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District Court 18 December 2020

R v XX

[2020] NSWDC 771

Fraud & dishonesty
CRIMINAL LAW SENTENCING FRAUD OFFENCES MULTIPLE OFFENCES ADDITIONAL OFFENCES ON FORM 1 WHETHER CAUSAL NEXUS TO OFFENDING

Citation: R v XX [2020] NSWDC 771
Court: District Court of New South Wales
Date: 18 December 2020
Judge(s): Abadee DCJ

Background

The offender was a legal practitioner who operated two law firms in Sydney, Brisbane, and Penrith. Over a 14-month period from February 2018 to May 2019, he systematically misappropriated client funds held in trust, directing payments into trust accounts and then immediately diverting those funds for unrelated purposes.

The offending affected a large number of clients engaged in ordinary legal matters: property sales, wills and probate, and family law proceedings. Victims suffered serious financial harm, including inability to access settlement proceeds, forfeiture of deposits, and breach of settlement agreements. The total amounts misappropriated across all counts and Form 1 matters ran into several million dollars, though some partial repayments were made.

The Law Society of NSW received complaints and appointed a receiver in December 2018. Police became involved in April 2019. Notably, the offender continued to offer legal services to former clients even after the Law Society's intervention, prompting Supreme Court injunction proceedings in August 2019.

  • What was the appropriate sentence for five counts of dishonestly obtaining a financial advantage by deception under s 192E(1)(b) of the Crimes Act 1900 (NSW), with five further offences on a Form 1?
  • What weight should be given to the offender's undiagnosed Bipolar Disorder Type 1 as a mitigating factor, and whether a sufficient causal nexus existed between that condition and the offending?
  • What weight should general and personal deterrence receive given the psychiatric evidence?
  • Whether "special circumstances" under the Crimes (Sentencing Procedure) Act 1999 (NSW) existed to justify a departure from the standard ratio between the non-parole period and the total sentence?

Decision

The District Court approached sentencing on the basis that misappropriation of client funds by a solicitor is a serious category of fraud. Such offending carries a significant need for general deterrence given the trust placed in legal practitioners by vulnerable clients, the difficulty of detection, and the serious financial and personal harm caused to victims.

On the question of the offender's mental health, the court accepted that Bipolar Disorder Type 1 had been undiagnosed at the time of the offending. However, the court had to assess whether a meaningful causal link existed between the condition and the criminal conduct. The judgment indicates the court gave some weight to the psychiatric evidence, but the sentencing remarks make clear that the mitigating effect of the condition was limited by the sustained, calculated, and concealed nature of the offending and its continuation even after regulatory scrutiny began.

The court acknowledged mitigating factors, including the guilty plea, the offender's cooperation with the receiver, his admissions, and his assistance in identifying victims. These factors attracted a discount on sentence. The continuation of offending after the Law Society's involvement and the breadth and duration of the scheme were significant aggravating considerations.

On the question of special circumstances, the court's remarks record a finding on this issue but the indicative sentences and the structure of the non-parole period (4 years and 9 months of an 8-year total) reflect the court's resolution of that question. The court also recommended that the psychiatric report be provided to Corrective Services to assist with the offender's classification and treatment in custody.

Orders Made

  • The offender was convicted of five principal offences (Sequences 1, 3, 7, 8, and 9) under s 192E(1)(b) of the Crimes Act 1900 (NSW).
  • Total term of imprisonment: 8 years, commencing 19 November 2019 and expiring 18 November 2027.
  • Non-parole period: 4 years and 9 months, expiring 18 August 2024.
  • Indicative sentences imposed for each sequence (after guilty plea discount):
  • Sequence 1 (with Sequence 4 on Form 1): 2 years
  • Sequence 3 (with Sequence 1 Form 1 matter on Form 1): 1 year
  • Sequence 7 (with Sequence 5 on Form 1): 2 years
  • Sequence 8 (with Sequence 6 on Form 1): 2 years
  • Sequence 9 (with Sequence 2 on Form 1): 1 year
  • The sentence was backdated to 19 November 2019, reflecting 1 year and 30 days already served in custody.
  • The court recommended that the psychiatric report of Dr Furst (1 December 2020) be provided to the Department of Corrective Services for classification and treatment purposes.

Key Takeaways

  • Misappropriation of client trust funds by a solicitor attracts significant weight on general deterrence at sentencing, reflecting the particular trust clients place in their legal practitioners and the difficulty in detecting such conduct.
  • An undiagnosed mental health condition (here, Bipolar Disorder Type 1) can operate as a mitigating factor in sentencing, but the extent of that mitigation depends on whether a sufficient causal nexus is established between the condition and the offending conduct.
  • Continued offending after regulatory intervention was treated as a meaningful aggravating factor, counteracting some of the cooperation and assistance the offender provided to the Law Society's receiver.
  • The guilty plea, cooperation with the appointed receiver, and admissions facilitating identification of victims were treated as mitigating considerations and attracted a sentencing discount.
  • Where an offender has a diagnosed psychiatric condition affecting rehabilitation prospects, courts may recommend that relevant reports be provided to Corrective Services to assist with classification and treatment, without that recommendation affecting the quantum of the sentence itself.

Legislation and Cases Referenced

Legislation
- Crimes Act 1900 (NSW), s 192E
- Crimes (Sentencing Procedure) Act 1999 (NSW), ss 3A, 5, 21A

Cases
- Attorney-General's Application under s 37 of the Crimes (Sentencing Procedure) Act 1999 (No.1 of 2002) (2002) 56 NSWLR 146
- Director of Public Prosecutions (Cth) v De La Rosa (2010) 79 NSWLR 1
- Hili v The Queen (2010) 85 ALJR 195
- Johnson v R [2020] NSWCCA 126
- Leung, Simon Yuk v R [2014] NSWCCA 44
- McMahon v R [2011] NSWCCA 147
- Oudomvilay v R [2006] NSWCCA 275
- Parente v R (2017) 96 NSWLR 633
- R v Curtis (No 3) [2016] NSWSC 866
- R v Donald [2013] NSWCCA 238
- R v El-Rashid (unreported, 7 April 1995, NSWCCA)
- R v Finnie [2002] NSWCCA 533
- R v Glynatis (2013) 230 A Crim R 99; [2013] NSWCCA 131
- R v Hawkins (1989) 45 A Crim R 430
- R v Hinchcliffe [2013] NSWCCA 327
- R v Marvin (unreported, 1 November 1995, NSWCCA)
- R v Mungomery (2004) 151 A Crim R 376
- R v Pont (2000) 121 A Crim R 302
- R v Smith (1987) 27 A Crim R 315