Director of Public Prosecutions v Shmuel

[2022] VCC 417

IN THE COUNTY COURT OF VICTORIA

Revised

Not Restricted

Suitable for Publication

AT MELBOURNE

CRIMINAL JURISDICTION

CR 18-01320

DIRECTOR OF PUBLIC PROSECUTIONS

v

IMMANUEL SHMUEL

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JUDGE:	HIS HONOUR JUDGE SMITH
WHERE HELD:	Melbourne
DATE OF HEARING:
DATE OF SENTENCE:	31 March 2022
CASE MAY BE CITED AS:	DPP v Shmuel
MEDIUM NEUTRAL CITATION:	[2022] VCC 417

REASONS FOR SENTENCE

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Subject:

Catchwords:

Legislation Cited:

Cases Cited:

Sentence:

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APPEARANCES:	Counsel	Solicitors
For the Director of Public Prosecutions	Ms S. Isaacs	The Office of Public Prosecutions
For the Accused	Mr V. Nath

HIS HONOUR: 

1Immanuel Shmuel, you have pleaded to one charge of attempting to dishonestly obtain a financial advantage by deception from the Commonwealth contrary to s134.2, 11.1, and 134.2(1) of the Criminal Code Act 1995 (Cth).

2The circumstances of your offending were set out in considerable detail in the summary of the prosecution opening which was tendered as Exhibit A at your plea hearing and read in court on that occasion.  In summary, the circumstances are as follows.

3From 1992, you operated a practice as a tax and management accountant in Melbourne.  From about August 2004, you operated that business through a registered company, EC Services Pty Ltd, which I will describe in these remarks as EC Services. 

4In April 2006, EC Services applied to the Bank of Queensland to become a franchisee.  As I understand it, the bank had sought to establish a number of bank branches in Victoria which would be operated by franchisees. 

5In August 2006, EC Services executed a document known as an 'owner managed branch agreement' with the bank.  The franchise which EC Services was situated in was in High Street, Preston.  The principal activities run by the franchise were banking products and services. 

6The owner managed branch agreement was renewed in August 2011.  That agreement provided, inter alia, that EC Services and yourself, as its director, would have sole responsibility for the engagement of staff, training costs, renumeration, superannuation entitlements, taxes, and workers' compensation.  At all material times, you were the sold director of EC Services. 

7In its operation of the franchise, EC Services employed a number of staff.  During the period in which the franchise operated, those employees were paid by EC Services and EC Services properly withheld PAYG tax from their income.  EC Services was required to forward those withheld tax sums to the Australian Taxation Office (ATO). 

8

In February 2015, the bank sought to terminate the owner managed branch agreement with EC Services.  It wrote to you in your capacity as director of EC Services, enclosing a formal termination notice with effect from 12 March 2015.  That notice set out what the bank considered were the obligations and responsibilities of EC Services that survived the termination of the agreement.  They included that EC Services remained liable for the renumeration of its employees, superannuation, and leave entitlements up to and including

12 March 2015. 

9Pursuant to the provisions of the Commonwealth Taxation Administration Act 1953, EC Services was under an obligation to withhold taxation amounts from payments to employees and to pay their withheld amounts to the commissioner of taxation.  Pursuant to that legislation, amounts that are withheld are required to be reported in a monthly or quarterly business activity statement - BAS documents, as we sometimes refer to them.  They are required to be reported by the employer and remitted to the ATO. 

10Between July 2006 and August 2012, BAS returns were lodged by EC Services on a quarterly or monthly basis.  BAS returns disclosed details of all wages paid to employees, PAYG withholdings, and superannuation payments. 

11From August 2012, EC Services failed to lodge any BAS returns and failed to forward PAYG withholdings to the commissioner of taxation.  Despite your experience as an accountant and tax agent, you had no previous experience in banking, and I accept that from about 2012, you had encountered financial difficulties, none of which were explained to this court.

12As a consequence of non-lodgement of BAS returns, the ATO conducted an audit of EC Services.  In June 2014, the ATO audit team met with you and requested outstanding BAS returns to be lodged.  You provided spreadsheets to the ATO setting out the amounts of each BAS from July 2012 to June 2014.  You signed an accompanying declaration that the information provided by you was true and correct.

13On the basis of the audit of BAS forms provided by you, the ATO assessed that the PAYG withholdings owed by EC Services to the ATO was $121,832.  In addition, the company was liable for superannuation guarantee amounts for employees of EC Services totalling $42,903, penalties of $18,700 for failing to lodge those returns, and a general interest charge in the sum of $15,584.  Those amounts totalled $199,019.  You were advised of those results of the audit in October 2014.  The amounts claimed by the ATO were not paid by the company EC Services.  Accordingly, the ATO sought to wind up the company in proceedings commencing in August 2015. 

14On 21 October 2015, you forwarded to the solicitors for the ATO, BAS forms for the company EC Services.  You claimed that the company was in fact owed a refund by the ATO as opposed to owing the ATO any moneys. 

15On 9 October 2015, your solicitors forwarded to the ATO's legal representatives 68 unsigned BAS and income tax returns for EC Services covering the period from July 2006 and described as 'up to date'.  The ATO noted that these had not been signed and requested that they be signed in order to be considered.  Each of those BAS returns recorded PAYG withholdings as nil.  This advice was false, and you knew it as so. 

16On 23 November 2015, you signed 52 amended BAS records relating to EC Services for the period between July 2006 and July 2013.  The following day, you amended 14 further BAS records relating to EC Services for periods between August 2013 and September 2014.  As a result of those amendments made by you of the BAS records for EC Services recording zero PAYG tax withholdings, this resulted in a notional credit balance relating to PAYG which offset any accumulated debt claimed by the ATO and resulted in a notional credit balance of $144,538. 

17If this had been true, EC Services would no longer have owed any money to the ATO but would have been owed money by it.  On that basis, the ATO instructed its lawyers to consent to the winding up proceedings in relation to EC Services being dismissed.  Shortly afterwards, you then requested the ATO to refund the credit previously referred to, that is $144,538.  That refund was not paid by the ATO to you or to the company.

18In December 2015, the ATO commenced a further audit of EC Services in relation to the amendments that had been made to BAS records for the period July 2006 to September 2014, and GST annual returns for the periods 2008 to 2012 and 2015. 

19In December 2015, officers of the ATO discussed the revised BAS and GST annual returns with you.  You advised that you were the sole director of the company and authorised tax agent for it.  You disputed that you were responsible for any PAYG withholdings for the Bank of Queensland franchise on the grounds that the Bank of Queensland head office by then had control of all staff. 

20Nevertheless, you admitted that all of the staff of EC Services were recruited and employed by EC Services, wages to them were paid, and tax withheld by EC Services in respect of those staff.  When the Bank of Queensland franchise was taken over by the bank, staff of EC Services were all replaced, with the exception of one employee. 

21The offending conduct the subject of the charge against you was that between 23 November 2015 and 24 November 2015, you attempted to commit an offence contrary to s134.2(1) of the Criminal Code, in that you attempted to dishonestly obtain a financial advantage from the Commonwealth, namely evading EC Services' liability to remit PAYG withholding tax in the sum of $390,776 to the ATO by deception, mainly by the provision of false information in the 68 amended BAS returns lodged or recorded with the ATO in the name of EC Services for the period from July 2006 to September 2014.  The maximum penalty for that offence is 10 years' imprisonment. 

22You initially pleaded not guilty.  The trial of the matter commenced in April 2019.  On the second day of the trial, 30 April 2019, you changed your plea to one of guilty.  This was just prior to the empanelment of a jury. 

23You later made application to change that plea to one of Not Guilty.  And on 3 May 2021, that application to change your plea was refused by another judge of this court.  Your plea was heard before me on 16 March of this year. 

24By way of background, you are aged 58.  You were born in Sri Lanka.  You lived in Australia for approximately 30 years since about the age of 25.  You have tertiary qualifications and you have worked as a tax accountant for more than 20 years. 

25You suffer from a number of medical conditions, including elevated blood pressure, high cholesterol, ischemic heart disease which required insertion of stents in 2011, multiple transient ischemic attacks, degenerative neck disease with nerve compression, type 2 diabetes, hypothyroidism, and diffuse fatty tumours or Dercum's disease.  You have been diagnosed with a low grade but chronic mixed anxiety depression order with significant mood disturbance. 

26Letters of referral from a general practitioner, Dr Vira Vyravipillai, to Specialist Professor Christofi in relation to Dercum's disease, and Professors Zajac in relation to diabetes, both in 2021 were tendered.  No reports from either of those specialists were tendered. 

27A report from a psychiatrist, Dr Lester Walton, dated 9 October 2019 was tendered at your plea hearing.  This report, as can be seen by its date, was prepared approximately two and a half years ago.  Dr Walton noted a history of admission to the Northern Hospital psychiatric unit in mid-2004, where it seems that you spent one night, and a further short period at the Melbourne Clinic.  It seems that you have not had any contact with psychiatric treaters for many years. 

28Dr Walton noted that you were appropriately concerned about the forthcoming legal sentencing and were also depressed as you contemplated what you regarded as inevitable divorce, and chronic pain over the years. 

29Dr Walton diagnosed you as suffering from low grade but chronic mixed anxiety and depressive disorder, reaching back to your troubled marriage, and a pattern of self-medicating with alcohol, significant mood disturbance currently surrounding your pending legal position, an intellectual deficit that was quite mild in nature and likely secondary to underlying mood disturbance.  He diagnosed no type of mental disorder. 

30He commented that whilst you were obviously an intelligent man, he considered that this was not matched by psychological maturity, and that you were a person who substantially lacked insight into what may have motivated you towards the offending behaviour.  He did not think that you demonstrated a fully mature remorse.  He did consider that you were in need of psychiatric counselling in the form of - sorry, treatment in the form of medication, and that you would possibly benefit from some counselling. 

31A number of character references were tendered on your behalf from Sivanayagam, Ronald Rodrigo, Anne Tuck Reuben Mallarajan, Nandaraja, Steven Selathurai, Hoshida Pantaki, and a Ms or Mrs C. Kally.  They each appeared to regard you as being a person of good character and intellect.  It appears from those letters that you have been, at least as far as your clients are concerned, a helpful and efficient accountant over the years.

32I do note, however, that each of the references to which I have referred, dates back two and a half years or more, and that none of the referees to whom I have referred make any mention of the offence for which you have been charged and to which you have pleaded guilty, and for which I am to sentence you today.  There is nothing to indicate that any of those referees have any knowledge of your offending behaviour.

33Section 5(1) of the Sentencing Act provides that the only purposes for which sentences may be imposed are to punish the offender to the extent - just before I continue reading that, I am not sure I am not wandering into error there - does s5 of the Sentencing Act apply to this matter?

34MS ISAACS:  No, Your Honour.

35HIS HONOUR:  I would not have thought it did.  I do not know what came over me. 

36MS ISAACS: In terms of the principles, Your Honour, s16A(2) of the Crimes Act, Your Honour, 1914, common law.

37HIS HONOUR:  Yes.  Yes, thank you.  In any event, matters that I consider that I should take into account when sentencing you are the maximum penalty that has been prescribed by Parliament, namely 10 years' imprisonment.  Current sentencing practices - and I will come back to that in a moment.  The nature and gravity of the offence.  Your culpability and the degree of responsibility for the offence.  Whether you pleaded guilty, and if so at what stage of the proceeding.  Your previous character, and the presence of any other aggravating or mitigating factors concerning you. 

38And I take into account that you pleaded guilty, even though your plea could not be considered as an early one, you nevertheless did plead guilty.  This has some utilitarian benefit, in that witnesses were not required to give further evidence in court, and that valuable court resources have been saved, which is especially relevant in this pandemic era.

39Your plea of guilty was of course followed by an unsuccessful application to change that plea back to not guilty.  In the circumstances, I am not satisfied that you have shown any genuine remorse for your offending.  I take into account your age and the various problems to your health which I have previously referred to. 

40Much time was spent at your plea hearing discussing the problem which you alleged that you had had with the Bank of Queensland in the years leading up to your offending.  I note that you believed that you had been poorly treated by the bank and that you wrote to a number of Government ministers about that treatment.

41Whether your complaints concerning the bank are justified or not, I am unable to say on the material before me.  There was no evidence concerning those allegations given at your plea hearing.  The bank might well have submitted that their termination of your franchise agreement and earlier problems that you had with them were entirely justified on their part.  There is simply no material before me upon which I could reach any conclusion concerning this. 

42However, I am able to say this, that whether or not the behaviour and conduct of the Bank of Queensland in relation to your franchise left something to be desired or not, this did not and never could have entitled you to commit this offence.  It never could have been a justification for this offence. 

43I take into account that your false amendments in relation to the BAS returns resulted in the ATO mistakenly crediting a total of $390,766 to your client account.  This is a substantial sum.  And your attempt to avoid your debt to the ATO and your attempt to obtain a wrongful refund from the ATO was based entirely on information provided by you to the ATO which you knew was false.  I consider that your conduct was premeditated and in no way the result of some impulsive or spur of the moment action on your part. 

44I consider that the gravity of your offence is serious and that your culpability and responsibility for the defence is high.  No one else contributed.  I take into account the maximum penalty referred to earlier in these remarks.  I take into account principles of denunciation and specific and general deterrence, which I consider to be important to take into account here. 

45The prosecutor referred me to the Victoria Court of Appeal decision in a matter of the Commonwealth DPP v Gregory, where the court said:

'A sentence imposed for fraud upon the taxation revenue is intended to reaffirm basic community values, that all citizens, according to their means, should fairly share the burden of the incidents of taxation so as to enable government to provide for the community, and that the revenue must accordingly be protected, and that the offender should be censured through manifest denunciation.  When these considerations are not reflected in the responses of the courts, the criminal justice system itself fails to achieve it objects.'

46Your attempt to deprive the Commonwealth, and therefore the community, of a large amount of revenue, undermines the system of revenue upon which the community relies. 

47I take into account that a period of imprisonment in the current era of the COVID pandemic is very difficult for person in custody compared with earlier pre-pandemic times.  It was submitted on your behalf that your wrongful attempt to benefit financially from your conduct was transparent and unlikely to succeed.  This, it was submitted by your counsel, was a mitigating factor in your sentencing. 

48I view the offending conduct somewhat differently.  Matters pertaining to taxation and BAS documentation are complex, and the system relies to a large extent on the honesty of people filing BAS and other taxation returns to the ATO and relies also on the efficiency of the Commonwealth public service.  The fact that following your filing of false and dishonest returns, the ATO withdrew its application to wind up EC Services, indicates some confusion within the ATO as to the company's true indebtedness in respect of PAYG withholdings. 

49Fortunately, a decision was made to embark on a further audit which revealed the true position.  But this was by no means a certain result.  I do not share the view that your attempt to benefit financially from your conduct was unlikely to succeed and almost certainly to fail.

50The Crown provided me with a sample of what was described as comparative sentences imposed by courts with regard to similar offences.  I found these to be of relatively limited assistance.  The full facts surrounding those matters were different in each case and different from your circumstances.  Nevertheless, I can conclude that it is evidence that courts do regard the offence of obtaining property from the Commonwealth by deception or of attempting to do so as a very serious offence. 

51It is also clear that those offences are regarded as serious by Parliament, who have indicated this by prescribing a maximum sentence of 10 years' imprisonment. I note the provisions of s11.1(1) of the Code provides that a person who attempts to commit an offence is to be punished as if the offence attempted had been committed.

52The background to your offending was that you got into financial difficulties and considered that the simple solution was to retain substantial funds which you well knew were not yours, and which funds were required by law to be forwarded to the ATO.  You intended to retain them and, in addition, had hoped to wrongfully obtain further funds from the ATO. 

53In all the circumstances, I am satisfied that any sentence which did not involve a period of incarceration would not adequately reflect the seriousness of your offending or satisfy the purposes for which I am required to sentence you.

54On the charge of attempting to dishonestly obtain a financial advantage by deception from the Commonwealth, contrary to the sections of the Criminal Code that I have previously referred to, you are convicted and you are sentenced to a term of imprisonment of three years.  I direct that after serving 18 months of that term, you be released on a $5000 recognizance release order, to be of good behaviour for three years commencing from the date of your release from custody. 

55Now, are there ancillary orders of any nature sought by the prosecution?

56MS ISAACS:  No, Your Honour.  No.

57HIS HONOUR:  There is a document, Mr Shmuel, that has to be signed by you and me and my associate.  But I will just get it printed up first and I will have it passed down to counsel to look at, and if there is no issue arising from it, I will send it - I will get you, Mr Nath, to take it down to the dock.  I think at the commencement of my remarks I made a reference to ‑ ‑ ‑

58MS ISAACS:  (Indistinct).

59HIS HONOUR:  ‑ ‑ ‑ 131.2 of the Code.  I just cannot remember off the top of my head what that section says.  As I understand it, the principal ‑ ‑ ‑

60MS ISAACS:  It might have been the second offence, Your Honour, which was at the trial, which was subsequently withdrawn on resolution of this matter.

61HIS HONOUR:  Yes.  In any event, it is 134 ‑ ‑ ‑

62MS ISAACS:  We are dealing with 134.2(1), Your Honour ‑ ‑ ‑

63HIS HONOUR:  One, three, four, point two, that is correct

64MS ISAACS:  ‑ ‑ ‑ and 11.103 was dated - it is just the one charge of attempt to obtain financial advantage by deception from the Commonwealth.

65HIS HONOUR:  That makes more sense, does is not?  Mr Shmuel, what I have ordered is that you be sentenced to three years' imprisonment.  But after you have served 18 months of that term, you would be released on what is described as a recognizance release order, released back into the community, released from prison. 

66Subject to your entering into a bond, if you like, to be of good behaviour for the following three years.  So, provided you are of good behaviour, you would not serve the balance of that three-year term.  I will hand this down to counsel in any event, and you might want to discuss it with your counsel before you sign it.  I should also note - and I had not noted at least in my written remarks, that I regard that, in effect, Mr Shmuel has no relevant prior convictions. 

67Look, my associate points out, quite properly, that the various documents that I referred to earlier is arriving late.  It had not been officially tendered but I will admit them into evidence, namely the two referrals from the general practitioner Dr Vira Vyravipillai. 

68#EXHIBIT 3 -   Referrals of Dr Vyravipillai.

69#EXHIBIT 4 -   Warringal Private Hospital records.

70#EXHIBIT 5 -   Emails between George Sindillis and Mr Shmuel.

71#EXHIBIT 6 -   Medical history from Summer Hill Medical Clinic.

72MS ISAACS:  Does Your Honour ‑ ‑ ‑

73MR NATH:  Just - I am sorry, go ahead.

74HIS HONOUR:  One at a time.  One at a time.

75MS ISAACS:  Your Honour, during the course of this sentence, Your Honour referred to a Dr Walton Report.

76HIS HONOUR:  I did.

77MS ISAACS:  However, I understood on the last occasion at the plea, it was never included in the defence documents that were put before Your Honour.

78HIS HONOUR:  It was.

79MS ISAACS:  All right.

80HIS HONOUR:  I have it from well before the plea hearing.

81MS ISAACS:  Yes, Your Honour.

82HIS HONOUR:  And it was tendered, Exhibit 2. 

83MS ISAACS:  I (indistinct) Your Honour.  Apologise.

84HIS HONOUR:  And Mr Nath, you had something to say?

85MR NATH:  Yes, Your Honour.  Neither did I see any of that report of Dr Walton, it was not in my materials.  It probably went missing somewhere.  But as Your Honour says, it is there.

86HIS HONOUR:  It certainly got to me.

87MR NATH:  Just a reminder, Your Honour, you might say a few things about the custody management which I had mentioned earlier for the Corrections for Mr Shmuel.

88HIS HONOUR:  Well, you are talking, in reality, medical matters?

89MR NATH:  Yes, for his management in there.

90HIS HONOUR:  Yes.

91MR NATH:  Certainly, what I gather, that he does have conditions, and I read somewhere that the is not really open about all this and he may be in custody without being treated.

92HIS HONOUR:  Yes.  Mr Nath, I have very little up to date medical material before me.  In fact, one could say none, with the possible exception of the Summer Hill records which are current but lacking in detail.  I have spelt out in my sentencing notes what his conditions are, and I do not think I can - I would assume - I would be extremely disappointed if those notes were ignored, my sentencing remarks were ignored when a person such as Mr Shmuel is admitted into custody. 

93Certainly, they are there to be seen, and perhaps I could direct that the Summer Hill Medical Centre notes be provided to Corrections to give them some idea of the current matters which he has been seeking their attention in respect of, and I will do so.

94MR NATH:  Thank you, Your Honour, that may be useful, and I will let the instructors know as well.

95HIS HONOUR:  Yes, all right. 

96MR NATH:  Thank you, Your Honour.

97HIS HONOUR:  Thank you.  Anything else from counsel?

98MS ISAACS:  No, Your Honour.

99HIS HONOUR:  Yes.  Mr Shmuel can be taken downstairs, thank you.

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