R v Johnston

[2019] VCC 825

IN THE COUNTY COURT OF VICTORIA Revised
Not Restricted
Suitable for Publication

AT MELBOURNE
CRIMINAL JURISDICTION

CR-15-02243

THE QUEEN

V

DOUGLAS JOHNSTON

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JUDGE:	HER HONOUR JUDGE WILMOTH
WHERE HELD:	Melbourne
DATE OF HEARING:	Trial: 24, 26, 30 April, 1, 2, 3, 6, 7, 8 May 2019 Plea 21 May 2019
DATE OF SENTENCE:	7 June 2019
CASE MAY BE CITED AS:	R v Johnston
MEDIUM NEUTRAL CITATION:	[2019] VCC 825

REASONS FOR SENTENCE

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Subject: Criminal law - sentence            

Catchwords:   offender found guilty by a jury of 9 charges of obtaining a financial advantage by deception – 5 complainants -  offending committed with wife who pleaded guilty and was sentenced to five and a half years’ imprisonment, with a non-parole period of two years – parity -  no remorse or insight – similar prior history – general and specific deterrence.

Sentence: 6 years imprisonment with 3 years non-parole period.

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APPEARANCES:	Counsel	Solicitors
For the Commonwealth  Director of Public   Prosecutions	Mr S Moglia Ms S Barnes (Sentence)	CDPP
Chris McLennan & Associates
For the Offender	Ms J. Swiney

1HER HONOUR:  Douglas Johnston, you have been found guilty by a jury of nine charges of obtaining a financial advantage by deception, an offence for which the maximum penalty is 10 years' imprisonment.

2You committed these offences with your wife, Maureen Johnston, who pleaded guilty to some of the same charges, but to others as well.  She was sentenced by me on 21 December 2018 to a term of imprisonment of five and a half years, with a non-parole period of two years.  Your wife was sole director of a company called Small Business Management, or SBM, and you, together with your wife, were equal shareholders.

3Consequent on a complaint made to ASIC, an investigation was commenced, which identified deposits made into the SBM account by a number of possible investors.  It emerged that, beginning in 2009, you and your wife had had discussions with friends you had made through the Collingwood Football Club.  The two of you raised with them the idea of investing funds with you and your wife, using the SBM account for which your wife was the sole authority.

4You secured these funds as a result of false inducements made to these people, as to how the money was to be used, and the returns they would receive.  Part of the offending used features of a Ponzi scheme.  Most of the principal invested was never repaid, nor was most of the promised interest or rental payments.  You and your wife used the money for personal expenses, including gambling at the casino.

5During these discussions, your wife, Maureen, did most of the talking, but you were almost always present, and you contributed to the explanations given to the potential investors.

6In a discussion with Marion Kim Westlake (known as Kim Westlake) in 2009, you and your wife talked to her about her future financial situation, and suggested an investment which would help her to retire early.  You offered to set up a self-managed superannuation fund for her, into which she would pay her current superannuation funds, and you would manage the money for her.  You told her she would get better returns on her funds than she was getting currently.

7You were present when your wife told Ms Westlake to transfer her funds from a new account into the SBM account in two transactions of $15,000 each on consecutive days.  Thereby, through those transactions, Ms Westlake transferred a total of $30,000 into SBM.  These are Charges 1 and 2 on the indictment.  A few days later she transferred $10,000 into the SBM account, that is Charge 3.  Ten days later, she transferred $5,000 into the SBM account, which is Charge 4.  None of these funds were used for investment purposes.

8When Ms Westlake informed you through her lawyers that she was taking action to recoup her money, you falsely denied having been present with your wife during any relevant discussions.

9About two years later, you and your wife met Phillip and Judith Stephens, at a Collingwood football match.  Your wife told Mr Stephens that you knew a builder who was building a block of units in Port Melbourne, which she and you had invested in, and were looking for additional funds to complete the project.  A subsequent discussion included Mrs Stephens and yourself.  You and your wife, together, explained the project in the same terms, and Ms Stephens advised that they had about $650,000 in a private superannuation fund which they could invest.

10They were offered a return of 15 per cent, half to be paid by cheque, and the other half in cash, and a share in the profits on the sale of the units.  You both told the Stephens' that the units would be completed within 12 months, and then sold.  They were not told the name of the builder or the address of the units.

11On 14 July 2011, they transferred $650,000 into the SBM account having signed a document titled, 'Investment Agreement', provided by you and your wife.  The Stephens' took this to be proof of their investment, even though the document referred only to a return of 7.5 per cent, instead of 15 per cent.  This money was not used to assist in the construction of any units, and that is Charge 5. 

12In early May 2012, your wife called Phillip Stephens and told him about a property investment that she and you had organised with 10 or 12 other investors, to invest in a United States property which had been purchased through a business called US Invest.

13She said some investors had pulled out, and she enquired if the Stephens would be interested in replacing them.  She said they would receive rental income of about $1,400 per month.  You and your wife went to the Stephens home to discuss this further, and your wife explained it again.  She said each unit in a unit trust cost $50,000, and she was asking the Stephens to take two units, at a total cost of $100,000.

14The Stephens agreed, but said they only had $70,000 to invest.  You told them that was alright, as they were owed about $30,000 in interest on the other monies they had already invested in the Port Melbourne property, so this could be added to the $70,000 enabling the Stephens to take up the two units in the unit trust.  Mr and Mrs Stephens made two transfers of funds, $20,000 which is Charge 8, and $50,000 which is Charge 9.

15None of this money was used to buy property in the United States, or to repay any existing investors in the US property investment.  After the funds were transferred, you and your wife gave a letter to the Stephens, to which were attached several documents falsely purporting to confirm that they had an investment with US Invest.

16Mr and Mrs Stephens did not initially receive any interest payments, and you suggested to them that after six months they roll over the interest which was purportedly accrued from the investment.  This arrangement was confirmed in a letter.  The same arrangement was made after 12 months, and again the Stephens agreed.

17Over time, a number of letters were sent by SBM indicating the amount of interest being earned, with one letter indicating payment of $7,731 into the Stephens' superannuation account.  In fact, this amount was never received by them.  However, in May 2013, two cheques were deposited into their account for a total of $13,041.  They were never repaid the principal amounts of $650,000 and $70,000.

18Charges 6 and 7 arose from dealings with the complainants Jason Busuttil and Joanne Boulton.  They had become close friends of you and your wife through the Collingwood Football Club.  You and your wife told them that you had joined a business called US Invest through which they could purchase properties in the US.

19You told them that the plan was to bring together a group of about 10 investors to contribute $40,000 each which would be pooled to purchase the properties.  In early 2012 Mr Busuttil and Ms Boulton agreed to invest, and were told by your wife that an extra $10,000 from each investor was needed.

20You suggested that you would set up a self-managed superannuation fund for Ms Boulton, into which she could transfer her existing superannuation monies, and Mr Busuttil would draw down on his home loan account.  The funds were eventually transferred into SBM, and were not used to purchase any American properties, although after the $20,000 was transferred, and before the $30,000 was transferred, your wife told Mr Busuttil and Ms Boulton that two properties had been purchased.

21Several months later, Mr Busuttil confronted you and your wife with the assertion that no properties had been purchased, and you both continued to maintain that you had done so, using the names of third parties.  Mr Busuttil and Ms Boulton received two payments, purporting to be rental from their investments in the USA for $529.60 and $794.40.

22Later, their $50,000 investment was returned in full.  This was the only money returned out of the total sum of $815,000 which you obtained by these deceptions.  At the time of returning the $50,000 you asked Mr Busuttil whether he had made a complaint to ASIC.  He denied to you that he had done so, but said in evidence that in fact he had.

23I turn now to your personal background and circumstances.  By profession you are an accountant, who worked for others for many years before starting your own business.  As a man with a strong work ethic, married and with a family of three children, you worked hard to provide for them.  As early as 1989 you were charged with nine charges of being an unregistered tax agent, for which you were fined, and the following year you were convicted in the County Court for several deceptions for which you were placed on a Community Based Order.

24In October 2002, you were found guilty by a jury of four counts of deception, and you pleaded guilty to a further 18 counts of deception, as well as four other counts of infringements relating to your occupation.  You were sentenced to a term of four and a half years imprisonment, with a non-parole period of three and a half years.

25Those matters have been described as the Green Acres matters, a reference to a property development you were intent on pursuing during the 1990s.  The details were set out by His Honour Judge Hicks, formerly of this court, when he sentenced you. His Honour described you as having been unable to let go of the vision you had, despite being on bail at the time, and despite your previous convictions.

26Counsel representing you in the current charges described you as having become delusional over the vision you had then.  You made dishonest representations to your clients, and advised them to invest in the project, promising a high rate of return.  You obtained over $843,000 by these means.

27After your release from prison in 2006, you had to re-establish yourself.  You undertook further professional education in the IT field, but as I have set out earlier, the next round of offending began in 2009, with Maureen who is your second wife.

28Following the onset of her various serious medical conditions, you became her carer, a role which continued until her incarceration last December.  You had continued to visit her in prison, and to pay for and help organise her ongoing specialist treatment.

29Your own health issues are those perhaps often consistent with your age of 76 years, including a history of stroke, bowel cancer and osteoarthritis.  You had a total hip replacement in 2017.  It is said that overall you are in relatively good health.

30The long delay in this case has not been caused by any fault of yours, and has been mostly attributable to your wife's ill health, and the need for that to be thoroughly explored before she could be sentenced.  The trial and its possible outcome have weighed heavily upon you for a considerable time, and I take that into account.  Of course, there is no remorse held by you, and no indication that punishment will have any effect on your demonstrated disposition to ignore the constraints of the law.

31That said, there is merit in your counsel's submission that your age will preclude you from acting in any capacity as an accountant in future, and that your lifestyle, now or upon your release from prison, is most unlikely to be such as to attract investors of the type who became your victims.

32Accordingly, the need for specific deterrence is somewhat reduced, but must still carry some discernible weight, particularly given the lack of remorse.  The need for general deterrence, and strong denunciation by the Court is important, because of the enormous harm done to the victims of your entrenched dishonesty.

33Parity requires careful balancing in this case.  Many more people fell victim to your wife's criminal acts, and over a longer period than in the case of your offending.  She offended alone in some instances, but she was always involved in your offending, even though the charges against her in relation to Busuttil and Boulton were withdrawn.

34In other words, you did not offend alone.  She pleaded guilty, and so was able to benefit from a discount which is not available to you.  She suffers from very poor health, and there were serious concerns over whether the corrections system could provide adequately for the treatment of all her medical conditions.  Her experience of imprisonment will be more difficult because of this.

35Your health, by contrast, is relatively good, subject to those several age‑related conditions.  However, your moral culpability is greater, if only because you had already offended gravely in the past and had been punished for it.  Once again, and apparently with no insight into your behaviour, you were deceiving people of their money, and in the case of Mr and Mrs Stephens, virtually ruining their lives.

36I note that you provided, through your counsel, a document entitled, 'Douglas Johnston Plea Bargain', which is Exhibit 2.  It purports to be, at the same time, a denial and a partial explanation of your offending, and a critique of the manner in which the trial was conducted.  It refers to your claim that you, yourself, were a victim of your wife's criminality, and that you lost an inheritance of $180,000 that you invested in SBM.

37While making this claim you failed to acknowledge the harm done to others through your own behaviour, and that harm was made evident through the victim's evidence, and their victim impact statements.

38In the document, you also expressed your concern that should you be imprisoned, you will be unable to assist your wife by paying for and organising the importation of the gamma core unit, used to treat her neurological problem, which in the past had caused her to suffer frequent falls.  You will also be unable to assist by organising specialist appointments for the regular reviews she requires.  That is an unfortunate consequence of your offending.

39A sentence of imprisonment is the only appropriate sentence in this case.  You demonstrated a callous disregard for the trust placed in you by people who you led to believe stood to gain from the so-called investments.  When it was apparent people would not be getting their money back, you pursued new targets.  You had experienced a lengthy prison sentence in the fairly recent past before you began offending again, and you have shown no insight into that behaviour.

40Would you stand now, please, Mr Johnston.

I sentence you to terms of imprisonment as follows:

For Charge 5, three years.

For Charge 8, two years and six months.

For each of the other charges, two years.

The sentence for Charge 5 will be the base sentence for purposes of cumulation.  Six months of the sentences for Charges 1, 2, 6, 7, 8 and 9 will be served in cumulation upon the base sentence.  This results in a total effective sentence of six years.

In view of your age, and taking into account the burden you will experience knowing your wife will not have your assistance while she is serving her sentence, and while you are serving yours, I order that you serve a minimum period of 3 years before being eligible for parole. 

You have spent 14 days in pre-sentence detention, and I declare that to be reckoned as already served, and I shall note that on the Court record.

41There are applications for compensation orders to be made, in respect of Phillip and Judith Stephens, the sum of $720,000, and in the case of Marian Westlake, the sum of $45,000.

42Now, Ms Swiney, I don't think I had any indication of consent or non‑opposition to those orders?  I might be wrong about that.  Do you know whether that was the case?

43MS SWINEY:  Your Honour, I don't remember, to be honest.  I might just get those instructions, though.  Thank you.

44HER HONOUR:  Certainly.

45MS SWINEY:  There's an objection to those compensation orders, Your Honour.

46HER HONOUR:  It's objected to?

47MS SWINEY:  Yes, Your Honour.

48HER HONOUR:  I note that, and I make the orders.

49COUNSEL:  As Your Honour pleases.

50HER HONOUR:  Are there any other matters that I've neglected or omitted?

51MS BARNES:  No, Your Honour.

52HER HONOUR:  Thank you.  Officer, thank you.  You may take Mr Johnston now.  Is everything in order, Ms Barnes?

53MS BARNES:  Yes, Your Honour.

54HER HONOUR:  All right, thank you.  Adjourn the court, please.

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