R v Agius; R v Castagna (No 14)

[2018] NSWSC 1248

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:	R v Agius; R v Castagna (No 14) [2018] NSWSC 1248
Hearing dates:	1, 2 August 2018
Date of orders:	10 August 2018
Decision date:	10 August 2018
Before:	Adamson J
Decision:	See paragraph [124].
Catchwords:	CRIMINAL LAW – conspiracy to defraud Commonwealth – false declaration of income – money transferred to foreign bank accounts in Vanuatu to avoid detection – sentencing considerations – need for general deterrence and punishment – relevance of amount of under-payment of tax of $2.6 million   CRIMINAL LAW – conspiracy to deal with proceeds of crime – monies transferred under guise of sham loan agreement – additional criminality associated with dealing
Legislation Cited:	Corporations Act 2001 (Cth), s 206B Crimes Act 1914 (Cth), ss 16A, 16B, 16F, 17A 19AB, 19AD, 29D, 86 Criminal Code Act 1995 (Cth), ss 11.5, 135.4, 400.3 Income Tax Assessment Act 1936 (Cth), s 169A, Pt IVA Proceeds of Crime Act 2002 (Cth), ss 92, 94, 320
Cases Cited:	Agius v The Queen (2013) 248 CLR 601; [2013] HCA 27 Bugmy v The Queen (1990) 169 CLR 525; [1990] HCA 18 Coles v R [2016] NSWCCA 32 Director of Public Prosecutions (Cth) v Pratten (No 2) (2017) 94 NSWLR 194; [2017] NSWCCA 42 George v Rockett (1990) 170 CLR 104; [1990] HCA 26 Giourtalis v The Queen [2013] NSWCCA 216 Hili v The Queen; Jones v The Queen (2010) 242 CLR 520; [2010] HCA 45 Host v R [2015] WASCA 23; 248 A Crim R 353 Mill v The Queen (1988) 166 CLR 59; [1988] HCA 70 Pearce v The Queen (1998) 194 CLR 610; [1998] HCA 57 Postiglione v The Queen (1997) 189 CLR 295; [1997] HCA 26 Power v The Queen (1974) 131 CLR 623; [1974] HCA 26 R v Agius; R v Zerafa [2012] NSWSC 978; (2012) 87 ATR 528 R v El Rashid (Unreported, NSWCCA, 7 April 1995) R v Huang; R v Siu [2007] NSWCCA 259; (2007) 174 A Crim R 370 R v Jafari [2017] NSWCCA 152 R v Jones; R v Hili [2010] NSWCCA 108; ; (2010) 76 ATR 249 R v Ly [2014] NSWCCA 78; (2014) 241 A Crim R 192 R v MAK: R v MSK [2006] NSWCCA 381; 167 A Crim R 159 R v Mereb; R v Younan [2014] NSWCCA 149 R v Ronen [2006] NSWCCA 123; (2006) 161 A Crim R 300 R v Scook [2008] WASCA 114; (2008) 185 A Crim R 164 R v Todd [1982] 2 NSWLR 517 R v Wheeler [2000] NSWCCA 34 Rich v Australian Securities and Investment Commission (2004) 220 CLR 129; [2004] HCA 42 The Queen v Olbrich (1999) 199 CLR 270; [1999] HCA 54
Category:	Sentence
Parties:	Regina Robert Francis Agius Anthony Dante Castagna
Representation:	Counsel: P McGuire SC/A McGrath (Crown) P Lowe (Offender Agius) P Strickland SC/T Epstein (Offender Castagna)   Solicitors: Commonwealth Director of Public Prosecutions (Crown) David J Cohen (Offender Agius) Hazan Hollander Lawyers (Offender Castagna)
File Number(s):	2016/136935; 2016/137095

Judgment

Introduction

1. On 18 April 2018, following a trial by jury, the jury returned verdicts of guilty against Robert Francis Agius and Anthony Dante Castagna in respect of counts 1, 2 and 13 of the indictment presented on 19 February 2018.

2. Count 1 charged that the offenders conspired with each other between about 8 April 1998 and about 23 May 2001 to defraud the Commonwealth. Count 2 charged that between about 24 May 2001 and about 30 July 2009 the offenders conspired with each other with the intention of dishonestly causing a loss to a third person, the Commonwealth. The need for two counts arose from the amendment to the relevant statutory provisions which took effect on 24 May 2001: Agius v The Queen (2013) 248 CLR 601; [2013] HCA 27. Count 1 charged an offence against ss 29D and 86(1) of the Crimes Act 1914 (Cth) (conspiracy to defraud the Commonwealth), which carried a maximum penalty of imprisonment for a period not exceeding 20 years and/or a fine not exceeding 2,000 penalty units ($220,000). Count 2 charged an offence against s 135.4(3) of the Criminal Code Act 1995 (Cth) (Criminal Code) for which the maximum penalty is 10 years’ imprisonment and/or a fine of $66,000.

3. Count 13 charged that between about 2 February 2004 and about 15 April 2008 the offenders conspired with each other to deal with money or other property which was proceeds of crime, believing it to be proceeds of crime and, at the time of dealing, the value of the money or other property was $1 million or more contrary to ss 11.5(1) and 400.3(1) of the Criminal Code. The maximum penalty is imprisonment for 25 years and/or a fine of $165,000.

Facts

Principles

4. For the purposes of sentencing, I am required to set out the facts, consistently with the jury’s verdicts. Where facts are adverse to either offender I may not take them into account unless established beyond reasonable doubt.

Matters compelled by the jury’s verdicts

5. It follows from the jury’s verdicts on counts 1 and 2 that there was a conspiracy between the two offenders which commenced some time between April 1998 and a date not later than 23 May 2000 (being the date on which Dr Castagna’s 1999 tax return was lodged) and lasted until a date after 24 May 2001 (being the commencement of the period alleged in count 2). It arose from an agreement to conceal Dr Castagna’s full and true assessable income from the Commissioner of Taxation by using foreign companies and foreign bank accounts, controlled by Mr Agius, to hide the relevant funds. It follows from the jury’s verdicts on count 13 that there was an ongoing conspiracy between the two offenders between about 2 February 2004 and about 15 April 2008 to deal with the unpaid tax (being the proceeds of counts 1 and 2), the value of which was $1 million or more.

Other facts

Mr Agius

6. Mr Agius, an accountant by training, was initially employed by Priestley & Morris in Sydney. Mr Agius then went to work in London. When Priestley & Morris agreed with Moore Stephens, a UK firm, to set up an office in Vanuatu, Mr Agius moved to Vanuatu to become senior partner of that firm, which subsequently became known as PKF Vanuatu. He became a resident of Vanuatu, although he maintained a connection with Australia and had a residence in Kent Street, Sydney.

7. Moore Stephens, and later PKF Vanuatu, was a recognised accounting firm which provided international tax planning offshore services and operated a trust company, International Finance Trust Company Ltd (IFTCO), which was incorporated in Vanuatu in 1984 and controlled by Mr Agius. IFTCO was the ultimate holding company of Billbury Limited (Billbury), a company incorporated in the United Kingdom in 1983, which was also controlled by Mr Agius. Billbury’s principal place of business was Moore Stephens’ office in Vanuatu. Billbury was not registered in Australia and therefore had no Australian Company Number (ACN). Nor did it have a tax file number (TFN) and therefore could not lodge a tax return in Australia. When the Goods and Services Tax (GST) was introduced in Australia in 2000, Billbury did not apply for an Australian Business Number (ABN). For the financial years 1997 to 2007 Billbury had two corporate directors and shareholders, both of which were registered in Vanuatu. The Australian Taxation Office (ATO) was unable to conduct searches regarding these companies because of Vanuatu’s laws.

8. Mr Agius used IFTCO and Billbury as corporate vehicles through which funds could pass. He used these companies for clients of Moore Stephens and for his own purposes, which included the conspiracy the subject of counts 1 and 2, and the conspiracy the subject of count 13.

Dr Castagna

The arrangements with Macquarie Bank

9. Dr Castagna is Mr Agius’ cousin. He qualified as a Chartered Accountant, was a member of the Association of Chartered Accountants, a Fellow of the Certified Public Accountants and also has a PhD in Finance. He worked as an academic at the University of New South Wales and the University of Technology, Sydney from 1972 until 1987. In about 1987, Dr Castagna moved to Silicon Valley in the United States where he worked for about a decade as a venture capitalist. As he was concerned about the risks of being sued by a disgruntled client or investor, he asked Mr Agius to set up a trust for him to protect his assets. Mr Agius arranged for a trust to be created, the Delrick Trust, of which IFTCO was the trustee and which was managed by Moore Stephens until it was wound up in 2000.

10. In about 1997, Dr Castagna expressed an interest in working for Macquarie Bank (Macquarie) with a view to moving back to Sydney, as his wife, Sandy, wanted to return to Australia. Macquarie was interested in his skills as it hoped to expand the part of its business which advised, and raised capital for, start-up technology businesses. Daniel Phillips, an executive director of Macquarie, was involved in recruiting Dr Castagna for this purpose.

11. On 6 October 1997 Dr Castagna put a proposal to Mr Phillips which covered both his potential role as a non-executive director of Macquarie Technology Funds Management (MTFM) and also his role as a consultant for Macquarie. MTFM managed the Macquarie Technology Fund (the Fund). Initially, Dr Castagna worked part-time pursuant to a contract between himself and Macquarie. Subsequently, in about April 1998, when it was proposed that Dr Castagna work full-time, Mr Phillips told him that Macquarie required full-time consultants to be engaged through companies. I reject the submission that Macquarie’s policy contributed to the offending in any material way. It did no more than provide the opportunity for the offenders to commit the offences in counts 1 and 2.

The conspiracy the subject of counts 1 and 2

12. When Dr Castagna told Mr Agius of Macquarie’s requirement, Mr Agius suggested that he use Billbury for this purpose. It was agreed between them that all of the money paid for services physically provided by Dr Castagna to Macquarie would be paid in the first instance to Billbury. Upon receipt, Billbury would transfer the whole of these funds (minus bank fees) to foreign (non-Australian) bank accounts in the names of foreign companies (companies not incorporated in Australia). The offenders agreed that, out of these funds, an amount of $8,800 per month would be paid to Dr Castagna’s account in Australia and would be declared by him as income for “advisory fees” in his Australian income tax returns; and that the balance, though held for Dr Castagna’s benefit, would not be declared as income in his tax returns.

13. I am satisfied, in light of the admissions made by Dr Castagna in the Voluntary Disclosure Statement (VDS) he provided to the ATO, that the conspiracy began in about April 1998 not long before the first payments were made by Macquarie to Billbury in accordance with the first consultancy agreement made at about that time. The offenders’ purpose was to conceal Dr Castagna's full and true income in order to deprive the Commonwealth of the tax payable on the part that was undeclared.

14. Dr Castagna made several self-serving statements in his VDS, as well as admissions, including as to the conspiracy in counts 1 and 2. Except where a finding is recorded in these reasons, I do not accept the VDS. In particular I do not accept that Dr Castagna received any assurance from Mr Agius that the arrangements he proposed which are set out above were “fine” (meaning lawful) or were supported by legal advice or that either Mr Agius or Dr Castagna held any such belief.

The Consultancy Agreements

15. Macquarie conducted all discussions and negotiations concerning the provision of Dr Castagna’s services with Dr Castagna himself. Mr Phillips did not speak to, or have any knowledge of, anybody relating to Billbury apart from Dr Castagna. Macquarie had no interest in Billbury’s solvency or asset position and was prepared to contract with it notwithstanding that the accounts which were provided to Macquarie for the purpose of its “due diligence” showed that it had few, or negative, assets and little turnover.

16. From April 1998 onwards, Dr Castagna’s services were provided to Macquarie pursuant to three consecutive tri-partite agreements between Macquarie, Billbury and Dr Castagna. The terms of these agreements were similar. The agreements did not contemplate that anyone other than Dr Castagna would perform the services. Mr Phillips confirmed that no one else ever provided services on behalf of Billbury to Macquarie. Throughout the entire period of the consultancy agreements, Dr Castagna had his own allocated desk in the open plan arrangement at Macquarie’s offices in Sydney, where he was based.

17. Neither Dr Castagna nor Billbury ever rendered invoices, either to Macquarie or to each other, for services relating to the consultancy agreements.

The three consultancy agreements

18. The first agreement, which covered the period from 9 April 1998 to 30 June 1999, could not be located by Macquarie. However, it was referred to in a letter dated 9 April 1998 from Macquarie to Billbury, which was addressed to Dr Castagna’s address in California. Its terms were similar to those of the other two agreements.

19. All three consultancy agreements provided that there was to be no employment relationship created and that the legal relationship was to be one of principal and independent contractor. Billbury was obliged to indemnify Macquarie for any tax liabilities in the event that “the Representative” (defined to mean Dr Castagna) was deemed to be an employee of Macquarie. Macquarie had a right to terminate the agreement summarily and without notice if Dr Castagna became bankrupt or of unsound mind or could not perform the services under the contract for a period of three months.

20. The three agreements provided for annual consultancy fees to be paid to Billbury in monthly instalments. The annual fees were $250,000 under the first agreement and $275,000 under both the second and third agreements. Dr Castagna was paid separately for being a director of MTFM. The initial letter from Macquarie to Dr Castagna, dated 9 April 1998, identified a $US bank account in Auckland, New Zealand, into which Macquarie was to pay the fees. The account number was given, although not the name of the account holder, which was in fact Billbury. The letter invited Dr Castagna to sign the accompanying page to acknowledge that the schedule met his requirements for payment under the terms of the consultancy agreement. He signed under the following words:

“I hereby accept the terms of the payments to be made to me as per the Consultancy Agreement between Billbury Limited, its Representative and Macquarie Bank dated 9 April 1998.”

21. The first payment pursuant to the first consultancy agreement was made in April 1998. Payments continued to be made in successive months. In June 1998 Dr Castagna returned to Australia, although he continued to travel to the US for work. Dr Castagna notified the ATO that he became an Australian tax resident from 1 January 1999. As such, he was obliged to declare his worldwide income in his Australian tax return from that date.

22. The second consultancy agreement, which covered the period from 1 July 1999 until 30 June 2001, provided, effective from 1 April 1999, for a performance bonus to reflect Dr Castagna’s contribution to Macquarie’s profits.

23. GST, which was imposed from 1 July 2000, was introduced in Australia during the period of the second consultancy agreement. Up until this date, Macquarie Australia had been the Macquarie entity which had made all payments to Billbury under the consultancy agreements. However, in about May or June 2000 it was proposed that the consulting fees and bonuses payable to Billbury be paid out of MacEquities USA, a US company. The effect of this proposal, which was implemented by 1 July 2000, was that GST was not payable on the services provided under the consultancy agreements as they were provided to a foreign company, MacEquities USA. However, as Macquarie Australia was the relevant costs centre since Dr Castagna was physically working in Australia, Macquarie Australia reimbursed MacEquities USA for all payments the latter made to Billbury.

24. Dr Castagna’s accountants, HLB Mann Judd (Mann Judd), who understood that he was being paid by a Macquarie entity in the US, advised him that he did not need an ABN.

25. After 1 July 2000, companies were required to withhold Pay-As-You-Go (PAYG) tax from companies or persons which provided a service in Australia and which did not have an ABN. As Billbury did not have an ABN, Macquarie was obliged to deduct PAYG from payments made to Billbury. Due to what Macquarie described as an “administrative oversight”, it did not withhold the PAYG tax. Macquarie’s omission, which came to the attention of the ATO in about August 2008, does not affect the culpability of either offender but is included to provide context to Dr Castagna’s conduct in 2008 to which reference will be made later.

26. The third consultancy agreement covered the period from 1 July 2001 until 2011. The Macquarie entity which was party to this agreement was Macquarie USA Inc, being the entity which made the payments to Billbury. I note for completeness that Macquarie entered into a further consultancy agreement with Dr Castagna personally on 7 June 2011, for a term from 1 July 2010 to 30 June 2013, which is outside the period of the offending conduct.

Bonuses

27. In addition to the consultancy fees, Macquarie paid Billbury a total of $4,183,881.46 in bonuses for Dr Castagna’s work. This comprised bonus payments for his performance in the following financial years: $1,877,492.19 in 2000; $647,979.50 in 2001; $108,543.49 in 2004; $149,866.28 in 2005; $200,000 in 2006; and $1.2 million in 2007. The payments were made shortly after the commencement of the following financial year as a reward for the past year.

The payments made under the contract and the flow of funds

28. Macquarie paid in the order of $22,000 per month (depending on the period during which the payment was made) to Billbury's account in New Zealand. Billbury paid all of the money which it received from Macquarie for Dr Castagna’s services into accounts held in Vanuatu and in New Zealand, with the ANZ Bank, in the name of IFTCO and associated entities.

29. As had been agreed between the offenders in April 1998, about $8,800 per month (about $849,000 over the whole period) was transferred from IFTCO through various bank accounts, including those held in the name of Billbury, to Dr Castagna's personal Australian bank accounts at the Colonial State Bank and at the Commonwealth Bank. These sums were declared by him as income. The balance, over $5 million, was not declared by Dr Castagna as income.

30. The defence cases described the balance of $5 million (which was not declared by Dr Castagna) as a “retirement fund”. These funds were said to be held by IFTCO on behalf of a company limited by guarantee, Delrick Limited (Delrick). The jury’s verdict compels the finding that the whole of the monthly consultancy fees, and any performance bonuses paid by Macquarie to Billbury, constituted Dr Castagna’s income, which he was obliged to declare in his income tax returns.

Expert evidence

31. Domenico Rositano, a forensic accountant with the Australian Federal Police (AFP), analysed financial documents provided to him, which included documents seized pursuant to search warrants, and prepared a number of charts and tables. By reference to bank vouchers and bank statements he was able to trace the value of the payments made by Macquarie to Billbury and subsequent transfers to IFTCO. He was also able to trace the value of payments made from Mr Agius and a company, Bergius Pty Ltd (Bergius), incorporated on 19 June 2007, which Mr Agius owned and controlled, to Dr Castagna, which amounted to $4,349.500 (which was relevant to count 13).

32. Mr Rositano was not, however, able to trace, either directly or by value, a single dollar of any payment made by Macquarie to Dr Castagna. Indeed, he could not even perform the task to see if the value could be traced. Many records of IFTCO’s accounts were not accessible to the AFP because they were either in Vanuatu or in unknown countries. No documents were ever produced to the AFP in answer to the Mutual Assistance Request made by the AFP to Vanuatu. As a result, Mr Rositano could only trace the money going into and out of IFTCO’s accounts from bank statements for accounts held by IFTCO and its associated companies in other countries.

Macquarie Technology Fund

33. In addition to working as a consultant for Macquarie, Dr Castagna was also, from 16 February 1998 until 2 July 2013, a non-executive director of MTFM, which managed the Macquarie Technology Fund. It invested in start-up companies. Companies with which Dr Castagna was associated, CPB Investments Pty Ltd, Ceteris Paribus Pty Ltd and Ferodale Pty Ltd (Ferodale), also invested in such companies. The evidence was not sufficient to determine whether the monies used for such investments came from the funds paid to Billbury by Macquarie which were held for Dr Castagna’s benefit.

The accounting firms: Priestley and Morris; Moore Stephens and HLB Mann Judd

34. From 1999 to 2002 Fred Murrell was the partner responsible for preparing and lodging Dr Castagna’s tax returns. Mr Murrell became a partner of Priestley & Morris in 1983, which merged with Mann Judd in 1993. Mr Murrell remained a partner until 2002, after which he continued to work for the firm for some years as a consultant.

35. Alan Haagensen was also a partner of both firms as well as being a non-resident partner of Moore Stephens Vanuatu. He retired in 1989 but came back to the office from time to time to give advice to his former clients or when called upon by other partners or directors of the firm. Advice he obtained for a client in 1992 from Richard Edmonds SC, a tax specialist, led to Mr Agius recommending to the Vanuatu Government that its companies legislation be amended to provide for companies limited by guarantee. The recommendation was implemented.

Dr Castagna’s tax returns

Preparation of tax returns

36. Up to 2002 Mann Judd staff prepared Dr Castagna’s tax returns under Mr Murrell’s supervision. Mr Murrell considered that Dr Castagna prepared the instructions for his tax returns, which were sent by mail, in a very orderly fashion. According to Mr Murrell, it was generally only necessary to insert the information provided into the tax returns, which the firm prepared for Dr Castagna, his wife and the partnerships of which he was a member. Mr Murrell did not regard it as part of his role to check the accuracy of any instructions from Dr Castagna and did not expect his staff to do so. He accepted his instructions without question or inquiry as he regarded Dr Castagna as an honourable person. Mr Murrell met Dr Castagna on no more than four or five occasions. Some of their meetings concerned the introduction of GST on 1 July 2000 and whether Dr Castagna would require an ABN.

37. From about 2002 Mr Nussbaum, who specialised in Australian tax, became responsible for Dr Castagna’s tax returns, which he prepared based on Dr Castagna’s written instructions. Mr Nussbaum did not consider there to be any reason to doubt the figures in them as he knew Dr Castagna to be a qualified accountant.

Declaration of income

38. For each financial year from 1999 to 2008 Dr Castagna instructed Mann Judd to declare about $105,600 (being 12 times the monthly figure of $8,800) as “income from advisory fees”, an expression which I regard as deliberately vague. He did not specify the source of these funds in the written instructions, although his accountants were aware that he worked for Macquarie, and, as referred to above, became aware that after 1 July 2000 it was a US Macquarie entity which paid the consulting fees. Each year Dr Castagna signed a statutory declaration that these amounts were true and correct, without which his accountants would not have lodged the returns.

39. Had the balance of the monies paid by Macquarie to Billbury been declared as income in Dr Castagna’s Australian tax returns, an amount of $2,622,371.56 (as calculated by Anna Lee, an auditor at the ATO) would have been payable as tax. Dr Castagna did not declare the balance in his US tax returns for the same period. There was no suggestion that the balance should have been declared in the US tax returns.

40. I do not accept the statements in Dr Castagna’s VDS that he mentioned the arrangement with Billbury to either Mr Murrell or Mr Haagensen. I am satisfied on the basis of the whole of the evidence that Dr Castagna neither told Mr Murrell nor Mr Haagensen about, nor included details in his written instructions of, the consultancy agreements or the arrangement with Billbury. He deliberately concealed his true financial arrangements from his accountants.

The tax audit in 2008

Search warrants

41. On 28 April 2008, Mr Agius was arrested and charged with tax fraud and money-laundering offences separate from the present offences. Search warrants were executed at Mr Agius’ residence in Kent Street, Sydney and at a residence of one of his associates in Perth. These warrants entitled the AFP to seize documents, including those which related to Billbury and Dr Castagna’s tax affairs.

Meeting on 14 May 2008

42. On 14 May 2008, Dr Castagna rang Mr Nussbaum to arrange a meeting later that day to discuss the tax consequences of bringing an off-shore retirement fund to Australia. I infer that what prompted the contact was that Dr Castagna had become aware of Mr Agius’ arrest and the search warrants. This was the first time Mr Nussbaum had met Dr Castagna in person, although they had previously spoken on the phone. It was also the first occasion on which Dr Castagna disclosed to Mann Judd that Billbury was retained by Macquarie as a contractor and Billbury received fees, some of which were paid to a company limited by guarantee in Vanuatu for a retirement fund for Dr Castagna’s benefit.

43. Dr Castagna also showed Mr Nussbaum various portions of a written advice given by Mr Edmonds to the effect that there was no requirement for a tax payer to disclose, in an Australian tax return, income from, or an interest in, companies limited by guarantee incorporated in Vanuatu. Dr Castagna told Mr Nussbaum that he regarded the advice as supporting the structure he had in place. The advice contained nothing which had any bearing on the question whether the monies paid by Macquarie under the consultancy agreements had to be declared as income derived by Dr Castagna. I am satisfied that Dr Castagna appreciated the limitations of the advice, having regard to his expertise, financial experience and concern for his own interests.

44. On 20 May 2008 a search warrant was executed on Macquarie Bank. On the following day a search warrant was executed at Dr Castagna’s home in Gordon in his presence.

45. As referred to above, as a result of its investigation, the AFP discovered that Macquarie had failed to withhold PAYG tax from the payments it made to Billbury. On 22 August 2008 Macquarie made a VDS to the ATO concerning its non-compliance.

Meeting on 9 September 2008

46. I infer that Dr Castagna was aware of Macquarie’s VDS by the time Mr Nussbaum arranged to have another meeting with him on 9 September 2008. Mr Wickenden, a tax partner of the firm with expertise in international tax matters, also attended. Dr Castagna told them that he had borrowed $4.5 million from Mr Agius over 3 years through Bergius. He also said that he had received a $4.5 million bonus payment from Macquarie. He mentioned a retirement fund held by a company limited by guarantee in Vanuatu. Dr Castagna, in effect, acknowledged that only part of the monies Macquarie had paid to Billbury had been paid to him. He told them that the balance was put into a retirement fund for his sole benefit, of which IFTCO was the trustee. Dr Castagna mentioned Part IVA, the anti-avoidance provisions of the Income Tax Assessment Act 1936 (Cth) (the 1936 Act). Dr Castagna asked his accountants whether Macquarie was entitled to deduct PAYG from his consultancy fees but failed to tell them the crucial fact that Billbury did not have an ABN. On 24 September 2008 Mann Judd advised Dr Castagna that Macquarie was not obliged to withhold PAYG from payments made to Billbury. Their advice was incorrect as it was based on a false premise.

Notice of intention to audit dated 28 October 2008

47. Before the ATO conducts an audit of a taxpayer’s affairs it sends to the taxpayer a notice of intention to audit. The ATO sent such a letter to Dr Castagna on 28 October 2008. It is open to a tax payer to provide a VDS before, during or after the audit. Dr Castagna signed his VDS (which was undated) before he received the notice of intention to audit on 28 October 2008 although it was not sent to the ATO until 18 November 2008.

The 2008 tax return

48. On 10 May 2009 Mr Hazan, Dr Castagna’s lawyer, told Mr Nussbaum that Mr Catt, barrister, advised that the firm should prepare the 2008 tax return on the basis of previous years and that this had been confirmed by the ATO in a meeting which Mr Hazan had attended. Mr Nussbaum was concerned that, if Mann Judd did not prepare the 2008 return, Dr Castagna might sue the firm for repudiation of contract.

49. On 2 July 2009 Mr Nussbaum sent Dr Castagna an email enclosing draft tax returns for the 2008 year. Mr Nussbaum expressly confirmed that they had not been provided with all information relating to his tax affairs and had not been privy to discussions between Dr Castagna and his lawyers and the ATO. No one from Mann Judd had played any role in, or seen, Dr Castagna’s VDS. Mr Nussbaum sought a letter of indemnity from Dr Castagna. Dr Castagna responded by email on 3 July 2008, agreeing to the letter of indemnity and confirming that a request pursuant to s 169A of the 1936 Act would be added to his return. A s 169A(2) request is a request by a taxpayer for a decision from the Commissioner as to how a particular matter ought be treated in a tax return.

50. By 3 July 2009 the tax return for Dr Castagna for the 2008 financial year was overdue. On 21 July 2009 when Mann Judd lodged the return, the firm included the following s 169A request on his behalf:

“On the basis of the facts disclosed in my voluntary disclosure statement, which I attest to be true, have I correctly shown and returned, in the business and professional items section P8 at Label J, of my income tax return for the year ended 30 June 2008, the correct amount of assessable income that I earned from Billbury Limited?”

51. Dr Castagna terminated the services of Mann Judd after the firm submitted the 2008 tax return.

52. Mr Strickland submitted that the disclosures made by Dr Castagna in his VDS ought be taken into account in mitigation of the seriousness of the offending relating to that period. He contended that the admissions Dr Castagna made in the VDS formed an important aspect of the Crown case since he, in effect, admitted the conspiracy. The difficulty with this submission is that Dr Castagna made the VDS to justify his own position, not to enlighten the ATO as to the truth. As Mr Strickland put it in the sentence hearing:

“Dr Castagna entered into, he says, the process of good faith negotiations with the Australian Taxation Office in what he believed to be civil proceedings, he had no idea they’d be used in criminal proceedings. He produced that voluntary disclosure statement.”

53. In this respect I do not regard Dr Castagna as being in any different position to an offender who unwittingly makes admissions which assist the Crown in the course of a largely fabricated or exaggerated version of events. Nor do I accept Mr Strickland’s submission that Dr Castagna was “advised by the ATO to file his tax returns [for the year ended 30 June 2008] on the same basis”. It was Mr Catt, a barrister retained by Mr Hazan, who advised Dr Castagna to have his tax returns prepared on the same basis. Mann Judd was not privy to the disclosures made by Dr Castagna to the ATO. They prepared the tax returns on the same basis because they did not have sufficient information to do otherwise and required an indemnity from Dr Castagna as a condition of submitting the returns.

Transfers made from Mr Agius and Bergius to Dr Castagna

54. Dr Castagna owned considerable real estate interests in the area around Newcastle. He owned four properties as sole registered proprietor which he had formerly owned with his brother, Aldo, in Ferodale and Islington; various properties with his wife in Hamilton and East Maitland; and three properties in Wyee jointly with Aldo as tenants in common in equal shares. Dr Castagna wanted to demolish the existing residences on these properties and build townhouses and units for rental or sale.

55. Between April 2004 and April 2008, about $4.5 million was transferred into bank accounts of Dr Castagna from accounts in the name of Mr Agius or, following its incorporation, Bergius. The defence case, which was rejected by the jury, was that these transfers were a loan to help Dr Castagna develop his properties. At the time most of the transfers were made, there was no written agreement which provided for them. On 25 February 2008 a document which purported to be a loan agreement between Bergius and Dr Castagna was executed. It appeared to provide a legal basis for past and future transfers.

56. I am satisfied, on the basis of the jury’s verdict on count 13 and the evidence, that the loan agreement was a sham. The whole, or a substantial part, of the $4.5 million transferred by Mr Agius or Bergius to Dr Castagna between April 2004 and April 2008 was Dr Castagna’s own money and included an amount of at least $1 million in unpaid tax on undeclared income from the Macquarie consultancy agreements.

57. The transfers were made in several tranches. For example, on 2 February 2007, Mr Agius rang Dr Castagna and informed him that there was $540,000 available, to which Dr Castagna responded, “Oh, fantastic!” Mr Agius told him that there should be another $60,000 the following week but that he should “take that now while . . . it’s there”. Dr Castagna suggested that Mr Agius might think about using a cell phone from “Liz”. Dr Castagna also said he would talk about it later. This call was among those intercepted by the AFP pursuant to warrants which covered Mr Agius’ landline and mobile phone number for the period between November 2006 and about May 2008 as part of what became known as the Starlifter/OTD investigation, which I will describe in more detail below.

58. I infer that Dr Castagna’s reluctance to speak on the phone arose from his concern to conceal the true nature of the transaction. Mr Strickland submitted that there was another explanation: that Dr Castagna was concerned about Mr Agius being investigated by the ATO. However, there is no evidence to support this contention. Even if Dr Castagna knew at the relevant time that the ATO surveillance of Mr Agius included warrants for telephone intercepts, I am satisfied that he was also concerned to protect the secrecy of the conspiracies (counts 1, 2, and 13) to which he was party with Mr Agius. While the offenders’ reluctance to speak on the phone may have been used by the jury as a consciousness of guilt, I do not regard it as an aggravating factor on sentence.

59. The offenders went to substantial lengths to cloak the transfers in the guise of a loan. They did so, knowing that (genuine) advances of loan monies do not amount to income and are therefore not subject to income tax. They engaged reputable practitioners, including Mr Murrell and Mr Haagensen, as well as John Hastings, a solicitor, to consider structures and draft documents. Such structures included a put and call option, a joint venture, a second mortgage and promissory notes. These machinations, the detail of which is unnecessary to relate, continued for a period of years. They amounted to no more than an elaborate charade. The sums spent on professional fees and stamp duty were dwarfed by the savings on the tax which ought to have been paid on the undeclared income. As referred to above, the unpaid tax amounted to at least $1 million. That the professionals the offenders engaged believed the loan transaction to be genuine is testament to their capacity for dissembling.

The investigation and prosecution of the offenders

60. Because both offenders contended that delay ought be taken into account as a mitigating factor, it is necessary to summarise what occurred in the decade between the execution of the first search warrants in April 2008 and the return of the jury’s verdicts on 18 April 2018, as established by the evidence, particularly that of Federal Agent Scott Miller.

61. As referred to above, on 28 April 2008, Mr Agius was arrested and charged with fraud and money laundering. The charges arose from his involvement in round-robin transactions engaged in by clients of Owen T Daniels & Co, an accounting firm at Burwood, which had been the subject of an AFP investigation, known as “Starlifter/OTD”. Search warrants were executed on the firm, its clients and a number of financial institutions. Twenty two other persons were also charged as a result of this investigation, which placed substantial demands on the resources of the AFP, not only in the investigation but also in court hearings, appeals and retrials. The trial of Mr Agius and three co-offenders took 22 weeks before Simpson J: R v Agius; R v Zerafa [2012] NSWSC 978; (2012) 87 ATR 528. Between March 2009 and February 2013 the AFP’s resources were largely directed towards supporting court proceedings arising from this investigation.

62. Documents seized in the execution of search warrants on premises associated with Mr Agius led to investigations of other persons, including Dr Castagna, Mr Pratten and Mr Isbester, each of whom has subsequently been found guilty of tax offences and money-laundering. As referred to above, further search warrants were executed, including on Macquarie and Dr Castagna.

63. The Commonwealth Attorney-General’s Department made a request for search warrants to be executed on the offices of PKF Vanuatu. A large number of documents was seized. However, the Supreme Court of Vanuatu restrained the delivery of such documents to the Australian High Commission. Notwithstanding an appeal, in which the warrants and seizures were held to be lawful, further litigation ensued as a consequence of which not a single document from Vanuatu was provided to the Commonwealth Director of Public Prosecutions (DPP). Mr Agius was an applicant in the proceedings which had the effect of stopping production of the documents. The Crown does not rely on this matter to show that he was obstructive in this process.

64. From February 2013 the AFP sought to obtain witness statements from those at Macquarie, including Mr Phillips. Further search warrants were executed in May 2013, on Butlers, which had advised Mr Agius on the purported loan transaction, and Mann Judd. Mr Rositano’s statement was also obtained in 2013.

65. On 20 June 2013 Dr Castagna was issued with court attendance notices for conspiracy to defraud the Commonwealth and dealing with proceeds of crime worth more than $1 million. On 5 May 2014 the DPP consented to conspiracy charges. The DPP’s consent was required before proceedings could be commenced for an offence under s 135.4 of the Criminal Code (conspiracy to defraud the Commonwealth): s 135.4(14). In deciding whether Mr Agius ought be charged with conspiracy, the DPP considered matters associated with the public interest as he had recently been convicted and imprisoned for similar offending. On 9 May 2014 two court attendance notices were filed for Mr Agius, charging conspiracy to defraud the Commonwealth. He was subsequently further charged on 26 June 2014 with dealing with the proceeds of crime.

66. On 28 October 2015, following a committal hearing in the Local Court for which there had been over ten prior mentions and six hearing days (over a period of about nine months), the charges against Dr Castagna and Mr Agius were dismissed. Dr Castagna instructed his lawyers to make representations to the DPP that the DPP ought not file an ex officio indictment. On 28 April 2016 the DPP advised that the matter would proceed by way of ex officio indictment which was filed in this Court on 3 June 2016.

67. The jury was empanelled on 19 February 2018 and verdicts were returned on 18 April 2018. It was accepted by the Crown that the two offenders, through their legal representatives, had co-operated in the running of the trial which had the effect that it was conducted efficiently. The Crown also accepted that this was a matter I could take into account in the offenders’ favour, which I have done.

Relevant matters in sentencing

68. I am required to take into account matters that are relevant and known to the Court, which are catalogued in s 16A of the Crimes Act, as well as other relevant matters. The matters in s 16A which are relevant in the present case are:

(a)     the nature and circumstances of the offence;

(c)     if the offence forms part of a course of conduct consisting of a series of criminal acts of the same or a similar character--that course of conduct;

(e)     any injury, loss or damage resulting from the offence;

(f)     the degree to which the person has shown contrition for the offence;

(h)     the degree to which the person has co-operated with law enforcement agencies in the investigation of the offence or of other offences;

(j)     the deterrent effect that any sentence or order under consideration may have on the person;

(ja)     the deterrent effect that any sentence or order under consideration may have on other persons;

(k)     the need to ensure that the person is adequately punished for the offence;

(m)     the character, antecedents, age, means and physical or mental condition of the person;

(n)     the prospect of rehabilitation of the person;

(p)     the probable effect that any sentence or order under consideration would have on any of the person's family or dependants.

69. The nature and circumstances of the offences have been considered above in the recitation of relevant facts, as has the course of conduct. These matters will be addressed in more general terms below. The tangible loss resulting from counts 1 and 2, at least in so far as it can be measured in monetary terms, is $2,622,371.56. The intangible loss is the loss of confidence in the efficacy and integrity of the taxation system, which occurs when people such as the offenders defraud the Commonwealth in this way.

70. Because of the nature of count 13, it would be double-counting to take into account the loss resulting from that offence separately. Neither offender has shown any contrition. The other matters will be referred to in more detail below.

Seriousness of the offences

71. The Australian income tax system is based on “self-assessment” in that the assessment of income tax payable is based on the truth and accuracy of the information in the return lodged by the taxpayer. Ms Lee explained “self-assessment” as follows:

“[W]e [the ATO] rely on the honesty of the taxpayer to tell us what is their assessable income and allowable deductions.”

72. The ATO processes tax returns electronically, unless the ATO undertakes an audit, or a request under s 169A of the 1936 Act is made. Mr Strickland submitted that there was no breach of trust or abuse of position in the present case. This submission is technically correct, since Dr Castagna did not hold a fiduciary position. However, in substance, the ATO “trusted” Dr Castagna to declare his true income and he, in turn, abused that trust and his position as a citizen, by under-declaring his income. As McClure P (Mazza JA agreeing) said in Host v R [2015] WASCA 23; 248 A Crim R 353 at [24]:

“[T]he real victims of such conduct [tax fraud] are the members of the Australian community as a whole because it reduces the funds available for essential and other services and increases the taxation burden on honest taxpayers.”

73. As referred to above, the maximum penalty for the first count is 20 years’ imprisonment and for the second count 10 years’ imprisonment. The conduct underlying the two counts comprised a single conspiracy which commenced in early April 1998 and came to an end on about 21 July 2009 when Dr Castagna lodged his 2008 tax return, the last payment from Macquarie to Billbury having been made on 30 April 2008. I take into account the significant reduction in the maximum penalty as an indication of the change of attitude on the part of the legislature: R v Ronen [2006] NSWCCA 123; (2006) 161 A Crim R 300 at [73]. The period for which the conspiracy was on foot was significantly less for count 1 (3 years) than for count 2 (8 years).

74. The conduct covered by counts 1 and 2 lasted, in total, for more than 11 years. Its purpose was to enrich Dr Castagna at the expense of the public by using dishonest means which were, by their nature, difficult to detect, onerous to investigate and both time-consuming and expensive to prove. The conspiracies involved sophisticated deceit, the use of foreign bank accounts and the secrecy conferred by the laws of Vanuatu. Dr Castagna gave his tax affairs a false veneer of legitimacy by engaging reputable professionals as his tax agents. Mr Agius proposed the strategy to Dr Castagna who was willing to adopt it for his own benefit. It was Mr Agius who controlled the accounts through which the money passed and set up the structure which enabled Dr Castagna to conceal most of his income from the ATO. The conspiracies came to an end when they were interrupted by the ATO’s investigation of Dr Castagna’s tax affairs, which followed an investigation into Mr Agius. I infer that Dr Castagna made the VDS (much of which was false or misleading) and put in his 2008 tax return in the same terms as previously because he did not want to arouse any more suspicion. I regard the offending in counts 1 and 2 as very serious.

75. The maximum penalty for count 13 is 25 years. This is an indication of the seriousness with which the legislature regards dealing with the proceeds of crime, otherwise known as money-laundering. It was put by Mr Strickland that there was no additional criminality in count 13 which was not already encompassed by counts 1 and 2. I reject this submission. Counts 1 and 2 were complete without any dealing in the money which had not been declared as income in Dr Castagna’s tax returns. The elements of count 13 were manifestly different from those of counts 1 and 2: see Pearce v The Queen (1998) 194 CLR 610; [1998] HCA 57 at [20]. Count 13 incorporates additional criminality because it concerned the transfer of proceeds from counts 1 and 2 to Dr Castagna under the guise of loans which permitted him to use the funds for his further enrichment through property development.

76. The Crown discharged its onus of proving that the proceeds the subject of count 13 were at least $1 million. It cannot be concluded beyond reasonable doubt that all of the tax on the undeclared income (in the order of $2.6 million) was the subject of the dealing. It is also of some significance that the funds were used for lawful purposes, being development of real estate: R v Ly [2014] NSWCCA 78; (2014) 241 A Crim R 192 at [86] (Leeming JA, Hall and Schmidt JJ). The number of transactions and the period over which they were made is also relevant as is the dishonesty and sophistication involved in disguising the dealing as a loan. While the conspiracy in count 13 lasted for at least four years it is not possible to be satisfied beyond reasonable doubt of the total period over which the actual dealing occurred because other funds appear to have been included in the purported advances. The overt acts performed pursuant to the conspiracy the subject of count 13 involved a number of discrete transfers of money, which is also an indication of the extent of the criminality involved: R v Huang; R v Siu [2007] NSWCCA 259; (2007) 174 A Crim R 370 at [35] (Simpson, Howie and Hislop JJ). I assess the present offending as towards the lower end of the range of seriousness, largely because of the threshold in s 400.3(1) of the Criminal Code.

77. The crimes for which the offenders are to be sentenced do not represent momentary lapses or impulsive departures from proper standards: the offences were committed over the period of a decade and involved deliberate, calculated dishonesty for financial gain to the detriment of the Australian community as a whole. It would also appear that the offenders felt entitled to conspire with each other to defraud the public and deal with the proceeds of crime because they considered themselves to be members of the financial élite who, as such, were not subject to the obligations to which others must conform. Their access to foreign bank accounts and to the tax haven of Vanuatu made it significantly more difficult for their deception to be exposed.

General deterrence and punishment

78. In matters such as the present, general deterrence and punishment are highly significant. The idea, which emerged from many of the character references tendered on behalf of Dr Castagna, that a person may be entitled to retain an unblemished reputation for honesty and integrity notwithstanding having been convicted of serious offences of dishonesty involving defrauding the Commonwealth, is untenable. Although Dr Castagna was honest in his dealings with others in the business community and within his family, he was prepared to steal from the Australian community at large. He had one standard of behaviour for those he knew and those who could benefit him and another for the faceless Consolidated Revenue Fund, which he was prepared to deprive of its due, to the detriment of the whole community.

79. I am not to impose a sentence of imprisonment on either of the offenders unless, having considered all other available sentences, I am satisfied that no other sentence is appropriate in all the circumstances of the case: s 17A of the Crimes Act. Mrs Castagna said in her evidence at the sentence hearing:

“The thing that is important in life is your health and your family. But no one ever tells you what it is going to be like to lose your freedom. And I don’t think that’s something in Australia that we think about. But to lose your freedom is right up there.”

80. It is important that those who engage in tax fraud appreciate that it is a serious crime, for which they may be imprisoned. The sentences imposed on the offenders must incorporate an element of punishment and denunciation. They must also be sufficient to deter those who might regard the ATO as “fair game” and who might regard the payment of tax as either voluntary or an obligation which can be defeated by the use of obfuscation and deceit. I am satisfied that imprisonment is the only appropriate sentence for each offender, having regard to all the circumstances, but in particular, the seriousness and duration of the offending, the need for punishment, general deterrence and denunciation: see Hili v The Queen; Jones v The Queen (2010) 242 CLR 520; [2010] HCA 45 at [63].

81. In determining the length of the sentences to be imposed, I have taken into account the respective ages of the offenders (and the proportion between the sentence and the time which may be left to them) in addition to the other matters referred to.

Delay

82. Delay can be relevant to sentencing in various respects: Coles v R [2016] NSWCCA 32 at [15]-[29] (Fullerton J, Hoeben CJ at CL and Adams J agreeing); and Giourtalis v The Queen [2013] NSWCCA 216 at [1790], approving R v Scook [2008] WASCA 114; (2008) 185 A Crim R 164. First, the “uncertain suspense” in which a person can be left for an extended period of time can be taken into account; second, an offender may demonstrate progress towards rehabilitation in the intervening period; and thirdly, a sentence for a stale crime calls for a measure of flexibility.

83. The second and third matters can be addressed briefly. I do not regard the offenders as having made progress towards rehabilitation in the period between 2008 and the present, although I do not consider that they are likely to re-offend. I do not regard the crimes for which the offenders were convicted as “stale crimes”. The offenders were aware of the search warrants and the continuing investigation over the extended period.

84. As to the first matter relevant to delay, I accept that the offenders experienced “uncertain suspense”. Dr Castagna may initially have believed that money was the only thing at stake and that he could come to a negotiated settlement with the ATO. Mr Agius may have hoped and believed that he would not be charged with further offences of the same variety as those for which he had been charged in 2008 and tried in 2012. However, there was a period of many years during which neither offender could reasonably have believed that he was not at considerable risk of prosecution for the crimes of which he has ultimately been convicted.

85. In the period following 2008, Dr Castagna continued to work for Macquarie and act as a director. He continued to travel overseas and conduct himself as he had done in the past. His considerable energy and aptitude for capital-raising continued to be put to use in the various businesses in which he was involved, as consultant, director or shareholder. Even after he had been charged, his bail conditions were sufficiently flexible to permit him to travel overseas, which he did on at least six separate occasions. He and his wife Sandy did not tell their children of the prospect of his being charged, although they themselves were well aware of it, or the charges, when they were laid. Their families, friends and Dr Castagna’s business associates did not become aware of the charges until an article was published in the Sydney Morning Herald in October 2017.

86. Until Dr Castagna was required to attend court for his trial, which commenced on 19 February 2018, he worked full-time as Executive Chairman at Nuix Pty Ltd (Nuix), which provides data software, and Haventec Pty Ltd (Haventec), a security software company, which he co-founded. Nonetheless, although Dr Castagna continued to function at a high level, at least outwardly, I accept that he must have suffered significant stress over the period from 2008 until 2018, particularly as he had not envisaged criminal proceedings when he gave his VDS. Even after the charges against Dr Castagna were dismissed by the magistrate, he was well aware of the real prospect of an ex officio indictment being presented and took active steps to instruct his legal representatives to make submissions to the Director of Public Prosecutions on his behalf to prevent that eventuality.

87. Mr Agius’ position is different from that of Dr Castagna. He faced a lengthy trial relating to tax offences before Simpson J in 2012 for which he had been arrested and charged in April 2008. He has been in custody for the last six years serving sentences imposed by Simpson J, the first of which commenced on 31 July 2012 and the last of which will expire on 30 June 2021. The total effective term of the two sentences imposed by Simpson J was 8 years and 11 months. The non-parole period of 6 years and 8 months expires on 30 March 2019. He has been in uncertain suspense, wondering how much more time he might be required to spend in custody.

88. I reject Mr Lowe’s submission that Mr Agius ought to have been tried for the present offences in the trial before Simpson J. It would not have been in the interests of justice, even if the prosecution had been ready to proceed at that time (which I accept it was not), to join the trial of the two offenders before me, with the trial before Simpson J. It is inevitable that this Court would have ordered the trial of the two offenders to be heard separately from the trial before Simpson J. Nor was it practical to have the trial against Dr Castagna proceed separately from the trial of Mr Agius since there were joint conspiracy counts.

89. I understood Mr Lowe to submit that the DPP had material to charge Mr Agius well before he was actually charged. He argued that it was relevant that an officer of the AFP had reasonable grounds to suspect that Mr Agius had committed the present offences in 2008 when the search warrant was applied for. It is well established that the threshold of “reasonable grounds to suspect” is significantly below “on the balance of probabilities” and much less than “beyond reasonable doubt”: see George v Rockett (1990) 170 CLR 104 at 115-116 (Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ); [1990] HCA 26.

90. I do not regard the evidence as establishing that there was any tardiness on the part of either the AFP or the ATO in investigating potential charges against the offenders or in charging them or bringing them to trial. As referred to above, the proof of the offences required source documents, many of which could not be obtained, despite several attempts and legal proceedings, since they were located in Vanuatu. Evidence was also required from witnesses, including Mr Phillips at Macquarie, which was not readily forthcoming. Mr Rositano’s analysis of source documents also required time and resources.

91. Justice requires that there be a measure of understanding and flexibility where there has been, as in the present case, a significant delay between the time an offender first became aware of the risk of prosecution and the imposition of a sentence: R v Todd [1982] 2 NSWLR 517, at 519-520 (Street CJ, Moffit P, Nagle CJ at CL agreeing). This is so even where, as here, a considerable portion of the time was the inevitable consequence of the complexity of the offences committed and the associated difficulties in their investigation, prosecution and proof. I take into account that both offenders have been in “uncertain suspense” for a number of years.

Mr Agius

Subjective circumstances (character, antecedents, age, means and physical or mental condition of the person)

92. Mr Agius was born in November 1949 in Ethiopia. He is 68 years old. At the age of two, he migrated to Australia with his family. He and his sister lived for some time with the Castagna family. As referred to above, he worked in London before moving to Vanuatu in 1979. He became a citizen of Vanuatu. He is not an Australian citizen. He was married for about 23 years before divorcing in 1997. As a result of the marriage he had three sons.

93. Mr Agius’ former wife, Pauline Pollack, gave evidence that one of their sons, Simon, died during the course of the trial. Mr Agius visited his son before his death. At the time of the sentence hearing, Simon’s partner, Lucy, was due to give birth to a daughter. Mr Agius proposes, on his release from custody to return to Vanuatu and work to support Lucy (who speaks little English) and his granddaughter. Contact with Mr Agius will ensure that she learns English and is able to communicate with her late father’s family. Two of Mr Agius’ sons continue to live in Vanuatu. I may take into account the probable effect that any sentence would have on Mr Agius’ family or dependants under s 16A(2)(p) only if it is “extraordinary”: see the authorities referred to in Director of Public Prosecutions (Cth) v Pratten (No 2) (2017) 94 NSWLR 194; [2017] NSWCCA 42. I do not regard this matter as extraordinary as the new grandchild will, from birth, have the support of at least one of Mr Agius’ two surviving sons, both of whom live in Vanuatu. To the extent that these matters are relevant to subjective circumstances, I take them into account on that basis.

94. Mr Agius suffers from several medical conditions, including prostate cancer, unilateral hearing loss, osteoporosis, atrial fibrillation, hypertension, high cholesterol and vertigo. He suffered a stroke but has no residual symptoms. His prostate cancer is under active surveillance with ongoing pathology tests and urology reviews. There is no indication that these conditions cannot adequately be treated and monitored by Justice Health.

95. Mr Agius’ criminal history has already been referred to. He was convicted of two counts of conspiracy involving tax fraud and sentenced by Simpson J. The period of Mr Agius’ offending in that case was almost 10 years between 1997 and 2006. It came to an end only upon the execution of search warrants by the AFP in October 2006. The conspiracy comprised an agreement to promote a tax evasion scheme to the clients of Owen T Daniel & Co. The scheme involved the production of fake invoices, issued in the name of Billbury, for “management and consultancy services” to make it appear that deductible expenses had been incurred. The money transferred by the clients in purported payment of the invoices was returned to them as “loans” and not declared as income. The total loss to the Commonwealth from Mr Agius' conduct exceeded $5 million.

92. It was submitted by Mr Lowe that changes in the law and regulation of Vanuatu would make it more difficult for Mr Agius to commit similar crimes in the future and that, accordingly, his prospects of rehabilitation ought be regarded as good, although he continued to maintain his innocence and evinced no contrition. Simpson J considered that Mr Agius “may well have little further opportunity for engaging in this kind of criminal conduct” ([65]). I accept that Mr Agius, an intelligent man who is generally adept at advancing his own interests, would be unlikely to engage in tax fraud again because of what he now knows of the potential consequences of such conduct.

93. Mr Agius is automatically disqualified from managing Australian corporations for a period of 5 years upon release: s 206B of the Corporations Act2001 (Cth). As Mr Agius does not propose to live in Australia upon his release, this extra-curial punishment may be merely hypothetical in his case.

Dr Castagna

Subjective circumstances (character, antecedents, age, means and physical or mental condition of the person)

98. Dr Castagna was born in 1947 in Dire Dawa, Ethiopia. He is 71 years old. He has been married to Sandra for 45 years. They have two children, Felicity and Adam, each of whom have two children. Dr Castagna migrated to Australia in 1954 with his parents and brother. They lived in Newcastle. His professional qualifications and work history have already been referred to.

99. Dr Castagna has relied on the evidence of his reputation given in the trial by his accountants and Mr Phillips as well as several statements from members of his family, work colleagues and associates who speak of his reputation for, and qualities of, honesty and integrity. Many refer to his role as a mentor and his strong sense of ethics in a business environment. His qualities of generosity and interest in others are also the subject of commendation. I accept, on the basis of this material, that Dr Castagna was, in many ways, an apparently model citizen: he worked hard; was dedicated to his family; helped and mentored others; and used his undoubted talents and considerable energy to increase his own wealth and the wealth of those with whom he was associated. He helped several businesses to flourish by raising the requisite capital. Nuix is a notable example. Its founder died before the software business could be established. His widow asked for Dr Castagna’s assistance to raise capital for Nuix. Dr Castagna’s efforts helped create a valuable business. According to Mr Phillips, as at 5 March 2018, Nuix had a market value of $0.5 billion, of which Ferodale had an interest of between 7 and 10%.

100. Such was the regard in which Dr Castagna was held by those who knew him through personal or business connections that many character referees said that their view of Dr Castagna was not altered by his convictions of offences of dishonesty and fraud. Michael Aitken, the Chief Executive Officer of Capital Markets Co-operative Research Centre (CMCRC), gave oral evidence at the sentence hearing. The CMCRC is a partly publicly funded body which sponsors students to do PhDs to solve industry problems. Mr Aitken said that, although the CMCRC was not prepared to appoint Dr Castagna as a director after he had been charged, it still engaged him as a consultant to have access to his expertise in commercialising ideas. When asked whether Dr Castagna’s convictions made any difference to his view of Dr Castagna, Mr Aitken said that he could not reconcile them with his experience of the man.

101. The evidence and references show the extent to which Dr Castagna remains loved, respected and admired not only by his family but also by many people in the business community who have no doubt benefited over the years by his extraordinary ability to raise funds for developing businesses. Upon his release from gaol it is to be expected that, if he is still willing and able to work, there will be those who will welcome him back to the commercial world where he has been so successful in the past. It is unlikely that companies such as Nuix would engage him after his release having regard to the public profile of its governmental clients (which include the ATO, the AFP, Australian Securities and Investment Commission, Australian Customs and the US Attorney-General). I note, however, that Dr Castagna continued as Executive Chair of Nuix after he was charged and, according to the submissions made on his behalf at the detention application on 18 April 2018, until he was convicted.

102. Apart from the offending conduct, Dr Castagna is otherwise of good character and is entitled to have this taken into account in his favour. However, good character is of less significance as a mitigating factor in the face of systematic defrauding of the Commonwealth. As was the case here, the offender’s prior good character placed Dr Castagna in a position where he was able to commit the crime: R v El Rashid (Unreported, NSWCCA, 7 April 1995) at 3 (Gleeson CJ).

103. Dr Castagna’s statements of regret do not amount to contrition for he does not accept that he has done anything wrong, much less commit a crime. His statements to those whom his solicitor has retained to prepare reports for the sentence hearing are a mixture of hubris, grandiosity and criticism of those who have prosecuted him. For example, on 11 May 2018 when Ilan Cohen, a psychologist, asked him what impact a custodial sentence would have on his career Dr Castagna said:

“As a result of being recharged with the same charges and 10 additional charges I have lost my career and my capacity to contribute to the mentoring of young talented people, being in jail I am unable to contribute to the commercialisation of world class technologies and be recognised in Australia and overseas for those achievements.”

104. Dr Castagna’s health is relatively good for a man of his age, although he has a number of medical conditions which require monitoring and can be treated with medication. Until he was imprisoned following the return of the jury’s verdicts, he was working full-time when he was not in court or otherwise assisting his representatives to prepare his case. He continues to remain physically fit and exercises daily in gaol. Since his incarceration he has suffered Adjustment Disorder, an unsurprising consequence of his change in circumstances. I note that Mr Cohen, who saw Dr Castagna on 11 May 2018 when he had been in gaol for about three weeks, considered it to be highly probable that Dr Castagna would develop major depression as a result of separation from his wife. Although I accept that prison will be more onerous for him because it is his first time ever in custody, he has already adjusted to some extent and has been assisting fellow prisoners to write correspondence. He is in protective custody at his own request as he is fearful of other inmates. I accept the description by Ms Duffy, who saw Dr Castagna on 20 June 2018, and reported:

“[Dr Castagna’s] self concept involves a generally stable and positive self evaluation. He is normally a confident and optimistic person who approaches life with a clear sense of purpose and distinct convictions. He is adaptive and resilient in the face of most stressors, although at present he is experiencing notable stressors and turmoil in a number of major life areas, fortunately, he reports that he has a number of supportive relationships that appear to serve as a buffer to at least some effects of the stress.”

105. Dr Castagna is worried about his wife, Sandra, who has not worked in remunerative employment since she relinquished her career as a flight attendant after her children were born. He has always managed the household finances. Not long after he was imprisoned pending sentence, Sandra fell and fractured her left arm and broke at least six teeth. She has been treated with depression associated with his charges, convictions and incarceration. He is also concerned about the effect on his children and grandchildren, particularly those who bear his name.

106. Although Dr Castagna maintains his innocence, Mr Strickland submitted that his prospects of rehabilitation were good. Mr Strickland contended that being incarcerated has had a salutary effect on Dr Castagna which will disincline him from doing anything which could be regarded as questionable in his future taxation affairs. I accept that, like Mr Agius, Dr Castagna’s intelligence and capacity for advancing his self-interest and for assessing risk and reward will probably have the result that he will not re-offend.

The degree to which the person has co-operated with law enforcement agencies in the investigation of the offence or of other offences

107. Mr Strickland relied on Dr Castagna’s co-operation with the search warrant which was executed at his home. I take this into account.

The probable effect of any sentence on Dr Castagna’s family

108. It was put that Mrs Castagna will suffer significant emotional hardship as a result of the imprisonment of her husband. I accept that her sense of shock at their physical separation has been considerable. Nonetheless, they are in phone contact every day for the short periods allowed to prisoners, write to each other frequently and see each other weekly. Mrs Castagna has strong family support from her sister, her two children and her grandchildren. There is no evidence of any financial hardship. Although Mrs Castagna is unaccustomed to dealing with finances, there is no suggestion that she will be required to engage in any complex transactions. I take into account these family matters as being relevant to subjective circumstances, although I am not persuaded that they are exceptional or extraordinary.

Extra-curial punishment

109. Dr Castagna has already suffered extra-curial punishment. There has been considerable publicity about the jury’s verdicts which has the effect that a Google search of his name brings up the convictions. Nonetheless, he is not short of supporters, as his many glowing testimonials indicate. Those who admired him and have provided statements to that effect, continue to do so. One of the purposes of the principle of open justice is to inform the public of what occurs in the courts. General deterrence would be deprived of much of its force if the media, which are often the eyes and ears of the public in courtrooms, did not publish what occurs inside them.

110. I am entitled to take into account additional penalties following the failure to pay tax if they cause financial hardship: R v Mereb; R v Younan [2014] NSWCCA 149 at [21]-[24]. Ms Lee’s unchallenged evidence was that the tax shortfalls totalled about $2.6 million; the tax shortfall penalties total about $2.4 million and the estimate interest charges are about $2.4 million. There is no evidence that these amounts have caused any financial hardship to Dr Castagna or his family.

111. Dr Castagna is automatically disqualified from managing Australian corporations for a period of 5 years upon release pursuant to s 206B of the Corporations Act. This amounts to a penalty although it also has the purpose of protecting the public: Rich v Australian Securities and Investment Commission (2004) 220 CLR 129; [2004] HCA 42 at [37] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

Relevance of proceeds of crime orders

112. The Proceeds of Crime Act 2002 (Cth) provides that I must not have regard to any forfeiture order that relates to the offence to the extent that the order forfeits proceeds of the offence (s 320(b)); and that I must have regard to the forfeiture order to the extent that the order forfeits “any other property” (s 320(c)). It was common ground that no forfeiture orders have yet been made.

113. Restraining orders under the Proceeds of Crime Act were made in 2013 which restrain certain property, including the properties in the Newcastle area, the development of which was funded by the proceeds of crime which was the subject of count 13, as well as the properties in Gordon (the Gordon properties). Mr Strickland submitted that, although no forfeiture order had yet been made, these properties would be automatically forfeited, as a result of s 92 of the Proceeds of Crime Act. Although s 320(c), in terms, applies only where a forfeiture order has been made, Mr Strickland submitted that future forfeiture of the Gordon properties ought be taken into account in sentencing in favour of the offender to avoid an arbitrary result which would depend on whether a forfeiture order was made before or after a sentence was imposed.

114. I reject this submission. First, s 320 is, relevantly, a code which ought be regarded as covering the field of the relevance, for the purposes of sentencing, of the consequences of the Proceeds of Crime Act in sentencing proceedings and therefore prevailing over the more general provisions in s 16A of the Crimes Act: see R v Host at [17]-[25], cited with approval in R v Jafari [2017] NSWCCA 152 at [38]-[39] (Basten JA, Johnson and Davies JJ agreeing). The possible exception raised by McClure P in R v Host at [24] need not be considered as it was not raised by the Crown. As no forfeiture order has been made, it cannot be taken into account in the offender’s favour pursuant to s 320(c) of the Proceeds of Crime Act. Secondly, even if I were to accept that the making of a forfeiture order in future could be relevant, there would be a further obstacle. In the absence of an undertaking by Dr and Mrs Castagna that a forfeiture order in respect of the Gordon properties would neither be opposed nor be the subject of an application for an exclusion order pursuant to s 94 of the Proceeds of Crime Act, I could not assume, in any event, that a forfeiture order will be made in respect of the Gordon properties. Because this is a matter in mitigation, the offender bears the onus on the balance of probabilities: The Queen v Olbrich (1999) 199 CLR 270; [1999] HCA 54 at [27] (Gleeson CJ, Gaudron, Hayne and Callinan JJ. This onus has not been discharged on the issue of whether a forfeiture order is likely to be made in respect of the Gordon properties.

Parity

115. The principles of parity apply as each offender has been convicted of identical offences. Despite the different roles played by each offender, there is little, if anything, to distinguish between them on objective matters. They were complementary partners in crime, each contributing to the overall offending as equals. The idea appears to have come from Mr Agius who enabled Dr Castagna to make use of the opportunity presented by Macquarie’s policy of contracting with consultants and their companies. It was Mr Agius who controlled Billbury and IFTCO and had access to foreign bank accounts, including in Vanuatu. He used the structures which he had set up for his own firm to transfer the funds in such a way as to conceal the true extent of Dr Castagna’s income. However, it was Dr Castagna who earned the income; it was he who put in the false tax returns; it was he who obtained the benefit of paying about $2.6 million less tax than he ought to have done. He was the one who concealed the truth from his accountants and, year after year, submitted returns which were false pursuant to the conspiracy in counts 1 and 2. It was he who stood to gain from the development of his properties, although Mr Agius may well have stood to gain as well. As the loan agreement was a sham it is not possible to quantify how much, if any, financial benefit Mr Agius was to derive from his role in the conspiracies.

116. While Dr Castagna’s subjective matters are more in his favour than Mr Agius’, principally because Dr Castagna has no criminal history and is otherwise of good character, this advantage is to be balanced with the principles of totality referred to below, to ensure that Mr Agius receives only that sentence which he would have received had he been sentenced for these offences at the same time as Simpson J had sentenced him for the prior offences: see Mill v The Queen (1988) 166 CLR 59 at 66-67; [1988] HCA 70. It is also important to bear in mind how the principles of parity and totality operate in this context: Postiglione v The Queen (1997) 189 CLR 295 at 308; [1997] HCA 26.

Totality

117. The principle of totality is relevant to Mr Agius’ prior offending: s 16B of the Crimes Act. There is an overlap in the periods of the offending in the present case and the offending for which he was sentenced by Simpson J. The principles of totality require that, if all else were equal, Mr Agius would receive the same sentence for the present offences, had he been sentenced for them at the same time as Simpson J sentenced him for the other offences. In other words, I must assume that the sentence imposed by Simpson J was an appropriate exercise of her Honour’s discretion and decide what additional penalty ought be imposed for the current offences: R v MAK: R v MSK [2006] NSWCCA 381; 167 A Crim R 159 at [99] (Spigelman CJ, Whealy and Howie JJ). The principle of totality does not, however, have the consequence that the sentence for each further instance of criminality is to be discounted: R v Wheeler [2000] NSWCCA 34 at [36]-[37] (Sully J, Carruthers AJ agreeing). It is necessary to impose, in addition to the sentences imposed on Mr Agius by Simpson J, a sentence which also reflects the criminality of the present offences and which is, to borrow the words of s 16A(1) of the Crimes Act, “appropriate in all the circumstances of the case”.

118. Totality is also relevant to both offenders when considering counts 1 and 2 on the one hand (being the single conspiracy) and count 13 on the other. While the conspiracy in counts 1 and 2 are, in substance, to defraud the Commonwealth, the conspiracy in count 13 is to deal with the proceeds of crime. The loss to the victim (Consolidated Revenue) is not to be double-counted since at least $1 million of the amount of tax foregone (in the order of $2.6 million) was the subject of the dealing in count 13. Thus, I propose to allow a substantial degree of concurrency between the total sentences for the first two counts and the sentence for count 13. Mr Strickland relied on a passage in the judgment of the Court of Criminal Appeal in R v Jones; R v Hili [2010] NSWCCA 108; (2010) 76 ATR 249 in which Rothman J said at [17]-[18] (McClellan CJ at CL and Howie J agreeing) that there was no criminality in the money-laundering count in that case which was relevantly additional to the count of defrauding the Commonwealth. The High Court in Hili v The Queen; Jones v The Queen expressly refrained from expressing a view on the correctness of this statement and noted that it had not been in issue in the Court of Criminal Appeal: [10]. In these circumstances, I do not consider the statement, which was obiter, to confine my assessment of the additional criminality in count 13.

119. While it may be that the reason for the conspiracy in counts 1 and 2 was to obtain tax-free funds for the development of Dr Castagna’s properties, this purpose was not an element of counts 1 and 2, which did not require any “dealing” in the proceeds of crime at all. The offences of conspiracy in counts 1 and 2 were complete as long as there was an agreement between the offenders for the relevant unlawful purpose and at least one overt act by either of them pursuant to the agreement. It was open to the jury to convict the offenders of counts 1 and 2 and acquit them of count 13. In these circumstances I consider some accumulation to be necessary to take account of the additional criminality involved in count 13: see the discussion in Pearce v The Queen at [40] (McHugh, Hayne and Callinan JJ).

The structure of the sentence

120. Because counts 1 and 2 pertain to the same conspiracy, I propose to adopt the approach taken by Simpson J in R v Agius; R v Zerafa: that is to sentence for count 1 and have the sentence for count 2 commence the day following the expiry of the sentence for count 1.

121. For Commonwealth offences, there is no statutory or judicially determined “normal” ratio between the non-parole period and the total sentence. The non-parole period is to be determined by what, in all the circumstances of the case, ought be the minimum period of actual incarceration: Power v The Queen (1974) 131 CLR 623 at 627-629; [1974] HCA 26; Bugmy v The Queen (1990) 169 CLR 525 at 530-531; [1990] HCA 18; Hili v The Queen; Jones v The Queen at [44].

120. As Mr Agius is already the subject of an existing non-parole order, s 19AD of the Crimes Act applies. I propose to fix a new single non-parole period in respect of all federal sentences which he is to serve or complete. As the sentences to be imposed on Dr Castagna exceed, in the aggregate, three years, and he is not already serving a sentence, it is necessary to fix a single non-parole period: s 19AB(1) of the Crimes Act.

121. I have been referred by the parties to comparative cases and have considered them having regard to the caution given by the High Court in Hili v The Queen; Jones v The Queen at [53]-[54].

122. I note the undertaking given by the offenders’ respective legal representatives to explain the effect of the sentence, as required by s 16F of the Crimes Act.

Sentence

125. Robert Agius:

1. You are convicted of counts 1, 2 and 13 on the indictment.

2. For count 1, I sentence you to a term of imprisonment of 2 years and 3 months commencing on 31 March 2017 and expiring on 30 June 2019.

3. For count 2, I sentence you to a term of imprisonment of 4 years and 3 months commencing on 1 July 2019 and expiring on 30 September 2023.

4. For count 13, I sentence you to a term of imprisonment of 4 years and 3 months, commencing on 1 July 2020 and expiring on 30 September 2024.

5. The overall effective sentence I impose consists of a total term of 7 years and 6 months commencing on 31 March 2017 and expiring on 30 September 2024.

6. Pursuant to s 19AD(2)(e) of the Crimes Act 1914 (Cth) I fix a new single non-parole period of 8 years and 8 months, commencing on 31 July 2012 and expiring on 30 March 2021.

Anthony Castagna

7. You are convicted of counts 1, 2 and 13 on the indictment.

8. For count 1, I sentence you to a term of imprisonment of 2 years, commencing on 18 April 2018 and expiring on 17 April 2020.

9. For count 2, I sentence you to a term of imprisonment of 3 years and 6 months, commencing on 18 April 2020 and expiring on 17 October 2023.

10. For count 13, I sentence you to a term of imprisonment of 4 years, commencing on 18 April 2021 and expiring on 17 April 2025.

11. The overall effective sentence I impose consists of a total term of 7 years commencing on 18 April 2018 and expiring on 17 April 2025.

12. I fix a non-parole period of 4 years commencing on 18 April 2018 and expiring on 17 April 2022.

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Decision last updated: 10 August 2018