R v Donald Richard Maxwell

[2006] NSWDC 64

CITATION:	R v Donald Richard MAXWELL [2006] NSWDC 64
JUDGMENT DATE:	12 May 2006
EX TEMPORE JUDGMENT DATE:	05/12/2006
JUDGMENT OF:	Berman SC DCJ
DECISION:	See paragraph 19
CATCHWORDS:	Criminal Law - Commonwealth - Australian Financial Services Licence - Australian Securities and Investments Commission
LEGISLATION CITED:	Corporations Act
PARTIES:	Crown Donald Richard MAXWELL (Offender)
FILE NUMBER(S):	05/11/1010
COUNSEL:	T Muir (Crown) R. Pontello (Offender)
SOLICITORS:	Commonwealth DPP Brenda Duchen (Offender)

- 1 -

SENTENCE

1 HIS HONOUR: Donald Richard Maxwell appears for sentence today having pleaded guilty to one offence of carrying on a financial services business without holding an Australian Financial Services licence. The maximum penalty for that offence is imprisonment for two years.

2 Mr Maxwell became involved with some developers known as the Bell Development Group and the Central Development Group. They were developing a number of properties. They wished to have investors provide money to them. The offender agreed to act as an intermediary between potential investors and the developers. He set up a business and placed advertisements in newspapers, soliciting investments. A number of people responded to those investments. Through the efforts of the offender substantial amounts of money were invested with the developers. The offender was paid a commission on the funds invested. Most of the money invested by those people was lost.

3 The amount of money invested through the offender was significant, totalling more than a million dollars. The offender received a substantial commission for his work in obtaining those investments. None of the principal of the money invested by any of the three people referred to in the agreed statement of facts has been repaid.

4 It is important in assessing the criminality of the offender’s conduct to bear in mind the relationship between the loss suffered by the investors and the offence. This is not a case where the offender, through fraud or deception, persuaded people to invest in something that he knew to be a dodgy investment. In fact he himself invested some of his own money, and lost it as well.

5 The investors were encouraged by the appearance of things being above board. One investor, Mr McGregor, asked if the offender had a licence, to which he replied, “You don’t need to worry about that.” Mr Sollner, another investor, believed the offender to be qualified. Mr Moore says that if he knew that the offender was not licensed it would have made a difference to his decision as to whether to invest his money in the investments with the developers. Thus, the investors believed that the offender was operating above board, but in fact he was carrying on business, as is recognised by his plea of guilty, without a licence when he should have had one.

6 A licensee is required to do a number of things. Those are set out in s 912A of the Corporations Act. Also of relevance is s 912B. It is agreed that if Mr Maxwell had a licence, he would have been obliged to arrange for compensation arrangements under s 912B. It seems therefore that had the offender complied with his obligations it is less likely that the investors would have suffered the loss that they have suffered.

7 Of course had Mr Maxwell applied for a licence he may not have got one anyway. One of the purposes of the licensing regime is to ensure that only people of good fame and character are able to hold themselves out as financial advisers. Mr Maxwell was not of good fame and character. In 1999 he was convicted of a number of dishonesty offences. Potential investors who see a person holding themselves out as being a financial adviser are entitled to assume that the person is of good fame and character and has compensation arrangements put in place. That is why, when people such as Mr Maxwell carry on business as financial advisers without being licensed to do so, the offence they commit is a serious one.

8 It was said on behalf of Mr Maxwell that he was somewhat ignorant of his obligations to be licensed. The submission was put that he started committing this offence only a short time after the requirement that a financial adviser be licensed was introduced. That submission does not accord with the evidence. Mr Maxwell gave evidence that he was told by a lawyer that he did not need a licence as long as he did not give financial advice. The offender now accepts that he gave financial advice. He seems to suggest that he did not realise that at the time, but I have difficulty with that evidence. Much of what the offender said to Mr McGregor, Mr Moore and Mr Sollner is clearly financial advice and any reasonable definition of that term would encompass a large part of what the offender said to the investors.

9 The offender is now sixty nine years of age. He has been married and divorced twice and has children, some of whom provide him with ongoing emotional support. Of course that support has been important since the offender was charged with this offence.

10 From the material provided in the statement of facts and also from a pre-sentence report, it appears that the offender was a builder who entered a period of semi-retirement. He was introduced to the developers and was persuaded to become a consultant to them, obtaining investments as I have described earlier.

11 Mr Pontello submits that it is a mitigating factor that at no stage did the offender knowingly give false advice and that he put his own money in the investment, which tends to indicate that what he was suggesting to the investors was something he truly believed. That is not however a mitigating factor of this offence. It is not a mitigating factor of an offence that the offender did not commit a more serious offence.

12 Mr Pontello also submits that the role played by the offender was a reactive one in that there were no high pressure sales tactics and the offender did not target specifically vulnerable people. That appears to be the case. The offender did not target the naïve deliberately. Indeed, because he believed the investments were sound, he did not need to do so.

13 It is an aggravating factor of this offence that the offender was on a bond when he committed it, albeit that the bond was in its late stages. I do not consider it is an aggravating factor that the offender was in a position of trust in relation to the three investors, at least not as I understand what the concept of a trust involves. He was more in a position of a salesperson, albeit one that was giving advice.

14 The offender pleaded guilty, although it was conceded that this was a late plea. I will recognise that that plea had utilitarian value, and perhaps more appropriately given that this is a Commonwealth offence, demonstrates a willingness to assist in the criminal justice process.

15 The Crown submitted that in the case of serious criminal conduct, a full time custodial sentence is appropriate, unless there are exceptional circumstances. Courts have held that full time custodial sentences are appropriate in the absence of exceptional circumstances for a number of offences, in particular, and most well known, for those of commercial drug supply, but I am aware of no authority which suggests that that consideration applies to this type of offence. Indeed, given that the maximum penalty is only two years, I would be most surprised to see a decision along those lines.

16 It is not the case that it is up to the offender to demonstrate that a full time custodial sentence is inappropriate. However, the offence was nevertheless serious. The offender knew that he should have been licensed. He knew that his three investors were acting on his advice and the consequence of him not being licensed is, as I have said, that it is more likely that the three investors have suffered the loss they have suffered.

17 I am satisfied the offender is remorseful for what he has done. It was never his intention that the investors would suffer any loss at all. Perhaps his main motivation in what he did was to gain a commission, and perhaps because of that he was prepared to advise the investors to invest more with the developers than he would otherwise. But I accept that now that he realises those people have lost their money through his work, he is sorry for what he has done. He has also agreed with ASIC to a pecuniary penalty of $110,000 plus payment of ASIC’s costs of $55,500. It is to be noted that the offender is unlikely to be able to meet those obligations having no assets of any substance and now being on the pension.

18 I am satisfied that the offence is of such seriousness, aggravated as I have said by the fact that it was committed while he was on a bond, that a custodial sentence is appropriate. However, I will order that that sentence be served by way of periodic detention. I am satisfied that a head sentence of twelve months is an appropriate sentence which best recognises the need to deter others who may be tempted to operate unlicensed, to punish the offender for what he has done, and which takes into account that the offender is 69 years of age.

19 The order I make therefore is this. The offender is sentenced to imprisonment for a period of twelve months. He is to be released under a recognisance release order after eight months. He is to enter into a bond to be of good behaviour at the end of that eight month period the bond is for 4 months and the surety sum is $100. The offender is to attend the Parramatta Periodic Detention Centre at 8.30am on 27 May 2006 in order to commence serving his sentence of periodic detention.

20 Now Mr Maxwell, what I have ordered is a period of imprisonment which will be served by period detention. You have to attend gaol every weekend for a period of eight months or as advised by the Corrective Services authorities. You have to turn up to the Parramatta Periodic Detention Centre on 27 May this year at 8.30am to start serving your sentence. After that you’ll be told what time and what day to attend, probably the Friday evening. At the end of eight months you will no longer have to attend every weekend upon you entering into a bond to be of good behaviour. That bond will last for four months. If you breach that bond, that is if you are not of good behaviour during that period of four months, then the order can be revoked and you can return to custody. If you fail to turn up in the period of eight months every weekend then you can be brought back before this Court and I can make alternative arrangements as to your custody. Do you understand?

21 OFFENDER: Yes sir.

**********