Saoud v The Queen; Fernandez v The Queen [2019] VSCA 208

Ms A Pavleka, Solicitor for Public Prosecutions (Cth)

1 On 19 April 2018, following a 12-day trial in the County Court, Houssein Saoud and Carlos Fernandez were each convicted of one charge of jointly dishonestly causing a loss to the Commonwealth contrary to sub-ss 11.2A(1) and 135.1(5) of the Criminal Code 1995 (Cth). On charge 1, Saoud, along with a co-offender, Lebanon Kamarelddin, was convicted in respect of a loss of revenue of $2,147,612.27; and on charge 2, Fernandez and Kamarelddin were convicted in respect of a loss of revenue of $1,129,153.83.

2 On 17 May 2018, the judge sentenced both Saoud and Fernandez to 3 years' imprisonment and ordered that they each be released after serving 2 years and 3 months upon each of them giving security by recognizance in the sum of $5,000 to comply with a condition that they be of good behaviour for nine months.[1] The maximum term of imprisonment for the offence for which they were each convicted was 5 years.

3 On 17 August 2018, Niall JA gave Saoud leave to appeal against his sentence on the following ground:

1. The sentencing discretion miscarried as a result of the judge having found, in circumstances that deprived [Saoud] of procedural fairness, that:

(a) 'budget papers ma[d]e clear [that] the cost to the revenue of illegal tobacco by a way of excise foregone is considerable'; and

(b) [Saoud] knew the health risks associated with tobacco products and of its relationship to the government raising revenue on such products.[2]

4 In addition to appealing on the ground on which he has been granted leave, Saoud now seeks leave to appeal against his sentence on a further ground as follows:

1. The sentencing discretion miscarried as a result of a failure by the sentencing judge - led into error by defence counsel on the plea - to have regard properly or at all to the hardship suffered by [Saoud's] family as a result of his offending and incarceration. In particular, the sentencing judge failed to:

(a) consider whether the circumstances surrounding, in particular, the care of [Saoud's] profoundly deaf and autistic son, in his absence, were at law 'exceptional'; and

(b) have regard to the additional hardship upon [Saoud] of his prison term, knowing that his wife was all but alone and the sole carer of their two children, and especially their profoundly deaf and autistic son.

5 Subsequent to Saoud being granted leave to appeal, Fernandez filed an application for leave to appeal against the sentence imposed upon him. Fernandez now seeks leave to appeal his sentence on the following grounds:

1. The learned sentencing judge erred in the exercise of her sentencing discretion by denying procedural fairness to [Fernandez] in making findings that were relevant to sentence without giving [Fernandez] an opportunity to make submissions thereon, thereby giving rise to a miscarriage of justice:

'39. Indeed, as the recent budget papers make clear, the cost to the revenue of illegal tobacco by way of excise foregone is considerable. It is clear that general deterrence is an important sentencing factor.

1. 40. Regardless of the view one might have about licencing and marketing of tobacco, given what is known about its health risks, and of governments raising revenue on such a product, the gravamen of this offending is cheating the revenue, and it is for that you must be sentenced.'
2. The learned sentencing judge erred in the exercise of her sentencing discretion by failing to impose a sentence that was disparate to that imposed upon the co-accused Houssein Saoud thus giving rise to a justifiable sentence of grievance and a miscarriage of justice.

6 On 3 May 2014, following a period of surveillance, investigators from the Australian Taxation Office executed search warrants at two farms, a factory, and the garage of a house in Tarneit. There were signs that a tobacco crop had recently been harvested at the first farm. At the other farm, investigators found three tobacco drying kilns containing 4,227.5 kg of tobacco. The excise duty payable on that tobacco was $2,147,612.27.

7 At the factory, investigators found 2,222.7 kg of dried and cut tobacco, with an excise value of $1,129,153.83. A number of boxes of cut tobacco, with an excise value of $1,314,318.39, were found in the garage.

8 Saoud was the lessee of the two farms and, at the time the search warrants were executed, was living at the farm where the kilns were located. Kamarelddin, who is Saoud's brother-in-law and cousin, frequently travelled between the two farms and would attend at the factory as well. Saoud and Kamarelddin were linked to the transportation of kilns to the first farm and another property. Fernandez was the lessee of the factory and would attend there on occasion, although not as frequently as Kamarelddin.

9 Saoud, Fernandez and Kamarelddin were each charged with dishonestly causing loss to a Commonwealth entity. At trial, there was no challenge to the Crown's contention that a large scale tobacco growing, manufacturing and distribution operation was being conducted at the farms and the factory. The defence of all three accused at trial was that they did not have any involvement in, or knowledge of, that operation.

10 Ultimately, Saoud and Kamarelddin were convicted in respect of the growing, harvesting and drying operation that took place at the two farms (charge 1); and Fernandez and Kamarelddin were convicted in respect of the processing, storage and distribution operation at the factory (charge 2).

11 The judge commenced her reasons for sentence with a detailed description of the offending.[3] Her Honour then described the offending as 'a sophisticated operation, carried out over a considerable period of time, and requiring the investment of considerable sums of time, money and manpower'.[4] The judge identified the various activities involved in the offending as:

• Leasing the two rural properties ... at a combined cost of $5,200 a month.

• Having specialist tobacco spraying and harvesting equipment on-site.

• Sourcing, buying and arranging the heavy haulage transporting of the drying kilns.

• Installing, wiring up and maintaining the drying kilns at [one of the farms].

• Bussing in labourers to harvest the crop, transport it [from one farm to the other], unload it and dry it in the kilns.

• Renting a minibus and transporting workers and the crop.

• Renting cars for [their own] use and the use of others seen to be connected with the operation.

• Renting the factory, taking delivery of and unloading multiple loads of dried tobacco there.

• Using cutting machines and dryers at the factory to cut and process the tobacco.

• Providing boxes into which the processed tobacco could be packed.

• Loading trucks, vans and cars with boxes of processed tobacco.[5]

12 As the judge put it, the scale of the operation could also be measured by the amount of excise foregone on the tobacco found in the factory at the time of the execution of the search warrant on those premises.[6] The judge then referred to the level of the offending again, this time describing it as a 'large scale, continuing and serious criminal enterprise, involving sophistication and planning at execution, the investment of considerable time, money and effort over an extended period'.[7] The judge then said:

It is clear that the penalty for sophisticated, large scale continuing enterprises involving such a loss to the revenue must reflect the need to impose a punishment on offenders, which will mark the unacceptability of such behaviour and serve as a deterrent to you and others minded to engage in such conduct.

In my view, the sentence must not only reflect condemnation of this behaviour of tax or excise avoidance, dishonestly causing a loss to the Commonwealth as a result, and act as a deterrent to you, as well as to others minded to engage in activity such as growing and processing tobacco without an excise licence. It is no less serious a crime because it is the Commissioner of Taxation who suffers the loss rather than an individual citizen or taxpayer. Although this case reveals that tobacco excise is a significant component of the retail cost of tobacco, the gravity of the offending cannot be downplayed by disparaging tobacco excise as a 'revenue raiser', as if that somehow justifies avoiding the excise on tobacco.[8]

13 Relevantly so far as Saoud's ground 3 and Fernandez's ground 1 are concerned, the judge said:

Indeed, as the recent budget papers make clear, the cost to the revenue of illegal tobacco by way of excise foregone is considerable. It is clear that general deterrence is an important sentencing factor.

Regardless of the view one might have about the licensing and marketing of tobacco, given what is known about its health risks, and of governments raising revenue on such a product, the gravamen of this offending is cheating the revenue, and it is for that that you must be sentenced.[9]

14 The judge then turned to Saoud and Fernandez's personal circumstances. She observed that both men were adults who made 'conscious choices to engage in wholesale criminal activity' in the expectation of gain.[10]

15 The judge noted that Saoud had been born in Lebanon and emigrated to Australia with his wife in 2003. He had been unable to find employment commensurate with his level of training on account of his difficulties with written English.[11] Saoud's older son is profoundly deaf and has been diagnosed with autism, which the judge accepted had resulted in family hardship.[12]

16 The judge recorded that Saoud's wife gave evidence on the plea. While we will refer in more detail below to what the judge said about Saoud's wife's evidence,[13] for present purposes, it is sufficient to note that Saoud's wife gave evidence that, because of the extent of their child's disorder, he needs to be supervised and managed. She said that she and Saoud were able to communicate with their son by sign language (Auslan) and words, and that their son needed his father around.[14] However, the judge said she was unable, on the evidence, to make findings about the extent of Saoud's involvement with his children and therefore the degree of hardship which his wife would suffer on account of his imprisonment.[15]

17 In relation to Saoud's criminal history, the judge noted that he had been fined (without conviction) in the Magistrates' Court in 2011 for trafficking and possessing cannabis. The judge said that Saoud's more limited criminal history 'indicate[d] that [he was] entitled to have a more favourable view taken of [his] prospects for rehabilitation and that less weight need[ed] to be given to specific deterrence, as [was] the case with [Kamarelddin]'.[16]

18 The judge then turned to Fernandez's personal circumstances. She noted that he had not been in paid employment for most of his life on account of health problems. However, in recent years, he had been involved in kickboxing and had participated in exhibition events raising funds for orphans in Syria and Turkey.[17]

19 The judge observed that Fernandez had a significant prior conviction for the unauthorised possession of tobacco with an excise value of $537,467.25. He had been sentenced to six months' imprisonment, to be released immediately on his recognisance to be of good behaviour for two years.[18] Fernandez had also been convicted of two offences since being charged in relation to his part in the enterprise. Relevantly, in February 2015, he was sentenced to six months' imprisonment for money laundering, with immediate release on his recognizance to be of good behaviour for two years. He was also fined $15,000 for failing to report the transfer of currency in excess of $10,000 out of Australia.[19]

20 The judge observed that Fernandez's prior conviction had not deterred him from engaging in like offending. This, the judge said, tempered the weight to be given to his prospects for rehabilitation and also meant that specific deterrence assumed particular significance as a factor in sentencing.[20]

21 The judge concluded her sentencing remarks by noting that neither Saoud nor Fernandez had the benefit of a guilty plea or any evidence of remorse. She observed that the offending was 'at the high end of the range of seriousness' on account of the ongoing, sophisticated nature of the criminal enterprise and the quantum of loss occasioned to the Commonwealth.[21]

22 After the judge imposed the sentences, it came to her attention that certain documents had been filed on behalf of Saoud shortly before sentencing.[22] Among those documents were testimonials from various acquaintances of Saoud[23] and a letter from Saoud's wife supplementing the evidence she gave on the plea and referring to her circumstances (and those of their son) since Saoud had been in custody. Her Honour noted that the testimonials had not led her to form a more favourable view of Saoud's character or prospects for rehabilitation than that she had expressed earlier in her reasons for sentence.[24] In relation to the letter from Saoud's wife, her Honour said that the hardship occasioned by Saoud's imprisonment was 'no more than what would be expected, and what I have already taken into account.'[25]

23 Saoud and Fernandez both complain that the judge denied them procedural fairness when she referred in her sentencing reasons to recent budget papers and what is known generally, or what Saoud and Fernandez knew, about the health risks of tobacco.[26] The material they seek to impugn is contained in Reasons [38]-[40]. Complaint is made that no evidence was adduced on the plea hearing about 'budget papers' or about 'health risks' associated with tobacco products. Further complaint is made that the judge did not, at any stage of the plea hearing, raise these issues with counsel, or tell counsel 'how it was that she intended to inform her sentencing discretion by reference to them'.

24 Saoud and Fernandez contend that the impugned passages in the judge's reasons show that the judge considered it necessary to increase the weight she would give to general deterrence by reference to what was disclosed in the Commonwealth's budget papers and what she asserted was known about the health risks of tobacco - matters about which they were given no opportunity to make submissions.

25 While Saoud's and Fernandez's complaints about procedural fairness are arguable, in our view they should ultimately be rejected. What the judge said in the impugned passages was a statement of little more than the obvious - namely that general deterrence is an important sentencing factor in cases of the present kind where there is a substantial effort to cheat the revenue. So much has been said by courts many times before. The addition of what might be described as 'colour' by reference to budget papers and health risks added nothing to the substance of reasoning that was otherwise plainly correct and not contestable.

26 Further, when one reads the impugned passages in the context of the whole of the judge's carefully expressed and detailed reasons, one sees nothing in the impugned passages that either Saoud or Fernandez could realistically have taken issue with if the matter had been the subject of discussion on the plea. We are unpersuaded that the judge increased the weight she would otherwise have given to general deterrence because she took account of a material matter about which Saoud and Fernandez were denied procedural fairness. Nothing in her Honour's reasons or the sentences that she actually passed suggests to us that general deterrence was given any more weight than was actually required in all the circumstances.

27 In his remaining ground of appeal,[27] Saoud complains that despite his counsel informing the judge of relevant matters concerning the difficulties associated with caring for his disabled son, and despite telling the judge of facts personal to Saoud and his family that demonstrated real hardship, 'inexplicably' his plea counsel did not advance an argument that Saoud's wife's plight and her care for their son amounted in law to exceptional circumstances sufficient to attract from the sentencing judge mitigation for family hardship. Alternatively, it was submitted that if Saoud's wife's plight and their son's care was not 'exceptional' then the underlying facts in relation to it rendered Saoud's time in gaol more burdensome, because of his knowledge of the hardship that his wife would be suffering at home alone.

28 As we have already observed, Saoud's wife gave evidence on the plea. Her Honour's reasons show that she gave detailed consideration to that evidence and the circumstances now contended to be exceptional. Specifically, the judge said:

Your wife, Imam Kamarelddin, gave evidence on the plea. Her evidence as to how long you lived at the farm, how long the two of you had been separated but living under the one roof, and whether you were, for some period up to the time of the jury verdict, living again as husband and wife, I found contradictory and confusing.

She said that you are a good husband and father. She acknowledged past matrimonial difficulties, and said that you had, for five years, been separated and living under the one roof. That would cover the time of the tobacco venture. At one stage, Ms Kamarelddin said that you are living together as a family again. She said that she relied on you for assisting with the children, particularly the older boy, who at the age of 14 is now much more difficult for her to manage on her own. Because of the extent of his disorder, he needs to be supervised and managed. He does not know right from wrong, she said and needs instruction all the time as to what to do. She said the two of you were able to communicate with him both by sign language (Auslan) and words, and that the boys, but particularly the older one, heed you. She said he needs his father around. She spoke very positively of the benefits, particularly to your older boy, since you have been more actively engaged in his life in recent years. At another stage, when talking about how hard you worked, she said that you work six days a week and you gave the family a day to take the kids out. At another stage, she said that you had promised to try and be better with the family and to take the kids out, but that had not really happened yet.

Similarly, just what is the family's current financial circumstances was difficult to ascertain. I was told you are self-employed, running both your handyman business and also a painting business. I was told you work six days a week, employing up to four people, and brought home, on average, between $1,500 and $2,000 a week. Ms Kamarelddin, I was told, is in receipt of a carers benefit by reason of the high needs of your older child, of approximately $1,000 per fortnight and relies on you to supplement the pension and pay the mortgage (of just under $1,000 per month) on the family home. Whilst I accept, of course, that what Mr Crisp told me was told on the basis of instructions, there was no evidence presented to me to support any of the assertions about your businesses, your income or your contribution to the support of your wife and children.

I accept that there is considerable family hardship by reason of your oldest son's deafness and autism. It seems to me that your wife has shouldered the greater part of the burden of caring for him and the younger child. It seems clear also that she welcomes and encourages assistance from you, and sees positive benefit to the children. She said at one stage that it was more difficult for her because she had no family here. She appears to be a stoical woman who has accepted the hardships life has visited upon her, and done her best in difficult circumstances, including doing her best to keep the marriage or a civil and proper relationship between the two of you for the benefit of the children. You are lucky. Indeed perhaps luckier than you appreciate to have the support of such a woman. It is unclear to me on the evidence how much greater any hardship will be for your wife by reason of your imprisonment. That is, I am unable to make any findings positive or negative about the extent of your past or recent involvement with the children, particularly your older child, and therefore, the extent of any resultant hardship to your wife by reason of your removal and of the assistance that you can provide resulting from the imposition of a term of imprisonment. Similarly, I am unable to make any findings as to the extent of family financial hardship by reason of your imprisonment.[28]

29 Saoud submitted in this Court that the last paragraph of her Honour's reasons just extracted[29] 'betrays a number of errors'.

30 First, it was submitted that it was not open to the judge - in the light of Saoud's wife's unchallenged evidence on the plea - to find that it was 'unclear ... on the evidence how much greater any hardship will be for [Saoud's wife] by reason of [Saoud's] imprisonment'. That finding was submitted to be at odds with Saoud's wife's evidence, and with the unchallenged submissions of counsel for Saoud, that Saoud's son responded best or especially well to his father and that, in Saoud's absence, that behaviour had worsened.

31 Secondly, it was submitted that what her Honour said in Reasons [54] was internally inconsistent: on the one hand, finding that it was unclear how much greater the hardship would be for Saoud's wife by reason of Saoud's imprisonment; and on the other hand, finding that 'it seems clear also that she [Saoud's wife] welcomes and encourages assistance from [Saoud], and sees positive benefit to the children'.

32 In oral argument, counsel for Saoud[30] trenchantly criticised the conduct of Saoud's counsel on the plea. Relevantly to the present ground of appeal, it was contended that Saoud's plea counsel should have submitted that the hardship to Saoud's family, that would be caused by his incarceration, satisfied the exceptional circumstances test described in Markovic v The Queen.[31] The failure of plea counsel to make this submission, apart from being said to be 'inexplicable', was said to amount to flagrant incompetence on the part of plea counsel.

33 Similarly, Saoud's counsel contended that it 'beggared belief' that, in addition to a submission based on Markovic not being made, Saoud's plea counsel did not submit to the judge that Saoud's time in custody would be more burdensome knowing the hardship that his family was suffering as a result of his incarceration.

34 There is, we think, some force in the complaints now made about the conduct of Saoud's counsel on the plea. Nevertheless, it appears to us that the family matters which had the capacity to mitigate Saoud's sentence were all put to the judge, and that the judge gave them appropriate consideration, even though Saoud's plea counsel did not expressly state the basis upon which the evidence he called could be taken into account by the judge.[32]

35 Saoud submitted to us that despite the absence of any submission by his counsel on the plea, the sentencing judge ought to have concluded that there were exceptional circumstances which mitigated Saoud's penalty; alternatively, Saoud was at least entitled to call in aid of his predicament the additional hardship of his time in gaol 'knowing (as he must have) that, in his absence, the hardship to his family would be stretched to its limit'.

36 We are not persuaded that there is any substance in these submissions. The judge saw and heard Saoud's wife give evidence. She was not bound to form a view that there would be any particular level of greater hardship caused by Saoud's imprisonment. That said, it is plain that the judge gave detailed consideration to the evidence called before her. We see no error in her Honour's analysis, nor any inconsistency in her Honour's reasons. To the contrary, her Honour's analysis appears to be no more than a conventional weighing of the various matters put before her on the plea before coming to a concluded view on the topic as best she was able.

37 In his remaining ground of appeal,[33] Fernandez makes complaint about the failure of the judge to impose a lesser sentence on him than was imposed on Saoud. The gravamen of Fernandez's parity complaint is that his offending only related to a loss of revenue of $1,129,153.83, whereas Saoud's offending related to a loss of revenue of $2,147,612.27.

38 In argument, counsel for Fernandez submitted that because there was no 'actual' defrauding of the revenue - Fernandez's conduct merely involving an intention to deprive the revenue of excise that would become payable to the Commonwealth at the time of a subsequent sale of the tobacco - the Court should regard his offending as involving a lower level of moral culpability than that involved in the more usual forms of defrauding the revenue.

39 In our view, there is no substance in this submission. The judge well understood the true facts surrounding the offending, and correctly categorised the offending as a defrauding of the revenue. Putting the issue of 'jointly' to one side,[34] s 135.1(5) of the Criminal Code 1995 (Cth) provides:

A person commits an offence if:

(a) the person dishonestly causes a loss, or dishonestly causes a risk of loss, to another person; and

(b) the first mentioned person knows or believes that the loss will occur or that there is a substantial risk of the loss occurring; and

(c) the other person is a Commonwealth entity.

A loss in property, whether temporary or permanent, and includes not getting what one might get.

41 Thus the circumstances of the present case were properly described by the judge as an offence of defrauding the revenue - the relevant provisions of the Code not distinguishing between an actual loss of property or circumstances resulting in the Commonwealth 'not getting what [it] might get' as the result of an offender's dishonesty.

42 While the quantum of any loss to the Commonwealth is an important matter to be taken into account when sentencing for offending of the kind committed here, in the present case there was a very significant matter that weighed against Fernandez (but not against Saoud) in the sentencing synthesis. Fernandez had previously been sentenced for the offence of unauthorised possession of tobacco with an excise value of in excess of $500,000. Fernandez's prior criminal history (suggestive of a greater need for specific deterrence in his case and more limited prospects of rehabilitation than those enjoyed by Saoud) told in favour of a greater sentence being imposed upon him than upon Saoud.

43 In the end, we think it was well open to the judge to determine - for the reasons given by her - that both Saoud and Fernandez should be given the same sentence. As with the parity complaint made by Saoud that was rejected by Niall JA, Fernandez's parity ground must also be rejected.

44 In our view, the sentences imposed by the judge were entirely appropriate. No error has been shown in relation to either of them. Even if we had been persuaded that there was some error in either sentence, we are not persuaded that any different sentences should now be imposed.[35]

45 Notwithstanding that the maximum term of imprisonment for the offences for which Saoud and Fernandez were convicted was 5 years, for examples of this offence that were correctly described by the judge as being sophisticated, requiring considerable effort and involving substantial defrauding of the revenue, and in light of the lack of any remorse by the offenders, sentences of the order of those imposed by the judge were plainly warranted.

46 In conformity with the grant of leave already given to Saoud on his ground 3, we will grant leave to appeal to Fernandez on his ground 1. The appeals will, however, be dismissed, and leave to appeal on the other grounds that were argued before us will be refused.

[1] DPP v Saoud & Fernandez [2018] VCC 717 ('Reasons'). Kamarelddin was later sentenced by the same judge on charges 1 and 2 to a total effective sentence of 3 years and 3 months, with a non-parole period of 2 years and 3 months: see DPP v Kamarelddin [2018] VCC 1193.

[2] Leave to appeal on grounds alleging manifest excess and a parity complaint in relation to the sentence imposed on Fernandez was refused by Niall JA.

[9] Ibid [39]-[40] - noting that in his argument under ground 3 in his written case, Saoud seeks to impugn what the judge said at Reasons [38] as well as what she said at Reasons [39]-[40].

[13] When we deal with Saoud's ground 4.

[26] Saoud's ground 3 and Fernandez's ground 1.

[30] Not counsel who appeared on the plea.

[31] [2010] VSCA 105; (2010) 30 VR 589 ('Markovic').

[32] While in argument before us, counsel for Saoud made other criticisms of the conduct of his predecessor relating to the tendering of prescriptions for Endep and Panadeine Forte and medical reports (including psychologists reports) that were years out of date, and in one case related to different offending, these criticisms - which again had some force - did not form the basis of a specific ground of appeal. Moreover, while the plea conducted on behalf of Saoud before the judge was not perspicuous in its quality, we are not persuaded that it was so poor as to disclose error in the sentence imposed by the judge.

[34] As to which, see s 11.2A of the Criminal Code 1995 (Cth).

[35] See s 281 of the Criminal Procedure Act 2009.