R v Dunn (No 9)
[2014] WASC 61
•28 FEBRUARY 2014
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CRIMINAL
CITATION: R -v- DUNN [No 9] [2014] WASC 61
CORAM: EM HEENAN J
HEARD: 13 NOVEMBER 2013 & 29 JANUARY 2014
DELIVERED : 28 FEBRUARY 2014
FILE NO/S: INS 107 of 2012
BETWEEN: THE QUEEN
Prosecution
AND
GREGORY JOHN DUNN
Accused
Catchwords:
Conspiracy to cause a loss by dishonest means to a Commonwealth entity - Sophisticated fraud to create false deductions to reduce liability to taxation - False transactions giving rise to deductions totalling $7,190,282 - Tax sought to be avoided by these means, $2,557,393 - Eventual recovery by ATO of all tax due with penalties
Legislation:
Crimes Act 1914 (Cth), s 16A, s 17A, s 18, s 19AB
Criminal Code Act 1995 (Cth), s 135.4(3)
Income Tax Assessment Act 1936 (Cth)
Result:
7 years' imprisonment
4 years' non-parole period
Backdated to take effect from 17 September 2013
Category: A
Representation:
Counsel:
Prosecution : Mr P Roberts SC & Mr A L Troy (13 November 2013) Mr A L Troy (29 January 2014)
Accused: In person (13 November 2013) Ms L Boston (29 January 2014)
Solicitors:
Prosecution : Director of Public Prosecutions (Cth)
Accused: Lewis Blyth & Hooper
Case(s) referred to in judgment(s):
Barbaro v The Queen; Zirilli v The Queen [2014] HCA 2
Bartlett v The Queen [No 2] [2013] WASC 83
Commissioner of Taxation (Cth) v Hart [2004] HCA 26; (2004) 207 CLR 216
Commissioner of Taxation (Cth) v Peabody [1994] HCA 43; (1994) 181 CLR 359
Commissioner of Taxation (Cth) v Spotless Services Ltd [1996] HCA 34; (1996) 186 CLR 404
DPP (Cth) v Carter [1998] 1 VR 601; (1997) 91 A Crim R 222
DPP (Cth) v El Karhani (1990) 21 NSWLR 370; (1990) 51 A Crim R 123
Gilson v The Queen [1991] HCA 24; (1991) 172 CLR 353
R v Agius; R v Zerafa [2012] NSWSC 978; (2012) 87 ATR 528
R v Cox; R v Cuffe; R v Morrison [2013] QCA 10
R v de Figueiredo [2013] QCA 307
R v El Rashid (Unreported, NSWCCA, 7 April 1995)
R v Liles [2012] NSWSC 1249
R v Pantano (1990) 49 A Crim R 328
R v Rivkin [2004] NSWCCA 7; (2004) 59 NSWLR 284
R v Sakovits [2013] NSWSC 464
R v Shepherd (1988) 37 A Crim R 303
R v Stitt (1998) 102 A Crim R 428
R v Wheatley (2007) VCC 718; (2007) 67 ATR 531
R v Whitnall (1993) 42 FCR 512
R v Williams [2005] NSWSC 315; (2005) 152 A Crim R 548
The State of Western Australia v JWRL (a child) [2010] WASCA 179
The State of Western Australia v JWRL [No 4] [2009] WASC 392
EM HEENAN J: On 8 November 2013 at the end of a long joint trial Gregory John Dunn was found guilty of the offence of conspiring with another person with the intention of dishonestly causing a loss to a third person when that third person was a Commonwealth entity - contrary to s 135.4(3) of the Criminal Code Act 1995 (Cth). Following the verdict of the jury Dunn was convicted of that charge and, after subsequently hearing submissions on later occasions, now comes to be sentenced. The offence established by s 135.4(3) of the Criminal Code carries a maximum penalty of 10 years' imprisonment.
Dunn was one of four persons charged on the same indictment and tried together at this joint trial - in his case over the period from 2 September 2013 until 8 November 2013 although the trial involving another two of the accused continued until 13 November 2013. Those charged were Dunn, Peter Mervyn Bartlett, Ronald George Sayers and Deborah Jeanne Grace. The indictment presented by the Commonwealth Director of Public Prosecutions (CDPP) against the four accused charged them jointly as follows:
The Commonwealth Director of Public Prosecutions informs the Court that between about 15 August 2002 and 17 June 2004 at Perth in the State of Western Australia and elsewhere, Gregory John Dunn, Peter Mervyn Bartlett, Ronald George Sayers and Deborah Jeanne Grace (nee Cammiade) did conspire with each other and Trevor Neil Thomson with the intention of dishonestly causing a loss to a Commonwealth entity, contrary to section 135.4(3) of the Criminal Code Act (Cth).
Trevor Neil Thomson, who was named in the indictment as a co‑conspirator, had previously been charged with the same offence and had been convicted after his plea of guilty. He was sentenced to a term of imprisonment by McKechnie J on 13 May 2010 and since then has been released from prison on completion of his sentence. He was a witness for the prosecution at this joint trial.
At the end of the trial, which lasted for over 10 weeks, the jury found Dunn guilty as charged and the accused Grace not guilty. The jury was not able to agree upon a verdict in relation to either of the accused Bartlett or Sayers. As a consequence Mrs Grace was acquitted and discharged. Messrs Bartlett and Sayers have been remanded on bail for retrial.
It follows from this result and the verdicts of the jury that Dunn has been found guilty and convicted of conspiring with Trevor Neil Thomson with the intention of dishonestly causing a loss to a Commonwealth entity contrary to s 135.4(3) of the Criminal Code Act. The acquittal of Mrs Grace and the inability of the jury to reach verdicts on the charges against Bartlett and Sayers compels this conclusion. All the submissions advanced in relation to this sentencing, both written and oral, have proceeded on this basis and nothing in these reasons is to be taken as any inference or conclusion that either Mr Bartlett or Mr Sayers is a party to what occurred. The charges against them remain but are yet to be heard and finally determined.
Following Dunn's conviction on 8 November 2013 submissions were made and evidence taken on 13 November 2013 relating to his sentencing. On that occasion, as indeed had been the case throughout the long trial, Dunn was appearing on his own account without legal representation. However once the sentencing hearing proceeded to the point where he was invited to make submissions on his own behalf he asked for time to seek legal advice and representation. Having regard to the gravity of the situation in which he then stood and as there was no submission to the contrary by the prosecution, I adjourned the hearing for a short time to allow Dunn to explore the possibility of obtaining legal representation. Initially the adjournment was only for a period of a little over three weeks but, in the meantime, Dunn engaged solicitors who, not unreasonably, asked for more time to become familiar with the complexities of the evidence at the trial and Dunn's background in order to make submissions on his behalf. Accordingly the sentencing hearing was adjourned until 29 January 2014 when detailed further submissions were made. I then reserved my decision until today. No further oral evidence was taken at the hearing on 29 January 2014 but a number of written character references and a statement from a Victorian Homicide Detective describing Mr Dunn's assistance and co-operation in a homicide investigation being conducted by the Victorian Police were presented by consent and received. It will be necessary to explain the relevance of that homicide investigation but to do so much earlier preliminary detail is needed.
Some controversies have arisen from the submissions made in the course of sentencing about the role and importance of Dunn's activities in the conspiracy. Accordingly, it is necessary to restate the principles applying when contested issues of fact at trial need to be determined by a judge imposing sentence after conviction as a result of a jury verdict. I had occasion to refer to those principles in The State of Western Australia v JWRL [No 4] [2009] WASC 392 where at [9] ‑ [10] I observed:
The proper approach to the determination of facts for the purpose of imposing sentence after conviction by a verdict of a jury is well‑established. In R v Isaacs (1997) 41 NSWLR 374, 377 - 378, the Court of Criminal Appeal summarised the established principles which were later approved by the High Court in Cheung v The Queen [2001] HCA 67; (2001) 209 CLR 1 [14]. In Cheung's case, the High Court decided, by a majority, that when making findings relevant to sentencing, a judge is not obliged to impose a sentence according to a view of the evidence most favourable to the offender. Gleeson CJ, Gummow and Hayne JJ concluded that, provided the facts found by a sentencing judge are not inconsistent with the jury's verdict, the judge may make an assessment of an offender's degree of culpability which would not be supported by all, or perhaps any, members of the jury. In Isaacs (supra), the Court of Criminal Appeal had stated the principles as follows (Gleeson CJ, Mason P, Hunt CJ at CL, Simpson and Hidden JJ):
1.Where, following a trial by jury, a person has been convicted of a criminal offence, the power and responsibility of determining the punishment to be inflicted upon the offender rest with the judge, and not with the jury …
2.Subject to certain constraints, it is the duty of the judge to determine the facts relevant to sentencing. Some of these facts will have emerged in evidence at the trial; others may only emerge in the course of the sentencing proceedings …
3.The primary constraint upon the power and duty of decision‑making referred to above is that the view of the facts adopted by the judge for purposes of sentencing must be consistent with the verdict of the jury …
4.A second constraint is that findings of fact made against an offender by a sentencing judge must be arrived at beyond reasonable doubt.
5.There is no general requirement that a sentencing judge must sentence an offender upon the basis of the view of the facts, consistent with the verdict, which is most favourable to the offender … However, the practical effect of 4 above, in a given case, may be that, because the judge is required to resolve any reasonable doubt in favour of the accused, then the judge will be obliged, for that reason, to sentence upon a view of the facts which is most favourable to the offender …
That line of authority was followed and applied by the New South Wales Court of Criminal Appeal in R v Pisciuneri [2007] NSWCCA 265 by Hislop J [57], with whom Spigelman CJ and Harrison J agreed. It is also implied in the observations of the Court of Appeal in this State in Mason v The State of Western Australia [2005] WASCA 125 [3]; (2005) 30 WAR 205, 207.
These principles were affirmed and applied in the appeal: The State of Western Australia v JWRL (a child) [2010] WASCA 179 [9] ‑ [10] (Martin CJ). It is upon this basis that I have made the findings of fact which are set out in the passages which follow.
For present purposes the commencing point of the events which led to this prosecution can be taken to be the 1998/1999 tax year - that is the period ending on 30 June 1999.
At that time, and indeed through until 2004, Dunn was a businessman with some legal and accounting background but no formal qualifications in either discipline. He was, nevertheless, regarded in certain circles as knowledgeable and 'expert' in taxation and promoted to various people tax schemes which he had largely designed himself and which he believed to be legitimate in the sense that they would be effective to reduce the liability to taxation for persons who adopted them without being in any way dishonest, fraudulent or illegal. As will be seen, however, these tax schemes involved novel and adventurous transactions which several lawyers thought were at the very edge of acceptability and which may well be prone to being disregarded by the Federal Commissioner of Taxation (FCT) exercising his powers under pt IVA of the Income Tax Assessment Act 1936 (Cth) should they come under notice.
Messrs Bartlett and Sayers were and are, very successful and wealthy businessmen, each in his own right, but who were also in business together (although their joint enterprise was not then publically known and was for commercial reasons kept secret), in the operation of a mining resources company, Barminco Pty Ltd which later became a public company Barminco Ltd. This company conducted business as the trustee of a unit trust (the Barminco Unit Trust or BUT). The units in the BUT at the material times were held by a company Bremerton Pty Ltd (Bremerton) which Mr Bartlett controlled. Fifty per cent of the units in the BUT were held by Bremerton beneficially as trustee for the Bartlett Family Trust. The other 50% of the units held by Bremerton were held on trust for Nebraska Pty Ltd (Nebraska) which, in turn, was the trustee of the Sayers Family Trust. Both Bremerton and Nebraska, as trustees of the respective family trusts, had extensive discretionary powers as to the distribution of the income of those family trusts to, among others, a wide range of family members or corporations associated with family members as specified in the respective family trust deeds.
Messrs Bartlett and Sayers were old and close friends tracing their association back to their school days. Each had prospered by activities in the mining industry and by 1999 the operations of Barminco were very large, including a large number of employees, with a very big turnover and, despite large fluctuations in income over the years of the mining industry cycles including some significant losses, the business was, generally speaking, very profitable.
Concerned about the levels of taxation payable upon the profits of BUT which, by virtue of the trust structures, were distributed equally to Bremerton and Nebraska, and thence, at the discretion of the trustees for the family trusts, to eligible beneficiaries of those two family trusts, Messrs Bartlett and Sayers were introduced by their accountant, Mr Trevor Thomson, to Mr Gregory Dunn who was represented, and self‑presented, as a specialist in taxation affairs and a person willing to participate in what became known as the 'Appointor Arrangement' which was represented as capable, if implemented, of saving large amounts of taxation for the beneficiaries of the various trusts I have just been describing. I shall set out in more detail later the essential features of the Appointer Arrangement. First, however, I simply record that after hearing the recommendations of Mr Dunn, and taking independent legal advice on the subject Messrs Bartlett and Sayers decided to engage in the Appointor Arrangement scheme, and did so. This involved Mr Dunn, through his own entities (Timebase Investments Pty Ltd as Trustee for the Corpex Trust) becoming involved in distribution of the profits from BUT and was to operate, and did operate, over two tax years only, namely, from 1 July 1999 to 30 June 2001.
In this case the Crown has never alleged that the Appointor scheme was illegal, fraudulent or dishonest although, as will emerge, it was subsequently disregarded by the FCT under his powers under pt IVA. Amended income tax assessments were issued which had the effect, broadly speaking, of recouping for the Commonwealth tax which would have been payable had the Appointor Arrangement never been implemented. However, it is important to stress that neither in the Appointor scheme itself nor in its subsequent treatment by the FCT there is nothing which constitutes the offence of which Dunn has been convicted.
Rather, that offence emerges from the agreement and implementation of what was called throughout this trial the 'False Interest Scheme' (FIS). Essentially, the FIS was a false and fraudulent pretence that certain transactions had been entered into in relation to the BUT in June 1999 and which related to the 1999 tax year. For emphasis I add that this was for a period before the commencement of the Appointor scheme.
The transaction falsely represented as having then occurred was the issue of 79.90 million special units in BUT to the beneficiaries, direct or indirect, of the unit trust, namely Bremerton and Nebraska. According to the FIS these were $1 units paid only to 0.01 of a cent per unit and with the unpaid portion of the unit namely 99.99 cents being payable at a later date or dates and in the meantime carrying interest at 9% per annum payable by the new unit holders to Barminco in the 1999 tax year in advance but, because of the special terms of the issue and the accounting arrangements for BUT, that interest was receivable by BUT, and hence part of its profit, only in the following year - the 2000 tax year.
The FIS, as already stated, purported to record that this issue of special units in BUT had been agreed and implemented before the end of the 1999 tax year. Again speaking broadly, its purported effect was to create deductible interest payments to the aggregate of approximately $7.190 million, for Bremerton and Nebraska equally between them. It treated that additional aggregate income of interest of $7.190 million in the hands of BUT as falling into the 1999/2000 tax year.
The evidence at the trial was that no such transaction, as the issue of the special units or indeed of any part of the FIS, had occurred in June 1999. Rather, the prosecution case was that a variety of documents was prepared between July and September 2002 to pretend falsely to record that this issue of special units in BUT had occurred; had been taken up; and that the consequent payments including interest payments had occurred or ought to be treated as having occurred in the 1999 tax year.
Documents (exhibits 95 and 96) evidencing this false representation were submitted to a meeting said to have been attended by Messrs Dunn, Thomson, Bartlett, Sayers and possibly others in September 2002 and were signed or executed as if they were true. The result was that amended income tax returns were filed for BUT, Bremerton, Nebraska and various other beneficiaries of the Bartlett and Sayers Family Trusts receiving, via Bremerton and Nebraska, as the ultimate beneficiaries taking into account the monies paid and liabilities assumed in the FIS, that is the non‑existent 1999 issue of the special units. The aggregate result, again broadly speaking, was to achieve a significant saving of income tax liability for the ultimate beneficiaries of BUT for the 1999 tax year.
There was much controversy at the trial over who was present at the meeting or meetings when the documents for the FIS were executed. Also in issue at the trial was whether the signatures on those documents, appearing to be signatures of Messrs Bartlett and Sayers were in fact theirs. A further issue was, whether, on the basis that the documents recording the FIS were actually signed by Mr Bartlett and Mr Sayers, either signed the document without realising its contents or significance but merely on the assurance of one or both trusted advisors (Dunn and/or Thomson) that the documents were accurate and appropriate for them to sign or whether, if either of those two men did sign the documents, they did so because of a false representation or assurance from Thomson and/or Dunn that the documents were simply replacements of an original document or documents duly signed in June 1999 but, since then, accidentally lost. There was also an issue over whether or not Mrs Grace was at any such meeting or, if she was, whether she realised or fully comprehended what was occurring.
Having regard to the verdicts of the jury and because the charges against Messrs Bartlett and Sayers remain to be heard and determined I consider that my findings, for the purposes of this sentencing, on those various issues must be as follows.
First, I am satisfied that the so-called FIS was indeed a false and fraudulent pretence and that there had never been an issue of special units in BUT proposed or recorded in or about June 1999 or at all as the documents recording them and implementing the FIS stated. I am also satisfied that the origin of the FIS was a belated discovery, in July 2002 following a much delayed analysis of the financial performance of BUT, for the year ended June 1999, that the enterprise had, unexpectedly, made a profit of about $7.7 million or more for the 1999 tax year when, until about then, it had been expected that the enterprise would produce little or no profit for that period.
Further, I am satisfied that when the additional profit for BUT for that period was discovered it was regarded by at least Dunn and Thomson as a potential embarrassment. There are several possible reasons for this conclusion including the potential for that profit to prejudice or subvert the efficacy of the Appointor Arrangement. It is not necessary to reach any conclusion as to why exactly the unexpected dimension of the profit by BUT for the 1999 year discovered, as it was in July 2002, was regarded as actually or potentially embarrassing - it is enough that I am satisfied that this was then the view of Dunn and Thomson and conveyed to others.
The important feature which I am satisfied did exist was a determination by those designing and implementing the FIS to eliminate that profit. The FIS was designed and implemented with that single purpose in mind, that is, to provide false deductions for each of Bremerton and Nebraska for the interest payments due on the newly issued partly paid units, which could be set off against the distribution to each of those companies of their 50% share of the newly discovered profit for the 1999 year in BUT.
In case the chronology of all this may, at first, seem puzzling it is necessary to note that BUT in 2002 was in arrear in lodging its income tax returns for the years stretching back to 1999 and that there were similar arrears in the lodgment of returns by Bremerton and Nebraska and by some of the recipients of distributions from those family trust companies. In instances where income tax returns for the year ended 30 June 1999 had been filed by a company or beneficiary before September 2002 the implementation of the FIS involved filing amended returns for that tax year later.
Despite the submissions to the contrary made by Mr Dunn I am satisfied that he was the author and designer of the FIS and that it was he who procured Thomson to arrange to have the documents drafted for signature at the September 2002 meeting to give effect to the scheme which he had designed. At the trial there was controversy over whether or not manuscript drafts of the documents to record the FIS were in the handwriting of Mr Dunn or of Mr Thomson. Conflicting evidence on this issue was given by Mr Thomson on the one hand and by his former secretary on the other. He contended the documents had been written in Mr Dunn's hand while she stated that the documents she worked from were in Mr Thomson's handwriting. It is unnecessary to resolve this controversy and I do not consider this could be done on the basis of a finding beyond reasonable doubt. I am, however, satisfied that the draft documents, by whomever they were written when submitted for typing, originated in the proposal put forward by Mr Dunn to Mr Thomson who gave directions that the scheme as so designed should be implemented at a time when both Dunn and Thomson knew what was being proposed was false.
As to who was at the meeting or meetings in September 2002 I am satisfied that the meetings were attended at least by Messrs Dunn, Thomson, Bartlett and Sayers and that the documents falsely prepared had been put forward at the instance of Dunn and Thomson for execution. I am not satisfied that Mrs Grace was at the meeting and it is not possible to say which of several other people were also there although it is possible that at least one other person was. Who that was and whether or not he was there need not be determined. Similarly, it is not necessary for present purposes to determine whether the signatures on the minutes submitted to the meeting in September 2002 are indeed signatures of Messrs Bartlett and Sayers or, if they are, under what belief or circumstances they were signed by either of those men. It is enough that documents purporting to have been signed by Messrs Bartlett and Sayers and recording the terms of the FIS did emerge from, or shortly after, that meeting and that they were then acted on as was intended by Messrs Dunn and Thomson to lay the basis for recalculating the taxable incomes of each of Bremerton and Nebraska and their respective beneficiaries and to file taxation returns or amended taxation returns putting forward profits or distributions of profits based on that false scheme.
The immediate results of the FIS, so long as it continued undetected were that the beneficiaries who received distributions of profits from Bremerton and Nebraska in relation to the 1999 tax year had lower taxable incomes, and hence a smaller liability to taxation, than if the true profit of the two family trust companies had been declared and distributed. This was the object of the scheme and it resulted, by the conspiracy of Thomson and Dunn, in dishonestly causing a loss to the FCT and hence to the Commonwealth and so constituted an offence under s 135.4(3) of the Criminal Code.
Several other features of the FIS and its implementation need to be mentioned. First, the scheme did not constitute, nor was it ever intended to constitute, any misrepresentation or fraud in relation to the income or to the taxation liability of Dunn himself nor for that of any of his related companies or entities. The direct benefit of the FIS, at a financial level, was to the beneficiaries of the Bartlett and Sayers Family Trusts. Second, Dunn received no direct financial benefit from promoting or procuring the implementation of the FIS although I am satisfied that he saw it as being to his indirect advantage that the scheme should be promoted and implemented because that would conduce towards the reinforcement and continuation of the relationship which he was then actively enhancing with Messrs Bartlett and Sayers and in the promotion of other tax schemes which he had put to them in his role as their consultant on tax affairs. Thirdly, the actual FIS was not part of the Appointor Arrangement although, as will be seen, the postponement of the receipt of the interest income of approximately $7.19 million by BUT, payable as interest on the special units falsely claimed to have been issued, meant that that profit in BUT's hands and its eventual distribution to Bremerton and Nebraska fell into the first year of the operation of the Appointor Arrangement which, had it been effective, would have meant that it would have been received under the umbrella of the tax shelter created by the Appointor Arrangement, if that had lasted, and so would not have resulted in any taxation liability if the intended design conditions of the Appointor Arrangement had been met.
The observation is that, although in the implementation of the Appointor Arrangement there was a series of transactions which involved large amounts of money being paid to an overseas based company Crossline Overseas Limited (Crossline) which, in turn, was associated with a firm of tax accountants and advisors named Strachans operating in Switzerland and in Jersey in the Channel Islands, none of the monies involved in the FIS was payable to Crossline or to Strachans or sent overseas. In fact there were no monies payable. The scheme was basically just a fraudulent pretence to create a non-existing deduction which could be offset against profits which would eventually be taxable in the hands of beneficiaries to whom they were distributed. Nevertheless, the connections between Dunn and Crossline, and the payments made by Bremerton and Nebraska to Crossline by the indorsement of promissory notes drawn by these companies, ultimately to Crossline, became important for other reasons.
The Australian Taxation Office (ATO) and the Australian Crime Commission (ACC) as part of their nationwide investigation known as 'Project Wickenby' were investigating allegations and reports that various Australian businesses were remitting monies off‑shore to tax havens such as Switzerland, the Channel Islands and other places, with a view to concealing profit making operations off‑shore, which had they been disclosed, would have attracted liability to pay tax in Australia. These investigations were also being conducted into reports or allegations that certain Australian businesses were repatriating to Australia profits remitted to, or earned in, an off‑shore location, under the false guise that they were capital payments or non‑taxable receipts. In the course of these investigations the Project Wickenby taskforce had identified the firm of Strachans as an off‑shore entity suspected of being active in promoting and implementing off‑shore tax evasion for Australian entities.
When a senior member of the firm of Strachans, Mr Philip Egglishaw, visited Australia and stayed in Melbourne in February 2004 officers of Project Wickenby taskforce seized his computer and in its memory discovered the names of many Australian individuals or businesses who apparently had had dealings with Strachans over the years or who were current clients.
It is important here to emphasise that, merely because a person or a business was a client of Strachans or that their name may have been found on Mr Egglishaw's computer, does not establish that the person concerned was involved in any tax evasion activities or had committed any offence. Nevertheless, the contents of Mr Egglishaw's computer prompted a series of further investigations by the Project Wickenby officers which led eventually to them executing search warrants at the premises and offices of each of Dunn, Thomson, Bartlett, Sayers and Grace resulting in the seizure of a great quantity of financial records. This occurred in June 2005. By that time, Dunn had left Australia and had taken up residence in Thailand where he continued to live until events of 2012 when he was there arrested on an Australian extradition warrant, later extradited to Australia and charged with the offence of which he has now been convicted.
Following the execution of the search warrants at their respective premises by the ACC in June 2005 Messrs Sayers and Bartlett became, understandably, concerned about the suspicions by the authorities that they, or their companies, may have been involved in some way in off‑shore tax evasion and of the connection revealed between Crossline and Strachans. They engaged independent solicitors to investigate exactly what was involved in the indorsement of various promissory notes from Bremerton and Nebraska ultimately to Crossline and to the grant of the numerous securities in the form of mortgages, charges and other forms of security which they and their companies had granted to Crossline during the period November 2002 to mid-2003 following an unexpected communication to them by solicitors in Australia acting for Crossline, that a formal demand for the payment of the monies due under the indorsed promissory notes (totalling the sum of $32.40 million), would be made in the immediate future. In fact the demand was never made because of the proposal by the Bartlett and Sayers interests to issue securities to support the debt. The result was to make Crossline a secured creditor of Bremerton and Nebraska and other associated Bartlett and Sayers entities, for the face value of the promissory notes.
Those investigations, conducted principally by the solicitor for Messrs Bartlett and Sayers, Mr Ian Cochrane, eventually resulted in the promissory notes or the monies which they represented being returned by Crossline or cancelled and, presumably, the securities in support of them being discharged. Just exactly how this was accomplished and on what terms did not emerge at the trial and is not presently relevant.
What is important, however, from the viewpoint of Mr Dunn, and for that matter for all the others named in the charge, is that there has been no allegation or charge laid or pursued to the effect that implementation of the Appointor Arrangement or the issue and indorsement of the many promissory notes, or the granting of securities in favour of Crossline, or the involvement of Strachans, actually resulted in any off‑shore tax evasion or minimisation by Mr Dunn or by Messrs Sayers and Bartlett or by any persons or entities connected with them. Despite this aspect of the case coming under close investigation and evidence being received about it in order to place other transactions in context, no part of the present case involved an allegation of off-shore tax evasion and Mr Dunn's conviction does not involve or connote any activity of that sort. This is, as I have already said, in the end a case about a conspiracy to commit a fraud by the construction of a series of documents falsely recording the FIS, in order to lay the foundation for deductible expenses in relation to profits or income derived by tax payers in Australia.
Next in point of significance is the fact that after June 2001, when the Appointor Arrangement expired, Messrs Bartlett and Sayers through their various enterprises, including Bremerton and Nebraska, entered into other tax schemes put to them and, to an extent, administered by Dunn. Such schemes were implemented for the 2002, 2003 and 2004 years and involved to certain, but unknown, degrees management or implementation by Dunn. Dunn had a significant financial interest in the adoption and implementation of these various tax schemes by the Bartlett and Sayers entities. For the Appointor Arrangement, operating, as I have said, from 1 July 1999 to 30 June 2001, he, or a company associated with him, was to receive a benefit of up to $5 million. At the trial there was controversy as to whether this benefit could properly be termed a commission to Dunn's company or whether, more correctly, it was a benefit which his company derived from participating in a 'profit making enterprise or scheme' in which it was involved under the Appointor Arrangement. Nothing of significance turns on the correct categorisation of this reward to the Dunn interests for implementing the Appointor Arrangement and throughout the trial and again now I shall content myself referring to this by the non‑precise generic term of 'benefit' derived by the Dunn interests under the Appointor Arrangement.
Other benefits were derived by Dunn or by one or more of his associated companies arising from the subsequent tax schemes adopted by the Sayers and Bartlett interests in the tax years from 1 July 2001 to 30 June 2004. Overall, the aggregate benefits derived by Dunn or his associated company from the tax schemes adopted by the Sayers and Bartlett interests from July 2000 until July 2004 were approximately $11.55 million (see exhibit 196, PMB3 Annexure A). Therefore, and I find, the establishment, enhancement and continuation of the business relationship between Dunn, on the one hand, and Messrs Bartlett and Sayers on the other was very important to Dunn and of considerable actual and prospective advantage to him from 2000 onwards. It was certainly a powerful factor governing his behaviour in 2002. From 2000 onwards Dunn had been steadily increasing his influence on Messrs Bartlett and Sayers and by early 2002 had taken steps to erode, and then to supplant, Thomson's role as their accounting and tax advisor, so much so that by mid‑2002 Thomson had largely been excluded from his former role of influence and was soon replaced by different accountants. It was, therefore, very much in Dunn's long-term financial interests to devise a solution to potential tax liabilities looming for Bremerton and Nebraska or their ultimate beneficiaries arising from the late discovery in 2002 of the larger than expected profit by BUT for the 1999 tax year.
The ACC investigation
I have already noted how the investigation by the Project Wickenby taskforce, including its examination of the materials seized from the execution of the various search warrants in June 2005 did not lead to any allegation of off-shore tax evasion made against Dunn or others. However, it did lead to the discovery of the false interest scheme because the investigating authorities came to the conclusion that the documents purportedly executed in June 1999 (minutes exhibits 95 and 96 and the various copies of them) had not been executed until September 2002 and that they falsely recorded the issue of special units in BUT at an earlier date. It was that discovery and associated investigations which led to the charges being laid initially against Messrs Thomson, Sayers and Bartlett and Mrs Grace and then, much later and only after he had been extradited from Thailand to Australia in January 2013, against Dunn.
Trevor Neil Thomson
As previously stated, Thomson pleaded guilty to a similar charge before McKechnie J in May of 2010. He had co-operated with the authorities in the course of their investigations and had admitted to an investigating officer from the ATO when the matter was first seriously raised with him that the so-called minutes of June 1999 recording the FIS were, in fact, false and backdated. He provided a full account of his knowledge of the FIS and the associated activities of Dunn to the authorities and agreed to co-operate by giving evidence, if called upon to do so, for the prosecution at the trial of others charged or to be charged.
When he was sentenced by McKechnie J on 13 May 2010 (INS 172 of 2009) that degree of co-operation and promise of future co-operation was taken into account and resulted in a large measure of discount in the sentence which his Honour then imposed. At [47] his Honour observed that the length and nature of the conspiracy and Thomson's role in it and the amount of money in issue and the need for general deterrence required a sentence close to the maximum of 10 years and that an appropriate starting point was a term of 8 years' imprisonment. However, having regard to his plea of guilty, Thomson's personal circumstances and co‑operation, that was reduced to 4 years' imprisonment and then reduced by a further 9 months on the grounds of future co-operation. In the result, Thomson was sentenced to 3 years and 3 months' imprisonment and a minimum period of 13 months was set, to be served. McKechnie J made a recognisance release order to take effect after that period had been served upon Thomson giving security to be of good behaviour for a further 2 years after release.
The result, therefore, was that Thomson received an effective term of immediate imprisonment of 13 months, resulting in his release from prison in mid‑2011 on a recognisance to be of good behaviour for a further period of two years, which has now passed.
When sentencing Thomson, McKechnie J made a number of findings and observations about the nature of the conspiracy, the amounts of money involved and how it enabled BUT to evade taxes of about $3.5 million from 1999 onwards. In that sentencing his Honour also observed that the Appointor Arrangement resulted in loss of tax to the Commonwealth about $24 million, resulting in a total loss to the Commonwealth of about $27.5 million.
It is important, for present purposes, to note that those observations by McKechnie J were made on the basis of materials then before the court which had not been fully examined or tested in the way that the evidence at this long and detailed trial was scrutinised. It was simply not practicable for the entire extent of evidence relating to this conspiracy to be scrutinised or evaluated on Thomson's plea of guilty in the manner which has since been done years later at this trial when more information was to hand. The findings which I have already made, and those which follow, vary in some degree from the observations of McKechnie J made on Thomson's sentencing but the variations are based on facts which I am satisfied have been established at this trial and which, in most respects, have been common ground.
As a consequence, I record my finding that, in the events which have happened, no tax due to the Commonwealth has been lost by reason of the FIS. As I shall describe more fully in a moment, the FCT entered into negotiations with Messrs Bartlett and Sayers, BUT and Bremerton and Nebraska to settle differences between them concerning the liability of Messrs Bartlett and Sayers, the two trustee companies and related entities and beneficiaries to tax alleged to have accrued due over the tax years for the periods ending 30 June 1999 to 30 June 2005. Included within the ambit of the ensuing settlement was the tax payable by Bremerton and Nebraska or their respective beneficiaries for the 1999 tax year on the basis that the FIS was non-existent and that the additional profit of BUT for that year, which the scheme falsely sought to eliminate, was brought to account for the purposes of assessing taxation liability. Agreed applicable rates of taxation on that income were applied, together with penalties and interest, and the ensuing liability was part of a settlement sum paid by the BUT, Bartlett, Bremerton and Nebraska interests to the Commonwealth, resulting in an aggregate payment by those taxpayers of approximately $51.24 million.
Similarly, in the sentencing observations dealing with Thomson, there is reference to Barminco evading taxes of about $24 million due to the Commonwealth as a result of the Appointor Arrangement. I have already observed and found that the Crown has not alleged that the Appointor Arrangement was itself illegal, dishonest or fraudulent or that, as a result of it, any tax was illegally avoided. Rather, the position is that having investigated the tax schemes entered into by BUT, Messrs Bartlett, Sayers, Bremerton and Nebraska as promoted by Dunn over the period 1 July 2000 to 30 June 2005 an agreement has been reached between the taxpayers and the FCT that each of those schemes should be disregarded and liability of the taxpayers assessed on the basis that the schemes are ignored, just as the position would have been if the Commissioner had disregarded those schemes and made assessments under the powers conferred by pt IVA. The result of this has been that, retrospectively, tax has been calculated for the 2000 and 2001 years (the years during which the Appointor Arrangement was in operation) without regard to the existence of the Appointor Arrangement. Similar approaches have been taken in relation to the 1999, 2002, 2003, 2004 and 2005 years with regard to the different schemes which were in operation for those years. In the case of tax payable by the taxpayers liable during the life of the Appointor Arrangement, the tax has been calculated on the base rates plus interest but without penalties or penalty interest because the taxpayers entered into the Appointor Arrangement in reliance on the opinions of independent counsel and had disclosed all the details and supporting documents relating to the Appointor Scheme to taxation officers during the course of an inquiry which took place in October 2001. However, for subsequent years, not involving the Appointor Arrangement or any of the issues raised in the charge against Mr Dunn which have led to his conviction, not only the basic tax has been assessed but also interest for late payment plus penalties and penalty interest. The result has been that, by agreement, the BUT, Bartlett, Bremerton and Nebraska interests paid to the Commonwealth in settlement of all claims for outstanding tax, interest and/or penalties covering the tax years from 1999 to 2005 the sum of approximately $51 million. There is no suggestion that any further or other moneys are due by them to the Commonwealth as a result of the FIS, the Appointor Scheme or otherwise.
It is also important that I repeat that it has never been alleged that any portion of these taxes, interest or penalties due by the various taxpayers involved in these schemes was ever due or owing by Dunn or by any of his associated entities. It remains the case, however, that if the FIS had not been detected, and the resolution of the consequent taxation liabilities had not been achieved by the settlement with the FCT which I have described, tax on profits of some $7.2 million ($3,595.141 x 2 = $7,190,282) would, by this conspiracy, have been lost to the Commonwealth. That was, and remains, the purpose and object of the conspiracy. That has not, in the end, been achieved.
There is nothing in the conduct of Mr Dunn which has assisted in the detection of the conspiracy or the FIS or in the settlement which led to the discharge of the tax, interest and penalties demanded by the FCT.
The Appointor Scheme
From the commencement of the trial the prosecution contended that a motive for the accused, including Dunn, to enter the FIS was to protect the Appointor Arrangement or to ensure, so far as was possible, that the basic facts upon which senior counsel had advised that the Appointor Arrangement would be acceptable and could survive any attempt to disregard it by the FCT under the powers contained in pt IVA of the ITAA were adhered to, if not exactly, then effectively in substance. Consequently, the prosecution contended that the basic elements of the Appointor Arrangement and the purpose which it was to achieve in reducing liability for taxation for the income years 2000 and 2001 were relevant and material in viewing the actions of the accused in relation to the FIS.
I have explained the details of the Appointor Arrangement previously (see Bartlett v The Queen [No 2] [2013] WASC 83 [89] - [94] and what now follows is a summary of that previous explanation in the light of the evidence which has since emerged at this trial.
Messrs Bartlett and Sayers were, respectively, the Appointors of two family trusts, already mentioned, of which Bremerton and Nebraska (respectively) were the trustees. Both of those trusts were created before capital gains tax (CGT) became effective on 20 September 1985. Originally, it was contemplated that Messrs Bartlett and Sayers would each resign their offices as Appointors of the two family trusts in consideration for a payment of $27 million made by a Dunn-related company, Timebase Investments Pty Ltd, as trustee for the Corpex Trust. The scheme proceeds on the assumption that the office of Appointor of a family trust constitutes an asset which can be sold and that the price paid for the purchase of that asset, the $27 million already mentioned, will be a capital receipt by each of the Appointors for the sale of that office and, consequently, non-taxable (and immune from the CGT because it is the sale of a pre‑GST asset). By contrast, the purchase price of $27 million for the acquisition of the offices of Appointors of the two family trusts paid by Timebase, will be of a different character, namely, an outlay for the entry into a separate and distinct profit-making undertaking or scheme of limited duration which, for that reason, will constitute a deductible expense when measuring the ultimate profit of that profit-making scheme or undertaking.
As well as becoming the new Appointor of each of the two family trusts, Timebase secured the agreement of the respective trustees, Bremerton and Nebraska, that, subject to the terms of the agreement, it would be treated as the sole beneficiary entitled in distribution to the whole of the profits of the two family trusts for the years in which the Appointor Arrangement operated, namely, the 2000 and 2001 tax years. In other words, in addition to acquiring the office of Appointor of each of the two family trusts, for an outlay of $27 million, Timebase would also be entitled to the distribution of the whole of the profits of those two trusts for those two years which were estimated to be $30 million.
The Appointor Arrangement included a detailed mechanism for adjusting the obligation to pay the $27 million purchase price by Timebase (by the instalments which were provided in the deed) in the event that the profits distributed to Timebase as sole beneficiary did not reach the $30 million anticipated. It is unnecessary to set out in detail all these terms as it is sufficient to say that the terms of the Appointor deed itself effectively provided that the outlay by Timebase for the purchase of the offices of Appointors of the two family trusts would always be less than the aggregate of distributions to Timebase of profits from those two trusts during the life of the scheme. On this basis, the overall benefit to be derived by Timebase as distributions from the two family trusts would be $30 million against its outlay of $27 million for the purchase of the two offices of Appointors and the entitlement to be treated as the sole beneficiary for the distribution of profits from the two family companies for those two years.
Accordingly, on this basis, the profit-making undertaking or scheme for which Timebase would pay $27 million was the entire operation of the scheme over the two years leading to receipts by Timebase of $30 million. So it was contended that the $27 million could be set off against the $30 million, leaving the benefit to Timebase from this profit-making scheme or undertaking at $3 million or, in mathematical terms, 10% of the aggregate profits being distributed through the two family trusts over that two-year period.
This was the scheme which was designed and proposed by Dunn and which was put by him via Thomson and their solicitors to Messrs Bartlett and Sayers in 2000. They required the opinion of an independent senior counsel about the acceptability or legitimacy of the proposed scheme and such an opinion was then sought and obtained. Counsel advised that while the final position could never be entirely free from doubt and could be expected to face challenge by the FCT, the merits of the argument supporting the effectiveness of the Appointor Scheme should be accepted. Significant steps in counsel's reasoning to this surprising conclusion, a conclusion which has not been supported by the subsequent evolution of events, were:
(a)The amount of $27 million payable to Messrs Bartlett and Sayers upon their relinquishment of the offices of Appointors of the two family trusts would not be assessable as ordinary income.
(b)There would be no capital gains tax liability upon the proceeds from the realisation of the office of Appointor because even if that office did amount to a species of 'property', it was acquired before the commencement of the CGT legislation.
(c)Two of the three prerequisites for the operation of pt IVA of the ITAA were present, namely: the existence of a scheme and an objective conclusion that a party to the scheme had entered into it for the sole or dominant purpose of gaining a tax benefit for a taxpayer.
(d)Nevertheless, a 'tax benefit' within the meaning of s 177C(1) of the ITAA did not arise because none of the beneficiaries of the two family trusts who had previously received distributions could be regarded as having a reasonable expectation that they would receive the income distribution from the trusts in 2000 or 2001 if the current arrangements were not entered into. That conclusion was supported, to a significant extent, by the instructions provided to counsel that the past beneficiaries of the two family trusts who had received significant distributions, namely Verncrest Pty Ltd (for the Bartlett Family Trust) and Paveway Pty Ltd (for the RG Sayers Family Trust) would be placed in liquidation and would not, in any circumstances, be regarded as having a reasonable expectation of receiving distributions from the family trusts for the 2000 and 2001 years.
(e)As it could not be said that there was any particular beneficiary who had a reasonable expectation to have received distribution but for the implementation of the scheme, the decision in Commissioner of Taxation (Cth) v Peabody [1994] HCA 43; (1994) 181 CLR 359 meant that the provisions of pt IVA of the ITAA could not be successfully employed to disregard the scheme. Counsel then also opined that there was nothing in the then more recent case of Commissioner of Taxation (Cth) v Spotless Services Ltd [1996] HCA 34; (1996) 186 CLR 404 to cast doubt on that conclusion or the applicability of what counsel regarded to be the principle drawn from Peabody.
I interpose here to observe that the question of whether or not the Appointor Arrangement, as implemented, could be disregarded by the FCT under the provisions of pt IVA of the ITAA or otherwise has never been put to, let alone decided by, any appropriate tribunal or court. However, the evolution of subsequent events reveals that when demands were made by the FCT on BUT, Messrs Bartlett and Sayers and Bremerton and Nebraska relying, among other powers, upon the provisions of pt IVA of the ITAA, no attempt was made by any of those taxpayers to resist the assertions of the Commissioner. Although the settlement ultimately reached, as already described, was formally made without any admissions of liability, its entire structure and consequent obligation reflected the position that the Appointor Arrangement, among others, could be and was disregarded by the Commissioner. This is not at all surprising because, with respect to those who may have advised to the contrary, the test for whether or not any taxpayer derived a tax benefit when determining the applicability of pt IVA of the ITAA cannot be answered by showing that taxpayers who have received benefits in the past cannot or will not receive tax benefits in the future if the scheme is implemented. The statutory test is whether or not a party to the scheme entered into it for the sole or dominant purpose of gaining a tax benefit for 'a taxpayer'. The taxpayer deriving the benefit from the scheme need not be a person or any one of the persons who entered into or carried out the scheme or any part of the scheme because s 177D makes it plain that the person whose purpose is to be identified may be (but need not be) the relevant taxpayer or one of the other taxpayers mentioned in the section: see Commissioner of Taxation (Cth) v Hart [2004] HCA 26; (2004) 207 CLR 216 [35], [63], [64] and [66]. Although that decision was given after counsel advised in relation to the Appointor Arrangement it was a decision on the statute in the same terms as existed at the earlier date.
Therefore, from an objective viewpoint, there was every reason to consider that the efficacy of the Appointor Arrangement as it was considered by counsel in early 2000 from the viewpoint of efficacy in eliminating taxation liability for the Sayers and Bartlett Family Trusts or their respective beneficiaries for the 2000 and 2001 years was precarious. It must be added that when the Appointor Arrangement was formalised and entered into by Messrs Bartlett and Sayers and Bremerton and Nebraska, the consideration payable to the resigning Appointors, Messrs Bartlett and Sayers, was increased to $45 million and the consequent distributions which were to be paid, during the life of the scheme, to Timebase Pty Ltd were increased to $50 million, the difference of $5 million representing the 'benefit' to be derived by Timebase (Dunn's company) during the lifetime of the scheme.
It is to be noted that part of the implementation of the Appointor Arrangement involved the placement in liquidation of the two companies, Verncrest and Paveway, which had, in the years before, been the sole or main beneficiaries who received the distributions of income from those two family trusts. By placing those companies in liquidation, it was assumed by the designer of the scheme and by counsel who advised that further distributions of income to those two beneficiaries would be impossible and that neither could have any reasonable expectation that they would receive an income distribution from the trusts in the 2000 or 2001 years - thus eliminating, so it was thought, the possibility of any conclusion that a party had derived a 'tax benefit' from the implementation of the Appointor Arrangement. As I have already remarked, I consider that this is an unduly narrow and erroneous construction of the statute but that has not been formally decided or contested in any legal proceedings, nor was it challenged in this case, and my observations in this respect cannot be regarded as authoritative.
Another fact of significance is that at the time the Appointor Arrangement was being promoted and examined, that is in early 2000, it was not expected that BUT would have any, or any significant, income or profit from the 1999 tax year and, hence, that there would be no amount for distribution via Bremerton and Nebraska to any beneficiaries, whether Verncrest or Paveway or others.
The discovery of the unexpected profit by Barminco for the 1999 year
For reasons which I need not dwell on, the preparation of the financial accounts and income tax returns for BUT, and hence for Bremerton and Nebraska, had by 2002 become grossly in arrears. There were various reasons for this: dramatic growth in the size and turnover of the Barminco operation since 1999; the acquisition of other companies or mining service operations whose businesses became consolidated with or treated as subsidiaries of Barminco but whose own records and accounts were in such a state of confusion that they required more accounting and financial resources to bring them into a sufficient state of accuracy to be incorporated with the existing Barminco operations; and, so it seems, a general unexplained decline in the performance and efficiency of the accountant Thomson.
At the trial Dunn, and others, purported to attribute the sole or major part of the responsibility for the Barminco accounts being in such gross arrears to Thomson alone, a burden which he fully and contritely accepted. I am not entirely satisfied that Thomson was solely responsible for the delays which happened but the dilemma posed by the delays in filing returns and the unexpected discovery of this by Sayers and Bartlett in about May-June 2002, because, it must be said, they were so informed by Dunn who had known about the situation since October 2001, led to Thomson being permanently discredited in the eyes of Bartlett and Sayers and his influence becoming rapidly diminished. As Thomson's star as a financial and tax adviser plummeted, Dunn's reputation and esteem by Bartlett and Sayers rapidly ascended and by mid‑2002 his knowledge and authority on tax and related matters was accepted without question and Thomson's standing had been reduced almost entirely. He was by then on the way out and his exit followed quickly.
These changes led to special priority being given to get the BUT financial accounts and tax returns up to date and for the uncertainties and confusions associated with Barminco's takeover of other enterprises to be addressed and resolved. This resulted in a very busy period and in major revisions of the unaudited working accounts for Barminco over the 1999 to 2001 years. Many controversies emerged from this at the trial which need not now be mentioned. However, and importantly, what did emerge was that for the first time it was realised that Barminco had achieved a net income for the 1999 tax year ultimately set at $7.873 million when it had hitherto been expected that there would be little or no income for that year. There was some controversy over whether or not the assumption was that there would be no or little income or whether it had been expected that Barminco would make a significant but smaller income for that year but nothing turns on the resolution of that controversy.
The problem
The problem which the belated discovery of BUT's 1999 year profit revealed was how to deal with the profit. It had to be distributed equally to Bremerton and Nebraska but what was to be done with it then? It could not be distributed to Verncrest or Paveway because they had been, or were in the process of being, placed in liquidation. It was suggested by the prosecution that if the profits were distributed to any other eligible beneficiary, this would falsify the assumptions upon which counsel had opined that the Appointor Arrangement could survive challenge by the FCT, but I am hesitant to accept that postulate because any such distribution would necessarily be for profits derived in the 1999 tax year, that is, before the commencement of the Appointor Scheme. What can, however, be safely concluded is that it was realised by Messrs Dunn and Thomson that if this unexpected profit from the 1999 year were distributed to any eligible beneficiaries of the Bartlett or Sayers family trusts, there would be tax payable by those beneficiaries upon those distributions. However, if the profit could be eliminated or, as a result of the same process, deferred to the following tax year of 2000, then it would be distributable as part of the revenues of Bremerton and Nebraska under the Appointor Arrangement and in the tax sheltered environment which that scheme was thought to confer. By this means no tax would be payable on any part of that profit and, rather, its components would be absorbed pro rata in the discharge of the agreed distributions by the two family trust companies to Timebase, which were to be capped at the $50 million already mentioned.
This is what the FIS effectively did. The unexpected profit of $7.873 million by BUT was distributed equally between Bremerton and Nebraska. The interest on the unpaid portions of the partly paid units falsely recorded as being issued in June 1999 was calculated at a total sum of $7,190,282, half of which ($3,595,141) was claimed by each of Bremerton and Nebraska as deductions against the distribution of the profits which each received from Barminco totalling $3,936,721. It is to be noted that these deductions did not, in aggregate, equate with the total profit distributed. That had not been the original plan which had contemplated that one would cancel the other out. What in fact happened was that after the amounts for the interest payable on the special partly paid units had been calculated and designed to match the newly discovered profit of Barminco, a still greater profit by Barminco was discovered. By then it was too late to readjust and recalculate the interest payments. The final result left Bremerton and Nebraska with comparatively small distributions for the 1999 tax year, which were in turn distributed to members of the Bartlett and Sayers families whose emerging tax liabilities were paid for them by another or others.
Much time and attention in the course of the trial was devoted to ascertaining when the unexpected profits of BUT for the 1999 tax year were eventually discovered, and later increased, and how the design of the issue of the special units in BUT, falsely recorded as having occurred in 1999, was calculated in a way which unmistakably matched the interest payable by Bremerton and Nebraska on the unpaid liability for those units against the distributions which were to be made to them. This left no doubt, and I am satisfied, that the origin of the FIS lay in the belated discovery of the unexpected profit of BUT for the 1999 year which was not realised until July 2002, thus demonstrating that the minutes and documents recording the FIS were false and fraudulent. The verdict of the jury in convicting Dunn leaves open no other conclusion on this aspect of the case.
It has, rightly, of course, been pointed out that neither Dunn himself nor Timebase or any associated company derived any financial benefit from the design or implementation of the FIS. The tax which was to be saved would be savings for the benefit of beneficiaries of the Barlett and Sayers Family Trusts. Insofar as the purpose of the FIS was to protect the Appointor Arrangement, or to keep its implementation in conformity with the basis upon which counsel had offered his opinion that it would survive challenge by the FCT, the major benefits accruing from the protection of the Appointor Arrangement would be derived by Messrs Bartlett and Sayers (who received the tax-free capital payments for their roles as Appointors) and the potential beneficiaries of those two trusts if the profits had been distributed to them and became liable to tax. It might be said that the protection of the Appointor Arrangement was also to the advantage of Dunn in that the profit-making scheme and the identification of the quantum of his benefit of $5 million depended upon the acceptance of the Appointor Arrangement as effective but that possible aspect of the case was not raised at the trial and consequently is a possibility which I do not consider I should now pursue.
Whichever way one ultimately looks at the purpose and effect of the FIS, one consequence is inevitable, namely, that it was designed to create false deductions totalling $7,190,282 for Bremerton and Nebraska, which would result in savings of tax on those amounts in the hands of whichever beneficiaries of those family trusts the profits were to be distributed had the scheme not been attempted. In the result, counsel for prosecution and counsel for Dunn are agreed that the tax avoided by the FIS was in aggregate $2,557,391, being the corporate tax payable if the false deductions claimed by Bremerton and Nebraska were ignored or disallowed. This is the figure adopted by the FCT in the deed of settlement. There may be scope for some argument as to whether or not a non-corporate rate of tax on those distributions might have been chosen instead, but that has not been advanced by the Crown or by the ATO and, for that reason, need not be considered. Accordingly, that figure may be regarded as the direct benefit sought to be achieved by the FIS, although, as has been repeatedly stated, the Crown also contended for an unquantifiable benefit associated with the protection and preservation of the Appointor Arrangement from closer scrutiny, in which case the tax payable, had that scheme been ignored, together with any penalties would have been an additional benefit.
General sentencing principles for Commonwealth offences
The matters which must be taken into account when passing sentence on any person for a federal offence are specified by s 16A of the Crimes Act 1914 (Cth). By s 16A(2) the court is required to take account of such of the following matters as are relevant and known to the court in addition to any other matters which may be immaterial. The specific provisions are:
16A.Matters to which court to have regard when passing sentence etc.- federal offences
(1)In determining the sentence to be passed, or the order to be made, in respect of any person for a federal offence, a court must impose a sentence or make an order that is of a severity appropriate in all the circumstances of the offence.
(2)In addition to any other matters, the court must take into account such of the following matters as are relevant and known to the court:
(a)the nature and circumstances of the offence;
(b)other offences (if any) that are required or permitted to be taken into account;
(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;
(d)the personal circumstances of any victim of the offence;
(e)any injury, loss or damage resulting from the offence;
(ea)if an individual who is a victim of the offence has suffered harm as a result of the offence - any victim impact statement for the victim;
(f)the degree to which the person has shown contrition for the offence:
(i)by taking action to make reparation for any injury, loss or damage resulting from the offence; or
(ii)in any other manner;
(fa)the extent to which the person has failed to comply with:
(i)any order under subsection 23CD(1) of the Federal Court of Australia Act 1976; or
(ii)any obligation under a law of the Commonwealth; or
(iii)any obligation under a law of the State or Territory applying under subsection 68(1) of the Judiciary Act 1903;
about pre-trial disclosure, or ongoing disclosure, in proceedings relating to the offence;
(g)if the person has pleaded guilty to the charge in respect of the offence - that fact;
(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;
(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.
(2A)...
(2AA)...
(2B)...
(3)...
(4)For the purposes of a reference in this Part to a family, the members of a person's family are taken to include the following (without limitation):
(a)a de facto partner of the person;
(b)someone who is the child of the person, or of whom the person is the child, because of the definition of child in section 3;
(c)anyone else who would be a member of the person's family if someone mentioned in paragraph (a) or (b) is taken to be a member of the person's family.
In this case I have already described the nature and circumstances of the offence of which Dunn has been convicted. There are no other offences which are required or permitted to be taken into account in his case nor does this offence form part of any course of conduct consisting of a series of criminal acts of the same or similar character. The victim of this offence is the Commonwealth in the sense that its general revenue was, for a time, imperilled but there are no personal circumstances of any victim which otherwise need to be mentioned nor has there been any injury or damage resulting from the offence except that the collection of the tax liability which was dishonestly concealed was delayed. The effect of the delay has been compensated for by interest imposed on the late payment of the tax.
There is nothing to suggest that Dunn has shown any contrition for the offence by taking any action to make reparation or in any other manner. The question of him making reparation does not really arise because the tax has been recovered from others. Dunn pleaded not guilty to the charge but that is not an aggravating factor however a plea of guilty can act as a mitigating factor but that has not occurred.
In relation to co-operation with law enforcement agencies there is nothing to suggest that there has been any significant co-operation by Dunn in relation to the investigation of this offence but he has cooperated with the law enforcement agencies in Victoria in relation to the homicide which I have already briefly mentioned and upon which I will enlarge. The deterrent effect of any sentence is important both for personal and general deterrence as is the need to ensure that the offender is adequately punished. Dunn's character, antecedents, age, means and physical and mental condition will be described later. The effect of conviction and the associated stripping of Dunn of any significant assets means that he is unlikely to commit this or related offences in the future and to that extent rehabilitation can be expected to eventuate. I must also take into account the probable effect the sentence will have upon Dunn's extended family the details of which are described in his personal circumstances yet to be examined.
There are restrictions on the imposition of sentences set out by s 17A of the Crimes Act. Importantly Parliament has directed that a court shall not pass a sentence of imprisonment for a federal offence unless the court, after having considered all other available sentences, is satisfied that no other sentence is appropriate in all the circumstances of the case. The court also has the power to impose a sentence of imprisonment with or without hard labour.
Further evidence on the sentencing hearing
At the hearing on 13 November 2013, evidence was adduced by the Crown on matters then contended to be relevant to sentencing. This consisted of oral evidence from Mr Robert Philp, a principal specialist financial investigator with the ACC, who had a senior role in this prosecution and in the investigation of Dunn's affairs. It also resulted in the production, by subpoena, from the Federal Commissioner of Taxation, of a deed of settlement dated 11 October 2013 made between the FCT, Dunn and his associated company, Misty Mountain Pty Ltd, which throws light on Dunn's past and current financial position.
Dealing first with the evidence of Mr Philp. This dealt with inquiries made from information contained in Egglishaw's computer, which I have noted, had been seized by the authorities on his visit to Australia in 2004. This led to the identification of a series of international financial transactions between Strachans, or one or more of its entities, and Dunn, or one or more of his entities. The system of tracking of international financial records available to the ACC (Austrac) revealed that in June 2002, a Strachans entity transferred a sum of $A2,091,969 from an account with Deutsch Bank International Jersey to the Corner Banca Lausanne Switzerland. The source of the funds was a Strachans company associated with the Brody Trust which, according to records in Egglishaw's computer, indicated that the beneficial owner was Gregory John Dunn. Similar Austrac records disclosed that between March 2003 and September 2004, another Dunn company (Keyrange Pty Ltd) remitted $A1,900,000 from a Commonwealth Bank account in Armadale, Western Australia, to a National Westminster Bank account in London, held in the name of a Strachans entity. The records associated this account with Dunn and Philip de Figueiredo, a Strachans manager and with the Strachans trust of which Dunn was shown as beneficiary in the Egglishaw computer. Again in March of 2005, two amounts of $A808,000, and $A2,500,000 were transferred to a Strachans Swiss account as part payment to Dunn for tax schemes implemented on behalf of his clients.
As a result of this information, Mr Philp testified that he believed at the time of his extradition from Thailand in early 2013, Dunn had somewhere between $A5,000,000 and $A10,000,000 held to his benefit in Swiss bank accounts, along with the beneficial ownership and control over a residence in Hua Hin, Thailand, estimated to have cost more than $A2,000,000 to build.
Mr Philp also gave details of the arrangements for Dunn's extradition from Thailand. An arrest warrant was issued for Dunn in the Perth Magistrates Court on 3 August 2012 and, on 17 August 2012, formal procedures were commenced to extradite him from Thailand. As a result, he was arrested in Thailand on an extradition warrant on 15 December 2012 by the Royal Thai Police and taken into custody in Hua Hin. He was then transferred to a detention centre in Bangkok under extradition protocols and given 30 days in which to make a decision whether or not to appeal from the extradition order in the Thai courts or consent to the extradition. In mid-January 2013, Dunn advised the Thai court that he waived his right to appeal and consented to extradition. On 31 January 2013, officers from the ACC travelled to Thailand and formally took custody of Dunn, travelling back to Australia, arriving in Perth on the morning of Friday, 1 February 2013. Dunn was then transferred to the Perth watchhouse and appeared at a bail hearing that afternoon, obtaining bail subject to conditions, leading to his later release on bail on 4 February 2013.
During the course of 2013, Dunn entered into negotiations with the ACC and the ATO to settle a number of outstanding matters. He owed legal fees to the ACC as a result of a Federal Court action which he had taken in 2006. He owed money to the ATO in relation to outstanding income tax matters going back several years. Those negotiations involved the repatriation of funds held by Strachans in Switzerland to Dunn's benefit, whereby Dunn would retain a portion of the funds and the ATO and the ACC would receive the remainder. That settlement was eventually completed, but until the deed of settlement with the ATO was produced to the court on 13 November 2013, neither Mr Philp nor the prosecution was aware of its details.
That deed of settlement is now in evidence on the sentencing hearing. It recites that the Commissioner of Taxation, as the result of audit investigations, issued notices of assessment and amended assessment to Dunn for the years ended 30 June 1994, 1995, 2003, 2004, 2005; a notice of assessment and liability to pay penalties in respect of the years ended 30 June 2003 and 2004; a notice of assessment for 1998, 2000, 2001, 2002, 2003, 2004, together with associated notices of assessment and liability to pay penalties. Objections to these various assessments were lodged by Dunn, but disallowed, and then Dunn commenced proceedings in the AAT in respect of tax liabilities covering the years 1998 to 2004. There were also other proceedings between the Commission and Dunn in the AAT.
On 2 June 2011, the Commissioner of Taxation obtained a judgment in default against Dunn in the Supreme Court of Western Australia (CIV 2945 of 2009) in an amount of $20,271,888.23 for income tax, general interest charges and costs for tax liabilities covering the years 1994 to 2005. There were further liabilities for tax for the years 2000, 2001, 2002 due by Dunn. An application by Dunn to set aside that judgment was dismissed. The FCT has also commenced proceedings in the Supreme Court of Western Australia against Misty Mountain and others, seeking declarations relating to the ownership of property at Lawrence Way, Byford, in which the FCT asserts Dunn has an interest.
There are further costs orders payable by Dunn and Misty Mountain to the ACC as a result of other proceedings (WAD 125 of 2006; VID 341 of 2008 and M 21 of 2009).
According to the recitals in this deed, signed by Dunn, as at 22 August 2013, Dunn was indebted to the FCT in the total amount of $30,511,664.48 as the aggregate and the amount payable under the judgment, plus interest, plus additional income tax penalties on top of interest charges. The deed then recites that the FCT was satisfied that Dunn did not have the means to pay or cause to be paid the whole of the liability payable, but nevertheless provided for a settlement. Essentially, the settlement was that Dunn would pay to the Commissioner the sum of $3,992,000 plus any amounts to which the FCT becomes entitled upon the determination of the Supreme Court declaratory proceedings relating to his alleged interest in property at Byford. Of that $3,992,000 payable by Dunn, $200,000 would be paid by the Commissioner to the ACC, CDPP and AG in payment of Dunn's obligations pursuant to the various costs orders and the balance would be retained by the FCT as payment of the tax payable.
The deed provides that Misty Mountain and Dunn assign all their rights, entitlements and interests in the agreement with the Fitzpatricks relating to the Byford property to the FCT and transfers all their rights and interests in the Byford property to the FCT. It also stipulates as a condition the termination of pending appeals in the AAT and other related matters.
Although not expressly apparent from the deed of settlement (parts of which have been redacted), I am satisfied that the bulk, if not all, of the $3,992,000 payable by Dunn under the settlement comes from accounts in which he or his entities had an interest and which were controlled by Strachans in Jersey, Switzerland or elsewhere. There is a detailed statement of Dunn's assets, liabilities and financial interests annexed to and verified by the deed of settlement and, apart from minor personal items of no present significance, it is clear that, after this settlement, Dunn has no available assets or means and that the ATO was satisfied that no further moneys can be obtained from him.
In these circumstances I consider that, while the evidence of Mr Philp suggests that, at earlier times, Dunn had significant overseas assets, the situation now is that these no longer exist or cannot be identified or traced. The conclusion I reach is that I should treat Dunn as being bereft of any significant assets and, after that deed had been examined by the Crown, counsel for the prosecution did not contend otherwise nor seek to suggest that Mr Philp's evidence had not been overtaken by the subsequent events.
The fact that Dunn incurred personal liabilities to the FCT for tax and penalties in an amount of more than $30 million and that only a part of this amount has been recovered by the FCT has no bearing on the selection of the sentence which should be imposed on Dunn other than to lead to an appreciation of the fact that he is now almost entirely without means. He has not been charged or convicted of any offence in relation to his own taxation liabilities or the circumstances which led to them. The deed between Dunn and the FCT contains a recital that Dunn has relied upon a representation by the ACC that based on then current known information they have not identified any further offences arising out of Operation Wickenby and Operation Haycastle that requires the ACC to provide a brief of evidence to the CDPP. When that was put to Mr Philp when giving evidence at the sentencing hearing he was not inclined to accept or repeat any such assurance but no further possible charge against Dunn was identified or indicated. This sentencing must, therefore, deal exclusively with the selection of proper punishment for the offence of which Dunn has been convicted without regard to the consequences of any other conduct on his behalf which, although leading to major civil liabilities, has not been made the subject of any criminal charge.
Dunn's detention in Thailand pending extradition to Australia
The dates and duration of Dunn's detention in Thailand following his arrest on the Australian extradition warrant have been set out already. This shows that he spent from 15 December 2012 until 31 January 2013 in custody in Thailand, before being brought to Australia in the charge of officers of the ACC. During that time he was visited occasionally by Australian liaison officers of the AFP based in Bangkok and, possibly, by Australian consular officials. He has said, and it has not been disputed, that his confinement was particularly arduous; that he was repeatedly assaulted and, on one occasion, raped repeatedly by other prisoners and that, because of the conditions in which he was placed, the extreme shortage of food and the assaults, his health deteriorated very significantly. None of this was challenged by Mr Philp when he gave evidence in the course of the trial and was asked about those conditions by Dunn.
Significantly, while in custody in Thailand, Dunn claims that he overheard, and was then later informed by other prisoners, that they had been involved in the murder of an Australian man in Melbourne on 24 May 2009, a crime which became known in Melbourne as the 'Good Samaritan' homicide. Two Thai nationals have since been arrested in Thailand in relation to that homicide and have since been extradited to Melbourne to face resulting charges. Dunn had had conversations with both those Thai nationals whilst on remand at the Bangkok Remand Prison and, in these conversations, he asserts that they made admissions to him implicating themselves in the death of the Australian man in Melbourne. On his return to Perth, Dunn informed the Australian police authorities of this and they then notified the investigating detectives of the Victorian police homicide squad. An officer met with Dunn in May 2013 and Dunn provided him with a detailed statement in relation to the matter and has agreed to give evidence at both the committal hearing and the trial of these two Thai nationals in Melbourne. The detective senior sergeant from the Victorian homicide squad has written that Dunn's evidence will be important in the context of the trial of the two Thai nationals and has asked that Dunn's actions and co-operation in this regard be taken into account as part of his sentencing.
This co-operation by Dunn, although it does not relate to the offence with which he has been convicted, is nevertheless relevant and material and is a matter which is specifically made relevant by s 16A of the Crimes Act. I consider that credit should be given to Dunn for his role in this regard and I will return to this subject later.
Personal circumstances
Dunn was born on 19 August 1959 in country Western Australia and is, therefore, now aged 54 years. He is the eldest of four children. The family moved to Perth when he was aged six. His father died when he was 10 and his mother remarried when he was 12. He attended school in the outer Perth suburban areas and completed his high school education and then took a year off to work as a roustabout and a wool presser in a shearing team. After that he commenced a Bachelor of Business degree at Curtin University, majoring in accounting and law, but in his last year he was offered a position as a tutor and took this up without completing his degree. He began tutoring in tax and law. He was offered a position as an articled law clerk under the old system of five years' articles, which he took up, and, after having moved firms and principals, he became engaged mainly in tax advising work, objections, appeals and the like. However, unexpectedly, his principal resigned from his firm to go into commerce, leaving Dunn without the means of completing his articles or obtaining admission. He then met another lawyer and went to work with him as a tax consultant and he performed that task for about 9 1/2 years. After that, at the age of 37, he left to follow his own business interests, which were varied but which included advice and consulting on taxation matters. He continued working as a tax specialist until he moved to Thailand to take up permanent residence in 2003.
Dunn has no children of his own. His first marriage ended in divorce and in 2010 he met his current wife and they married and were living together in Thailand until his arrest in December 2012. He has an adopted daughter from an earlier relationship. His present wife has been financially dependent upon him and has health problems, which will make it difficult for her in his absence.
During 2007 Dunn became seriously clinically depressed. That contributed to the collapse of his first marriage. The treatment of his depression is difficult because of allergies which he has to many drugs and the depression is now long lasting.
Dunn has no previous or subsequent convictions in Australia or overseas. His referees speak of him as a fair, balanced and caring man and a person who is sympathetic to others, attentive and 'a man of integrity'. That last appellation cannot be sustained in view of the dishonesty associated with this offence.
It is evident that over the period from 1996 to 2004, if not later, Dunn had acquired quite a reputation in certain circles for being proficient and knowledgeable in relation to taxation and tax planning notwithstanding the absence of any formal legal or accounting qualifications. He designed and promoted several different tax schemes, including the Appointor Arrangement and other subsequent schemes which he put to Messrs Bartlett and Sayers and their associated entities. He succeeded in persuading his prospective clients and some lawyers that the Appointor Arrangement was plausible with some prospects of success if challenged by the FCT but, as this case shows, that hope was not realised in the events which have happened. He is certainly plausible and has a highly developed knowledge of certain aspects of trust and tax law but these events have reinforced the aptness of Alexander Pope's line that 'a little learning is a dangerous thing, drink deep, or taste not the Pierian spring' because in his preoccupation with tax considerations Dunn has shown himself to be oblivious to, or defiant of, other legal duties and obligations - principally the avoidance of fraud. Nevertheless, his prominence within the circle in which he mixed and his claimed expertise in taxation law gave his views the semblance of authenticity and made him more influential than he deserved to be. This led to very considerable financial success on Dunn's behalf and I am satisfied that the personal advantages to him of his association with Messrs Bartlett and Sayers were powerful factors in inducing him to act dishonestly, as he did.
Approach to sentencing
By s 16A(1) this court is required to impose a sentence on Dunn that is of a severity appropriate to all the circumstances of the offence. That means that the sentence must be one which adequately punishes the offender and which is not so far out of touch with the circumstances of the case as to constitute an affront to the community: R v Williams [2005] NSWSC 315; (2005) 152 A Crim R 548. Although not specifically listed in s 16A(2), general deterrence is a factor which a court must take into account: DPP (Cth) v El Karhani (1990) 21 NSWLR 370; (1990) 51 A Crim R 123, 377. The seriousness of an offence is reflected by the maximum penalty prescribed by Parliament for that offence: Gilson v The Queen [1991] HCA 24; (1991) 172 CLR 353, 364, and the offence against s 135.4(3) of the Criminal Code of which Dunn has been convicted is clearly a serious one.
The offence committed in this setting is a taxation fraud and a type of white collar crime. The tax collection system operating in this country, as a self assessment system, is a major source of government revenue and depends on the honesty of taxpayers. Taxation fraud undermines the efficiency and integrity of the income tax system and is consequently a pernicious form of fraud, the more so when it involves a sophisticated scheme: R v Stitt (1998) 102 A Crim R 428, 430. This FIS was certainly a sophisticated scheme and its implementation through the detailed preparation of false and fraudulent records and the amendment and lodgement of a series of false original or amended tax returns compounds its complexity. That its implementation by these means was not done by this offender but by others, seemingly unwittingly, is no answer to the culpability of Dunn or of the seriousness of the offence, because it is clear that implementation by such means was the point and object of the conspiracy.
As already stated, the tax sought to be avoided by this conspiracy can now be seen to approximate the sum of $2,557,393 as emerges from the deed of settlement between BUT, Messrs Bartlett, Sayers, Bremerton and Nebraska and the FCT. By any measure that is a large amount. It can be compared to cases involving serious frauds on the Commonwealth revenue, which usually result in custodial sentences in the absence of substantial mitigating circumstances: R v Whitnall (1993) 42 FCR 512, 519; R v Wheatley (2007) VCC 718; (2007) 67 ATR 531, 540 [59] and DPP (Cth) v Carter [1998] 1 VR 601, 605 - 606; (1997) 91 A Crim R 222.
For a crime like this or of this type general deterrence is a predominant consideration when sentencing: R v Sakovits [2013] NSWSC 464 [29]; R v Rivkin [2004] NSWCCA 7 [423]; (2004) 59 NSWLR 284; and R v Pantano (1990) 49 A Crim R 328 [330] (Wood J). In that last case his Honour observed that it is impossible to be unmindful of the difficulty in detecting sophisticated crimes of the kind there involved or of the possibility of a substantial loss by the public through their commission, hence making general deterrence an important element of sentencing. It is also accepted that offences of conspiracy, involving multiple offenders, present a greater danger to the community than offences involving a single offender and are punished accordingly: see R v Shepherd (1988) 37 A Crim R 303, 313 (Lee J).
In such cases which, in the main, involve 'white collar' offences it is frequently the case that the crime is rarely committed by people who have a previous criminal history being people who, up until that point, have been widely respected. But in such cases the relevance of good character is of less significance since it is a factor which normally places the offender in a position from which he or she is able to commit the offence: see R v El Rashid (Unreported, NSWCCA, 7 April 1995) (Gleeson CJ) quoted with approval in Rivkin at [410].
Counsel for the prosecution has referred to a series of cases, some but not all comparable, involving false representations or fraud in relation to allowable deductions for taxation. These include R v de Figueiredo [2013] QCA 307 where a Strachans officer who had pleaded guilty received a six-year maximum sentence with a two-year minimum on appeal; R v Cox; R v Cuffe; R v Morrison [2013] QCA 10 where promoters of tax minimisation schemes with a large number of participants received sentences varying from 9 years and 11 months maximum to 5 years maximum and minimums of 3 years and 4 months to 2 years and 6 months. Another serious conspiracy case was R v Liles [2012] NSWSC 1249 where for a long-running conspiracy, actively facilitating a scheme, resulted in a maximum term of 8 years and 3 months and a minimum term of 4 years and 11 months. Another case involving large losses to the revenue was R v Agius; R v Zerafa [2012] NSWSC 978; (2012) 87 ATR 528 which resulted in a maximum term of 8 years and 9 months with a minimum of 6 years and 8 months. As one would expect, there are many other cases and the penalties vary significantly with a number of shorter sentences being imposed and, in two instances, maximum prison sentences of 3 years being imposed. All this is but another of the many frequent demonstrations of how particular sentencing depends so much on the circumstances of each case and why one should not expect to find a tariff for any particular offence. In the end, the selection of a sentence to be imposed requires the application to the individual case of a judicial discretion taking into account all relevant factors: Barbaro v The Queen; Zirilli v The Queen [2014] HCA 2 [34], [41].
In the circumstances of this particular case, noting that the maximum prescribed penalty is 10 years' imprisonment, I consider that a starting point for the selection of the sentence of imprisonment, which is the only sentencing option appropriate to this case, should be 8 years' imprisonment. I have no doubt that Dunn was the principal architect of the FIS and the ensuing conspiracy. Thomson's role in the commission of the offence was grave but, in my view, was less culpable, he having been led to participation by Dunn and being essentially too weak to protest. He too had made significant financial gains because of his relationship with Bartlett and Sayers over the years and, so it appears, foolishly believed that he should assist in solving a dilemma for which he was at least partly responsible because of his delay in attending to BUT and associated companies' financial accounts and tax returns. However, in my view, Dunn's focus was not merely on avoiding the problem associated with the belated discovery of the unexpected profit, but in demonstrating his versatility and importance to Messrs Sayers and Bartlett and their associated companies in providing solutions to tax problems and in enhancing his relationship with them with a view to future engagements which, like the Appointor Arrangement, would be extremely profitable for him.
The result of the discovery of this offence, the subsequent investigations of it by the authorities and of Dunn's related activities have brought financial ruin to him. He has now been stripped of the wealth that he acquired, not as a result of this prosecution but because of his pursuit by the ATO. He has lost any interest which he may have in the land and property at Byford and the prosecution seems now to accept that his interest in the home at Hua Hin in Thailand is indirect and possibly tenuous.
The consequences of this offence mean that he will be separated from his wife and adopted child for a lengthy period, which will no doubt be distressing for him and a hardship for them, but the responsibility for those consequences is his alone. He has spent a total of some 52 days in custody as a result of his arrest in Thailand and extradition to Australia, and I am satisfied that full credit should be given for that period when fixing a date for the commencement of the sentence imposed. Indeed, there is authority for the proposition that where a person suffers imprisonment or is confined within some foreign jurisdiction in especially arduous or harsh conditions, recognition of that ordeal should be granted. There is then Dunn's role in cooperating with Victorian police authorities in Australia in relation to the investigation of the homicide of the young man killed in Melbourne and his readiness to give evidence at the trial of those accused.
Taking all those matters into consideration, I consider that I should reduce the starting point of the sentence from 8 years by 1 year to 7 years. This has been a difficult case for the authorities to investigate and for the Crown to prosecute and there has been no demonstration of contrition or remorse so far by Dunn and, consequently, further reduction or discount of the sentence is not warranted. As said earlier, it is necessary because of s 19AB(1) of the Crimes Act to fix either a recognisance release order or a non-parole period. I consider that a non-parole period should be set and that it should be 4 years. Dunn has, of course, been in custody since 13 November 2013 on remand for sentence. Full recognition of the time already spent in custody in connection with this offence can therefore be achieved by directing that the sentence of imprisonment be backdated to take effect dating from 17 September 2013. Accordingly, the head sentence of 7 years and the non-parole period of 4 years which I have fixed will each be backdated to commence on and from 17 September 2013. In view of s 18 of the Crimes Act the sentences of imprisonment are specified as being without hard labour.
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