Agius v R
[2015] NSWCCA 200
•5 August 2015
|
New South Wales |
Case Name: | AGIUS v R |
Medium Neutral Citation: | [2015] NSWCCA 200 |
Hearing Date(s): | 17 October 2014 |
Date of Orders: | 5 August 2015 |
Decision Date: | 5 August 2015 |
Before: | Bathurst CJ at [1]; R A Hulme J at [1144]; Bellew J at [1145] |
Decision: | Appeal against conviction dismissed. |
Catchwords: | CRIMINAL LAW – conviction appeal - conspiracy to defraud the Commonwealth of tax revenue under s 86(1) and s 29D of the Crimes Act 1914 (Cth) – conspiracy to dishonestly cause a loss or deliberately cause a risk of loss to the Commonwealth of income tax under s 135.4(5) of the Criminal Code Act 1995 (Cth) – proving the requisite state of affairs for conspiracy – stages of a conspiratorial agreement |
Legislation Cited: | Crimes Act 1914 (Cth) |
Cases Cited: | Agius v The Queen [2013] HCA 27; 248 CLR 601 |
Category: | Principal judgment |
Parties: | Robert Francis Agius (Appellant) |
Representation: | I Barker QC / P Coady (Appellant) |
File Number(s): | 2008/45500; 2008/245425 |
Decision under appeal: | |
Court or Tribunal: | Supreme Court |
Jurisdiction: | Common Law |
Citation: | [2012] NSWSCA 978 |
Date of Decision: | 23 August 2012 |
Before: | Simpson J |
File Number(s): | 2008/45500; 2008/245425 |
HEADNOTE
[This headnote is not to be read as part of the judgment]
The appellant, Mr Agius, was an expatriate Australian accountant practicing in Vanuatu at the firm Moore Stephens. He was charged, along with three accountants employed at the Australian firm, Owen T Daniel & Co (OTD), with two counts of conspiracy. First, conspiracy to defraud the Commonwealth, contrary to ss 86(1) and 29D of the Crimes Act 1914 (Cth). Second, conspiracy to dishonestly cause a loss or deliberately cause a risk of loss to the Commonwealth, knowing or believing that the loss would occur or that there was a substantial risk of loss occurring, contrary to s 135.4(5) of the Criminal Code Act 1995 (Cth). The conspiracy alleged was an agreement to defraud the Tax Commissioner of tax revenue by concealing the true taxable incomes of clients of OTD and dishonestly depriving the Commonwealth of, or jeopardising its right to, income tax, or causing a loss or risk of loss of income tax.
The conspiracy was effected by means of a scheme promoted by and/or on behalf of Mr Agius, carried out through the OTD accountants. The evidence at trial revealed that for each of OTD’s clients involved in the scheme, there was a flow of funds out of the client’s business to overseas companies, in respect of which false claims for tax deductions were made. The funds then flowed back to the client’s business and/or its directors as loans, in respect of which false claims for interest were also made on a number of occasions. Further, for three of the clients, sham insurance arrangements were created, in respect of which tax deductions were claimed.
Many of the witnesses at the trial gave evidence that the appellant had explained the scheme to them, had drawn diagrams to illustrate the flow of funds and was present at meetings at which the scheme was discussed. The evidence also demonstrated that the appellant executed a number of documents in connection with the scheme.
On 31 July 2012, a jury convicted Mr Agius and one of the alleged co-conspirators, Mr Zerafa, on both counts of conspiracy. The trial judge sentenced the appellant to 4 years and 5 months imprisonment in respect of the first count, 4 years 6 months imprisonment in respect of the second count and a fixed single non-parole period of 6 years and 8 months.
Mr Agius appealed his conviction and sentence. The main issues on appeal were:
Whether the trial judge erred by failing to direct the jury: to acquit the appellant; that the Crown must prove that the appellant was involved in filing false tax returns; that certain evidence may be unreliable; that two clients may have been involved in another conspiracy; clearly identifying the knowledge, belief or intent said to render the relevant conduct dishonest.
Whether the trial judge erred in directing the jury: on the involvement of the OTD clients who were witnesses; on the co-accused giving evidence; linking Moore Stephens to the scheme and the appellant to Moore Stephens.
Whether the verdict was unreasonable or could not be supported by evidence.
Whether the sentencing judge erred in: assessing the objective seriousness of the offence; imposing an unjustifiably disparite sentence on the appellant, compared to Mr Zerafa; imposing a sentence which was manifestly excessive.
The Court held (Bathurst CJ, RA Hulme and Bellew JJ agreeing), dismissing the conviction and sentencing appeal:
Whether the trial judge erred by failing to make certain directions to the jury
(i) Section 86(1) of the Crimes Act and s 135.4(5) of the Criminal Code are continuing offences. In order to prove the requisite ‘state of affairs’, The Crown only needs to prove that the accused and one other party to the conspiracy participated in an agreement to commit the offences in s 29D Crimes Act or s 135.4(5) Criminal Code, respectively. [962], [964] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
R v LK [2010] HCA 17; 241 CLR 177; Agius v The Queen [2013] HCA 27; 248 CLR 601, applied
(ii) A conspiratorial agreement has three stages which must be distinguished, first, making or formation, second, performance or implementation, third, discharge or termination. In general, the offence is complete at the first stage, when the agreement is made. Under the Criminal Code, the offence is not complete until an overt act is performed. [971] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
Saffron v The Queen (1988) 17 NSWLR 395; Director of Public Prosecutions v Doot (1973) AC 807; Agius v The Queen [2013] HCA 27; 248 CLR 601, applied
(iii) The trial judge did not err by failing to direct the jury to acquit the appellant as there was sufficient evidence upon which the jury could conclude that the conspiracy as particularised, as distinct from separate conspiracies, was entered into by the appellant and that he participated in the conspiracy during the conspiracy period. [973]-[991] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
Saffron v The Queen (1988) 17 NSWLR 395; Doney v The Queen [1990] HCA 51; 171 CLR 207, considered
(iv) The trial judge did not err by failing to direct the jury that the Crown needed to prove that the appellant was involved in filing false tax returns as the agreement alleged was that the scheme was promoted by the appellant and implemented by the OTD accountants. [997]-[998] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
(v) The purpose of s 165(1)(d) of the Evidence Act is to ensure that the jury is alerted to facts that may adversely affect the weight to be given to evidence. A warning is required if, without it, the jury may not be aware of a particular fact which affected the reliability of evidence. [1023] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
R v Fowler [2003] NSWCCA 321; 151 A Crim R 166, applied
(vi) The trial judge’s directions on unreliability were not erroneous as they were adequate to deal with the matters in s 165(1)(d) of the Evidence Act and it was open to her Honour to conclude that it was not necessary to indicate that certain evidence was unreliable. [1022]-[1023] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
Brown v The Queen [2006] NSWCCA 69, distinguished
(vii) The trial judge did not err in failing to direct the jury that two clients may have been part of a previous tax minimisation scheme as there was no evidence on this. [1045] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
(viii) The trial judge’s directions on the requisite dishonest belief of the appellant were not erroneous as her Honour identified the requisite belief rendering the agreement dishonest and encapsulated the facts on which the jury had to decide if the appellant had this belief, namely, that OTD’s clients were making claims for deductions not incurred. [1060] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
Peters v The Queen [1998] HCA 7; 192 CLR 493; Macleod v The Queen [2003] HCA 24; 214 CLR 230, considered
Whether the trial judge erred by making certain directions to the jury
(i) The trial judge did not err in directing the jury on the involvement of the directors as the directors had admitted involvement in the fraud and the direction was necessary to ensure that the jury was aware that their evidence should be treated with caution. [1027] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
(ii) The trial judge did not err in directing the jury regarding the evidence of the co-accused as this direction did not compliment them for giving evidence or suggest that the appellant’s failure to give evidence was because he believed he was guilty of the offence charged. [1035] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
Azzopardi v The Queen [2001] HCA 25; 205 CLR 50, considered
(iii) The trial judge’s direction referring to Moore Stephens was not unnecessary or prejudicial as there was a large body of evidence linking Moore Stephens to the scheme and indicating that the appellant was a partner of Moore Stephens and that a significant part of the scheme’s operation was carried out through employees of Moore Stephens. [1066]-[1068] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
Whether the verdict was unreasonable or could not be supported by evidence
(i) In determining whether a verdict should be set aside as unreasonable, the Court is required to make its own independent assessment of the evidence. If, after taking into account the primary responsibility of the jury in determining the question of guilt and the benefit of the jury of having seen and heard witnesses, the Court is left in doubt as to the verdict’s reasonableness, this doubt, in most cases, is a doubt the jury should have experienced. For a verdict to be unreasonable, it is not enough that a review of the evidence only shows that it was possible for the jury to have reached a different outcome, the jury must have had a reasonable doubt. [1000]-[1001] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
SKA v The Queen [2011] HCA 13; 243 CLR 400; M v The Queen [1994] HCA 63; 181 CLR 487; Libke v The Queen [2007] HCA 30; 230 CLR 559, applied
(ii) The verdict was not unreasonable as the evidence disclosed an extremely strong case against the appellant. The agreement the subject of the conspiracy could be inferred from the appellant’s promotion of the scheme, the steps carried out by him to establish the overseas structure and his participation during the course of the scheme. [1002]-[1010] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
The sentencing appeal
(i) A sentencing judge does not have to sentence on the basis of a view of the facts most favourable to the offender. This is subject to the constraints that the findings are not inconsistent with the jury’s verdict and must be made beyond reasonable doubt. [1100] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
Cheung v The Queen [2001] HCA 67; 209 CLR 1; R v Isaacs (1997) 41 NSWLR 374, applied
(ii) The sentencing judge did not err in assessing the objective seriousness of the offence as it was open to find that the appellant’s offence was close to the worst type of offence of this nature. [1104] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
(iii) The court will interfere with a sentence on the ground of disparity between the sentence imposed on an accused and a co-accused when it considers that the disparity gives rise to a justifiable sense of grievance, assessed by objective criteria. The court should not intervene when the disparity is justified by a difference between co-offenders’ criminal history, general character and the part each played in the criminal conduct. [1120] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
Green v The Queen; Quinn v The Queen [2011] HCA 49; 244 CLR 462, applied
(iv) The difference in sentences imposed on the appellant and Mr Zerafa did not give rise to a justifiable sense of grievance as the appellants offending was in the worst class of its kind, unlike Mr Zerafa’s, and he played a far more significant role in promoting and implementing the scheme. [1121] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
(v) The sentence imposed was not manifestly excessive as the offence: had continued over at least eight years, providing a mechanism by which eight companies were able to defraud the revenue of significant amounts of tax; was of a serious nature and of a type that had a corrosive effect on society; was in the worst class of its kind; and there was a need for punishment and general deterrence. [1133]-[1135] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
Hili v The Queen; Jones v The Queen [2010] HCA 45; 242 CLR 250; R v Ruha [2010] QCA 10; 198 A Crime R 430; R v Huston [2011] QCA 350; 219 A Crim R 209, applied
(vi) Sentences imposed in other cases can and should provide a yardstick for sentencing judges against which to measure a proposed sentence. However, care must be taken in having regard to these cases and the history of the range of sentences does not establish the correct range or the upper and lower limits of the range. The whole of the circumstances giving rise to a sentence must be examined. [1136] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
Hili v The Queen; Jones v The Queen [2010] HCA 45; 242 CLR 250; Director of Public Prosecutions (Cth) v De La Rosa [2010] NSWCCA 194; 79 NSWLR 1, applied
(vii) The differences between cases referred to by the appellant and the present case meant that they did not support the contention that the sentence was manifestly excessive. [1137]-[1140] (Bathurst CJ); [1144] (RA Hulme J); [1145] (Bellew J)
DPP v Goldberg [2001] VSCA 107; 184 ALR 387; R v Ronen [2006] NSWCCA 123; 161 A Crim R 300; Chen v R [2009] NSWCCA 66, considered
JUDGMENT
BATHURST CJ:
INTRODUCTION
The appellant, Robert Francis Agius (Mr Agius) and three others, Carol Abibadra (Ms Abibadra), Deborah Judith Jandagi (Ms Jandagi) and Kevin Zerafa (Mr Zerafa) were charged on indictment presented on 27 February 2012 with two counts of conspiracy.
The first count was that between about 1 January 1997 and about 23 May 2001, they conspired with each other and with Owen Trevor Daniel (Mr Daniel) to defraud the Commonwealth, contrary to s 86(1) and s 29D of the Crimes Act 1914 (Cth).
The second count was that between about 24 May 2001 and about 23 October 2006, they conspired with each other and with Mr Daniel to dishonestly cause a loss or deliberately cause a risk of loss to a third person, namely, the Commonwealth, knowing or believing that the loss would occur or that there was a substantial risk of loss occurring, contrary to s 135.4(5) of the Criminal Code Act 1995 (Cth).
Following a five month trial, on 31 July 2012, Mr Agius and one of the alleged co-conspirators, Mr Zerafa, were convicted on both counts. The jury was unable to reach a verdict in respect of the other two co-accused.
On the first count, Mr Agius was sentenced to imprisonment for 4 years and 5 months, commencing on 31 July 2012 and expiring on 30 December 2016. On the second count, he was sentenced to imprisonment for 4 years and 6 months, commencing on 31 December 2016 and expiring on 30 June 2021. The sentencing judge fixed a single non-parole period of 6 years and 8 months, expiring on 30 March 2019.
Particulars of the alleged conspiracy
Because of the nature of the matters raised in the appeal, it is necessary to set out in some detail the particulars of the conspiracy and the overt acts alleged by the Crown.
The particulars supplied by the Crown extended for some 850 pages. However, the principal allegations as they appear from that document can be summarised as set out below.
The conspiracy alleged was an agreement made between about 1 January 1997 and about 10 April 2008 to defraud the Federal Commissioner of Taxation (the Commissioner) of tax revenue by dishonestly concealing the true taxable incomes of corporate and individual clients of Owen T Daniel & Co Burwood (OTD) by a scheme promoted by and/or on behalf of Mr Agius (the scheme) through Mr Daniel, who died on 7 February 2006, Mr Zerafa, Ms Jandagi and Ms Abibadra. The alleged co-conspirators with Mr Agius all worked with Mr Daniel at OTD. For convenience, they are referred to as the OTD accountants.
It was alleged that Mr Agius and the OTD accountants agreed to defraud the Commonwealth by agreeing to dishonestly deprive the Commonwealth of, or to jeopardise the Commonwealth’s entitlement to, income tax, or dishonestly cause a loss or risk of loss to the Commonwealth of income tax. The means by which the agreement was alleged to be effected was by Mr Daniel and/or Mr Zerafa and/or Ms Jandagi and/or Ms Abibadra concealing from, and failing to declare to, the Australian Taxation Office (the ATO), the true taxable incomes of corporate and individual clients of OTD by implementing a scheme promoted by and/or on behalf of Mr Agius.
It will be noted from these particulars that it was not alleged that Mr Agius participated in the actual implementation of the fraud. Rather, it was alleged that the OTD accountants implemented the scheme which was promoted by him.
The effect of the scheme was particularised as, first, falsely inflating the expenses of the companies, thus reducing their taxable income. It was also alleged that the scheme had the effect of disguising income coming into Australia as loans, thus depriving the Commissioner of income tax payable on this dividend income, or exposing the Commissioner to the risk of that deprivation.
Mr Agius was described in the particulars as an expatriate Australian accountant practising in Vanuatu in the firm Moore Stephens, which later changed its name to PKF Vanuatu, Chartered Accountants & Business Advisers (PKF Vanuatu).
The agreement was alleged to have been formed in Sydney some time between 1 January 1997 and 1 May 1997. It was alleged that the original parties to the agreement were at least Mr Agius and Mr Daniel. It was alleged that the other co-conspirators joined the conspiracy at times between 1997 and 2000.
It was alleged that the corporate and individual clients of OTD which utilised the scheme during the course of the conspiracy were: Anscott Pty Ltd (Anscott) and its officers, Barbara Ruth Leimroth (Ms Leimroth) and Horst Reinhard Leimroth (Mr Leimroth); Australian Safety Specialists Pty Ltd (ASS) and its officers, Phillip Waller (P Waller) and David Waller (D Waller); Bemawell Pty Ltd (Bemawell) and its officer James Gerard O’Rourke (Mr O’Rourke); Different Solutions Pty Ltd (Different) and its officer, Clarissa Elizabeth Mattingly; Gladesville Bridge Marina Pty Ltd (GBM) and its officers, Phillip Barry Southcombe (Mr Southcombe) and Eva Maria Southcombe (Ms Southcombe); Hunter Civil & Hire Pty Ltd (HCH), Daley Labour Pty Ltd (Daley Labour) and Hydro-Magda Pty Ltd (Hydro-Magda) and their officers, Geoffrey Clive Daley (Mr Daley), David Allan Pritchard (Mr Pritchard) and Mark Patrick Bennett (Mr Bennett); Jiess Building & Carpentry Services Pty Ltd (Jiess) and its officer Glyn Morgan Jones (Mr Jones); Kylood Pty Ltd (Kylood) and Hilisa Pty Ltd (Hilisa) and their officer, Anthony Joseph Luis Hilli (Mr Hilli); Pacific Computing & Innovation Pty Ltd (Pacific Computing) and its officer, Stephen Victor Hawkins; PHY Electrical Contractors Pty Ltd (PHY) and its officers, Paul Boutros Mereb and Youssef Saadallah Mereb; Outboard World Pty Ltd (Outboard World) and its officer, Michael Joseph Calleija; and Tara Consulting Pty Ltd (Tara) and its officer, Margaret ‘Collette’ McKenna (Ms McKenna). These companies are collectively referred to as the Australian companies. As the trial developed, evidence was not led of the utilisation of the scheme by Different, Pacific Computing, PHY and Outboard World or their respective officers.
The scheme was particularised as being implemented by a number of steps. As it will be necessary to deal with the factual allegations in some detail later in this judgment, it is only necessary to provide a broad outline of these steps.
(a)Step 1 – Monies that the Australian companies utilised for the scheme were transferred by or on behalf of those companies to one of a number of New Zealand bank accounts controlled by Mr Agius which had been set up in the names of different corporate entities. All of the bank accounts were with the Auckland branch of the Australia and New Zealand Banking Group Ltd (ANZ Bank).
(b)Step 2 – In most instances, within a short period of time, Mr Agius, through PKF Vanuatu, transferred, or caused to be transferred, the monies received into one of the New Zealand accounts, less amounts retained by Mr Agius as fees and commissions, to another of the New Zealand accounts.
(c)Step 3 – In most instances, within a short period of time, Mr Agius, through PKF Vanuatu, transferred, or caused to be transferred, the amounts of money referred to in Step 2 into the bank accounts of certain of the Australian companies, their officers, or in one instance, to the officers of an Australian company by cash payments.
(d)Step 4 – The officers of the Australian companies then either retained the money in their personal bank accounts or transferred the money to the bank accounts of the Australian company, purportedly as a repayment of a shareholders loan.
It was alleged that the scheme involved the creation of nominee companies in Vanuatu on behalf of each of the Australian companies, with names that were deliberately different from the Australian companies, in order to assist PKF Vanuatu to conceal their accounting for the monies transferred in Steps 1-3. It was also alleged that in order to falsely substantiate the appearance of payments made during the ordinary course of business, with respect to the monies transferred in Step 1, documents were created by or on behalf of Mr Agius, through PKF Vanuatu, to pretend that such transfers were for services such as management and consultancy fees, insurance premiums or loan interest, including invoices for the cost of such services. It was also alleged to have involved the creation of false loan documentation in order to pretend that monies coming back to Australia from New Zealand were loans from foreign lenders. Such loan monies were not assessable income.
Finally, the scheme was said to have involved the preparation and lodgement of false tax returns. As I have indicated, it was not alleged that Mr Agius participated in this particular overt act.
The case presented at trial
It is convenient to deal separately with the case presented at trial in respect of each company said to have utilised the scheme and their respective officers. In respect of each such company, a statement of facts was agreed upon and the officers gave evidence.
1 ASS
a The agreed statement of facts
The involvement of ASS in the scheme covered the period from the 1998 financial year to the 2005 financial year.
In the 1998 financial year, ASS transferred amounts of AUD $40,025 and $20,025 to an account with ANZ Bank in Auckland, held in the name of Billbury Pty Ltd (the Billbury account). Of the first amount, $32,000 was transferred from the Billbury account into an ANZ Bank account in the name of Uniton Pty Ltd (the Uniton account), of which $31,961.66 was transferred to ASS. The whole of the latter amount was transferred from the Billbury account to the Uniton account and $19,961.81 was transferred back to ASS.
No tax deductions relevant to the proceedings were claimed in that year. However, accrued expenses of $150,000, recorded in the unaudited accounts as costs of goods sold, was said to relate to Billbury expenses. The transfers from Uniton to ASS were recorded in the unaudited accounts as “Uniton Ltd (Loan)”.
The transactions in the 1999 financial year followed a similar pattern. Money was transferred by ASS to Billbury by six transactions, the whole or a greater part of the funds the subject of each transfer was transferred from the Billbury account to the Uniton account and the bulk of the funds were then transferred back to ASS. Of the money transferred to Billbury, $400,150 was recorded as management and consulting fees. The accounts also recorded the payments from Uniton to ASS as loans from Uniton to ASS and recorded $14,660 as an interest expense, of which $14,200 was said to relate to Uniton. The amounts of $400,150 and $14,660 were claimed as deductible expenses in the 1999 ASS tax return.
The transactions in the 2000 financial year were a little more complex. As was previously the case, a series of transactions took place by which monies in Australian dollars were transferred from ASS to the Billbury account. These funds appear to have been paid into the Uniton account and, after some relatively small deductions, transferred to ASS. In addition, one transfer of $12,805 was made by ASS directly into the Uniton account. In addition to these transactions, three transfers in United States dollars were made. Of these transfers, one was made into the Uniton account and one was made into the Billbury account. The third was made into an account of a Vanuatu company, International Finance Trust Company Ltd (IFTC), with the ANZ Bank in Vanuatu (the IFTC Vanuatu account). These payments did not flow back to ASS in the year in question.
In the unaudited accounts for the 2000 financial year, $500,000 of the $504,504 “Management and Consulting” fees was said to relate to the claimed Billbury expenses. This amount, along with $57,994, said to be “Interest expenses” in respect of the Uniton loan, was claimed as a deduction in the 2000 tax return.
The transactions for the 2001 financial year followed a slightly different pattern. As in the previous years, ASS transferred funds in Australia dollars into the Billbury account. In addition, one transfer of $52,194.24 was made by ASS directly into the Uniton account.
As in the previous years, the monies paid into the Billbury account were paid, with some small deductions, into the Uniton account. The bulk of these funds were paid to ASS. However, in respect of one transaction, $204,885 was paid into an account operated by P Waller and D Waller (collectively, the Wallers) with the National Australia Bank Ltd (NAB) in Sydney (the Waller account). This money was subsequently transferred by them to ASS.
In addition, ASS made three transfers in United States dollars. Two were to the Billbury account and one was to an account held by IFTC with the ANZ Bank in Auckland (the IFTC account). The money the subject of these transactions did not flow back to ASS or the Wallers in the 2001 financial year.
A figure of $550,000 was included in the prepared profit and loss statement for ASS as management and consulting fees. In the unaudited accounts, they were recorded as relating to Billbury. A further $150,000 was recorded in the unaudited accounts as “May & June Management Fees” which had been accrued but not paid for. The profit and loss statement ultimately included in the unaudited accounts showed $700,000 as management and consulting fees relating to Billbury and interest expenses of $122,127 relating to Uniton. These amounts were claimed as deductions in the 2001 tax return.
The flow of funds in the 2002 financial year was similar to that which occurred in the 2001 financial year. ASS, by a series of transactions, transferred money into the Billbury account. After some small deductions, the funds were transferred out of that account into the Uniton account. In respect of two of these transactions, the funds were transferred to ASS, after a further small deduction. In respect of the other transfers into the Uniton account, the funds were transferred to the Waller account.
In addition, an amount of $109,939.99 was transferred directly by ASS into the Uniton account. This amount was paid back to ASS with another transaction, subject to small deductions.
Following receipt of the funds by the Wallers, they paid them to ASS, subject to rounding adjustments.
In the unaudited accounts for the 2002 financial year, amounts totalling $706,520 were recorded under management and consulting fees. Of this amount, $360,605 was recorded against the description “Billbury” as professional fees/marketing, $109,914.99 was originally described as loan interest but was subsequently recorded as management fees, whilst $236,000 was recorded as product insurance. These amounts recorded as management fees formed part of a total of $715,073 described as management fees which were claimed as tax deductions in this financial year.
In addition, an amount of $192,400 was claimed as a deduction as interest related to Uniton.
In the 2003 financial year, ASS, in a series of Australian dollar transactions, caused money to be deposited into the Billbury account. After small deductions, these funds were paid into the Uniton account. One of the deductions, an amount of $5,308.82, was paid into the IFTC account. ASS also made one direct transfer of funds, totalling $173,220.62, to the Uniton account.
After deductions, the amounts which were transferred to the Uniton account were transferred to the Waller account. One of the deductions, an amount of $18,400, was paid into the IFTC account. After minor adjustments, the funds transferred to the Waller account were transferred to ASS.
In addition, ASS, by three United States dollar transactions and one Australian dollar transaction, transferred funds into the IFTC account. None of the monies transferred into that account flowed to ASS in the 2003 financial year.
In this financial year, payments from ASS to Billbury totalling $300,000 were recorded as management and consulting fees. The sum of $265,327 was recorded as an accrued interest expense. The agreed statement of facts stated that this expense related to Uniton.
The amounts of $300,000, $265,327 and $94,515 (the latter amount recorded as an accrued insurance expense) were claimed as tax deductions for the 2003 financial year.
The flow of funds for the 2004 financial year followed a similar pattern to previous years, but was more complex. By four separate Australian dollar transactions, ASS transferred funds into the Billbury account. The funds from two of these transactions, subject to small deductions, were paid into the Uniton account. These funds, subject to some further small deductions, one of which was paid into the IFTC account (an amount of $341.47), were paid into the Waller account. Although it is not clear how much, it appears that at least part of these amounts was transferred back to ASS.
The other two transactions by which funds were transferred to the Billbury account each involved an amount of $50,000. These amounts, subject to small deductions, were transferred to an account with the ANZ Bank in the name of Edgecumbe Finance Ltd (Edgecumbe Finance), a company incorporated in the Republic of Ireland (the Edgecumbe account). This money was subsequently paid into the Waller account. It appears that one of these transactions was transferred back to ASS, however, it is not clear whether the other transaction was.
In addition to the monies transferred to Billbury, three Australian dollar transfers of $238,794.17, $86,000 and $60,030 were made by ASS into the Uniton account. These amounts, subject to deductions amounting to $32,581, $341.47 of which was transferred to the IFTC account, were paid into the Waller account.
Finally, an amount of $94,515 was transferred by ASS into an account with the ANZ Bank in the name of Lime Street Commercial & General Insurance Ltd (Lime Street) (the Lime account). This amount, subject to a deduction of $2,938.50, was transferred to Uniton and subsequently, subject to a small deduction, to the Waller account. It is not clear if it was transferred back to ASS.
Of the total funds paid into the Waller account, $742,961, the majority, $427,464, was transferred back to the ASS account. In addition, $30,000 was transferred from the Waller account into a NAB account operated by Worldwide Sales and Imports (Worldwide account). It was noted in the agreed statement of facts that this was an account operated by the Wallers.
In the prepared accounts for that year, $295,454.55 was recorded under the marketing ledger as Billbury expenses on a cash basis. This amount was claimed as a deduction in the 2004 financial year.
An amount of $298,732.30, made up of $297,009.73 (Uniton interest less withholding tax) and $1,722.57 (Edgecumbe Finance interest less withholding tax), was claimed in the tax return as interest expenses.
The sum of $94,515 was recorded in the accounts as insurance expenses to Lime Street.
No relevant tax deductions were claimed in the 2005 financial year, although the flow of funds showed a similar pattern.
ASS made four Australian dollar transfers in that year. The first, an amount of $100,000, was paid into the Billbury account. These funds, subject to a small deduction, were transferred into the Uniton account. From this account, subject to small deductions, they were transferred to the Waller account and ultimately $85,000 was repaid to ASS.
The second transfer of $100,000 was paid into the Lime account. Of that amount, $96,909.06 was transferred into the Uniton account. Subsequently, $10,000 was paid back into the Lime account. The balance, subject to a small deduction, was transferred to the Waller account.
The third transfer of $297,009.73 was paid directly into the Uniton account. It was subsequently transferred in two tranches to the Waller account and thereafter, it was paid back to ASS in two tranches, with a deduction of $100,000.
The fourth transfer of $1,722.57 was paid into the Edgecumbe account. It was not transferred out of that account in the 2005 financial year.
In addition, three transfers were made out of the Worldwide account. The first of $150,000 was to the Billbury account. Subject to some small deductions, these funds were transferred to the Uniton account. Subsequently, the funds were transferred to the Waller account and then to ASS.
The second transfer of $249,500 was transferred into the Lime account. These funds, after deduction of $7,575.98, were transferred to an account held by Uniton with the Bank of New Zealand (the Uniton BNZ account). Subject to some deductions, these funds were then transferred to the Waller account and subsequently back to ASS.
The third transfer of $103,000 was made to Lime Street. Of this amount, $90,000 was transferred to the Uniton account and, after a small deduction, to the Waller account.
There were also two further transfers made from the Uniton account to the IFTC account, one of $4,000 and one of $29,700. None of the monies transferred into the IFTC account flowed back to ASS in the 2005 financial year.
b The evidence of Mr Phillip Waller
P Waller gave evidence that he first met Mr Daniel in January or February 1998. He said that after that meeting, he and D Waller decided to appoint OTD as their accountants. He stated that he remembered Mr Daniel saying at that meeting that he could help minimise their tax.
P Waller gave evidence that he recalled that some time after that meeting, perhaps a couple of weeks later, Mr Daniel contacted him and D Waller and said that he would like to introduce them to a Mr Agius from a company in Vanuatu who could help with their tax. P Waller said that he met Mr Agius with Mr Daniel within a month or two thereafter, before 30 June 1998. He said that at the meeting, Mr Agius explained how his company, Moore Stephens, in Vanuatu, could help them. He said that Mr Agius explained that Moore Stephens was an international financing company/accounting company and explained how he could help them in other areas such as in Hong Kong, where ASS did a lot of dealings in purchasing products. P Waller gave evidence that Mr Agius told them how ASS and the Wallers could benefit by using a couple of companies that he had set up, one of them being Billbury. He stated that Mr Agius explained how ASS could get a false invoice sent from Billbury in England. He said that Mr Agius told the Wallers that after the money had been sent around the world, a company called Uniton would set up a loan and that that company would lend to the Wallers personally, so that there would be a cash flow for their business. P Waller described this as “basically we were getting a false invoice, paying it and then drawing down a false loan.” He said that Mr Agius told them that they would have more documents than necessary to cover any audits or any questions that the taxman would ask them.
P Waller said that as a result, he and D Waller signed documents for a $1 million loan with Uniton. He said that Mr Agius and Mr Daniel explained that the loan would not be paid back, but interest would be paid on the loan yearly. He said that this in fact occurred.
P Waller said that he recalled receiving an interest bill from Uniton in the sum of $200,000. He said that he and Ms Abibadra, an OTD accountant with whom he worked, worked out that this was part of the scheme for reducing profits, as by sending off the extra few bills, the loan was being legitimised. P Waller was also shown Uniton invoices of $173,195.62 for interest in the 2002 financial year and $297,009.73 for interest in the 2004 financial year. He said that the position with these invoices was the same as the earlier invoices.
P Waller said that during the course of the meeting with Mr Agius, Mr Agius drew a round circle highlighting what would occur. He said that the diagram basically showed the profits from ASS, with an arrow going up to Billbury, then an arrow down to Uniton and then an arrow back to the Waller account. P Waller drew a diagram which reflected his recollection of the document.
That diagram showed ASS profit flowing to the ANZ Bank in New Zealand as a result of a Billbury invoice, then flowing to Uniton and subsequently back into the Waller account. P Waller said that originally, he and Ms Abibadra would work out what the profits were for the business for the month and then would transfer that information to a Ms Kelly Fawcett (Ms Fawcett), who worked for Moore Stephens in Vanuatu. P Waller said that Mr Agius mentioned in the original meeting that Ms Fawcett would be the contact in Vanuatu and that she was the contact that they had in fact predominantly used over the years. He described that the system was that if, for example, there was a $40,000 payment that ASS was going to pay to Billbury, that $40,000 would be drawn down on Uniton through Ms Fawcett within four to five days. He said that Ms Fawcett would then send the money back through another account in New Zealand into their personal account in Australia.
P Waller said that he recalled that there was a start up fee of $8,000 to cover all of the paperwork. He recalled Mr Daniel and Mr Agius saying, “there will be plenty of paperwork. You will be well covered. It’s well worth the $8,000”.
P Waller gave evidence that he asked what should be done if the tax office did an audit. He said that Mr Agius responded, “There won’t be a problem, you’ll have plenty of paperwork and they’d only be fishing if it did come in.” P Waller gave evidence that at one stage, Mr Agius told him and D Waller that he (Mr Agius) had a number of clients in Australia participating in the same scheme and that the scheme had been successful for many years.
P Waller said that subsequently, he called Mr Daniel and said that he was happy to go ahead and for him (Mr Daniel) to start the paperwork.
P Waller gave evidence that ASS dealt with IFTC on a number of occasions. He was referring to a document on the letterhead of that company dated 10 June 1998, relating to a remittance of $40,000 into the Billbury account on 8 June. The document directed the ANZ Bank to transmit $8,000 into the IFTC account. P Waller gave evidence that the $40,000 came from ASS and the $8,000 was a bill for setting up the paperwork. He said that he did not have anything to do with Ms Fiona McConachie (Ms McConachie), who signed the document. It should be noted that the document was also signed by Mr Agius.
P Waller gave evidence that in about April 2004, he had a meeting with Mr Agius in ASS’s office in Seven Hills. He said that Mr Agius came in to discuss the loan with Uniton, which had reached its peak of $3 million, and that it was necessary to find another avenue for reducing overseas tax.
P Waller gave evidence that the $3 million borrowed was part of the scheme whereby a fictitious loan had been set up which was just a way of getting the money back to the Wallers as a loan, so the interest payments on the loan were also tax deductions. He said that ASS never got any part of the $1 million or $3 million into its own hands from any overseas lender.
P Waller said that at the meeting, Mr Agius said that he had agreed to purchase an insurance company called Lime Street Insurance. He said that Mr Agius told him that the idea “was to look at ways of insuring something that you would not normally insure with a normal insurance company”. He said that at the time of that meeting, Mr Agius had not secured Lime Street but, some time later, he came back and said, “We’ve now secured Lime Street and we can go ahead”, and documentation came over and monies were paid to Billbury.
P Waller said that as far as he was concerned, Lime Street was Mr Agius. He said that after he got the insurance documentation, he fairly quickly paid the initial amount for the insurance, $300,000. He said that he could not recall whether anything was done to get the bulk of the $300,000 back into the Waller account.
P Waller said that he first heard the name Edgecumbe Finance when he received two inward payments from that company into the Waller account. He said that Ms Abibadra told him that she contacted Vanuatu and spoke to Moore Stephens and was told that there was a mistake and the money that was previously sent to pay a Billbury bill should have come back as a Uniton credit but came back as an Edgecumbe Finance credit instead. He said that she said that the only way to fix this was to arrange the documentation for $150,000 to cover a new loan.
P Waller was shown an invoice from Edgecumbe Finance, dated 30 June 2004, to the Wallers, claiming a net amount of interest of $1,722.57. When asked whether he had any recollection of Edgecumbe Finance, he stated that that was the company that the Wallers had received incorrect loan documents for and new documents were drawn up under Edgecumbe Finance. He stated that the Wallers never received a loan from Edgecumbe Finance and did not owe Edgecumbe Finance any interest on any loans. He was also shown an Edgecumbe Finance letter dated 9 February 2004, purporting to be a loan facility agreement, together with a guarantee and indemnity. He said that he did not think there was any real purpose for the document.
P Waller was shown a Billbury invoice dated 27 January 1998, recording a fee for professional marketing and consulting services. He said that Billbury did not provide any of the services set out in the invoice and that it was never intended that they be provided.
P Waller said that most of the money paid to Billbury came back into the Waller account.
P Waller was also shown two invoices dated 17 August 1999 and 25 August 1999, both relating to work done for a company, Lincoln Investments Ltd. The first was from Moore Stephens and the second from IFTC. The second was signed by Mr Agius. He stated that on receipt of these invoices, he rang Ms Abibadra and asked what Lincoln Investments was all about. He said that she informed him that she did not have a clue and told him just to pay the bills.
P Waller was shown the profit and loss statement for ASS as at 30 June 1999. He referred to the management and consulting fees shown as an expense in that profit and loss statement and said that 99% of those expenses were not genuine business expenses, something he knew at the time. He stated that he knew that ASS’s tax return for the 1999 financial year contained false claims for deductions and false descriptions of non-existent expenses.
P Waller was asked about the loan draw downs and interest payments made to Uniton. He stated that this had nothing to do with the Billbury accounts, rather, it was a second bite of the cherry, namely, interest payments. He was referred to an invoice from Uniton dated 30 June 2001, saying that there was an amount of $109,914.99 interest payable. He said that ASS was not indebted to Uniton for that amount. In relation to his own tax returns for that period, he stated that there were certain things in it, such as Billbury and personal loans that were not truthful. He said that Ms Abibadra was responsible for the preparation of his personal tax returns.
P Waller was shown a further invoice for $50,000 from Billbury for carrying out a marketing survey in China. He said that it was not genuine. He was also shown another invoice from Billbury for $25,000 relating to the performance of the marketing survey in China with additional matters relating to high visibility personal protective safety clothing. He said that Billbury did not provide any services of that nature to ASS.
P Waller said that in the latter part of 2001, he went to Vanuatu for a holiday, as Mr Daniel told him that it would be a good idea to make the arrangements look legitimate.
P Waller was referred to a letter addressed to him dated 1 July 2003 from Lime Street, relating to a recent application for Key Man Insurance and enclosing a certificate of cover. The letter was signed by Mr Agius. Attached to the letter was a certificate of cover. P Waller identified the signature witnessing the affixing of the common seal of Lime Street as that of Mr Agius.
P Waller said that the bulk of the money paid as insurance premiums came back to the Waller account. He said that to his recollection, it all came back, except for maybe a $25 bank charge. P Waller was also shown the policy and again identified the signature of the witness to the affixing of the common seal as being that of Mr Agius.
P Waller was also asked about an interview he had with the ATO in April 2005. He said that in September 2004, Mr Daniel indicated that the ATO was requesting certain documents regarding Billbury and Uniton. He said that the night before the audit meeting with the ATO, he had what he described as a role play or a run through with D Waller, Mr Daniel, Ms Abibadra and Mr Zerafa, to go through questions that the ATO could possibly ask. He said that either Mr Daniel or Mr Zerafa would ask questions such as, “Where did you first meet Robert Agius?”. He said that he was told that the last thing he was supposed to say was “In Owen T Daniel’s office”. He said that it was ultimately decided that he would be better off just mentioning that he met Mr Agius in his old employer’s office and that he knocked on the door peddling his wares and offering offshore tax advice.
P Waller said that he had a contact, a Mr Dennis Turner (Mr Turner), who worked in London in the same business as ASS and had spent many years building up distributor clients from China and around the world. He said that at the meeting, it was decided that Mr Turner was a good person to use as a deflector to the ATO, to say that ASS had a contact in England by the name of Mr Turner who was employed by Billbury. He said that the participants at the pre-audit meeting built a story around this. In cross-examination, Mr Zerafa denied that he attended this meeting.
P Waller confirmed that Mr Turner had nothing to do with Billbury.
P Waller said that at the subsequent meeting with the ATO on 12 April 2005, the lead auditor told him that there was no such company as Billbury. As a result, he walked out of the meeting and telephoned Mr Agius in Vanuatu and Mr Agius said, “Get to the fax machine now, I’ll send you the registration paperwork Billbury”.
In cross-examination, P Waller accepted that the first meeting with Mr Daniel may have been on 17 March 1998, not January or February. He accepted, after being referred to his diary notes, that the meeting at which he was introduced to Mr Agius may have taken place on 27 March 1998 and that Mr Daniel contacted him to arrange for that meeting.
He repeated his evidence that it was explained to him that Mr Agius worked with an international accounting firm, Moore Stephens, and that Mr Agius explained that the proposed arrangements involved offshore transactions and that he would provide the necessary documents to satisfy the ATO.
So far as Ms Fawcett was concerned, P Waller acknowledged that his original evidence was incorrect and that it was around 2000 or 2001 when he started to contact her.
In cross-examination by counsel for Ms Abibadra, P Waller acknowledged that the first interest bill received from Uniton was in the sum of $202, the second in the sum of $14,200, the third in the sum of $52,194, the fourth in the sum of $109,914 and the fifth, for the financial year ending June 2002, in the sum of $173,195. He accepted that his evidence in chief regarding an interest bill of $200,000 may have related to his first request for a drawdown from the Uniton loan on 12 April 2002 and that he may have been referring to the interest invoice from Uniton for the financial year ending June 2003 in the sum of $238,794.
In cross-examination by senior counsel for Mr Agius, P Waller stated that when he first met Mr Daniel, he (Mr Daniel) said that he could help him minimise tax. P Waller acknowledged that at that stage, there was no suggestion that the tax minimisation might become part of an illegal scheme.
P Waller acknowledged that it was intended that money would be sent offshore in exchange for, or in response to, an invoice from Billbury and that the amount to be sent offshore would match the amount claimed. He said that that happened every time money was sent offshore and that he did not send money to Billbury when there was no invoice.
In cross-examination, P Waller was shown four invoices from Billbury which predated any conversation between him and Mr Agius. He said that the invoices themselves were back dated and denied that it was a baseless allegation that Mr Aguis was involved in the scheme to set up false invoices.
P Waller acknowledged that he concurred in taking out the Lime Street insurance policies without inquiring whether cheaper policies could be taken out elsewhere. He stated, in that context, that “We were not paying for the insurance we said we were paying for”.
In relation to the 1998 financial year, P Waller acknowledged that ASS sent about $60,000 to Billbury. It was pointed out to him in cross-examination that there were invoices in that year totalling $150,000. He agreed that this was inconsistent with his evidence that in respect of each payment, there was a corresponding invoice. P Waller stated that he could only assume that the invoices were backdated.
P Waller agreed that in that year, $150,000 was claimed as an accrued expense. He said that he could not explain why there were only invoices to the value of $60,000. He stated that he did not authorise Mr Daniel or anyone in his employ to send any internal accounting documents to Vanuatu.
In that context, it was suggested to P Waller that the invoices did not come from overseas but were in fact created by OTD. P Waller said that he could not answer that question.
P Waller was asked similar questions concerning the 2001 financial year. It was pointed out to him that there was $550,000 paid to Billbury and invoices totalling $700,000. He said that he could not explain how that happened and that he also could not explain why there were no invoices which matched the transfers to Billbury in that year. It was suggested to him that the likely explanation was that the invoices were created by Mr Daniel. P Waller stated that he did not believe that to be the case.
P Waller was cross-examined in a similar fashion in relation to the 2004 financial year and again acknowledged that he could not identify any invoices which matched the transfers to Billbury in that year.
In relation to the 2005 financial year, P Waller acknowledged that there was no invoice to support the payment of $150,000 from the Worldwide account to Billbury in that year. It was again put to him that the likelihood was that the invoices were created by OTD when the ATO started to investigate. He stated again that he did not know who made the invoices and assumed that the invoices were coming from Vanuatu.
P Waller was also cross-examined about research and development claims made by ASS. He said that it was possible that he told the tax auditor that research by Billbury formed part of the claim for research and development. He acknowledged that the claim for research and development was entirely fraudulent and that, to the extent that he had stated that Billbury was involved, that was a lie.
P Waller also acknowledged that he deliberately misled the tax investigator, Mr Mark O’Flynn (Mr O’Flynn), by telling him that Mr Daniel had nothing to do with the research and development claim. He acknowledged that the claim for around $600,000 was fraudulent and had nothing to do with Mr Agius. P Waller was also cross-examined about the claim for accrued expenses relating to Lime Street in the 2003 financial year. He acknowledged that while he had stated that he first heard about Lime Street in April 2004, he had made a claim for it in his 2003 tax return. He explained the discrepancy as involving “creative accounting”.
c The evidence of Mr David Waller
D Waller stated that he was a director of ASS between 1997 and November 2005. He gave evidence that he met Mr Daniel in early 1998 and that OTD was retained as the accountants for ASS in early 1998.
D Waller gave evidence that a few months thereafter he met Mr Agius. At this meeting, D Waller stated that they discussed ASS, including the nature of the business and future growth expectations. He said that Mr Agius gave a presentation and told him and P Waller that Moore Stephens was an accounting business that looked after firms similar to ASS by minimising their tax.
D Waller said that he was told that Moore Stephens were located in Vanuatu. He said that Mr Agius talked about an offshore company structure that his firm controlled. D Waller said that Mr Agius stated that he (Mr Agius), or the Vanuatu company, would provide an invoice for services rendered, which would be recorded in the ASS accounts as a business expense. Mr Agius then explained that the funds would be transferred back to pay for those expenses and that the Wallers would receive these funds as a loan, which they would never have to repay.
D Waller gave evidence that Mr Agius drew a diagram showing the cash flow. In the course of his evidence, D Waller drew a diagram which he said was similar to that shown to him by Mr Agius. The diagram was in similar form to that drawn by P Waller and showed money flowing from ASS to Billbury via an ANZ Bank account to Uniton and then back to ASS.
D Waller said that he recalled Mr Agius speaking about Billbury and Uniton and a New Zealand bank account. He said that he recalled discussions about the ATO and how the transaction would be explained if they made inquiries. He gave evidence that it was mentioned that Moore Stephens had a few clients minimising their tax in this way and that they had no previous issues with the ATO. He said that Mr Agius had said that all of the documents would be provided if the ATO were to contact him or P Waller in relation to an audit.
D Waller gave evidence that he recalled being told at the meeting that the initial charge would be $8,000. D Waller said that he had no personal role in relation to any of the payments which were made by ASS to New Zealand or any dealings in that context with anyone at OTD.
D Waller said that at some stage, he came to hear of a company named Lime Street. He said that P Waller had told him that he had had a meeting with Mr Agius in which Lime Street was brought up. He said that Lime Street was providing ASS with an insurance policy and that D Waller was being insured for Key Man Insurance. He gave evidence that, similar to Billbury, it was a fictitious company that was providing ASS with an invoice for which ASS would pay and would then receive the funds back. He stated that he had never heard of Key Man Insurance.
D Waller was shown an invoice from Billbury addressed to ASS dated 3 June 1998. He said that none of the work described in that invoice was carried out by Billbury on behalf of ASS.
D Waller said that he did not have any knowledge of the manner in which the monies paid out of ASS to the ANZ Bank in Auckland subsequently came back and found their way into his personal tax returns.
D Waller said that he was made aware that the ATO was proposing to conduct an audit into ASS. He said that he was made aware of this by P Waller and that there was a meeting concerning the audit in the office of OTD the day before the audit meeting with the ATO was to take place. He said that the only information that he had prior to the meeting at OTD was that P Waller had told him “the guys at Owen T Daniel’s would like to discuss the audit”.
He remembered that at the meeting, people were role playing in relation to the type of questions that might be asked and the types of answers which should be given. He said that some of the suggested answers were untrue.
D Waller gave evidence that he did not have a lot of input in the meeting, which was chaired by P Waller, who was the one answering all of the questions. He said that the answers given by P Waller were untruthful so far as they related to Billbury and Uniton.
D Waller was asked whether he knew Mr Turner. He said that he did and that because of the work that Mr Turner had been doing in relation to research of products, Mr Daniel thought it would be a good idea to use his name as the person working for them from Billbury. He said that the research work done by Mr Turner had nothing to do with either Billbury, Uniton or Lime Street.
D Waller was shown notices of demand from Uniton and Edgecumbe Finance demanding the repayment of loans. He said that no money was owed by him to either Uniton or Edgecumbe Finance.
In cross-examination, D Waller repeated his evidence that Mr Agius explained to him that Moore Stephens was an international accounting firm that helped clients similar to ASS to minimise their tax, that the proposed arrangements would involve offshore transactions and that he (Mr Agius) would provide the necessary documents for tax purposes.
d The evidence of Mr Mark O’Flynn
At the relevant time, Mr O’Flynn was an officer of the ATO. He was responsible for conducting the audit into the taxation affairs of ASS and the Wallers. He gave evidence that during the course of an interview that he had with the Wallers, P Waller indicated that Billbury carried out consulting work in finding products, factories and markets in Europe and China. Mr O’Flynn said that P Waller told him that Mr Turner spoke constantly with D Waller in relation to Billbury. He said that P Waller also said that when he first contacted Mr Agius regarding a loan, Uniton offered a facility. He said that P Waller told him that he contacted Mr Agius because he could not get a business loan in Australia.
Mr O’Flynn also said that P Waller told him that the Wallers initially took out a personal loan of $1 million and intended to increase this to $4 million. He said that he was told that there was no security for the loan, just personal guarantees and that the funds were paid into a personal bank account.
Mr O’Flynn said that P Waller told him that both Billbury and Uniton had the same principal, Robert Agius.
2 GBM
a The agreed statement of facts
In 1983, the directors of GBM, Mr and Ms Southcombe (collectively, the Southcombes), engaged OTD as their and GBM’s accountants and tax agents on an ongoing basis.
The agreed statement of facts states that Mr Agius was not involved in the preparation of the GBM accounts or in the preparation and lodgement of income tax returns for GBM or the Southcombes.
In 1997, prior to receipt of funds from any New Zealand accounts, the unaudited accounts of GBM recorded $328,000 as accrued management and consulting fees. These fees were claimed as expenses in the 1997 GBM tax return.
The accounts for 1997 recorded an unsecured loan in an amount of $210,588. This amount was recorded on documents prepared by Ms Southcombe as “Uniton/Security Life Nominees Ltd”.
In 1998, GBM made eight transfers out of an account held by it with Colonial State Bank (GBM A/c No 1) into the Billbury account. The total value of the transfers was $328,280. Each of the transfers, rounded down to the nearest hundred, was transferred into the Uniton account. Subsequently, subject to some small deductions, and one deduction of $8021.34, they were transferred back to the GBM A/c No 1.
Each of the outgoing payments was recorded in the accounts as management and consulting fees, being payments for fees previously accrued.
In the 1998 unaudited accounts, $250,000 was recorded as management and consulting fees, with a corresponding entry under unsecured loans. The incoming amounts from Uniton, totalling $284,709.26, were recorded as unsecured loans. The total closing balance of the unsecured loans shown in the accounts was $745,297, made up of the 1997 unsecured loan of $210,588 plus the amounts of $250,000 and $284,709.26.
The $250,000 management and consulting fees were claimed as expenses in the 1998 tax return for GBM.
In the 1999 financial year, six transactions, in similar form to those in the 1998 financial year, took place. The total amount transferred out of the GBM A/c No 1 in these transactions was $250,210.
The unaudited accounts for GBM recorded $250,000 of the money paid out in the 1999 financial year as management and consulting fees. An additional $50,000 was also recorded as management and consulting fees and a corresponding entry was made in the accounts as a loan.
The sum of $300,000, being the total amount referred to in par 128 above, formed part of the total management and consulting fees of $320,747, claimed as expenses in the GBM 1999 income tax return.
The incoming payments from the Uniton account were recorded as unsecured loans. The closing balance of loans recorded in the name of Uniton was $1,079,666. In the income tax return for the 1999 financial year, GBM claimed $39,884 as interest expenses. This was described in the ledger as “Vanuatu interest”.
In the 2000 financial year, similar transactions took place. Seven transfers were made out of the GBM A/c No 1 to the Billbury account. The total value of these transfers was $300,210. The amounts received in respect of four of the transfers were paid into the Uniton account and then, subject to small deductions, paid back into the GBM A/c No 1. The other two transfers were transferred to the IFTC account and from there, subject to small deductions, paid into the GBM A/c No 1.
In addition, one transfer of $35,694.51 was made out of the GBM A/c No 1 directly into the Uniton account and then, subject to small deductions, back into the GBM A/c No 1.
In the same year, GBM made a United States dollar transfer of $1,300 into the IFTC account.
In that year, $119,974, described as interest expenses, was claimed by GBM as a tax deduction. It was made up of $41,933.20, recorded as interest paid to non-residents, $68,302, recorded as an accrued interest expense and $9,679.82, recorded as “Int Fin Trust Co US $5503.03”.
The closing balance for unsecured loans in the unaudited accounts was $1,094,834.45.
In 2001, two transfers were made from the GBM A/c No 1 to the Uniton account. The amount of the first transfer, with a small deduction, was paid out of this account into the GBM A/c No 1 four days later. The second transfer was transferred from the Uniton account into an account operated by a company, Security Life Nominees Ltd (Security Life), with the ANZ Bank in New Zealand (the Security Life account). On the same day, the money was transferred, with a small deduction, into the GBM A/c No 1.
In addition, a transfer was made from the GBM A/c No 1 directly to the Security Life account. Three days later, this transfer, with a small deduction, was transferred to the GBM A/c No 1.
In the same year, a United States dollar transfer of $3,453.25 was paid into the IFTC account.
In its tax return for the 2001 financial year, GBM claimed $91,451 as interest expenses. This was said to be made up of what was described as $45,845.77 interest to Uniton and $50,605 interest to Security Life.
In the accounts, the funds from Uniton and Security Life which flowed into the GBM A/c No 1 account were described as loan draw downs. The closing balance for unsecured loans stated in the accounts was $1,245,223.
There were two transfers made by GBM in the 2002 financial year. These were made out of an account of GBM with the Commonwealth Bank of Australia (CBA) (GBM A/c No 2). The first was made into the IFTC account and the second was made into the Security Life account. The latter transfer, with a small deduction, was transferred back to the GBM A/c No 2.
In this financial year, a tax deduction of $137,200 for interest expenses was claimed in the tax return lodged by GBM. This was made up of amounts referred to in two Security Life invoices.
The funds flowing back to GBM from Security Life were described as unsecured loans.
In the 2003 financial year, six transfers, totalling $271,473.04, were made from the GBM A/c No 2 to the Security Life account. The first of these, with a small deduction, was transferred back to the GBM A/c No. 2.
The other five transfers, with small deductions, were transferred from the Security Life account into the IFTC account. The second and third transfers, with an addition of some $900, were then combined and transferred into the Edgecumbe account and then into an account with the NAB in the name of Robert and Pauline Agius (the Agius account). These funds, subject to a small deduction, were then transferred to a Ms Ingrid Algie (Ms Algie), Ms Southcombe’s sister (AB 17/7895). The monies the subject of the fourth, fifth and sixth transfers were not transferred out of the Security Life account in the year in question.
In the 2003 tax return, $116,208 was claimed as interest expenses.
In the 2004 financial year, four transfers were made out of the GBM A/c No 2 into the Security Life account. The total amount transferred was $185,112. Subject to small deductions, these transfers were paid into the IFTC account. The first three of these transfers, totalling $129,870.47, were then combined with three transfers made to the IFTC account in the 2003 financial year, amounting to $164,787.21 and, subject to a deduction of $4,657.68, were transferred into an account with the Westpac Banking Corporation entitled “Des Last Pty Ltd t/a Gladesville Bridge Yacht Sales” (Des Last account). This account was operated by Ms Southcombe.
The fourth transfer was in an amount of $55,028. Of this amount, subject to small deductions by Security Life, $19,415 was transferred into the Edgecumbe account. After a small deduction, these funds were transferred into an account with the CBA entitled “Fit for a King” (the Fit for a King account), operated by Mr Arthur Isbester (Mr Isbester).
In that year, an amount of $112,070.24 was claimed as interest expenses.
It is convenient to deal with the flow of funds in the 2005-2007 financial years together. In the 2005 financial year, three transfers were made from the GBM A/c No 2 into the Security Life account.
The first and second of these transfers were each in an amount of $55,028. These monies were transferred together, subject to a small deduction, in the same year into the Edgecumbe account. Thereafter, in the same year, after a deduction of $9,870.46, the money was transferred into the Fit for a King account.
The third transfer, which took place on 16 June 2005, was in an amount of $891,196.37. Of this amount, $285,330.46 was transferred into the IFTC account on 22 December 2006. On 3 April 2007, a portion of this transfer, $100,015, was transferred into the Edgecumbe account and thereafter, on the same day, into an account with the ANZ Bank entitled “Impressive Concepts Account” (the Impressive Concepts account), operated by Mr Isbester. On 14 June 2007, a further portion of $219,000 was transferred from the IFTC account into the Impressive Concepts account.
The balance of the third transfer was paid from the Security Life account into the Edgecumbe account between 27 September 2005 and 22 December 2006. In the same period, funds totalling $600,000 were paid out of the Edgecumbe account into the Fit for a King account.
In the 2005 financial year, a tax deduction of $41,510 was claimed for interest expenses. No relevant deductions were claimed in the subsequent years.
b The evidence of Ms Eva Maria Southcombe
Ms Southcombe gave evidence that she met Mr Daniel around 1982 or 1983 and that he had acted as her and her husband’s accountant for many years.
Ms Southcombe gave evidence that she looked after the office arrangements, the office staff and all of the paperwork for GBM. She said that she also supplied tax information to GBM’s accountant. She said that her husband looked after the outdoor staff, the maintenance of GBM’s marina and the work that was conducted on the boats for GBM and that he was also involved in the brokerage business.
Ms Southcombe said that around March 1998, Mr Daniel told her that he had a very good friend, Robert Agius, who he believed could be of value to her and her husband. She said that she subsequently met Mr Agius at the OTD office. She said that he was introduced by Mr Daniel as an expert in tax who worked in a very reputable worldwide company. Mr Daniel told her that Mr Agius would be very helpful to them and that a large number of clients used his assistance to minimise tax. There was a discussion of how tax minimisation may be available, but she said she did not understand it.
She said that either Mr Daniel or Mr Agius told her at the meeting that Mr Agius was based in Vanuatu with a firm, Moore Stephens.
Ms Southcombe said that she recalled asking whether there was any criminality involved in Mr Agius’ proposals and she was assured that there was not.
Ms Southcombe said that she recalled that either Mr Daniel or Mr Agius mentioned that funds would be forwarded overseas and returned.
Ms Southcombe identified a brochure she was given headed “Moore Stephens Vanuatu”. She said that she believed that she received the brochure at the first meeting.
She recalled that after the meeting, either her or her husband telephoned Mr Daniel and said that they (the Southcombes and GBM) would go along with what was suggested “because it sounded like something that all the big companies seemed to do”. She said that she subsequently learnt from Ms Jandagi that OTD was communicating with both Mr Agius’ office and a company called Hamilton Holdings Pty Ltd (Hamilton Holdings) in order to set up the necessary paperwork.
Ms Southcombe gave evidence that she thought that Hamilton Holdings was a company that could not be taxed and “it was a company I think that was sort of between Billbury and Uniton that sort of maintained accounts of monies et cetera.” She said that she knew that Hamilton Holdings was located in Vanuatu and that she received paperwork in relation to that company from OTD in May 1998.
Ms Southcombe was referred to the recording in GBM’s accounts of $328,000 as forming part of the total management and consulting fees for the 1997 financial year (see par [123] above). She said that the figure was provided by Ms Jandagi who “worked out that figure from our taxes”.
Ms Southcombe was referred to an email that she forwarded to Ms Jandagi in May 1988. She acknowledged that the 1997 tax return had been lodged by the time of that email. She said that the $328,000 was paid by GBM by June 1998 and that the claim for the tax deduction was made by Ms Jandagi.
She said that at the time she wrote the email, she did not understand what was happening in the process or whether there was a time urgency in forwarding the funds. It was only when she received a response to the email that she realised that it was urgent.
Ms Southcombe was referred to an email forwarded to her by Ms Jandagi on 1 June 1998. The email stated that Hamilton Holdings could not be associated with Ms Southcombe in any way and the Southcombes could not be directors or shareholders of the company. Ms Southcombe said that she thought this was very strange but that she was told it was a vehicle that was set up by Mr Agius for his purposes. She said that she could not be certain whether she was told that by Mr Agius or Ms Jandagi.
Ms Southcombe was referred to a handwritten diagram which she said she received in a meeting with Mr Daniel and Mr Agius. She said that the meeting was subsequent to the first meeting and occurred because she and her husband did not understand the process and wanted to know how the scheme was structured. The diagram showed a box with arrows indicating invoices from Billbury and loans from Uniton. Ms Southcombe that said she was told that the box represented GBM and that the diagram indicated invoices going to Billbury, cash being paid to Billbury and loans from Uniton. When asked about the word “invoice” on the diagram, she said that she was told by Mr Agius that “they would be providing us with invoices”. She said that Mr Agius also told her that the invoices would be management and services invoices from Billbury. She said that she understood that the total scheme was for tax minimisation and was part of Robert Agius’ tax minimisation scheme.
Ms Southcombe said that at the time the payment of $328,000 was made, GBM had not received any invoices and that invoices were only received in the latter part of 2000 from Billbury.
Ms Southcombe said that in February 1999, she was told by Mr Agius that Mr John Warmington (Mr Warmington) of Moore Stephens Vanuatu would be the contact person for her, her husband and their companies.
Ms Southcombe was asked about loan interest payments to Uniton. She said that she would receive statements and there would be interest payments noted on the statements. She was shown an invoice which referred to a draw down facility of $1 million, the invoice being for $39,893.83. She said that when she received the invoices, she would arrange for a payment of that amount by GBM. She said that GBM had not received a payment of $1 million from Uniton.
Ms Southcombe said the payments which came from Uniton as a loan were approximately the same amounts as payments which had gone out to Billbury.
Ms Southcombe said that at some stage, she raised her concerns with Mr Agius about her lack of understanding of payments coming from Uniton in May 2000. She said that “we stopped the invoices” when the loan amount was close to $1 million on the balance sheet. She said that she initially raised the matter with Ms Jandagi and, subsequent to that, had a number of face-to-face meetings with Mr Agius in OTD’s offices. She said that initially, those meetings were in the presence of Ms Jandagi, but in 2005, Mr Zerafa attended.
Ms Southcombe also indicated that she was concerned about not receiving invoices from Billbury. She referred to an email written by her to Ms Jandagi on 7 December 1998, in which she said that Mr Agius had told her in July that he had virtually finished the invoices they had requested. In the email, she also complained that since then, she had referred to four emails that she had sent to Mr Agius in relation to the invoices, without any response at all.
Ms Southcombe gave evidence concerning a further email that she sent to Ms Jandagi on 3 March 1999 following up on her email of 7 December 1998. She indicated that she had emailed Mr Agius nine times requesting invoices in relation to the funds transferred to Billbury in the 1998 financial year. She stated in that email that those requests had been going on for nine months and that it was “Absolutely ridiculous” and this was “no way to have an association or have things work.”
Ms Southcombe indicated that by 2000, “we” (presumably the Southcombes and GBM) had had enough and did not wish to be involved in the scheme any more or have the Uniton loan on the balance sheet. She said that Ms Jandagi told her that all of the other clients were happy with the scheme and did not want to get out of it, that she did not know how GBM could get out of the scheme and that the best thing that could be done was to minimise their involvement. She said that the only thing done in that particular year was to pay $17,000 in interest because she did not want the balance on the loan on the balance sheet to keep escalating. She said that after the 2001 financial year, there were more interest payments made because there was no alternative but to continue to pay them as there was no way out of the loan.
Ms Southcombe said that after that time, they decided to try and get rid of the loan by paying it off and making payments towards the principal of the loan to reduce it. In that context, she said that the funds that they were sending overseas, in her mind, were not for a tax deduction, but were to get out of the loan, because the tax deduction was only on the interest, not the principal. She said that the payments went into the hundreds of thousands of dollars.
She also said that she had meetings with Mr Agius and Ms Jandagi to try and get some of the money back. She said that it was a difficult situation. She said that Mr Jandagi suggested that it could come back through the OTD trust account and that she requested this to occur. However, she said that Mr Agius and Mr Zerafa decided that this was inappropriate. Ms Southcombe gave evidence that on 23 September 2003, she received an email from Mr Agius concerning the proposal to transfer funds back to GBM through the OTD trust account. The email stated that if questioned, she could not hope to hide behind the OTD trust account as “they [OTD] have to disclose”.
1076Her Honour also referred to the invoices purportedly for interest on loans said to have been drawn down. She also referred to the insurance aspects of the scheme, noting in particular that the communications in relation to that aspect were directly with Mr Agius.
1077Her Honour noted that the amount of money sent to New Zealand and claimed as deductible expenses resulted in substantial revenue loss. She pointed to the fact that, in the case of ASS, the tax evaded was $1.27 million and in respect of the other companies, ranged from just under $100,000 to $654,000. She pointed out that the nature and circumstances of the offending included the period over which it was perpetrated.
1078Her Honour stated that there was uncontradicted evidence that Mr Agius actively presented and promoted the scheme to clients of OTD through his association with Mr Daniel, who selected clients that he considered suitable for participation. She referred to the fact that on a number of occasions, Mr Agius outlined the scheme with the assistance of diagrams.
1079Her Honour stated that she was “satisfied beyond reasonable doubt that the implementation of the arrangements was at all times under the direct control and supervision of Mr Agius”: Sentencing Judgment at [43]. She noted that he was a signatory on the New Zealand bank accounts, whilst acknowledging that the evidence did not go so far as to show that he had control over them.
1080Her Honour stated that she was also satisfied beyond reasonable doubt that the appellant received financial benefit from his involvement.
1081Her Honour also noted that Mr Agius was involved, to a very significant degree, in seeking to perpetuate and protect the conspiracy after the ATO’s interest had become apparent. She referred to the letters of demand from Edgecumbe Finance, accepting that the appellant had told directors of two companies that those letters could be ignored. She stated that she was also satisfied that Mr Agius was significantly involved in returning funds to directors of GBM, pointing to the sham boat purchase and the return of funds through Mr Isbester. Her Honour concluded as follows:
“[60] The above abbreviated account makes it very clear that Mr Agius in particular was heavily involved in both promoting and implementing the scheme arrangements and in attempting to conceal the true nature of the arrangements after the ATO began its inquiries. On his behalf it was submitted that I ought not to find that he was a "promoter". The principal argument put in support of this argument was that it was, in fact, Mr Daniel who was the promoter of the scheme. While I accept that Mr Daniel did actively promote the scheme, that does not exclude another from acting in a similar role. I am satisfied beyond reasonable doubt that an accurate description of Mr Agius' role is that of ‘promoter’. I am, as I have mentioned, also satisfied that he undertook an active role in the day to day implementation of the scheme. Some weight was, on Mr Agius' behalf, attributed to the fact, which is not disputed, that Mr Agius played no part in the preparation of any of the income tax returns. I accept that to be a fact, but its relevance is non-existent. What Mr Agius did was to propose the fraudulent conduct to a number of company directors and provide them with the means of committing the frauds, safe (as they were led to believe) in the knowledge that the documentation would deflect any inquiry by the ATO.”
1082In considering the appropriate sentence, her Honour stated that it was “hardly necessary to say that offences such as these call for sentences containing a strong element of general deterrence”: Sentencing Judgment at [63]. She stated, however, that the need for personal deterrence was limited, having regard to the appellant’s age, his criminality, the need for a significant punitive element in the sentence and the fact that he would have little further opportunity for engaging in the type of criminal conduct in question. She stated that the most important sentencing considerations were general deterrence and the need to impose adequate punishment.
1083In dealing with the injury, loss or damage resulting from the offences, a matter required to be taken into account by virtue of s 16A(e) of the Crimes Act, her Honour made the following remarks:
“[63] … For the purposes of s 16A(2)(e), the immediate injury suffered by the Commonwealth was a very considerable loss of revenue. In respect of the eight companies of which evidence was given, the financial loss was said to be in excess of $5 million. But there is also an intangible loss. The Australian taxation system, based as it is on self-assessment, depends for its integrity upon the honesty of citizens. Of course, there will always be those who choose to cheat. They are cheating their fellow citizens, casting a greater burden on each of them. Further, when it is known that the system can be, and is, cheated, the very structures of society are damaged. The self-assessment system depends not only on the honesty of taxpayers, but on the confidence of taxpayers that others will make their proper contributions, or that, if they do not, they will be adequately punished.”
1084Her Honour dealt with the personal circumstances of the appellant. She referred to the character evidence tendered on his behalf, noting his generous contribution to Vanuatan society and that he was regarded as a man of integrity, a perception she said was simply false. In these circumstances, she said that she gave the character evidence little weight.
1085Her Honour referred to the fact that the appellant was reported to have suffered a stroke in 2009, although stating that he appeared to suffer minimal after effects. She referred to the fact that medical evidence showed he suffered from sleep apnoea, degenerative changes in his right knee and was finding prison conditions difficult to adjust to and stressful. However, her Honour said that what was reported was to be expected of a middle aged, middle class man, facing the reality of an extended period of incarceration for the first time. Her Honour’s conclusion was in the following terms:
“[77] I find that there is nothing in the circumstances concerning Mr Agius that mitigates the gravity of his offences. On behalf of the DPP, it was submitted that his case comes very close to a ‘worst case’, calling for a penalty close to the maximum provided by law. I accept that submission. That brings me to a consideration of what the maximum penalty is. Taken at face value, the operational legislation provides, in respect of the first offence, for a maximum penalty of imprisonment for 20 years; in respect of the second offence, a maximum penalty of 10 years.
…
[79] I am required, by the doctrine stated by the High Court in Pearce v The Queen [1998] HCA 57; 194 CLR 610, to impose an appropriate sentence in respect of each offence, before considering questions such as accumulation or concurrence, and totality. In my opinion, the overriding question in the case of Mr Agius is the question of totality; whether he were to be sentenced individually for two offences, each committed over a confined period, the second wholly consecutive on the first, or for a single continuous conspiracy over the entire period, the result will be much the same.”
1086As I indicated, in considering the change in the maximum penalty, her Honour adopted the approach in Ronen.
1087In support of his application for leave to appeal against his sentence, the appellant relied on four grounds of appeal. However, as will appear, one of these grounds was abandoned during the hearing of the appeal.
Ground 10
10. The sentencing judge erred in her assessment of the objective seriousness of the offence and of the applicant’s level of involvement in the tax scheme.
1088In support of this ground, the appellant pointed out that the trial judge found that the appellant was the promoter of the scheme, which originated in Vanuatu and “involved the payment of money by Australian companies in response to false invoices … and fraudulent claims of those amounts as deductible business expenses, and the return to the directors personally of the money, masquerading as loans”.
1089The appellant submitted that there was evidence, which was open for the sentencing judge to accept, that the scheme was actively promoted by Mr Daniel and Mr Zerafa, more than it was by the appellant. He pointed to the fact that all of the participants were clients of OTD and that Mr Daniel and Mr Zerafa were their trusted advisers.
1090The appellant also submitted that it was open for her Honour to accept that the services of Moore Stephens and PKF Vanuatu were used by Mr Daniel and Mr Zerafa to cover a pre-existing tax scheme and therefore, the appellant’s role, and the resulting objective seriousness of his role, was less.
1091In this regard, the appellant stated that it was open for the sentencing judge to conclude, on the balance of probabilities, that the scheme originated with the recording of false journal entries for expenses, payments were made to cover these expenses and sometimes, invoices were subsequently presented. The appellant submitted that in these circumstances, his role was substantially less than that of Mr Daniel and Mr Zerafa.
1092The appellant also submitted that rather than being involved for a period of ten years, his involvement commenced in March 1998 and ended on 23 October 2006.
1093At the hearing, counsel for the appellant submitted that the role of the appellant was more akin to covering up the scheme, rather than being the initiator. As with the conviction appeal, particular reliance was placed on the entry of $328,000 in GBM’s books as accrued management expenses and claims for this amount as a deduction, prior to Ms Southcombe meeting Mr Agius and prior to the making of overseas payments by GBM.
1094Counsel for the appellant also submitted that the primary role played by the OTD accountants in the scheme was demonstrated by the fact that, in the case of Hilisa, the amount to be paid overseas was resolved in a conversation between Mr Hili and an OTD bookkeeper, Ms Lynda Meek (see par [415] above).
1095The Crown submitted that her Honour’s finding that Mr Daniel actively promoted the scheme did not exclude the fact that the appellant was also a promoter of the scheme.
1096The Crown submitted that the fact that the scheme was implemented in a haphazard and inept way did not reduce the appellant’s culpability.
1097The Crown submitted that the evidence did not establish a pre-existing fraudulent practice by OTD. It submitted that her Honour was correct in finding that although the appellant was only briefly involved in the endeavour to deceive the ATO, he was involved, to a significant degree, in perpetuating and protecting the conspiracy after the ATO’s interest had become apparent.
1098The Crown submitted that the sentencing judge did not find that the invoices were at the heart of the scheme, rather, her Honour found that fraudulent claims for income tax deductions said to be for business expenses were.
1099The Crown also pointed out that the scheme was first presented to Kylood in early 1997 and it could be inferred that the appellant’s involvement also commenced at that time. In any event, it was submitted that it was immaterial whether the appellant’s involvement extended over eight or 10 years.
Consideration
1100In Cheung v The Queen [2001] HCA 67; 209 CLR 1 at [14], the plurality quoted the decision of this Court in R v Isaacs (1997) 41 NSWLR 374 at 378, stating that there was “no general requirement that a sentencing judge must sentence an offender upon the basis of the view of the facts … most favourable to the offender”. This is subject to the constraints that the findings are not inconsistent with the jury’s verdict and must be made beyond reasonable doubt.
1101It was not suggested that the findings made by the sentencing judge were inconsistent with the jury’s verdict. Further, in my opinion, it was open to her Honour to make a finding that Mr Agius promoted the scheme. Indeed, the evidence overwhelmingly pointed to this being the case. I have set out the evidence relating to each transaction in detail and summarised the evidence when dealing with Grounds 1 and 3 of the grounds of appeal. That evidence demonstrates that Mr Agius promoted the scheme along with Mr Daniel and, to a considerably lesser extent, Mr Zerafa. Further, it shows that he took a key role in the day-to-day implementation of the scheme and provided a means by which the fraud could be committed.
1102I have dealt with the argument concerning the pre-existing tax scheme and the claim for the $328,000 in the 1997 GBM tax return above. At the risk of repetition, there was no evidence of a pre-existing tax scheme and the $328,000 was paid to Uniton and returned to GBM through the mechanics of the scheme. Further, the submission pays no regard to the many other transactions utilised in the scheme.
1103The primary judge was correct in concluding that the scheme was crude and carried out in a haphazard and inept manner. This does not alter the degree of the appellant’s culpability. Further, his culpability was not lessened by the fact that his involvement in the scheme may have extended for eight years rather than 10.
1104In these circumstances, her Honour was correct in concluding that the appellant’s offence came very close to the worst type of offence of this nature. This ground of appeal has not been made out.
Ground 11
11. Her Honour’s treatment of the applicant’s circumstances as compared with the co-accused Zerafa led to an unjustifiable disparity between their sentences
1105The sentencing judge sentenced Mr Zerafa to 500 hours community service work on the first count. On the second count, her Honour sentenced Mr Zerafa to imprisonment for 3 years, commencing on 23 August 2012 and expiring on 22 August 2015, but ordered that he be released forthwith on entering into a recognisance to be of good behaviour for three years.
1106Following a Crown appeal, Mr Zerafa was sentenced to imprisonment for 3 years and 6 months, commencing on 23 August 2012 and expiring on 22 February 2016, with a non-parole period of 2 years and 3 months, expiring on 22 November 2014: R v Zerafa [2013] NSWCCA 222 (Zerafa Sentencing Appeal).
1107The appellant submitted that there was a marked disparity between Mr Zerafa’s sentence and the sentence imposed on him, which could not be explained by differences in her Honour’s finding as to their respective involvement in the scheme.
1108The appellant pointed to the following findings of fact made by the sentencing judge in respect of Mr Zerafa. First, he knowingly gave untrue evidence. Second, his offending period was seven years. Third, communication with Moore Stephens and PKF Vanuatu went through him or Mr Daniel. Fourth, Mr Zerafa’s involvement began at an early stage and he had a working knowledge of the scheme by mid-1999. Fifth, he was involved with a number of Australian taxpayers in the preparation of fraudulent tax returns. Sixth, although he was under the influence of Mr Daniel, he could advise clients independently without Mr Daniel. Seventh, he was involved in preparing at least two company directors for audit meetings. Eighth, he received no direct financial benefit or reward from the scheme.
1109Having regard to these findings, the appellant submitted that there was no justifiable reason to take the good character of Mr Zerafa into account but not that of Mr Agius.
1110The appellant pointed to the finding of the sentencing judge that Mr Agius received a benefit from the scheme, although modest. He submitted that it could be inferred that as Mr Zerafa was entitled to 25% profit, as a partner of the firm, he too received a similar modest benefit.
1111The appellant also submitted that the finding that the delay of six years between the execution of the search warrants in 2006 and the trial caused Mr Zerafa considerable stress and anxiety, was equally applicable to the appellant. This was particularly so given that he was not an Australian citizen, was separated from his family and community and could not continue working, as his business was in Vanuatu.
1112Ground 12 of the grounds of appeal, which contended that the sentencing judge did not properly take into account the appellant’s bail conditions, ultimately was not pressed as a separate ground, but it was submitted that the bail conditions were relevant to the issue of parity. The appellant pointed out that although he was on bail, the conditions included forfeiture of his passport and reporting conditions.
1113In relation to this ground, the appellant pointed to the fact that the sentencing judge found that those conditions were not onerous, but took into account the stress imposed on Mr Zerafa and his family whilst awaiting trial.
1114The Crown submitted that the sentence imposed by this Court on Mr Zerafa was of primary significance. It was submitted that a number of factors led to this Court imposing a sentence which it regarded to be at the bottom of the range. These factors were that, first, the 500 hours of community service had been completed and second, the 13 months of his suspended sentence had passed without incident. The Court also considered that Mr Zerafa’s offending was not in the category of the worst type.
1115In relation to the fact that Mr Zerafa’s good character was taken into account, whilst the appellant’s was not, the Crown pointed to the reasons that the sentencing judge gave for adopting this approach. In her remarks on sentence, her Honour pointed to the fact that Mr Zerafa was introduced to a morally poisonous environment and he engaged in the conspiracy under the malign influence of Mr Daniel.
1116The Crown submitted that the finding by the sentencing judge that Mr Zerafa received no financial benefit needed to be balanced by the conclusion of Hoeben CJ at CL in this Court, that there was an indirect benefit to him: Zerafa Sentencing Appeal at [86].
Consideration
1117In considering this issue, it is important to have regard to the conclusions reached by the Court of Criminal Appeal in the Zerafa Sentencing Appeal.
1118In that case, Hoeben CJ at CL, with whom Latham J agreed, emphasised the need for general deterrence for offences of this nature: at [37]. His Honour acknowledged that “the circumstances leading to the respondent’s involvement in the scheme, the continuing baleful influence of Mr Daniel and the respondent’s intervention in 2004 to prevent new clients entering the scheme were important matters for her Honour to take into account”: at [87]. However, his Honour also stated that they did not account for his continuing involvement until 2006, when he was in his 30s, or his efforts to mislead the investigators. His Honour accepted that the delay was relevant to his sentencing, but stated that the extra-curial punishment resulting from him being struck off the roll of chartered accountants was only of limited effect, being a risk that Mr Zerafa chose to take: at [91]-[92]. He stated that even if the effect of the respondent’s incarceration on his family was taken into account in sentencing, it would not significantly affect the outcome, not being exceptional hardship: at [97].
1119Importantly, although concluding that the sentencing judge failed to give sufficient weight to general deterrence and the need to impose adequate punishment and that she overvalued Mr Zerafa’s personal circumstances, Hoeben CJ at CL held that Mr Zerafa’s offending was not in the worst category: at [98]. In resentencing, his Honour also took into account the need for restraint on a Crown appeal and described the sentences imposed as towards the bottom end of the range.
1120In Green v The Queen; Quinn v The Queen [2011] HCA 49; 244 CLR 462 at [31], the plurality, quoting Gibbs CJ in Lowe v The Queen [1984] HCA 46; 154 CLR 606 at 610, emphasised that the reason a court interferes on this ground is that it considers that “the disparity is such as to give rise to a justifiable sense of grievance”, assessed by objective criteria. They emphasised that the court would refrain from intervening when the disparity is justified by a difference between co-offenders’ criminal history, general character and the part each played in the relevant criminal conduct.
1121In the present case, the ultimate sentence imposed on Mr Zerafa does not give rise to such a justifiable sense of grievance. Critically, Mr Agius’ offending was in the worst class of case, while Mr Zerafa’s was not. Mr Agius’ role in promoting and implementing the scheme, as I have described above, was of far greater significance than the role played by Mr Zerafa. Although the Court of Criminal Appeal discounted, to some extent, the influence of Mr Daniel on Mr Zerafa, as they pointed out, it remained an important matter for the sentencing judge to take into account. It was in this context that the sentencing judge took into account the previous good character of Mr Zerafa.
1122Further, it is relevant in this regard to recognise that the Court in resentencing Mr Zerafa imposed a sentence which it considered to be “towards the bottom of the range”.
1123So far as the other matters raised by the appellant are concerned, the Court of Criminal Appeal referred to the question of delay in the context of resentencing. As I indicated, Hoeben CJ at CL stated that the effect on Mr Zerafa’s family was not a matter which would significantly affect the outcome.
1124In these circumstances, the difference in the sentences was justified. This ground of appeal is not made out.
Ground 13
13. The sentence imposed upon Mr Agius was manifestly excessive.
1125The appellant submitted that the matters raised in relation to the previous grounds demonstrated that the sentence was manifestly excessive.
1126The appellant also submitted that the appellant’s lack of receipt of any significant financial benefit from the scheme demonstrated manifest excess.
1127The appellant sought to contrast the financial benefit of $189,000, received by him and his associated entities, with sentences imposed for fraud involving much greater levels of personal gain. He pointed to the cases of: DPP v Goldberg [2001] VSCA 107; 184 ALR 387 (Goldberg), involving, he submitted, a personal gain of $20 million and a sentence of 7 years, with a non-parole period of 4 years and 6 months; Ronen, involving a gain of $15-20 million dollars, in respect of which partly concurrent sentences of 8 years and 6 months and a non-parole period of 5 years and 6 months were imposed; and Chen v R [2009] NSWCCA 66, a case involving conspiracy to deal with around $118 million, in which a sentence of 6 years, with a non-parole period of 3 years and 7 months, was imposed.
1128The appellant also submitted that manifest excess was demonstrated by the sentence given to scheme participants, pointing to the sentence given to each of the Wallers of 2 years and 7 months, with a recognizance after 16 months, in circumstances where the fraud was said to amount to $1,229,160.48.
1129Senior counsel for the appellant also submitted that the total accumulation of the sentence demonstrated manifest excess.
1130The Crown submitted that the question of financial benefit to the appellant was not as relevant as the amount in which the Commonwealth revenue was defrauded. It also pointed out that the relevance of the sentences given to scheme participants was limited as they were only involved in their own scheme.
1131However, the Crown did point to the sentence imposed by this Court on Mr Hili and Mr Jones in R v Jones; R v Hili [2010] NSWCCA 108; 79 NSWLR 143. In that case, a sentence of 3 years imprisonment was imposed on both taxpayers, after a discount of 50% for an early plea and assistance. The Crown submitted that their offending was at a much lower level.
1132The Crown pointed out that the sentencing judge correctly recognised that it was necessary to impose an appropriate sentence in respect of each offence before considering questions such as accumulation or concurrence and totality. The Crown pointed to the view expressed by her Honour that the overarching question was one of totality. Thus, whether the appellant was sentenced for two offences committed over a confined period, the second wholly consecutive on the first, or a simple continuing conspiracy over the whole period, the result would be the same.
Consideration
1133The approach to be taken in considering whether a sentence is manifestly excessive (or inadequate) or is unreasonable or plainly unjust, was summarised by the High Court in Hili v The Queen; Jones v The Queen [2010] HCA 45; 242 CLR 520 (Hili; Jones) at [59] in the following terms:
“[59] As was said in Dinsdale v The Queen, ‘[m]anifest inadequacy of sentence, like manifest excess, is a conclusion’. And, as the plurality pointed out in Wong, appellate intervention on the ground that a sentence is manifestly excessive or manifestly inadequate ‘is not justified simply because the result arrived at below is markedly different from other sentences that have been imposed in other cases’. Rather, as the plurality went on to say in Wong, ‘[i]ntervention is warranted only where the difference is such that, in all the circumstances, the appellate court concludes that there must have been some misapplication of principle, even though where and how is not apparent from the statement of reasons’. But, by its very nature, that is a conclusion that does not admit of lengthy exposition.”
1134In the present case, it does not seem to me that the sentence was manifestly excessive. The offence continued over at least eight years, providing a mechanism by which eight companies and their directors were able to defraud the revenue of significant amounts of tax. The seriousness of offences of this nature has been emphasised by the courts: Hili; Jones at [63]; R v Ruha [2010] QCA 10; 198 A Crim R 430 at [45]. The corrosive effect on society of such offences has also been emphasised: See the remarks of the sentencing judge, referred to in par [1083]; R v Huston [2011] QCA 350; 219 A Crim R 209 at [57]-[58]; Zerafa Sentencing Appeal at [83].
1135As I indicated, the judge was correct in finding that the offence fell into the worst class of offences of this nature. Having regard to the need for punishment and general deterrence, it does not seem to me that the sentence imposed was manifestly excessive.
1136However, it is necessary to deal with the cases which the appellant submitted demonstrated that the sentence was manifestly excessive. In Hili; Jones, at [53], the plurality pointed out that, “in seeking consistency, sentencing judges must have regard to what has been done in other cases”. However, in stating that care must be taken in the use of such cases, the Court repeated the warning given by Simpson J in Director of Public Prosecutions (Cth) v De La Rosa [2010] NSWCCA 194; 79 NSWLR 1 at [303]-[305], that the history of the range of sentences does not establish the correct range or the upper and lower limits of the range. In Hili; Jones, the plurality referred to Simpson J’s comments that such cases can and should provide guidance to sentencing judges in appellate courts and stand as a yardstick against which to measure a proposed sentence. However, quoting Simpson J, they stated that “it is only by examination of the whole of the circumstances that have given rise to the sentence that ‘unifying principles’ may be discerned”: Hili; Jones at [53]-[55].
1137The cases referred to by the appellant demonstrate the importance of that warning. Goldberg was a Crown appeal from a sentence imposed following the respondent’s guilty plea to one count of conspiracy to defraud the Commonwealth. Contrary to the submission of the appellant, the personal gain obtained by Mr Goldberg was not $20 million (the amount of defrauded), but rather $800,000: at [30]. The Court held that it was proper to take into account the guilty plea as a significant factor: at [39]. Further, the Court recognised a need for moderation on a Crown appeal: at [53].
1138Ronen was a case involving a 72 year old woman in bad health who was suffering from osteoporosis, lower back pain and osteoarthritis of both knees. She also had conjunctivitis and bilateral cataracts: at [15]. Although the appellant had made a significant personal gain, she had settled her dispute with the Commissioner. The settlement included the payment of penalty tax of $7,180,508. The Court held that that was a form of punishment which had to be taken into account in considering the appropriate sentence: at [50]-[52].
1139Chen involved an appeal against a sentence imposed as a result of a plea of guilty. In dismissing the appeal, it was noted that the appellant came to Australia in 1990 and became an Australian citizen in 2001. He was involved in manual labour until 2000: at [13]. Although the conspiracy was substantial, the appellant was described as being at the “mid level in the organisational hierarchy of the conspiracy”: at [34]. The sentencing judge indicated that were it not for the plea, he would have imposed a sentence of 8 years.
1140The difference between these cases and the present case demonstrates that they provide no support for the contention that the sentence imposed was manifestly excessive.
1141Finally, I do not consider that the sentencing judge gave inadequate consideration to the question of totality. As she pointed out, the result would have been the same had the appellant been sentenced to a single conspiracy covering the whole period.
1142In these circumstances, this ground is not made out.
Orders
1143I would make the following orders:
(1)Appeal against conviction dismissed.
(2)Leave to appeal against sentence granted but appeal dismissed.
1144R A HULME J: I agree with the orders proposed by Bathurst CJ for the reasons his Honour has provided. My own assessment of the evidence at trial leads me to join in the assessment of the case against the appellant as “extremely strong”.
1145BELLEW J: I have had the advantage of reading in draft the judgment of Bathurst CJ and have undertaken an analysis of the evidence. I agree with the orders proposed by his Honour for the reasons he has set out.
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