REGINA v O'DRISCOLL [2003] NSWCCA 281 | Case summary

Wednesday 1 October 2003 REGINA v William Benedict O'DRISCOLL Judgment 1 SPIGELMAN CJ: The Applicant was convicted of two charges of defrauding the Commonwealth contrary to s29D of the Crimes Act 1914 (Cth) and sixteen charges of "structuring" transactions contrary to s31(1) of the Financial Transaction Reports Act 1988 (Cth) ("the FTRA"). The Applicant was successful in an appeal against conviction on the "structuring" charges (R v O'Driscoll [2003] NSWCCA 166). 2 In that judgment I said with respect to the newly raised sentencing appeal: "[113] The Appellant has not put on any submissions in this regard and should be given an opportunity to do so. It appears to me to be a matter that can be dealt with by way of writing, subject to any application to the Registrar of the Court of Criminal Appeal that an oral hearing occur. It will be desirable for the present bench to consider the sentence appeal, or at least two members of this bench should do so. It may be that when the submissions are filed, it will be appropriate for a direction to be made under s6AA of the Criminal Appeal Act 1912". 3 Written submissions have been filed. There was no submission to the Registrar for an oral hearing. A direction was made under s6AA of the Criminal Appeal Act 1912. 4 The application for leave to appeal against sentence is based on the fact that in his remarks on sentence the sentencing judge took into account the illegality of the structuring events in the sentences he imposed for the two fraud charges. By reason of this Court's decision, those events did not involve illegality. This Court quashed the convictions and entered a verdict of acquittal with respect to all of those charges. This is the error upon which the Applicant relies as the foundation of an appeal against sentence. 5 The conduct of the Applicant, on which the fraud charges were based, involved the operation by the Applicant of two companies, each of which pretended to be a labour hire company. The Applicant's scheme involved the payment of wages to workers in the construction industry in the form of cash. The employers of workers in that industry would pay to the sham labour hire company the gross wages due to workers by way of a lump sum cheque. The operator of each company would then bank the cheque, convert the proceeds to cash and pay the workers their wages, or return the funds to the employer for payment to the workers, without deducting tax, but after deducting a commission for itself, generally of 7 percent. The amount of each employer's cheque would usually represent the amount owed to the workers/sub-contractors. On occasions they were in excess of that amount. When that occurred the Applicant, in effect, assisted the owner of the business to claim a false deduction and evade tax by receiving cash. 6 The Crown case established the operation of the scheme in two distinct phases through two different companies. The two fraud charges related to each of these distinct periods. For two years commencing 1995 the scheme operated through Star Suppliers Pty Ltd ("Star"). From 1997 the scheme was operated in the name of A-Quip Hire Pty Ltd ("A-Quip"). 7 On the Crown case the Applicant controlled and directed each of these companies. He conducted their affairs through assumed names - O'Donovan in the case of Star and O'Neil in the case of A-Quip. He opened bank accounts and operated them in the assumed names. He filed false applications with the Australian Taxation Office for favourable treatment under the Prescribed Payments System ("PPS") under the Income Tax Assessment Act 1936 (Cth), a scheme specifically directed to tax evasion by payment of wages in cash in the construction industry. 8 The cheques deposited over a period of twenty-four months in the case of Star amounted to $13,030,097 and in the case of A-Quip to $3,371,959. In each case the Applicant had issued false or blank invoices purporting to represent work carried out by Star or A-Quip on behalf of the business. The invoices were in the dollar amounts received by the Applicant but, because of the certificate falsely obtained from the ATO, there was no need for the businesses to remit Prescribed Payments to the ATO. 9 The Crown established that the specimen signature for the account holders in the name of either O'Donovan or O'Neil was in fact written by the Applicant. Similarly the signatures of hundreds of cheques used in the operation of the scheme in the name of either O'Donovan or O'Neil were also generally written by the Applicant, who did not contest that he had completed, signed and cashed the cheques. He was identified by a number of bank officers who had come to know him as a regular customer as either O'Donovan or O'Neil. 10 Before the sentencing judge the Commonwealth estimated the loss of remittances under the Prescribed Payments Scheme in an amount of $2,606,029 in the case of Star and $674,390 in the case of A-Quip. Furthermore, it is plain that the substantial proportion of the cash payments made to workers and their employers, indeed quite probably the overwhelming proportion of those payments, was never declared as income by the recipients of the cash. The fraudulent scheme operated by the Applicant led to a substantial but incalculable loss to the revenue. 11 On the calculations presented to the trial judge and not questioned on the appeal, the Applicant received in excess of $1.1 million as compensation for his criminal conduct. 12 Throughout the trial the Applicant maintained his innocence and claimed that he had conducted all of the transactions on behalf of a "Mr O'Donovan" a claim rejected by the jury. His Honour correctly identified this stance as manifesting a total lack of contrition with regard to the offences committed. His Honour also noted the seriousness of the offences, which appears from the maximum penalty of ten years imprisonment for an offence. 13 His Honour also made findings which, save for the reference to the contravention of Financial Transaction Reports Act, do not require qualification: "The offences reveal a premeditated scheme involving considerable planning which also involved the perpetration of very many criminal acts. The prisoner did not merely assist others to commit fraud, but provided a tax evasion service for which he was paid a commission. He provided blank and/or false invoices to conceal the fraud. He avoided the cash reporting provisions of the Financial Transaction Reports Act by making withdrawals under $10,000. He used false identities. The law has recognised in the past that offences of this kind are difficult to detect. The principle that generally in the case of a series of offences of defrauding the revenue, the element of general deterrence is of major importance and that usually such offences should receive full-time custodial sentences as has been referred to in a number of cases." 14 His Honour's error, in the light of the quashing of the conviction on the FTRA offences is indicated in the following italicised extract from that part of his Honour's reasons where he was considering the appropriate sentence for the FTRA offences. His Honour said: "The prisoner carried out those financial transactions as part of the scheme that he put in place to perpetrate the fraud on the revenue. Whilst it might be said that those transactions were not a necessary part of carrying out those frauds the fact that the transactions were carried out in the way they were, as transactions for amounts less than $10,000, considerably diminished the likelihood of detection. The offences were therefore an integral part of the fraud and I have taken that fact into account as part of the commission of the fraud itself. In the circumstances, whilst there is reason to regard these offences seriously, as previously said, in my view there is also the potential for double punishment if I were to accumulate sentence with respect to those charges, on the offences under s29D. …". 15 The way his Honour had taken this matter into account appears from the previous extract I have quoted, i.e. as one of a number of different illegalities and improprieties involved in the process of implementing the fraudulent schemes. 16 His Honour's reference to the fact that he had taken into account the FTRA offences "as part of the commission of the fraud" occurred in a context where he was explaining why he proposed to make the sentences for each set of FTRA offences concurrent with each of the fraud offences to which they related. 17 His Honour sentenced the Applicant to two years for each of the FTRA offences. With respect to the first of the s29D offences, relating to the company Star, his Honour imposed a fixed term of five years. In the case of the second of the s29D offences, with respect to the company A-Quip, his Honour also sentenced the Applicant to a period of five years but on this occasion fixed a non-parole period of two years and six months. 18 Of particular significance, however, was his Honour's partial accumulation of the two sentences for the s29D offences. The term for the second offence commenced upon the expiration of two years and six months of the first offence, which accordingly became, in substance, a non-parole period for the first offence. Thereafter the non-parole period for the second offence came into effect. From the perspective of the Applicant the effect of the accumulation was to impose an effective head sentence of seven years and six months with a non-parole period of five years. 19 The subjective circumstances of the Applicant are fully set out in the remarks on sentence of the sentencing judge and it is unnecessary to repeat them. A number of additional factors have been brought to the attention of the Court by affidavit, particularly the steps taken by the Applicant to develop life skills in the prison environment and the fact that, by reason of his appeal to this Court, he has been kept in custody in the harsher environment of maximum security. 20 The sentencing judge referred to the decision of this Court in R v Patrick O'Connor [2002] NSWCCA 156 which involved a similar fraudulent scheme. The observations of Sully J and Smart AJ, with both of whom Handley JA agreed, are of assistance. The reasoning in that case must not be treated as if it were a precedent. Some of the submissions made in this application appear to treat the reasoning in that way. 21 There are important differences between the two cases. The subjective circumstances of the two offenders were completely different. Furthermore the amounts defrauded in O'Connor were lower. In that case the accused did plead guilty. More significantly, in terms of the result, was that the Crown had conceded in that case at trial that sentences for the two offences under s29D of the Crimes Act could be entirely concurrent. His Honour, in effect, imposed a rolled up sentence. In O'Connor their Honours indicated that, but for the Crown concession, an effective head sentence for the two s29D offences would have been five years with an effective non-parole period of three years (see at [36.8] and [98]). 22 It is entirely inappropriate to treat the sentence in O'Connor as some sort of base to which arithmetical calculations can be applied. The indications of an appropriate sentence given in O'Connor are, allowing for the different facts of the two cases, broadly comparable to that imposed by the sentencing judge in the present context. His Honour referred to O'Connor by way of guidance and took into account the prior case law, also mentioned in O'Connor, on the approach to sentencing for revenue fraud offences, particularly the significant weight to be given to general deterrence and the comparatively lower weight to be given to past integrity and character. 23 The objective gravity of the offences in terms of the litany of deception involved and the quantum of the loss to the revenue is high. No objection can be taken to his Honour imposing a five year term with a two and a half year non-parole period with respect to each offence. (In the case of the first count the non-parole period is an effective one rather than an actual one.) 24 From the perspective of the effective sentences, however, the crucial decision made by his Honour was the degree of accumulation of the two sentences. The modus operandi of the two offences were similar. However, they did represent two distinct periods of offending with a lengthy visit overseas intervening. It may well have been that the choice of a second company to take over the scheme was a further stratagem to avoid detection, although there is no finding to that effect. 25 It is clear that some accumulation was appropriate. In making this decision the principle of totality was and is an important consideration. 26 The error identified by reason of the successful appeal against the FTRA offences was and is not, in my opinion, a material element in the exercise of the sentencing discretion. His Honour referred to the fact that the modus operandi adopted by the Applicant itself constituted offences as one factor in a list of improper and illegal activity involved in the commission of the fraud offences. Although his Honour referred to the fact that he had taken this element of illegality into account, nothing suggests that this was a significant consideration in his Honour's determination of the appropriate sentence for each of the s29D offences or in the application of the principle of totality to determine the appropriate degree of cumulation. 27 Applying s6(3) of the Criminal Appeal Act 1912, I am not satisfied that some other sentence is warranted in law. Leave to appeal should be granted but the appeal dismissed. 28 HULME J: The circumstances leading to the conviction of the Applicant and then to these proceedings are set out at some length in the judgment of the Chief Justice. For my part it is sufficient to summarise them as follows. 29 Over of a period of 2 years the Applicant pursued, on a weekly if not daily basis, a calculated course of action whereunder he deprived the Commonwealth of, in the case of one company which the Applicant used, in excess of $2.6M and in the case of another such company, in excess of $670,000. A jury held his conduct in the use of each company constituted fraud. He profited by his conduct in an amount in excess of $1.1M. He pleaded not guilty and manifested a total lack of remorse. 30 The maximum term of imprisonment prescribed for each of the Applicant's offences is 10 years imprisonment. On each count the Applicant was sentenced to 5 years imprisonment, the commencing dates and a non-parole period being fixed so that the effective sentence imposed was 7½ years imprisonment including a 5 years non-parole period. 31 The authorities make it clear that general deterrence is an important consideration when sentencing for offences of defrauding the revenue and that in determining the sentence appropriate to any offence regard must be had to its gravity viewed objectively - see, e.g. R v Cappadona & Anor [2001] NSWCCA 194; R v O'Connor [2002] NSWCCA 156; 32 In any assessment of that objective gravity, of the magnitude of the Applicant's criminality, it is not inappropriate to reflect on the fact that in the case of most people engaged in full time occupation, it would take them between 10 and 20 years to earn the over $1 million which the Applicant derived. During that time most of their earnings would be expended in the costs necessary or incidental to sustaining themselves and working over the period. At least to the extent to which these outgoings are time related - and they are to a very large extent - the Applicant's criminality enabled him to make his $1 million while avoiding those costs. 33 Furthermore, in the circumstances here it is also appropriate to record that there is nothing apparent but the deterrent effect of punishment to provide any indication that the Applicant will not, on his release, further offend. 34 Although it is not unlikely, and I am prepared to assume, that in fixing the sentences that he did, the trial judge took into account against the Applicant the offences under the Financial Transactions Reports Act 1988 (Cth) of which he had been convicted but of which he has now successfully appealed, sub-section 6(3) of the Criminal Appeal Act provides:- "On an appeal under s5(1) against a sentence, the court, if it is of opinion that some other sentence, whether more or less severe is warranted in law and should have been passed shall quash the sentence and pass such other sentence in substitution therefore, and in any other case shall dismiss the appeal." 35 When regard is had to the criminality of the Applicant involved in the two offences of which he remains convicted, I am not satisfied that any sentence less severe than he received is warranted. Indeed, although obviously there are limits, I would not have found manifestly excessive a sentence substantially greater than that imposed on the Applicant. 36 I agree with the orders proposed by the Chief Justice. **********

REGINA v O'DRISCOLL

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