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Supreme Court 18 October 2012

R v Liles

[2012] NSWSC 1249

Fraud & dishonesty
SENTENCE DISHONESTY OFFENCES CONSPIRE TO DEFRAUD COMMONWEALTH S 29D AND S 86 CRIMES ACT 1914 (CTH) TAX TAX AVOIDANCE SCHEME

Citation: R v Liles [2012] NSWSC 1249
Court: Supreme Court of New South Wales
Date: 18 October 2012
Judge: Schmidt J

Background

The offender was an experienced accountant, a former President of the National Institute of Accountants, who became involved in an international tax avoidance scheme operated through a Vanuatu accounting firm. Over a number of years she facilitated a small number of her clients' participation in the scheme, which involved fraudulent arrangements that collectively caused losses to the Commonwealth of close to $3 million. The scheme exploited two successive statutory regimes governing conspiracy to defraud, spanning roughly the period 1997 to 2006.

The offender pleaded guilty to four charges arising from two separate conspiracies, referred to in the judgment as the Mascall conspiracy (1 July 1997 to 31 July 2005) and the Sakovits conspiracy (1 April 2001 to 30 September 2006). Two charges were brought for each conspiracy because each straddled the transition between the old Commonwealth Crimes Act regime and the Criminal Code Act 1995 (Cth) regime that commenced in May 2001. A third conspiracy involving two further charges was taken into account under s 16BA of the Crimes Act 1914 (Cth).

Both parties accepted that a custodial sentence was required. The dispute centred on the nature and seriousness of the offending, the weight to be given to the offender's personal circumstances, and how the sentence should be structured across the four counts.

  • What was the appropriate maximum penalty to apply where the two statutory regimes carried different maximum penalties (20 years under the Crimes Act and 10 years under the Criminal Code Act), given that each conspiracy straddled the transition between them?
  • How serious was the offender's conduct, including her role in the scheme (promoter or facilitator), her motive, and the consequences of the offending?
  • What weight should be given to personal circumstances, including the destruction of professional reputation, financial hardship, age, and health?
  • What discount was warranted for the guilty plea and the offender's offer to give evidence against co-conspirators?
  • How should sentences for the individual counts be structured, including questions of concurrency, accumulation, and whether special circumstances existed justifying adjustment of the non-parole period?

Decision

Schmidt J held that, where a conspiracy straddles the transition between two statutory regimes with different maximum penalties, the lesser maximum of 10 years should be treated as the outer boundary for sentencing purposes. This followed the approach taken in R v Boughen; R v Cameron [2012] NSWCCA 17 and the observations of Spigelman CJ in R v Ronen [2006] NSWCCA 123, to the effect that a reduced maximum penalty is no longer an appropriate yardstick for assessing the seriousness of the conduct.

On the question of seriousness, the court rejected the defence characterisation of the offender as a minor facilitator who derived no personal gain and acted under a sense of obligation to existing clients. Because the offender did not give evidence at the sentencing hearing, many submissions made on her behalf were difficult to accept. Schmidt J was satisfied that the offences were serious, considerably more so than the defence submitted, a conclusion supported by the detailed agreed statement of facts and the offender's own statement made after entering her pleas. The court accepted that the offender's role was substantial, and that the participation of co-conspirators would not have commenced or continued without her.

The offender's significant personal circumstances, including the loss of her professional career and business, financial hardship, age, and the health of both herself and her husband, were taken into account in mitigation, as were her guilty pleas (accepted as evidence of contrition) and her offer to give evidence in the prosecution of the Sakovits co-conspirators. A discount was applied to reflect those factors. However, the court concluded that the seriousness of the offending, and the need for general deterrence for offences of this kind committed by a professional in a position of trust, required a substantial custodial sentence regardless of those circumstances.

The sentences were structured with partial accumulation across the four counts to reflect the fact that the conspiracies were discrete, while also giving effect to the totality principle. Special circumstances were found to exist, justifying a longer than usual ratio of non-parole period to total sentence. A recognisance release order was made for early release at the four year eleven month mark of a total sentence of eight years and three months.

Orders Made

  • Count 1 (Mascall conspiracy, Crimes Act): Imprisonment for 2 years and 6 months, commencing 18 October 2012, expiring 17 April 2015.
  • Count 2 (Mascall conspiracy, Criminal Code Act): Imprisonment for 2 years and 6 months, commencing 18 April 2015, expiring 17 October 2017.
  • Count 3 (Sakovits conspiracy, Crimes Act): Imprisonment for 2 months and 2 weeks, commencing 21 October 2015, expiring 3 January 2016.
  • Count 4 (Sakovits conspiracy, Criminal Code Act): Imprisonment for 5 years and 2 weeks, commencing 4 January 2016, expiring 17 January 2021.
  • Total sentence: 8 years and 3 months.
  • Release on recognisance on 17 September 2017 (after 4 years and 11 months), to be of good behaviour during the balance of the term, without cash security.
  • Fingerprinting ordered under s 3ZL of the Crimes Act 1914 (Cth).

Key Takeaways

  • Where a conspiracy straddles the legislative transition from the Crimes Act 1914 (Cth) to the Criminal Code Act 1995 (Cth), the Supreme Court confirmed that the lesser maximum penalty (10 years) operates as the outer boundary for sentencing, applying the approach in R v Boughen; R v Cameron.
  • An offender's failure to give evidence at a sentencing hearing limits the weight a court can give to favourable characterisations of their role or motivation advanced by defence counsel, particularly where the agreed facts and the offender's own statements tell a different story.
  • Serious dishonesty offences committed by a professional in a position of trust attract substantial custodial sentences even where significant personal hardship, reputational destruction, and genuine contrition are established in mitigation.
  • Special circumstances justifying a longer non-parole ratio to head sentence can be found where the total effective sentence, formed by partial accumulation across multiple counts, produces a period of imprisonment that warrants a greater emphasis on rehabilitation.
  • Guilty pleas and offers to cooperate in the prosecution of co-conspirators are relevant mitigating factors, but they do not displace the need for deterrence in complex, prolonged tax fraud conspiracies involving close to $3 million in losses to the Commonwealth.

Legislation and Cases Referenced

Legislation
- Crimes Act 1914 (Cth), ss 16BA, 16F, 20AA, 29D, 86, 3ZL
- Criminal Code Act 1995 (Cth), s 135.4(3)

Cases
- Hili v R; Jones v R [2010] HCA 45; (2010) 242 CLR 520
- Pearce v R [1998] HCA 57
- R v Agius; R v Zerafa [2012] NSWSC 94
- R v Blanco [1999] NSWCCA 106 A Crim R 303
- R v Boughen; R v Cameron [2012] NSWCCA 17
- R v Hinton [2002] NSWCCA 405; 143 A Crim R 286
- R v Ronen [2006] NSWCCA 123; (2006) 161 A Crim R 307
- R v Togias [2001] NSWCCA 522