R v Cavanagh

R v CAVANAGH
[1999] SASC 418

Court of Criminal Appeal: Doyle CJ, Debelle and Wicks JJ (ex tempore)

DOYLE CJ. I agree that the appeal should be allowed. I agree with the reasons given by Debelle J.
I would add just this. The sentence is high compared with other sentences for similar offences. Some reduction is appropriate on that basis. But, in my opinion, the time has arrived for an increase in the sentences imposed for substantial frauds of this kind for the reasons indicated by Debelle J. This was what Cox J foreshadowed in R v Davies (1996) 187 LSJS 467; 88 A Crim R 226. In future, a sentence of the order originally imposed by the sentencing judge would not be regarded by me as inappropriate.
DEBELLE J. The appellant pleaded guilty to 144 counts of fraudulent conversion. He was ordered to serve a period of imprisonment for nine years. The sentencing judge fixed a non-parole period of five years. The appellant appeals against the sentence on the ground that it is manifestly excessive.
The separate counts of fraudulent conversion arise out of a course of conduct extending over about four and a half years from March 1991 to November 1995. There are three separate victims. They are the Trustee Companies Officers Association (14 counts); an elderly widow, Mrs J.N. Ray (83 counts); and another elderly widow, Mrs H.N. House (47 counts). The total amount involved is some $240,000.
From 1991 to 1992 the appellant had been employed by two trustee companies in Adelaide as a consultant and financial adviser. In about 1980 he took up a position on the committee of the Trustee Companies Officers Association. He later became treasurer and in about 1987 or 1988 he became president. He was still president of the association in 1991 and 1992. In October 1992 the appellant commenced employment as a wills officer with Von Doussas, a firm of solicitors. His employment was terminated on 24 February 1995.
As president of the Trustee Companies Officers Association, the appellant was one of a number of signatories of the Association's bank account. Cheques required only one signature. The appellant and his wife operated a bank account in the name of Sangora Investments. Between March 1991 and July 1992, while President of the Association, the appellant drew cheques on the Association's bank account payable to Sangora and other payees. The cheques totalled some $29,000.
In January 1993, when employed at Von Doussas, the appellant prepared a will for Mrs House. In April 1994 Mrs House went to Von Doussas and again saw the appellant. She arranged that the proceeds of the sale of her house property be invested in a trust account in her name and in the name of her niece. The appellant arranged for an account to be opened at National Australia Trustees in the name of appellant as trustee for Mrs House and her niece. The appellant was the sole signatory of the account. Proceeds of the sale were $135,597.02. They were paid into this account. Mrs House then moved to Sydney to live. The appellant drew cheques for his own use and benefit on this account. In June 1995 he informed Mrs House that the balance of the account was $139,201.92, in other words, that it had earned some interest. In fact, the balance was then $40,930.89. In October 1995 Mrs House made inquires at Von Doussas concerning her will. In the course of those inquires, the unauthorised drawings on her account were discovered. Further investigations were made into the appellant's conduct. Those investigations disclosed fraudulent dealings with monies belonging to Mrs Ray.
In 1990, whilst employed by Executor Trustee, the appellant had prepared a will for Mrs Ray. In late 1992 Mrs Ray contacted the appellant at Von Doussas and instructed him to assist her in the sale of her house and its contents. She informed him that she was moving into a nursing home. She instructed him to pay the deposit for her room at the nursing home and to pay other accounts, and to invest the proceeds in a trust account at the Commonwealth Bank of Australia at its Glenside branch. The appellant attended to these matters. However, from March 1993 the appellant drew cheques on this bank account for his own use and benefit. On 9 March 1994 he sent a letter to Mrs Ray advising her that her investment then totalled $87,321.48. In fact, only $9049.62 then remained in the account. In round figures, the appellant fraudulently converted about $96,000 belonging to Mrs House to his own use, and about $115,000 belonging to Mrs Ray.
Examination of the papers shows the appellant applied the funds that he took to pay a wide variety of personal and household accounts such as rates, insurances, improvements to the house he and his wife occupied at Crafers, as well as improvements to the garden. Substantial withdrawals were made to pay the mortgage repayments in respect of that house. There were many payments for repairs and insurances on the appellant's Jaguar motor car. We were told they totalled some $30,000. One payment was for a three day holiday taken by the appellant and his wife in 1994. On occasions a substantial payment was made into the joint bank account operated by the appellant and his wife. One such instance is a cheque drawn on 21 December 1994 paying $23,317.42 into that joint bank account. It is apparent that Mr Cavanagh treated the trust accounts as funds from which he could draw at will.
Because the fraudulent conduct in respect of Mrs House occurred while the appellant was employed by Von Doussas, Mrs House has been able to be fully reimbursed for her loss from the professional indemnity insurance scheme for legal practitioners. That, however, has in turn resulted in a substantial depletion of that scheme. Nevertheless, the appellant's activities has had a significant impact upon her. Mrs House has described as devastating the impact of losing the money which she and her late husband had worked hard to obtain.
There has also been a very devastating impact upon Mrs Ray. She has now in her late eighties. The victim impact statement shows that as a result of the appellant's actions she has been very severely affected. She has on many occasions expressed feelings of guilt in that she believes that it was her fault for trusting the appellant. She has become quite withdrawn and rarely leaves her room except for meals and medical appointments. She has lost her self-confidence and self-esteem. It is not clear why she has not been indemnified for her loss by the professional indemnity insurance scheme for legal practitioners. It seems that there is no fund to which she can turn to replace her substantial financial loss. There simply is no realistic prospect of restitution.
The Trustee Companies Officers Association has also had to bear the loss without any restitution. The appellant has indicated a desire to make some kind of restitution if his financial situation should improve. There is, however, no realistic possibility of that occurring. The appellant's estate has been bankrupted.
The appellant was aged 50 when sentenced. On leaving school he joined the South Australian Police Force and remained there for six or seven years. For the last two years of his service he was a police prosecutor. He then spent about four years lecturing in law at the Australian Federal Police College. From 1981 to 1984 he was employed by Farmers Trustees as a wills consultant and financial adviser. He then joined Executor Trustees as a business planning and development consultant and was employed by that company until 1992. He has been married for 29 years. His wife suffered an accident about 25 years ago and now has major medical problems which make it difficult for her to be left alone.
When employed by Executor Trustee, he and his wife built a house property at Crafers. A dispute arose with the firm which constructed the foundations. This dispute resulted in litigation in the District Court. It seems that the appellant and his wife then got into financial difficulties and his offending then commenced. It is apparent the unauthorised dealings with the funds entrusted to him were not merely applied to off-set financial stringency: in large part, his dealings have been motivated by greed.
After leaving Von Doussas the appellant and his wife entered into negotiations with the Department of Environment and Natural Resources which was looking for persons to occupy Neptune Island and carry out certain duties there. The Bureau of Meteorology has also established a weather station on Neptune Island. In May 1996 the appellant and his wife entered into a lease of Neptune Island for a period of 15 years. The sentencing judge had regard to the fact the appellant was anxious to continue his duties on the island. He had asserted that both the Department and the Bureau of Meteorology wanted him and his wife to remain on the island. There was evidence before the sentencing judge from which the judge concluded that the fact that the appellant would not return to the island would have minimal effect upon operations and that the appellant had overstated the position. There is no reason to interfere with that conclusion.
The offences involved breaches of trust of an extremely serious kind. It is apparent that the appellant has abused the trust reposed in him without compunction and on a regular and frequent basis over a period of years. In the case of the trust monies belonging to the two elderly widows he has treated the funds as his own. The amounts involved are very substantial. Serious loss has been inflicted on Mrs Ray and on the Trustee Officers Association. As I have said, Mrs House was able to be indemnified for her loss, but in the case of the two widows it is not simply a question of the crime resulting in the deprivation of the whole or a substantial part of the savings of a victim. In the case of Mrs Ray it is the deprivation of all that she and her husband had acquired throughout their life. In addition, both widows are experiencing substantial emotional suffering.
The sentencing judge allowed the appellant a discount of ten per cent for his plea of guilty. The discount was reduced below what it might otherwise have been because of the lateness of the plea. Until a very late stage, the appellant had intended to plead not guilty.
The judge also noted that the appellant expressed his deep regret and apologies to the three victims. The judge accepted that the appellant was now contrite and the possibility of his reoffending was remote. However, the appellant's expressions of contrition and remorse must be weighed against the fact that until a late stage he intended to plead not guilty. The judge also noted that the appellant had submitted that there was no deliberate attempt on his part to defraud the victims and that he was caught up in the situation and his pattern of behaviour was totally out of control. The pattern of offending belies this assertion. The repeated nature of the offending clearly indicates that it was quite deliberate.
The sentence was, as Mr Mead said, very high. Mr Mead submitted that both the head sentence and non-parole period are higher than the sentences imposed by this court for similar offending involving substantially higher amounts of money.
The punishment must, of course, fit the crime. In R v Davies (1996) 88 A Crim R 226 this court questioned whether the existing sentencing standards were adequate and said the time may well come when it is necessary to revise them “for large-scale systematic breaches of trust”: per Cox J at 230. There can be no standard sentence for this kind of offending. The manner in which breaches of trust of this kind can occur are many and varied. It is therefore rarely useful to compare one case with another unless the cases form part of a pattern of offending. Each case has its own individual characteristics which necessarily distinguish that case from other cases: see the observations of King CJ in Height (unreported, Court of Criminal Appeal, 22 June 1994, judgment no. S4634) and in Nicholls (1991) 160 LSJS 204 at 205. At one extreme, the offending may represent one or two single acts of folly where substantial, if not complete, restitution is made. At the other extreme the offending may represent a long period of offending over several years where the amount taken is extremely large and there is no prospect of restitution. One of the difficulties with this kind of offending is that it can remain undetected for a long time. In some cases it might never be detected. The fact that it may remain undetected for a long time obviously has, when very substantial sums of money are fraudulently taken, disastrous consequences for the victim or victims. In most cases there is no fund or scheme to provide indemnity of the kind available in this case to Mrs House. The sad and unfortunate plight of Mrs Ray is more typical. Even if a fund or scheme is available it is not a mitigating factor when sentencing the offender: see Hodby (1988) 143 LSJS 466 and Nicholls (supra).
The offending is no less criminal in character than many other serious crimes. In Ashdown (1994) 72 A Crim R 63 and in Davies, comparisons were made with the offences of armed robbery involving no actual violence, and breaking offences involving substantial thefts. As Cox J noted in Davies (at 230), the moral blameworthiness in this kind of offending compares quite unfavourably with a typical multiple housebreaking. This kind of offending is premeditated, deliberate and repetitive. The fact that it involves deceit only serves to underline the criminal wilfulness of the conduct. In cases of this kind, the description of the crime as fraudulent conversion should not disguise the fact that it is a form of stealing - in this case, as in others, stealing on a grand scale. Deterrence must therefore be a predominant factor in the sentence.
Not infrequently the offender is a person with no previous convictions and of good standing in the community. In many instances the offender's good character and reputation in the community is the reason why he has been permitted to occupy a position of trust: see Jacobs J in Hunter (1984) 36 SASR 101 at 105. It is, nevertheless, necessary for the sentence to be sufficient to act as a general as well as a personal deterrent. As Cox J said in Davies (at 229):
“Crimes of this sort are usually committed by respectable people of good standing - that is how they come to be in the positions of trust which they are able to exploit to their advantage. The deterrent effect of the sentence or non-parole period upon other people of good reputation. in a similar position and similarly tempted, would be substantially diminished if persons who committed series of offences of this kind are still given substantial credit for their previous good character. Nor for the same reason should much allowance be made for the circumstance that, as is almost always the case, such a defendant is unlikely to offend again.”

Those who might be tempted to offend in the same way must be under no misapprehension. They must be aware that a defendant of this kind will be sternly punished.

All of these considerations point to the conclusion that the offending in this case called for a high sentence. However, while little is to be gained by comparing the nature of the offending with other cases, the amount which has been stolen by the offender will have some bearing on the penalty. While it is extremely difficult to make close comparisons between cases because the facts and circumstances of each case will differ, it is nevertheless necessary to place the offending in the overall scale of offending so that justice appears to be done to other persons who have been dealt with or will be dealt with in the future for offending of this kind. The amount taken in this case was significantly lower than in other cases which have been before this court in recent years. Another factor is that the length of this sentence reduces the scope for longer sentences when larger amounts are involved. This is not to say that the overall level of sentences for this kind of offending will not have to be increased in the future.
I think that the sentencing judge has erred in fixing a head sentence which is manifestly excessive. I would, therefore, reduce the head sentence but only to a period of eight years. There is no warrant, in my view, for reducing the non-parole period. I would, therefore, allow the appeal for the purpose only of varying the head sentence to a period of eight years.
WICKS J. I agree with the orders proposed by Debelle J for the reasons he gives. I also agree with the observations of the Chief Justice. I have nothing to add.
DOYLE CJ. The orders of the court are as follows:
Appeal allowed.
Set aside the sentence imposed by the Supreme Court.
Substitute a sentence of imprisonment for eight years and fix a non-parole period of five years in relation to that sentence.
Direct that the head sentence and non-parole period commence from 11 February 1999.

[1999] SASC 418

23 September 1999