R v Sittczenko; ex parte Cth DPP [2005] QCA 461

CRIMINAL LAW - APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION - APPEAL AND NEW TRIAL - APPEAL AGAINST SENTENCE - APPEAL BY ATTORNEY-GENERAL OR OTHER CROWN LAW OFFICER - APPLICATIONS TO INCREASE SENTENCE - OTHER OFFENCES - where the respondent pleaded guilty to 11 counts of inducing another to deal in financial products by dishonest concealment of material facts in contravention of

s 1041F(1)(b) Corporations Act 2001 (Cth) - where the counts arose out of the operation of a scheme whereby the respondent made it possible, in return for a commission, for individuals to access preserved superannuation benefits - where the respondent received concurrent sentences of 18 months imprisonment with respect to each offence but the learned sentencing judge proceeded to order that the respondent be released forthwith upon giving a recognizance in the sum of $4,000 - where the offending with which the respondent was charged took place after the respondent agreed to civil orders made by the Federal Court which restrained him from having any involvement in any business purporting to facilitate the early release of superannuation benefits - where the respondent had provided an undertaking to co-operate with law enforcement authorities against a co-offender - where the respondent had no prior criminal history - whether the learned sentencing judge had given proper weight to the promise of co-operation with the authorities - whether the Court of Appeal should impose a short period of imprisonment after the respondent had been released into the community - whether the sentence imposed on the respondent was manifestly inadequate

Corporations Act 2001 (Cth), s 1041

Crimes Act 1914 (Cth), s 21E

Director of Public Prosecutions (Cth) v Hunter [2004] VSCA 219; (2003) 7 VR 119, cited

R v Brady; Brindley & Shale [2005] QCA 135; CA No 32, 39 and 80 of 2004, 29 April 2005, cited

R v Solway; ex parte Attorney-General (Qld) [1995] QCA 374; CA No 187 of 1995, 22 August 1995, distinguished

York v The Queen [2005] HCA 60; (2005) 79 ALJR 1919, considered

Commonwealth Director of Public Prosecutions for the appellant

[1] de JERSEY CJ: I have had the advantage of reading the reasons for judgment of Keane JA. I agree with the orders proposed by His Honour, and with his reasons.

[2] KEANE JA: On 29 July 2005, the respondent pleaded guilty to 11 counts of inducing another to deal in financial products by dishonest concealment of material facts. These offences involved the operation of a scheme set up by the respondent whereby preserved superannuation benefits were released to policy holders, less commission retained by the respondent and others, in contravention of

s 1041F(1)(b) of the Corporations Act 2001 (Cth). A contravention of s 1041(1)(b) is an offence punishable by a fine of up to $22,000 or imprisonment for five years, or both.[1] The offences occurred between 1 April 2003 and 6 September 2003.

[3] The respondent was sentenced to 18 months imprisonment in respect of each offence to be served concurrently but the learned sentencing judge proceeded to order that the respondent be released forthwith upon giving security by recognisance in the sum of $4,000 conditioned on him being of good behaviour for five years. The learned sentencing judge fixed upon this sentence having regard to the high level of co-operation promised by the respondent to the authorities in relation to the prosecution of other persons involved in the fraudulent release of superannuation benefits.

[4] Pursuant to s 21E of the Crimes Act 1914 (Cth) ("the Crimes Act"), the respondent had provided an undertaking to co-operate with law enforcement agencies in the prosecution of one of his co-offenders, Mark David. This co-operation involved giving evidence against David at his trial. At the sentencing of the respondent, the prosecution acknowledged in written submissions that the respondent's evidence would "substantially add to the prosecution case" and make the chances of a conviction "much greater". The learned primary judge gave reasons in camera in which he made it clear that, but for the promised co-operation, he would have sentenced the respondent to two years imprisonment in respect of each offence to be served concurrently, to be released after having served eight months upon giving security by recognisance in the sum of $4,000 conditioned on him being of good behaviour for a period of five years.

[5] The Commonwealth Director of Public Prosecutions appealed against the sentence imposed by the learned sentencing judge on two bases. First, it was contended that the sentence was manifestly inadequate. The second ground of appeal related to

s 21E(2) of the Crimes Act. This ground of appeal has now been abandoned and need not be considered any further.

[6] On 17 January 2003, the Australian Securities and Investments Commission ("ASIC") and the Australian Taxation Office ("ATO") applied to the Federal Court of Australia for relief against the respondent and others in relation to a scheme whereby the respondent and others encouraged members of the public to transfer their preserved superannuation benefits to certain nominated funds. In particular, the application sought an injunction to restrain the respondent from being involved in any way with any business facilitating the early release of superannuation benefits.[2]

[7] On 7 February 2003, final orders were made by Drummond J of the Federal Court. By consent, it was declared that the respondent had procured or induced contravention of penal laws in respect of the scheme which he had been running. It was also ordered, again with the consent of all parties, that the respondent be restrained from advertising, promoting or operating any business facilitating the early release of superannuation interests and from holding out to members of the public that he was associated with any superannuation entity or arranging for the redemption of superannuation interests.

[8] Despite these orders, which as I said were made with the consent of the respondent, in March 2003 the respondent suggested to Bronwynne Clarke that she or her associates undertake the role of trustee of a sham superannuation fund. Members of the public who wanted early access to their superannuation benefits were to be solicited by newspaper advertisements and induced to roll over their benefits from legitimate superannuation funds. On the respondent's suggestion, and with his advice, a bogus fund named Health Group Super Fund was set up by Clarke.

[9] The respondent's plan was then carried into effect. Members of the public were induced to request their superannuation trustees to pay their preserved superannuation entitlements to the Health Group Super Fund account that had been established by Clarke on the respondent's instructions. Members of the public who wished to have access to their preserved superannuation funds were told to sign rollover withdrawal forms directed to their superannuation fund. When funds were received, Clarke liaised with Errol Cassidy in relation to the distribution of the proceeds. A certain proportion of the monies received were divided between those involved in the scheme, including David, Cassidy and the respondent, with the balance being paid into the bank account of the relevant superannuation policy holder.

[10] The respondent also suggested to Andrew Helwig that he arrange a similar bogus superannuation fund in the name South Coast Forestry Group Super Fund which operated in the same way as the Health Group Super Fund, with Clarke and Helwig liaising with each other and Errol Cassidy in relation to the distribution of funds as they were received.

[11] The respondent advised Clarke and Helwig to ensure that each of their Funds was placed on the ATO's Register of Complying Superannuation Funds ("ROCS"). Once this was done, each Fund appeared to be a complying regulated Superannuation Fund. In truth, the respondent and the other participants in the scheme never had any intention that the funds would act as superannuation funds. It was always intended by them that as soon as cheques were received from genuine superannuation funds, they would be paid out. The respondent's deception led the trustees of genuine superannuation funds to believe that they were rolling over superannuation benefits into another superannuation fund which would hold the funds as superannuation benefits.

[12] The pursuit of this scheme resulted in 11 members of the public rolling over superannuation benefits into the accounts operated by Clarke and Helwig. The total amount so paid into those accounts was $487,711.95. Of this amount, $392,017 was released to the former holders of the superannuation interests. This may be expected to have adverse consequences to those taxpayers in terms of their liability to income tax. In any event, the funds are no longer preserved as superannuation entitlements. The operators of the scheme retained $89,749.56. The respondent received approximately $11,200.

[13] The respondent was born on 20 May 1953. He was between 49 and 50 years of age at the time of the offences and was 52 years of age at the date of sentence. He has no prior criminal history.

[14] For most of his working life he has been employed as a builder.

[15] As the learned sentencing judge appreciated, the gravamen of the respondent's wrongdoing was not that members of the public were defrauded of the totality of their funds. His Honour recognised that the respondent's offending involved a "deliberate flouting of a regulatory mechanism that was set up to ensure that superannuation is collected, protected and respected". His Honour also appreciated that the offence was serious and that the claims of general deterrence were significant.

[16] His Honour also referred to the circumstance that the offending conduct occurred after the orders of Drummond J had been made in February 2003.

[17] It is clear that the respondent's early plea of guilty, his previous good record and his undertaking to co-operate with the authorities in relation to the prosecution of others involved in the scheme weighed heavily with the learned sentencing judge. In particular, it is clear that it was in recognition of the respondent's promised

co-operation in the proceedings against David that a sentence of two years imprisonment with release on recognizance after eight months in actual custody was reduced to a sentence of 18 months imprisonment with immediate release on recognizance.

[18] It is well established that substantial discounts in sentencing should be allowed to recognise the value of an informer's co-operation under provisions such as s 21E of the Crimes Act, and that these discounts may be up to a third or even a half of the otherwise appropriate sentence.[3] However, as McPherson JA recently pointed out in R v Brady; Brindley & Shale,[4] discounts of that size are exceptional and are usually appropriate only in those cases where co-operation places a person at personal risk of severe retribution from other criminals. When arriving at the appropriate level of discount in each case, the court must consider the value of an informer's co-operation and the risk to the personal safety of the informer, while ensuring that "the reduction does not result in a sentence which is an affront to community standards".[5]

[19] In the present case, in my respectful opinion, the assessment of the value of the informer's discount in the respondent's case miscarried. The respondent's very important and, indeed, pivotal role in the commission of these offences has been obscured by his promise of co-operation against one of his co-offenders to the extent that 100 per cent of the time which the respondent would otherwise have spent in custody has been allowed as an informer's discount. In my respectful opinion, the learned sentencing judge, in focusing upon the respondent's

co-operation against one of his co-offenders, has failed to keep steadily in view the central role of the respondent in the counselling and execution of these offences. In the upshot, this failure has led to the imposition of a sentence which is, in my respectful opinion, an affront to community standards. The respondent is not obliged to serve any time in actual custody in a case where, having consented to the orders made by Drummond J, he immediately set about organising deliberate and persistent contraventions of the law including the involvement of others in his plans. That this state of affairs has come about by reason of the respondent's willingness to give evidence against one of those others is an affront to community standards including those relating to individual responsibility.

[20] Further, the nature and circumstances of this species of criminal misconduct, and the kind of people who engage in it, are such that the risks to the respondent's personal safety while in custody cannot be said to have been significantly heightened by the respondent's promise of co-operation against his co-offenders.

[21] In cases such as this, an offender who has acted brazenly, unlawfully and deliberately for his or her own profit to undermine a legislative scheme which has been enacted to promote the welfare of the community can be deterred generally only by the prospect of detention. In this regard, it should be recalled that the respondent pleaded guilty to 11 offences, each of which carried a maximum penalty of five years imprisonment.

[22] In my respectful opinion, notwithstanding the respondent's promise of co-operation against his co-offender, the value of that co-operation could not be valued so highly as to warrant a sentence which did not involve a period of actual imprisonment in recognition of the persistent and serious nature of the respondent's offending. It follows that I consider the sentence imposed by the learned sentencing judge to have been manifestly inadequate.

[23] The respondent submits that the approach of this Court on a Crown appeal against sentence "should be conservative". The statutory basis for an appeal against sentence by the Director of Public Prosecutions of the Commonwealth is contained in s 669A(1) of the Criminal Code 1899 (Qld) ("the Criminal Code") which provides:

"(1) The Attorney-General may appeal to the Court against any sentence pronounced by -

(a) the court of trial;

(b) a court of summary jurisdiction in a case where an indictable offence is dealt with summarily by that court;

and the Court may in its unfettered discretion vary the sentence and impose such sentence as to the Court seems proper."

[24] Although s 669A of the Criminal Code confers a right of appeal upon the Attorney-General of Queensland, it should be noted here that the situation which pertains in Queensland[6] mirrors that in other Australian States such as Victoria, where the Court of Appeal recently noted in Director of Public Prosecutions (Cth) v Hunter[7] that:

"The Director of Public Prosecutions (Cth) appealed against the sentences imposed pursuant to the provisions of s 567A of the Crimes Act 1958. That section empowers the Director of Public Prosecutions (Vic) to appeal to the Court of Appeal against a sentence or sentences passed on a person convicted on indictment if the Director considers that "a different sentence should have been passed and is satisfied that an appeal should be brought in the public interest ...". That right of appeal is exercisable by the Commonwealth Director of Public Prosecutions through the combined operation of s 68(2) of the J_udiciary Act_ 1903 (Cth) and

s 9(7) of the Director of Public Prosecutions Act 1983 (Cth)."

[25] When an appeal is brought under s 669A(1) of the Criminal Code this Court is required to undertake two tasks. The first of these tasks is to determine whether or not an error has occurred in the exercise of the discretion possessed by the learned sentencing judge.[8] One way to demonstrate such an error is to demonstrate that the sentence imposed was manifestly inadequate.[9] I am satisfied, as I have already said, that such an error has been demonstrated in the present case.

[26] The second task that must be undertaken, once an error has been identified, is to exercise the sentencing discretion afresh and to "impose such sentence as to the Court seems proper". I have already expressed the view that the respondent's offending required that he serve a period of actual imprisonment.

[27] The respondent submits in this regard, however, that even if this Court were to come to the conclusion that a period of actual imprisonment would be appropriate, it should refrain from imposing such a sentence. Reliance is placed on the dictum of Pincus JA in R v Solway; ex parte Attorney-General (Qld)[10] where his Honour said that "it is an unusual course to send an offender who is at large to prison for a relatively short period". That may be so when it is considered that, while the appellate court may have regarded a sentence of imprisonment as preferable, the sentence that was imposed was nonetheless one that was within the discretion of the sentencing judge, or where the passage of time means that a sentence of imprisonment would no longer be appropriate when allowance is made for activities such as community service that may have been carried on in the interim between sentence and the hearing of an appeal. The situation is different where, as in this case, it is clear that the sentence imposed was manifestly inadequate and that the sentence which was initially imposed required the respondent to do nothing more than enter into a recognisance.[11] It should also be remembered that the conclusion of the Court in Solway was that the sentence imposed was within the appropriate range at the time it was made, even though developments in the intervening period suggested that a heavier sentence should have been imposed.

[28] I would reject the submission that, as a general rule, the fact that it may be appropriate to impose a sentence involving only a short period of actual imprisonment means that an offender should not be required to serve any time in custody at all. It has previously been recognised by this Court that the notion, that an appellate court ought to be reluctant to impose a short custodial sentence on an appeal by the Crown where a non-custodial sentence was imposed at first instance, may yield to other considerations.[12] The circumstances of the offending involved in this case require that the respondent should serve a term of actual imprisonment, albeit a relatively short term.

[29] As to the appropriate term of actual imprisonment, even if an informer's discount of one-third is allowed in respect of the period of actual imprisonment which the learned sentencing judge would have imposed on the respondent had it not been for his promise of co-operation, a period of imprisonment somewhat in excess of five months should have been imposed. As I have already observed, there is no suggestion that the respondent's personal safety in prison is at risk to any extent warranting greater than a one-third discount.

[30] For these reasons, the appeal should be allowed.

[31] The sentence should be set aside and, in lieu thereof, the respondent should be sentenced to 18 months imprisonment for each offence to be served concurrently, with the respondent to be released after having served five months upon giving security by recognizance in the sum of $4,000 conditional on him being of good behaviour for five years.

[32] A warrant should issue for the arrest of the respondent.

[33] MACKENZIE J: I agree, for the reasons given by Keane JA, that the appeal should be allowed. I agree with the orders proposed by him.

[1] See Corporations Act 2001 (Cth), s 1311(1), Sch 3.

[2] Preserved benefits held in a regulated superannuation fund are only permitted to be voluntarily distributed to the member of the fund entitled to those benefits upon the satisfaction of a "condition of release": Superannuation Industry (Supervision) Regulation 1994 (Cth), reg 6.18(1). A "condition of release" is one of those events listed in Column 2 of Schedule 1 of the Regulation and includes, inter alia, death, retirement, permanent incapacity and attaining age 65: Superannuation Industry (Supervision) Regulation 1994 (Cth), reg 6.01, Sch 1. The vice of the scheme operated by the respondent was that it allowed persons to access preserved benefits without having to satisfy a condition of release.

[3] See, eg, R v Gladkowski [2000] QCA 352; (2000) 115 A Crim R 446.

[4] [2005] QCA 135; CA No 32, 39 and 80 of 2005, 29 April 2005 at [15].

[5] R v Gladkowski [2000] QCA 352 at [7]; [2000] QCA 352; (2000) 115 A Crim R 446 at 448.

[6] See, eg, R v Cook; ex parte Director of Public Prosecutions (Cth) [1996] 2 Qd R 283 at 284 - 285.

[7] [2003] VSCA 219 at [3]; [2003] VSCA 219; (2003) 7 VR 119 at 119 - 120.

[8] This was the approach supported by Callinan and Heydon JJ in York v The Queen [2005] HCA 60 at [63]; (2005) 79 ALJR 1919 at 1931. In the same case, McHugh J held that the wording of s 669A meant that it was unnecessary to demonstrate error and that "the Court can interfere with the sentence for any reason that it thinks is sufficient, so long as the reason is not an arbitrary one": York v The Queen [2005] HCA 60 at [27]; (2005) 79 ALJR 1919 at 1924 - 1925. It may be noted that an error in the exercise in the sentencing discretion would certainly provide a sufficient and proper reason for this Court to interfere with a sentence imposed below. As such an error has been found in the present case, the result, which is that the appeal must be allowed, is the same regardless of which approach is applied.

[9] See R v Melano; ex parte Attorney-General [1994] QCA 523; [1995] 2 Qd R 186 at 189; York v The Queen [2005] HCA 60 at [66]; (2005) 79 ALJR 1919 at 1931.

[10] [1995] QCA 374; CA No 187 of 1995, 22 August 1995 at [16] in the reasons for judgment of Pincus JA.

[11] See R v Alibasic and Salajdjiza; ex parte Cth DPP [2005] QCA 108; CA No 401 and CA No 402 of 2004, 15 April 2005. That case provides an example of this Court intervening to impose a relatively short custodial sentence when the sentence imposed at first instance, which required no more than the entry of a recognisance, was judged to be manifestly inadequate.

[12] R v Wright; ex parte DPP (Cth) [1994] QCA 16; (1994) 74 A Crim R 152 at 160 - 161; R v Kopa; ex parte DPP (Cth) [2004] QCA 100 at [27]; [2004] QCA 100; (2004) 206 ALR 197 at 205.