agreed) said: "33 It is well established that a complaint that a judge failed to attribute sufficient weight to an issue on sentence will not generally be a material error. As Johnson J said in Majid v R [2010] NSWCCA 121 at [40]: "The second, third and fourth grounds of appeal complain that the sentencing Judge had given "insufficient weight" to different aspects of the Applicant's subjective case in passing sentence. In Stephens v R [2009] NSWCCA 240, Grove J (McClellan CJ at CL and RA Hulme J agreeing) observed at [16]-[18], that there are inherent problems in a ground expressed in that fashion succeeding, as the ground tacitly concedes that some weight had been placed upon the factor by the sentencing Judge. Circumstances in which matters of weight will justify intervention by this Court are narrowly confined, whether the proceeding is a Crown appeal or an offender's application for leave to appeal with respect to sentence: R v Baker [2000] NSWCCA 85 at [11]; Ryan v R [2009] NSWCCA 183 at [33]; Cao v R [2010] NSWCCA 109 at [57]."" 24In those circumstances, it was open to her Honour to find that the past and intended future penalty payments constituted "significant extra curial punishment". There was a factual basis for the finding in that the amount of their penalties was large and the selling of their houses would involve hardship. No convincing basis has been demonstrated to establish that her Honour gave "too much weight" to this factor. 25This ground of appeal has not been made out. Ground 2 - Error in imposing a single non-parole period of 2 years. Ground 3 - The sentence was manifestly inadequate. 26The Crown submitted that the High Court's approval of the statement of principle in Ruha v R [2010] 198 A Crim R 430 at [45] in Hili and Jones at [41] made it clear that the necessary deterrent and punitive effects of sentences for serious tax fraud must be reflected both in the head sentence and in any provision for earlier release from custody. The Crown submitted that this was another way of stating the requirement in s16A(1) of the Crimes Act 1914 (Cth) that a court should make an order which was of a severity appropriate in all the circumstances to the offence. The Crown submitted that the sentences imposed in this case did not satisfy those tests. 27The Crown supported these grounds of appeal by quoting extensively from Hili and Jones where the High Court identified considerations which were indicative of manifest inadequacy: "62 In the present matters, the inadequacy of the sentences imposed at first instance was evident from consideration of all of the matters that were relevant to fixing a sentence (and making a recognizance release order) "of a severity appropriate in all the circumstances of the offence". The chief considerations which pointed to inadequacy in these cases were the nature of the offending, and the sentences that had been imposed in cases most closely comparable with the present. 63 The applicants' offending was sustained over a long time. It was planned, deliberate and deceitful, requiring for its implementation the telling of many lies. The applicants acted out of personal greed. The amount of tax evaded was not small. Detection of offending of this kind is not easy. Serious tax fraud, which this was, is offending that affects the whole community. As was pointed out in Ruha, the sentences imposed had to have both a deterrent and a punitive effect, and those effects had to be reflected in the head sentences and the recognizance release orders that were made." 28The Crown then reviewed some of the cases to which reference has already been made (at [12] hereof) which involved other participants in this scheme. The Crown stressed that this was not a case where the offenders had admitted guilt but guilt had only been established after a trial and consequently no discount of sentence was involved. 29The Crown focused particularly upon the decision of this Court in Hawkins and compared salient features of this case with those in Hawkins. The Crown submitted that in this case the respondents' conduct was slightly longer in duration than that of Mr Hawkins by a period of 4 months and that the monetary amount involved was significantly greater, i.e. $1 million as opposed to $606,000. The Crown submitted that the respondents were jointly responsible for that overall amount, even though their individual liability was of a similar scale to that of Hawkins. Consideration 30The Crown accepted that as a Crown appeal, the Court needed to be mindful of the principles which govern Crown appeals generally. The Crown accepted that the relevant principles were summarised by Wood CJ at CL (with whom Meagher JA and Bell J agreed) in R v Wall [2002] NSWCCA 42 at [70]: 70 ... it is important to note the principles which apply in relation to the determination of a Crown appeal against sentence: (a) The normal restriction upon appellate review of the exercise of a discretion, as set out in House v The King (1936) 55 CLR 499, applies to Crown appeals against sentence: Dinsdale v The Queen [2000] HCA 54; 202 CLR 321; with the result that this Court cannot merely substitute its opinion, as to the appropriate sentence, for that of the sentencing judge: Lowndes v The Queen [1999] HCA 29; 195 CLR 665 at 671; rather, it may interfere only where error either latent or patent is shown; R v Tait (1979) 46 FLR 386 at 388; and Wong and Leung v The Queen [2001] HCA 64; 76 ALJR 79 at para 58 and 109. (b) Appeals by the Crown should generally be rare; Malvaso v The Queen [1989] HCA 58; 168 CLR 227 at 234, and unless there is a clear error of principle identified, it would be exceptional for the Court to interfere: R v Baker [2000] NSWCCA 85. (c) A Crown appeal against sentence is concerned with establishing matters of principle "for the governance and guidance of courts having the duty of sentencing convicted persons": per Barwick CJ in Griffiths v The Queen [1977] HCA 44; 137 CLR 293 but this power extends to doing what is necessary to avoid manifest inadequacy or inconsistency in sentencing, that is, where the sentence is definitely outside the appropriate range for the case in hand: Everett v The Queen [1994] HCA 49; 181 CLR 295 at 299; Dinsdale v The Queen (2000) 202 CLR 32, at paras 61 and 62, and Wong & Leung v The Queen at para 109. (d) The Court has a lively discretion to refuse to intervene even if error has been shown, and in deciding whether to exercise that discretion, it should have regard to the double jeopardy that a convicted person faces as a result of a Crown appeal: R v Allpass (1993) 72 A Crim R 561, R v Papazis (1991) 51 A Crim R 242 at 247, and Wong and Leung v The Queen at para 110. (e) A sentence which is imposed as a consequence of a successful Crown appeal will generally be less than that which should have been imposed by the sentencing court: R v Holder and Johnston (1983) 3 NSWLR 245 at 256, and will generally be towards the lower end of the available range of sentence: Dinsdale v The Queen at para 62." 31Leaving aside the reference to double jeopardy (Bui v Director of Public Prosecutions (Cth) [2012] HCA 1; 244 CLR 638), those principles remain valid and were restated by the plurality (French CJ, Crennan and Kiefel JJ) in Green v The Queen; Quinn v The Queen [2011] HCA 49; 244 CLR 462 where their Honours said: "1 The primary purpose of appeals against sentence by the Attorney-General or Director of Public Prosecutions ("Crown appeals") under s 5D of the Criminal Appeal Act 1912 (NSW) ("the Criminal Appeal Act") is "to lay down principles for the governance and guidance of courts having the duty of sentencing convicted persons." That purpose distinguishes Crown appeals from appeals against severity of sentence by convicted persons, which are concerned with the correction of judicial error in particular cases. The Court of Criminal Appeal of New South Wales, in the exercise of its jurisdiction under s 5D, has a discretion to decline to interfere with a sentence even though the sentence is erroneously lenient. That discretion is sometimes called the "residual discretion"." 32To succeed on either of these grounds, the Crown must demonstrate that her Honour's orders were "unreasonable or plainly unjust" (Markarian v R [2005] HCA 25; 228 CLR 357 at [25]). Another way of expressing the same concept is that the Crown must demonstrate that the non-parole periods and total sentences imposed were outside the range of sentences that could have been imposed. The discretion conferred on a sentencing judge is wide. There is no single correct sentence. What reveals manifest inadequacy of sentence is consideration of all the factors relevant to fixing the sentence (Hili and Jones at [60]). 33It is clear from her Honour's remarks on sentence that she did what she was required to do and took into account all the factors relevant to fixing this particular sentence. While it might be that other judges would have reached a different conclusion and while it might be that the sentences ultimately imposed were towards the bottom of the range, the fundamental question is whether these sentences are unreasonable or plainly unjust, or that their severity has failed to match the seriousness of the offending. 34In that regard, there is nothing inappropriate in the non-parole period being half of the head sentence. This matter was considered by the High Court (Mason CJ and McHugh J) in Bugmy v The Queen [1990] HCA 18;169 CLR 525 at 531 - 532. There their Honours said: "19 Once this is accepted, it follows that the considerations which the sentencing judge must take into account when fixing a minimum term will be the same as those applicable to the setting of the head sentence. Obviously, the weight to be attached to these factors and the way in which they are relevant will differ due to the different purposes behind each function. 20 A prisoner's prospects of rehabilitation will be relevant to the fixing of a minimum term, both by way of mitigation and because the community benefits from the reformation of one of its members. Conversely, the community needs to be protected from a violent offender, especially one whose prospects for rehabilitation are bleak. Likewise, the nature of the crime will be relevant because a more serious offence will warrant a greater minimum term due to its deterrent effect upon others. But the nature of the offence does not assume the importance which it has when the head sentence is determined. There, the sentence must be proportionate to the gravity of the offence (Veen v The Queen (No 2) [1988] HCA 14; (1988) 164 CLR 465, at p 477), whereas the minimum term represents a portion of the head sentence during which the offender will not be considered for parole." 35It was these kinds of discretionary issues which her Honour clearly took into account when determining what non-parole period she should impose. Error has not been demonstrated in this approach. 36Central to the Crown's submissions in support of these grounds is that the sentences can be demonstrated to be manifestly inadequate by reference to other cases where clients of OTD were involved. It is true that in some cases, e.g. R v Hawkins, the sentence imposed was higher. That, however, is not indicative of error. 37In Wong v R [2001] HCA 64; 207 CLR 585 at [58] Gaudron, Gummow and Hayne JJ said: "58 ... Secondly, there is the residuary category of error which, in the field of sentencing appeals, is usually described as manifest excess or manifest inadequacy. In this second kind of case appellate intervention is not justified simply because the result arrived at below is markedly different from other sentences that have been imposed in other cases. Intervention is warranted only where the difference is such that, in all the circumstances, the appellate court concludes that there must have been some misapplication of principle, even though where and how is not apparent from the statement of reasons." 38Similarly, in Munda v Western Australia [2013] HCA 38; 249 CLR 600 there is a discussion at [38] - [40] by the majority (French CJ, Hayne, Crennan, Kiefel, Gageler and Keene JJ) as to the use of comparable cases as a yardstick in determining the appropriate sentencing range for a given offence. At [39] their Honours said: "39 ... But in Hili it was distinctly not said that a yardstick derived by reference to comparable cases was an essential precondition of a conclusion that a sentence was manifestly inadequate. It was acknowledged that such a disparity is one pointer towards inadequacy; but French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ expressly approved the statement of Simpson J in Director of Public Prosecutions (Cth) v De La Rosa that previous sentences may be used to establish a range of sentences that have been imposed but not that the range is correct. In particular, the range of sentences that have been imposed in the past does not fix "the boundaries within which future judges must, or even ought, to sentence."" 39In any event, leaving aside R v Hawkins, the sentences here are not markedly out of step with those imposed in other cases involving clients of OTD. In this case her Honour was in a uniquely favourable position to assess the competing factors in the case because she had presided over the trial and could assess the evidence of the respondents. One of the difficulties in comparing sentences imposed in other cases without identifying some unifying principle is that the circumstances of the offending and the personal circumstances of the offenders are so varied. I am not persuaded that the sentences imposed were outside the range of sentences for offences of this kind so as to be properly regarded as manifestly inadequate. 40There is another consideration which should not be ignored. In determining a Crown appeal the Court has a residual discretion to decline to interfere with the sentence even though the sentence might be erroneously lenient (Green v The Queen; Quinn v The Queen at [1]). In Bugmy v The Queen [2013] HCA 37; 249 CLR 571 the majority (French CJ, Hayne, Crennan, Kiefel, Bell and Keene JJ) said at [24]: "24 ... However, within a range of sentences for this offence and this offender, the weight to be given to the evidence and the various, conflicting, purposes of sentencing was a matter for Judge Lerve. The authority of the Court of Criminal Appeal to substitute a sentence for that imposed by Judge Lerve was not enlivened by its view that it would have given greater weight to deterrence and less weight to the appellant's subjective case. The power could only be engaged if the Court was satisfied that Judge Lerve's discretion miscarried because in the result his Honour imposed a sentence that was below the range of sentences that could be justly imposed for the offence consistently with sentencing standards. In that event, the Court was required to consider whether the Director's appeal should nonetheless be dismissed in the exercise of the residual discretion. ..." 41It follows that even if I had been persuaded that the sentences imposed by her Honour were manifestly inadequate in the exercise of the residual discretion I would have declined to interfere with the sentences. 42These grounds of appeal have not been made out. 43The order which I propose is that the Crown appeal should be dismissed. 44McCALLUM J: I agree with Hoeben CJ at CL that the appeal should be dismissed, for the reasons stated by his Honour in respect of the three grounds of appeal relied upon by the Crown. The evidence before the sentencing judge established that, as to some tax years, the exact amount of primary tax payable remained in dispute, but on any view it was open to conclude that the extent of each offender's liability for penalty tax (including their liability for interest on penalty tax) was significant. The sentences imposed were undoubtedly lenient, in my view, but her Honour's remarks on sentence reveal a thoughtful exercise of discretion with careful regard to the relevant considerations, including the strong subjective case for each offender. I have not been persuaded that the sentences were unreasonable or plainly unjust in all the circumstances. I agree with the order proposed by Hoeben CJ at CL. 45GARLING J: I agree with the orders proposed by Hoeben CJ at CL, for the reasons which he gives. As well, I am not of the opinion that a more severe sentence was warranted in law and should have been passed: s6(3) Criminal Appeal Act 1912.

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