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District Court 9 February 2024

R v Zhang

[2024] NSWDC 118

Fraud & dishonesty
CRIME FRAUD CONSPIRACY RELEVANT FACTORS ON SENTENCE MULTIPLE OFFENCES OBJECTIVE SERIOUSNESS

Citation: R v Zhang [2024] NSWDC 118
Court: District Court of New South Wales
Date: 9 February 2024
Judge: Blackmore ADCJ

Background

The offender was the controlling mind behind the Hightrade Group of companies, a collection of corporate entities involved in property development in New South Wales. Following a jury trial of approximately ten months, he was found guilty on 9 October 2023 of two counts of conspiracy to dishonestly cause a loss to the Commonwealth, contrary to s 135.4(3) of the Criminal Code Act 1995 (Cth). The maximum penalty for each offence is ten years' imprisonment and/or a fine of 600 penalty units.

The two conspiracies centred on the fraudulent lodgement of Business Activity Statements (BAS) with the Australian Taxation Office (ATO), generating false or inflated claims for input tax credits (ITCs) and GST refunds in connection with two property developments. Count 1 (the JKC charge) related to a retail development at Regent Street, Chippendale, and ran from approximately January 2004 to June 2006. Count 2 (the RHV charge) related to a hotel and golf resort development in Pokolbin in the Hunter Valley, and ran from approximately June 2004 to April 2008.

The offender acted in concert with two co-conspirators, one of whom served as the Hightrade Group's internal accountant and another who performed administrative and accounting functions and nominally controlled a set of shell companies used to generate fictitious invoices. The scheme operated through a layered structure of tier 1, tier 2, and tier 3 companies, with inflated and fabricated invoices flowing through the tiers to produce false ITC entitlements for the developer entities.

  • What sentences were appropriate for two counts of conspiracy to dishonestly cause a loss to the Commonwealth, having regard to the nature, scale, and duration of the offending?
  • How should the objective seriousness of each conspiracy be assessed, including the total quantum of loss to the ATO?
  • What weight should be given to subjective factors, including delay in prosecution, periods spent in pre-sentence custody (including time resisting extradition from New Zealand), and any psychological considerations?
  • How should the sentences be structured under the totality principle, including the degree of accumulation and the fixing of a single non-parole period under s 19AB of the Crimes Act 1914 (Cth)?

Decision

Blackmore ADCJ assessed the offending as objectively serious. The JKC conspiracy caused total losses to the ATO of approximately $2.5 to $3 million across two phases. The RHV conspiracy caused losses of between $10.5 million and $12 million. The frauds were elaborate, sustained over several years, and involved the deliberate use of fictitious companies, false invoices, and nominee directors (including persons who were not in Australia during the relevant periods). The offender was found to have been in effective control of the scheme throughout.

On subjective factors, the court took into account the significant delay between the alleged offending (2004 to 2008) and sentencing in 2024, as well as the offender's time spent in pre-sentence custody. The offender had been held in custody in New Zealand from April to September 2019 while contesting extradition, on remand from September 2019 to April 2022, and again from the jury verdict in October 2023 until the sentencing date. The Crown faintly argued that the New Zealand extradition period should not be fully credited, but the court rejected that submission and counted all three periods as pre-sentence custody. Taking those periods into account, the court set the commencement date for the sentence as 28 September 2020.

The court applied the totality principle and determined that partial accumulation was appropriate given the distinct nature of the two conspiracies. A sentence of six years was imposed for Count 1 and seven years and six months for Count 2, accumulated by two years and six months, producing a total effective sentence of ten years. General deterrence was identified as a significant consideration in fixing the non-parole period. The court also recommended that the offender receive psychological treatment while in custody.

Orders Made

  • Conviction recorded on both counts of conspiracy to dishonestly cause a loss to the Commonwealth.
  • Count 1 (JKC conspiracy): six years' imprisonment.
  • Count 2 (RHV conspiracy): seven years and six months' imprisonment, accumulated by two years and six months.
  • Total effective sentence: ten years' imprisonment, commencing 28 September 2020 and ending 27 September 2030.
  • Single non-parole period (under s 19AB of the Crimes Act 1914 (Cth)): six years and eight months, ending 27 May 2027.
  • Recommendation that the offender receive appropriate psychological treatment in custody.
  • The offender to be supervised on parole, with supervision terminable at the discretion of Community Corrections.

Key Takeaways

  • The District Court treated the scale, duration, and sophistication of the ATO fraud conspiracies as central to the assessment of objective seriousness, with the RHV conspiracy (losses of $10.5 to $12 million over nearly four years) attracting the heavier sentence.
  • Time spent resisting extradition in a foreign jurisdiction is not automatically excluded from pre-sentence custody calculations. The court held there was no sufficient basis to discount the New Zealand extradition period, and credited it in full when determining the sentence commencement date.
  • Under the totality principle, partial accumulation of sentences for separate conspiracies was appropriate where the offences were distinct in subject matter and duration, even where they overlapped in time and shared the same co-conspirators.
  • A single non-parole period for multiple federal offences may be set under s 19AB of the Crimes Act 1914 (Cth), and the court treated general deterrence as a significant factor in setting that period for large-scale Commonwealth fraud.
  • Significant delay between the commission of offences and sentencing (here, approximately sixteen to twenty years) was a recognised subjective consideration, though it did not displace the court's emphasis on the gravity of the offending.

Legislation and Cases Referenced

Legislation:
- Criminal Code Act 1995 (Cth), s 135.4(3)
- Crimes Act 1914 (Cth), ss 16A, 19AB

Cases:
- Dickson v R [2016] NSWCCA 105
- Director of Public Prosecutions v Hamman (unreported, NSWCCA, 1 December 1998)
- Hili v R; Jones v R (2010) 242 CLR 520
- Milne v R [2012] NSWCCA 24
- R v Cranston [2023] NSWSC 454
- R v El Rashid (unreported, NSWCCA, 7 April 1995)
- R v Hausman; Hausman v R; R v Rostankovski; Rostankovski v R [2022] NSWCCA 24
- R v Kelu; R v Millner [2023] NSWSC 1537
- R v O'Connor [2002] NSWCCA 156
- R v Rivkin (2004) 59 NSWLR 284
- Regina v Pont [2001] NSWCCA 419; 121 A Crim R 302
- Totaan v R (2022) 108 NSWLR 17
- Tyler v R (2007) 173 A Crim R 458