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9
Supreme Court 23 August 2012

R v Agius; R v Zerafa

[2012] NSWSC 978

Fraud & dishonesty
CRIMINAL LAW SENTENCING AFTER TRIAL CONSPIRACY TO DEFRAUD THE COMMONWEALTH CRIMES ACT 1914, S 29D, S 68(1) CRIMINAL CODE (CTH) CRIMES ACT 1914, PT 1B

Citation: R v Agius; R v Zerafa [2012] NSWSC 978
Court: Supreme Court of New South Wales
Date: 23 August 2012
Judge(s): Simpson J

Background

Following a five-month jury trial, two men were convicted on two counts each of conspiracy to defraud the Commonwealth. The first offender was the senior partner of an international accountancy firm operating out of Vanuatu. The second was initially an employee, and from 2000 a partner, in a Sydney accountancy firm whose principal was a now-deceased third party who had orchestrated the broader scheme.

The conspiracy ran, as a matter of substance, from 1 January 1997 to 23 October 2006. It was charged in two separate counts solely because Commonwealth criminal law was restructured mid-scheme, with the Criminal Code (Cth) commencing on 24 May 2001 and replacing the relevant provisions of the Crimes Act 1914 (Cth). Simpson J treated the two counts as reflecting a single continuous course of criminal conduct.

The scheme involved Australian companies claiming income tax deductions for management and consultancy services that were never provided. False invoices, prepared on the letterheads of UK-registered companies, were supplied to participating Australian businesses. The money paid against those invoices moved through offshore structures, and the companies received a proportion back, while the conspirators retained the balance. Two other co-accused who stood trial with the offenders resulted in hung juries.

  • What sentences were appropriate for each offender, having regard to the nature, duration, and financial scale of the conspiracy?
  • How should the court approach the maximum penalty for the first count, given that the Crimes Act 1914 carried a 20-year maximum but the replacement Criminal Code carried only a 10-year maximum for comparable conduct?
  • What weight should be given to mitigating factors including the junior offender's relative subordination to a more powerful employer, attempts to withdraw from the scheme, delay in proceedings, cooperation in the conduct of the trial (as distinct from cooperation in the investigation), and the probable effect of imprisonment on the offenders' families?
  • Was an Intensive Correction Order an appropriate alternative to full-time imprisonment?
  • How should the totality principle apply when sentencing for two separate counts arising from what was, in substance, one continuous conspiracy?

Decision

Simpson J found the fraud scheme to be serious, sustained, and carefully concealed. The conspiracy spanned nearly a decade, involved a large number of Australian companies, produced substantial financial benefit for the conspirators, and required the creation of false document trails. Neither offender showed any contrition. General deterrence was identified as a consideration of fundamental importance in a case of this kind.

On the question of the maximum penalty for the first count, the court considered the reduction from 20 years under the Crimes Act 1914 to 10 years under the Criminal Code. Simpson J concluded that this reduction was relevant to the assessment of objective seriousness and to fixing an appropriate sentence, even though the higher maximum technically remained applicable to pre-2001 conduct.

The two offenders were treated very differently because their roles and personal circumstances differed significantly. The senior partner, as a principal architect of the scheme, received a substantially heavier sentence. The junior partner's culpability was moderated by several factors: his subordinate relationship to the deceased principal of the Sydney firm, evidence that he had attempted to withdraw from the scheme, delay in proceedings, and his role in cooperating with the prosecution in the manner in which evidence was adduced at trial (which, while falling short of cooperation in the investigation itself, materially reduced the burden on the court and jury).

The court rejected an Intensive Correction Order as inappropriate given the seriousness of the offending and the need for general deterrence. For the senior offender, the court imposed full-time imprisonment with a non-parole period. For the junior offender, the court imposed a community service order on the first count and a fully suspended term of imprisonment on the second count, reflecting the combined weight of the mitigating factors specific to him.

Orders Made

Robert Francis Agius:
- Convicted on both counts
- Sentenced to an aggregate term of imprisonment of 8 years and 11 months
- Non-parole period of 6 years and 8 months, expiring 30 March 2019

Kevin Zerafa:
- Convicted on both counts
- First count: 500 hours of community service work, with reporting to Burwood District Office of NSW Probation and Parole Service
- Second count: imprisonment for 3 years (commencing 23 August 2012), released forthwith on entering a recognisance to be of good behaviour for 3 years (in effect, a suspended sentence)

Key Takeaways

  • A single continuous conspiracy that straddles a change in Commonwealth criminal legislation may be charged as two separate counts to reflect the two statutory regimes, but the sentencing court treats the overall conduct as one course of criminal conduct for the purposes of totality.
  • Where the maximum penalty for comparable conduct was reduced when new legislation commenced, the reduction is a relevant factor in calibrating the appropriate sentence, even where the higher maximum technically applies to the pre-commencement conduct.
  • Cooperation with the prosecution in the manner of adducing evidence at trial, while distinct from cooperation in the investigation of the offences, can still be taken into account as a willingness to facilitate the course of justice under the principles in Cameron v The Queen (2002) 209 CLR 339.
  • The influence of a more powerful employer or senior co-conspirator can operate as a mitigating factor, but its weight depends on the degree to which the junior offender genuinely acted under that influence and whether attempts were made to withdraw from the scheme.
  • Under s 17A of the Crimes Act 1914 (Cth), a court sentencing for Commonwealth offences must consider all alternatives to imprisonment before imposing a custodial sentence; in this case an Intensive Correction Order was found to be unavailable and inappropriate given the objective seriousness of the conspiracy and the primacy of general deterrence.

Legislation and Cases Referenced

Legislation:
- Crimes Act 1914 (Cth), including Pt 1B (ss 16A, 16F, 17A), s 29D, s 68(1), s 86(1), s 86(2)
- Criminal Code (Cth), s 135.4(5)
- Criminal Code Amendment (Theft, Fraud, Bribery and Related Offences) Act 2000
- Crimes (Sentencing Procedure) Act 1999 (NSW)
- Crimes (Sentencing Procedure) Regulation 2010 (NSW)
- Crimes (Administration of Sentences) Act 1999 (NSW)
- Crimes (Administration of Sentences) Regulation 2008 (NSW)
- Interpretation Act 1987 (NSW)

Cases:
- Agius v R [2011] NSWCCA 119
- Bui v Director of Public Prosecutions (Cth) [2012] HCA 1
- Cameron v The Queen [2002] HCA 6; 209 CLR 339
- DPP v Karazisis [2010] VSCA 350
- DPP v Nikolic [2008] VSCA 226
- Pearce v The Queen [1998] HCA 57; 194 CLR 610
- R v Bateson [2011] NSWSC 643
- R v Boughen; R v Cameron [2012] NSWCCA 17
- R v Hinton [2002] NSWCCA 405; 143 A Crim R 286
- R v Ida Ronen [2006] NSWCCA 123
- R v Lanteri [2006] VSC 225
- R v Scott [1975] AC 819
- R v Togias [2001] NSWCCA 522