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33
Court of Criminal Appeal 4 October 2013

R v Zerafa

[2013] NSWCCA 222

Also reported as (2013) 235 A Crim R 265
Fraud & dishonesty
CRIMINAL LAW SENTENCE APPEAL CONSPIRACY TO DEFRAUD COMMONWEALTH CRIMES ACT 1914 (CTH) S29D, S86(1) CRIMINAL CODE (CTH)

Citation: R v Zerafa [2013] NSWCCA 222
Court: Court of Criminal Appeal, New South Wales
Date: 4 October 2013
Judge(s): Hoeben CJ at CL, Latham J, Beech-Jones J

Background

The respondent, an accountant, was convicted after a five-month Supreme Court trial on two counts of conspiracy to defraud the Commonwealth. The offending spanned nearly a decade, from 1997 to 2006, and involved a scheme operated through a New South Wales accounting firm. The scheme assisted Australian companies in lodging fraudulent income tax returns that claimed deductions for management, consultancy, and insurance services that were never actually provided. False invoices and an elaborate trail of documentation were created to support the fictitious expense claims, resulting in losses to the Commonwealth exceeding $5 million.

The scheme was implemented by the accounting firm in which the respondent worked, initially as an employee and later as a partner from 2000. Money paid by the participating companies flowed through New Zealand and Irish bank accounts before being returned to company directors disguised as loans, thereby concealing further income tax liabilities. The respondent did not receive a direct financial benefit from the scheme, but gained an indirect benefit through his position at the firm.

At first instance, Simpson J sentenced the respondent to 500 hours of community service on Count 1 and a three-year term of imprisonment (wholly suspended on a recognizance) on Count 2. The Crown appealed on the ground that those sentences were manifestly inadequate and that a custodial sentence was required.

  • Whether the sentences imposed at first instance were manifestly inadequate, warranting intervention by the Court of Criminal Appeal
  • Whether the sentencing judge gave insufficient weight to general deterrence and the need for adequate punishment in the context of serious "white collar" fraud
  • Whether the sentencing judge gave excessive weight to the influence of the respondent's principal employer and to his personal circumstances
  • Whether the probable effect of imprisonment on the respondent's family and dependants must rise to the level of "exceptional hardship" before it can be considered under s 16A(2)(p) of the Crimes Act 1914 (Cth), and how much weight that factor carries

Decision

The Court of Criminal Appeal unanimously allowed the Crown appeal and found the original sentences manifestly inadequate. Hoeben CJ at CL, writing the lead judgment, identified the offending as serious: it involved a sustained conspiracy over approximately nine years, significant losses to the Commonwealth, the creation of false documentation to deceive the Australian Taxation Office, and the respondent's professional status as an accountant. Those features demanded meaningful weight be given to general deterrence and the need for adequate punishment.

The Court found that while the respondent's conduct was influenced by his older and more senior employer, that influence did not substantially reduce his culpability given the duration of the offending and his status as a trained professional. The argument that the absence of direct financial gain significantly reduced the respondent's criminality was also rejected. The indirect benefit to his professional position was real, and professionals occupy a position of trust that the scheme fundamentally exploited.

On the proper construction of s 16A(2)(p) of the Crimes Act 1914 (Cth), the Court considered whether the probable effect of a sentence on an offender's family required "exceptional" hardship before it could be taken into account. Beech-Jones J, in a separate analysis accepted by the Court, concluded that the word "exceptional" does not appear in the provision and that requiring it as a threshold imports a gloss not supported by the statutory text. Even accepting that the probable effect on the respondent's young children, including the significant anxiety manifested by his son, warranted real weight, that factor was ultimately of limited effect given the seriousness of the offending. The Court re-sentenced the respondent to an actual term of imprisonment.

Orders Made

  • Crown appeal allowed
  • Sentences imposed by Simpson J on 23 August 2012 quashed
  • Count 1: sentence of 500 hours community service confirmed
  • Count 2: imprisonment for 3 years and 6 months, commencing 23 August 2012 and expiring 22 February 2016, with a non-parole period of 2 years and 3 months, expiring 22 November 2014

Key Takeaways

  • The Court of Criminal Appeal confirmed that sustained white collar fraud involving professional participants, elaborate concealment, and significant losses to the Commonwealth demands substantial weight be given to general deterrence, even where the offender has no direct financial gain.
  • A professional's susceptibility to pressure from a more senior colleague carries limited mitigating value where the offending continued over many years and the offender held professional qualifications placing ethical obligations on them.
  • Under s 16A(2)(p) of the Crimes Act 1914 (Cth), the probable effect of a sentence on an offender's family and dependants does not require "exceptional" hardship as a threshold; the provision, on its text, requires the court to consider the probable effect without that additional gloss, though the weight given to it will vary with the circumstances.
  • Even where significant and genuine hardship to young children is established, it will carry only limited weight in the overall sentencing synthesis when the offending is sufficiently serious.
  • Sentences that fail to impose actual imprisonment for offences of this gravity risk failing the requirement that punishment be adequate, particularly where general deterrence is a paramount consideration.

Legislation and Cases Referenced

Legislation
- Crimes Act 1914 (Cth), ss 16A(2)(p), 29D, 86(1)
- Criminal Code Act 1995 (Cth), s 135.4
- Acts Interpretation Act 1901 (Cth)
- Corporations Act 2001 (Cth)
- Crimes Legislation Amendment Act (No 2) 1989 (Cth)
- Criminal Law (Sentencing) Act 1988 (SA)

Key Cases
- Hili v R; Jones v R [2010] HCA 45; 242 CLR 520
- Markarian v R [2005] HCA 25; 228 CLR 357
- Bui v DPP (Commonwealth) [2012] HCA 1; 244 CLR 638
- Green v The Queen; Quinn v The Queen [2011] HCA 49; 244 CLR 462
- Dinsdale v The Queen [2000] HCA 54; 202 CLR 321
- Griffiths v R [1977] HCA 44; 137 CLR 293
- Everett v R [1994] HCA 49; 181 CLR 295
- John v Federal Commissioner of Taxation [1989] HCA 5; 166 CLR 417
- Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; 177 CLR 485
- R v Hawkins [2013] NSWCCA 208
- Elmir v R [2009] NSWCCA 22; 193 A Crim R 87
- Hay v R [2013] NSWCCA 22
- Director of Public Prosecutions v Ip [2005] ACTCA 24