HOLMES v LEWINSKI - [2005] SASC 96

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Criminal)
HOLMES v LEWINSKI
Judgment of The Honourable Justice Besanko
18 March 2005
MAGISTRATES - APPEALS FROM AND CONTROL OVER MAGISTRATES - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT - PRINCIPLES ON WHICH COURT ACTS - INTERFERENCE WITH DISCRETION
CRIMINAL LAW - APPEAL AND NEW TRIAL AND INQUIRY AFTER CONVICTION - APPEAL AND NEW TRIAL - APPEAL AGAINST SENTENCE - APPEAL BY ATTORNEY-GENERAL OR OTHER CROWN LAW OFFICER
Appeal by Crown against sentence imposed by Magistrate - respondent charged with ten offences against s 37(2A) of the Insurance (Agents and Brokers) Act 1984 (Cth) - respondent pleaded guilty to the charges - Magistrate made an order under s 19B of the Crimes Act 1914 (Cth) discharging the respondent without proceeding to conviction - whether Magistrate erred in not recording convictions and imposing a sentence of imprisonment - where respondent operated an insurance business - where respondent received premiums from clients and used the premiums to pay business and personal expenses and for gambling - where respondent was in a position of trust yet engaged in a deliberate and sustained course of dishonest conduct - appeal allowed - orders made by Magistrate set aside and convictions recorded, but respondent released without passing sentence upon her entering into a bond to be of good behaviour and subject to other conditions.
Magistrates Court Act 1991 s 42; Insurance (Agents and Brokers) Act 1984 (Cth) s 37; Crimes Act 1914 (Cth) ss 16A, 19B, 20; Offenders Probation Act 1913 s 4, referred to.
Cobiac v Liddy (1969) 119 CLR 257; Jones v Morley (1981) 29 SASR 57; R v Wilton (1981) 28 SASR 362; Lanham v Brake (1983) 34 SASR 578; Commissioner of Taxation v Baffsky (2001) 192 ALR 92; House v The King (1936) 55 CLR 499; Uznanski v Searle (1981) 26 SASR 388; Everett v The Queen (1994) 181 CLR 295; R v Osenkowski (1982) 30 SASR 212; R v Nemer (2003) 87 SASR 168; Police v Cadd & Ors (1997) 69 SASR 150, considered.

HOLMES v LEWINSKI
[2005] SASC 96
Magistrates Appeal

BESANKO J: This is an appeal by the Commonwealth Director of Public Prosecutions (“the Commonwealth Director”) against a sentence imposed by a Magistrate. The appeal is brought pursuant to s 42 of the Magistrates Court Act 1991.
The respondent was charged on information with ten offences against s 37(2A) of the Insurance (Agents and Brokers) Act 1984 (Cth). At the relevant time, section 37(2A) of that Act made it an offence for a person who received money as agent of an insurer as a premium under a contract of insurance or a proposed contract of insurance to fail to pay the money to the insurer within 37 days after the day on which the money was received. At the relevant time the penalty for an offence against s 37(2A) and (4) of the Act was imprisonment for a period of 12 months or a fine of $6,600.00. The respondent pleaded guilty to the charges.
The Magistrate made an order under s 19B of the Crimes Act 1914 (Cth) discharging the respondent without proceeding to conviction. The order made by the Magistrate is in the following terms:
“Pursuant to s 19B of the Crimes Act, without recording a conviction, I discharge you upon giving security by recognisance in the sum of $500.00 to comply with the following conditions:
1) to be of good behaviour for a period of 18 months;
2)to be under the supervision of a probation officer and to obey all reasonable directions of that officer as to attendance at medical assessments, programs and for treatment;
3) that you pay the victims the following amounts:
Steven and Toni Denison-Smith - $1404.40
Graham and Mary Williams - $2146.99
James and Pamela Smith - $677.60.”
Under s 20 of the Crimes Act the Magistrate had the power to convict the respondent of the offences but then, without passing sentence, to require her to enter into a bond to be of good behaviour and subject to other conditions (s 20(1)(a)). Alternatively, the Magistrate, after recording convictions, could have imposed a sentence of imprisonment but ordered that the respondent be released on entering into a bond to be of good behaviour and subject to other conditions (s 20(1)(b)).
The Commonwealth Director submits that the Magistrate erred in not recording convictions and imposing a sentence of imprisonment. He does not suggest that it would not have been appropriate to order that the respondent be released forthwith upon entering into a bond to be of good behaviour and subject to other conditions.
The circumstances of the offending and the respondent’s personal circumstances
The respondent is a woman who is 48 years of age. During the period from 1995 to 2002 she operated a business as sole proprietor under the name “Harrerds Insurance Agencies”. The respondent was an agent and sub-agent of various insurance companies and brokers in relation to life and general insurance. She received premiums from clients who expected that she would forward the premiums to the relevant insurance companies. Between August 1999 and September 2000 she received premiums from seven clients but she did not pay the premiums within the period fixed by s 37(2A) of the Insurance (Agents and Brokers) Act1984 or at all. The premiums were paid into the respondent’s bank account and then used by the respondent to pay business and personal expenses and for gambling. Receipts were not issued by the respondent and she said that she never issued receipts. When the offending came to light, the respondent was interviewed and she essentially made full admissions including admissions to the effect that she withheld premiums principally to support her gambling addiction. I do not think it is necessary to set out the details of each of the ten offences. It is sufficient to say that there were seven clients involved, and that the premiums not paid by the respondent totalled $12,498.98. In the case of each offence, the clients were uninsured without knowing it for periods ranging from one month to twelve months. In addition, it seems that in at least a couple of cases, the respondent maintained the deception with the client that the client was insured some time after the premiums had been paid. In one case she in fact deducted an excess on a non-existent insurance policy when she arranged for a damaged motor vehicle to be repaired.
The Magistrate was undoubtedly correct to say that the respondent had engaged in a deliberate and sustained course of dishonest conduct and that it was even more serious because she was in a position of trust. The Magistrate was correct to say that many of the victims had established relationships with the respondent in the past such that they were unlikely to have questioned her actions. The offending was deliberate, it occurred over a reasonably substantial period of time and it involved a not unsubstantial sum of money.
There were some unhappy aspects to the respondent’s childhood and her first marriage failed. She claims that she was assaulted as a child. She said that at one time in her life she became involved in a satanic cult. She developed a gambling problem before she committed the offences which are the subject of the appeal. The respondent was seen by Dr Craig Raeside before the hearing before the Magistrate. Dr Raeside is a psychiatrist and his report is dated 31^st March 2003. One of Dr Raeside’s major conclusions was summarised by the Magistrate in her sentencing remarks in the following words:
“Also, at the time of the offences, you were suffering a borderline personality disorder that was sufficiently severe that Dr Raeside categorised it as a chronic post-traumatic stress disorder. He says that the severity of your condition rendered you more susceptible to the impact of problem gambling.”
Dr Raeside said that notwithstanding the presence of the psychiatric disorder, he was unable to find any evidence to suggest that the respondent did not know the nature and quality of her actions, the wrongfulness of them, or that she was unable to control her conduct.
The respondent told Dr Raeside when she saw him in March 2003 that she was employed as a finance broker on a full time basis.
The Magistrates Court conducts a diversion program, and the respondent was accepted into that program in August 2003. It was recommended that the respondent engage in various programs, and it is fair to say that the respondent’s participation in the program was positive. It seems that she was directed to undertake various programs relevant to her depression and her history of difficulties with gambling.
The respondent was seen by a clinical neuro-psychologist, Ms L Denson, in April and May 2004. Ms L Denson noted that the respondent was working for an accountant and studying accountancy. She had gained two distinctions and three credits but she noticed that studying was harder than she expected. The respondent’s performances on standardised psychometric testing were suggestive of mild impairment of some executive (frontal lobe type) cognitive functions. Otherwise, she performed at her expected level. Ms Denson said that the respondent’s pattern of test performances suggests that if she has cognitive difficulties related to brain injury they are subtle rather than severe, and it is unclear whether they explained her study difficulties.
The evidence before the Magistrate suggested that the respondent has encountered a number of difficulties in her life. At the same time, the evidence suggested that the respondent is an intelligent woman who does not lack social skills.
The Magistrate’s reasons
As I have said, the Magistrate said that the respondent had engaged in a deliberate and sustained course of dishonest conduct and that her conduct was even more serious because she was in a position of trust. She used the money for gambling and the Magistrate said that the respondent saw her actions as merely borrowing money from her trading account and paying it back when she was able to rather than defrauding her clients. The Magistrate said that at the time of the offences the respondent was suffering a borderline personality disorder that was sufficiently severe that Dr Raeside characterised it as a chronic post-traumatic stress disorder and that the disorder rendered the respondent more susceptible to the impact of problem gambling. The Magistrate said that the respondent had participated successfully in the diversion court program.
The Magistrate said that she had considered all of the matters in s 16A(2) of the Crimes Act. That subsection sets out the matters the Court must have regard to when passing sentence. The Magistrate said that she gave the respondent credit for her pleas of guilty and that she considered the respondent’s prospects for further rehabilitation were good. The Magistrate noted that the respondent was no longer licensed as a broker. Apart from the offences before her, the Magistrate said the respondent was a person of good character. The Magistrate noted that the relevant authorities required her when passing sentence to give considerable emphasis to the need for both personal and general deterrence.
The Magistrate turned to consider whether the respondent satisfied some of the criteria in s 19B(1)(b) of the Crimes Act. The Magistrate found that by reason of her prior good character, antecedents and mental or psychological condition at the time of the offending, the respondent did satisfy some of the criteria in s 19B(1)(b). The Magistrate said that she was then required to consider whether the relevant criteria reasonably support one or more of the three options referred to in s 19B(1)(b) that it is inexpedient to inflict any punishment, that it is inexpedient to inflict any punishment other than a nominal punishment or it is expedient to release the respondent on probation.
The Magistrate said:
“Having regard to all of the circumstances of the offences and to your circumstances as an offender and, particularly having regard to your successful completion of the diversion court program over an extended period, I consider that the criteria reasonably support the opinion that it is expedient to release you on probation.
The discretion under s 19B to discharge without conviction arises for consideration and I must therefore consider the exercise of that discretion.
You are remorseful and contrite. You have made restitution of some moneys the subject of the charges and have paid the balance into the Registry so that I can make a reparation order today. I am satisfied that that (sic) you are unlikely to re-offend and that in all the circumstances your rehabilitation outweighs the need for general deterrence.
I find that this an appropriate case to discharge you without conviction on a recognisance.”
Issues on appeal
In the words of s 19B of the Crimes Act the Magistrate found the charge proved but she was “of the opinion, having regard to character, antecedents … [and] mental condition of the [respondent] that it [was] expedient to release the [respondent] on probation”.
There are a number of cases which have considered the operation of s 19B or the equivalent section in the Offenders Probation Act 1913 (s 4 (1)). In Jones v Morley (1981) 29 SASR 57, King CJ described the two conditions that must exist for the discretionary powers conferred by the section to arise. First, there must be some mitigating aspect arising from one or more of the matters mentioned in the section which would “provide a sufficient ground for a reasonable man to hold that it would be expedient to extend the leniency which the statute permits” (Cobiac v Liddy (1969) 119 CLR 257 per Windeyer J at 276), and secondly, the Court must actually form the opinion required by the section, namely that having regard to one or more of the matters mentioned it is expedient to exercise one of the powers conferred by the section. I will refer to these two conditions as the two stages.
In relation to the first stage, it has been held that the word “antecedents” is as wide as can be conceived. In Jones v Morley (supra) King CJ said (at 63):
“The word ‘antecedents’ is ‘as wide as can be conceived’; R v Vallett, per Lord Goddard CJ at p 232. It is certainly wide enough to include all aspects, favourable and unfavourable, of an offender’s background, past life, personal, family, social, employment and vocational circumstances, and of his current way of life and its inter-action with the lives and welfare of others.”
As I understand it, the matters identified at the first stage must be the matters which justify the exercise of leniency contemplated by the section (R v Wilton (1981) 28 SASR 362 per King CJ at 367; Lanham v Brake (1983) 34 SASR 578 per Cox J at 585), although this proposition may not be so clear as to be beyond argument (see the discussion by Spigelman CJ in Commissioner of Taxation v Baffsky (2001) 192 ALR 92 at [16] – [24]). At the second stage, the court considers all matters relevant to the sentencing function including the matters identified in s 16A(2) of the Crimes Act and considerations of general deterrence which although not specifically mentioned in s 16A(2) are clearly relevant to the sentencing function (Commissioner of Taxation v Baffsky (supra) per Spigelman CJ at [92]). Ordinarily a conviction will result from a finding that a charge is proved. However, the Magistrate had a discretion to release the respondent on probation if she considered it was expedient or right or proper or advantageous to extend leniency of that nature.
A challenge to the formation of an opinion that it is expedient to release the respondent on probation is subject to the restrictions that attend a challenge to the exercise of a discretion (House v The King (1936) 55 CLR 499; Uznanski v Searle (1981) 26 SASR 388 per King CJ at 389; Commissioner of Taxation v Baffsky (supra) per Spigelman CJ at [9]). An appellate court will not interfere with the exercise of the discretion simply because it would have exercised the discretion in a different way. It has been said on a number of occasions in the context of a discretion of the type now under consideration that it is the magistrate’s discretion not that of the appeal court (Cobiac v Liddy (supra) per Windeyer J at 275; Uznanski v Searle (supra) per King CJ at 389 per Sangster J at 395).
A question arises as to whether to succeed the Commonwealth Director must show not only an error of the type identified in House v The King (supra), but also one of the matters the prosecution must show before an appeal by the prosecution will be allowed. The hurdles facing the prosecution are well known and I need only refer to Everett v The Queen (1994) 181 CLR 295, R v Osenkowski (1982) 30 SASR 212 per King CJ at 212 – 213 and R v Nemer (2003) 87 SASR 168.
The fact that this is an appeal as of right (and not by leave) does not mean that the hurdles facing the prosecution do not apply (Police v Cadd & Ors (1997) 69 SASR 150) per Doyle CJ (with whom Duggan and Mullighan JJ agreed on this point) (at 159).
The fact that an appeal is an appeal against a non-custodial sentence may mean that the hurdles facing the prosecution do not apply (Police v Cadd (supra) per Doyle CJ (with whom Duggan and Mullighan JJ agreed on this point) at 159). However, I do not think that this has been clearly established by the authorities and in any event it is not clear to me that this case falls into that category.
I am disposed to think that the usual hurdles facing the prosecution on an appeal by it do not apply in this case because of the nature of the decision made by the Magistrate. She was not exercising a general sentencing discretion. Rather she had to be satisfied of one of the specific matters in 19B(1)(b) and she had to be satisfied that it was expedient to release the respondent on probation. In my opinion, the Commonwealth Director is entitled to succeed if he shows an error of the type identified in House v The King (supra). I should add that, for reasons I will give, I think that in any event the prosecution overcomes the usual hurdles that attend prosecution appeals in that I think the Magistrate’s decision is so disproportionate to the seriousness of the offences as to shock the public conscience.
The first question is whether the respondent’s character, antecedents and/or mental condition provided a sufficient ground for a reasonable man to hold that it would be expedient to extend the leniency which the statute permits.
The Magistrate found that prior to the offences the respondent was a person of good character. I assume she meant by that that the respondent had no material prior convictions. The finding of good character was not challenged by the Commonwealth Director although he submitted, correctly I think, that it was of less relevance in relation to the later offences committed in the course of the respondent’s offending.
The Magistrate also found that the respondent’s antecedents enlivened the discretion in s 19B. The matters relevant to this criterion which the Magistrate mentioned were the respondent’s gambling problem and the fact that in 1996, as the Magistrate put it, this problem developed to the point where the respondent lost about $220,000, her house, her reputation and her self-esteem. I must say that if these were the only matters the Magistrate had in mind I would not consider them sufficient to enliven the discretion.
The Magistrate found that the respondent’s mental or psychological condition was sufficient to enliven the discretion. The Magistrate referred to Dr Raeside’s opinion that at the time of the offending the respondent suffered a borderline personality disorder that was sufficiently severe to be characterised as a chronic post-traumatic stress disorder. The severity of the respondent’s condition rendered her more susceptible to the impact of problem gambling. Dr Raeside does express these opinions in his report although two observations may be made about what he says. First, he says that he is unable to be definitive about the type of personality disorder suffered by the respondent, but he suspects it is best classified as a personality disorder. Secondly, his opinion must be considered in the context of the respondent’s conduct and the nature of her offending. She knew the nature and quality of her actions and the wrongfulness of them, and she was able to control her conduct. More importantly, as I have said the respondent is an intelligent woman who does not lack social skills. She had sufficient intelligence and social skills to conduct her own business as an insurance agent from 1995 to 2002 and it seems without incident between 1995 and August 1999. Her business required a certain level of business acumen and social interaction. The offending involved a course of conduct which involved calculated deception. Although the matters which I have identified might be said to weaken the Magistrate’s finding that the respondent qualified in terms of her antecedents and mental condition, I am satisfied that together with her good character there was sufficient for the Magistrate to conclude that the first condition or stage was satisfied.

A broader range of considerations are relevant at the second stage. In my opinion, considerations of deterrence, both general and personal, were very important in this matter. General deterrence was particularly important. The offending involved the fraudulent misappropriation of the money of other people. The respondent was in a position of trust. The offending occurred over a substantial period of time. The offence was one that is not easy to detect in that it may go undetected if a claim is not made. The deception consisted not only of accepting the monies and not paying them over but in some cases of maintaining the deception when queries were raised by clients. Personal deterrence was also important. It is true that the respondent pleaded guilty and was remorseful and contrite. Furthermore, she participated in the diversion court program and her prospects of further rehabilitation (said the Magistrate) were good. The Magistrate found that the respondent was unlikely to re-offend. The respondent had made restitution of some monies and paid the balance into Registry so that the Magistrate could make a reparation order. These are significant matters but they do not mean considerations of personal deterrence are irrelevant. Some weight must be given to considerations of personal deterrence.
The respondent’s good character, difficult personal circumstances, mental condition and gambling addiction were matters the Magistrate was entitled to take into account. I have already referred to these matters. However, for the reasons I have given, considerations of deterrence, particularly general deterrence, were so important in the circumstances of this case that an exercise of the discretion in s 19B of the Crimes Act involved an error of the type identified in House v The King (supra). Furthermore, it was so disproportionate to the seriousness of the offences as to shock the public conscience.
The Magistrate erred in concluding that it was expedient to exercise the powers in s 19B and her orders under that section must be set aside.
It seems to me that the fraudulent and deliberate nature of the offending committed over a period of time by a person occupying a position of trust would ordinarily call for a sentence of imprisonment albeit that the other circumstances of the present case might justify an order that the respondent be released forthwith upon her entering into a bond. However, as against that I am conscious of the fact that this is a prosecution appeal and the Magistrate was obviously impressed by and considered it appropriate to place weight on the circumstances suggesting leniency. In those circumstances, and not without some hesitation, I think it is appropriate to exercise the power in s 20(1)(a) of the Crimes Act. The respondent should be convicted of the ten offences but it is appropriate that she be released without passing sentence on her upon her entering into a bond to be of good behaviour and subject to other conditions.
Conclusion
The appeal must be allowed and the orders made by the Magistrate under s 19B of the Crimes Act should be set aside. Convictions must be recorded but I think it is appropriate that the respondent be released without passing sentence on her upon her entering into a bond to be of good behaviour and subject to other conditions. I will hear the parties as to the precise form of the orders.