REGINA v KELVIN

COUNSEL : Applicant: J W Conomos Crown: R F Sutherland SOLICITORS : Applicant: Peter O'Neill Crown: Commonwealth DPP CATCHWORDS : Tax fraud - professional accountant - Application for leave to appeal against severity of sentence DECISION : Sentence varied - See par 17

IN THE COURT OF CRIMINAL APPEAL CCA 60532/99

MASON P HEYDON JA SMART AJ

JUDGMENT 1 MASON P: The applicant seeks leave to appeal against the severity of sentences imposed in the District Court by Judge Freeman. The applicant pleaded guilty to six counts of defrauding the Commonwealth contrary to s29D of the Crimes Act 1914 (Cth). The maximum penalty in respect of each offence was 10 years imprisonment or a fine of $110,000 or both. On each count the applicant was sentenced to imprisonment for 2½ years, subject to a recognisance release order directing that the applicant be released on recognisance after 18 months of the sentence. 2 When he appeared for sentence in August 1999, the applicant was a certified practising accountant and registered tax agent who had been running his own accounting business at Balgowlah and Epping the previous 26 years. The offences were based on a system adopted between 1991 and 1995. The applicant removed tax stamps from documentation provided to him by clients. These stamps were then used in his own tax returns for the years 1991 to 1994 and in the returns of his former de facto wife for 1993 and 1994. The applicant then claimed in the relevant income tax returns that taxation instalment deductions had been made by him through the purchase of tax stamps. This not only satisfied the tax liability in the relevant years, but also resulted in a refund for those years. The conduct came to light when the applicant was reported to the Australian Tax Office by an employee. 3 The applicant was committed for trial. He pleaded guilty over a year later and only two weeks before the listed hearing date for trial. According to the sentencing judge the Crown case appeared to be a strong one. Shortly before the sentencing proceedings the applicant paid the reparation sought by the Australian Tax Office in the sum of $97,000. 4 The applicant was 54 at the time of sentencing. He had been through an acrimonious divorce eight years previously and he lived alone. The pre-sentence report provided by the Probation and Parole Service indicated that the applicant displayed little contrition, maintaining that his staff committed the offences. 5 The learned sentencing judge described the offences and the circumstances of the plea of guilty. He correctly observed that the value of the plea lay primarily in the utilitarian effect of having saved the community the cost of a trial. Reference was made to the reparation payment and to the almost inevitable loss of the right to practise as an accountant that would ensue conviction. 6 His Honour accepted the Crown submission that the applicant stood in a position of trust not only in relation to the Australian Tax Office but also in relation to his clients. He held that the applicant's action breached that trust in a number of ways. He pointed out that the system of taxation collection in Australia is necessarily dependent to a very large extent upon the honesty of those who are licensed and qualified to assist ordinary taxpayers in meeting their obligations. That system depends upon the honesty, integrity and co-operation of those persons. 7 The judge referred to the case law which reflects belated but now clear acknowledgement that tax fraud should not be treated more leniently than social security fraud as a matter of practice. He said that fraud on the Taxation Department is a serious offence, the more so when it involved a breach of a position of trust, as in the present case. Reference was made to the decision of the Victorian Court of Appeal in Nguyen and Phan (1996) 86 A Crim R 521 . Having regard to these factors, His Honour said that the issue of general deterrence loomed large. 8 I do not understand the applicant to dispute the correctness of these propositions. They are supported in this State by decisions such as R v Meares, CCA, unreported, 3 October 1997 and Stitt (1998) 102 A Crim R 428 to which this Court was referred by the respondent. 9 To my knowledge the leading authority in this State is Director of Public Prosecutions v Hamman, CCA, unreported, 1 December 1998, to which reference was made by Judge Freeman. In that case there were offences against ss 29B and 29D of the Crimes Act. The total income understated over a period of three years was in excess of $600,000. It was a case in which a barrister received cheques from solicitors which he did not include as part of his gross income over a period of three years. In some cases the cheques were endorsed in favour of third parties for the payment of debts owing to those third parties. The offences referable to s29D involved sums totalling almost $145,000. Unlike the present case, the defendant in Hamman cooperated to the fullest after he had been detected and he pleaded guilty at the earliest opportunity. There was extensive favourable character evidence. The Court of Criminal Appeal held that a sentence of two years imprisonment to be served by way of periodic detention was manifestly inadequate. However, considering the hardship of imposing a full-time custodial sentence on a respondent after he had become adjusted to and had served in part a sentence of imprisonment by way of periodic detention, the Crown appeal was dismissed. Sheller JA addressed the sentencing considerations in the following terms: General deterrence is a predominant consideration when sentencing for offences of defrauding the revenue.

Appeal courts have discussed and emphasised the seriousness of frauds committed to the detriment of the public revenue. Inevitably, the Australian system of tax collection depends upon the honesty of taxpayers and, in particular, upon their fully declaring in each year of income what their gross income is. In a free society, such as Australia, the tax collector cannot check that every taxpayer has done so. The effect of dishonesty and non-disclosure of income increases the burden on all other taxpayers and particularly those who have truly disclosed their gross income. This demonstrates the serious nature of the offences charged against the respondent and the importance when punishing such offences to put in the forefront of the principles to be applied that of general deterrence.

While undoubtedly it is a matter to be taken into account, it is, in my opinion, of small account, that when caught out the offender pays the tax due and additional tax by way of penalty for which the offender is liable to a greater or lesser extent, according to the Commissioner's discretion, whatever the reason for non-disclosure. Past integrity and good character, devotion to family and work and contributions to the community, impeccable though they have been, carry little weight against the confession by a plea of guilty that over a period of three years which ended only when the respondent was caught out, the respondent knowingly on three occasions understated his income by very large amounts for his own benefit or advantage."

10 The judgment in Hamman discusses the contrast between periodic detention and a sentence by way of full-time imprisonment. It was held that periodic detention was, within the meaning of s16G of the Crimes Act 1914 (Cth) "a federal sentence to be served in a prison of a State". Nevertheless, periodic detention was held to be inappropriate for the type and level of criminality revealed in Hamman. As Sheller JA pointed out, the overriding consideration is found in s16(A)(1), namely, that in determining the sentence to be passed 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. 11 In this case there was a substantial body of character evidence. As his Honour recognised, this showed that the applicant was a man of previous good character and reputation. The character witnesses also indicated that the applicant had in the sentencing judge's words "been over the years, these offences to one side, an exemplary member of the community much concerned with works of practical assistance, much concerned with works of charity". His Honour gave these matters weight, albeit discounted weight having regard to the guidance from Hamman. 12 The applicant himself gave no evidence, even in the face of the critical Pre-Sentence Report which indicated lack of contrition, indeed some lack of acknowledgement of responsibility for the offences charged. For understandable reasons this troubled his Honour. Before us, counsel for the applicant drew attention to material showing that the applicant was, at least up to the time of being sentenced, having difficulty in accepting the reality or seriousness of his position. The sentencing judge accepted the fact that this did in part explain the absence of explanation. I would also accept it. But, like the primary judge, this acceptance cannot remove the complete absence of explanation if not excuse for dishonest actions that occurred over a prolonged period of time. In these circumstances I also agree with his Honour's characterisation of the actions as "repeated and persistent, flagrant fraud". 13 The applicant does not point to any specific error of principle in the reasons of the sentencing judge. At its highest it was put that insufficient weight had been given to various relevant factors. 14 This said, I would uphold the appeal and reduce the term of custody from 18 to 12 months. I am clearly of the view that a sentence of full time imprisonment was the only appropriate sentence having regard particularly to the objective circumstances of the offences and the very limited degree to which the applicant co-operated with law enforcement agencies in the investigation of the offences (cf s16A(1)(h)). 15 However, a sentence of full time custody for 18 months strikes me as appealably excessive when all matters are taken into account. This was a first offence. There has been reparation in full. The applicant was and is entitled to the benefit of the positive evidence of good character. It is also pertinent that he will almost certainly lose his right to practise as an accountant. Also, there does appear to be one error of fact which is of some relevance, namely that the trial averted would have gone for many weeks not a couple of days as stated in the judgment. 16 I would grant leave to appeal and uphold the appeal. 17 The concurrent sentences imposed should be varied to ones of 2 years imprisonment to date from 24 August 1999 with an order that the applicant be released on recognisance after giving securities following the completion of 12 months of that sentence, that is on 23 August 2000. The overall sentence would expire on 23 August 2001. 18 HEYDON JA: I agree. 19 SMART AJ: I also agree. 20 MASON P: The orders of the Court will be as indicated. Mr Kelvin, you understand that what that means is that the term of the imprisonment will be varied. It will extend until 23 August of this year and if prior to then you enter into a recognisance for good behaviour for the remaining 12 months of the two years sentence then you will be released under the conditions of that recognisance. **************

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