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Court of Criminal Appeal 6 August 2014

R v Mereb; R v Younan

[2014] NSWCCA 149

Fraud & dishonesty
CRIMINAL LAW CROWN APPEAL AGAINST SENTENCE TAX SHORTFALL APPROXIMATELY $1 MILLION APPEAL DISMISSED.

Citation: R v Mereb; R v Younan [2014] NSWCCA 149
Court: Court of Criminal Appeal, New South Wales
Date: 6 August 2014
Judge(s): Hoeben CJ at CL; McCallum J; Garling J

Background

Two respondents operated a successful electrical contracting business and were clients of an accounting firm known as Owen T Daniel & Co. From around August 2000, they agreed to participate in an offshore "round robin" tax avoidance scheme promoted by the firm's principal and an associated accountant based in Vanuatu. The scheme involved transferring money from the business to New Zealand bank accounts, which was then returned to the respondents, while false expense claims were lodged in the company's tax returns.

The scheme ran from approximately 2000 to 2006 and involved 19 international transfers totalling around $1.74 million. The resulting tax shortfall for the company and the respondents personally was approximately $1 million in total. The respondents were convicted by jury on charges of conspiring with the intention of dishonestly causing a loss to the Commonwealth, contrary to s 135.4(3) of the Criminal Code (Cth).

The District Court sentenced each respondent to four years' imprisonment with a non-parole period of two years. The Crown appealed to the Court of Criminal Appeal, arguing the sentences were manifestly inadequate and that the sentencing judge had made specific errors in her reasoning.

  • Whether the sentencing judge erred by treating the past repayment of tax and interest, and the likely future payment of penalty tax and interest, as a "significant extra-curial punishment" (that is, punishment suffered outside the formal sentencing process) warranting a reduction in sentence.
  • Whether the sentencing judge erred by fixing a two-year non-parole period without adequate regard to the federal sentencing requirements in Part 1B of the Crimes Act 1914 (Cth), particularly the obligation under s 16A to impose a sentence of appropriate severity in all the circumstances.
  • Whether the sentences imposed were manifestly inadequate when measured against comparable cases involving the same scheme.

Decision

The Court of Criminal Appeal rejected all three grounds of appeal and dismissed the Crown's appeal unanimously.

On the first ground, the Court found no error in treating repayment of the tax shortfall, together with the anticipated payment of substantial penalty tax and interest (said to be comparable in magnitude to the amounts already paid), as extra-curial punishment. The sentencing judge accepted evidence that the respondents would need to sell their homes to meet those obligations. The Court considered this a legitimate and well-established sentencing consideration.

On the second ground, the Court was not persuaded that the sentencing judge had failed to apply the federal sentencing framework under the Crimes Act 1914 (Cth). The non-parole period of two years was examined in that context and no error of principle was identified.

On the third ground, manifest inadequacy, the Court acknowledged the sentences were lenient. However, it found the sentencing judge had engaged in a careful and thoughtful exercise of discretion, taking into account the strong subjective case for each offender, including their co-operation with police, their conduct at trial (which significantly shortened proceedings), and their repayment of the tax shortfall. Hoeben CJ at CL concluded the sentences were not "unreasonable or plainly unjust." Even if manifest inadequacy had been established, his Honour indicated he would have exercised the residual discretion available in Crown appeals to decline to interfere. McCallum J and Garling J each agreed the appeal should be dismissed.

Orders Made

  • The Crown appeal was dismissed.

Key Takeaways

  • Repayment of tax shortfalls and the anticipated payment of penalty tax and interest can properly constitute "extra-curial punishment" in federal tax conspiracy sentencing, particularly where repayment is of significant financial consequence to the offender.
  • In Crown appeals against sentence, the Court of Criminal Appeal confirmed that it is not sufficient for the Crown to show the sentencing court would have weighted deterrence more heavily or the subjective case less so. The appeal power is engaged only if the sentence falls below the range that could justly be imposed.
  • A residual discretion exists in Crown appeals, meaning that even where a sentence is found to be manifestly inadequate, an appellate court retains the power to decline to intervene. Hoeben CJ at CL confirmed he would have exercised that discretion against substituting a higher sentence in the circumstances of this case.
  • The Court of Criminal Appeal acknowledged the sentences were "undoubtedly lenient" (per McCallum J) but found this alone did not render them unreasonable or plainly unjust given the careful balancing of relevant factors undertaken below.
  • Participation in a planned, sustained tax conspiracy lasting nearly five years and involving a tax shortfall of approximately $1 million was treated as a serious matter; however, strong subjective factors, including co-operation with authorities, conduct at trial, and substantial voluntary repayment, remained capable of significantly moderating the sentence.

Legislation and Cases Referenced

Legislation:
- Criminal Code (Cth), s 135.4(3), s 11.5
- Crimes Act 1914 (Cth), Part 1B, s 16A(1)
- Criminal Appeal Act 1912 (NSW), s 6(3)

Cases:
- Bugmy v The Queen [2013] HCA 37; 249 CLR 571
- Bugmy v The Queen [1990] HCA 18; 169 CLR 525
- Bui v Director of Public Prosecutions (Cth) [2012] HCA 1; 244 CLR 638
- Green v The Queen; Quinn v The Queen [2011] HCA 49; 244 CLR 462
- Hili v R; Jones v R [2010] HCA 45; 242 CLR 520
- Markarian v R [2005] HCA 25; 228 CLR 357
- Munda v Western Australia [2013] HCA 38; 249 CLR 600
- R v Boughen and Cameron [2012] NSWCCA 17
- R v Hawkins [2013] NSWCCA 208
- R v Hili; R v Jones [2010] NSWCCA 108
- R v Lamella [2014] NSWCCA 122
- R v Liles [2012] NSWSC 1249
- R v Sakovitis [2013] NSWSC 464
- R v Wall [2002] NSWCCA 42
- R v Zerafa [2013] NSWCCA 222
- Ruha v R (2010) 198 A Crim R 430
- Wong v R [2001] HCA 64; 207 CLR 585