R v Zerafa

Ly v R [2007] NSWCCA 28 Markarian v R [2005] HCA 25; 228 CLR 357 Markovic v R, Pantelic v R [2010] VSCA 105; 30 VR 589 McAree v Barr [2006] TASSC 37 McCraw v R [2011] NSWCCA 162 Nguyen v R [2001] WASCA 72; 118 A Crim R 519 Nguyen v R [2001] WASCA 119; 160 FLR 284 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; 195 CLR 1 R v Aller [2004] NSWCCA 378 R v Berlinsky [2005] SASC 316 R v Boughen; R v Cameron [2012] NSWCCA 17 R v Cheung [2010] NSWCCA 244; 203 A Crim R 398 R v Edwards (1996) 90 A Crim R 510 R v Girard [2004] NSWCCA 170 R v Grbin [2004] NSWCCA 220 R v Hawkins [2013] NSWCCA 208 R v Hernando [2002] NSWCCA 489;136 A Crim R 451 R v Hinton [2002] NSWCCA 405; 134 A Crim R 286 R v Huston; ex parte Cth DPP; R v Fox; ex parte Cth DPP; R v Henke; ex parte Cth DPP [2011] QCA 350; 219 A Crim R 209 R v Jones; R v Hili [2010] NSWCCA 108; 76 ATR 249 R v Kearns [2003] NSWCCA 367 R v Kertebani [2010] NSWCCA 221 R v MD, BM, NA and JT [2005] NSWCCA 342 R v MacLeod [2013] NSWCCA 108 R v Matthews (1996) 130 FLR 230 R v Murphy [2005] NSWCCA 182 R v Nguyen [2006] NSWCCA 369; 166 A Crim R 124 R v Pogson; R v Lapham; R v Martin [2012] NSWCCA 225 R v Ida Ronen, Nitzan Ronen, Izhar Ronen [2006] NSWCCA 123; 161 A Crim R 300 R v Sinclair (1990) 51 A Crim R 418 R v Togias [2001] NSWCCA 522; 127 A Crim R 23 R v Wheatley [2007] 67 ATR 531 R v Williams [2005] NSWSC 315; 152 A Crim R 548 R v Wirth (1976) 14 SASR 291 R v X [2004] NSWCCA 93 R v Zamagias [2002] NSWCCA 17 S v R [2003] WASCA 309 Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317 Sowaid v R [2011] NSWCCA 177 Van Eeden v R [2012] NSWCCA 18 Waugh (aka Willoughby) v R [2010] NSWCCA 3 Texts Cited: Australian Law Reform Commission, ALRC Report 44: Sentencing, (March 1988) Category: Principal judgment Parties: Regina (Cth) - Appellant Kevin Zerafa - Respondent Representation: Counsel: Mr P Neil SC/Ms S McNaughton SC - Appellant Mr T Game SC - Respondent Solicitors: Commonwealth Director of Public Prosecutions - Appellant Brown Wright Stein Lawyers - Respondent File Number(s): 2008/125795 2009/232626 Decision under appeal Citation: [2012] NSWSC 978 Date of Decision: 2012-08-23 00:00:00 Before: Simpson J File Number(s): 2008/125795 2009/232626

Judgment 1HOEBEN CJ at CL: Offences and sentence After a five month trial in the Supreme Court with three co-accused, the respondent was found guilty on two counts of conspiracy to defraud the Commonwealth. The counts as charged on the indictment were as follows: Count 1: Between about 1 January 1997 and 23 May 2001 the respondent conspired with Mr Robert Agius, Owen Daniel and two others to defraud the Commonwealth, contrary to sections 86(1) and 29D of the Crimes Act 1914 (Cth) for which the maximum penalty is imprisonment for 20 years. Count 2: Between 24 May 2001 and 23 October 2006 the respondent conspired with Mr Robert Agius, Owen Daniel and two others dishonestly to cause a loss, or dishonestly to cause a risk of loss, to the Commonwealth, knowing or believing that the loss would occur or that there was a substantial risk that the loss would occur contrary to s135.4 of the Criminal Code 1995 (Cth) (maximum penalty 10 years imprisonment). 2The respondent was sentenced by the trial judge, Simpson J, on 23 August 2012 as follows: Count 1: Community Service work for 500 hours. Count 2: Imprisonment for 3 years commencing 23 August 2012 and expiring on 22 August 2015 with the respondent to be released on entering into a recognizance to be of good behaviour for three years. 3Initially the Crown relied upon a single ground of appeal: That the sentence imposed was manifestly inadequate. 4In the alternative, the Crown sought to rely upon additional grounds of appeal against the prospect that the Court might conclude that the case was one of specific error in sentencing, rather than manifest inadequacy. No objection was made to those additional grounds. Those additional grounds of appeal were: Further or alternatively, 2 Her Honour erred in finding that the offences, in the respondent's case, do not fall even near the worst category and in failing to find that they fall close to the worst category. 3 Her Honour failed to give sufficient weight to the nature and circumstances of the respondent's offending and the need to impose adequate punishment. 4 Her Honour gave excessive weight to the influence of Mr Daniel on the respondent's offending conduct. 5 Her Honour erred in giving excessive weight to the personal circumstances of the respondent in determining the sentences imposed. Factual Background 5The conspiracy, the subject of each count, originated in an accountancy firm in Vanuatu. During the period of the conspiracy, Mr Agius was the senior partner of the firm and was resident in Vanuatu. The conspiracy centred on a series or pattern of arrangements that concerned the preparation and lodgement of Income Tax Returns on behalf of Australian companies conducting businesses of various kinds. A large number of Australian companies were invited to and did, participate. The directors of eight of those companies gave evidence in the trial. Those companies became involved via their association, professionally (as clients), with a New South Wales firm of accountants practising under the name of "Owen T Daniel and Company" (ODC), of which the now deceased Mr Owen Trevor Daniel was the principal and in which the respondent was initially an employee, and from 2000, a partner. 6Throughout the trial, the arrangements were referred to as a "scheme". The scheme was fraudulent. What actually happened varied markedly from company to company and on occasions, departed substantially from what can be discerned as having been the original conception. 7At the heart of the scheme were fraudulent claims by Australian companies for income tax deductions, said to be for business expenses. As designed, the scheme involved provision by the Australian company participants of invoices for specified services - usually identified as "management and consultancy services". The wording on the invoices was selected, sometimes in conjunction with the company directors, to appear to be relevant to the nature of the business conducted by the relevant company. These services were never provided by the invoicing company. It was never intended that such services be provided. The invoices were prepared on the letterheads of UK registered companies. 8Notwithstanding that no such services were provided, the Australian companies made payments of the amounts on the invoices. Payments were made to New Zealand bank accounts in the name of the UK invoicing companies. The Australian companies entered the payments into their profit and loss (income and expenditure) statements. The total of the expenses for the year, including the false entries, were then translated into the business expenses in the companies' Income Tax Returns, and (in accordance with the self assessment system operated by the Australian Taxation Office ("the ATO")) resulted in reduction in the taxation for which the companies were assessed to be liable. The false claims for business expense deductions constituted the fraud, the subject of the conspiracy in the first count, and the loss to the Commonwealth, the subject of the conspiracy in the second count. 9The money paid to the New Zealand accounts was, within a short period, transferred to other accounts, also held in New Zealand banks, in the names of finance companies based in Ireland. The money was then, again within a short time, returned to Australia, usually to the personal accounts of the directors of the Australian companies. It was returned under the guise of loans. The purpose of returning the money in this way was to avoid it appearing in the records of the directors as income, with potential income tax liability. The payment of money which was in reality the money of the companies, to the companies' directors, without it being declared for income tax purposes, was a secondary fraud or loss to the Commonwealth. In some cases, the company directors transferred the money back to the company's accounts, recording the transfers as directors' loans. 10The scheme was therefore relatively simple. It involved the payment of money by Australian companies in response to false invoices for services not received by the Australian companies and fraudulent claims of those amounts as deductible business expenses and the return to the directors personally of the money, masquerading as loans in order to avoid personal income tax. 11Integral to the scheme was the maintenance of company accounting records that included the false transactions and the preparation of Income Tax Returns based on those false accounts. This was done by the company directors with the assistance of ODC. 12The scheme involved an elaborate trail of documentation. That trail began with the invoices for services. It also included letters from the Irish finance companies, reportedly responding positively to requests (which had never been made) for loan finance in specified sums, purported loan documents and further invoices, this time from the finance companies, purportedly representing interest charges on the draw down of the loans. 13This documentation was clearly designed to give an appearance of authenticity to the transactions in case of inquiry or investigation by the ATO. 14A variation of the scheme emerged in 2003. It involved the provision to Australian companies of documents entitled "Certificate of Insurance". These were alternatives to the invoices for management and consultancy services. In other respects, this variation followed a similar pattern to that previously described. The certificates of insurance, which were false, purported to specify the nature of the insurance, the amount of cover and the period of cover, together with the premium. The Australian companies paid the amounts specified as the premiums to New Zealand accounts, most of the money was transferred to other New Zealand accounts, from which it was returned, again masquerading as loans, to the Australian company directors. The Certificates of Insurance were created to provide apparent authentication of the insurance payments in the event of an inquiry by the ATO. 15Implementation of the scheme was haphazard and inept. In many cases, invoices for services were not provided to the Australian companies. In others, they were not provided until after the Australian company directors had pressed for their provision for the purpose of completing the company accounting records. Frequently, the amounts on the invoices did not correspond with the payments that were made. In some cases, the Australian companies made entries (false) in their accounts, purportedly representing payments to the UK companies for relevant services, but did not, in fact, send money to New Zealand. These were simply false claims for deductible expenses. They were not claims made in accordance with the design of the scheme, but they were a consequence of it and flowed directly from participation by those company directors. 16In each case, the Australian company directors were told that participation in the scheme required payment of a fee as "start up costs". This varied from $8,000 to $12,000 over the period of the conspiracy and was deducted from the first payment. 17The most elaborate part of the scheme was the documentation designed to provide evidence that the money returned to the company directors constituted loans. Commonly but not invariably, an Australian company director received, unsolicited, a letter from a finance company in Ireland, stating that a request made by the Director[s] for loan finance had been approved (no such request had, in fact, been made). With this letter was a document entitled "AUD$ facility". These documents on superficial assessment had the appearance of genuine commercial transactions. They stated that finance was sought and offered "for the purpose of debt restructuring". Usually the stated amount of the loan was $1 million. 18These documents were created for the purpose of satisfying any ATO inquiry. That the purported loans were shams was evident by two circumstances. First, notwithstanding the quantum of the loans, no security was sought. Second, the loan offers were accompanied by undated letters containing two palpably false statements - that the loans had been (fully) drawn down, and that the loans had been fully repaid. These letters came to be known as "letters of forgiveness" or "letters of comfort". 19Money was sent from the finance companies to the Australian company directors. The amounts sent corresponded with the amounts purportedly paid in respect of the false "management and consultancy" fees claimed in the invoices, subject to deductions for administration expenses, and a single deduction, from the first payment, for "start up" costs. This was the last step in the "round the world trading scheme". 20Communications were substantially with the Vanuatu accounting firm Moore Stephens/PKF either through Mr Daniel, the respondent or other employees of ODC, or directly by the company directors. 21The nature and circumstances of the offending include the period over which it was perpetrated. In the case of Mr Agius, it was a period of almost 10 years. In the case of the respondent, a period of more than 7 years from the middle of 1999. It came to an end only on the execution of search warrants by officers of the Australian Federal Police (AFP) in October 2006. 22Mr Agius actively presented and promoted the scheme to clients of ODC. He did this through his association with Mr Daniel. He was in the practice of making regular visits to Australia and of making contact with Mr Daniel who identified and selected clients he considered suitable for participation. 23It was common for Mr Daniel to tell potential recruits to the scheme that the arrangements were legal and above board and had been scrutinised by the ATO auditors and had survived that scrutiny. Notwithstanding the assurances given by Mr Daniel, in general the participants were in no doubt that the arrangements they were embarking upon were fraudulent in that they centred upon false claims for deductible expenses. As a consequence, the directors of all but one of the eight companies identified in the trial, entered pleas of guilty to various charges of dishonesty. Six of them have served terms of imprisonment. In respect of the eight companies of which evidence was given, the financial loss was said to be in excess of $5 million. 24On 23 October 2006 a search warrant was executed by the AFP at the offices of ODC. At about the same time search warrants were executed at the house of the respondent and other employees of ODC. Remarks on sentence 25The following findings of fact were made by her Honour. None of these findings was challenged by the parties. 26The implementation of the arrangements was at all times under the direct control and supervision of Mr Agius. He did this with the administrative support of employees of Moore Stephens/PKF in Vanuatu and also with the administrative support of employees of ODC including the respondent. 27The respondent's involvement began at an early stage. He frequently communicated with client participants and with Moore Stephens/PKF, in the administration of scheme transactions. By 9 July 1999 the respondent had a working knowledge of the arrangements whereby the scheme was implemented. The respondent was very involved with a number of companies in the maintenance of the companies' accounts and the preparation of the fraudulent Income Tax Returns and he was well aware of the false records in the accounts and the fraudulent claims in the Income Tax Returns. 28On occasions the respondent determined or advised the amount of money that should be sent overseas. On at least two occasions, he personally forwarded the "letters of comfort" to the directors with the advice that they keep the letters in safe places. 29Initially the respondent acted solely on the instructions of Mr Daniel. He was during the period 1997 to 2001 (count 1) aware of the fraudulent nature of the arrangement. The full appreciation of that fraudulent nature grew upon him gradually. By 2001 he had a fair working understanding of the nature of the arrangements such that he could and did advise clients independently without recourse to Mr Daniel. By 2001 the respondent had become a partner in the firm. He was trusted by Mr Daniel, who presented him to clients as "my right hand man". 30In 2004 the respondent, on reading material disseminated by the ATO concerning overseas tax minimisation schemes, approached Mr Daniel to express his concerns and urge that no new clients be initiated into the scheme. He was abruptly and discourteously rebuffed. From that date, however, no further clients joined the scheme. 31In about 2003 the ATO began making inquiries into overseas transactions. The respondent took an active role in organising fabricated responses to the audit of one of the companies, Tara. In the case of that company, two meetings took place with officers of the ATO. Immediately before the first Mr Daniel offered Tara's director, Ms Collette McKenna, a false story she could tell the ATO officers concerning her entry into the arrangement. The respondent had no part in this fabrication but was aware of it. He attended the meeting, aware that Ms McKenna had been advised by Mr Daniel to give untruthful replies to questions asked of her. After that meeting, the respondent requested that Ms McKenna compile a document that had the appearance of a consultancy report emanating from the invoicing company, that corresponded with what appeared in the invoices - in other words, the respondent asked her to create false material in the hope that it would satisfy the ATO that the invoices were generally for "consultancy services provided". 32When Ms McKenna produced this document, the respondent created or was involved in the creation of a coversheet to provide added apparent authenticity. The respondent arranged for invoices to be created but may not himself have created the invoices. The respondent provided Ms McKenna with three documents purporting to be "Consulting Agreements". They were also designed to mislead ATO auditors. 33In relation to a company, ASS, the respondent participated in a "role playing" exercise on the evening before a scheduled meeting with ATO officers in April 2004. A false story was concocted to explain the invoices relevant to that company. False answers were provided by the respondent for the directors of Kylood Pty Limited and Jiess Pty Limited (Messrs Hili and Jones) when the ATO signalled its intention of making inquiries and required answers to pertinent written questions. In the early stages, all of the respondent's participation was undertaken at and under the direction of Mr Daniel and not on his own initiative. 34Her Honour found that the respondent was actively involved, and became more so as time went on, that he was well aware that he was involved in a fraudulent activity and that he was led into this by an unscrupulous, immoral and overpowering employer, Mr Daniel. 35For the purposes of s16A(2)(c) of the Crimes Act (Cth), her Honour found that both Agius and the respondent engaged in a course of criminal conduct that constituted the offences. Company participants in the scheme filed false Income Tax Returns year after year with the connivance of both offenders. This went on repeatedly over an almost 10 year period in the case of Mr Agius, and a 7 year period in the case of the respondent. 36Her Honour concluded: "63 It is hardly necessary to say that offences such as these call for sentences containing a strong element of general deterrence. The need for individual deterrence (s16A(2)(j)) of the offenders is less obvious. I believe that it is unlikely that Mr Zerafa will require any further reminder of the need to avoid using his profession for fraudulent purposes. Indeed, on his behalf it was put that it is likely that he will lose his professional status as an accountant, and will not have the opportunity to use his profession for that purpose. ... For the purposes of s 16A(2)(e), the immediate injury suffered by the Commonwealth was a very considerable loss of revenue. In respect of the eight companies of which evidence was given, the financial loss was said to be in excess of $5 million. But there is also an intangible loss. The Australian taxation system, based as it is on self-assessment, depends for its integrity upon the honesty of citizens. Of course, there will always be those who choose to cheat. They are cheating their fellow citizens, casting a greater burden on each of them. Further, when it is known that the system can be, and is, cheated, the very structures of society are damaged. The self-assessment system depends not only on the honesty of taxpayers, but on the confidence of taxpayers that others will make their proper contributions, or that, if they do not, they will be adequately punished." (ROS [63]) 37Her Honour found that the two most important sentencing considerations, having regard to the role played by each offender, and the nature and circumstances of the offending were "general deterrence and the need to impose adequate punishment" [64]. 38By reference to s16A(2)(m) - character, antecedents, age, means and physical or mental condition - her Honour made the following findings in respect of the respondent. 39He was born in October 1975 and was married with two young children (aged 8 and 6 at the time of sentence). He had no criminal convictions and her Honour was satisfied that his good character was a matter appropriate to be taken into account. He commenced employment with ODC in 1997 when he was 21 or 22 years of age. He had previously had very little employment experience and none in a professional office. 40Her Honour found that the environment into which he was inducted was morally poisonous and that Mr Daniel was a very corrupt man. She noted that Mr Daniel was also gregarious, charming and charismatic and was generous to the respondent who was an impressionable and vulnerable young man. Her Honour was satisfied that the respondent did not engage in the scheme of his own initiative, but did so under the malign influence of Mr Daniel. Her Honour took into account, to his credit, that he did make an attempt in 2004 to persuade Mr Daniel to cease involvement and that notwithstanding Mr Daniel's rebuff, that attempt had the effect of limiting, if not bringing to an end, the participation of clients of the firm in the scheme. Her Honour found that he was entitled to credit for that stand. 41Her Honour was satisfied that the respondent received no direct financial reward or benefit for his participation. 42Her Honour found: "84 Mr Zerafa gave evidence in the trial over many days, and I had the opportunity to observe him in some detail. I should say at the outset, that I am satisfied that, in significant ways, the evidence that he gave was knowingly untrue. However, I also had some opportunity to make an assessment of his personal characteristics. I formed the view that, while he is intelligent, he lacked the strength to resist the overpowering personality of Mr Daniel. This may be due to family circumstances of which I have little evidence. He did give evidence that, at a critical time, he was almost estranged from his father, and this had the effect of driving him further into the sphere of influence of Mr Daniel." (ROS [84]) 43It was not until eighteen months after the execution of the search warrants that the respondent was charged and five and a half years later that the trial commenced. Her Honour found that both he and his wife had in the ensuing six years, suffered from depression and anxiety. The family life had been severely affected. The younger child was a baby when the search warrants were executed and the older child was aged two. As a consequence, the children had never lived in a normal stress-free family environment. One child exhibited very worrying behavioural tendencies. Her Honour was satisfied that it was probable that a fulltime custodial sentence would produce significantly adverse and, in all probability, irremediable effects on the respondent's wife and his children. Her Honour found that this in turn would make a period of incarceration more difficult for him [86]. 44In relation to how she should use this finding, her Honour said: "87 Uninstructed by authority, I would have considered that s 16A(2)(p) of the Crimes Act both entitled and obliged me to take those family consequences into account. However, binding authority requires me to take a different approach. Those circumstances may not be given substantial weight in the sentencing determination unless they can be categorised as "exceptional": R v Togias [2001] NSWCCA 522 at [9]-[17]; R v Hinton [2002] NSWCCA 405; 143 A Crim R 286 at [31]. In Togias, Spigelman CJ seems to have taken the view that, although the words "exceptional circumstances" are not to be found in s16A(2)(p), nevertheless they have so consistently and repeatedly been notionally engrafted into the legislation by a number of State appellate courts that the time has passed for any court other than the High Court to reverse the trend. In Bui v Director of Public Prosecutions (Cth) [2012] HCA 1, in a different context, the High Court rejected a construction that would have put an impermissible gloss on the text of s16A (at [19]; see also [25]-[27]). Nevertheless, Togias and Hinton state the law that I must apply. Powerful as the evidence of the impact on Mr Zerafa's family and dependents is, the circumstances here fall short of exceptional. I cannot allow s16A(2)(p) to guide the sentence to be imposed." 45Her Honour accepted that it was likely that the respondent would lose his profession and livelihood because the professional bodies governing the accountancy profession had moved to strike his name from the relevant registers. She considered that this was a significant extra-curial punishment which it was appropriate for her to take into account. She concluded that besides the professional disgrace, it would bring with it a very heavy financial cost. 46In relation to culpability, her Honour rejected the Crown submission that his offences were close to a worst case. She said: "91 I accept that, objectively speaking, the offences are very serious, although I reject the contention that, in Mr Zerafa's case, they fall into the worst category, or even near it. I do accept that they involve a breach of the trust reposed in an accountant, both by the clients, by the community, and by the ATO. That breach of trust is, as I have indicated, somewhat ameliorated by the absence of any moral or ethical guidance on the part of Mr Daniel, who could have been expected, but entirely failed, to introduce Mr Zerafa to morally and ethically acceptable accounting practices. Mr Daniel used Mr Zerafa (and others in the practice) as instruments in a personal war he appeared to be conducting against the ATO. I do not accept that Mr Zerafa's participation approximates a worst case. That is particularly so, because of his youth and naivety, in relation to the period covered by the first offence." 47Her Honour summarised her conclusions before passing sentence on the respondent. She said: "124 In Boughen and Cameron I made plain my views that those who defraud the revenue by tax evasion must pay the same heavy penalties as those who defraud the revenue by social security fraud. I do not resile from those views. Two circumstances distinguish those cases from that of Mr Zerafa. One is that such cases invariably involve and are perpetrated specifically for the purpose of financial gain to the offender. That is not here the case. The second is that they invariably involve a conscious and deliberate decision on the part of the offender to participate in the fraud. That also is not the case here. Mr Zerafa was drawn, quite insidiously, into the conspiracy by an older and stronger employer. I have already held that, by mid-1999, Mr Zerafa was very aware of the essential nature of the scheme. It is true, as the Crown submitted, that he could have confronted Mr Daniel, could have left the employment, and could have reported the conduct to the relevant authorities or professional bodies. To hold that he ought to have done that is to ignore the realities of the situation in which he found himself. Had he had more experience of the world when he came into Mr Daniel's orbit, he may well have been in a better position to evaluate the true character of his employer, and the degree to which the work he was required to do departed from acceptable professional practice, and to have resisted Mr Daniel. He did not have that experience. That, in my opinion, significantly diminishes his culpability. In this context I place considerable store on his 2004 attempt to persuade Mr Daniel to abandon the scheme, and, indeed, the apparent success of those efforts despite Mr Daniel's arrogant and hostile response." 48Her Honour also took into account that it was almost six years since the execution of the search warrants. Her Honour qualified the effect of the delay because the evidence was complicated and detailed and because considerable additional delay was occasioned by unsuccessful applications of the four accused, for a stay of proceedings and appeals against the refusal of those applications. Submissions 49It was common ground that despite the maximum penalty for count 1 being imprisonment for 20 years, and that for count 2 imprisonment for 10 years, the Executive Memorandum contained a clear acknowledgment that the maximum penalty under the Crimes Act was "far too high". The parties accepted the approach in R v Ida Ronen, Nitzan Ronen, Izhar Ronen [2006] NSWCCA 123; 161 A Crim R 300 where the Court (Howie J with whom Spigelman CJ at Kirby J agreed) found that the situation was one where the sentencing judge was entitled to take into account that the maximum penalty prescribed (here count 1) was no longer an appropriate yardstick for the sentence to be imposed and had little relevance as a guide to the seriousness of the offender's conduct. The Crown accepted that it was appropriate to take into account the significant diminution in the maximum available sentence as indicative of a change of attitude on the part of the legislature. 50The Crown accepted that its right of appeal was an exceptional power to be exercised with restraint and in order to allow the Court to lay down sentencing principles (Griffiths v R [1977] HCA 44; 137 CLR 293; Everett v R [1994] HCA 49; 181 CLR 295 and R v MD, BM, NA and JT [2005] NSWCCA 342. The Crown accepted these statement of principle: "... An appeal by the Attorney General should be a rarity, brought only to establish some matter of principle and to afford an opportunity for the Court of Criminal Appeal to perform its proper function in this respect, namely, to lay down principles for the governance and guidance of courts having the duty of sentencing convicted persons." (Barwick CJ in Griffith at 310). "The reference to "matter of principle" in that passage must be understood as encompassing what is necessary to avoid the kind of manifest inadequacy or inconsistency in sentencing standards which Barwick CJ saw as constituting "error in point of principle"." (Brennan, Deane, Dawson and Gaudron JJ in Everett at 300) 51The Crown noted that the most recent statement of principle in Green v The Queen; Quinn v The Queen [2011] HCA 49; 244 CLR 462 per French CJ, Crennan and Kiefel JJ at [1] and [36] was to similar effect: "1 The primary purpose of appeals against sentence by the Attorney-General or Director of Public Prosecutions ("Crown appeals") under s5D 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 s5D, 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"." "36 A primary consideration relevant to the exercise of the residual discretion is the purpose of Crown appeals under s 5D which, as observed earlier in these reasons, is "to lay down principles for the governance and guidance of courts having the duty of sentencing convicted persons." That is a limiting purpose. It does not extend to the general correction of errors made by sentencing judges. It provides a framework within which to assess the significance of factors relevant to the exercise of the discretion." 52Despite those limiting principles, the Crown submitted that this case fell within that permissible category of Crown appeals where the Court ought to intervene because the sentences imposed were manifestly inadequate and created an inconsistency in sentencing standards. The Crown submitted that this Court should intervene in order to maintain adequate standards of punishment for offences of this kind, i.e. tax fraud. The Crown submitted that taking into account all relevant matters, the sentences did not reflect the circumstances of the offences committed by the respondent and constituted an affront to community standards (R v Gallagher [1991] 53 A Crim R 248; 23 NSWLR 220 at 232). 53The Crown relied upon the summary of principles applicable to a Crown appeal against sentence provided by Refshauge J (with whom Penfold and Lander JJ agreed) in R v TW [2011] 6 Act LR 18 at [4] - [6]. Accordingly, the Crown submitted that occasions may arise for the bringing of a Crown appeal: (a) When a sentence reveals such manifest inadequacy or inconsistency in sentencing standards as to constitute an error in principle. (b) Where it is necessary for a Court of Criminal Appeal to lay down principles for the governance and guidance of courts having the duty of sentencing a convicted person. (c) To enable the Courts to establish and maintain adequate standards of punishment for crime. (d) To enable idiosyncratic views of individual judges as to particular crimes or types of crimes to be corrected. (e) To correct a sentence which is so disproportionate to the seriousness of the crime as to shock the public conscience. (f) To ensure, as far as the subject matter permits, that there will be uniformity of sentencing. 54As indicated, the Crown accepted the facts found by her Honour. However, it submitted that her Honour did not give proper weight to those findings. For example, the Crown accepted her Honour's finding as to the relationship between Mr Daniel and the respondent but not the weight given to it by her Honour. By reference to her Honour's finding that in general the directors of the Australian client companies were in no doubt that the arrangements they were embarking upon were fraudulent, the Crown submitted that it was impossible for the respondent not to have known from the time of his first involvement in the scheme in about mid 1999, that at its core the scheme was fraudulent in the manner set out by her Honour. 55The Crown sought to demonstrate the inadequacy of the sentence by setting out the findings by her Honour as to the role of the respondent. (1) It began at an early stage. He frequently communicated with client participants and with the Vanuatu firm of Mr Agius in the administration of the scheme transactions. He was instrumental in making the initial arrangements to set up the structures for Tara. He had a working knowledge of the scheme by early July 1999 [47]. (2) He was very involved with a number of the companies, the maintenance of their accounts and the preparation of fraudulent income tax returns and was well aware of the false records in the accounts and the fraudulent claims in the returns [48]. (3) On occasions he determined or advised the amount of money which should be sent overseas and on at least two occasions, he personally forwarded "letters of comfort" to the directors with the advice that they keep the letters in safe places [49]. (4) During the period 1997 - 2001 (count 1) he was aware of the fraudulent nature of the arrangements although it was possible, even likely, that his full appreciation of that fraudulent nature grew upon him gradually. However, by 2001 he had a fair working understanding of the nature of the arrangements, such that he could and did, advise clients about the scheme independently without recourse to Mr Daniel [50]. (5) By 2001 he had become a partner in ODC. He was trusted by Mr Daniel, who presented him to clients as "my right hand man" [51]. It was beyond doubt that by 2004 he was aware of the fraudulent nature of the arrangements [52]. (6) After the ATO began making inquiries into overseas transactions in about 2003, he took an active role in organising fabricated responses to the audit of Tara. Her Honour set out in detail his conduct in this regard [53]. He was aware of Mr Daniel offering Ms McKenna a false story to tell the ATO officers. After the audit meeting he requested that Ms McKenna compile a false consultancy report which appeared to conform with the company invoices. In other words, he asked Ms McKenna to create false material in the hope that it would satisfy the inquiries of the ATO. He provided a coversheet for this document and arranged for false invoices and false "consulting agreements" to be created so as to mislead the ATO auditors [53]. (7) In relation to ASS he participated in a "role playing" exercise on the evening before a scheduled meeting with ATO officers in April 2004 at which a false story was concocted to explain the invoices relevant to that company [54]. (8) In relation to the companies of which Messrs Hili and Jones were directors, similarly false answers were provided by him to the directors when the ATO signalled its intention of making inquiries and required answers to pertinent written questions [55]. 56The Crown accepted that her Honour made strong findings in favour of the respondent in relation to subjective matters. Her Honour was satisfied that in the early stages, his participation in the scheme was at and under the direction of Mr Daniel and not on his own initiative. She was prepared to take into account the respondent's good character. His participation in the criminal conduct was contributed to by his youth and inexperience and the morally bankrupt employment environment with which he became involved through Mr Daniel. Nevertheless, the Crown submitted that her Honour had given excessive weight to these matters so that nothing less than a substantial sentence of fulltime custody was adequate to meet the circumstances of his offending. The Crown submitted that a sentence was required which "provides sufficient disincentive to others who may be tempted to offend, to ensure that they refrain from criminal activities" (R v Podgson & Ors [2012] NSWCCA 225 at [143]). 57In relation to its primary complaint of manifest inadequacy, the Crown relied upon the statement of principle by the High Court in Hili v R; Jones v R [2010] HCA 45; 242 CLR 520 at [58] - [67] where the plurality (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ) said: "60 ... But what reveals manifest excess, or inadequacy, of sentence is consideration of all of the matters that are relevant to fixing the sentence. ..." "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." 58The Crown submitted that it was not without significance that Messrs Hili and Jones were clients of ODC and were directors of two of the companies involved in the scheme. In a Crown appeal (R v Jones' R v Hili [2010] NSWCCA 108; 76 ATR 249) this Court re-sentenced each of them to imprisonment for 3 years with a recognizance release order to take effect after 18 months. The appeal to the High Court was dismissed. 59The Crown also relied upon another decision involving clients of ODC, R v Boughen; R v Cameron [2012] NSWCCA 17. These directors participated in the scheme between 1997 and 2004. They each evaded income tax of approximately $500,000. In a Crown appeal, Simpson J (with whom Hislop and Latham JJ agreed) said: "59 At least since 1996, when Brooking JA said: "The seriousness of the offence of defrauding the Commonwealth of a large sum of money by not declaring assessable income has in the past, perhaps, not always been sufficiently reflected in the sentences passed. Those who systematically defraud the Revenue of a large sum over a substantial period must in general expect a substantial custodial sentence. The deterrent and punitive effects of that sentence should not be unduly diminished by allowing release from custody at an unduly early stage." ( R v Van Nhan Nguyen; Huu Duc Phan (1996) 86 A Crim R 521 at 525), appellate courts have consistently insisted that tax evasion offences ought to attract significantly deterrent sentences. This, properly, puts tax evasion into the same class of offending as social security fraud, which has an even longer history of insistence on custodial sentences. 60 The earlier occasions on which social security fraud has been treated as an offence calling for significantly deterrent sentences are catalogued in the decision of this Court in R v Mears (1991) 53 A Crim R 141 pp 145-146. Lee J quoted from the judgment of Street CJ in R v Luu (unreported, NSWCCA 7 December 1984): "The courts of this State have uniformly sought to make plain to persons who abuse the system of social welfare that they must expect to face heavy penalties. The introduction into the administration of that system of overly meticulous preliminary checks before benefits are paid could result in real hardship to persons whose need for benefits is urgent and immediate. Thus it is that such susceptibility is open to abuse, which results in persons who do abuse it receiving salutary penal consequences at the hands of the Court." To the same effect is the decision of this Court in R v Purdon (unreported, NSWCCA, 27 March 1997). This approach to social security fraud cases has been consistent in this State and others: see eg R v Medina (unreported, NSWCCA 28 May 1990); R v Carroll [1991] 2 VR 509; R v Cameron; R v Simounds (unreported, SACCA, 19 July 1993); Kovacevic v Mills [2000] SASC 106; 174 ALR 77." 60The Crown noted that Messrs Boughen and Cameron received sentences from this Court of imprisonment for 3 years with a recognizance release order to operate after 18 months. Those were sentences imposed after a 50 percent discount for assistance and a plea of guilty. 61Her Honour while adhering to the views which she expressed in R v Boughen; R v Cameron distinguished the respondent's position in that he had not received any financial gain from his participation in the scheme and because his initial participation had not involved a conscious and deliberate decision on his part, but rather he had been drawn insidiously into the conspiracy by an older and stronger employer. The Crown challenged that reasoning. It submitted that while it could not identify any financial gain, it strained credulity to accept that he did not expect some benefit, even if that benefit were intangible, e.g. the continuation of his employment with the firm, both as an employee and as a partner. 62The Crown submitted that her Honour's first point of distinction failed to take into account his breach of trust as a professional accountant, registered tax agent and partner in an accounting practice directly enabling clients to defraud the Revenue. It also failed to have regard to the matters referred to at [63] in Hili and Jones. The Crown submitted that it failed to have regard to the offending conduct in relation to Ms McKenna and the company, ASS. The Crown submitted that the absence of personal greed did little, in the circumstances of this case, to detract from the objective criminality of the offending. It submitted that the respondent was a critical vehicle through which the scheme operated. 63In relation to the second point of distinction the Crown submitted that even it were given full weight, the sentences were manifestly inadequate. The Crown submitted that the respondent was not deprived of his free will by the corrupting influence of Mr Daniel, nor was there evidence that his will was relevantly overborne by Mr Daniel during the whole period of the offending, particularly after 2004 when he actively engaged in conduct to deceive officers of the ATO. The Crown submitted that the respondent's study and training as an accountant and as a member of the Chartered Institute of Accountants, as well as his registration as a tax agent, must have made him aware of the seriously dishonest nature of his conduct and serious breach of professional trust and the trust of the community by abusing the Australian self assessment tax system. The Crown submitted that these factors well outweighed the ameliorating aspects of his youth and inexperience when he first came in contact with Mr Daniel. 64The Crown noted that in Hili and Jones, the High Court had accepted Ly v R [2007] NSWCCA 28 as a case which could provide some guidance as to an appropriate sentence to be imposed on participants in a tax fraud scheme. The Crown submitted that Ly v R had particular relevance to this case because the offender was a tax agent who lodged false income tax returns on behalf of tax payer clients as a consequence of which he fraudulently obtained 49 tax refunds totalling approximately $329,000 in a two year period. The Crown noted that he received a sentence of imprisonment for 6 years, with a non-parole period of 4 years after a discount of 25 percent for his plea. The Crown submitted that with the respondent there had been no plea, no co-operation in the investigation of the offences and no remorse, although there had been a degree of co-operation in the conduct of the trial. The Crown submitted that the offending conduct of Ly as recorded at [13] of the judgment was similar to but not as extensive as that of the respondent. 65The Crown referred the Court to R v Wheatley [2007] 67 ATR 531 where the offender had been sentenced by a judge of the County Court of Victoria to 2 ½ years imprisonment for evading tax of about $318,000 by what were described as "complex arrangements to funnel Australian earned funds offshore, under the guise of authenticity" (at [69]). The Crown noted that the sentencing judge held that the offending was found to have been due to need not greed. The offender received a sentence of imprisonment for 2 ½ years with a recognizance release order to take effect after 15 months. 66In relation to the alternative grounds of appeal, the Crown did not make separate submissions but noted that these matters had been covered in its submissions in relation to the primary ground of manifest inadequacy. Respondent's submissions 67The respondent advised the Court that he had completed the 500 hours of community service work. Thirteen months of the suspended sentence had passed without incident. 68The respondent submitted that the delay in this matter had been extensive. The search warrants were executed in 2006 but he was not charged until 2008. The trial did not take place until 2012. He submitted that even the appeal proceedings had been delayed in that they were originally fixed for hearing in February 2013. The respondent relied upon her Honour's finding [86] that this delay had contributed to the development of depression and anxiety in him and his family and that the family has been severely affected. He referred to her Honour's specific finding that the two children had never lived in a normal stress free family environment and that one child had exhibited "very worrying behavioural tendencies". The respondent submitted that these were matters which were properly taken into account by her Honour as being a product of the delay in the finalisation of the criminal proceedings against him (R v Hernando [2002] NSWCCA 489; 136 A Crim R 451; R v Cheung [2010] NSWCCA 244; 203 A Crim R 398). 69The respondent submitted that the significant delay was an important consideration in her Honour's judgment. He submitted that it was also an important factor to be taken into account in answer to the Crown's submission that a custodial sentence should now be imposed. He submitted that 7 years had passed since the search warrants were executed, that he and his family had been living in a state of anxiety during that period and that the family had now come to terms with his conviction and the sentence which had been imposed. He submitted that the significant extent of the delay would make it cruel and unfair to both him and his family to now impose a custodial sentence. 70The respondent submitted that the imposition of a custodial sentence at this time would fail to have regard to the extra curial punishment to which he had been subjected. The Institute of Chartered Accountants had moved to strike his name from the relevant register so that he would in due course lose his profession and his livelihood. He submitted that this was a very substantial punishment and was correctly noted by her Honour [88] as militating against a custodial sentence. 71The respondent relied upon her Honour's error in refusing to consider whether the imposition of an Intensive Correction Order (ICO) was an appropriate sentence for him. Her Honour concluded that such an order was not appropriate since an ICO was directed to the rehabilitation of an offender and he was not in need of rehabilitation. Such an approach has now been expressly disproved in R v Pogson; R v Lapham; R v Martin [2012] NSWCCA 225. The respondent submitted that in the context of this appeal, her Honour's approach had operated to his disadvantage in that her Honour may well have imposed an ICO in respect of either or both of the counts of which he was convicted. 72The respondent submitted that in accordance with s16A(2)(p) of the Crimes Act 1914 (Cth) a fulltime custodial sentence, if imposed by this Court, would have a most adverse effect on his family. In that regard, he submitted that in her Honour's discussion of this matter at (see [44] hereof) her Honour had erred by following R v Togias [2001] NSWCCA 552; 127 A Crim R 23 and R v Hinton [2002] NSWCCA 405; 134 A Crim R 286. On that issue, the respondent noted that her Honour had found [86] that "I am satisfied that it is probable that a fulltime custodial sentence would produce significantly adverse, and, in all probability, irremediable, effects on Mr Zerafa's wife and his children". Even so, her Honour did not regard that as "exceptional". 73The respondent submitted that R v Togias and R v Hinton were wrongly decided and that not only should they not have been followed by her Honour, but they should not be followed by this Court. The respondent submitted that should this Court decide that he be re-sentenced, it was necessary for the Court to properly interpret and apply s16A(2)(p) and to give the evidence on that issue full force and effect, regardless of whether the evidence could be properly categorised as "exceptional". The respondent submitted that if this Court did so, such a factor would render a fulltime custodial sentence inappropriate. 74The respondent developed his argument as follows. Section 16A(2)(p) provides that where it is known to the court, the court must take into account "the probable effect that any sentence or order under consideration would have on any of the person's family or dependants". He submitted that the decisions in Togias and Hinton required that despite the wording of s16A(2)(p), the hardship be "exceptional" before it could be taken into account on sentence. He submitted that such an interpretation was not authorised by the wording of the subsection. 75The respondent submitted that Bui v DPP (Commonwealth) [2012] HCA 1; 244 CLR 638 held that it was necessary to interpret the language of s16A to determine whether common law principles were picked up. Bui v DPP held that the principle of "presumed anxiety" was not a matter listed in s16A and that a court could not have regard to it on re-sentencing. Although the decision in Bui was not directly on point, the respondent submitted that it was clear from the reasoning that the statutory language of s16A must be applied according to its clear terms. If that approach is correct, the respondent submitted that Togias and Hinton were wrongly decided. 76In the alternative, the respondent submitted that there was no real uniformity in approach to s16A(2)(p) in NSW. Although the decisions in Togias and Hinton were regarded as stating the law in NSW, they had not been followed in R v Nguyen [2006] NSWCCA 369; 166 A Crim R 124. There, James J (with whom Hidden and Hislop JJ agreed) citing R v Girard [2004] NSWCCA 170 and R v X [2004] NSWCCA 93 at [24] said: "27 It was submitted by the Crown that, accepting that X and Girard had been correctly decided and should be applied in the sentencing of Commonwealth offenders, all that those cases had decided was that hardship to members of an offender's family, while it could be taken into account as a part of the general subjective facts, could not be used to justify any substantial reduction in sentence, unless it was truly exceptional. In my opinion, this submission is in accordance with the parts of Sully J's judgment in X and Hodgson JA's judgment in Girard which I have quoted and should be accepted." 77The respondent did accept that on this issue, the courts of Victoria had followed Togias (Markovic v R, Pantelic v R [2010] VSCA 105; 30 VR 589, DPP v Bui [2011] VSCA 61). The respondent also accepted that the Courts of Queensland had followed Togias (R v Huston; ex parte Cth DPP; R v Fox; ex parte Cth DPP; R v Henke; ex parte Cth DPP [2011] QCA 350; 219 A Crim R 209 R v Jones [2010] NSWCCA 108; 76 ATR 249). He did, however, note that the Supreme Court of the ACT (DPP v Ka-Hung Ip [2005] ACT CA 24) expressly disavowed any reliance upon Togias and that the position in South Australia was not clear (R v Berlinsky [2005] SASC 316) nor was the position in Western Australia (Thi Nga Nguyen [2001] WASCA 72 and Nguyen v The Queen [2001] WASCA 119). 78On the basis of the contradictory authority in the States of Australia, and the clear approach of the High Court in Bui, the respondent invited this Court to overrule Togias or alternatively, not to follow it and to apply s16A(2)(p) of the Crimes Act 1914 (Cth) according to its wording, both when considering the submissions of the Crown and, should it become necessary, when determining to re-sentence him. 79The respondent submitted that her Honour had taken into account all relevant considerations in a detailed judgment and had appropriately exercised her sentencing discretion. He submitted that the points of distinction identified by her Honour between this case and cases such as R v Boughen; R v Cameron were valid. The absence of any financial gain by him, together with his youth, impressionability and vulnerability when he commenced employment with ODC were important distinguishing features. The respondent submitted that it was open to her Honour to give substantial weight to his attempt in 2004 to dissuade Mr Daniel from continuing with the scheme. He submitted that the cases relied upon by the Crown, i.e. Boughen and Cameron, Ly and Hili and Jones were readily distinguishable on their facts. The respondent submitted that a suspended sentence was a serious form of punishment in that it carried the threat of imminent imprisonment should its conditions be breached (Dinsdale v The Queen [2000] HCA 54; 202 CLR 321; R v Zamagias [2002] NSWCCA 17). Consideration 80I have concluded that this is an appropriate matter for a Crown appeal. Her Honour's sentencing judgment, and the issues raised by the parties, involve matters of principle which this Court should deal with "for the governance and guidance of courts having the duty of sentencing convicted persons" (Griffiths v R [1977] HCA 44; 137 CLR 293 (per Barwick CJ)). 81While being mindful that a Crown appeal against sentence is an appeal against the exercise of a sentencing judge's discretion, I have also concluded that the Crown appeal in this matter should be upheld and that it will be necessary to re-sentence the respondent. I have concluded that the sentences reveal such manifest inadequacy as to constitute an error in principle. 82Her Honour made a number of significant factual findings which set out in detail the criminality involved in the respondent's offending. These were conveniently collected by the Crown in its submissions (see [55] hereof). In summary, the offending covered seven years. Other than in the conduct of the trial, there was no co-operation in the investigation of the offences and no contrition. His involvement with the scheme was substantial. After the ATO commenced investigations, he actively sought to thwart those investigations. His actions over that period were the very antithesis of his obligations as an accountant. 83The characterisation by the Queensland Court of Appeal (Muir, Chesterman JJA and Margaret Wilson AJA) of the conduct under consideration in R v Huston is (except for the element of personal gain) appropriate to the respondent's offending. "[57] The offending here was serious, protracted, deliberate and grossly dishonest. It was embarked upon in the case of Henke and Huston for personal gain. It put at risk about $4.5 million of Commonwealth revenue. The criminal conspiracy involved elaborate attempts at concealment and disguise. Two of the conspirators were accountants who must have understood the gravity of their criminal misconduct. The third (Henke) was a registered tax agent. Such persons, more than most, must know of the need for taxing statutes to be applied uniformly according to their terms, and the consequences of subverting their uniform application. The effect of evading taxation liability is to deprive the community of revenue needed to provide government services and to impose an unfair burden on those who act honestly. [58] Sentences in these cases must do more than pay lip service to the need for general deterrence. They must be effective deterrents, and address the reality that conspiracy to evade tax is a form of corruption which has an insidious corroding effect on society. They must as well vindicate honest taxpayers." 84Her Honour recognised many of these considerations when she referred to not only the immediate loss of revenue suffered by the Commonwealth, but what she described as "an intangible loss" which encompassed, in effect, an attack on the Australian taxation system and the cheating of fellow citizens (see [36] hereof). 85Her Honour observed: "64 ... The two most important sentencing considerations, having regard to the role played by each offender, and the nature and circumstance of the offending, are general deterrence and the need to impose adequate punishment." Unfortunately, the sentences imposed on the respondent failed to reflect those considerations and were not of a severity appropriate in all the circumstances of the offending. 86The matters of distinction identified by her Honour between this case and that of Boughen and Cameron while important, were not sufficient to justify the sentences which were imposed. As the Crown submitted, while there may not have been any direct financial gain derived by the respondent from the scheme, there was obviously an indirect benefit in relation to his position in ODC and being regarded by Mr Daniel as his "right hand man". 87The circumstances leading to the respondent's involvement in the scheme, the continuing baleful influence of Mr Daniel and the respondent's intervention in 2004 to prevent new clients entering the scheme were important matters for her Honour to take into account in sentencing. They did not, however, answer the fact of the respondent's continuing involvement with the scheme until 2006 when he was in his thirties, nor did they answer his efforts to mislead officers of the ATO once it had commenced its investigations into the scheme. They did not answer his absence of remorse, as illustrated by her Honour's finding [84] that in significant ways the evidence which he gave at trial was knowingly untrue. Despite the influence of Mr Daniel, there was no suggestion of any duress in relation to the respondent's continuing participation in the scheme. 88There is no doubt that delay in the prosecution of an offence in many cases will be a matter of mitigation to be taken into account in sentencing a convicted person. Weight needs to be given in those circumstances to the effect on the convicted person of that delay. 89Notwithstanding, it has been recognised that in cases involving complex financial transactions, account has to be taken of the difficulty of proof. In R v Kearns [2003] NSWCCA 367, a case involving the improper use by the offender of his position as an officer of a corporation, contrary to s232(6) of the Corporations Act 2001 (Cth), it was held that the sentencing judge did not err in failing to take into account a delay of four years between the offence and the commencement of proceedings. Spigelman CJ (with whom the other members of the court agreed) said: "68 In the present case, I do not see that the delay was of such an order of magnitude as to conclude that any significant unfairness arose of a character that needed to be identified and adverted to by the trial judge in the sentencing task. There was a process of investigation by the Australian Securities Commission that continued for some years prior to the laying of charges. The period of some three and a half years for the process of investigation and determination of which charges could be pursued does not, in the circumstances, appear to me to be so excessive as to constitute a factor that is required to be taken into account in the exercise of the sentencing discretion." 90The delay in this matter coming to trial was substantial. However, her Honour found [125] that this was not due to fault on the part of the Crown. The evidence was complicated and detailed which was to be expected in a five month trial with four accused where liability was fully contested. As her Honour noted: "Some considerable additional delay was occasioned by applications, unsuccessful, made on behalf of the four accused for a stay of proceedings, and appeals against the refusal of these applications." 91In any event, her Honour did take into account, as has this Court on re-sentencing, that there had been a substantial delay and that this caused considerable stress and anxiety to the respondent and his family. The circumstances of that delay, however, were not such as to prevent either her Honour or this Court from imposing an appropriate sentence as required by s16A(1) of the Crimes Act 1914 (Cth). 92While I accept the relevance of the extra curial punishment likely to be suffered by the respondent as a mitigating factor, its effect is limited. As with insider trading cases, it must have been anticipated by the respondent that an inevitable consequence, if his offending were discovered and successfully prosecuted, would be that he would be struck off the role of chartered accountants as not being a fit and proper person to pursue that profession. This was a risk which the respondent chose to take when he facilitated the operation of the scheme for 7 years. 93In relation to s16A(2)(p) it is not appropriate for this Court to overrule or depart from cases such as Togias and Hinton. As the respondent accepted, the "exceptional hardship" approach has been followed in Queensland and Victoria, and to a limited extent in South Australia and Western Australia. It is only the ACT which has refused to follow that line of authority. As Spigelman CJ acknowledged in Togias: "17 If there is to be any change in this position, and that was not put in this case even on a formal basis, only the High Court can effect it." 94The Court had before it not only the report of a psychologist, Ms Adams, dated 15 August 2012 which was before her Honour, but a more recent report, dated 18 February 2013 and affidavits from the respondent and his wife. These last three documents were before the Court on a contingent basis, i.e. they were to be read if the Court decided to re-sentence the respondent. 95The first report of Ms Adams focused not so much on the effect on the respondent's wife and two children if he received a custodial sentence, but on the anxiety and distress caused to the family by the "invasion of their home" by members of the AFP executing a search warrant in 2006 and the effect of the delay in the proceedings being finalised. Ms Adams also noted that any time that the respondent spent in prison would be made worse for him because he would be aware of how much his wife and children were suffering. Of course those latter considerations could be taken into account in sentence proceedings quite independently of s16A(2)(p) and were in fact taken into account by her Honour. They have been taken into account by this Court in re-sentencing. 96The recent report from Ms Adams and the affidavits focused more on the effect on the respondent's wife and children if he is re-sentenced to a period of imprisonment. Ms Adams reported the respondent as suffering from increased anxiety and sleeplessness. His wife has become very anxious and is unsure how she will cope if he is sent to prison. The respondent's son, aged nine, has become anxious and there is a probability that he will display nervous behaviour in such a circumstance. The affidavit material confirms that history and prognosis. 97I am not satisfied on my reading of this material that even if those parts which related to the effect of the respondent's incarceration on his family were taken into account on sentencing, it would significantly affect the outcome. As her Honour concluded, those circumstances do not amount to "exceptional" hardship. Except for the nervous symptoms likely to be experienced by the respondent's son, it is the sort of reaction that one would expect from most close families if a father received a prison sentence. Accordingly, even if as the respondent urged upon the Court, hardship to third parties was taken into account in the sentencing process, it would not operate to significantly mitigate the sentence which should be imposed. 98I do not accept as was submitted by the Crown that the respondent's offending was in the worst category for offences of this kind. His offending was serious as her Honour found, but not of that level. Accordingly, my reason for intervening is that her Honour failed to give sufficient weight to general deterrence and the need to impose adequate punishment. I am satisfied that her Honour's sentencing discretion miscarried and that her reasoning over-valued the respondent's personal circumstances and particularly the effect of Mr Daniel's influence. For the same reasons it is not appropriate to exercise the Court's residual discretion and to decline to intervene. 99The result is that the sentences are substantially more lenient than the offending called for and that the sentencing discretion must be re-exercised by this Court. The seriousness of the offending and his breach of trust as an accountant have to also be adequately taken into account. 100Some assistance is provided by the decisions in Boughen and Cameron, Hili and Jones and Ly. The sentence imposed on Mr Agius of 9 years with a non-parole period of 6 years and 8 months is also of assistance. The facts of these cases differ in a number of respects from this case. The respondent has a stronger subjective case, particularly in relation to his introduction to criminality under the influence of Mr Daniel. Accordingly, while these cases provide some assistance, the respondent has to be sentenced by reference to his particular offending and his particular personal circumstances. 101I am also mindful that this is a Crown appeal and there has been substantial delay so that there is a need for judicial restraint. In oral submissions, the Crown accepted that in relation to count 1 the sentence of 500 hours of community work was within the range of appropriate sentences for that offending, but at the very bottom. In respect of count 2, the Crown urged that only a custodial sentence would be appropriate and that the sentence would need to be significant. I agree. Nevertheless the sentence which I propose is also towards the bottom of the range. 102The orders which I propose are: (1) Crown appeal allowed. (2) The sentences imposed by Simpson J on 23 August 2012 are quashed. (3) In lieu thereof the respondent is sentenced as follows: In respect of Count 1, the sentence imposed by Simpson J is confirmed. In respect of Count 2, the respondent is sentenced to imprisonment for 3 years and 6 months, commencing 23 August 2012 and expiring 22 February 2016 with a non-parole period of 2 years and 3 months, expiring 22 November 2014. 103LATHAM J: I agree with Hoeben CJ at CL. 104BEECH-JONES J: I have had the benefit of reading the judgment of Hoeben CJ at CL which comprehensively surveys the landscape of this appeal. His Honour finds that the sentence imposed by Simpson J was manifestly inadequate and that it is appropriate for this Court to intervene and re-sentence the respondent to a custodial sentence. I agree with that course and, subject to what follows, his Honour's reasons for doing so. 105Hoeben CJ at CL proposes that an appropriate sentence for the respondent on count 2 is one of three years and six months with a non-parole period of two years and three months backdated to the date he was sentenced. This term, backdated as it is, represents a lenient sentence for the respondent. The level of criminality involved was significant. He and others implemented a fraud on the Commonwealth over a very long period. The suggestion that he was overborne by the principal of the accounting firm, Mr Daniel, does not substantially diminish his criminality given the length of time over which the conduct occurred, his personal circumstances and his status as a professional. Professional persons are meant to resist pressure to act unethically. Otherwise the significance of general deterrence in the punishment of so-called "white collar criminals" is well recognised (R v Williams [2005] NSWSC 315; 152 A Crim R 548 at [44] to [47] per Wood CJ at CL). 106Further, as is evident from the cases discussed in the judgment of Hoeben CJ at CL at [57] to [65], the sentences imposed on some of the clients of his accounting firm that implemented the scheme the firm marketed are only moderately less than the sentence that is proposed for the respondent. In addition to those cases I also note that in R v Hawkins [2013] NSWCCA 208 this Court upheld a Crown appeal against one of those clients and imposed a series of sentences that cumulated to a combined sentence of six years and a non-parole period of three years and six months. That offender was convicted after a trial of one offence under s 29D of the Crimes Act 1914 (Cth) and seven offences under s 134.2(1) of the Criminal Code Act 1995 (Cth) each of which carried a maximum penalty of ten years. He received an identified tax benefit of approximately $600,000.00 (at [12]) which corresponded with the loss occasioned to the Commonwealth. In the respondent's case he contributed to the occasioning of a loss of in excess of $5 million to the Commonwealth. Although there was no identifiable gain accruing to the respondent from participating in the fraudulent scheme, as noted by Hoeben CJ at CL at [86], there was an obvious indirect benefit flowing to the respondent from his actions in terms of his position in his accounting firm. 107Ordinarily these matters would suggest that a sentence that exceeded that proposed by Hoeben CJ at CL might be warranted. Nevertheless I agree with the sentence proposed by his Honour, bearing in mind one further matter. This concerns the relevance, if any, of an unchallenged finding made by Simpson J in the emphasised portion of the following passage: "Both [the respondent] and his wife have, in the six years since the execution of search warrants that signalled the commencement of these proceedings, suffered from depression and anxiety. Their family life has been severely affected. The younger child was a baby when the search warrants were executed. The older child was two years old. As a consequence, the children have never lived in a normal, stress-free family environment. One child has exhibited very worrying behavioural tendencies. I am satisfied that it is probable that a fulltime custodial sentence would produce significant adverse, and, in all probability, irremediable, effects on Mr Zerafa's wife and his children. That, in turn, would make a period of incarceration more difficult for him. Of course, those who commit criminal offences must live with the consequences to themselves, and to those closest to them." (emphasis added) 108This finding was sought to be supported by further evidence tendered on the appeal against the contingency that the Court decides to intervene and re-sentence the respondent as I consider it must. This evidence is summarised by Hoeben CJ at CL at [94] to [96]. I refer to the nature of the consequences envisaged by the unchallenged finding and expanded upon by the further evidence below. 109In her sentencing judgment Simpson J described the relevance of this finding in the passage extracted by Hoeben CJ at CL at [44] but which for convenience I will again set out: "Uninstructed by authority, I would have considered that s 16A(2)(p) of the Crimes Act both entitled and obliged me to take those family consequences into account. However, binding authority requires me to take a different approach. Those circumstances may not be given substantial weight in the sentencing determination unless they can be categorised as 'exceptional': R v Togias [2001] NSWCCA 522 at [9]-[17]; R v Hinton [2002] NSWCCA 405; 143 A Crim R 286 at [31]. In Togias, Spigelman CJ seems to have taken the view that, although the words 'exceptional circumstances' are not to be found in s 16A(2)(p), nevertheless they have so consistently and repeatedly been notionally engrafted into the legislation by a number of State appellate courts that the time has passed for any court other than the High Court to reverse the trend. In Bui v Director of Public Prosecutions (Cth) [2012] HCA 1, in a different context, the High Court rejected a construction that would have put an impermissible gloss on the text of s 16A (at [19]; see also [25]-[27]). Nevertheless, Togias and Hinton state the law that I must apply. Powerful as the evidence of the impact on Mr Zerafa's family and dependents is, the circumstances here fall short of exceptional. I cannot allow s 16A(2)(p) to guide the sentence to be imposed." 110During argument there was debate about whether these comments meant that Simpson J felt constrained by authority to not give the probable effects on the respondent's family of his incarceration any weight on the one hand or any determinative or substantial weight on the other. Given that this Court is proposing to re-sentence, it is not necessary to resolve that debate about her Honour's reasons. However the debate highlights some uncertainty in the authorities about the proper construction or manner of application of s 16A(2)(p). 111Senior Counsel for the respondent, Mr Game SC, sought to draw on the unchallenged finding and the further evidence as one of many factors warranting leniency being exercised in favour of his client if the Court proceeded to re-sentence his client. To that end he made two submissions concerning s 16A(2)(p) of the Crimes Act. First, he contended that the two judgments referred to in the above extract, namely R v Togias [2001] NSWCCA 522; 127 A Crim R 23, and R v Hinton [2002] NSWCCA 405; 134 A Crim R 286, which construed s 16A(2)(p) as requiring hardship to third parties to be "exceptional" before it can be taken into account, were wrongly decided and should not be followed. In that context he accepted that the hardship that would be occasioned to his client's family in the event that he was sentenced to a custodial sentence would not meet the description of "exceptional circumstances", as discussed in the authorities. 112Second, he submitted that, even if Togias and Hinton were not overruled, the subsequent decision of this Court in R v Nguyen [2006] NSWCCA 369; 166 A Crim R 124 at least enabled some weight to be given to the probable hardship to the respondent's family as found by Simpson J.

R v Edwards 113In R v Edwards (1996) 90 A Crim R 510 at 516 Gleeson CJ described the following passage from the judgment of Wells J in R v Wirth (1976) 14 SASR 291 as the "most frequently cited Australian judgment on [the] subject" of the relevance of the impact of incarceration of an offender on third parties: "The argument thus presented to us raises the following question: When (if ever), and to what extent (if at all), should the hardship caused, directly or indirectly, by a proposed sentence of imprisonment, to the family of, or to others closely associated with, the offender be taken into account by the Court in mitigation of that sentence? ... Hardship to spouse, family, and friends, is the tragic, but inevitable, consequence of almost every conviction and penalty recorded in a Criminal Court. ... It seems to me that courts would often do less than their clear duty - especially where the element of retribution, deterrence, or protection of society is the predominant consideration - if they allowed themselves to be much influenced by the hardship that prison sentences, which from all other points of view were justified, would be likely to cause to those near and dear to prisoners. But it has been often remarked that the strength of our law lies in the willingness of judges, when applying a principle, not to carry it past the point where a sense of mercy or of affronted common sense imperatively demands that they should draw back. So it is proper that I should here add that, in my opinion, hardship likely to be caused by a sentence of imprisonment under consideration ought to be taken into account where the circumstances are highly exceptional, where it would be, in effect, inhuman to refuse to do so. For example, if it were demonstrated to the satisfaction of the court that to send a man to prison would, without much doubt, drive his wife to suicide, it would be a steely-hearted judge who did not, however illogically, at least try to meet the situation by suitably framed orders as to penalty. But further than that, in my judgment, courts should not go." (emphasis added) 114Although Wells J warns against sentencing judges being "much influenced" by the hardship that would be occasioned to an offender's family by their incarceration, the principle stated by his Honour goes further. It only allows the hardship likely to be caused to families to be taken into account when the circumstances are "highly exceptional" (cf R v Kertebani [2010] NSWCCA 221 at [65]). On its face the principle stated by Wells J in Wirth does not permit hardship falling short of exceptional to be considered as a factor warranting any consideration as part of the process of "instinctive synthesis" undertaken in sentencing an offender (Markarian v R [2005] HCA 25; 228 CLR 357). 115Edwards was a Crown appeal against a sentence of periodic detention for manslaughter that was imposed because of the hardship the offender's full time custody would cause to a long term patient at an institution who was cared for by the offender. This sentence was set aside on the basis that those circumstances were not properly characterised as "exceptional" (at 516 and 517 per Gleeson CJ). The sentencing judge was found to have "deflect[ed] her[self] from imposing the sentence of full-time imprisonment which she plainly indicated she would otherwise have imposed" (at 518). Thus Edwards was a case in which the sentencing judge was found to have wrongly treated the impact on a third party as determinative of the type of sentence that was to be imposed. 116Although the limitations on considering hardship to third parties derived from Edwards are said to be the subject of "well settled principles" (FP v R [2012] NSWCCA 182 at [309] per R.A. Hulme J) they are sometimes stated in different terms. Thus, in Hay v R [2013] NSWCCA 22 at [49] Edwards was cited for the proposition that "[i]t is well established that the effect on family or others can be taken into account only in exceptional circumstances". That formulation reflects the statement of Wells J in Wirth (see also Waugh (aka Willoughby) v R [2010] NSWCCA 3 at [16] per Hidden J, McClellan CJ at CL and Simpson J agreeing). Recently, in R v MacLeod [2013] NSWCCA 108 at [43] the principle derived from Edwards was described as being that "it is only in exceptional circumstances that hardship to third parties can be taken into account in order to reduce an otherwise appropriate sentence". This formulation leaves open the possibility that the "otherwise appropriate sentence" is one in which hardship to third parties falling short of exceptional circumstances is considered as part of the process of "instinctive synthesis", even if it cannot be considered as a "distinct matter justifying any substantial modification of an otherwise appropriate penalty" (Dipangkear v R [2010] NSWCCA 156 at [41] per Whealy J). 117This latter possibility has been explicitly recognised in cases discussing Edwards and applying the Crimes (Sentencing Procedure) Act 1999 ("Sentencing Act"). Thus, for example, in R v Girard [2004] NSWCCA 170 at [21] Hodgson JA, with whom Levine and Howie JJ agreed, stated: "In relation to the children, in my opinion this was not shown to be a case falling within the category of exceptional circumstances as discussed in Edwards. It is certainly a matter of concern, and a matter that can be taken into account as one subjective circumstance in assessing the appropriate penalty, that innocent children will be adversely affected by the imprisonment of their parents. However, in the absence of exceptional circumstances, this is not to be taken into account as a specific and particular matter resulting in a substantial reduction or elimination of a sentence of imprisonment." (emphasis added) 118It is unnecessary to consider these cases further as they concern the Sentencing Act, whereas this case involves the proper construction of the Crimes Act. One matter of significance to the Sentencing Act is that hardship to an offender's family can justify a finding of "special circumstances" for the purposes of s 44(2) (King v R [2010] NSWCCA 202 at [18]; R v Grbin [2004] NSWCCA 220; R v Murphy [2005] NSWCCA 182).

Sub-section 16A(2)(p) 119The unchallenged finding made by her Honour extracted at [107] reflects the literal terms of s 16A(2)(p) of the Crimes Act, which relevantly provides: "(1) In determining the sentence to be passed, or the order to be made, in respect of any person for a federal offence, a court must impose a sentence or make an order that is of a severity appropriate in all the circumstances of the offence. (2) In addition to any other matters, the court must take into account such of the following matters as are relevant and known to the court: (a) the nature and circumstances of the offence; ... (p) the probable effect that any sentence or order under consideration would have on any of the person's family or dependants." 120On its face this provision clearly enables sentencing judges to take into account the probable hardship to an offender's family of the offender's incarceration. 121It has been accepted that s 16A of the Crimes Act is apt to incorporate some judge-made sentencing principles. Thus, in Hili v R; Jones v R [2010] HCA 45; 242 CLR 520 at [25] the plurality stated: "As noted in Johnson v R, s 16A of the Crimes Act, on its proper construction, accommodates the application of common law principles of sentencing, such as the principle of "totality" discussed in Mill v R. Section 16A accommodates the application of that and some other judicially developed general sentencing principles because those principles give relevant content to the statutory expression 'of a severity appropriate in all the circumstances of the offence' used in s 16A(1), as well as some of the expressions used in s 16A(2), such as 'the need to ensure that the person is adequately punished for the offence'." (references omitted) 122However the accommodation by s 16A of judge-made sentencing principles has its limits (Bui v Director of Public Prosecutions (Cth) [2012] HCA 1; 244 CLR 638 at [18] and [25]). It is not apposite to s 16A(2)(p). Unlike the provisions described in the above passage from Hili (ie s 16A(1) and 16A(2)(k)), s 16A(2)(p) is not drafted at a level of generality that permits the accommodation of the principle in Wirth. 123A consideration of the secondary materials does not lead to any conclusion different to that which is suggested by the plain words of the s 16A(2)(p) (Acts Interpretation Act 1901 (Cth), s 15AB(1)(a)). Section 16A was introduced into the Crimes Act by the Crimes Legislation Amendment Act (No 2) 1989 (Cth), which started its life as the Crimes Legislation Amendment Bill (No 2) 1989. The Bill was the outcome of Australian Law Reform Commission's report on sentencing (ALRC Report 44: Sentencing, (March 1988)). Chapter 6, entitled "Determining the sentence", recommended at [170] the inclusion in legislation of a list of factors relevant to sentencing which comprehended "the impact on third parties of a particular sanction, for example, distress, reduced financial circumstances and deprivation of emotional support for the offender's family". In explaining this recommendation the Report stated at [172]: "Two controversial matters. Two matters have been included which may be regarded as controversial. · Impact of a particular sanction on third parties. This matter might be thought to authorise punishment otherwise than by reference to the offender's characteristics or conduct and therefore not be consistent with the principles underlying this report. On the other hand, depending upon the nature of the relationship, a detrimental impact on the offender's family can itself be a form of punishment of the offender. Several submissions to the Commission warned of the potentially destructive results if the impact of punishment on third parties, especially the family of the offender, was ignored." 124Of greater significance is the Explanatory Memorandum to the Bill which stated as follows in relation to s 16A: "Subsection (1) directs a sentencing court to impose a sentence or make an order that is appropriate to the gravity of the crime, having regard to the circumstances of the offence. Subsection (2) contains a number of matters that must be taken into account by a court when selecting a sentence, if relevant. These matters are in addition to matters a court is otherwise required or permitted to take into account on sentencing. The subsection in part gives statutory recognition to matters already taken into account by courts when sentencing (eg the character, antecedents, age, means and physical or mental condition of the person), but it also highlights certain matters including the circumstances of the victim and the probable effect of the sentence on the offender's family or dependants. The matters to be taken into account are not set out in a hierarchy of importance or significance." (emphasis added) 125This passage suggests that s 16A(2)(p) was seen as introducing a matter that had not previously been considered by the Courts. In so far as the passage from the judgment of Wells J in Wirth suggests that a sentencing court was precluded from giving any consideration to the hardship caused to family members unless that hardship was exceptional, then s 16A(2)(p) was intended to alter that position.

Cases considering s 16A(2)(p) 126In Adami and Adami v R (1989) 42 A Crim R 88 the South Australian Court of Criminal Appeal construed s 10(n) of the Criminal Law (Sentencing) Act 1988 (SA) as not altering the common law position that "the effect of a sentence of imprisonment on dependants is not normally to be taken into account in fixing the sentence" (at 91 per Bollen J). Sub-section 10(n) was in similar terms to s 16A(2)(p). In R v Sinclair (1990) 51 A Crim R 418 at 430 to 431, the Western Australian Court of Criminal Appeal (Malcolm CJ, Kennedy and Pidgeon JJ agreeing) referred to Adami and Adami, and held that s16A of the Crimes Act was not intended to alter the common law, finding that the sentencing judge had wrongly construed s 16A(2)(p) as though it had. 127In R v Matthews (1996) 130 FLR 230 at 233 the Victorian Court of Appeal (Phillips CJ, Southwell and Hampel A-JJA agreeing) followed Sinclair to the effect that "hardship to the family of the [offender] resulting from the [offender's] imprisonment could be taken into account only if that hardship were exceptional", although it was acknowledged that at "first sight" that result was not supported by s 16A(2)(p). 128In his often quoted passage in R v Togias [2001] NSWCCA 522; 127 A Crim R 23 at [13] to [17], Spigelman CJ followed these decisions stating: "His Honour approached the sentencing exercise on the basis that hardship to a child had to be classified as 'exceptional' before it could be given substantial weight for the purposes of s16A(2)(p). Counsel for both the Appellant and the Respondent in this appeal accepted that his Honour was correct. The necessity for such an 'exceptional' effect has long been accepted for sentencing at common law. (See eg R v Edwards (1996) 90 A Crim R 510 per Gleeson CJ at 516-517). The South Australian Court of Criminal Appeal held that legislation in that State to the same effect as s16A(2)(p) did not affect the application of the common law principle (R v Adami (1989) 51 SASR 229). The Western Australian Court of Criminal Appeal came to the same conclusion with respect to s16A(2)(p) (R v Sinclair (1990) 51 A Crim R 418 esp at 430-431). This was also the conclusion of the Court of Appeal in Victoria (R v Matthews (1996) 130 FLR 230 at 233). (See also R v Carmody (1998) 100 A Crim R 41 at 45). Courts of Criminal Appeal in three States have interpreted s16A(2)(p) as not altering the common law. Exceptional hardship is required. It is important that Courts of Criminal Appeal adopt the same approach to the interpretation of national legislation. Some comments by Dunford J appear to express a different view (R v Caradonna [2000] NSWCCA 398 at [25]). However Gleeson CJ referred to the South Australian and Western Australian decisions without disapproval in Edwards supra at 517. Subsequently to Caradonna, where he had agreed with Dunford J, Wood CJ at CL affirmed the authority of the earlier cases (R v Ceissman [2001] NSWCCA 73 at [36]). If there is to be any change in this position, and that was not put in this case even on a formal basis, only the High Court can effect it." (emphasis added) 129The reference to "substantial" in the first paragraph of this extract suggests that Spigelman CJ may have left scope for hardship that was not classified as exceptional to be given some weight in the sentencing exercise. The statement in the last paragraph presumably reflects his Honour's assessment of the weight of accumulated authority on the point. Further, at [80] of Togias Grove J endorsed a passage from an academic text that referred to the need for the hardship to be "overwhelming" or "extreme" as "correctly stating the law, applicable both at common law and by virtue of s 16A(2)(p) of the Crimes Act". 130Shortly after Togias was decided, in R v Hinton [2002] NSWCCA 405; 134 A Crim R 286 at [31] Howie J stated: "It is now clear that the reference in s 16A(2)(p) of the Crimes Act to the 'probable effect that any sentence or order under consideration would have on any of the person's family or dependents' should be read as if it were proceeded by the words 'in an exceptional case': R v Togias [2001] NSWCCA 522 where many of the relevant cases concerned with the effect on a child of a sentence of imprisonment imposed upon the mother are considered in the judgment of Grove J. But each case will, to a very great degree, depend upon its own facts involving an evaluation of the seriousness of the objective circumstances of the offence committed, the extent of the requirement for general and, perhaps, specific deterrence, and the nature and degree of the impact of the sentence upon the third person. It should be emphasised that the question of whether the probable effect of a sentence upon a third party will give rise to an exceptional case, cannot be considered in isolation from the facts of the particular matter and the degree of criminality involved in the offences for which sentence is to be imposed." (emphasis added) 131The reference in this paragraph to "the nature and degree of the impact of the sentence upon the third person" is to be understood as explaining the manner of assessing whether the relevant hardship is truly exceptional. The opening part of the paragraph makes explicit that s16A(2)(p) is to be read consistent with the passage from the judgment of Wells J in Wirth. It precludes any consideration being given to such hardship unless it satisfies the description of exceptional. 132In R v Nguyen James J, with whom Hidden and Hislop JJ agreed, arguably formulated a different approach at least to that stated by Howie J in Hinton. His Honour noted at [21] to [22] the discussion in Togias and Le v R [2006] NSWCCA 136, but then also noted the passage from the judgment of Hodgson JA in Girard extracted above at [117]. His Honour then reconciled those decisions as follows at [27]]: "It was submitted by the Crown that, accepting that X and Girard had been correctly decided and should be applied in the sentencing of Commonwealth offenders, all that those cases had decided was that hardship to members of an offender's family, while it could be taken into account as a part of the general subjective facts, could not be used to justify any substantial reduction in sentence, unless it was truly exceptional. In my opinion, this submission is in accordance with the parts of Sully J's judgment in X and Hodgson JA's judgment in Girard which I have quoted and should be accepted." (emphasis added) 133Since they were decided, Togias and Hinton have been applied by this Court in numerous judgments concerning federal offenders (eg Sowaid v R [2011] NSWCCA 177 at [39], R v Aller [2004] NSWCCA 378 at [23], Le at [25], Van Eeden v R [2012] NSWCCA 18 at [3] and at [36] to [39, Hawkins at [55]), Ihemeje v R [2012] NSWCCA 269 at [71], McCraw v R [2011] NSWCCA 162 at [11], Kertebani at [66], Elmir v R [2009] NSWCCA 22; 193 A Crim R 87 at [68] to [70]). Only in Le was the correctness of Togias and Hinton directly challenged as it was in this case, and in that case it does not appear that the Court was taken to the secondary materials.

Interstate decisions since Togias and Hinton 134Mr Game SC submitted that the broad consensus that appeared to have been reached by the intermediate Courts of Appeal concerning s 16A(2)(p) as revealed by the passage from the judgment of Spigelman CJ in Togias had unravelled since those judgments were published. He accepted that Queensland (R v Huston; ex parte Director of Public Prosecutions (Cth) [2011] QCA 350; 219 A Crim R 209) and Victoria (Markovic v R; Pantelic v R [2010] VSCA 105; 200 A Crim R 510) had maintained the test of exceptional circumstances or exceptional hardship. However he submitted that the Australian Capital Territory had accepted his primary submission and that the position was now different in Western Australia and South Australia to what it had formerly been. 135I accept Mr Game's submission in so far as it concerns the Australian Capital Territory. In Director of Public Prosecutions v Ip [2005] ACTCA 24 at [60] the Full Court of the Supreme Court of the Australian Capital Territory (Higgins CJ, Gray and Madgwick JJ) "specifically dissociate[d] itself from the reasoning" in Togias. 136However I do not accept the balance of Mr Game SC's submission. He contended that in R v Berlinsky [2005] SASC 316 the South Australian Court of Criminal Appeal adopted a different approach to s 16A(2)(p) to that which they adopted to the equivalent provision in State law considered in Adami and Adami. However, in Berlinsky at [5] Doyle CJ referred to and applied Adami and Adami and referred to the need to establish exceptional circumstances. Gray J, at [15] to [17], referred with approval to a number of judgments of other intermediate Courts of Appeal that required exceptional circumstances or hardship. 137As for Western Australia, Mr Game SC referred the Court to the twin decisions of Nguyen v R [2001] WASCA 72; 118 A Crim R 519, and Nguyen v R [2001] WASCA 119; 160 FLR 284. However, in allowing the appeal and ordering a non-custodial sentence in that case, the Court clearly applied a test that required exceptional circumstances to be demonstrated (Nguyen v R [2001] WASCA 119 at [39] per Malcolm CJ and at [66] per Wallwork J). Further, in S v R [2003] WASCA 309 at [29] Miller J, with whom McKechnie J agreed, restated the need for exceptional circumstances in cases which seek to invoked s 16A(2)(p). Wallwork AJ disagreed, stating at [39] that s 16A(2)(p) "should be applied in State Courts without any 'riders' to the clear words of the section". 138Tasmania is too often overlooked. However, it does not appear that this issue has been dealt with by its Court of Criminal Appeal, although Sinclair, Matthews and Togias have been followed at first instance (McAree v Barr [2006] TASSC 37 at [21] per Evans J).

Approach to s 16A(2)(p) 139The above represents only a sample of the judgments of intermediate courts of appeal that have considered or applied s 16A(2)(p). Contrary to Mr Game SC's submission, with the exception of the Australian Capital Territory, intermediate Courts of Appeal of all the mainland States have consistently construed it in a manner that requires that exceptional circumstances be demonstrated before its subject matter is to be given any, or possibly any substantial, weight. Nevertheless, the origin of that principle is a South Australian decision concerning legislation of that state. As best as I can ascertain, none of the judgments that have adopted or applied this principle has attempted to reconcile it with the express words of the section or considered the secondary materials concerning its introduction. In my view those matters invalidate the assumption upon which this stream of cases has flowed, namely that the section was not intended to modify the common law's treatment of hardship to an offender's family. 140This succession of cases has led to the adoption of a principle with little to commend it. If in other contexts Courts are bound to consider the impact of their orders on innocent third parties (Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; 195 CLR 1 at [65] to [66]; Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317 at 324 and 332), why is the impact on children of any sentence under consideration to be excluded unless their hardship is only exceptional? The primary objects in sentencing of "retribution, deterrence [and the] protection of society" described by Wells J in Wirth can still be given effect to without requiring sentencing courts to divide the forms of hardship occasioned to an offender's family into those which meet the description "exceptional" and those which do not. The assessment of probable hardship to family members is a task that sentencing courts are perfectly able to undertake, and no doubt they do. In any event, the words of the section and the secondary materials indicate a clear policy choice on the part of the legislature on this topic. 141Further, the difficulty that accompanies the addition of a gloss to a legislative provision that is otherwise clear is revealed by the different formulations of the gloss that have emerged from the cases. The construction adopted by Howie J in Hinton suggests that no consideration can be given to hardship that falls short of the description "exceptional". The judgment of Spigelman CJ in Togias suggests that something other than "substantial weight" might be afforded to probable hardship occasioned to family members of offenders even if exceptional circumstances cannot be demonstrated. Nguyen appears to confirm that. In circumstances where s 16A(2) specifies that a court is to take a "matter into account", what authority does an intermediate court of appeal have to specify the weight a sentencing court attaches to that factor? The relevant constraint on a sentencing court affording too much weight to the factor set out in s 16A(2)(p) is to be found in s 16A(1). Unconstrained by authority, in my view, s 16A(2)(p) should be applied by sentencing courts according to its terms, without having to determine whether the circumstances are exceptional or otherwise. If the result of affording weight to that consideration is that the sentence is unduly lenient then that will attract appellate interference on the established basis that it is manifestly inadequate, but not because some specified level of weight was attached to this factor that the Crimes Act does not expressly preclude. A sentence that is manifestly inadequate does not conform with s 16A(1). 142Standing in the path of the adoption of this approach is the stream of authority in this Court and other intermediate courts of appeal that I have referred to. In so far as the latter is concerned, I can only depart from their interpretation of a Commonwealth law if I am "convinced that that interpretation is plainly wrong" (Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; 177 CLR 485 at 492; Hili at [57]). The same test has been said to apply to departures from earlier decisions of this Court (Hili at [74] per Heydon J). 143In Gett v Tabet [2009] NSWCA 76; 254 ALR 504 at [294] to [295] the Court of Appeal (Allsop P, Beazley and Basten JJA) described this test as stating a necessary but not sufficient basis for departure, and expanded upon what was meant by the description "plainly wrong": "The phrases 'plainly wrong' or 'clearly wrong' can be understood to focus on at least one or more of the following attributes of a ruling: (a) the fact of error is immediately (in the sense mentioned in [283] above) apparent from reading the relevant judgment; (b) the strong conviction of the later court that the earlier judgment was erroneous and not merely the choice of an approach which was open, but no longer preferred (cf Chamberlain and Clutha), and (c) the nature of the error that can be demonstrated with a degree of clarity by the application of correct legal analysis. In our view, the first possibility is liable to be highly subjective and should not be required, where the other two possibilities are satisfied. The existence of (b) and (c) is a precondition to the exercise of the power to depart from earlier authority." 144In my view, the words of s 16A(2)(p) are clear. The secondary materials confirm that meaning. The cases that have considered the provision have not reconciled their construction with either. I am satisfied that the construction of s 16A(2)(p) which reads the provision as though it was preceded or proceeded by the words "in an exceptional case" is plainly wrong on either of the approaches suggested in Gett at [294] to [295]. 145In Gett at [296] to [301] the Court of Appeal also noted that there were "practical considerations" which governed a decision to depart from earlier authority even if the precondition to departure had been established. At [297] their Honours noted a passage from John v Federal Commissioner of Taxation [1989] HCA 5; 166 CLR 417 at 438 to 439, namely: "There is no doubt that this court has power to review and depart from its previous decisions. However, such a course is not lightly undertaken: see Queensland v Commonwealth (1977) 16 ALR 487; 139 CLR 585, especially at 599, 602 and 620. Although there is, in the words of Dixon J in Attorney-General (NSW) v Perpetual Trustee Co (Ltd) (1952) 85 CLR 237 at 243-4, 'no very definite rule as to the circumstances in which [the court] will reconsider an earlier decision', in Commonwealth v Hospital Contribution Fund (1982) 40 ALR 673 ; 150 CLR 49 Gibbs CJ (at 56-8), with whom Stephen J (at 59) and Aickin J (at 66) agreed, specified four matters which in that case justified departure from earlier decisions. The first was that the earlier decisions did not rest upon a principle carefully worked out in a significant succession of cases. The second was a difference between the reasons of the justices constituting the majority in one of the earlier decisions. The third was that the earlier decisions had achieved no useful result but on the contrary had led to considerable inconvenience. The fourth was that the earlier decisions had not been independently acted on in a manner which militated against reconsideration, as had been the case in Queensland v Commonwealth." 146The Court of Appeal in Gett accepted that the principles governing the departure by the High Court from its earlier decisions did not necessarily translate to intermediate courts of appeal (at [299]). In particular, account must be taken of the role of the High Court in resolving differences that may emerge either between intermediate courts of appeal or within them (at [299]). Nevertheless the Court noted the need for consistency and certainty in the law (at [300]). 147In this case the Director was plainly on notice that the correctness of Togias and Hinton was challenged. The Director responded by pointing to the consistent line of authority that was contrary to the respondent's contention. However the Director did not contend that any great uncertainty or inconvenience would be occasioned by a departure from those decisions. 148One of the considerations identified in John as potentially warranting a departure from earlier decisions is that the "earlier decisions did not rest upon a principle carefully worked out in a significant succession of cases". There is no doubt that the principle referred to in Edwards is a principle that "was carefully worked out in a significant succession of cases". However, as I have sought to demonstrate, the adopted construction of s16A(2)(p) is not such a principle. 149Notwithstanding the authorities to the contrary, I accept Mr Game SC's first submission as noted in [111] above.

The respondent's family 150At the time of the hearing of the appeal the respondent's son was nine years old and his daughter was seven. In her affidavit, the respondent's wife described the offender as a "hands on" father. The affidavit evidence confirms that the family was close. 151The passage from the judgment of Simpson J refers to the "worrying behavioural tendencies" of the respondent's son. This was not a reference to any form of anti-social behaviour on his part, but instead to him manifesting significant anxiety about the fate of his father and thus his family. The context is that he and his sister have never known a time when their parents were not under severe stress as a result of the respondent's investigation and trial. It is unnecessary to describe how the son's anxiety manifests itself. However, by way of example, it appears that, unbeknown to his parents, he had written to the Australian Tax Office asking them to drop the action against his father. He believes that his intervention caused his father to avoid incarceration. Not surprisingly, in her affidavit his mother describes her fears for her son's wellbeing if his father is incarcerated. 152In the passage extracted from her Honour's judgment in [107] above, the "irremediable ... effects" on the respondent's wife and children of his incarceration were not identified, nor did they need to be. In the circumstances the likely harm to the wellbeing of his family, especially his children, is obvious. In this case, the unchallenged finding of her Honour, which is confirmed by the material before the Court, is a matter deserving of real weight in the process of synthesising the various factors relevant to fixing an appropriate sentence. 153Having regard to that and to other matters I have referred to, I agree with the orders proposed by Hoeben CJ at CL.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 October 2013