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Court of Criminal Appeal 15 December 2014

Lu v R

[2014] NSWCCA 307

Fraud & dishonesty
CRIMINAL LAW SENTENCING

Citation: Lu v R [2014] NSWCCA 307
Court: Court of Criminal Appeal, NSW
Date: 15 December 2014
Judges: Price J, McCallum J, R A Hulme J

Background

The appellant was convicted by a jury on 21 counts of cheating or defrauding while being a director of a company (contrary to s 176A of the Crimes Act 1900), and one count of obtaining money by deception. The offences were committed over more than three years and involved 11 victims who were defrauded of almost $2.163 million in total.

The appellant operated what the sentencing judge described as a Ponzi scheme. Through his company, he falsely represented to investors that their funds would be placed with Perpetual, a well-known financial institution. No such relationship with Perpetual existed. The invested funds were instead directed into accounts controlled by the appellant and used for private purposes, while new investor funds were used to pay returns to existing investors.

The victims suffered serious harm. They included an elderly man who lost his life savings and was forced onto an aged pension, a couple who lost all their property and had to postpone their retirement, and a man who lost two houses purchased with a compensation payout following a serious car accident. The District Court imposed an aggregate sentence of nine years with a non-parole period of six years.

  • Whether the sentencing judge erred by treating the appellant's abuse of a position of trust as an aggravating factor under s 21A(2)(k) of the Crimes (Sentencing Procedure) Act 1999, given that the relevant offences under s 176A of the Crimes Act 1900 already involved a director of a company
  • Whether the aggregate sentence and non-parole period were manifestly excessive

Decision

On the first ground, the Court of Criminal Appeal rejected the appellant's argument. The relevant question under s 21A(2)(k) is whether the offender abused a position of trust or authority in relation to the victim. The sentencing judge's remarks made clear that the aggravating factor was directed at the appellant's conduct in holding himself out as a financial adviser, and the trust that victims reposed in him in that capacity. That trust relationship arose from the appellant's personal dealings with clients, not simply from his role as a company director.

The Court confirmed that s 21A(2)(k) may apply even where the offender is a director, provided the abuse of trust relied upon is not an element of the offence itself. Because breach of trust is not a constitutive element of the s 176A offence, there was no error in treating it as an aggravating factor here. The Court cited established authority showing that courts have long recognised abuse of a position of trust as aggravating in fraud and dishonesty offences, including cases involving bank employees, real estate agents, and solicitors.

On the second ground, the Court found that the offending was extremely serious and that no issue could be taken with the individual indicative sentences. It further noted that previous cases do not establish a binding sentencing range, following the High Court's decision in Barbaro v R; Zirilli v R [2014] HCA 2. Once the appropriateness of the individual indicative sentences was acknowledged, the argument that the aggregate was manifestly excessive could not be sustained.

Orders Made

  • Leave to appeal granted
  • Appeal dismissed

Key Takeaways

  • Under s 21A(2)(k) of the Crimes (Sentencing Procedure) Act 1999, abuse of a position of trust can be treated as an aggravating factor in a fraud offence even where the offender is a company director, provided that the trust relationship relied upon is not an element of the offence charged.
  • The Court of Criminal Appeal confirmed that where the trust arises from the offender holding himself out as a financial adviser and cultivating personal reliance by victims, that conduct is distinct from the bare fact of directorship and may properly be treated as aggravating.
  • Sentencing courts have recognised abuse of trust as an aggravating feature across a range of dishonesty offences involving employees, agents, and professionals, and this approach reflects the position at common law.
  • Following Barbaro v R; Zirilli v R [2014] HCA 2, prior cases do not establish an "available range" of sentences; an argument of manifest excess therefore cannot be sustained simply by pointing to comparative decisions.
  • In dismissing both grounds, the Court left intact an aggregate sentence of nine years with a non-parole period of six years for a Ponzi scheme defrauding 11 victims of nearly $2.163 million over more than three years.

Legislation and Cases Referenced

Legislation:
- Crimes Act 1900 (NSW), ss 172, 176A, 178BA
- Crimes (Sentencing Procedure) Act 1999 (NSW), ss 21A(2)(k), 53A

Cases:
- Barbaro v R; Zirilli v R [2014] HCA 2; 88 ALJR
- R v Martin [2005] NSWCCA 190
- R v Suleman [2009] NSWCCA 70
- R v Pantano (1990) 49 A Crim R 328
- R v Woodman [2001] NSWCCA 310
- R v El-Rashid (CCA(NSW), 7 April 1995)
- R v Chaloner (1990) 49 A Crim R 370
- R v Hawkins (1989) 45 A Crim R 430