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District Court 5 June 2020

R v Egge

[2020] NSWDC 277

Fraud & dishonesty
FRAUD AGAINST THE REVENUE FACT FINDING ON SENTENCE CONSISTENCY WITH JURY VERDICTS INCONSISTENCY WITH JURY VERDICTS TAX INCENTIVE SCHEME

Citation: R v Egge [2020] NSWDC 277
Court: District Court of New South Wales
Date: 5 June 2020
Judge(s): Sutherland SC DCJ

Background

The offender was charged with 31 counts arising from an alleged scheme to defraud the Australian Taxation Office by making false claims under the Commonwealth Research and Development Tax Incentive Scheme. The four principal counts alleged that the offender dishonestly obtained financial advantages from the Commonwealth by lodging tax returns for two related companies claiming R&D tax offsets to which those companies were not entitled. A further 27 counts related to the creation of forged documents intended for use in future fraudulent claims.

The charges emerged as a collateral outcome of a NSW Police investigation into a suspected arson at Newcastle commercial premises in July 2014. During that investigation, police obtained telephone interception warrants. Subsequently, the offender's bookkeeper confessed to police that he had fabricated large numbers of invoices at the offender's direction, and that those invoices had been used to support R&D tax refund claims lodged with the ATO.

After a lengthy trial spanning approximately 109 sitting days, more than 7,000 pages of transcript, 227 exhibits, and 36 oral witnesses, the jury returned a single guilty verdict on count 3. That count concerned a false representation to the Commissioner of Taxation that one of the offender's companies, ALSS, was entitled to an R&D tax offset for the 2013-2014 financial year when it had no such entitlement. The jury returned not guilty verdicts on all remaining 30 counts.

  • What findings of fact could the sentencing court properly make, given that the jury returned 30 acquittals alongside a single conviction?
  • Whether the sentencing court could treat the offender's overall criminality as equivalent to the full case the Crown had presented at trial, notwithstanding the acquittals.
  • Whether findings of fact on sentence must be consistent only with the guilty verdict, or must also be not inconsistent with the verdicts of not guilty.
  • What sentence was appropriate for the single offence of dishonestly obtaining a financial advantage by deception, having regard to the offender's personal circumstances and the principles of general deterrence.

Decision

The central challenge for the sentencing court was determining what facts could legitimately be found after a jury returned acquittals on 30 of 31 counts. The Crown argued that technical directions given to the jury explained the acquittals, and urged the court to treat the offender's overall moral culpability as reflecting the full scope of the alleged fraudulent scheme. The court rejected that approach. Adopting it would deprive the offender of the full benefit of his acquittals and would contravene the principle in R v De Simoni that a sentencing judge cannot punish an offender for conduct constituting a more serious offence of which the offender has not been convicted.

His Honour accepted that a sentencing judge is not obliged to adopt the view of the facts most favourable to the offender, but held that findings of fact must not be inconsistent with the verdicts of not guilty. Given the significant overlap between the counts and the way the Crown had framed its case, this was a particularly complex task. The court declined to treat the not guilty verdicts as simply unexplained, and instead sought to understand the rationale that could be divined from the jury's pattern of verdicts.

In the result, the court made restricted findings consistent with the guilty verdict on count 3 alone. Although his Honour noted he was not satisfied that either company was conducting genuine R&D, that broader finding had to be put aside given the acquittals. A reparation order was limited to the financial advantage attributable to the single count. The court took into account the offender's age, various health concerns, the then-current coronavirus pandemic, and the need for general deterrence in assessing the appropriate sentence.

The court imposed a 19-month sentence, to be served by way of an Intensive Correction Order rather than full-time custody.

Orders Made

  • Convicted of count 3 (dishonestly obtaining a financial advantage by deception, contrary to s 134.2 of the Commonwealth Criminal Code Act 1995).
  • Sentenced to 19 months imprisonment, to be served by way of an Intensive Correction Order commencing 5 June 2020 and expiring 4 January 2022.
  • Standard ICO conditions imposed: no commission of any offence; submission to supervision by a Community Corrections Officer.
  • Additional condition: 120 hours of community service work as identified in the Sentence Assessment Report of 4 December 2019.
  • Reparation order in favour of the Commonwealth in the sum of $25,800.75.

Key Takeaways

  • A sentencing judge's findings of fact must not only be consistent with the jury's guilty verdict but, particularly where counts substantially overlap, must also not be inconsistent with the verdicts of not guilty. The District Court here held that these are separate and cumulative constraints on the sentencing fact-finding exercise.

  • Where a jury returns a mixed verdict, the Crown cannot invite a sentencing court to sentence the offender as though the acquittals were merely the product of legal technicalities. To do so would contravene the principle in R v De Simoni, which prohibits sentencing for conduct constituting a more serious or different offence of which the offender was not convicted.

  • Although sentencing courts are not required to adopt the view of facts most favourable to the offender (per Cheung v The Queen and R v O'Neill), the task of finding facts adverse to the offender remains subject to the criminal standard of proof beyond reasonable doubt. Mitigating facts need only be established on the balance of probabilities.

  • Reparation orders after a split verdict are confined to the financial advantage attributable to the specific count on which conviction was entered. The court made an order for $25,800.75, reflecting the restricted fact-finding compelled by the jury's acquittals on the remaining counts.

  • An Intensive Correction Order remained available as the sentencing disposition for a single offence of this nature, even where the sentencing judge's own broader assessment of the underlying conduct was more adverse than the jury's verdicts permitted the court to act upon.

Legislation and Cases Referenced

Legislation
- Commonwealth Criminal Code Act 1995 (Cth), s 134.2
- Crimes Act 1900 (NSW), s 253(b)(ii)
- Crimes (Sentencing Procedure) Act 1999 (NSW), s 7(1)

Cases
- Cheung v The Queen [2001] HCA 67; (2001) 209 CLR 1
- EF v R [2015] NSWCCA 36
- Karout v R [2019] NSWCCA 253
- Pratten v R [2014] NSWCCA 117
- R v De Simoni [1981] HCA 31; (1981) 147 CLR 383
- R v Fangaloka [2019] NSWCCA 173
- R v McHaffie (unreported, 8 April 2011, Queensland District Court)
- R v Michael (unreported, 1 March 2013)
- R v Neylon (unreported, 20 June 2008, Victorian County Court)
- R v Olbrich [1999] HCA 54; 199 CLR 270
- R v O'Neill [1979] 2 NSWLR 582
- R v Van Tung Luu (unreported, 7 December 1984, NSWCCA)
- R v Winchester (1992) 58 A Crim R 345
- R v Zamagias [2002] NSWCCA 17
- Robertson v R [2017] NSWCCA 205