Director of Public Prosecutions v Kawecki

[2020] VCC 1751

IN THE COUNTY COURT OF VICTORIA Revised
Not Restricted
Suitable for Publication

AT MELBOURNE
CRIMINAL JURISDICTION

CR 20-00384

THE QUEEN

v

MARK KAWECKI

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JUDGE:	HIS HONOUR JUDGE LAURITSEN
WHERE HELD:	Melbourne
DATE OF HEARING:	1 October 2020
DATE OF SENTENCE:	5 November 2020
CASE MAY BE CITED AS:	DPP v Kawecki
MEDIUM NEUTRAL CITATION:	[2020] VCC 1751

REASONS FOR SENTENCE
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APPEARANCES:	Counsel	Solicitors
For the Commonwealth Director of Public Prosecutions	Ms S. Holmes	Commonwealth Director of Public Prosecutions
For the Accused	Mr K. Ginges	Coleman Greig Lawyers

HIS HONOUR: 

Introduction

1Mr Kawecki, you have pleaded guilty to two charges of engaging in dishonest conduct in relation to a financial product in the course of carrying on a financial services business.

2With the first charge, you submitted applications on behalf of applicants for shares in three corporations or companies.  These applications contained false information about the address of each applicant.  You were one of the applicants.  The companies were Premiere Eastern Energy Ltd
(Premiere), Davenport Resource Ltd (Davenport) and Jack-in Group Ltd
(JIG).

3With the second charge, you submitted applications for shares and a table of applications for shares of two companies containing false or misleading information about the beneficial holders of the shares.  The corporations were Premiere and Wisr Ltd (Wisr).    

4The gist of these charges is you assisted these companies to be listed on the Australian Stock Exchange (ASX) by the applications you submitted.  
They enabled these companies to say they had at least 300 non-related shareholders.  The listing rules of the ASX requires at least that number.  Failing that, the companies would not have been listed on the ASX.  
These companies were listed on the ASX.  You were paid fees by these companies or stockbrokers for providing these applications.  Your share of the overall fees was $47,700 together with GST for these applications.  
The benefit you received is $47,700 for there is nothing to suggest you did not meet your obligations under the GST legislation.   

5The maximum penalty for each offence is imprisonment of 10 years or a fine of 4,500 penalty units, which is $765,000, or both the fine and imprisonment. 

Circumstances

6During the periods covered by these offences, you managed a number of discretionary and unit trusts.  You were the sole director and/or shareholder in the corporate trustees.  You also managed four superannuation funds. Two of those funds belonged to you, one to your father and one to a family friend. You used these various entities to invest in listed shares. 

7The relevant listing rules of the ASX require a minimum number of unrelated shareholders to a corporation before it allows the corporation to list. These rules are intended to achieve two purposes:

(a) to reject poorer quality corporations by demonstrating sufficient investor interest in them; and

(b) by ensuring on initial listing, some level of liquidity in the shares. 

Charge 1

Premiere 

8In January 2015, you applied for shares in Premiere in the names of 25 applicants.  One application was in your name and the rest in the names of companies of which you were a director.  The address for each applicant was false, even your own.  The correct address in each instance should have been your address in Frankston South.  This was your residential address and the address of the registered office of each of the companies and their principal place of business.  Except for one company, each applicant applied for 10,000 shares costing $2,000.  This complied with another aspect of the listing rules: the need for each shareholder having at least $2,000 worth of shares.

9On 6 February 2015, Premiere was listed on the ASX.

10As a viable company, Premiere did not last long.  On 17 January 2018, it was placed into liquidation.  It has now been liquidated with no return to the shareholders. 

Davenport

11In 2016, you attended a presentation by a director of Davenport.  Later, you wrote to him suggesting what you arrange through applications and the rewards you wanted.  Apart from fees, you and an associate wanted a large number of options.

12You provided 80 applications.  Where the applicants were companies, you were a director of each.  In all applications, the address was false.  
Each applicant applied for 10,000 shares, costing $2,000.  Again, this was to comply with a listing requirement.

13On 19 January 2017, Davenport was listed.

Jack-in Group 

14This company was originally called Oilfield Workforce Group Ltd.  
This company had been delisted and was seeking relisting.  You arranged 140 applications for shares.  Again, all of the addresses for yourself and the companies were false.  They should have been the Frankston South address.

15On 30 December 2016, JIG was relisted.

Charge 2

Premiere 

16Sally-Ann Sullivan, your friend, provided 12 names for applications for shares in Premiere.  You paid her a fee for each name.  As you funded each application, you were the actual owner of the shares. 

Wisr

17In June 2015, you provided 42 applications.  Each applicant had your Frankston South address.  You asserted that you managed the accounts of each applicant, they remained independent of you, were aware of these applications and wanted to acquire the shares.  None of this was true.  

18On 10 July 2015, Wisr was re-listed on the ASX.

Criminal History

19You have no previous convictions or findings of guilt.  Nothing has arisen since the commission of these offences.

Guilty Pleas

20On 4 March 2020, you pleaded guilty to these charges at a committal mention hearing.  That was the sixth such hearing.  However, at that hearing, the existing charges were rolled into the two present charges.  In terms of the timing of such pleas, it is conceded by the prosecution that they occurred at the earliest reasonable opportunity. 

21These pleas are evidence of your remorse.  There is other evidence of your remorse.  There are the letters you wrote to ASIC.  There are your expressions of remorse made to the three persons who wrote letters to the court.  I accept you are remorseful.

22They also assist in the administration of justice by making the listing for a trial available to other accused persons.  They save the delay to finalisation of the charges against you if they proceeded to trial.  They save the time of the trial.  This type of prosecution would be complex and protracted through the need to prove various matters and call up to 26 witnesses to do so.

23Overall, these pleas of guilty entitled you to a significant discount on the penalties I would impose in their absence.

Banning

24On 20 June 2018, you were banned from providing financial services for seven years.  The ban ends on 19 June 2025[1]. Your counsel in their written outline of submissions cited the intended purpose of the banning order.

[1] s.920A of the Corporations Act 2001

The purpose was to deter you and others from engaging in such conduct. 

25This banning order does not stop you from managing companies. However, if convicted of these offences, you will be automatically disqualified from managing companies for five years[2].

[2] s.206B

26The fact of a conviction has another effect.  Under its Act, ASIC may order you repay its costs incurred in investigating these charges.  Those costs are said to amount to $359,733.04[3]. 

[3] s.91 of the Australian Securities and Investment Commission Act 2001

Publicity

27Your banning received significant attention in the media, especially the financial media.  It has accentuated your shame and damaged your reputation. 

Co-Operation With Authorities

28I accept you assisted ASIC in its investigation of your offences.

Personal

29You are now 45. You were 39 and 40 at the time of your offending.

30You are employed as the general manager of your domestic partner’s tyre recycling business in Sydney.  She started this business in September 2017. It obtained the relevant licence in February 2018.  The business has been profitable in four of the last 30 months.  It is a very competitive business and has been adversely affected by the COVID-19 restrictions.  You are not paid a salary or wage.  Both you and your partner are living off savings.

31The title of general manager sounds more important than it is.  You are involved in the day to day business of recycling, not simply managerial. 

32When ASIC started its investigation in September 2017, you ceased your financial services work immediately even though you were not banned until February the following year.  Before ceasing, you had earned $250,000 per year before tax.     

33Although you control corporate entities, they pay you no income.

34You still trade in shares through corporate entities and in your own name.  The value of your personal trading portfolio is about $50,000.  Your share trading generates income for you. 

35You own a house and land in Frankston South.  You value it at about $700,000.  It has a mortgage of $500,000.  Surprisingly, you have not rented it to generate income.

36You have two credit cards. Both have reached their maximum levels: one at $35,000 and the other at $40,000.    

37Your partner has $10,000 in debts. 

Psychiatric Assessment

38Danielle Florida is a clinical psychiatrist.  She first saw you on 1 March 2019.  She has seen you another four times. Admittedly, on three of those times, the primary purpose of your visit was to obtain a medicate certificate.  Your last visit on 7 August 2020 came two days after your counsel wrote to her.

39Using DSM-5, Dr Florida diagnosed you as suffering from five recognised psychological disorders:  Adjustment Disorder; Generalised Anxiety Disorder; Social Anxiety Disorder; Obsessive Compulsive Disorder; and Attention Deficit Hyperactivity Disorder or ADHD.  Of those disorders, it appears Dr Florida only attributes ADHD as having contributed to or was causative in some way of your offending. She said[4]:

'Mark has untreated ADHD which would have led to him making impulsive decisions without full regard to consequences.

'ADHD symptoms are the result of impaired executive function, which means individuals with ADHD struggle with planning, organisation, time management and sustaining focus. Their inattentive memory problems lead to errors in judgment, poor problem solving and critical thinking, an inability to follow through on thoughts and actions, and thoughtlessness and problem avoidance.'

[4] Report dated 15 September 2020 at pp.8-9

Letters

40I have read the letters of your brother, Matt, your friend, Mr McEvoy and your domestic partner, Camillia.  Each says you are remorseful.  Both your partner and Mr McEvoy speak of the benefits you have received from treatment at the Sydney Cognitive Development Centre.  Your partner points out how her competitors have used the publicity about these charges to damage her recycling business.

41As your partner also points out, the delay in bringing these charges to an end has weighed significantly upon you.   

Discussion

Moral culpability. 

42The prosecution summarised the elements of your dishonesty:

(a) providing false addresses and details of beneficial holders of the shares to circumvent ASX Listing Rules.

(b) in the course of acquiring the information, approaching friends and offering payment for the use of information that was false.

(c) keeping track of the false information in a spreadsheet on your computer for future reference and use;

(d) using your experience and knowledge to ensure that the other listing rules were complied with in an attempt to avoid detection.

43The ASX takes a pragmatic view of companies seeking listing.  It assesses the quality of the company with the number of non-related shareholders.  
If there are sufficient, then it supposes there will be an adequate market in its shares.

44With hindsight, your actions were not, or apparently not, critical to the listing of these companies.  But you were not to know that at the time.  They aided the listing of the companies.  For example, there were 563 applicants who became shareholders in Premiere.  Since only 24 related to you, Premiere had an ample number of shareholders on listing.

45The fact of their listing and your part in it did not cause or contribute to the failure of Premiere or the unsuccessful progress of the other companies in terms of their profitability or share price.  The fact you sold out of Davenport and WISR at a loss and did not sell out of Premiere is unfortunate but most people invest in companies, including you in these instances, hoping that their investment will prove profitable.  Very few invest without that end in mind.  These investments were not a series of altruistic acts done for the benefit of the promoters.  The commission was a benefit in addition to the expected profit from the investments themselves.  Nevertheless, I cannot disregard the fact of you incurring losses on the investments in Premiere, Davenport and WISR with the loss in Premiere involving the entire investment.

46Your counsel submits your undiagnosed and thus untreated ADHD led you to bend over backwards to help people and not do the research into these investments one might expect.  Frequently, people invest because the investment is recommended by persons whose judgment they trust.  They do not examine the proposed investment to any real extent.  That appears to be the case with you.  Nevertheless, I agree the symptoms of ADHD played a part in your offending.  Your willingness to perform the dishonest acts was influenced by your condition.    

47With the first charge, your conduct occupied only a few days in total over a period of years.  You did not change the registered addresses of your various entities.  You received monies for these applications.  You may not have received most of those monies if their correct addresses were revealed in the applications for shares.  I note that the individual applicants did not lose money over their investments.

Objective seriousness. 

48This may be the first prosecution under s.1041G of the Corporations Act 2001. Both counsel referred to other instances of sentencing for somewhat similar offences under the Act. Looking at the facts of those cases, I agree the objective seriousness of your offending is towards the lower end of the offences contemplated by s.1041G of the Corporations Act 2001.

General deterrence. 

49These offences are hard to detect and prove.  The investigation was long and expensive.  The indictment lists 26 potential witnesses.  The ASX relies on the accuracy of shareholder details provided by companies.  It is unrealistic to expect either a company or the ASX to investigate each application as to the validity of the entity, especially its address.  General deterrence is an important sentencing consideration.  However, it is tempered by the effect of your ADHD.  Many persons in the community would not identify with you because of your disorder.  It is not tempered by the publicity you have received in financial publications. Your counsel named eight including the Sydney Morning Herald and the Financial Review; the latter having an Australia-wide distribution.  If this case receives further publicity then it simply fosters the purpose of general deterrence.  

Specific deterrence. 

50Despite this proceeding, your banning from providing financial services until June 2025, your attempts to educate yourself about the relevant obligations and rules and the adverse publicity, you remain involved with many companies, trusts and other financial entities.  You also remain interested in shares and other securities and their trading.  Although convictions on these charges will disable you from holding any office in a company, there remains some need for specific deterrence to figure in my sentences although it is not great.   

Verdins. 

51Your counsel relied upon limbs 1, 3, 4 and 5 stated in R v Verdins[5].  I have already discussed the impact of these limbs except for the fifth, which is of no relevance in light of the penalties I will impose.  

Totality principle. 

[5] (2007) 16 VR 269

52Your counsel submits there is significant overlap between Charges 1 and 2. There is merit in the submission.  Premiere and Wisr are common to both charges.

Parity. 

53Mr Eli Ekman appears to have been involved in somewhat similar conduct to you and, to an extent, with you. It also appears he has not been charged with criminal offences or received a banning order. Your counsel relies on the principle of parity in sentencing. 

54Parity in sentencing was discussed in Lowe v R[6]. Mason J said[7]:

'Just as consistency in punishment – a reflection of the notion of equal justice – is a fundamental element in any rational and fair system of criminal justice, so inconsistency in punishment , because it is regarded as a badge of unfairness and unequal treatment under the law, is calculated to lead to an erosion of public confidence in the integrity of the administration of justice.'

[6] (1984) 154 CLR 606

[7] At pp.610-611

55Dawson J added a justifiable sense of grievance on the part of an offender in your position[8].

[8] At p.623

56Mr Ekman is not your co-offender in this proceeding. It appears he has not been charged with any offence under the Corporations Act 2001.
Strictly speaking, the principle cannot apply in your case.  In any event, I know little of Mr Ekman and nothing of why the prosecuting authorities have approached him in the way they apparently have.  There are too many uncertainties present in my knowledge of his case for me to conclude there has been a breach in the notion of equal justice in the administration of justice.   

Costs

57Upon conviction, ASIC can seek costs against you.  It is unclear whether it will or will not.  If it gained an order for the full amount of its costs, then you are likely to be bankrupted.  No doubt, this uncertainty will cause you some anxiety.  

Submitted dispositions 

58Your counsel submitted I should sentence you under s.19B of the Crimes Act 1914. He submitted I could include conditions of treatment, reparation or costs. This disposition would give due recognition to your mental health issues and also recognise your antecedents, character and the circumstances of your offending.

59For this submission, the relevant part of s 19B is paragraph (b) of sub-s.(1):

'the court is satisfied in respect of that charge or more than one of those charges, that the charge is proven, but is of the opinion, having regard to:

(i) the character, antecedents, age, health or mental condition of the person;  

(ii) the extent (if any) to which the offence is of a trivial nature; or

(iii) the extent (if any) to which the offence was committed under extenuating circumstances;

That it is inexpedient to inflict any punishment, or to inflict any punishment other than a nominal punishment, or that it is expedient to release the offender on probation.'

60Paragraphs (c) and (d) deal with the orders which the court may make.  
Your counsel relied on the order which can be made under paragraph (d). 

61Sentencing under s.19B involves a two-stage process. In
DPP v Moroney&Ors, T Forrest J said[9]:

'It is beyond doubt that s.19B(1) provides for a two stage process. Spigelman CJ described the process as follows:

"Section 19B(1)(b) itself consists of two stages.  First is the identification of a factor or factors of the character specified in sub-pars (i), (ii) and/or (iii) of the paragraph.  The second stage is the determination that, having regard to the factor or factors so identified, 'it is expedient to inflict any punishment' or to reach the other conclusions for which the paragraph provides."

'The factors relevant to the second stage of the process (i.e. whether it is inexpedient to inflict punishment other than nominal punishment) are the factors that ordinarily arise upon a consideration of s.16A of the Act together with the aspect of general deterrence. Expressing it another way, whilst a person may qualify for s.19B consideration if a court is satisfied of one or more of the s.19B(1)(b) factors, the court may not proceed further to exercise that discretion in a person’s favour until it considers the wider factors that ordinarily are taken into account on sentence. Only then if it appears ‘inexpedient’ to punish or punish more than nominally would a s 19B order be made.' (citations omitted).

[9] [2009] VSC 584 at [15]

62Later T Forrest J said[10]:

'The exercise of discretion under s.19B has been described as available only in ‘exceptional circumstances’ and this approach was urged upon me by Mr Gurvich. In my opinion the correct approach is that set out by Spigelman CJ in Baffsky with Simpson J and Einfeld AJ concurring. In that case, the Court rejected the submission by counsel for the commissioner to the effect that s.19B was not available for revenue offences unless exceptional circumstances were found to exist. At para. [72] the court approved a test originally formulated by Jacobs J in Kelton v Wren:

"there must be something that clearly distinguishes the circumstances of the offence under consideration from the typical offence, or circumstances of an unusual nature personal to the defendant, before [s.19B] can be properly involved in dealing with this particular offence.

And

"there must be something which clearly distinguishes the particular breach of the section under consideration from what may be regarded as a typical breach of the section."

'This approach has general application to Commonwealth offences…'        

[10] At [27]

63Your counsel cited from paragraph 37 of the judgment of Harrison J in R v Mauger[11]. I have read the judgment. In its terms, s.10 of the NSW Crimes (Sentencing Procedure) Act 1999 is somewhat similar to s.19B of the Commonwealth Crimes Act 1914. Mainly, that case involved an appeal by the Crown against the inadequacy of the sentence imposed. On the appeal, the difference between the Crown’s position on sentence and that of Mr Mauger was whether he should be convicted. There was no disagreement over the conditions and duration of the bond imposed by the sentencing judge. It is in that light that the observations of Harrison J in paragraph 37 should be understood.

[11] [2012] NSWCCA 51 at [40]

64Your counsel relied on the principle of parity, your previous good character, your mental disorder bearing on the twin aspects of deterrence, early guilty pleas, prospects of rehabilitation and punishment through banning orders.  
I did not understand him to submit the offences were of a trivial nature or that they were committed under extenuating circumstances.  Even if he had made those submissions, I would disagree.  Neither offence is of a trivial nature.  Their combined effect yielded to you a sizeable amount of money.  Your hope was that the companies would trade above the amounts paid for them.  
That was your hope even though it did not eventuate.  There were no extenuating circumstances notwithstanding the other circumstances personal to you.

65Looking at the factors relied on by your counsel in the context of s.16A of the Act and more broadly, I do not consider that it is inexpedient to inflict any punishment or to inflict any punishment other than a nominal punishment.  
For completeness, there is no basis to release you on probation.

Imprisonment. 

66The prosecution submits sentences of imprisonment are the starting point in this case with the factors in mitigation leading to such sentences not being served immediately.

67In her careful submissions, the prosecutor took me to various parts of s.16A of the Crimes Act 1914. She pointed to s.16A(2)(c) and the fact that your offending occurred over almost two years, involved a number of individual acts of dishonesty and using your position as an experienced financial adviser.

68As to general deterrence, she quoted a passage from the judgment of Charles JA in the DPP v Bulfin[12].  I have already discussed the issues of detection and proof of your offences.  Even though in your case there is no evidence of losses to large numbers of small investors, general deterrence holds a place of particular significance although tempered by the fact of your disorder.  

[12] [1998] 4 VR 114 at 131-132

69Contrary to the prosecutor’s submission, I am satisfied your disorder contributed to your offending in that it caused you to make impulsive decisions without full regard to the consequences.  It is the impulsivity which is the key factor.  It may sit oddly with your protracted offending but your various decisions were affected by your impulsivity.  The contribution was material but of limited significance.

70I consider your prospects of rehabilitation are very good.  You have sought psychiatric help and are prepared to continue to seek such help.  You have remained offence free in the years following your offending.  

71I have already discussed your pleas of guilty and the fact of your existing banning order.

72Conscious as I am also of the maximum penalties, imprisonment is not appropriate. To arrive at imprisonment as the appropriate penalty, I must eliminate all other lesser options. This is the effect of the common law and is made very clear in s.17A(1) of the Crimes Act 1914. In arriving at imprisonment as the appropriate sentence, I must disregard an ability to release immediately after the imposition of the sentence. The circumstances must justify imprisonment irrespective of an ability to release you immediately or even after serving a period of time. Simply, each charge does not justify a sentence of imprisonment.

73There are other sentencing options under the Crimes Act 1914. A community correction order is inappropriate because of the temporary suspension of arrangements between relevant authorities in Victoria and NSW. It is unknown when those arrangements will resume. To make such an order now may see its conditions not implemented for an uncertain period. For that reason alone, it is an inappropriate option. In any event, I consider the imposition of fines as sentences of severity appropriate to the circumstances of the offences. On each charge, I will fine you $15,000, making a total of $30,000.

74Are there any other matters that counsel wish to raise?

75Mr GINGES:  Your Honour, mine is a query and it is probably from my unfamiliarity with processes, do I understand that the fine will be processed by Fines Victoria, such that any application by my client to pay by instalments will be through that organisation?  If Your Honour does not know, I will not press Your Honour for it, we can raise it with the Registry.

76HIS HONOUR:  Very droll.  Ms Holmes, do you want to say anything about that?

77MS HOLMES:  For my learned friend's benefit, I believe that the matter will be dealt with by Fines Victoria.  I have nothing further to raise.  I can have discussions with my learned friend about that, Your Honour.

78MR GINGES:  I am grateful.  Nothing further from our end, Your Honour.

79HIS HONOUR:  If I was imposing a fine under Victorian legislation, I would, in this particular court, that being the County Court, I would enable the person fined to pay to the Registrar of this court today the fine, which generally speaking is inappropriate or unlikely to be occurring and then refer its collections to Fines Victoria, which is the matter to which you refer, Mr Ginges.  If Ms Holmes is of the same view, then perhaps I would make a standard order.  He can pay the amount to the Registrar of this court today and failing that, refer the fines to Fines Victoria for collection.

80MR GINGES:  Yes, thank you, Your Honour.

81HIS HONOUR:  If Fines Victoria decline to accept the matter, which is a possibility having not researched it, then I presume it would be - well I am not granting any stay, am I?  It could be a matter that you might wish to further agitate, Mr Ginges, if that came to pass, if Fines Victoria decline to enforce the fines on jurisdictional grounds.

82MR GINGES:  Yes.

83HIS HONOUR:  But I do not suppose there is any problem in me or in you on behalf of your client making an application to me subsequently.  I do not think I need to give you liberty to apply, which would occur in a civil case.

84MR GINGES:  No, if it returns to Your Honour, Your Honour will not be unctuous I expect, so I do not think will cause a problem.

85HIS HONOUR:  Do you see it as causing any problem if I make those two orders payable to the Registrar of this court today, failing that to be collected by Fines Victoria?  Do you see any problem with that, Ms Holmes?

86MS HOLMES:  No, Your Honour.

87HIS HONOUR:  And allowing, without stating it, allowing an ability of the accused to make application to me with notice obviously if there is some problem raised by Fines Victoria.

88MS HOLMES:  Yes.

89HIS HONOUR:  All right.

90MR GINGES:  Thank you, Your Honour.

91HIS HONOUR:  Is there anything - sorry.

92MR GINGES:  I am sorry, Your Honour, I was just going to ask, will Your Honour's judgment be published to the parties at some point?  Is it usually that process?

93HIS HONOUR:  It will go up on the website once I have corrected a couple of the errors from the transcript.  I have given a copy of my decision already to the transcribers, so we should get it back today and I can correct it and it will be put on our website and I will have my associate send each of you a copy.

94MR GINGES:  Grateful, thank you, Your Honour.

95HIS HONOUR:  Is there anything else, anything you wish to raise,
Ms Holmes?

96MS HOLMES:  No, Your Honour.

97HIS HONOUR:  All right.  Well if that be the case then, I will get my tipstaff to adjourn the court.

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