Director of Public Prosecutions v CW
[2013] VCC 1236
•6 August 2013
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CRIMINAL DIVISION | Revised (Not) Restricted Suitable for Publication |
Case No. CR-13-00193
| DIRECTOR OF PUBLIC PROSECUTIONS |
| v |
| CLESTUS WEERAPPAH |
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JUDGE: | HIS HONOUR JUDGE MEREDITH | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 30 July 2013 | |
DATE OF SENTENCE: | 6 August 2013 | |
CASE MAY BE CITED AS: | DPP v CW | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 1236 | |
REASONS FOR SENTENCE
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APPEARANCES: | Counsel | Solicitors |
| For the DPP | Mr R. Pirrie | |
| For the Accused | Mr I. Mill QC. Mr P. Burns |
HIS HONOUR:
1 Clestus Weerappah, you have pleaded guilty to three counts, pursuant to s184(2)(a) of the Corporations Act 2001, of using your position dishonestly with the intention of gaining an advantage. The maximum penalty for this offence is five years’ imprisonment and/or a fine of up to 2,000 penalty units.
2 You have also pleaded guilty to a charge, pursuant to s1308(2) of the Corporations Act 2001, of making a false or misleading statement or admission in a document lodged with ASIC. The maximum penalty for this offence is five years’ imprisonment and/or 2,000 penalty units.
3 You have also pleaded guilty, pursuant to s1307(1) of the Corporations Act 2001, to an offence of falsify books relating to the affairs of a company. The maximum penalty for this offence is two years’ imprisonment and/or a fine of 100 penalty units.
4 A prosecution summary was tendered on the plea as Exhibit 1 and its contents were not disputed. I annex this summary to these reasons and, accordingly, I need only briefly recount the circumstances of your offending.
5 You were the sole director and secretary of Dollarforce, which operated a financial services business from offices in Hampton, Victoria. You were also the sole registered director and secretary of Alamanda Property Investments No.2 Pty Ltd (Alamanda), and My Building No.1 Pty Ltd (MB1). Alamanda had previously been known as Dollarforce and was, in effect, the same entity. Dollarforce promoted property-related investments to its clients, in particular an investment program known as “the Dollarforce Fixed Interest Fund”. Investors were offered an annual return on their invested capital in this fund and they could also redeem their funds invested in this fund. You and another, Lewis, in late 2004 established Elite Equities Pty Ltd as a financial planning practice. By late 2005 Elite Equities Pty Ltd became a public company, Elite Equities Ltd (Elite). Elite was located in the same premises as Dollarforce. Elite recommended investments in Dollarforce products to its clients.
6 Charges 1 to 3, involving breaches of s184(2)(a) of the Corporations Act 2001, involved the use of funds obtained from investors contrary to representations made to those investors. These funds were applied in the main to:
(i)the maintaining of quarterly interest payments to investors in the Dollarforce Fixed Interest Fund;
(ii)repaying capital to Dollarforce Fixed Interest Fund investors who applied to redeem their funds; and
(iii)the payment of business and other expenses.
7 Charge 1 relates to false representations made to investors in the Ivory Property Trust (IPT). This is a rolled-up charge and relates to 12 investors who lost a total of $1.2m. Between 12 September 2005 and 27 September 2006, you, a director of the Ivory Property Group Pty Ltd, falsely represented that funds obtained from investors would be invested in the IPT. This was represented as being for the purchase and development of property on investors’ behalf. These representations were made via “an information memorandum” and also verbally, and were made by you and others on your behalf.
8 Charge 2 relates to false representations made to investors in MB1, between 21 October 2005 to 21 August 2006. This is a rolled-up charge relating to 13 investors who invested a total of $1.78m. A total of $125,000 was recovered by investors the subject of Charge 2. From 15 September 2003, you were the sole registered director and secretary of MB1. MB1 was the trustee of the Darling Street Unit Trust (DSUT). Alamanda was a shareholder in MB1.
9 It was represented to investors that funds obtained from them would be used for property investment purposes. Instead, most of the funds were applied to your company, Dollarforce.
10 MB1 had an interest in a property at 81 Lorimer Street, Port Melbourne, as trustee of the DSUT.
11 Charge 3 relates to false representations made to investors in the Bennett Street Property Trust (BSPT). Bennett Street Developments Pty Ltd (BSD) was trustee of the BSPT. This is a rolled-up charge and relates to 13 investors. Between 2 November 2007 and 17 June 2008 investors invested a total of $1,286,950 in the BSPT. The BSPT was marketed as a residential property investment vehicle; in particular, the proposed purchase and development of a property at 25 Bennett Street, Balwyn, was marketed. This was done through a document known as the BSPT Information Memorandum, and also by verbal representations made by you.
12 Altitude Property No.1 Pty Ltd (AP1) was the trustee of the Bennett Street Unit Trust (BSUT), as distinct from the Bennett Street Property Trust (BSPT). AP1 purchased 25 Bennett Street for $900,000 from your wife in October 2007. You were a director of AP1. Thus, AP1 effectively owned 25 Bennett Street.
13 Investors were led to believe that the BSPT had a proprietary interest in the property at 25 Bennett Street. This entity in fact did not.
14 Charge 4 is also a rolled-up charge relating to your role in the issue of a prospectus to raise funds through the issue of shares in the public company Altitude Property Ltd (APL). In the prospectus you:
(i)knowingly made or authorised the false or misleading statement that loans to a related company had been forgiven;
(ii)knowingly failed to disclose material information, being the existence of an incentive payment agreement between APL and another company of which you were a director; and
(iii)knowingly failed to disclose material information that MB1 owed $2.95m to investors. APL was purchasing MB1.
15 As detailed in relation to Charge 2, MB1 was the trustee of the DSUT, Alamanda was a shareholder in MB1 and, in effect, the vendor.
16 APL’s float was to raise funds to enable APL to purchase shares in MB1 and units in the DSUT. This transaction would mean, in effect, that APL bought the Lorimer Street property.
17 A heads of agreement between you, as director of Alamanda, and another, Lewis, as director of APL, set out an “incentive payment” that the proposed purchaser, APL, would pay to Alamanda, the proposed vendor. This enabled payments to Alamanda for assisting with the development approval and other work on the Lorimer Street property. The incentive payments were to be based on the increase in value of the property.
18 Ultimately, incentive payments were made in the order of $1.44m.
19 A sale agreement was duly entered into between Alamanda, as vendor, and APL, as purchaser, of the units and shares in the DSUT and MB1 in order to acquire Lorimer Street.
20 In order to finance the purchase, APL issued a prospectus. This prospectus was not accepted by ASIC and a stop order was put in place preventing the offering or selling of shares in APL.
21 To address ASIC’s concerns with the prospectus, a number of alterations were made to the accounts of MB1 and the DSUT. These alterations had the effect of converting a net asset deficiency of about $1.8m to a positive position of about $1.9m. This involved the removal of a liability of $2.95m, which reflected investor loans made to MB1 and write-offs of investor loans, in the form of a purported debt forgiveness in the amount of $2.88m by Alamanda.
22 There was no basis for the reduction and write-offs. They had the effect of improving the appearance of MB1 and the DSUT’s financial position by about $3m. The DSUT accounts were included in a replacement prospectus.
23 The replacement prospectus raised $3.975m from public subscription, and at the time of its liquidation, APL had cash in bank of only $1,734.
24 Charge 5 is not a rolled-up count and concerns the falsification of a sale agreement for the sale of property at 25 Bennett Street, Balwyn.
25 As detailed earlier the property was sold on 6 October 2007 to AP1. In January 2009 you produced a false document purporting to be a back-dated contract of sale for the property between AP1 and Bennett Street Developments Pty Ltd (BSD), dated 1 November 2007. This document was produced to ASIC under notice.
26 Your offending is appropriately described as serious, deliberate, calculated and persistent. The only appropriate sentence is one of immediate imprisonment.
27 It is to be noted that Charges 1 to 4 are rolled-up counts and enable, with the consent of the defendant, a collection of offences to be bundled together into a single count. These counts embrace significant criminality as well as substantial sums of money.
28 The sum of $125,000 has been recovered in relation to Charge 2. No other funds have been recovered. The Crown indicated that approximately $513,000, less administration costs, was likely to be available in relation to your offending which concerned the IPT and the Bennett Street property.
29 I make the reparation order sought by the Crown in relation to Charges 1 to 3, and indicate I will take the making of this order into account in imposing sentence.
30 The courts have made many statements about the seriousness of white collar crime. As noted in DPP v Bulfin [1998] 4 VR 114 at 131, it is a feature of such offending that the offenders are likely to have no prior convictions, good character references, and good prospects of rehabilitation. The offences are often difficult to detect and for such offences personal mitigatory factors must be given less weight than the factor of general deterrence.
31 I have had regard to eight victim impact statements tendered in this matter. They are eloquent testimony to the injury, loss and damage that your offending has occasioned. Your offending has led to substantial losses to private investors, and the victim impact statements speak of the distress that your offending has caused.
32 You are 48 years of age having been born in Sri Lanka and immigrated to Australia at age 7. You lived with your family in Carnegie and then Oakleigh. You gained a pass at Year 12 level and obtained a Diploma in Computer Programming.
33 You had a problematic relationship with your father and left the family home, after your parents separated, when you were about 25 years of age. You were married to Anne, your first wife, in 1991. You have two daughters from that marriage. You separated around 1998/1999 and later formed a 10 year relationship with Andrea Hawkins. You and Ms Hawkins separated in 2009.
34 Following this separation you returned to live with your mother, rent-free, and have been the primary caregiver to your eight year old daughter from your relationship with Ms Hawkins.
35 I accept that the term of imprisonment which I will impose upon you will weigh more heavily for you as a result of your separation from your daughter.
36 On obtaining your Diploma of Computer Programming, you worked with Touche Ross doing data entry and managing of computer systems. You then had several different positions and in 1992 became a registered finance broker and established Dollarforce Financial Services Pty Ltd. Initially you worked from home but built the company up to a point where you were working from serviced offices.
37 In 2001 the Fixed Interest Fund was commenced. Ultimately you became heavily involved in investments relating to a series of companies or entities related to a Mr Dale Robertson. Robertson’s group of companies collapsed in 2005, with many companies related to the Robertson group going into liquidation. At the time of this collapse, the Robertson group owed Dollarforce approximately $7m. Your position was further complicated when developments you were associated with received a half million dollar GST assessment.
38 The Robertson loss, I am told, was the catalyst for your offending conduct which involved you essentially misusing funds to prop up, in the main, Dollarforce and some other entities. I am told and accept the funds misapplied by you were not used to fund an extravagant personal lifestyle but, rather, were utilised in an attempt by you to trade your way out of what was a financial black hole.
39 So far as the Ivory Property Trust (IPT) is concerned, remaining properties referred to in the prospectus were the subject of signed transfers by the vendor. The final transfer of these properties was imminent at the time of ASIC’s intervention. So far as My Building No.1 (MB1) is concerned, a permit had been obtained for the commercial development of the Lorimer Street site. The property was the subject of a market appraisal valuing it at $12m. The property was ultimately sold by the mortgagee for $3.6m after appointment of a provisional liquidator. So far as Bennett Street, Balwyn, is concerned, a planning permit had been obtained, a builder engaged and Westpac had indicated its preparedness to provide funding for the project.
40 You have no assets to speak of and are currently employed for wages.
41 You have no prior convictions and character evidence was led from two witnesses, Mr Dimitri Pastris and Mr Thomas Hazel. These witnesses attested to your work ethic and your generally honourable conduct. In addition, I have had regard to 21 references which were tendered on your behalf and form Exhibit B on the plea. They also attest to your otherwise good character, your involvement in community works, and your remorse at your offending.
42 Your plea of guilty occurred after a contested committal and at a time close to the listed trial date of this matter. The plea of guilty occurred, however, in the context of negotiations to try and resolve this matter before committal proceedings. Neither counsel on the plea were involved in these negotiations. Conflicting reasons were given regarding why the negotiations broke down. I am not in a position to determine why it was that the negotiations broke down. However, in light of the complex nature of this matter, and the complexity of settlement negotiations, I do not diminish the value to be accorded to your plea of guilty due to the fact that it did not occur prior to your committal. I accept your plea of guilty demonstrates remorse, as does other material relied upon in the hearing.
43 The trial of this matter was estimated to take in the vicinity of two months and your plea of guilty further entitles you to a significant discount in sentence as a result of its utilitarian value.
44 I am told that recently you have provided information of assistance to the investigator of this matter. The prosecutor characterised this as information of value. I take this into account.
45 The effect of the term of imprisonment that I will impose means that you will be disqualified from managing a corporation. Further, you will not be eligible to obtain a real estate agent’s licence. I have taken this into account.
46 The prosecutor accepted that there has been a delay of significance experienced by you. I was referred to Paragraphs 35 and 49 of R v Merrett & Ors (2007) 14 VR 392. I have had regard to the statements of principle made by and collected in the judgment of Maxwell P. I take into account your rehabilitation in the time since the commission of these offences and the stress and uncertainty which having these matters hanging over your head has meant for you. I note you attribute the need to have a portion of your bowel removed to a result of the stress which was operating upon you.
47 Exhibit A on the plea was a report of Mr Jeffrey Cummins, forensic psychologist. Mr Cummins opines that you have developed a reactive adjustment disorder with mixed anxiety and depressed mood in response to your legal situation. Notwithstanding authorities such as R v Nguyen [2010] VSCA 127 at Paragraphs 24-26, and R v LP [2009] VSCA 271 at Paragraphs 30−31, I propose there ought be some moderation of general deterrence in its operation upon you. I take into account your reactive adjustment disorder as an aspect of the stress and uncertainty which the delay has occasioned to you.
48 With regard to what is symptomatic of your abovementioned condition, namely, emotional fragility, tearfulness and other associated symptoms, I do find that your prison sentence will weigh more heavily upon you than it would another in normal health. I also accept Mr Cummins’ opinion that your mental state will further deteriorate in the custodial environment. Accordingly, I have mitigated the punishment to be imposed upon you.
49 I accept the prospect of your reoffending is slight and your rehabilitative prospects are good. I accept that for you specific deterrence is of less significance.
50 Section 16A(2) of the Crimes Act (Cth) obliges me in sentencing you to take into account the matters referred to within that section “as are relevant and known to the court”. I have done this. Pursuant to s16A(1) of the Crimes Act (Cth), I must impose a sentence that is of a severity appropriate in all the circumstances of the offence. Section 16A accommodates the application of common law principles of sentencing. While general deterrence is not specifically listed in s16A(2), it is a matter to be accorded weight given the nature of your offending.
51 On Charge 1, I sentence you to 18 months’ imprisonment to commence this day.
52 On Charge 2, I sentence you to 18 months’ imprisonment to commence on the expiration of nine months from the date of commencement of the sentence I have imposed on Charge 1.
53 On Charge 3, I sentence you to 18 months’ imprisonment to commence on the expiration of nine months from the date of commencement of the sentence I have imposed on Charge 2.
54 On Charge 4, I sentence you to 18 months’ imprisonment to commence on the expiration of nine months from the date of commencement of the sentence I have imposed on Charge 3.
55 On Charge 5, I sentence you to nine months’ imprisonment to commence on the expiration of twelve months after the commencement of the sentence I have imposed on Charge 4.
56 This makes a total effective sentence of 48 months or four years’ imprisonment. I order you serve a period of two years’ imprisonment before being released on recognisance in the sum of $5,000 to be of good behaviour for the period of 24 months or two years.
57 I declare seven days by way of pre-sentence detention.
58 The purpose and consequences of making the recognisance release order I have just made are to reflect the gravity of your offending, but to also take into account the mitigating factors to which I have referred. You will serve two years in prison before being released. If you are of good behaviour over the following two years, that will be an end to the sentencing process so far as this court is concerned. If you are not of good behaviour, in all likelihood you will be brought back before this court and, depending upon the nature and seriousness of your transgression, the court may either take no action, impose a fine, extend the period of good behaviour, or impose a different penalty, or revoke the recognisance release order and send you back to prison for the balance of your sentence.
59 Doing the best I can in the complex circumstances of this plea, I indicate that but for your plea of guilty I would have imposed a total effective sentence of five years’ imprisonment and a recognisance release order after you having served three years’ and three months imprisonment.
60 Now I will hand down to both counsel a copy of the actual sentences that I have imposed, and as I have indicated my desire is to structure the sentences so that they make a total effective sentence of 48 months, or four years imprisonment. I will hand those to both of you, if I am in error in the way in which I have structured the sentence I can at this stage under the slip rule make any necessary changes. If I am correct, if the appropriate recognisance release order could be prepared, faxed to CW, I will stand down and I will come back after you have had time to look at the sentences, have regard to the numbers, and of course if there is a difficulty I will come back onto the bench.
61 MR BURNS: Thank you Your Honour.
62 MR PIRRIE: Thank you Your Honour.
63 HIS HONOUR: I'll stand down briefly to enable that process to occur. Of course I am readily available.
64 MR PIRRIE: As Your Honour pleases.
65 (Short adjournment.)
66 HIS HONOUR: All right, firstly the figures add up?
67 MR PIRRIE: Well the do Your Honour, I think we've been around the mulberry bush no doubt like Your Honour has.
68 HIS HONOUR: All right.
69 MR PIRRIE: I shouldn't be mirthful about that, but yes, it's a difficult - I think we've all done our own calculations as best we can, and every way we've looked at it at the moment, yes we all agree that the figures do add up.
70 HIS HONOUR: All right.
71 MR PIRRIE: It's a complicated sentencing exercise from Your Honour's perspective, but whichever way we've turn it round we come up with the same figure.
72 HIS HONOUR: All right, terrific.
73 MR PIRRIE: If there is any difficulty then we'd obviously approach Your Honour and deal with it if it needs to be so.
74 HIS HONOUR: All right, now the mechanics of the recognisance release order?
75 MR PIRRIE: The mechanics are - my instructor will prepare - get it to your associate, she has prepared it, I'm sorry.
76 HIS HONOUR: I've got it now.
77 MR PIRRIE: All right, and then it has to be faxed as I understand.
78 HIS HONOUR: All right.
79 MS BURNS: My learned instructor and I will actually go and visit and explain it to him Your Honour, but we may be in a box that doesn't allow us to pass documents back and forth, so if it was faxed down we could explain it to him and he can fax it back.
80 HIS HONOUR: He needs - it needs to be faxed to him, he needs to enter into it now.
81 MR BURNS: Indeed Your Honour, and that's why we'll go down and explain it to him.
82 HIS HONOUR: Sure, yes, thank you, we'll put CW back on the screen. All right, now I didn't realise CW wasn't able to hear us when I came back in, but all counsel are agreed that the figures which appear in my sentence correspond to a total effective sentence of 48 months imprisonment. And the recognisance release order will be faxed for CW to sign at the prison, and that will be done shortly. I have explained the consequences and the reason for making that order in the balance of my sentencing reasons, but I understand you will further explain that to your client.
83 MR BURNS: I will Your Honour.
84 HIS HONOUR: Thank you. Now I will stand down again until we have completed that task.
85 MR BURNS: As Your Honour pleases.
86 HIS HONOUR: Anything else Mr Pirrie?
87 MR PIRRIE: I don't believe so, I think Mr Alexander was in court, I don't know whether he's here, but he certainly came up to court and I can't see him, he's gone.
88 HIS HONOUR: He was sitting there, yes.
89 MR PIRRIE: Well I'm reluctant to mention things in his absence other than the fact that I think he was trying to get a document to your associate yesterday.
90 HIS HONOUR: All right.
91 MR PIRRIE: It looks like from your associates reaction that I think the document may have got through to Your Honour.
92 HIS HONOUR: All right, thank you, I will have a look at that.
93 MR PIRRIE: Yes, if needs be can we approach Your Honour jointly to mention the matter if needs be?
94 HIS HONOUR: Yes.
95 MR PIRRIE: We'd appreciate that Your Honour.
96 HIS HONOUR: Yes. All right I'll stand down until we've sorted out the recognisance release order.
97 MR PIRRIE: As Your Honour pleases.
98 HIS HONOUR: Thank you.
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