R v Falconer

Case •

[2018] NSWSC 1765

•

16 November 2018

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: R v Falconer [2018] NSWSC 1765
Hearing dates: 9 November 2018
Decision date: 16 November 2018
Jurisdiction:Common Law
Before: Adamson J
Decision:

See paragraph [170]

Catchwords:

CRIMINAL LAW – sentence – dishonestly using position as a director to gain benefit – impact on shareholders and investing public – prior good character of limited weight – contrition genuine – plea of guilty at earliest reasonable time – very high objective seriousness – importance of general deterrence

  CRIMINAL LAW – parity with co-offender – less serious – smaller amount of money taken – integral to whole offending
Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth), ss 13, 19
Corporations Act 2001 (Cth), ss 184, 206B, 1307, 1309
Crimes Act 1914 (Cth), Pt 1B, ss 16A, 16F, 17A, 19AB, 19AC, 20, 20AB
Crimes (Sentencing Procedure) Act 1999 (NSW), Pt 5
Cases Cited: AB v The Queen (1999) 198 CLR 111; [1999] HCA 46
Blanco v R [1999] NSWCCA 121; (1999) 106 A Crim R 303
Director of Public Prosecutions (DPP) v Bulfin [1998] 4 VR 114
Einfeld v R [2010] NSWCCA 87; (2010) 200 A Crim R 1
Hili v The Queen; Jones v The Queen (2010) 242 CLR 520; [2010] HCA 45
Munda v State of Western Australia (2013) 249 CLR 600; [2013] HCA 38
Postiglione v The Queen (1997) 189 CLR 295; [1997] HCA 26
Power v The Queen (1974) 131 CLR 623; [1974] HCA 26
R v Achurch [2011] NSWCCA 186; (2011) 216 A Crim R 152
R v El Rashid (Unreported, NSW Court of Criminal Appeal, 7 April 1995)
R v Hawkins (1989) 45 A Crim R 430
R v Kearns [2003] NSWCCA 367
R v Kennedy [2000] NSWCCA 527
R v Kinch [2016] NSWSC 63
R v Pantano (1990) 49 A Crim R 328
R v Sigalla [2017] NSWSC 52
R v Wilkinson (No 5) [2009] NSWSC 432
Rich v ASIC (2004) 220 CLR 129; [2004] HCA 42
The Queen v De Simoni (1981) 147 CLR 383; [1981] HCA 31
Xiao v R (2018) 96 NSWLR 1; [2018] NSWCCA 4
Category:Sentence
Parties: Regina
John Falconer (Offender)
Representation:

Counsel:
S Callan/A Garsia (Crown)
K C Morgan SC (Offender)

  Solicitors:
Commonwealth Director of Public Prosecutions (Crown)
Musgrave Legal (Offender)
File Number(s): 2017/269483

Judgment

Introduction

  1. John Falconer (the offender) stands to be sentenced for six offences: five offences contrary to s 184(2) of the Corporations Act 2001 (Cth) (counts 1-5 on the indictment) and one offence contrary to s 1309(1) of the Corporations Act (count 6 on the indictment). The maximum penalty for the s 184 offences is 5 years and/or a fine of 2000 penalty units ($220,000). The maximum penalty for the s 1309 offence is 5 years and/or a fine of 200 penalty units ($22,000). All of the offences were committed when the offender was a director of TZ Limited ACN 073 979 272 (TZ).

  2. Counts 1, 2, 3 and 5 allege dishonest breach of the offender’s duty as a director with the intention of dishonestly gaining an advantage for himself or someone else contrary to s 184(2)(a) of the Corporations Act. Count 4 alleges dishonest breach of his duty as a director, reckless as to whether this may result in advantage for someone else, contrary to s 184(2)(b) of the Corporations Act. The offender committed the offences in counts 1-5 between 8 December 2006 and 24 September 2008.

  3. The facts surrounding counts 1-5 are set out in more detail below. The dates, beneficiaries and amounts are summarised in the following table:

Count/ section

Dates of payments

Beneficiaries

Amount and type of benefit

1

The Oasis Transaction

s 184(2)(a)

8 Dec 2006

ZMS Investments Pty Ltd (ZMS) & Sigalla

$300,000 to ZMS

28 Dec 2006

Chyron Services Ltd (Chyron) & the offender

$300,000 to Chyron

2 Feb 2007

Joyeagle Ltd (Joyeagle), the offender & Sigalla

847,458 shares in TZ issued to Joyeagle

2

The O’Donnell Transaction

s 184(2)(a)

5 July 2007

Golf Link Partners Pty Ltd and Sigalla

$300,000 to Golf Link

14 Feb 2008

ZMS and Sigalla

$200,000 to ZMS

20 Feb 2008

BZI and Sigalla

$500,000 to BZI

3

The Reader China Transaction

s 184(2)(a)

19 July 2007

Profit Pearl Holdings Ltd (Profit Pearl), the offender and Linda Lau

$400,000 to Linda Lau, of which $300,000 subject of charge

4

The Sigalla transfers

s 184(2)(b)

25 Feb 2008

BZI and Sigalla

$68,000 to BZI

20 March 2008

ZMS

$300,000 to Heidtman on account of a creditor of ZMS

17 July 2008

BZI and Sigalla

$500,000 to BZI

21 July 2008

BZI and Sigalla

$167,783.37 to BZI

23 July 2008

BZI and Sigalla

$600,000 to BZI

18 Aug 2008

BZI and Sigalla

$525,000 to BZI

24 Sept 2008

BZI and Sigalla

$500,000 to BZI

5

The Cyplex transfers

s 184(2)(a)

31 Dec 2007

Cyplex Company Inc (Cyplex)

$540,000

3 March 2008

Cyplex

$576,000

  1. The total value of the advantage gained by the offender and others from these offences was $6,276,783. The transactions which involved payments to the offender or his companies of which they retained the benefit are highlighted in bold in the table above and amount to $1.416 million.

  2. The offender also committed an offence against s 1309(1) of the Corporations Act on or around 30 April 2008 and 28 February 2009 (count 6) in that he authorised information relating to the affairs of TZ to be sent to the Australian Securities Exchange (ASX) that was, to his knowledge, false or misleading in a material particular.

  3. On 9 November 2018 the offender pleaded guilty to the six counts on the indictment. It was accepted that he had indicated that he would plead guilty when the matter was committed to this Court.

The Facts

  1. The following narrative is largely derived from the agreed statement of facts.

TZ and its subsidiary, TZI

The companies

  1. TZ is a public company which was incorporated in Australia on 14 May 1996. TZ re-listed on the ASX in early 2004 when it became the 100% owner of Telezygology Inc. (TZI), a company based in Chicago, United States. TZI was largely concerned with the development of "intelligent fastening" technologies. TZ’s main function was to raise funds for TZI with a view to the latter being listed on the NASDAQ. This did not occur because of the Global Financial Crisis (GFC) which became apparent in September 2008.

The board

  1. The offender was a director of TZ from 15 July 2004 to 18 June 2009 and the company secretary of TZ from 24 February 2004 to 18 June 2009. He served as Executive Director and Chief Financial Officer of TZ until 18 June 2009.

  2. Andrew Sigalla (Sigalla) was a director of TZ from 8 January 2004 to 15 July 2004 and from 29 January 2007 to 18 June 2009. In the intervening period from 15 July 2004 to 29 January 2007, Sigalla continued to conduct himself as a director of TZ within the meaning of the extended definition of "director" in the Corporations Act. As referred to below, Sigalla was eventually charged, tried, convicted and sentenced for offences he committed relating to TZ.

  3. The other directors of TZ during the relevant period were: Dickory Ruddock, from 8 January 2004 to 15 July 2004; Chris Kelliher, from 24 February 2004 to 29 January 2007; Anthony Leibowitz, from 24 February 2004 to 7 July 2006; and Michael Otten, from 7 July 2006 to 18 June 2009.

TZ’s accountants

  1. The offender is a chartered accountant and was a director of Dunbar Associates Pty Ltd 062 305 800 (Dunbar Associates), which provided accounting and corporate secretarial services to TZ from about 2004.

  2. In late 2005, when TZ moved its business operations to the Chicago offices of TZI, the books and records of TZ were moved to the offices of Dunbar Associates in Pitt Street, Sydney, NSW. In 2007, TZ occupied an office in Bligh Street, Sydney, NSW and Dunbar Associates moved to share that office space.

  3. From 2004 Dunbar Associates employed Farouk Fagredin, who did the day-to-day banking and bookkeeping for TZ from 2004 to May 2009. His tasks included maintaining TZ's general ledger, arranging payments to suppliers, performing banking duties such as arranging the transfer of funds, preparing consolidated worksheets for TZ, drafting Quarterly Appendix 4C and Half Yearly Appendix 4D Financial Reports and drafting accounts for other financial reports that were required to be lodged with the ASX. Mr Fagredin reported directly to the offender, who instructed him as to what transactions to effect and how they were to be recorded in TZ’s general ledger. The offender finalised and approved all of the reports that Mr Fagredin drafted for TZ.

  4. From time to time Mr Fagredin also complied with requests from Sigalla that payments be made by TZ to certain suppliers, that funds be transferred from TZ to other parties (predominantly Sigalla-related entities) or that funds be drawn down from term deposits held by TZ. It was an agreed fact that when Mr Fagredin received such instructions from Sigalla, his usual practice was to obtain confirmation from the offender that such transactions were authorised before effecting them. As there was no evidence to suggest either that Mr Fagredin did other than follow the offender’s instructions or that Mr Fagredin obtained any benefit from any of the transactions the subject of counts 1-5, I am satisfied that Mr Fagredin acted on the offender’s instructions in respect of all acts done by him which are referred to below.

TZ’s auditor

  1. From April 2004 to March 2009, Stephen Taylor of Taylor & Co Chartered Accountants was the auditor of TZ. He understood that the offender was the director with prime responsibility for the preparation, finalisation and sign-off of the consolidated accounts of TZ.

TZ’s bank accounts

  1. TZ had the following bank accounts with National Australia Bank (NAB).

Name

Branch/ Account no

Abbreviation

TZ Limited Business Management Account

082-057/51-758-4256

TZ Account

TZ Limited Share Placement Account

082-057/ 57-593-3063

TZ Share Placement Account

Term deposits

75-470-1794

75-459-1871

87-141-3986

75-017-8844

Term deposits

Billing account for Sigalla’s credit card (4557-0455-3560-8958)

4557-0499-0114-5306

Credit card account

  1. Any request to transfer funds from TZ's NAB accounts had to be in writing with two authorised signatures. Prior to April 2007, transfers made from TZ's NAB accounts were authorised by the signatures of the offender and Mr Kelliher. From about April 2007 until September 2008 such transfers were authorised by the signatures of the offender and Mr Fagredin.

  2. By April 2007, the offender had authorised Mr Fagredin to affix the offender’s electronic signature to documents such as bank transfer request forms. Mr Fagredin obtained the offender’s approval whenever the offender’s electronic signature was applied to a document.

  3. The offender and Mr Fagredin had online ‘read only’ access to TZ’s NAB accounts. Sigalla’s access enabled him to transfer funds electronically.

TZ’s Capital Raisings

  1. As referred to above, TZ’s main function was to raise capital to fund the operations of TZI. In 2004 an Initial Public Offering raised in the order of $12 million from retail investors.

  2. In December 2006, TZ raised a further $20 million by issuing 200 convertible notes to DKR Soundshore Oasis Holding Fund Limited (Oasis) (Oasis raising). This amount funded TZ’s operations from December 2006 to February 2008.

  3. In February 2008, TZ raised $24 million by issuing 24,000 convertible bonds to QVT Fund LP and Quintessence Fund LP (QVT raising). These funds, which were placed on term deposits with NAB, were used to fund TZ’s operations from April 2008.

  4. Monies raised from the Oasis and QVT raisings were used to fund the transactions the subject of counts 1-5 during the periods covered by the reports in count 6.

Sigalla's companies: ZMS Investments Pty Ltd (ZMS) and BZI Pty Limited (BZI)

ZMS

  1. ZMS was set up as an investment vehicle and corporate advisory company. During the relevant period, Sigalla and his wife were the only directors and Sigalla’s wife was the only shareholder.

  2. On 5 June 2006, ZMS borrowed in the order of $10 million from Perpetual Investment Management Limited (Perpetual) to develop an industrial estate at Ingleburn, NSW (Perpetual Loan). The conditions of the Perpetual Loan required ZMS to pay interest on the loan in arrears each month. Heidtman & Co Lawyers (Heidtman) acted for Perpetual in respect of the Perpetual Loan. This is relevant to count 4.

BZI

  1. BZI was incorporated as a trustee for the Sigalla Family Trust and was used for private share trading and investment opportunities. Throughout the relevant period, Sigalla and his wife were the only shareholders and directors of BZI. Sigalla was also the secretary during that period.

Sigalla’s companies’ share trading and bank accounts

  1. At all relevant times, BZI and ZMS both had share trading accounts with BBY Limited (BBY).

  2. Sigalla and his companies had the following NAB accounts, relevantly, as follows:

Name

Branch/ Account no

Abbreviation

BZI Pty Limited ATF the Sigalla Family Trust Business Cheque Account

082-057/58-585-3040

BZI Account

Andrew Sigalla National Flexidirect

082-067/46-045-0635

Sigalla's Account

ZMS Investments Pty Limited Business Management

082-067/68-511-8166

ZMS Account

The offender’s companies

Profit Pearl

  1. The offender beneficially owned Profit Pearl Holdings Limited (Profit Pearl), which was administered by Intertrust Hong Kong Limited (Intertrust). Intertrust owned and administered Joyeagle Limited (Joyeagle), a company incorporated in the British Virgin Islands. Intertrust’s role was to conduct transactions on behalf of its clients including holding and subsequently selling shares. It was, in effect, a conduit for Intertrust’s clients.

Cyplex

  1. The offender also beneficially owned Cyplex Company Inc. (Cyplex), a company incorporated in the British Virgin Islands, which was also managed by Intertrust on his behalf.

Chyron

  1. The offender beneficially owned Chyron Services Limited (Chyron), a company incorporated in the British West Indies.

The facts relating to the offences

  1. Each of counts 1-5 concerns transfers of funds out of the TZ Account and the TZ Share Placement Account (and shares, in the case of count 1) for the benefit of either the offender or others. They will be considered in turn.

Count 1: The Oasis Transaction

  1. Count 1 relates to unauthorised benefits which the offender and/or Sigalla took for themselves in the course of the Oasis Transaction. The benefits the subject of count 1 comprise: a payment of $300,000 on 8 December 2006; a payment of $300,000 on 28 December 2006; and the issue of 847,458 shares in TZ worth $500,000 on 29 January 2007.

Legitimate commissions paid with respect to the Oasis Transaction

  1. In late 2006, Andrew Lai introduced Linda Lau to Oasis with a view to obtaining capital for TZ. Mr Lai and Ms Lau, who were both based in Hong Kong, became entitled to be paid a commission by TZ for the roles they played in the Oasis raising.

  2. Mr Lai agreed to a 6% commission, which amounted to $1.2 million. At his request, his commission was paid on 28 December 2006 to his company, Yorkshire Capital Limited (Yorkshire Capital). Ms Lau agreed to 0.5% commission, which amounted to $100,000. This was paid on 28 December 2006. Mr Lai privately agreed to pay Ms Lau a further 1% from his portion of the commission (that is, $200,000).

The unauthorised benefits

  1. The three transactions the subject of count 1 are as follows.

  1. On 8 December 2006, $300,000 was transferred out of the TZ Share Placement Account and credited to the ZMS Account. The written instructions for the transfer bore the electronic signature of Mr Kelliher, although he had not authorised it to be used for this transfer.

  2. On 28 December 2006, $300,000 was transferred out of the TZ Share Placement Account and credited to a bank account in the name of Chyron. The written instructions for the transfer bore the signatures of the offender and Mr Kelliher, although Mr Kelliher had not authorised his signature to be used for this transfer.

  3. On about 29 January 2007, TZ issued 847,458 shares in TZ worth $500,000 to Joyeagle. The proceeds of the sale of the shares were used for the benefit of the offender and one of his clients, Stephen Harvey, as well as to pay Intertrust’s fees for its role in the sale of the shares.

  1. The offender and Sigalla made various arrangements, set out below, to hide the fact that these transactions were for their own benefit and not for the benefit of TZ.

  2. Their arrangements were recorded by the offender in a misleading diary note as follows:

“13 Nov 06   Oasis note deal is 6% to Andy [Lai] and 6% to Linda [Lau] split 4 ways (AL-LL-AS-JF) – 50% shares at 59c and 50% cash – JF [the offender] needs HK entity to take up 6% and distribute.

29 Nov 06   AJS [Sigalla] confirmed HK is 50/50

4 Dec 06   He [Sigalla] now says the split is 6% to Andy [Lai] and the other 6% is ½% to Linda and the balance 50/50. Andy will not now take his 6% in cash and shares. Only cash.”

  1. Emails were also sent between the offender and Sigalla in December 2006 in which they discussed the creation of a false invoice for $1.2 million which would be made to look as if it had come from Ms Lau.

  2. Further, the offender instructed Mr Fagredin as to how he should record (falsely) the payments made to Mr Lai and Ms Lau and the benefits illegitimately obtained by the offender and Sigalla in TZ’s general ledger. The offender’s instructions were as follows:

“Debit to Share Issue Costs A/c 3-1150

8 Dec 06

ZMS Investment Pty Limited

$ 300,000

28 Dec 06

Yorkshire Capital [Mr Lai’s company]   

$1,200,000

28 Dec 06

Chyron Service

$ 300,000

28 Dec 06   

Linda Lui [sic]   

$ 100,000   

Debit to Deferred acquisition cost lic A/c 1-3241

29 Jan 07

issue of shares in lieu of final payment to external

$ 500,000”

  1. No debt to, or service or supply provided by, ZMS, Chyron, Joyeagle, Sigalla or the offender justified the transactions the subject of these apparent charges. The payments and share issue were authorised by the offender, using his position as a director dishonestly with the intention of, ultimately, gaining a benefit for himself and Sigalla. There was no “related party” disclosure of these transactions. I regard these transactions as amounting to a course of conduct.

Count 2: The O’Donnell transfers

  1. Count 2 relates to unauthorised benefits which the offender and/or Sigalla took for themselves in the course of the O’Donnell transfers. The benefits the subject of count 2 comprise: $300,000 on 5 July 2007; $200,000 on 14 February 2008; and $500,000 on 20 February 2008.

  2. Jeffrey O’Donnell was a director of Golf Link Partners Pty Ltd (Golf Link). Between June 2003 and November 2005, Mr O’Donnell gave Sigalla cheques amounting to about $1 million to be invested in TZ and/or TZI. As at November 2005, Mr O'Donnell had received neither share certificates nor other relevant documents in respect of his investments. In November 2005, and subsequently, Mr O'Donnell tried, unsuccessfully, to obtain the relevant share certificates.

  3. To placate Mr O'Donnell, Sigalla arranged for TZ’s funds to be paid to Golf Link and told Mr O'Donnell that the funds were a loan from Sigalla, which was secured against the shares which Mr O'Donnell understood he had purchased. TZ received no consideration for the payments.

The first “loan” of $300,000 on 5 July 2007

  1. The first such “loan” was purportedly made on 5 July 2007 when $300,000 was transferred from the TZ Share Placement Account to a NAB account held by Golf Link, on written instructions bearing the electronic signature of the offender and Mr Fagredin. The offender instructed Mr Fagredin to record this transaction as a consulting fee to Ms Lau in the general ledger of TZ. Ms Lau provided no corresponding consulting service to TZ and had no knowledge of the payment. Sigalla had no entitlement to the funds.

The second “loan” of $200,000 on 14 February 2008

  1. On 12 February 2008, Sigalla emailed the offender as follows:

“I really need to pay perpetual asap so they stop from suing me. The CB [convertible bonds] funds [the $24 million from the QVT raising] are released on Friday; can I get an advance before then?”

  1. Later that day, the offender sent an email to Mr Fagredin, which was copied to Sigalla, instructing him to transfer $300,000 to Heidtman’s trust account and to “[m]ark the payment ‘Sigalla’ as he authorised it.”

  2. On 13 February 2008, Sigalla emailed Mr Fagredin and the offender, saying: “Please don’t transfer until you have spoken to me.”

  3. On 14 February 2008, Sigalla emailed Mr Fagredin and the offender, instructing Mr Fagredin: “The $300,000 needs to be transferred to ZMS account first thing in the morning. John [the offender] will confirm.” A copy of this email bears a handwritten note from Mr Fagredin “less $100k for credit cards.”

  4. On 14 February 2008, $200,000 was transferred from the TZ Account to the ZMS Account. The written authorisation bore the handwritten signature of Mr Fagredin and the electronic signature of the offender.

  5. Although Sigalla’s email of 12 February 2008 suggested that he needed the money to pay the Perpetual Loan, the ZMS Account bank statement indicates that the $200,000 received on 14 February 2008 enabled a cheque (#1454) in the amount of $200,000 in favour of Mr O'Donnell to be honoured. This was the second of the three “loans” from Sigalla to Mr O’Donnell.

  6. The $200,000 payment was falsely recorded in TZ’s general ledger by Mr Fagredin as a fee paid to Yorkshire Capital in relation to raising share capital. Neither Mr Lai nor his company (Yorkshire Capital) received the $200,000. TZ received no benefit for the payment.

The third loan of $500,000 on 20 February 2008

  1. On 20 February 2008, $500,000 was transferred from the TZ Account to the BZI Account, on written instructions bearing the handwritten signature of Mr Fagredin and the electronic signature of the offender.

  2. The payment was the subject of email correspondence dated 20 February 2008 between Mr Navarro of NAB, Mr Fagredin, and ultimately the offender (who copied it to Sigalla). The offender instructed Mr Fagredin to complete the written instructions required by NAB for the transfer to BZI. The funds were falsely described as a “payment for sub-underwriting fees".

  3. The transfer of $500,000 to the BZI account put the account in funds to honour cheque #43 in the amount of $104,370 written to “Berndale”, which was deposited into a bank account for Berndale Securities Limited (Berndale Securities), the trust account for BBY. This was credited to ZMS’s BBY Account.

  4. Of the balance of the $500,000, $300,000 was transferred to the ZMS Account, putting it in funds to pay cheque #1457 in the amount of $300,000 written to Sigalla. That cheque was deposited into Sigalla’s Account which, in turn, put it in funds to pay cheque #1354 in favour of Mr O’Donnell. This was the third “loan” from Sigalla to Mr O'Donnell.

  5. On 22 February 2008 electronic transfers of $22,000 and $20,000 were also made from the balance of $500,000 to Sigalla’s Account and his NAB Gold Rewards visa card.

  6. The offender instructed Mr Fagredin to record the $500,000 transaction in TZ’s general ledger as a fee paid to an unidentified entity for sub-underwriting services. BZI had not provided, and TZ had not received, any sub-underwriting services in return for the payment. Neither Sigalla nor BZI had any legitimate entitlement to the funds.

Summary of count 2

  1. The payments on 5 July 2007, 14 February 2008 and 20 February 2008 (totalling $1,000,000) were authorised by the offender using his position as a director dishonestly with the intention of Sigalla gaining a benefit (primarily, by making him Mr O’Donnell’s creditor). Neither Sigalla, nor ZMS nor BZI had any legitimate entitlement to the funds. There was no “related party” disclosure of these transactions.

  2. The payments were made from TZ’s funds to enable Sigalla to placate a third party, Mr O'Donnell. The offender directed Mr Fagredin to effect two out of the three payments. The offender also instructed Mr Fagredin to falsely record all three of these transactions in TZ’s ledger. I regard these transactions as amounting to a course of conduct.

Count 3: The Reader China Shares

  1. On 19 July 2007, $400,000 was transferred from the TZ Share Placement Account to Ms Lau's HSBC account in Hong Kong, on written instructions bearing the electronic signatures of the offender and Mr Fagredin. In accordance with the offender’s instructions, Mr Fagredin falsely recorded the payment in TZ’s general ledger as consulting fees paid to Ms Lau.

  2. The $400,000 was not for consulting services. Rather, it constituted an investment in Ms Lau's business, Reader China Group Limited (Reader China), on behalf of Sigalla and/or the offender. Through an email exchange with Ms Lau and Sigalla in June 2007, Sigalla agreed to take up a 3.3% share in Reader China through Profit Pearl. This investment was reflected in a share subscription agreement dated 20 July 2007 between Reader China and Profit Pearl. The investment was also the subject of emails between Sigalla and Ms Lau dated 6 and 7 September 2007.

  3. The payment on 19 July 2007 was authorised by the offender using his position as a director dishonestly, intending a benefit for Ms Lau, Profit Pearl and himself (at least to the extent to which the offender was a listed beneficial owner of Profit Pearl). There was no legitimate entitlement to these funds. There was no “related party” disclosure of this transaction. The Crown accepted that it had not proved to the requisite standard that the offender had benefited from the transfers the subject of count 3. I regard these transactions as a course of conduct.

Count 4: The Sigalla transfers

  1. Various payments were made from the TZ Account for the benefit of Sigalla, which are the subject of count 4. These payments comprised the following: $68,000 on 25 February 2008, $300,000 on 20 March 2008, $500,000 on 17 July 2008, $167,783.37 on 21 July 2008, $600,000 on 23 July 2008, $525,000 on 18 August 2008 and $500,000 on 24 September 2008. The instructions for each of these transfers bore the handwritten signature of Mr Fagredin and the electronic signature of the offender.

Transfer to Sigalla of $68,000 on 25 February 2008

  1. On 25 February 2008, Sigalla emailed the offender and Mr Fagredin asking the offender to get Mr Fagredin to transfer $68,000 to the ZMS Account “for the subunderwriting today”. This amount was immediately transferred from the TZ Account to the BZI Account.

  2. Shortly afterwards, Sigalla used his internet access to transfer the monies from the BZI Account to the ZMS Account with the narration: “loan as [Andrew Sigalla]”.

  3. In accordance with the offender’s instructions, Mr Fagredin recorded the transfer as the balance of a fee for sub-underwriting services. BZI had not provided, and TZ had not received, any sub-underwriting services in return for the payment.

Transfer to Sigalla of $300,000 on 20 March 2008

  1. In the second half of 2007 and the first months of 2008, ZMS incurred interest on the Perpetual Loan of between about $90,000 and $100,000 per month. As at February 2008, ZMS had defaulted on several months of interest and was in arrears in the amount of $600,000. On 20 March 2008, Sigalla sent an email to Mr Fagredin (copied to the offender) instructing him to transfer $300,000 "on behalf of ZMS Investments" to a bank account for the Heidtman Trust Account, stating “John [the offender] has ok please do ASAP”. The sum of $300,000 was transferred from the TZ Account to an account in the name of "Heidtman & Co Trust Account". The written instructions indicated that the transaction was on "behalf of ZMS Investment”.

  2. The $300,000 was used by ZMS to pay interest in arrears on the Perpetual Loan. Mr Fagredin recorded the $300,000 payment in TZ's general ledger as a debit entry in account “1-1250 Sundry DD” with the description “DD”. Following the resignations of Sigalla and the offender in June 2009, the balance in this account, including the $300,000, was written off as irrecoverable in the 2009 audited accounts of TZ.

Transfer to Sigalla of $500,000 on 17 July 2008

  1. As at 17 July 2008, Sigalla's betting account with Eskander's Betstar Pty Ltd (Betstar) was in debit in the amount of $230,839.75. On that day, $500,000 was transferred from the TZ Account to the BZI Account.

  2. The $500,000 put BZI into funds to pay cheque #91 for $87,780.15 to Berndale Securities. This was credited to BZI's BBY Account. The funds also enabled the payment of cheque #92 for $200,000 to Betstar to reduce Sigalla’s gambling debts.

Transfer to Sigalla of $167,783.37 on 21 July 2008

  1. As at 19 July 2008, Sigalla owed Tom and Bill Waterhouse, who were bookmakers, gambling debts of $863,500. Sigalla wrote cheque #94 in favour of Tom and Bill Waterhouse in the sum of $200,000.

  2. On 20 July 2008, Sigalla sent an email to Mr Sommerlad of NAB explaining that the BZI Account was overdrawn because Mr Fagredin could not transfer funds from TZ to BZI until a drawdown from the TZ term deposit had cleared. Sigalla advised Mr Sommerlad that TZ now had cleared funds and that Mr Fagredin would email the relevant transfer request (from TZ to BZI) on 21 July 2008.

  3. On 21 July 2008, $167,783.37 was transferred from the TZ Account to the BZI Account, which put the BZI Account into sufficient funds to honour cheque #94.

Transfer to Sigalla of $600,000 on 23 July 2008

  1. On 23 July 2008, $600,000 was transferred from the TZ Account to the BZI Account. Sigalla sent an email to Mr Sommerlad of NAB with a note “James [Sommerlad]. This will be quicker. Please confirm when completed.” The $600,000 put the BZI Account in sufficient funds to honour a cheque (#95) for $250,000 to "T & B Waterhouse Pty Ltd", which was used to reduce Sigalla’s gambling debts.

  2. The balance of the $600,000 was used by BZI for cheque #96 in the amount of $69,932.53 and cheque #97 in the amount of $77,850.84, both written to Berndale Securities. These amounts were credited to BZI's BBY Account.

Transfer to Sigalla of $525,000 on 18 August 2008

  1. As at 16 August 2008, Sigalla’s gambling debts to Tom and Bill Waterhouse amounted to $1,943,280.

  2. On 18 August 2008, Sigalla sent an email to Mr Fagredin instructing him to transfer $525,000 to BZI "for share purchase". Mr Fagredin followed his usual practice of confirming the transfer with the offender. Thereafter, $525,000 was transferred from the TZ Account to the BZI Account. On the same day as the $525,000 was received into the BZI Account, an amount of $500,000 was transferred from the BZI Account to Sigalla’s Account. This put Sigalla's personal account into sufficient funds to honour cheque #1380 for $500,000 to Tom and Bill Waterhouse.

Transfer to Sigalla of $500,000 on 24 September 2008

  1. As at 20 September 2008 Sigalla owed Tom Waterhouse $1,604,430 in gambling debts. On 24 September 2008, Sigalla sent an email to Mr Fagredin and the offender, in which he instructed Mr Fagredin to transfer $500,000 to BZI "first thing this morning". This sum was immediately transferred from the TZ Account to the BZI Account. Later that day, Sigalla sent an email to Mr Sommerlad of NAB advising that Mr Fagredin had faxed the funds transfer request and asking Mr Sommerlad to process the request "straight [a]way" because Sigalla was about to fax another transfer request that he needed “actioned ASAP”.

  2. As soon as the $500,000 was received into the BZI Account, an amount of $400,000 was immediately transferred, first to Sigalla’s Account and, from there on instructions signed by Sigalla, to an ANZ account held by Tom & Bill Waterhouse to reduce Sigalla’s gambling debt.

  3. The $500,000 payment was recorded in TZ's general ledger by Mr Fagredin as a debit entry in the account "1-1150 KasBank Investment Account" (the KasBank Investment Account) with the description "BZI - CRF". This entry was false as TZ had no investment with KasBank. The balance in the account, including the $500,000, was written off in TZ's 2009 audited accounts.

Summary of count 4

  1. Count 4 comprises seven transactions, by which total funds of $2,660,783.37 were transferred out of TZ for the benefit of Sigalla and his companies. The payments on 25 February 2008, 20 March 2008, 17 July 2008, 21 July 2008, 23 July 2008, 18 August 2008 and 24 September 2008 were authorised by the offender using his position as a director of TZ dishonestly, in circumstances in which he was reckless (under s 184(2)(b) of the Corporations Act) as to the benefit gained by Sigalla, BZI and ZMS. Neither Sigalla, nor BZI nor ZMS had any legitimate entitlement to the funds.

  2. There was no “related party” disclosure in relation to any of these transactions.

  3. The offender instructed Mr Fagredin to falsely record these payments in TZ's general ledger as debit entries in the KasBank Investment Account.

  4. Count 4 is to be distinguished from counts 1, 2, 3, and 5 in that, for this count, the offender was reckless as to whether his dishonest use of position would result in an advantage to himself or someone else. Although there is no direct evidence that the offender actually knew about all of the transactions at the relevant time, they were the subject of emails from Sigalla to Mr Fagredin, of which the offender received a copy. Moreover, the offender instructed Mr Fagredin to use the offender’s electronic signature to authorise the transfers. Thus, the offender used his position as a director of TZ dishonestly, reckless as to the advantages being gained by Sigalla from these transactions. These transactions amounted to a course of conduct.

Count 5: The Cyplex transfers

Transfer of $540,000 to Cyplex on 31 December 2007

  1. On 31 December 2007, $540,000 was transferred from the TZ Account to an ICBC account in Hong Kong held by Intertrust, on written instructions bearing the signatures of the offender and Mr Fagredin. The $540,000 was received by Intertrust on behalf of Cyplex.

  2. In February 2008, the offender, through Cyplex, instructed Intertrust to use the $540,000 to pay: $200,000 to Nutri-Care Limited for the purchase of 1 million shares by Cyplex; and $324,000 to Pontego Investments Inc, purportedly as a “sub-underwriting fee”.

  3. The $540,000 payment was falsely recorded in TZ's general ledger by Mr Fagredin, in accordance with instructions given by the offender, as a "placement fee" to an unidentified party in relation to shares or other securities issued by TZ. Neither Cyplex nor Pontego provided any "placement" or "sub-underwriting" services to TZ to justify the payment.

Transfer of $576,000 to Cyplex on 3 March 2008

  1. On 3 March 2008, $576,000 was transferred from the TZ Account to a Standard Chartered Bank account in Hong Kong held by Cyplex (the Cyplex Account), an account beneficially owned by the offender. The $576,000 was transferred on written instructions bearing the handwritten signature of Mr Fagredin and the electronic signature of the offender, which recorded that the purpose of the transfer was "Placement fee 24 Million", indicating that the payment was a fee in relation to the QVT raising.

  2. The transaction was falsely recorded in TZ's general ledger by Mr Fagredin as a payment to Cyplex for services provided in relation to the issue of shares or other securities in TZ. Neither Cyplex nor the offender provided any services to TZ to justify the payment.

Summary of count 5

  1. The payments on 31 December 2007 and 3 March 2008 (which totalled $1,116,000) occurred by the dishonest use of the offender’s position as a director. There was no "related party" disclosure of these transactions. The two transactions the subject of count 5 were solely for the offender's benefit. The offender instructed Mr Fagredin to record them falsely in TZ's general ledger. In effecting these transactions the offender used his position as a director dishonestly, with the intention that he would benefit. These transactions amounted to a course of conduct.

Count 6: False information to ASX

False information provided on 30 April 2008

  1. Mr Fagredin drafted an Appendix 4C Quarterly Report for the quarter ended 31 March 2008, which he emailed to the offender who reviewed and signed-off on the report as director and company secretary of TZ. On 30 April 2008, TZ sent the report to the ASX (the Quarterly Report).

  2. Under the section of the Quarterly Report which covered payments to directors and associates of the entity and related entities, payments of $258,000 to related parties were disclosed and described as “management fees, director fees, wages and expenses reimbursement at normal commercial rates” (per item 1.26). Item 1.25 disclosed “nil” loans to related parties. The Quarterly Report failed to disclose payments, including those referred to above, made by TZ to directors and/or related entities during the relevant quarter. Accordingly, the offender authorised information to be given to the ASX which related to the affairs of TZ and which, to his knowledge, was false or misleading in a material particular.

  3. In the last quarter of 2008, TZ made the payments set out in the table (the Additional Payments).

Date

Amount

Account to which payment made

13 October 2008

$300,000

Sigalla's Account

16 October 2008

$400,000

BZI Account

20 October 2008

$300,000

Sigalla's Account

26 November 2008

$200,000

BZI Account

10 December 2008

$669,534.89

BZI Account

15 December 2008

$782,000

BZI account

  1. Mr Fagredin recorded the Additional Payments in accordance with instructions from the offender as debit entries in the KasBank Investment Account in TZ's general ledger.

False information provided on 28 February 2009

  1. Mr Fagredin drafted an Appendix 4D and Financial Report for the Half Year ended 31 December 2008, which was then reviewed and signed-off by the offender as director of TZ. On 28 February 2009, TZ sent the report to the ASX (Half Year Financial Report).

  2. The Half Year Financial Report stated "cash and cash equivalents" to be in the amount of $13,993,689. This included the balance of the “KasBank Investment Account”, which was said to amount to $10,579,361.59 and which included each of the payments referred to above, which were recorded as debit entries in the KasBank Investment Account. The offender represented these payments as cash in hand in the Half Year Financial Report, when the payments had actually been made by TZ to BZI and Sigalla, for Sigalla's own benefit. Accordingly, the offender authorised information to be given to the ASX which related to the affairs of TZ and which to his knowledge was false or misleading in a material particular.

The investigation and prosecution of the offender and his post-offence conduct

The commencement of the investigation

  1. On 10 August 2009 TZ’s solicitors wrote to the Australian Securities and Investments Commission (ASIC) to request a meeting to discuss allegations that the previous board had committed fraud against TZ. On 14 August 2009, ASIC commenced an investigation pursuant to s 13 of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) into the conduct of persons, including Sigalla, the offender and Mr Fagredin.

  2. In August 2009 ASIC obtained a freezing order against the offender and his accountancy firm, Dunbar Associates. TZ claimed the monies the offender and Sigalla had taken. The offender settled the proceedings against him by the payment of about $400,000. He also lent $100,000 to Sigalla (which was not repaid). TZ lodged the following statement with the ASX on 7 February 2011:

“As previously disclosed by TZ Limited (the "Company"), the Company had been contemplating commencing proceedings against two individuals (including one previous director of the Company) for the recovery of moneys which it believed were owing to it. The Company advises that it has today entered into deeds of settlement with both those individuals and entities associated with them and the Supreme Court of New South Wales has today made orders to vary the freezing orders that were obtained by the Australian Securities and Investments Commission against those individuals and associated entities to allow the settlements to take place. This has avoided the need for the Company to commence legal proceedings for the recovery of the moneys.

Under the terms of the deeds of settlement the Company is to receive a total of $492,500 in settlement payments on or before 21 February 2011.”

The creation of the “mandate letter”

  1. Not long after ASIC began its investigation, Sigalla arranged for the creation of a false document known as the “mandate letter” which bore the date 22 July 2004 and purported to entitle him to a commission of 8% on all of TZ’s capital raisings for a five-year period. Although the offender told Sigalla at the time (August 2009) that the creation of the mandate letter was “a crazy thing to do”, the offender nonetheless signed it and, without authorisation, applied the electronic signature of Mr Leibowitz. As referred to above, Mr Leibowitz had been a director of TZ as at the date of the letter (22 July 2004), but was no longer a director. By reason of the offender’s admissions in cross-examination, his part in the mandate letter has been proved beyond reasonable doubt. The offender appreciated, at the time, that Sigalla would use the letter to hide or justify a number of fraudulent transactions which had benefited Sigalla and which were likely to come under question in the course of the ASIC investigation. The offender subsequently learned that Sigalla had created false invoices to justify such payments by reference to the mandate letter although the offender played no role in the creation of any of those invoices.

The s 19 examinations

  1. The offender attended seven compulsory examinations pursuant to s 19 of the ASIC Act, the first of which was conducted on 10 September 2009 and the last of which was conducted on 30 January 2012. At the final examination documents were shown to the offender relating to the offences the subject of the investigation. The scope of the investigation was expanded over the period to 30 March 2012 as ASIC received further evidence and information.

The offender’s departure from Australia and the laying of charges against the offender and others

  1. On 13 March 2012, the offender left Australia. He indicated on his departure card that he intended to stay overseas for 28 days. A border alert was put in place following his departure. It was not triggered between March 2012 and September 2017 as the offender did not return to Australia during that period. Charges were laid against the offender on 21 December 2012. Between 14 March 2012 and 28 February 2014 the offender travelled out of Thailand at least once a month, usually for a period of 1-3 days. From 14 March 2012 to 15 May 2013 the offender travelled on his Australian passport and from 17 May 2013 to 28 February 2014 he travelled on his British passport.

  2. On 19 February 2013, Mr Fagredin pleaded guilty to one offence against s 1307(1) of the Corporations Act (falsification of a company’s books). On 15 May 2013 he was convicted and released, without passing sentence, on a 12-month good behaviour bond with surety of $2,000 pursuant to s 20(1)(a) of the Crimes Act 1914 (Cth).

  3. On 16 May 2013 ASIC sent an email to the offender’s last known Australian legal representative, advising that an arrest warrant had been issued against the offender and seeking confirmation as to whether he continued to act on the offender’s behalf. On 20 May 2013, ASIC received a response that the solicitor had no instructions to act on the offender’s behalf. On 22 May 2013, the offender contacted ASIC by email and sought details of the arrest warrant and charges. This information was provided the following day.

  4. Between 10 June 2013 and 11 October 2013, ASIC and the offender exchanged emails on at least 12 further occasions. ASIC set out the bail conditions to which it would agree were the offender to return to Australia. The offender took exception to the proposed bail conditions on various grounds, including that he no longer had an identified residence in Australia and that he wanted to preserve his right to leave Australia while on bail. On 11 October 2013 ASIC advised the offender to instruct a lawyer in Australia to act on his behalf. Further charges were laid against the offender on 18 February 2014.

  5. ASIC prepared an extradition brief for the Attorney-General’s Department which was required to be translated into Thai at an approximate cost of $50,000. The extradition request was presented to the Ministry of Foreign Affairs of the Kingdom of Thailand on 9 December 2014. On 9 January 2015 the request was forwarded to the Thai Office of the Attorney-General, which is the central authority for extradition in Thailand.

  6. The offender explained in his oral evidence that he decided to go to Thailand and not return to Australia because he did not want to “get bogged down in the whole mess” of Sigalla’s trial and did not want to be tried jointly with him. He said that he was “broke” as a result of the settlement with TZ and would have been unable to work in Australia because of the investigation and the offences with which he had been charged. Shortly after his resignation from the board of TZ in mid-2009, the offender also resigned from the board of Kingsgate Consolidated Limited (Kingsgate), a company which operated a mine in Thailand, on the basis that he was under investigation in Australia. The offender continued to work in Thailand as a consultant, including for Kingsgate. In 2012 Kingsgate employed the offender in Thailand as he was well regarded and thought to have the appropriate skills.

  7. The offender explained that he decided to remain away from Australia until Sigalla’s trial was over to see what happened to him. He had what he described as a “forlorn and stupid hope that [Sigalla] would be found not guilty”, which would mean that the charges against the offender would be likely to be dropped.

  8. On 22 November 2016, Sigalla was convicted, after a trial by jury, of 24 counts under s 184 of the Corporations Act. The offender learned the result of Sigalla’s trial on or about that date. On 3 February 2017, Sigalla was sentenced to an overall term of imprisonment of 10 years with a non-parole period of 6 years: R v Sigalla [2017] NSWSC 52. The offender became aware of Sigalla’s sentence not long after it was imposed.

  9. Notwithstanding Sigalla’s convictions after trial, the offender still hoped that the Director of Public Prosecutions (Cth) (DPP) would not prosecute him for the offences with which he had been charged. However, he knew that, at some point in the future, there was a prospect that he would be arrested and brought back to Australia to be tried.

  10. The offender did not attempt to hide his whereabouts from the Australian authorities, who knew his email address and phone number. He was also known to the Australian ex-patriate community in Thailand.

  11. Ultimately, on 5 April 2017, the Thai Criminal Court issued an arrest warrant for the offender which was forwarded to the Thai police to be executed. The offender was arrested on 1 June 2017. On 2 June 2017, he consented to his return to Australia. On 5 September 2017, after the requisite period elapsed for revocation of consent, the offender was brought back to Australia in the custody of the Australian Federal Police. He has remained in custody and has not applied for bail.

  12. The offender was committed to this Court on 2 May 2018 following his waiver of the right to a committal hearing in the Local Court. On the first occasion the matter came before this Court, 1 June 2018, the offender indicated that he intended to plead guilty but sought time for plea negotiations. At the sentence hearing on 9 November 2018 the offender formally entered guilty pleas to the six counts on the indictment. The statement of agreed facts, which was detailed, avoided the need for a significant amount of evidence to be adduced.

Comparison between the offender’s charges and Sigalla’s charges

  1. There is substantial overlap between the offender's charges and Sigalla's charges. The charges concerning the offender were “rolled up”, whereas the charges against Sigalla were individual charges relating to single transactions. The following table sets out the differences between the two indictments.

Sigalla count

Offender count

Notes

1, 2, 3

1

4, 6, 7

2

5

3

8, 10, 11, 12, 13, 14, 15

4

Offender charged that he was “reckless” (s 184(2)(b)); Sigalla charged that with “intent” (s 184(2)(b)).

No corresponding charge

5

No corresponding charge

6

6, 9, 16, 17, 18, 19, 20, 21, 22, 23, 24

No corresponding charge

Sentencing principles and statutory requirements

  1. Part 1B of the Crimes Act applies. In determining the sentence to be passed, the court must impose a sentence or make an order that is of a severity appropriate in all the circumstances of the offence: s 16A(1) of the Crimes Act. The court is obliged to take into account those matters in s 16A(2) of the Crimes Act which are relevant and known to the court.

  2. The matters in s 16A(2) which have been identified by the parties as relevant, and which I accept are relevant, are addressed below.

  3. Whenever imposing a sentence involving conditional release or of a non-custodial kind, the court must have regard to the nature and severity of the conditions that may be imposed on, or may apply to, the offender, under that sentence or order: s 16A(3) of the Crimes Act. A court shall not pass a sentence of imprisonment for a federal offence unless the court, having considered all other available sentences, is satisfied no other sentence is appropriate in all the circumstances of the case: s 17A of the Crimes Act.

Consideration

The nature and circumstances of the offences and whether they constitute a course of conduct

  1. The relevant facts are as set out above. As a director of TZ Ltd, the offender was placed in a position of considerable trust, which he abused over an extended period. He acted in gross dereliction of his duty. The offences involved both dishonesty and greed. His offending conduct took place over a period of two years and three months. The offender’s personal gain was $1,416,000, being the sum of $300,000 (count 1) and $1,116,000 (count 5). He turned a blind eye to several transactions by which Sigalla personally gained at least $2,660,783. The overall total of the impugned transactions was $6,276,783. The amount of money concerned is a relevant matter in determining the gravity of the offences: R v Hawkins (1989) 45 A Crim R 430 at 435 (Lee J, Newman and Loveday JJ agreeing).

  2. In cross-examination, the offender said that he took the money which comprised the Cyplex transactions in order to restore funds to his clients because Sigalla had commandeered all of the TZ shares which the offender and his clients owned. The monies transferred to Cyplex were, nonetheless, for the offender’s benefit. While I accept that this may have been the offender’s motive for the Cyplex transactions, the duties owed by the offender to TZ and its shareholders required him to stand up to Sigalla and not, as occurred, collaborate in fraudulent transactions to the detriment of TZ. Although the offender was, in one sense, a victim of Sigalla’s capacity to engineer situations which compromised others for his own benefit, the offender was also a perpetrator.

  3. It is also significant that the offender used his position to render detection significantly more difficult by authorising the false recording of the transactions in the TZ general ledger.

  4. Before determining the objective seriousness of the offences, it is necessary to deal with the Crown’s submission that the mandate letter made the offending more serious. Leaving aside the separate principles which apply to uncharged conduct in the area of sex offences, there are substantial limits on the use to which post-offence conduct can be put in assessing objective seriousness: see the discussion in R v Wilkinson (No 5) [2009] NSWSC 432 at [61] (Johnson J). A review of the authorities indicates that post-offence conduct is typically regarded as increasing the objective seriousness where the offence is murder and the offender has disposed of the body or acted in some way which made the homicide more heinous.

  5. The Crown relied on Einfeld v R [2010] NSWCCA 87; (2010) 200 A Crim R 1 in support of its submission that the creation of the mandate letter could be taken into account to increase the objective seriousness of the offender’s criminality. In that case the appellant had told three lies in the witness box: first, that he was not driving the speeding vehicle; second, that he had been in Forster at the time; and, third, that a named American resident (who was deceased at the time) had been the driver. The appellant was charged with one count of perjury, which related to the first lie. In that case there was a direct connection between the charged conduct (the first lie) and the uncharged conduct (the second and third lies) each of which occurred within a period of minutes in the same context. The sentencing judge took the other two lies into account, not because they, of themselves, added to the objective seriousness of the first lie, but because they indicated that the charged lie was “not a spontaneous response given in the witness box, but a planned response to an expected question”: Einfeld v R at [143] (Basten JA).

  6. The present case is, in my view, distinguishable. Although the offender can be taken to have appreciated that he and Sigalla were connected in that their conduct was being investigated by ASIC and the offender’s role in Sigalla’s crimes was integral, the Crown accepted that they could not link the mandate letter and the invoices to the particular counts to which the offender has pleaded guilty. It would appear that the offender could have been charged with an offence for his role in the creation of the mandate letter, but he was not. Nor was Sigalla charged with creating the mandate letter; the evidence relating to Sigalla’s creation of the mandate letter was relevant in his trial because of its capacity to amount to a consciousness of guilt: R v Sigalla at [69]. I do not regard the principle in The Queen v De Simoni (1981) 147 CLR 383; [1981] HCA 31 as apt since the further uncharged offence has not been shown to amount to a more serious offence than those for which the offender pleaded guilty. In my view, the reason the post-offence conduct ought not be taken into account is that it does not bear a sufficiently close connection with the subject offences such as to increase their objective seriousness.

  7. For these reasons, I do not regard the offender’s part in the mandate letter (by signing it and applying the electronic signature of Mr Leibowitz to it) as increasing the objective seriousness of the offences for which he is to be sentenced. I have not taken the mandate letter into account in assessing their objective seriousness.

  8. I regard counts 1-5 as very serious for the reasons given above.

  9. Count 6 concerned the filing of the reports with the ASX which the offender knew to be misleading and deceptive. The Quarterly Report failed to disclose payments to directors or related entities which amounted to a sum in excess of $2.5 million. In the Half Year Financial Report, the assets of TZ were overstated by at least $6 million (being the sum of the amounts in counts 1-5). These two matters were potentially highly germane to future investors in, and existing shareholders of, TZ. The offender’s filing of these returns with the ASX which grossly overstated TZ’s assets and failed to disclose significant benefits paid to directors and related parties, particularly of the magnitudes in the present case, is objectively very serious.

Circumstances of victim; injury, loss and damage

  1. The offender owed statutory and fiduciary duties to TZ and its shareholders. TZ needed to raise capital to fund TZI’s operations. TZ’s shareholders were affected as these funds were not used for the benefit of TZ.

  2. There was also a wider consequence of the offender’s criminality for the investing public. The offender’s conduct tended to undermine trust in the integrity of the governance and probity of public companies. Private investment in public companies is a significant aspect of the market economy. lf potential investors fear that the directors of public companies will misuse their positions to their own advantage, they will be less inclined to invest, leaving the market deprived of capital. The sentence must take into account the importance of safeguarding and restoring investor confidence in the ASX: R v Kearns [2003] NSWCCA 367 at [4]-[5] (Spigelman CJ).

Degree of contrition, co-operation with the authorities and willingness to facilitate the administration of justice

  1. The offender admitted in oral evidence that he knew that he had a responsibility, as a director of TZ, to act in the interests of the company and its shareholders and that he knew at the time of the offending that his conduct was dishonest and in breach of his duties as a director.

  2. In October 2018 the offender admitted to Karen Burgoyne, psychologist, that his reasons for committing the offences were a combination of greed and poor judgment, which he rationalised on the basis that it was relatively common behaviour and that there was a chance that he would be able to pay the money back (presumably from the profits made if the NASDAQ listing went ahead). He told Geoffrey Galloway, the author of the pre-sentence report, that “similar conduct was commonplace amongst his peers during what he described as the ‘heady days’ prior to the [GFC] of 2008”.

  3. In his affidavit, the offender said that he “buried [his] head and ignored what was happening”. He also deposed that he appreciates that what he did was wrong. He said:

“l deeply regret the hurt I caused to others over the period of offending and now realise that my failure to step in and stop what was happening hurt the company, those associated with it, and the general confidence of the corporate system.”

  1. Prior to his departure from Australia in 2012, the offender’s co-operation with authorities was required by law and cannot, therefore, be regarded as voluntary. He was required to attend the examinations pursuant to s 19 of the ASIC Act and to answer questions posed in the examinations truthfully.

  2. The offender has expressed contrition to Ms Burgoyne, in his affidavit and in his oral evidence and has demonstrated a willingness to facilitate the course of justice since his return to Australia under the extradition process. I accept his contrition as genuine and that, from 1 June 2017, he has been willing to facilitate the course of justice. He has made some reparation to TZ by settling the claim referred to above, which is also to be taken into account in his favour. I accept the Crown’s concession that the fact that the offender did not contest his extradition is a factor to be taken into account in his favour: AB v The Queen (1999) 198 CLR 111; [1999] HCA 46 at [55] (Gummow and Callinan JJ) and [91]-[100] (Kirby J).

  3. As referred to above, the offender was in custody in Thailand from 1 June 2017 to 5 September 2017 in conditions which were significantly more onerous than those to which he has been subjected since his return to Australia. I take into account the length and the conditions of his incarceration in Thailand in the overall sentence: R v Kinch [2016] NSWSC 63 at [87] (Hidden J). He has not applied for bail since his return to Australia. I also regard his guilty plea as indicating contrition and a willingness to facilitate the course of justice and will take it into account on that basis as well as for its utilitarian value (see below).

The guilty plea

  1. The offender’s guilty plea is also relevant for its utilitarian value. I accept that there should be a specified discount in recognition of the utilitarian value of the offender’s guilty plea because it has saved the expense of a trial: Xiao v R (2018) 96 NSWLR 1; [2018] NSWCCA 4 at [277]-[278].

  2. I note that the trial by jury of Sigalla took 24 hearing days. It was not necessary for trial dates to be allocated in this Court because of the offender’s early indication of his preparedness to plead guilty. The Crown accepted that the plea was entered at an early stage. Although it is likely, had the matter gone to trial, that the offender’s trial would have been shorter than that of Sigalla, it would nonetheless have taken several weeks at significant public expense. Ms Musgrave, the offender’s solicitor, has provided a comprehensive explanation of the difficulties of analysing the brief (which comprised 29 volumes) as well as the material from Sigalla’s trial and obtaining instructions from the offender who was in custody. I accept that the offender pleaded guilty at the earliest reasonable opportunity, although this did not occur in the Local Court.

  1. I propose to allow a discount for the utilitarian value of the offender’s plea of guilty of 25% which I have applied to the sentences which I would otherwise have imposed for each of the six counts. I note that my discretion as to the amount of the discount is not constrained by any guideline judgment or statutory provision as all the offences are Commonwealth offences.

Deterrence: specific and general

  1. In the present case, I do not regard specific deterrence as a matter of particular weight since it is unlikely that the offender will ever be placed in a position of trust again.

  2. However, general deterrence is of significance, especially as offences of this sort are notoriously difficult to detect: R v Pantano (1990) 49 A Crim R 328 at 330 (Wood J, Carruthers J agreeing). As the Victorian Court of Appeal said in Director of Public Prosecutions (DPP) v Bulfin [1998] 4 VR 114 at 131-132:

“The motivation to engage in conduct of the kind here under consideration may spring from many sources: a position of trust and the easy ability to abuse it; the enormous rewards that may be available; a position of high authority in some substantial enterprise and the offender's assumption that discovery or proof of wrongdoing can be avoided; greed or the burden of funding an extravagant lifestyle; weakness in succumbing to outside pressures to use deceitful means for business ends; and personal or corporate ambition, to name but a few. Whatever the motivation, offences of the kind here in question almost invariably involve a carefully calculated course of conduct over a long period, repeated deliberate acts of dishonesty, substantial amounts of money, and, frequently, losses (often tragic in their impact) to large numbers of small investors. The offender often holds a position making it possible, or has the ability, to disguise or camouflage the conduct in question. Detection is difficult, the investigation of the crime usually lengthy and very expensive, and the problems of trial and proof will frequently be extreme. . . . The result of such considerations, in my view, is that the element of general deterrence will usually carry particular significance in sentencing for crimes such as the present, both in relation to the total effective sentence and the non-parole period; together with a requirement for strong denunciation by the sentencing court.”

  1. General deterrence is also significant in the context of the offender’s statements to the effect that behaviour such as his was commonplace in the lead-up to the GFC.

  2. It is important to emphasise that the role of general deterrence (and denunciation) in sentencing is not limited to the utilitarian purpose of regulating the risks of deviant behaviour. The obligation of the state (through the sentencing court) is also to express the community’s disapproval of the offending conduct: Munda v State of Western Australia (2013) 249 CLR 600; [2013] HCA 38 at [54] (French CJ, Hayne, Crennan, Kiefel, Gageler and Keane JJ).

Need for adequate punishment

  1. I accept the Crown’s submissions that, given the nature and circumstances in which the offences were committed and the offender’s conduct, punishment and general deterrence are both very significant factors.

Character, antecedents, age, means and physical or mental condition of the offender

  1. The offender has no criminal history. He has adduced evidence that showed that, compared to Sigalla, he grew up in relatively modest circumstances. He has also adduced evidence of his good character, including from persons who worked with him in Thailand for Kingsgate who were surprised at the charges as they regarded him as an honest person of good character. In the context of offences such as the present, good character is not as significant a mitigating factor: R v El Rashid (Unreported, NSW Court of Criminal Appeal, 7 April 1995) (Gleeson CJ). It is also significant that the offending conduct occurred over an extended period: R v Kennedy [2000] NSWCCA 527 at [22] (Howie J, Simpson J agreeing).

  2. The offender qualified as an accountant after finishing school and worked consistently for the following decades both in Australia and overseas in responsible positions, including as a director, company secretary or Chief Financial Officer for several ASX-listed companies. From 1983 he operated his own accountancy practice. The offender began the course of offending conduct at the age of 58, when he had considerable professional experience as an accountant and auditor. He is now 70 years old.

  3. The offender adduced evidence to the effect that he has had a lifelong history of depressive symptoms. Ms Burgoyne considered that he would meet the diagnostic criteria for Persistent Depressive Disorder (Dysthymia). She opined that these symptoms combined with the offender’s personality traits to result in his engaging in a range of risky and irresponsible behaviours including repeated infidelity, excessive use of both legal drugs, alcohol and illicit drugs (including cocaine) as well as the offending conduct. The offender gambled to a modest extent. He knew that Sigalla was a gambler but was not aware of the extent of Sigalla’s gambling debts.

  4. The offender admitted to Ms Burgoyne that, throughout the period of offending, he was “living the high life” with Sigalla and used cocaine at work and as part of his leisure. He said in evidence that he had used cocaine overseas more than in Australia as it was relatively inexpensive overseas. He explained that, by “high life”, he was referring to travel, lunches, dinners and cocaine but said that he did not buy “Armani suits or flashy cars”. He accepted in cross-examination that his depression did not cause him to offend.

  5. The offender admitted that the depression really emerged when “everything was falling down in 2007-2008”. I understood this to be a reference to the GFC, which destroyed the prospect of TZI being listed on the NASDAQ. The offender realised that this, in turn, would result in TZ’s shares losing value (rather than increasing substantially, as would have occurred in the event of a successful float of TZI), and would mean that the offender would not be able to pay back the money he had been responsible for taking from TZ. This would increase the prospect that the fraudulent transactions would be revealed.

  6. I have taken these matters into account, although I note that there is no reliable evidence to indicate that the offender did not, at any given time, appreciate the gravity of his wrongdoing or the need to disguise it because of its criminality. The instructions he gave Mr Fagredin to record the transactions in TZ’s general ledger indicated a substantial level of subterfuge.

  7. The offender’s physical health is affected by various medical conditions (thrombocythemia, high blood pressure, chronic back pain, migraines, irregular heartbeat, osteoarthritis in knees and hips and depression). He is also partially deaf and suffers from sleep apnoea. I have taken these matters into account in determining the sentence to be imposed, having regard to the principles expressed in R v Achurch [2011] NSWCCA 186; (2011) 216 A Crim R 152 at [117] (Johnson J).

The prospect of rehabilitation of the person

  1. I accept that the offender is contrite and is unlikely to re-offend, even in the unlikely event that he is placed in any position of trust again. Accordingly, I consider his prospects of rehabilitation to be good.

The probable effect on family or dependents

  1. The probable effect on family or dependants is only to be taken into account where it is exceptional, consistent with the common law. The evidence is not sufficient to establish that the hardship suffered by the offender’s family, including his four children and two grandchildren, by being deprived of his company, is exceptional.

Extra-curial punishment

  1. Loss of career and professional reputation may amount to a form of “extra-curial” punishment. I accept that the offender has lost his reputation in the business community as a consequence of his offending conduct.

Disqualification from holding office

  1. As a result of his convictions the offender is automatically disqualified from managing corporations for a period of 5 years upon release (s 206B of the Corporations Act) without leave of a court. This is a matter to be taken into account as a penalty, although it also has the dual purpose of protecting the public: Rich v ASIC (2004) 220 CLR 129; [2004] HCA 42 at [35], [37], [49]-[52].

Delay

  1. Delay between offending and sentence is potentially relevant in three respects. First, the "uncertain suspense in which a person may be left" for an extended period can, in some circumstances, be taken into account. Secondly, an offender may demonstrate progress towards rehabilitation in the intervening period. Thirdly, a sentence for a “stale crime” calls for a “measure of understanding and flexibility of approach”: Blanco v R [1999] NSWCCA 121; (1999) 106 A Crim R 303 at [16].

  2. In the present case, the period between the offending conduct and the charges being laid has been explained by David Flintcroft, a lawyer in the Corporations and Corporate Governance Enforcement team of ASIC, whose affidavit was read without objection and who was not cross-examined. The relevant chronology has been set out above. I do not regard the period of about three years and six months for the investigation of the offences and the formulation of charges as unreasonable in the circumstances or as indicating any lack of expedition. I reject the offender’s submission that:

“[H]e has not added to the complexity or the length of the investigations. The blame for that course falls squarely on Sigalla.”

  1. Such was the offending conduct and the subterfuge of the offender and Sigalla that a long and detailed investigation was necessary to reveal the nature of the transactions and their illegality. As appears from the narrative set out above, the descriptions of the transactions were themselves misleading which would inevitably have prolonged the investigation.

  2. Ms Morgan SC, who appeared for the offender, accepted that the time the offender spent in Thailand until his extradition was “neutral” in that the offender could not say that ASIC or the DPP delayed the prosecution of the offences and the Crown accepted that the offender did not hide from the prosecutors and was entitled to wait to be extradited. I understood it to be common ground that I could not take the delay into account in favour of, or against, either the offender or the Crown. However, one consequence of the time the offender spent in Thailand is that he is now seventy years old. I have taken into account the offender’s age as part of his subjective circumstances.

Parity

  1. It was common ground that the principles of parity apply between the offender and Sigalla. Equal justice requires that, as between co-offenders, there should not be any marked disparity of sentence that gives rise to a justifiable sense of grievance: Postiglione v The Queen (1997) 189 CLR 295 at 301; [1997] HCA 26.

  2. There are significant differences between the offender’s involvement and that of Sigalla. Further, as referred to above, the manner of charging them has been different.

  3. The offender’s involvement in the Sigalla transfers (count 4) was that he was reckless as to the beneficiary of the transaction (s 184(2)(b) of the Corporations Act); whereas Sigalla himself was sentenced on the basis that the jury was satisfied that he had intended to benefit himself (s 184(2)(a) of the Corporations Act). Sigalla and his companies derived a substantially greater financial benefit from his criminality (in excess of $7.5 million) than did the offender ($1.416 million). Sigalla was not involved in the conduct the subject of counts 5 and 6 against the offender. Sigalla committed 11 further offences in respect of further transactions which were not the subject of charges against the offender. The offender played a direct role in causing the subject transactions to be falsely described in the accounts of TZ.

  4. I accept that Sigalla was the principal architect of most of the offending conduct and that he was, as the offender and other witnesses called by the offender have deposed, a threatening and intimidating character who was bullying and abusive to those around him, including the offender. While the offender gained considerably from the offending conduct, I accept that he was not its progenitor. He appears to have been, in the context of his relationship with Sigalla, a weak man, who collaborated in Sigalla’s dishonesty. Nonetheless the offender extracted considerable sums from his offending, although his share was much smaller than Sigalla’s. TZ was a public company and needed more than one director. Had the offender not been willing to apply his signature, and that of other directors who had electronic signatures, Sigalla would not have been able to effect the transactions that were to his benefit.

  5. There are also differences in the subjective circumstances of the offenders and in particular their ages, their attitude to their offending and the conviction of Sigalla following a trial as compared with the plea of guilty by the offender.

Comparative cases

  1. I have considered the authorities to which the parties have referred me and have read them in light of what the High Court said in Hili v The Queen; Jones v The Queen (2010) 242 CLR 520; [2010] HCA 45 at [48]-[49] and [53]-[56] about the limited value of previously decided cases in the sentencing process.

Section 17A of the Crimes Act

  1. I am satisfied that no sentence other than a sentence of imprisonment is justified in the circumstances of the present case. While the offender’s criminality is less than that of Sigalla and his subjective circumstances somewhat more favourable (largely because of his age), the conduct was very serious and requires a sentence of full-time imprisonment to fulfil the need for general deterrence and punishment.

  2. I note that Ms Morgan accepted that a period of imprisonment would be an appropriate sentence, although she submitted that any further term of imprisonment could be served in the community pursuant to a recognizance release order commencing on the date of sentence (ss 19AC(1) and 20(1)(b) of the Crimes Act) and an Intensive Corrections Order (ICO) under the Crimes (Sentencing Procedure) Act 1999 (NSW) (s 20AB of the Crimes Act and Part 5 of the Crimes (Sentencing Procedure) Act). I have also considered whether to make a recognizance release order as well as the other sentencing options.

Structure of the sentences

  1. I accept that there is a need for a degree of concurrency between the sentences for counts 1-5 because each involved dishonest use of the offender’s position as a director to obtain a benefit for himself or others from TZ. Although there was, in a broad sense, a course of conduct which involved depriving TZ of its funds and (in the case of count 1, its shares), there needs to be accumulation to take account of the different and additional criminality for each count. Count 6 is also related, although it is a different offence and comprises a different type of conduct. There will be a degree of accumulation to take account of the additional criminality involved in each count.

  2. I note the requirements of ss 19AB and 19AC of the Crimes Act as to non-parole periods and that there is no assumed starting point for the ratio between any non-parole period and the total term. The non-parole period is to be determined by what, in all the circumstances of the case, ought be the minimum period of actual incarceration: Power v The Queen (1974) 131 CLR 623 at 627-629; [1974] HCA 26.

  3. I note Ms Musgrave’s undertaking to explain to the offender the purposes and consequences of fixing the non-parole period: s 16F of the Crimes Act.

Orders

Conviction

  1. I order that the offender is convicted of each of the 6 counts on the indictment.

Sentence

John Falconer:

  1. For count 1, I impose a sentence of imprisonment of 2 years and 3 months, commencing on 1 June 2017.

  2. For count 2, I impose a sentence of imprisonment of 2 years commencing on 1 October 2017.

  3. For count 3, I impose a sentence of imprisonment of 1 year and 10 months commencing on 1 February 2018.

  4. For count 4, I impose a sentence of imprisonment of 2 years commencing on 1 June 2018.

  5. For count 5, I impose a sentence of imprisonment of 2 years and 6 months commencing on 1 December 2018.

  6. For count 6, I impose a sentence of imprisonment of 1 year and 7 months commencing on 1 May 2020.

  7. The overall effective sentence I impose consists of a total term of 4 years and 6 months commencing on 1 June 2017 and expiring on 30 November 2021.

  8. I fix a non-parole period of 3 years, expiring on 31 May 2020.

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Decision last updated: 16 November 2018

Most Recent Citation
Cases Citing This Decision

3

Will v The Queen (No 2) [2021] ACTCA 14
Donnelly (a pseudonym) v The King [2022] SASCA 125
R v Roussakis [2021] ACTSC 19
Cases Cited

23

Statutory Material Cited

4

R v Sigalla [2017] NSWSC 52
R v Hawkins [2023] NSWSC 1370
R v Wilkinson (No. 5) [2009] NSWSC 432