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Supreme Court 10 August 2018

R v Agius; R v Castagna (No 14)

[2018] NSWSC 1248

Fraud & dishonesty
CRIMINAL LAW CONSPIRACY TO DEFRAUD COMMONWEALTH FALSE DECLARATION OF INCOME SENTENCING CONSIDERATIONS RELEVANCE OF AMOUNT OF UNDER

Citation: R v Agius; R v Castagna (No 14) [2018] NSWSC 1248
Court: Supreme Court of New South Wales
Date: 10 August 2018
Judge(s): Adamson J

Background

Following a jury trial, two offenders were convicted on three counts: two counts of conspiracy to defraud the Commonwealth by concealing income from the Australian Taxation Office, and one count of conspiring to deal with the proceeds of that fraud. The first offender, an accountant based in Vanuatu, operated a trust company and controlled offshore corporate structures through which funds could be moved and hidden from Australian tax authorities. The second offender, a chartered accountant and former academic turned venture capitalist, was the first offender's cousin.

From approximately April 1998, the second offender worked as a consultant to a major Australian bank. Rather than declaring the full income earned from that consultancy, the two offenders arranged for payments to flow through a UK-incorporated company controlled by the first offender, with only a small portion returned to Australia and declared as income. The balance, though beneficially held for the second offender, was never disclosed to the ATO. The conspiracy ran for more than eleven years, spanning two separate statutory regimes, which is why two distinct fraud counts were required.

The third count covered a period between 2004 and 2008, during which the offenders conspired to deal with the undeclared funds as proceeds of crime, using a sham loan agreement as cover. The total tax shortfall established for sentencing purposes was approximately $2.62 million.

  • What sentences were appropriate for each offender across the three counts, having regard to the statutory maximum penalties and the principles applicable to federal offending?
  • How should the sentencing court assess the seriousness of the conspiracy to defraud charges, including the duration of the offending and the sophistication of the scheme?
  • What weight should be given to the absence of contrition and the use of offshore structures and foreign secrecy laws to frustrate detection?
  • How should the sentences be structured to avoid double-counting, particularly given that count 13 (proceeds of crime) related directly to the same funds underpaid in counts 1 and 2?
  • What non-parole periods should be fixed under the federal sentencing regime, including under s 19AD of the Crimes Act 1914 (Cth) for an offender already subject to an existing non-parole order?

Decision

Adamson J characterised the offending in counts 1 and 2 as very serious. The conspiracy lasted more than eleven years, involved sophisticated deception, the deliberate use of Vanuatu's secrecy laws to frustrate ATO scrutiny, and the engagement of reputable professionals to give the arrangements a false air of legitimacy. The court accepted that the self-assessment basis of the Australian tax system requires honesty from taxpayers, and that fraud of this kind undermines public confidence in the integrity of the taxation system and burdens honest taxpayers.

The court identified the first offender as the architect of the scheme. He controlled the offshore accounts and corporate vehicles, proposed the strategy, and enabled the concealment. The second offender was a willing participant who stood to benefit financially. Neither offender showed any contrition. The court did not accept that either offender genuinely believed the arrangements were lawful or supported by legal advice.

On count 13, the court was careful not to double-count the loss already reflected in counts 1 and 2, given that the proceeds of crime offence concerned the same funds. The court treated the conspiracy to deal with proceeds of crime as representing additional criminality, reflecting the further steps taken to disguise the nature and movement of the funds through a sham loan structure.

The statutory framework required the court to fix non-parole periods under the federal scheme. Because the first offender was already subject to an existing non-parole order, s 19AD of the Crimes Act 1914 (Cth) applied, requiring the court to fix a new single non-parole period across all federal sentences. For the second offender, whose aggregate sentences exceeded three years and who was not already serving a sentence, s 19AB(1) required a single non-parole period to be set.

Orders Made

Robert Agius:
- Count 1: 2 years and 3 months' imprisonment, commencing 31 March 2017, expiring 30 June 2019
- Count 2: 4 years and 3 months' imprisonment, commencing 1 July 2019, expiring 30 September 2023
- Count 13: 4 years and 3 months' imprisonment, commencing 1 July 2020, expiring 30 September 2024
- Total effective sentence: 7 years and 6 months, commencing 31 March 2017, expiring 30 September 2024
- New single non-parole period (under s 19AD(2)(e)): 8 years and 8 months, commencing 31 July 2012, expiring 30 March 2021

Anthony Castagna:
- Count 1: 2 years' imprisonment, commencing 18 April 2018, expiring 17 April 2020
- Count 2: 3 years and 6 months' imprisonment, commencing 18 April 2020, expiring 17 October 2023
- Count 13: 4 years' imprisonment, commencing 18 April 2021, expiring 17 April 2025
- Total effective sentence: 7 years, commencing 18 April 2018, expiring 17 April 2025
- Non-parole period: 4 years, commencing 18 April 2018, expiring 17 April 2022

Key Takeaways

  • Tax fraud conspiracies involving offshore corporate structures, foreign bank secrecy, and sustained deception over more than a decade will be treated as very serious offending, attracting significant custodial sentences with general deterrence and punishment as primary considerations.
  • Where two conspiracy counts arise from a single continuous course of conduct (but different statutory regimes), the sentencing court must treat the duration of each charged period separately while remaining alert to the totality principle across the overall effective sentence.
  • A proceeds of crime conspiracy charge arising from the same underlying funds as the predicate fraud counts does not automatically attract separate loss-based aggravation; the court must avoid double-counting by treating it instead as additional criminality for the further dealing conduct.
  • Absence of contrition, and a voluntary disclosure statement found to be largely false or misleading, operated as significant factors against either offender receiving a reduction in sentence on the basis of remorse or cooperation.
  • Under the federal sentencing framework, where an offender is already subject to a non-parole order, s 19AD of the Crimes Act 1914 (Cth) requires the court to fix a new single non-parole period encompassing all federal sentences being served or to be served.

Legislation and Cases Referenced

Legislation:
- Crimes Act 1914 (Cth), ss 16A, 16B, 16F, 17A, 19AB, 19AD, 29D, 86
- Criminal Code Act 1995 (Cth), ss 11.5, 135.4, 400.3
- Income Tax Assessment Act 1936 (Cth), s 169A, Pt IVA
- Proceeds of Crime Act 2002 (Cth), ss 92, 94, 320
- Corporations Act 2001 (Cth), s 206B

Cases:
- Agius v The Queen (2013) 248 CLR 601; [2013] HCA 27
- Hili v The Queen; Jones v The Queen (2010) 242 CLR 520; [2010] HCA 45
- Pearce v The Queen (1998) 194 CLR 610; [1998] HCA 57
- Postiglione v The Queen (1997) 189 CLR 295; [1997] HCA 26
- Mill v The Queen (1988) 166 CLR 59; [1988] HCA 70
- Bugmy v The Queen (1990) 169 CLR 525; [1990] HCA 18
- Power v The Queen (1974) 131 CLR 623; [1974] HCA 26
- George v Rockett (1990) 170 CLR 104; [1990] HCA 26
- Director of Public Prosecutions (Cth) v