Zhao v R

Facts

1. The sentencing judge summarised the facts in accordance with a document headed 'Statement of Agreed Facts' tendered in the Crown case on sentence. That document reveals a complex fraud conducted over a period of months which resulted in a benefit to the applicant of US$730,773.39 (Count 1) and US$190,224,28 (Form 1). The single count contrary to s 192E(1)(b) on the indictment embraces a course of criminality.

The business of Paris International

1. The applicant was the sole director and shareholder of Paris International Group Pty Ltd ("Paris International"). The business of Paris International was the export of waste paper and cardboard to China for reprocessing into recycled paper products. Paris International had a contractual arrangement with America Chung Nam Inc ("ACNI"), a company registered in California, for the sale of waste paper and cardboard sourced in Australia for recycling in China. ACNI dealt with the applicant's father, Mr Zhao, in respect of that arrangement.

TTS and ACNI

1. The applicant's father Mr Zhao recommended TTS Waste and Resource Management ("TTS") to an officer of ACNI as a new Australian supplier of waste paper and cardboard. Mr Zhao did not disclose that his daughter, the applicant, had any connection with TTS. "TTS Waste and Resource Management" was in fact a business name registered by Paris International on 29 March 2011.
2. The ACNI officer subsequently entered into email negotiations with TTS for the supply of waste paper product from Australia. The person with whom he negotiated was the applicant, who was using the pseudonym "Kelly Shin". The applicant asserted that TTS had no connection with Paris International. In late March 2011, TTS and ACNI reached agreement for the supply by TTS of a quantity of waste cardboard that would be shipped to a nominated consignee paper mill in China.
3. On 2 April 2011, ACNI placed three purchase orders with TTS for different grades of cardboard. The value of those orders was US$500,000, $637,000 and $208,800 respectively. It was anticipated that these orders would require the consignment by TTS of 228 shipping containers. The last date for the supply of the goods was specified as 7 May 2011.
4. On 3 April 2011, prior to the shipment of any of the waste cardboard, ACNI placed an additional order for office waste white paper. The value of this order was US$204,750 and would require 87 containers.
5. TTS was incorporated on 25 July 2011, with the applicant listed as its sole director and shareholder.

Arrangements for payment

1. By agreement, the supplier TTS was to bear the cost of shipping the freight and the purchaser ACNI would be responsible for obtaining the relevant certificates and Customs clearance.
2. Arrangements for payment were by way of Letters of Credit provided by Comerica Bank ("Comerica"), the US bankers for ACNI, with respect to specific purchase orders. TTS was to obtain a Bill of Lading from the shipping carrier once a consignment had left Sydney. TTS would then forward the Bill of Lading and supporting documentation to Comerica via its banks, the Commonwealth Bank of Australia ("the Commonwealth Bank") and the Australian and New Zealand Banking Group Ltd ("ANZ"). Upon receipt of the relevant documents, Comerica would cause the appropriate funds to be forwarded to the bank account of TTS. The applicant on the Letters of Credit was ACNI and the beneficiary was TTS.
3. Three Letter of Credit facilities were created for a total of US$2,178,550 in respect of six orders. The last dates of shipment stipulated on the Letters of Credit were 7 May 2011, 13 May 2011 and 31 August 2011.
4. As between ACNI and TTS, it was initially agreed that payment would be 90 days after the date of the Bill of Lading. In late April 2011, the applicant requested that the terms of the Letters of Credit be amended to "'at sight'", rather than "90 days". The effect of this amendment would be to allow Comerica to release the appropriate funds under the Letter of Credit facilities immediately once satisfied with the documentation lodged. ACNI agreed and the terms of the Letters of Credit were amended.

Legitimate consignments

1. There were nine legitimate shipments of waste paper product made by TTS to Dong Guan Nine Dragons Papers Industries Co. Ltd ("Dong Guan") in April and May 2011 pursuant to the agreement between TTS and ACNI. The value of those consignments was US$157,939.35. Payment was made by Comerica using the funds secured by the relevant Letters of Credit.
2. By 7 May 2011, the first deadline, only 19 of the 228 containers of waste paper product ordered by ACNI had been dispatched. The Letters of Credit required strict compliance with the deadlines set out at [19] above. After their expiration, TTS was no longer entitled to make a claim under the relevant purchase orders for any waste paper shipped to China.

Fraudulent Bills of Lading

1. On or about 7 May 2011, three false Bills of Lading and supporting documents were created at the offices of TTS. The Bills of Lading were for US$147,201.30, $262,499.55 and $155,122.74 respectively. The documents were forwarded to the Commonwealth Bank in order to procure payments from Comerica for shipments that had not been made.
2. On or about 12 May 2011, another false Bill of Lading and other supporting documents were created to evidence the shipment of 22 containers. The value of that consignment was US$168,005.25. Those documents were also used to procure payments from Comerica.
3. The false Bills of Lading were signed "Kelly," a pseudonym of the applicant.
4. On 6 June 2011, the Commonwealth Bank received amounts of US$146,788.30, $261,798.30, $154,679.60 and $167,507.19 from Comerica. Those amounts were transferred by Comerica pursuant to the Letters of Credit upon receipt of the forged documentation. Paris International ultimately received this money, as TTS remained an unincorporated entity at that stage.

Disposition of funds

1. The funds obtained from the fraud matter on the indictment were used to pay a debt of US$627,346.44 that Paris International owed to the Commonwealth Bank. The remaining US$102,784.23 was credited to the CBA Foreign Currency account held in the name of Paris International.
2. In May 20111, a property at Macquarie Fields was purchased by another company incorporated by the applicant, Sunday International Investment Group Pty Ltd ("Sunday International") with some of the funds represented by the debt held by the Commonwealth Bank.

Further fraud (Form 1)

1. Between 3 May 2011 and 4 July 2011, four more legitimate shipments were made.
2. On 7 July 2011, ACNI placed two further purchase orders with TTS. The two orders would require 22 containers and 87 containers and were worth US$127,500 and $500,000 respectively.
3. On or about 25 July 2011, another false Bill of Lading and supporting documentation were created. These documents referred to 32 containers with a value of US$198,325. Comerica subsequently authorised the release of an amount of US$190,224.28 to the ANZ account of TTS. The TTS commercial invoice was signed by "Louisa", another fictitious identity adopted by the applicant.
4. The bulk of the money obtained as a result of this fraud went into the account of Sunday International.

Detection of the fraud

1. ACNI began to make inquiries with respect to the Bills of Lading when Dong Guan failed to receive consignments. They were found to be forged. ACNI commenced an internal investigation. Two ACNI executives travelled to Sydney and met with the applicant, who pretended to be "Jenny Chan", and her then partner Gary Said. No resolution was achieved.
2. In October 2011, police commenced an investigation. On 24 April 2012, the applicant was arrested and charged.

Subjective circumstances

1. The applicant's case on sentence consisted of a psychological report under the hand of Stephen Wood. She did not give evidence.
2. The report of Mr Wood set out details of the applicant's background. It stated that the applicant was the only child of her parents. She moved to Australia with her father at the age of 14 and they were later joined by her mother. Her parents separated and her father returned to China. Her father owns and operates a paper recycling business. Both parents are in ill health, with the applicant's mother being particularly dependent on the applicant for financial and other support.
3. The applicant commenced living with her ex-partner Gary Said in 2011. She described Mr Said as emotionally and physically abusive. Police were apparently called to their house on a number of occasions. There is one child of their union, a son who was two years old at the time of sentence. The child apparently reacts fearfully to his father's presence.
4. The applicant became involved in the paper recycling business in 2005. In 2011, she started her own business, Paris International. A further business, Enviro Paper Recycling, closed down in 2013 as a result of financial difficulties and what the applicant described as a failure by her then partner Mr Said to help with day-to-day operations.
5. The applicant told Mr Wood that she did not think about the criminality of what she was doing because she had become obsessed with money that she said was owed to her father by ACNI. She spoke of financial pressure relating to supporting her mother and son and servicing a large mortgage.
6. The applicant has no history of mental illness or substance abuse. Mr Wood made a diagnosis of adjustment disorder with mixed anxiety and depressed mood, related to the applicant's life circumstances at the time of the assessment.

Reasons

1. His Honour noted that this was a very significant fraud, in the commission of which multiple false identities were used. His Honour could not find beyond reasonable doubt that the offence was aggravated by a breach of trust within the meaning of s 21A of the CSP Act, as was urged by the Crown, observing that contractual parties are not usually regarded as being in a position of trust in relation to each other. His Honour then turned to the submissions on behalf of the applicant to the effect that there was little evidence of personal aggrandisement and that the applicant has been living in "straitened circumstances". There is evidence that some of the money obtained was used to pay a mortgage debt.
2. His Honour noted that there was a dearth of information as to why the applicant committed the offence. His Honour found that it "…required considerable planning and a degree of sophistication in the adoption of the various identities and it used extensive knowledge of the nature of international trade and bills of lading." His Honour further found that the offence was "very serious" and "a sophisticated piece of criminality" involving a large amount of money and a high degree of dishonesty.
3. Having noted the submissions of the parties pertaining to the effect of imprisonment on the applicant and her family members, his Honour considered that the circumstances of the applicant's offending nevertheless required a custodial sentence.
4. Her Honour made the following finding in relation to special circumstances within the meaning of s 44 of the CSP Act: "The offender is a relatively young woman. She has a young child. She has no prior criminal convictions. This will be her first time in gaol. She seems to be in some form of almost catatonic denial of the reality of her circumstances. I propose to find special circumstances. She will need assistance in re-entering the community. She will need assistance with her psychological difficulties and there are positive signs, so far as one can ascertain, of rehabilitation. She has expressed a form of remorse. I think that she would benefit from supervision and accordingly I propose to find special circumstances."
5. Following this finding of special circumstances the statutory ratio was varied by his Honour such that the non-parole period imposed comprised approximately 56% of the head sentence.

Grounds of appeal

1. The applicant relied upon the following five grounds of appeal: 1. Error in failing to consider or give enough weight to an Intensive Correctional [sic] Order under 7 Crimes (Sentencing Procedure) Act (NSW) 1999 (Ground 1). 2. Error in failing to give more weight to special circumstances (Ground 2). 3. Error in not taking into account the extra time needed on parole, being the first time in custody (Ground 3). 4. Error in not taking into account her mental state as a result of being separated from her child (Ground 4). 5. Error in not given a great discount [sic] for pleading guilty (Ground 5).

Applicant's submissions

1. The thrust of the applicant's submission in support of Ground 1 was that the applicant should have received a custodial sentence to be served by way of an Intensive Correction Order ("ICO") in the community rather than by full-time imprisonment. Mr Quinn of counsel submitted on behalf of the applicant that "targeted intervention" under an ICO would assist the applicant and the community by addressing the applicant's offending. He relied upon the fact that the applicant is a first-time offender and that the likelihood of her re-offending is "non-existent". She is not alcohol or drug-dependent and poses no risk to others. She has a need to be at liberty in order to take care of her young son. Mr Quinn further submitted that the sentencing judge failed to address the threshold question in s 5(1) of the CSP Act.
2. In respect of Grounds 2 and 3, Mr Quinn submitted that the applicant is a young offender who is in custody for the first time and that the offence was committed at a time when circumstances such as the Global Financial Crisis conspired to make her particularly vulnerable. In addition, her father had abandoned her mother when the applicant was pregnant. It was submitted that she has excellent prospects of rehabilitation and accordingly should have received a non-parole period that was half of the head sentence imposed rather than one which comprised two thirds of the head sentence.
3. In relation to Ground 4, it was submitted that his Honour failed to take account of the "mental anguish" the applicant would experience as a result of being separated from her child.
4. Finally, in addressing Ground 5, the applicant submitted both that his Honour ought to have given a greater discount in recognition of the utilitarian value of the applicant's plea of guilty and also that in applying a discount of 10%, his Honour should have reduced the head sentence from 36 months to 32.6 months.

Crown submissions

1. The Crown's principal response in relation to the first four grounds of appeal was to note that the applicant does not contend that any factual errors were made in the sentencing decision nor that the sentencing judge had failed to rely on any principle or relied upon any mistake of principle. Nor does the applicant expressly rely upon a ground asserting manifest excess. In these circumstances the applicant has failed to show error in the sense required to demonstrate that the sentencing discretion has miscarried: House v The King (1936) 55 CLR 499.
2. In respect of Ground 1 it was submitted that unless the applicant can demonstrate that a head sentence of three years was not open to his Honour in all the circumstances, in the sense of being manifestly excessive, there can be no error in the determination not to impose an ICO. This is because Parliament has prescribed a "ceiling" of two years' imprisonment for ICOs: see s 7 of the CSP Act.
3. In any event, the Crown submitted, a sentence of three years' imprisonment was clearly open having regard to his Honour's finding that the offence was a very serious example of fraud involving very large amounts of money. The matters relevant to the assessment of the objective seriousness of the offence were the degree of planning, the amount of money defrauded and the applicant's adoption of multiple false personae that were maintained even after the fraud was detected. The Crown submitted that the applicant's submissions do not take account of the weight that his Honour needed to afford to purposes of sentencing other than rehabilitation, including general deterrence and denunciation.
4. In respect of Grounds 2 and 3, the Crown noted that an assertion that a sentencing judge placed insufficient weight on a factor will not usually be enough in itself to impugn the exercise of the sentencing discretion. In any event, the factors upon which the applicant relies in support of Grounds 2 and 3, namely prospects of rehabilitation, need for supervision, and the effect of custody on the applicant and her son, were taken into account by the sentencing judge.
5. In respect of Ground 4, it was submitted that the sentencing judge was "clearly cognisant" of the issue of the separation between mother and child that a custodial sentence would inevitably cause, albeit that the separation was likely to be temporary. It would be implausible, it was submitted, to suggest that his Honour would have been unaware of the psychological effects of the separation. This is especially so having regard to the fact that his Honour had the psychological report under the hand of Mr Wood available to him. The Crown submitted that the sentencing judge took into account this factor.
6. In respect of Ground 5, the Crown submitted that the applicant has failed to show error in the sentencing discretion in the relevant sense. There is no entitlement to a specific discount for a plea of guilty, although the utilitarian value of a plea should generally be reflected by a 10-25% discount on sentence: R v Thomson and Houlton [2000] NSWCCA 309; 49 NSWLR 383. The primary consideration in determining the utilitarian value of a plea, and therefore the appropriate discount, is the timing of the plea.
7. The Crown noted that the applicant entered a plea of guilty close to two years after charge and at a time after her trial was listed to commence. In light of this, a discount of 10% was well within the exercise of his Honour's sentencing discretion. Finally, the Crown submitted that the applicant's contention that the discount was "lost in the sentencing process" cannot be sustained having regard to the findings of the sentencing judge.

Grounds 1, 2 and 3

1. Given that each of Grounds 1 to 3 contend that the sentencing judge did not give sufficient weight to certain matters, it is convenient to deal with them together.
2. This Court is a court of error. It is not sufficient, in order to establish a basis for the intervention of this Court, for an applicant to assert that a sentencing judge gave insufficient weight to one factor or another: Bullock v R [2016] NSWCCA 131 at [65]; Bland v R [2014] NSWCCA 82; 241 A Crim R 51 at 66 [112]-[113]; R v Kennedy [2016] NSWCCA 123. To impugn the exercise of the sentencing discretion, the applicant is required to demonstrate error of the type in House v The King. As Gleeson CJ, Gummow and Callinan JJ observed in Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 at [25]: "Of particular importance in the present case is the principle that a court of criminal appeal may not substitute its own opinion for that of a sentencing judge merely because the appellate court would have exercised its discretion in a manner different from the manner in which the sentencing judge exercised his or her discretion. As with other discretionary judgments, the inquiry on an appeal against sentence is identified in the well-known passage in the joint reasons of Dixon, Evatt and McTiernan JJ in House v The King itself an appeal against sentence. Thus is specific error shown? (Has there been some error of principle? Has the sentencer allowed extraneous or irrelevant matters to guide or affect the decision? Have the facts been mistaken? Has the sentencer not taken some material consideration into account?) Or if specific error is not shown, is the result embodied in the order unreasonable or plainly unjust? It is this last kind of error that is usually described, in an offender's appeal, as 'manifest excess', or in a prosecution appeal, as 'manifest inadequacy.'"
3. His Honour considered that the circumstances of the applicant's offending required a custodial sentence despite her favourable circumstances. Implicit in this finding is that, in accordance with s 5(1) of the CSP Act, his Honour regarded no penalty other than imprisonment as appropriate in the circumstances. The finding of the sentencing judge that the appropriate sentence was one of three years' imprisonment necessarily excludes the possibility of the imposition of an ICO pursuant to s 7 of the CSP Act. The applicant does not contend that a sentence of three years' imprisonment was not one that was open to his Honour.
4. As for the complaint that there should have been a greater variation of the statutory ratio in light of a finding of special circumstances, the non-parole period imposed in this matter was 55% of the head sentence, not two thirds of the head sentence as was contended by Mr Quinn. This was already a significant departure from the statutory ratio. In any event such a variation is a discretionary matter for the sentencing judge. As Spigelman CJ stated in R v Cramp [2004] NSWCCA 264 (at [31]), "…the size of such an adjustment raises so many matters of a discretionary nature that this Court should be very slow to intervene."
5. Grounds 1, 2 and 3 have not been established.

Ground 4

1. Ground 4 asserts that the sentencing judge erred in not taking into account the applicant's mental state as a result of being separated from her child. To the extent that this ground contends that the sentencing judge erred by failing to take into account the applicant's separation from her child, it must fail. It is apparent from his Honour's Reasons that the maintenance of the relationship between the applicant and her child was a foremost consideration at sentence.
2. His Honour stated in his reasons that "…the disposition of Ms Zhao's young child has been one of the major issues in the sentencing process." His Honour noted that the matter first came before him for sentence on 25 July 2014. It was then stood over to 17 October 2014 in order for a report to be provided in relation to the Mothers and Children's Program administered by Corrective Services. The matter was adjourned once again to 17 December 2014 for further evidence from the report writer Ms Belinda McIness in relation to the same issue.
3. It follows that Ground 4 is not made out.

Ground 5 - error in not giving a greater discount for pleading guilty

1. Any reduction in sentence made in recognition of the utilitarian value of a plea of guilty is a matter for the discretion of the sentencing judge. The principal consideration is the timing of a plea: De Angelis v R [2015] NSWCCA 197 at [55] per Simpson JA, with whom Button and Fagan JJ agreed. Usually a discount of 10% is allowed for a "late plea" on the first day of the trial.
2. The applicant entered a plea of guilty on 17 April 2014. Her trial had been listed to commence on 31 March 2014. The applicant thus pleaded guilty after her matter was first listed for trial. His Honour noted that, although the applicant's plea came at a late stage, it avoided the need for a trial involving matters that would have been difficult for a jury to comprehend. In these circumstances, the Crown conceded that a discount of 10% was appropriate. The applicant's contention that the sentencing judge should have given her a more significant discount in recognition of the utilitarian value of her plea of guilty is not made out. No error has been demonstrated.
3. At the hearing of this application Mr Quinn further submitted that the discount of 10% was "lost in the calculations." He submitted: "I will take your Honour really to the crux. Whilst I put forward all the five grounds, I take your Honour to the last ground which is that it would appear on the remarks that his Honour gave the applicant a 10 percent discount. Now in relation to the discount it's lost in the calculations. Did he give her a sentence of three years three months or did he give her a sentence of three years?"
4. The meaning of the submission that the discount was "lost in the calculations" was not clear. Mr Quinn denied that his submission was to the effect that his Honour failed to specify a notional starting point. Rather, he contended that there was no "transparency" in the process and that the 10% discount to which his Honour made reference was not carried over into the final sentence. This submission cannot be accepted.
5. The sentencing judge noted that he would allow a discount for 10% for the late plea. His Honour did not expressly nominate the starting point for the sentence before applying that discount. Despite this, the head sentence he imposed was one of 36 months after the discount of 10% had been applied. In these circumstances it is clear that the starting point for the head sentence was 40 months.
6. There is no requirement for a sentencing judge to expressly quantify the starting point of the sentence. Nor is there anything to suggest that his Honour failed to apply the discount to the sentence that was imposed on the applicant in this matter.
7. Ground 5 is not made out.

Disposition of the application for leave to appeal

1. For the reasons given above, none of the grounds of appeal upon which the applicant relies has merit. I would refuse leave to appeal.

Orders

1. I propose that the Court make the following orders: 1. Extend time for filing application for leave to appeal to 4 March 2016. 2. Refuse leave to appeal against sentence.

Amendments 19 August 2016 - Expression of orders in para [74] amended to reflect orders on coversheet. 19 August 2016 - Typographical errors in para [59]. 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: 19 August 2016