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Court of Criminal Appeal 29 May 2015

Chen v R

[2015] NSWCCA 122

Fraud & dishonesty
CRIMINAL LAW APPEAL AGAINST CONVICTION OBTAINING A BENEFIT BY DECEPTION CRIMINAL CODE SS 134.2, 11.1 POTENTIAL FOR CIRCULAR REASONING ERROR ESTABLISHED

Citation: Chen v R [2015] NSWCCA 122
Court: Court of Criminal Appeal, NSW
Date: 29 May 2015
Judges: R A Hulme J (with Davies J and Bellew J agreeing)

Background

The appellant was convicted by a jury of 23 counts of obtaining a benefit by deception and 4 counts of attempting to do so, contrary to the Criminal Code (Cth). The offences related to 27 fraudulent Business Activity Statements lodged with the Australian Taxation Office on behalf of two companies he controlled between December 2004 and June 2007. The BAS forms falsely claimed GST refunds by inflating figures for non-capital purchases and export sales. The ATO paid out approximately $1.4 million before audit intervention halted further payments.

The appellant's scheme involved fabricating invoices purportedly from a supplier that never actually traded with his companies, creating circular cheque transactions to simulate business activity, and producing false documents during ATO audits. Two employees assisted unwittingly: his tax agent prepared the BAS returns based on spreadsheets he supplied, and an office employee made the bank withdrawals and deposits he directed. He was sentenced to 10 years' imprisonment with a non-parole period of 6 years.

The appellant challenged both his conviction and his sentence before the Court of Criminal Appeal.

  • Whether the trial judge erred by directing the jury that it could treat the appellant's false evidence as consciousness of guilt, given that finding his evidence to be false would, in the circumstances, inevitably mean the prosecution had already proven its case (creating a risk of circular reasoning).
  • Whether the sentencing judge erred in her assessment of objective seriousness by referring to the involvement of innocent third parties (the tax agent and the office employee) in the offending conduct.

Decision

Conviction appeal: the consciousness of guilt direction

The trial judge directed the jury that, if it concluded the appellant's evidence was false, that conclusion could itself be used as evidence of consciousness of guilt. The Court accepted that this direction was problematic. In the circumstances of this case, a finding that the appellant's evidence was false would necessarily mean the prosecution had already established its case, meaning the consciousness of guilt direction added nothing and risked circular reasoning: using the conclusion of guilt as evidence of guilt.

The Court found that the direction was unnecessary and constituted an error. However, the Court then considered whether the error caused a substantial miscarriage of justice, as required before an appeal can succeed. Having regard to the strength of the prosecution case, which included documents found on the appellant's own SD cards showing he had fabricated invoices, dual sets of export invoices labelled "Real" and "Cargo" for significantly different amounts, and the circularity of the bank transactions, the Court concluded there was no real risk the jury engaged in any improper reasoning process. The error did not produce a substantial miscarriage of justice and the conviction appeal was dismissed.

Sentence appeal: objective seriousness and innocent third parties

The sentencing judge identified the involvement of innocent third parties among the factors contributing to the objective seriousness of the offences. The appellant argued this was an error because neither the tax agent nor the employee was disadvantaged or made detection harder by their involvement.

The Court noted that the sentencing judge did not explain precisely how the third-party involvement bore on objective seriousness. It identified several ways in which it could legitimately do so, including as evidence of the complexity and brazenness of the scheme and of the appellant's willingness to use innocent agents to further his fraud. In any event, the Court held that the dominant feature of the objective seriousness was the sustained, elaborate nature of the fraud and the large sums involved. Even if the reference to third parties was technically erroneous, that error was minor compared to the genuinely aggravating features of the conduct. Leave to appeal against sentence was refused.

Orders Made

  • Leave to appeal against conviction granted.
  • Appeal against conviction dismissed.
  • Leave to appeal against sentence refused.

Key Takeaways

  • A consciousness of guilt direction may be erroneous where, in the circumstances of the particular case, a finding that the accused's evidence was false would inevitably establish the prosecution case, creating a risk of circular reasoning rather than providing any independent inferential step.
  • Establishing a legal error in a jury direction does not automatically produce a successful conviction appeal: the error must have caused a substantial miscarriage of justice, assessed against the totality of the evidence.
  • Where the evidence against an accused is overwhelming and independent of the problematic direction, the Court of Criminal Appeal may find no real risk the jury engaged in improper reasoning, even if the direction itself was unnecessary and technically flawed.
  • In sentencing for fraud offences under the Criminal Code (Cth), the use of innocent third parties to facilitate an offending scheme may permissibly contribute to an assessment of objective seriousness, including as evidence of complexity, brazenness, or the offender's willingness to involve others.
  • Refusing leave on the sentence ground, the Court of Criminal Appeal confirmed that an isolated reference to a potentially marginal factor does not constitute a sentencing error warranting appellate intervention where the overall assessment of objective gravity was plainly justified by more significant features of the conduct.

Legislation and Cases Referenced

Legislation
- Criminal Code (Cth) ss 11.1, 134.2
- Crimes Act 1914 (Cth) s 16A(2)
- Criminal Appeal Act 1912 (NSW)
- Criminal Appeal Rules r 4

Cases
- Edwards v The Queen [1993] HCA 63; 178 CLR 193
- Gall v R; Gall v R [2015] NSWCCA 69
- R v Lane (No 13) [2010] NSWSC 1540
- R v Lane [2011] NSWCCA 157; 221 A Crim R 309
- R v Laz [1998] 1 VR 453
- R v Lucas (1981) 1 QB 720
- R v Mercer (1993) 67 A Crim R 91
- R v Sirillas [2006] VSCA 234
- R v Wang (Court of Criminal Appeal (NSW), 11 February 1994, unreported)
- R v Zheng (1995) 83 A Crim R 572