DPP (Cth) v Hunter; DPP (Cth) v Milner
[2003] VSCA 171
•24 October 2003
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 196 of 2003
| DIRECTOR OF PUBLIC PROSECUTIONS (COMMONWEALTH) |
| v. |
| TERENCE JOHN HUNTER |
| No. 197 of 2003 |
| DIRECTOR OF PUBLIC PROSECUTIONS (COMMONWEALTH) |
| v. |
| GRAEME JEOFFREY MILNER |
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JUDGES: | WINNEKE, A.C.J., VINCENT and EAMES, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 22 October 2003 | |
DATE OF JUDGMENT: | 24 October 2003 | |
MEDIUM NEUTRAL CITATION: | [2003] VSCA 171 | |
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Criminal law – Crown appeal – Corporation offences – Improper use of position as officer of company and seeking subscriptions from public for a prescribed interest without an approved deed - $3.5 million loss to investors and funds dishonestly transferred to companies controlled by respondents – Failure to accumulate sentences producing a manifest inadequate sentence.
| APPEARANCES: | Counsel | Solicitors |
| For the DPP | Mr R.T. Barry | Solicitor for the Director of Public Prosecutions (C'th) |
| For the Respondent Hunter | Mr D. Ross, Q.C. with Mr G. Mullaly | Victoria Legal Aid |
| For the Respondent Milner | Mrs J. Morrish, Q.C. with Ms S. Thomas | Goldsmiths |
WINNEKE, A.C.J.:
In 1997 and 1998 Terence Hunter, aged 58, and Graeme Milner, aged 47 (the respondents), two members and devotees of the Apostolic church in Bendigo, conceived and promoted a thoroughly risk-laden scheme by means of which they secured millions of dollars from fellow church members and a wider circle of acquaintances. The moneys were secured through the use of a company called Acts Net Ltd of which each of the respondents was an "officer" within the meaning of the Corporations Law. By means of false representations some 80 investors were induced to part with their money in favour of two separate schemes. In all some $4 million was invested upon promises of short-term returns of 60 to 100 per cent. At all relevant times Hunter was a minister of the Bendigo church and the Chairman of the Board of Ascension College which had been founded by the church and which was in some way intended to benefit from the schemes. Mr Milner was an accountant. He was the bursar of the college and also on its board. Like Hunter, he drew a salary from such funds as the college had. Hunter and Milner had been friends and associates for some 20 years.
The prospective investors were told that their moneys would be placed in "overseas debenture trading programs" which were organised and run by overseas entrepreneurs. No doubt they were lured by promises of large returns; but there is little doubt that their attention was - at least to an extent - engaged by the trust which they placed in the respondents. Many of the investors were people with small assets. So successful was the manner in which the schemes were "floated" to them that many of these investors sold their assets or mortgaged their homes to participate. Their victim impact statements constitute an eloquent testimony to the personal tragedies which they now face.
Following the inevitable collapse of the schemes, which have largely been of benefit only to their overseas promoters, the respondents were presented in the County Court upon an indictment containing six counts. Four of those counts alleged "knowingly making improper use of their position as officers of Acts Net Ltd by dishonestly transferring funds from the company's account with intent to gain benefit for themselves" contrary to ss.232(b) and 1317FA(1) of the Corporations Law, which offence is taken to be included in the Corporations Act 2001 by s.1401 of that Act. Two of these counts (namely counts 1 and 3) were alleged against Hunter; and three of them (namely counts 1, 2 and 4) against Milner. Each of counts 5 and 6 alleged against both Hunter and Milner that they were "knowingly concerned in Acts Net Ltd issuing invitations to subscribe for prescribed interests in a 'Bank Debenture Trading Program' without there being an approved deed in force". These offences were alleged pursuant to ss.1065(1) and 1311(1) of the Corporations Law, taken to be included in the Act of 2001 by virtue of s.1401 of that Act.
On 15 April 2003 each of the respondents pleaded guilty to the offences alleged against them. Each of those offences attracted a maximum penalty of five years and/or a stipulated monetary penalty. Following pleas in mitigation the sentencing judge, on 20 June 2003, imposed penalties upon the respondents as follows:
Hunter: Counts 1 and 3 - two years' imprisonment on each count; Counts 5 and 6 - 18 months on each count. His Honour ordered pursuant to s.19 of the Crimes Act (Cth) that each such sentence commence on the day of sentence and he directed that Hunter be released on a recognizance release order after serving six months of the sentence.
As to Milner his Honour ordered in respect of counts 1, 2 and 4 that he serve a period of two years' imprisonment on each count; on counts 5 and 6 that he serve a period of 18 months' imprisonment on each count. Again, his Honour ordered each of the sentences commence on the day of sentence and directed that Milner be released also after six months on a recognizance release order.
The Director of Public Prosecutions (Cth), by notice dated 18 July 2003, has appealed against the sentences which the County Court imposed on each of the respondents. Despite the grounds set out in the notice, Mr Barry, who appeared for the Director, informed us at the outset of the appeal that the essence of the appeal was that the sentencing judge was in error in failing to recognise that there were here two very discrete episodes of criminal offending; the gravity of which could only be reflected in appropriate cumulation of portion of the sentences imposed on counts 5 and 6 upon the sentences imposed on counts 1 to 4. This failure, so it was submitted, has infected the entire sentencing process, particularly the minimum periods of six months ordered to be served by each respondent before being released on their own recognizances.
Before considering further the arguments put on behalf of the Director, it is desirable to say a little more about the nature of the offending. The debenture trading scheme which was eventually introduced to investors by the respondents and/or their agents appears to have been hatched by some unscrupulous entrepreneurs in the United States and promulgated throughout the globe via the Internet. The overseas entrepreneurs were apparently signalling to interested persons that there were substantial profits to be made, and quickly, in what were called bank debenture trading programs
The respondents decided, in or about 1997, to take advantage of the opportunities offered; and further decided that, in pursuit of that purpose, they would utilise the corporate entity Acts Net Ltd to invite members of the public to subscribe funds. Although it is claimed that they sought some general advice, apparently insufficient was communicated to enlighten them that what they intended to do was in breach of those provisions of the Corporations Law which regulate the dealing with prescribed interests without an approved deed. Because, ultimately, the respondents invited the public to subscribe to two separate schemes, they offended twice against s.1065(1) of the Corporations Law by being knowingly concerned in the company issuing invitations to the public to subscribe for prescribed interests in the respective trading programs without there being an approved deed. These were the offences which were alleged in counts 5 and 6. Had the respondents complied with the provisions of the Law, these schemes would not have got off the ground. As it was, the respondents were able to invite and attract, with lavish promises and misleading documentation, subscription funds from an array of investors, which funds were promised to be sent offshore to be invested by a third party in a so-called "no risk bank debenture trading scheme". In the first scheme the third party was represented to be Fenmore International Ltd and in the second the third party was represented to be Dakota Capital Management Inc.
Thirty investors, many or most of whom knew the respondents (and trusted them) through the Bendigo church, subscribed their funds to the first scheme which continued from about December 1997 until approximately April 1998. Some 50 investors subscribed their funds to the second scheme which continued during the latter half of 1998. In total, as I have said, some $A4 million was subscribed, of which some $3.5 million was ultimately lost to the investors. Investors were encouraged to invest in the schemes by representations that large profits would be returned on capital within short periods of time. That encouragement included an elaborate complex of documentation calculated to assure investors that their money would be safe, would not be used otherwise than for the purpose of lodgement into the relevant debenture trading program and that no part of the funds invested would be deducted by the respondents or their companies for any purpose so that, if the debenture trading program did not proceed, the funds invested would be returned to the investor in specie and "every cent invested " would be "promptly refunded". To that end, each investor was given a "Letter of Guarantee of Funds" (signed by the investor and Hunter on behalf of Acts Net Ltd) confirming that the directors of the company were giving an "unequivocal guarantee" to the investor that the investor's funds were to be "held in trust", "only applied for the express use of the debenture trading program", and not subject "to any deductions whatsoever". Contrary to this documentation, the material before the sentencing judge showed that the investors' funds were, without consultation with the investors, transferred from time to time into accounts of other companies controlled by the respondents and used thereafter for the benefit of the respondents. Those activities were the subject of counts 1 to 4 inclusive on the indictment, that is the counts which alleged that the respondents at various dates in 1997 and 1998 and contrary to s.232(b) of the Corporations Law knowingly made improper use of their positions as officers of the company by dishonestly transferring those sums from the Acts Net Ltd US "dollar account" to the account of Acts Ministry Inc. or the account of Ascension College Inc. With the intent to gain directly or indirectly an advantage for themselves or others.
Quite apart from the deceitful documentation, there were other pressures placed upon investors to participate in these schemes or to placate them so as to maintain their participation. Thus, Peter Carson, who had invested substantial amounts in September 1997, made inquiries about his investment of Milner in December. Milner responded by fax advising that "the program had been extended by 30 days to 6 April when a 100% return would be paid". Upon the strength of those representations Carson invested more money. Theresa Buckley said that in August 1997 she was approached by Hunter and Milner and asked whether she was interested in investing in a "government guaranteed no risk investment scheme". It was, they said, "limited to Christians". They further told her that the "Federal Government uses the scheme to move funds". Kathryn Andrew, an ordained priest and school teacher, said that she was told by Hunter that the "investment program worked" and that he had to sit down and "count piles of money". She, too, was told that invitations to invest were only being made to Christians. He told her that he was "a millionaire". The funds which she invested were part of her husband's superannuation. Rodney Witcombe was introduced to the second scheme in Perth by Milner. Milner explained to him that he (Milner) would place the funds invested in a selected trading program with a reputable bank, maintaining control of the funds under his signature and that this would guarantee security of the capital. When, in July 1998, Witcombe met Hunter and Milner to ask further questions, he was told that "the mechanism consisted of hundreds of interbank transactions" in which the bank "rented the potential of the investors' money whilst retaining it on safe deposit and, through the power of leveraging, substantial profits were made". This induced Witcombe to invest more money. These were samples of the misrepresentations made to investors to gain or maintain their interest. It is because those profits, which were being promised to the investors, are "prescribed interests" within the meaning of the Corporations Law that an approved deed is required to protect the investors. It would seem that the respondents proceeded in blind or studied ignorance of these legal requirements.
The foregoing to sufficient, I think, to provide a suitable synopsis, for present purposes, of the acts committed by the respondents which underlay or supported the offences to which they pleaded guilty. It also sufficiently exposes, for the purpose of this appeal, the level of criminality of the respondents in committing those acts.
His Honour appeared to regard these crimes as "a folly" emanating from religious fanaticism. He took the view that each of the respondents should be treated as equally culpable but regarded neither of them as fitting "comfortably into the regular criminal mould". Hunter, he believed, was both deluded and desperate to maintain "his kingdom". Although, as his Honour said, the case might be described as "white collar crime", it was better described as "religious fanaticism, picking up on the tidbits of economic fanaticism underwritten by the then prevailing ... disregard for financial rashness" (whatever that might mean). This was a case, his Honour thought, where "international high finance" was totally incompatible with "spiritual enrichment". Each respondent, in his Honour's view, had contributed to extensive losses through "misguided folly and recklessness". It was the "schism" between the Apostolic church and its Bendigo branch which "marked the beginning of the desperation and the delusion". They were "victims" of their "obsessive commitment" and religiosity, said his Honour. To that end, in his Honour's view, they were not driven by personal gain or greed but by identifying themselves too closely with the church. Although his Honour took the view that the respondents had been "culpable" in the manner of embarking upon the scheme, they did not "consciously dupe the investors". Such dishonesty, as there was, was objective (whatever that might mean). It was, in the end, the judge's view that it was the "schism", which resulted in the Bendigo branch of the church "breaking away" from the Apostolic church, which "caused all this". It was that which, so his Honour said, caused the "reckless conduct" in which each respondent had engaged; a recklessness which was "characterised by a significant amount of wilful self-deception".
Mr Barry contended that his Honour's sentencing remarks and the ultimate sentences imposed were far too generous to the respondents and failed to adequately recognise the true level of their criminality and the devastation which they had caused to so many of their adherents who had placed their trust in them. Religious fanaticism and self-delusion, he contended, could not explain why intelligent men in their position would embark upon a year long process of extracting money from those whom they must have known were placing their trust in them by falsely representing the facts which they must have increasingly come to know were not true. His Honour's sentencing remarks, it was said, concentrated far too much on his perception of what was driving these men rather than focusing on the impact which their deliberate conduct had upon the investors. There was no acknowledgment, or proper acknowledgment, of the undisputed fact that these men had embarked upon extracting money from investors for a second scheme when they must have known that the first scheme was a failure. The sentences actually imposed, it was put, were a reflection of this misconception because there was no cumulation of the sentences imposed on counts 5 and 6, either as between themselves or between them and the sentences imposed upon counts 1 to 4 inclusive. The result, it was submitted, was a total effective sentence which did not reflect the overall criminality either in the head sentence or the minimum term ordered to be served.
Counsel for each of the respondents reminded the Court that this was a Crown appeal in which the Court, for reasons emanating from the principles of double jeopardy, should be slow to intervene with the exercise of his Honour's sentencing discretion. Mr Ross, on Mr Hunter's behalf, pointed to his client's age and previous good behaviour, the plea of guilty and other mitigating factors which justified the sentences which his Honour had imposed, particularly the sentence of 24 months on counts 1 to 4 inclusive which amounted to 40 per cent of the maximum. Mr Ross submitted that his Honour was entitled to conclude that his client clearly believed in the scheme, as a consequence of foolishness and naivety. On behalf of Mr Milner, Mrs Morrish adopted the submissions which Mr Ross had made on behalf of Hunter and further pointed to the fact that Milner's belief in this scheme was underscored by the fact that he had contributed personally to it. Despite the fact that he was an accountant, he was not experienced in the ways of the world. She also pointed out that his Honour's view of the respondents' conduct was supported by the fact that at least two of the victims had forgiven Milner and had given evidence in his support. Much emphasis was laid upon the fact that his Honour's decision not to cumulate any portion of the sentences was very much a matter of his Honour's discretion with which this Court, on a Director's appeal, should be slow to interfere.
This appeal has been well argued on both sides. However, at the end of the day, I am quite satisfied that his Honour's discretion has miscarried, largely for the reasons which have been advanced by Mr Barry. In my view, his Honour has undervalued the seriousness of the conduct in which the respondents engaged and particularly has failed to recognise, both in his reasons and in the sentencing disposition, the fact that the respondents determined to embark upon a second scheme at a time when they must have known that the first scheme was, or was about to become, a failure because of the offshore third party's inability to deliver. The fact is that they continued to make false representations to many investors for the purposes of inducing those investors to part with their money by soothing them with blandishments both in words and written guarantees that their moneys were safe. The offences described in counts 5 and 6 were indeed the product of separate schemes and were offences which described entirely different conduct from the offences described in counts 1 to 4. A sound exercise of the sentencing discretion, in my view, rendered it a virtual imperative to order some degree of cumulation of the sentences imposed on those counts, both upon each other and upon the sentences impose on counts 1 to 4. For my own part, I am by no means satisfied that either respondent showed any willingness to contribute his own moneys to these schemes. That matter was in dispute between the Director and counsel for Milner before the sentencing judge. His Honour made no finding about it and notwithstanding that Mr Milner had claimed in his record of interview to have contributed about $40,000, the evidence to which we were referred would not support that fact. But whether that is so or not, it is, in my view, inconceivable that men of the experience and calibre of the respondents could have failed to recognise that, as a the 1998 year wore on, their continued extraction of moneys from people whom they knew were dependent upon them, warranted the confident prediction of profits contained in their written and oral representations.
I would accordingly allow the appeals, set aside the sentences imposed by his Honour. In lieu thereof I would substitute the following sentences, bearing in mind the principles of double jeopardy arising from the fact that each is standing for sentence for the second time.
In respect of Hunter, I would substitute the sentences as follows: On counts 1 and 3, two years' imprisonment; on each on counts 5 and 6, 18 months' imprisonment on each. I would direct that three months of the sentence imposed on Count 5 and six months of the sentence imposed on Count 6 be served cumulatively upon each other and upon the sentences imposed on counts 1 and 3. The total effective sentence will therefore be one of two years and nine months. I would direct that Hunter be released on recognizance in the sum of $1,000 for a period of 21 months after serving 12 months of the period of imprisonment imposed.
In respect of Milner, on counts 1, 2 and 4 I would order that he serve two years; imprisonment on each, on counts 5 and 6, 18 months' imprisonment on each. I would direct that three months of the sentence imposed on count 5 and six months of the sentence imposed on count 6 be served cumulatively upon each other and upon the sentences imposed on counts 1, 2 and 4. The total effective sentence will therefore be one of two years and nine months. I would direct that Milner be released on his own recognizance in the sum of $1,000 for a period of 21 months after serving 12 months of the period of imprisonment imposed.
VINCENT, J.A.:
I agree that this appeal should be allowed and for the reasons advanced by the Acting Chief Justice.
I also agree in the disposition of the matters pronounced by him. I would add that in my view a particularly serious feature of the conduct of each of the respondents is that each engaged in the process of repeatedly and deliberately lying to persons who trusted them in order to extract money from them.
EAMES, J.A.:
I agree with the orders proposed by the Acting Chief Justice and with his reasons.
WINNEKE, A.C.J.:
The formal orders of the Court will be as follows:
In respect of the respondent Hunter, the appeal is allowed. The sentences imposed by the trial judge in the County Court are quashed. In lieu thereof this Court orders as follows:
On counts 1 and 3, two years' imprisonment to commence on today's date;
On count 5, 18 months' imprisonment to commence on 24 July 2004;
On count 6, 18 months' imprisonment to commence on 24 January 2005
The total effective sentence will therefore be one of two years and nine months.
The Court orders that the respondent Hunter be released after serving 12 months of the sentence imposed upon his own recognizance in the sum of $1,000 for a period of 21 months. Pursuant to s.16E of the Crimes Act (Cth), the Court declares that the respondent Hunter has already served 127 days of the sentences which we have imposed. We further direct that the fact of such declaration and its details be entered in the records of this Court.
We direct that it be explained to the respondent Hunter that we have made a recognizance release order directing that he be released after serving 12 months of the term of imprisonment which we have imposed (which will be effectively approximately eight months from today's date). The balance of the sentence imposed (21 months) will be served in the community. A condition of his recognizance is that he be of good behaviour; failure to comply with which may result in his being taken back into custody.
In respect of the respondent Milner, the Court records that the appeal be allowed. The sentences imposed by the trial judge in the County Court are quashed and in lieu thereof this Court orders as follows:
On counts 1, 2 and 4 he be imprisoned to two years' imprisonment on each count, to commence on today's date;
On count 5 he be sentenced to a term of imprisonment of 18 months', to commence on 24 July 2004; and
On count 6 he be sentenced to a period of imprisonment of 18 months to commence on 24 January 2005.
The total effective sentence will therefore be one of two years and nine months.
The Court orders that the respondent Milner be released after serving 12 months of the sentence imposed upon his own recognizance in the sum of $1,000 for a period of 21 months. Pursuant to s.16E of the Crimes Act (Cth), we declare that the respondent Milner has already served 127 days of the sentences which we have imposed. We further direct that the fact of that declaration and its details be entered in the records of this Court.We direct that it be explained to the respondent Milner that we have made a recognizance release order directing that he be released after serving 12 months of the term of imprisonment which this Court has imposed (which will effectively be about eight months from today having regard to the pre-sentence detention). The balance of the sentence imposed (21 months) will be served in the community. A condition of his recognizance is that he be of good behaviour; failure to comply with which may result in his being taken back into custody.
WINNEKE, A.C.J.:
Is anything further, Mr Barry?
(Discussion ensued re reparation order)
WINNEKE, A.C.J.:
We confirm the reparation orders made by the trial judge in respect of the amounts listed in Exhibit D before him and will attach them to the formal sentences when they are produced.
(Discussion ensued re appeal costs certificate)
WINNEKE, A.C.J.:
We will consider the question of the appeal costs certificate and we will let counsel know our reasons about that in due course.
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