Bell v The Queen - [2001] WASCA 174

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : COURT OF CRIMINAL APPEAL

CITATION: BELL -v- THE QUEEN [2001] WASCA 174

CORAM: MALCOLM CJ
WALLWORK J
STEYTLER J

HEARD: 12 APRIL 2001

DELIVERED : 8 JUNE 2001

FILE NO/S: CCA 253 of 2000

BETWEEN: NOEL ANDREW BELL
Applicant
AND
THE QUEEN
Respondent

Catchwords:

Criminal law and procedure - Sentencing - Issuing invitation to subscribe without an approved prospectus - Loss to investors in excess of $1 million - Whether aggregate sentence of 2 years and 10 months excessive - Sections of Corporations Law under which applicant charged repealed between conviction and imposition of sentence - Whether conduct would breach Corporations Law if engaged in today - Whether relevant to sentencing of applicant - Whether insufficient weight given to mitigating circumstances - Sentence imposed not manifestly excessive

Legislation:

Corporations Law (WA), s 92(2), s 601ED(4), s 706, s 708, s 1018(1), s 1311(1)(a)

Crimes Act 1914, s 19AC(1)

Result:

Leave to appeal granted
Appeal dismissed

Representation:

Counsel:

Applicant: Mr W S Martin QC & Mr R A Mazza
Respondent: Mr P N Bevilacqua

Solicitors:

Applicant: Mazza & Mazza
Respondent: Commonwealth Director of Public Prosecutions

Case(s) referred to in judgment(s):

Australian Softwood Forests Pty Ltd v Attorney General (NSW) Ex rel Corporate Affairs Commission (1981) 148 CLR 121
Clowes v Federal Commissioner of Taxation (1954) 91 CLR 209
La Rosa v The Queen, unreported; CCA SCt of WA; Library No 970733; 12 December 1997
R v Commons (1986) 4 ACLC 551

Case(s) also cited:

Australian Securities Commission v Wilson (1993) 117 FLR 115
Australian Softwood Forests Pty Ltd v Attorney-General (NSW) (1981) 148 CLR 121
Bugmy v The Queen (1990) 169 CLR 525
Dinsdale v The Queen (2000) 175 ALR 315
House v The King (1936) 55 CLR 499
Lowndes v The Queen (1999) 195 CLR 665
R v Duffy (1996) 85 A Crim R 456
R v Gallagher (1991) 23 NSWLR 220
R v Majeric [2001] VSCA 15
R v Perrier (No 2) [1991] 1 VR 717
R v Smith (1982) 7 A Crim R 437
Siganto v The Queen (1998) 194 CLR 656
Vartzokas v Zanker (1989) 44 A Crim R 243
Verschuren v The Queen (1996) 17 WAR 467
Von Lieven v Stewart (1990) 21 NSWLR 52

MALCOLM CJ: I agree that the application for leave should be granted but I would dismiss the appeal for the reasons to be published by Steytler J.
WALLWORK J: The facts concerning this application for leave to appeal against sentence are contained in the reasons for judgment of Steytler J.
There are at least two issues of importance arising from the application. The first is whether there were one or two "participation interests" within the meaning of the Corporations Law as it was at the time the money was raised from the investors. The second is whether, if there were in fact two participation interests, the applicant should have been sent to prison for a term of 2-1/2 years in the light of s 11 of the Criminal Code WA, which provides:
"A person cannot be punished for doing or omitting to do an act, unless the act or omission constituted an offence under the law in force when it occurred, nor unless doing or omitting to do the act under the same circumstances would constitute an offence under the law in force at the time when he is charged with the offence."
When the applicant was indicted for the relevant offences on 10 October 2000, and if there were two separate participation interests within the meaning of the legislation, the applicant's activity would not have been illegal as there would have been less than 20 persons and less than $2,000,000 involved in each scheme within the meaning of the Law.
The first question is whether there were one or two participation interests involved in the charges.
Mr Michael Leslie's evidence, at 81 of vol 1, says that:
"Bell explained that funds were invested in a USD deposit account under a formal trust agreement whereby he was the beneficiary and signatory to this deposit account. He explained that the trust had been established by a solicitor in Manila and that the inter-bank trading activity occurred between major Philippine banks and banks in Hong Kong and Singapore (the Standard Chartered Bank was mentioned). He explained that he and his Australian partner had a connection to the solicitor and the securities trader who effected the trading activity. … He explained that the existence of the deposit account under the

trust arrangement enabled the trader to undertake the trading activity at volumes leveraged by a factor up to 16 times and that the small commission amount paid on the large leveraged amount equated to a large commission income on the small amount invested. He advised that because it was inter-bank trading there was no risk and the trading transactions were pre‑arranged by the trader and happened virtually instantaneously by electronic transfer."

Mr Leslie also states that:
"In mid late July 1994, Bell advised us that he and Hughes had taken a decision to move the funds from the Philippines to the United States and that the return would be dropping from 2 per cent per week to 4 per cent per month for 10 months of the year (February to November). When I asked him why he was doing this he advised that the trade in the Philippines was demanding a bigger slice of the commission and that the ongoing weekly management of the Manila business was now taking too much time and his finance broking business was suffering as a consequence. He explained that the move to the US involved a 12 month contractual arrangement where income was guaranteed and that this was a more certain long term arrangement than the Philippines. Bell stated that the US trading arrangement was similar to that in the Philippines in that it was leveraged on balance sheet trading between banks in AAA and AA collateral securities such as treasury bonds. Bell said that our funds now formed part of a larger pool of funds which was specifically managed by a securities trader called Joe Scarboro from Albuquerque, New Mexico, who undertook some of the off balance sheet collateral securities trading business on behalf of the Bank of America. Bell said that Scarboro conducted the trading through one of the large US securities trading houses on behalf of the Bank of America - he mentioned Solomons." (my underlining)
A participation interest means "any right to participate, or any interest: (a) in any profits, assets or realisation of any financial or business undertaking or scheme whether in Australia or elsewhere; (b) in any common enterprise …".
It was submitted for the applicant that there were in fact two schemes, that the second scheme, being the Bank of America Investment Scheme, was different to the Manila Investment Scheme insofar as the number of trades to be undertaken in one year, the income to be generated from each trade and the banks through which the trades would be conducted were different in each scheme. I note also that the US Scheme was said to involve a 12 month contractual arrangement and that this was said to be a more certain long term arrangement than that in the Philippines.
The prosecution case was that the Manila Investment Scheme operated between September 1993 and March 1994. Having in mind that the joint holders of an interest in a scheme are regarded as single members, the prosecution brief indicates that the first investment in the Bank of America Scheme was made by Mr Hall on 7 April 1994.
On the facts given by the prosecution, $950,968 was received before 7 April 1994, which money could fairly be categorised as being contributions to the Manila Investment Scheme. The payments made after 7 April 1994 amounted to $1,869,815. Therefore, if two schemes existed, in neither scheme was the sum of $2,000,000 or raised and in neither case were there 20 members. Therefore, due to the amending legislation as at the time the applicant was sentenced, the impugned conduct which had been illegal when it was committed was no longer illegal.
It is of significance that, on his return from overseas in about April 1997, the applicant confessed to some of the investors that there was in fact no scheme and that it seemed that there never had been a scheme and that there was no money left. There is no evidence as to what happened to the money which had been invested in the Manila Scheme, but it prima facie appears that it had by then been misappropriated. It could not, in my view, be said that money which had been misappropriated was then raised from the participants for investment in the USA Scheme, which apparently did not exist either. For money to be "raised" from participants, it is necessary that they have it or have some control over it.
In Clowes v Federal Commissioner of Taxation (1954) 91 CLR 209, at 225, Kitto J said: "The word "scheme" is not satisfied unless there is some programme, or plan of action; …". That definition was adopted by Mason J in Australian Softwood Forests Pty Ltd v Attorney General (NSW) Ex rel Corporate Affairs Commission (1981) 148 CLR 121, at 129. See also the words of de Jersey J in R v Commons (1986) 4 ACLC 551, at 558, where his Honour referred to the words of Kitto J and Mason J (as he then was) and said: "The remaining question is whether Commons offered a right to participate in the profits of that scheme".

Assuming that the other investors were given similar information by the applicant to that which was given to Mr Leslie, in my view, the arrangement in the USA was a different "business undertaking or scheme" within the meaning of the Law to that which had been described as operating in the Philippines. There was a different "programme or plan of action" to adopt the words of Kitto J. There were thus two participation interests within the meaning of s 9 of the Corporations Law which was operative at the relevant time.
Because of the operation of s 11 of the WA Criminal Code, in my view the applicant should not have been punished because at the time he was charged with the relevant offences (in my view, when the fresh indictment dated 10 October 2000 was laid), Mr Bell's actions did not constitute offences under the then operative Corporations Law.
STEYTLER J: This is an application for leave to appeal against sentence.
On 16 October 2000 the applicant pleaded guilty to 24 counts of issuing an invitation to subscribe for a prescribed interest when a prospectus had not been lodged, contrary to s 1018(1) and s 1311(1)(a) of the Corporations Law. On 3 November 2000 he was sentenced to a total period of imprisonment of 2 years and 10 months. A period of 10 months' imprisonment was imposed in respect of the first count. One year's imprisonment was imposed in respect of each of the other counts. The sentences imposed in respect of counts 1 and 2 were ordered to be served cumulatively. Those imposed in respect of all other counts were ordered to be served concurrently with each other but cumulatively upon the sentences imposed in respect of counts 1 and 2. The sentencing Judge made a recognisance release order pursuant to the provisions of s 19AC(1) of the Crimes Act 1914. This allowed the applicant's release from prison after serving 17 months' gaol upon him giving a personal recognisance in the sum of $5,000 to be of good behaviour for a period of 17 months.
The applicant was, in 1993, involved in the insurance and finance industry. He was told by a business acquaintance, one Craig Allan Hughes ("Hughes"), of an overseas financial investment scheme. The scheme was somewhat loosely explained by Hughes. However it was said to involve the provision of funds by investors for deposit with a bank in Manila. The money was to be used by the bank to conduct what were referred to as "trades" in bank securities. There were

to be investment "units" of US$50,000 each. The bank was to pay a commission on each trade. There would be between 40 and 60 trades per annum.

The applicant and Hughes agreed that the applicant would promote the scheme in Western Australia. Investors were to be told that they could expect to receive large profits in the form of regular dividends amounting to 50 per cent of their investment per annum. The applicant was to obtain a share of the commissions which were to be paid by the banks. Arrangements were made by which funds obtained by the applicant would be deposited into the account of a company controlled by him and then transferred to a bank in Manila in accordance with Hughes' directions.
In about June 1993 the applicant discussed the scheme with Mr Steven La Rosa ("La Rosa") who was employed as an insurance agent with Mutual Life & Citizens Ltd. La Rosa was then also a licensed investment adviser. He worked in the same building as the applicant. At some time prior to June 1993 La Rosa had heard about the existence of the scheme through overhearing conversations between the applicant and other people. In about June 1993 he approached the applicant about the scheme. He was given details of the scheme (to the extent that there were any). The applicant told La Rosa that he had successfully operated schemes of that kind before. He asked La Rosa whether he had any clients who might be interested in the scheme. The two men then agreed that La Rosa would, using the applicant's description of the scheme, obtain money from his friends and acquaintances. He would give that money to the applicant or pay it into an account in the name of the applicant's company.
Between August 1993 and March or April 1994 the applicant raised $358,000 from investors. During the same period La Rosa raised in excess of $663,000 from investors. All of this money was remitted by the applicant to a bank account in Manila.
In about March 1994 Hughes told the applicant that the Manila investment scheme was going to be transferred to the United States of America. He said that the minimum investment would remain US$50,000. The funds invested for the purposes of payment to the bank in Manila would be deposited, instead, with the Bank of America in the United States. That bank would then use the money to conduct trades in much the same way as had, Hughes said, occurred in Manila. Hughes told the applicant that the Bank of America guaranteed a minimum of four trades per month (but that there would be no trades in December and January). The investment would generate an income of 1 per cent per trade or an estimated 40 per cent per annum on money invested. The income would be paid monthly to the applicant's company. Any money invested in the scheme could not be withdrawn for 12 months but it could, thereafter, be withdrawn on one month's notice. The applicant was told that the money invested was guaranteed by the Bank of America. He was also told that the scheme should be kept confidential.
The applicant and La Rosa told existing investors about the change. They said that investors' funds were being or had been transferred to the United States. The applicant, and La Rosa at the applicant's direction, suggested to existing investors that it was a good time to make further investments. They also approached other investors. Between April 1994 and January 1995 a further sum of about $1.8 million was raised. Between August 1993 and January 1995 almost $2.9 million was raised, in total, from what the sentencing Judge described as "24 people, some of them couples".
The sentencing Judge said that the scheme was never clearly explained to investors. Letters written to them were quite uninformative. The same was true of oral statements made to them. Somewhat different versions of the scheme were given to different investors at different times. Some investors were told that the bank or banks were trading in currencies. Another was told that the trading was in "off balance sheet banking transactions". Yet another was told that the trading was in debentures. However, his Honour said, investors were generally given to understand that their money would be safe and secure, that the applicant was in control of the scheme, that there was a lot of money to be made, that large and reputable banks were involved so that there was no or low risk, that the investment would be used only for the purpose of banking transactions between banks, that commissions were guaranteed to arise out of these transactions, that there would be regular revenue returns to investors and that the applicant was in a position to ensure that investors would not lose their capital.
When some investors asked for more details as to how the scheme worked they were, his Honour said, "fobbed ... off using confidentiality restrictions as an excuse". The sentencing Judge also said that the assurances which the applicant gave to investors were baseless. He had, in fact, no control over the funds once they left his company's account. He saw no documents which verified the scheme. There were no agreements or security instruments which protected investors' funds. In fact, his Honour said, there was, as matters turned out, no scheme at all.
The sentencing Judge went on to say:
"It is important that I should emphasise that in these proceedings you are not charged with fraud or with conspiracy to defraud or stealing or anything of the kind. It is not suggested you got anything out of this scheme except for the commissions from money that came back to Australia. You are charged with regulatory offences, the offences being the issuing of invitations to subscribe for a prescribed interest when a prospectus in relation to the interest had not been lodged.
However, this is no technical requirement of form and yours was no trivial breach. The object of the requirement in the Corporations Law as it then stood for an approved prospectus with respect to investment schemes and the object of similar requirements in the Corporations Law as it now stands is to stop people engaging in the reckless conduct in which you engaged. It is to protect investors in the securities market from the very thing that has happened to these unfortunate investors. If you had attempted to lodge a prospectus, it is certain that the prospectus would not have been approved. Indeed, it is hard to imagine what the prospectus would have said."
In July 1995 the applicant received a letter from an American correspondent by the name of Bolland. The letter was, the sentencing Judge said, a strange letter. It contained extravagant terminology which did not have a genuine ring. The sentencing Judge said:
"Insofar as any sense can be made of it, the letter claimed that the Australian Securities Commission was meddling and that this was frightening off the US operators and was having a detrimental effect on the scheme and that you should try to stop the Securities Commission somehow. You went along with Bolland's story and passed it on to your investors as being the true reason why revenue was less than it should be. How you could honestly have thought that Bolland's far fetched explanation was true I do not know.
You must have appreciated it was unlikely in the extreme that large and reputable American banks with whom you were supposed to be dealing would stop doing lawful banking business because the Australian Securities Commission was asking some questions, but that is what you earnestly told your investors. You even got some of them to sign documents aimed at the Securities Commission saying they were happy with their investment and according to the depositions I have read they did so only on your reckless assurance that their investment was safe and that you had everything under control and that everything would be alright if the Securities Commission stopped its investigation."
Investors became concerned when their returns diminished. However the applicant continued to assure them that everything was alright. He said that their money was completely safe and that he had everything under control. Eventually, in early 1997, the applicant decided to go overseas in order to make his own investigations. On his return, in about April 1997, he confessed to some of the investors that there was no scheme, that it seemed that there never had been a scheme and that there was no money left.

The sentencing Judge said that the depositions from victims, and their impact statements, spoke eloquently of the devastation which the scheme had caused. Some of the investors had lost their homes and life savings. For some there was no prosect of recovery because of their advanced ages.
The sentencing Judge also referred to Federal Court proceedings which had been commenced in February 1995 by the Australian Securities Commission. He said that the applicant gave to the Federal Court an undertaking that he would not take further commissions. However, his Honour said:
"Having given that undertaking you sought to sidestep the spirit of it. Whilst you refrained from making deductions from payments to investors which were still coming back you asked your investors to pay you commission for their receipts. In many instances they did so. In this way you received a further $28,000 of commission.
It was submitted on your behalf that you were not in breach of your undertaking to the Federal Court. Strictly speaking, that is no doubt true. However, it is really beside the point. The point is you knew the ASC was contending that you were not legally entitled to commission and that you should be stopped from getting commission. It is against that background, namely, a serious challenge to the lawfulness of your activities and to your right to charge commission, that you gave your undertaking. Having given it, you continued to claim commission from your investors as if there was no question about your entitlement."
His Honour next said that, taking the view which was most favourable to the applicant, the shortfall from the moneys invested was at least $1 million. Moreover, that figure took no account of the costs which investors incurred in borrowing to make their investments and in servicing their loans.
He then went on to say:
"As I have observed, the maximum custodial penalty is 5 years for each offence, and there are 24 convictions. It is proper to regard the 24 offences as connected and to approach the task of sentencing on that basis. Although a sentence must be passed with respect to each conviction, it is a matter of arriving at an aggregate sentence which is appropriate to your offending conduct viewed as a whole.
Taking that approach, I am satisfied for the purposes of s 17A of the Crimes Act that the offences can only be dealt with by way of a sentence of imprisonment. This is because the seriousness of your offending conduct, viewed as a whole, requires firm punishment and because the sentence must contain substantial elements of personal and general deterrence. The amount of money involved was large, the conduct was persisted in for over 12 months and the consequences have been devastating to a number of people. You took advantage of the trust which investors had in you and in La Rosa."
His Honour then went on to deal with a submission which had been made to him that general deterrence was irrelevant. This was said to be so because the sections of the Corporations Law under which the applicant had been charged had been repealed with the consequence that the applicant would not, if his conduct had taken place at the time of sentencing, be guilty of an offence. He said, in that respect:
"Your scheme was a managed investment scheme, as now defined in the law, and it was a scheme that would be required to be registered under s 61EB [sic, s 601EB] of the Corporations Law because it had more than 20 members and it breached the $2,000,000 ceiling. This scheme had 24 members and in the 12 month period between 17 January 1994 and 16 January 1995 the scheme raised more than $2,000,000. It raised in excess of $2.3 million.
It was submitted on your behalf that the $2,000,000 was not breached because there were two schemes in that period and that $2,000,000 was not raised by either scheme. This submission requires me to accept that the Manila investments were one scheme and the US investments were another. I do not accept that. From the investors' point of view, it was all one scheme involving one type of commercial investment with and through you."
His Honour then returned to the question of an appropriate sentence. He said that the case was one which would properly attract to a person who was involved to the extent that the applicant was involved, namely "as a principal and prime mover", a sentence of 4 years' imprisonment. He said, in that respect:
"In coming to that conclusion I have had regard in particular to the decision of the Court of Criminal Appeal in La Rosa's case. La Rosa was your recruit. Although he raised substantially more funds ... [than] you actually did, you were the instigator. You told him what to tell investors and you gave him the assurances in respect to absence of risk and so on which he simply passed on to his investors.
In arriving at a sentence of 2 years and 6 months before deduction for cooperation with authorities, the Court of Criminal Appeal in La Rosa's case treated La Rosa as having been duped by you into honestly believing in the success of the scheme and the security of the investments which he was procuring. The Court of Criminal Appeal regarded him as your recruit and your agent, much more distant from the scheme itself than you.
Whether this is true or not is beside the point for present purposes. The point is that the sentence which the Court of Criminal Appeal thought appropriate for La Rosa, treating him in that light, shows that to a person as close to the scheme as you were and having your level of responsibility with respect to the instigation and control of the scheme, the sentence for failing to comply with the law as to the issue of a prospectus should be of the order of 4 years before regard is had to the other matters which the Crimes Act requires me to take into account in arriving at a final sentence."
His Honour then said that the applicant had shown little contrition. This, he said, was evidenced by his dismissive stance to the position taken up by the Australian Securities Commission and by the fact that he had maintained a plea of not guilty until "really the very last moment".
His Honour then went on to say:
" You did in the end plead guilty to these charges and that has saved a lot of resources and has saved the State the cost of a long trial. Although you must receive some credit for your plea of guilty on that account, it cannot be great because of the lateness of it and because, anyway, I think the case against you was overwhelmingly strong.
I am informed, and I accept, that you have now cooperated with law enforcement agencies with respect to other offences committed by Hughes. Those offences relate to the earlier scheme which you were involved with, not to this scheme, the scheme in question in this case. I find in accordance with the certificate that has been presented by the Director of Public Prosecution[s] that your degree of cooperation with respect to those offences is of material use to the prosecutors and is deserving of credit.
I must now come to the matters personal to you. You are 44 years of age, born and brought up in this state with a wife and three young children. You have had a lifelong interest in yachting and have achieved very considerable success in that sport. You are widely known and highly regarded in the yachting fraternity for your contribution to that sport.
Your vocation is in the field of lease financing in which you have had a long and respectable career. So far as appears, you have never engaged in entrepreneurial activity until you joined up with Hughes to promote the earlier overseas investment scheme, the 1992 scheme, to which I have referred. That scheme and the scheme in question seem to be your only ventures into this kind of activity.
You have never been a high roller, so to speak. You and your family have lived conservatively and you have always been a devoted family man. You have been a sociable person. People speak of you as being affable and friendly with a wide circle of friends and acquaintances, not only in the yachting fraternity but also in the sport of football in which you have been closely involved at quite a high level and generally.
I accept that when this matter became public you felt obliged to withdraw from these lifelong social and sporting pursuits and that this has caused a degree of hardship and distress. I accept that you regard yourself as disgraced in the eyes of many of your friends and acquaintances. I have read a book of character references and heard evidence from two character witnesses. All these referees speak highly of you.
I'm required to have regard to the probable affect that any sentence will have on your family and dependents. I accept the submissions made on your behalf and the testimony of the character witnesses that this whole affair, especially the imposition of a sentence of imprisonment, will cause your wife and children and your elderly mother who lives with you very considerable and lasting distress. It will also bring substantial financial hardship. I have no doubt that the sentence I'm about to pass will have a deterrent effect upon you and that your prospects of rehabilitation are excellent. I do not anticipate that you will offend again.
As to the other matters to which I am required to have regard which have not already been mentioned, I note that you pleaded guilty in the District Court recently to three charges arising out of the first scheme with Hughes. They are the matters which I take into account in mitigation of your sentence.
Leaving aside the credit you should receive for your cooperation with law enforcement agencies concerning the first Hughes scheme the appropriate discount for all those mitigatory matters is 1 year. For the purposes of section 21E(1)(a) of the Crimes Act I state that your sentence is further reduced by 2 months for your cooperation with authorities concerning the other offence, the other Hughes scheme. The aggregate sentence is therefore 2 years and 10 months."
His Honour then structured the sentence in the manner which I have earlier described.
The proposed grounds of appeal are six in number. They are (leaving out the particulars to ground 1) as follows:
"1.His Honour erred in law by finding that the conduct engaged in by the applicant in obtaining money from the complainant investors remained illegal conduct notwithstanding the repeal, after the commission of the offences, of section 1018 of the Corporations [L]aw.
...
2.The learned sentencing judge failed to give a sufficient discount to the sentence imposed upon the applicant for his cooperation with law enforcement agencies.
3.The learned sentencing judge erred in finding that the applicant was 'a principal and prime mover' with respect to the schemes and failed to take into account that the evidence revealed that the true principal and prime mover of the schemes was Craig Allan Hughes.
4.His Honour erred in finding that the Court of Criminal Appeal's decision in the case of La Rosa v The Queen Supreme Court of Western Australia Court of Criminal Appeal delivered 12 December 1997 Lib. No. 97073[3] was to the effect that a person in the role of the applicant should receive a term of imprisonment of 4 years before mitigating factors are taken into account.
5.His Honour gave insufficient weight to the applicant's antecedents and matters personal to him.
6.The learned sentencing judge imposed upon the applicant a sentence of imprisonment which was, in all the circumstances of the case, manifestly excessive. The applicant should have been fined or, alternatively, given a suspended sentence."
I will deal with each of these grounds in turn.
As to the first of them, it was common cause that schemes of the kind in question in this case would now be managed investment schemes for the purposes of the Corporations Law. Moreover, by virtue of s 92(2) of the Corporations Law, the expression "security", when used in relation to a body, means, inter alia, interests in a managed investment scheme made available by the body. That being so, an offer of interests in a management investment scheme made available by a body corporate requires disclosure to investors under Part 6D.2 of the Corporations Law unless s 708 thereof provides otherwise (s 706).
Section 708(1) provides, insofar as is relevant, that:
"Personal offers [and it is common cause that the offers in this case were personal offers] of a body's securities by a person do not need disclosure to investors under this Part if:
(a)none of the offers results in a breach of the 20 investors' ceiling (see subsections (3) and (4)); and
(b)none of the offers results in a breach of the $2 million ceiling (see subsections (3) and (4))."
Section 708(3) provides that:
"An offer by a body to issue securities:
(a)results in a breach of the 20 investors' ceiling if it results in the number of people to whom securities of the body have been issued exceeding 20 in any 12 month period; and
(b)results in a breach of the $2 million ceiling if it results in the amount raised by the body by issuing securities exceeding $2 million in any 12 month period."
Counsel for the applicant have prepared a schedule which, they submit, discloses that neither the 20 investors' ceiling nor the $2 million ceiling was breached.
So far as the $2 million ceiling is concerned, the argument aired before the learned sentencing Judge to the effect that there were two schemes was again advanced on the appeal. Counsel for the applicant contended that, if there were two schemes, then in neither case was a sum of $2 million or more raised. He submitted that, while the scheme operated (if that is an appropriate word for what took place) in Manila, $950,968.03 was raised and, while it operated in the USA, $1,869,815.80 was raised.
So far as the number of participants was concerned, counsel for the applicant contended that (bearing in mind that, under s 601ED(4) of the Corporations Law, joint holders of an interest in a scheme are to be counted as a single member when working out how many members a managed investment scheme has) there were only eight members of the first scheme and 10 of the second. This of course meant that, even if there was only one scheme, the membership ceiling had not been exceeded.
While there may be substance to this last submission, I am not persuaded that the $2 million ceiling was not breached. Even if it be accepted that the scheme for the raising of money to enable "trades" to be conducted by a bank in Manila was relevantly distinct from that which raised money for a similar purpose but with a bank in the USA, rather than merely a variation of the existing scheme, the fact remains that the money raised for the Manila scheme was, ostensibly at least, transferred to the USA scheme. Investors were told that their funds had been or would be transferred to the USA. It is at least implicit in what was said and done that they consented to this (and this was common cause). That being so, it seems to me, the money previously invested in the Manila scheme, if it was a separate scheme, was raised a second time for the purpose of investment in the USA scheme, thereby taking the total amount raised for that scheme over the $2 million mark.
Counsel for the applicant submitted that, because it was very probable that no money was in fact ever transferred from Manila to the USA, it could not be said that any money had in that way been raised for investment in the USA. I am unable to accept that submission. Even if the money which had been raised for investment in Manila had, by then, been misappropriated (and the evidence was silent in this respect), it still existed, at least, as a sum owed to the investors which could be and was, in my opinion, raised a second time by the issue of interests in the second scheme.
It follows, in my opinion, that the conduct in question would still breach the Corporations Law if engaged in today and that the sentencing Judge was right to take no account of changes to the law in this respect.
I should add, in any event, that it seems to me to make no difference, for the purpose of sentencing the applicant, whether the conduct in question would or would not be illegal today. The fact is that the applicant's conduct was illegal at the material time. If there had been substance to the applicant's contention that his conduct would not now be illegal, and there is no suggestion that it was not so when he was first charged with the offences to which he subsequently pleaded guilty, that would only be so because of what are essentially technical reasons which bear not at all, in my opinion, on his culpability at the relevant time or on the issue of deterrence.
It is important to bear in mind that the contention made to the sentencing Judge on behalf of the applicant (and repeated to us) was that, if the applicant's conduct was no longer illegal, factors of personal and general deterrence were irrelevant to his sentence. I am unable to accept this submission. It seems to me to overlook the fact that the applicant's conduct was illegal at the relevant time. So far as personal deterrence is concerned, the applicant had shown a preparedness to persuade others to invest in a scheme or schemes, on a relatively large scale, without any regard at all to whatever might be the disclosure requirements of the Corporations Law, even if that was through a failure to make any enquiries as to what those requirements were. It was from again engaging in conduct of that general kind that he needed to be deterred. So far as general deterrence is concerned, it should be made known to those who may be disposed not to comply with the disclosure requirements of the Corporations Law, as those requirements exist from time to time, that they might, in that event, be severely dealt with. They should know that this is especially so if considerable sums are to be placed at risk. That proposition is not affected by changes in the disclosure requirements from time to time. It consequently seems to me that the sentencing Judge rightly took account of the need for both personal and general deterrence.
As to the second ground of appeal, it is true that the sentencing Judge gave to the applicant a very limited discount for his co‑operation with law enforcement agencies. A two month discount might well be regarded as less than that which might ordinarily be expected in such cases. However in this case the co‑operation, like the applicant's plea of guilty, came at the very last moment and was, as his Honour found, given in circumstances in which the applicant had shown little contrition. The applicant's position in this respect might be compared with that of La Rosa who, while living in Malaysia, had voluntarily returned to Perth to be interviewed by the Australian Securities Commission and had then co‑operated fully with the authorities. La Rosa's sentence was reduced by six months in respect of that co‑operation.
In these circumstances, while acknowledging that the discount is less than that which might ordinarily be expected, I am not prepared to find that it was outside the range of the proper exercise of a sentencing discretion.
As far as ground 3 is concerned, it seems to me that the applicant was appropriately described by the sentencing Judge as "a principal and prime mover" with respect to the scheme or schemes in which he was involved. While he had, on the facts before his Honour, been duped by Hughes who, he said, was the real architect of the scheme or schemes, this does not alter the fact that the applicant played a central role in promoting what was done. Without his efforts, and especially his assurances, it seems very unlikely that the scheme could have been as successful as it was. It was also he who had recruited La Rosa, albeit, on the evidence before the sentencing Judge, at La Rosa's request. Moreover it was through the applicant's companies that the money travelled to destinations in the Philippines and the United States. It was he who passed on, coupled with his own assurances (for which there was absolutely no basis), the vague and ambiguous explanations which had come to him from Hughes. There is consequently no substance, in my opinion, to this ground of appeal.

As to ground 4, the sentencing Judge said that a person who is involved to the extent to which the applicant was involved should be sentenced to a term of 4 years' imprisonment and that, in coming to that conclusion, he had had regard to the decision of the Court of Criminal Appeal in La Rosa's case (La Rosa v The Queen, unreported; CCA SCt of WA; Library No 970733; 12 December 1997). He said, as will be apparent from the penultimate of the extracts from his judgment quoted above, that the approach of the Court of Criminal Appeal in La Rosa's case was such as to demonstrate that a person having the applicant's level of responsibility with respect to the instigation and control of the scheme should be sentenced to a period of imprisonment in the order of four years before having regard to matters in mitigation.
It seems to me that this conclusion was open to his Honour. La Rosa was sentenced to a total period of imprisonment of 2 years, after the reduction of 6 months in respect of his co‑operation. That was in circumstances in which La Rosa's role was less than that of the applicant (in the sense that the applicant was closer to the centre of things and must have known, full well, how little basis there was for the assurances which he gave) and in which La Rosa had shown genuine contrition and had pleaded guilty at a very early stage. La Rosa, like the applicant, was a person of excellent prior antecedents. He had references which indicated that he was held in high regard by many. He had no prior convictions for criminal offences.
There is consequently no substance, in my opinion, to this ground.
As to ground 5, it will be apparent from the extract from the learned sentencing Judge's reasons which I have last quoted that his Honour took into account the applicant's favourable antecedents and each of the matters personal to him which had been raised by way of mitigation. No basis at all has been made out for the contention that he gave insufficient weight to any of these things.
Finally, ground 6 raises the contention that the sentence of imprisonment was manifestly excessive and that the applicant should have been fined or given a suspended sentence.
It may be accepted that the sentence was severe (albeit no more severe than that imposed upon La Rosa when regard is had to the different levels of involvement, and contrition, of the two men) given that the applicant was being sentenced for failure to comply with the disclosure provisions of the Corporations Law and not for his participation, albeit unwitting, in a fraud. However the offence had still to be considered in its overall context. The applicant was reckless in his approach. He relied on vague and ambiguous explanations. He made absolutely no attempt, until it was far too late, to enquire as to the truth of what was said to him by Hughes. He sought no independent assurances, notwithstanding that he frequently gave assurances of his own. He did not, it seems, ask to see any proper supporting documentation. He repeatedly said that he was in control of the scheme or schemes when this was patently not so. He was dealing in very considerable sums of money on behalf of people who could ill afford to lose it. His conduct in the course of the Federal Court proceedings and his late plea of guilty showed, as the learned sentencing Judge said, a lack of any real contrition. It was against this background that the learned sentencing Judge was called upon to assess the applicant's failure to have regard to the disclosure requirements of the Corporations Law, and to consider to what extent the penalties provided by that law for breach of those requirements (each offence carried a maximum penalty of 5 years' imprisonment and a fine of $20,000) should be imposed. In my opinion that background, taken together with the substantial penalty provided for in cases of breach and what had been said by the Court of Criminal Appeal in La Rosa's case, was such as to leave open to the sentencing Judge the disposition at which his Honour ultimately arrived.
In all of these circumstances, I am not persuaded that this was a case in which no more than a fine or a suspended sentence of imprisonment should have been imposed. It seems to me that the sentence of 2‑1/2 years' imprisonment imposed upon the applicant was within the bounds of an appropriate exercise of discretion. I am not prepared to interfere with it.
While I would allow the application for leave to appeal I would dismiss the appeal.