R v Cook - [2004] SADC 151

DISTRICT COURT OF SOUTH AUSTRALIA
(Criminal)
R v COOK
Reasons for Sentence of His Honour Judge Lunn
5 November 2004
CRIMINAL LAW
Sentencing - two counts of defrauding the Commonwealth of sales tax totalling $1,179,941 of which $1,143,217 remains unpaid - almost 76 year old, former company director with no previous record - ill health - some likelihood of being at greater risk of serious medical problems in gaol than if at home - single sentence of imprisonment for 4-1/2 years and a non-parole period of 6 months.

R v COOK
[2004] SADC 151
REASONS FOR SENTENCE

On 27 May 2004 John Rugless Cook pleaded guilty in this Court to counts 1 and 4 on the Information of defrauding the Commonwealth contrary to s29D of the Commonwealth Crimes Act 1914. Count 1 related to him having between 1 January 1996 and 22 January 1999 defrauded the Commissioner of Taxation by causing John Cook Winebroker Pty Ltd (“JCWB”) to fail to pay $1,143,217 in sales tax knowing that amount to be due and payable. Count 4 related to him having between 1 July 1977 and 22 July 1998 defrauded the Commissioner of Taxation by causing Ridgemont Wines Pty Ltd (“Ridgemont”) to fail to pay $36,724 in sales tax knowing that amount to be due and payable. Nolles were then entered on counts 2 and 3 on the Information and I ignore them.
Cook was a director and shareholder and the secretary of JCWB which traded as “The National Wine Merchant”. He was also a director and shareholder and the secretary of Ridgemont. Both JCWB and Ridgemont carried on business wholesaling large quantities of wine to retailers. Cook ran the business operations of both companies and devoted very substantial amounts of time and energy to their operations.
Both JCWB and Ridgemont were liable to pay sales tax to the Commissioner of Taxation on wine sold by them. The rate of sales tax was 41% of the sale prices. The sales tax was payable upon the sales by JCWB and Ridgemont being effected regardless of whether, or when, they received payment from their purchasers. Both companies were obliged to submit periodic sales tax returns to the Commissioner of Taxation in which they were required to declare truthfully the amount of sales tax due for payment. It was a self-assessment system which relied upon the honesty of the taxpayer. Cook was responsible for the information supplied in the sales tax returns lodged by JCWB and Ridgemont.
In 1997/98 financial year Ridgemont lodged sales tax returns falsely declaring the amount of sales tax due by it was $18,187 whereas its true liability was $54,911. The amount initially declared of $18,187 was paid by Ridgemont. The shortfall of $36,724 was paid on 21 September 1998 after a Tax Office audit of Ridgemont in July 1998.
JCWB lodged sales tax returns for the period from January 1996 to December 1998 declaring that the total amount of sales tax due for that period was $258,883. That amount was paid. A subsequent audit by the Tax Office determined that the total sales tax liability of JCWB for this period was $1,402,100 which meant there had been an underpayment of sales tax of $1,143,217. Cook subsequently acknowledged the accuracy of these figures.
The sales tax liability of $1,143,217 of JCWB remains unpaid and there is no prospect of any significant part of it being recovered. JCWB went into voluntary liquidation on 3 June 1999. There is no outstanding liability for sales tax by Ridgemont.
Cook is now almost 76 years of age. He is married and has four adult daughters. Tragically, his only son was killed in a road accident when he was aged 26. His family are standing by him and supporting him.
Cook has no criminal record. Three character references have been tendered all of which attest to his general honesty and previous good character. The offences were out of character for him.
Dr Flynn, a psychiatrist, reported that Cook has no diagnosable psychiatric illness. He has had some history of depression and there is a reasonable likelihood of him being prone to a depressive reaction to his convictions and imprisonment.
Dr Boorman, the general practitioner of Cook, reported that he has mitral valve regurgitation in his heart which has not yet required treatment, but may be needed in the future. In June and October 2002 Cook had suffered transient ischaemic minor strokes which now make him at increased risk of future strokes and heart attacks.
Cook did not derive any significant financial benefit for himself from the offences. The evolution of the offending was the all too familiar story in business of tight cash flows and excessive bad debts, and of trading on after the companies had become insolvent in misplaced and unrealistic hopes that future trading would improve and generate sufficient funds to allow voluntary disclosure to be made to the Tax Office and the requisite sales tax and monetary penalties to be paid. The frauds enabled Cook to keep the businesses of JCWB and Ridgemont running for much longer than would have otherwise been the case. By falsifying the sales tax returns for JCWB Cook in effect shifted the major burden of the trading losses of it onto the Taxation Office to the benefit of other then creditors of JCWB. Cook did not initially embark on a major attempt to defraud the Taxation Office, but rather allowed his frauds to escalate as the financial position of JCWB deteriorated. Nevertheless, a loss to the general revenue of over $1,000,000 is a very serious matter. The sentence must contain a substantial element of general deterrence. There is no likelihood that Cook would re-offend.
Cook is contrite and remorseful for what occurred. He realises the embarrassment and heart ache which his offending has caused his family and friends. While the offences were out of character he cannot be treated entirely as a first offender because of the period of time over which his offending occurred. He is to be given a substantial discount on his sentence because of his early pleas of guilty.
Cook’s present age of almost 76 years, and his current state of health, are significant factors in sentencing him. The Court must keep in mind that each year of his sentence represents a significant proportion of the remainder of his life and the sentence is not to be a crushing one for him at his advanced age: R v Hunter (1984) 36 SASR 101.
There has been a significant delay between the offences coming to light through the Taxation Office audits which were completed by February 1999 and these proceedings being instituted in August 2003. In November 2001 the Federal Police executed search warrants to obtain relevant documents. In December 2001 Cook, as was his legal right, declined to be interviewed by the Federal Police. This meant that the prosecution did not have the benefit of any admissions which he might have made in such an interview and had to prepare its case on the basis that it had to be able to prove every element of the offences. From the volume of the material supplied to the Court this was clearly a major exercise and took some time. However, on the factor of Cook’s age somewhat more leniency is to be extended to an offender now aged 75 years than to one who would have been aged about 70 years if the matter had been brought promptly before the Court. Cook has now had the prospect of these convictions and his imprisonment hanging over his head for many years. Nevertheless, the whole responsibility for the delay is not to be visited against the prosecution because Cook did not facilitate a quicker prosecution by submitting to a record of interview.
The maximum penalty for each offence under s29D of the Commonwealth Crimes Act 1914 is imprisonment for 10 years and/or a fine of $110,000. Subject to the health issue to be mentioned below it was not disputed, and I find, that immediate imprisonment is the only appropriate penalty for an offence involving a loss to the revenue of just over $1,000,000. A single sentence is to be imposed under s18A of the South Australian Criminal Law (Sentencing) Act 1988. (Section 18A applies to sentencing for Commonwealth offences prosecuted on Information: R v Jackson (1998) 72 SASR 490.) In sentencing I have regard to what has been said by the Court of Criminal Appeal in R v Ruggiero (1998) 104 A Crim R 358, R v Jackson (above) and R v Anderson. CCA, 11/4/2002, Jud No [2002] SASC 111, unreported.
A single sentence is imposed on Cook on both counts of imprisonment for 4½ years. But for his pleas of guilty that would have been imprisonment for 6 years. The length of the head sentence is not affected by the considerations of health mentioned hereafter.
Submissions on sentence were initially completed on 29 July 2004 and I remanded Cook in custody to await sentence. He had not previously been taken into custody. He was held in the Adelaide Remand Centre. His solicitors sent a copy of the medical reports from his general practitioner to the Remand Centre which set out his medical problems as outlined above and disclosed that he was on regular blood-thinning medication.
On the evening of 3 August Cook, while locked in a cell, had an episode of rectal bleeding. He contacted the control room by intercom to be told that he was over-reacting and a nursing medication team would visit him later in the night. About half an hour later he had another substantial episode of rectal bleeding. He again contacted the control room on the intercom and shortly after he was visited by the nursing medication team who observed the blood in the toilet. They took him to the infirmary where it was decided that his condition was not serious enough to warrant taking him to the Royal Adelaide Hospital by taxi and that they would request a police escort to take him to the hospital. It took over an hour, and considerable complaints from Cook, before he was taken to the Emergency Department at the hospital. When there he again needed to go to the toilet. He again had substantial rectal bleeding. He lost consciousness while in the toilet and was admitted to the hospital. No further episodes of bleeding occurred and he was returned to the Remand Centre on 5 August.
On 10 August he appeared before me when I released him on bail to enable tests to be carried out to determine the cause of the rectal bleeding. He has been on bail ever since. He had spent thirteen days in custody. Since August Cook has been under the care of Mr Game, a general surgeon specialising in diseases of the gastrointestinal tract. I have received several reports from Mr Game and he has given oral evidence. I accept his evidence.
Mr Game has diagnosed Cook as having severe diverticular disease and severe ulceration of his oesophagus. The latter condition is likely to have been exacerbated by aspirin which Cook had been taking for some time because of his history of transient ischaemic attacks. He has since been taken off aspirin and put onto another blood-thinning medication to reduce the risk of strokes. It would appear that Cook had had the diverticular disease for some considerable time, but it only became symptomatic on 3 August. This may have been precipitated by stress associated with his incarceration.
Cook has not had any further episodes of rectal bleeding since 3 August but he is at real risk of such episodes in the future. Surgery is not likely to be helpful at this stage.
If Cook had further gastrointestinal bleeding from his diverticular disease, he could be at serious risk if he does not receive immediate medical attention. The necessity for him to be on blood-thinning medication means that the volume of blood loss will be greater than if he was not on that medication. The danger is that a loss of blood volume, and the resultant rapid drop in blood pressure, will greatly increase the risk of a heart attack. A serious blood loss may also cause a loss of consciousness, as happened on the third episode on 3 August, which would mean Cook would not thereafter be able to summon help.
Dr Holmwood, the Director of Prison Health Services, has indicated that if Cook is returned to custody he would be kept at Yatala Prison because there is a 24 hour nursing service available there. During the night he would be locked in a cell. He would be checked each two hours by custodial officers. He would have access to an intercom unit to contact the control room which should result in him being visited by a custodial officer within five minutes and an ambulance should be able to arrive within a further fifteen minutes if his condition warranted this. There would be a medical management plan put in place for Cook in consultation with Mr Game. Dr Holmwood did not suggest that such a management plan would not provide adequate treatment for Cook.
Mr Game has expressed considerable concern that Cook would be at greater risk from gastrointestinal bleeding in prison than if he was at home. If during the lock down Cook was to lose consciousness as a result of his bleeding before he could summon help, any treatment for the bleeding could be substantially delayed with possibly fatal consequences. He also considered that the stress involved in a return to prison would make it more likely that Cook would have further episodes of gastrointestinal bleeding than if he was at home.
The relevant law is set out in the following passage from King CJ in R v Smith (1987) 44 SASR 587 at 589
“… The state of health of an offender is always relevant to the consideration of the appropriate sentence for the offender. The courts, however, must be cautious as to the influence which they allow this factor to have upon the sentencing process. Ill health cannot be allowed to become a licence to commit crime, nor can offenders generally expect to escape punishment because of the condition of their health. It is the responsibility of the Correctional Services authorities to provide appropriate care and treatment for sick prisoners. Generally speaking ill health will be a factor tending to mitigate punishment only when it appears that imprisonment will be a greater burden on the offender by reason of his state of health or when there is a serious risk of imprisonment having a gravely adverse effect on the offender’s health.”
Cook’s counsel submitted that there was a serious risk of further imprisonment causing the possible death of Cook and I should therefore wholly suspend the sentence to be imposed. He submitted that I could impose terms on a bond under s20(1) of the Commonwealth Crimes Act 1914 requiring Cook to remain at home for the period of the bond other than in certain exceptional circumstances which would be the equivalent of a sentence of home detention. While he conceded there was no equivalent of s38(2c) of the State Criminal Law (Sentencing) Act 1988 in the Crimes Act he said a similar effect could still be achieved under the general powers in s20(1) of the Crimes Act 1914. I am not aware of any precedent for such a bond. However, in view of my other conclusions it is not necessary to pursue this possible option any further.
As occurred in R v Smith (above), and as recognised in Sopher (1993) 70 A Crim R 570, any mitigation through ill health must be balanced against the gravity of the crime and the degree of criminality involved. Cook perpetrated deliberate, systematic frauds for over three years involving a loss to the revenue of over $1,000,000. These are very serious offences. While I accept that the matters stated above show that there is a serious risk of further imprisonment having a grave adverse effect on Cook’s health, when weighed against the gravity of the crimes, I do not consider that the risk is so serious that it would be proper to order that there should be no further period of immediate imprisonment and a suspension of the whole sentence. There are a number of contingencies involved in the risk. The first is that he will in fact have further episodes of gastrointestinal bleeding. So far there have only been three such episodes all on the one day, although the stress involved in a return to prison does increase their likelihood. He may have none. The second is that such an episode would occur during lock down and other than shortly before the two hourly cell visits. The third is that the bleeding will produce unconsciousness before he can summon help on the intercom. It is at least equally likely he would not lose consciousness. The fourth is that there would not be some similar risk of him becoming unconscious at home and it not being ascertained by his wife. There was no evidence on the point. While I accept that it would be more likely that a collapse would be detected quickly at home there may be factors which would operate against that. His wife may be sleeping too soundly or sick herself or may be out for the evening. While there is some potential for Cook not to be able to get the urgent medical treatment he would need if he had serious gastrointestinal bleeding while in prison, the likelihood is that in most instances he would obtain the necessary treatment. While his problem was not treated with sufficient seriousness at the Remand Centre on 3 August the authorities did not then know of his diverticular disease whereas now it is well-known to Dr Holmwood and those who will be responsible for his management plan. The Court assumes that the prison authorities will act reasonably to provide treatment in the event of Cook having any further episode of gastrointestinal bleeding while in prison.
While the gravity of the offending as a matter of general deterrence requires that Cook should spend some significant period in prison, the matters relating to his health as stated above allow me to make that period much shorter than would otherwise have been the case even for a man of his age. After taking into account the thirteen days already spent in custody the non-parole period is fixed at six months. Both the sentence and the non-parole period are to run from today.