R v Kong
[2007] VSCA 106
•28 May 2007
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 388 of 2006
| THE QUEEN |
| v |
| DANNY HON YEONG KONG |
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JUDGES: | MAXWELL P, ASHLEY and NEAVE JJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 9 May 2007 | |
DATE OF ORDER: | 18 May 2007 | |
| DATE OF PUBLICATION OF REASONS FOR JUDGMENT | 28 May 2007 | |
MEDIUM NEUTRAL CITATION: | [2007] VSCA 106 | |
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Criminal law – Sentence – Whether specific error – Whether sentence manifestly excessive - Appellant employed by the Australian Tax Office – Obtaining financial advantage by deception – False BAS claims - Unauthorised access to taxation records.
Appeal allowed - Appellant re-sentenced and released on a recognizance pursuant to s 20(1)(b) of the Crimes Act 1914 (Cth).
Criminal Code Act 1995 (Cth), s 134.2. Taxation Administration Act 1953 (Cth), s 8XA.
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| APPEARANCES: | Counsel | Solicitors |
| For the Crown | Mr M Camilleri | Office of the Commonwealth DPP |
| For the Appellant | Mr S A Moglia | Lewenberg & Lewenberg |
MAXWELL P:
On 18 May 2007 I joined in orders allowing the appeal and re-sentencing the appellant. I did so for the reasons given by Ashley JA.
ASHLEY JA:
On 18 May 2007 I joined in orders, by which, in short, the appeal was allowed, the appellant was re-sentenced to an aggregate period of 20 months’ imprisonment, and it was ordered that he be released on a recognizance after serving 177 days of that sentence – this meaning that he would be released on 18 May. These are my reasons for joining in those orders.
On 30 August 2006 Danny Hon Yeong Kong pleaded guilty to one count (count 1) of obtaining a financial advantage by deception contrary to s 134.2 of the Criminal Code Act 1995 (Cth) and to three counts (counts 2, 3 and 4) of, I will put it shortly, taking action for the purpose of obtaining confidential information about another person’s tax affairs contrary to s 8XA of the Taxation Administration Act 1953 (Cth). On 22 November 2006 he was sentenced to 18 months’ imprisonment on count 1,[1] and to two months’ imprisonment on each of counts 2, 3 and 4.[2] In effect, the judge cumulated the sentence on count 4 on the sentence imposed on count 1, this yielding an aggregate sentence of 20 months’ imprisonment. Her Honour ordered, pursuant to s 20(1)(b) of the Crimes Act 1914 (Cth), that, after serving ten months’ imprisonment the appellant be released on recognizance in the sum of $1,000, to be of good behaviour for 12 months. She also made an order for reparation.
[1]The maximum penalty is ten years imprisonment and/or a fine of $66,000.
[2]The maximum penalty is a fine of $11,000 and/or imprisonment for two years.
Pursuant to leave granted, the appellant appealed against sentence. The grounds of appeal were as follows:
“1. The total effective sentence is manifestly excessive.
2. The pre-release period is manifestly excessive.
3.The learned sentencing judge erred in sentencing the appellant on the basis of his conduct [the] subject of count 1 being aggravated by virtue of his employment.”
Circumstances of the offending
The circumstances of the offending can be shortly explained. The appellant is a man now aged 47. He holds qualifications in accountancy and economics. He was employed by the Australian Tax Office (“ATO”) between 5 December 1988 and 8 September 2005. He resigned on the latter date, having been suspended earlier that year. Having commenced his employment in a lowly position, by late 2002 he was classified as an Administrative Service Officer Class 5, and was employed as a General Field Auditor in the Small Business Line Section.
The GST system came into operation on 1 July 2000. Shortly thereafter the appellant sought an ABN and GST registration for a company which he had set up several months earlier to engage in an overseas trading enterprise.
It was not suggested, I interpolate, that the company had been incorporated with a fraud upon the Commonwealth in mind.
Notwithstanding the lawful purpose of the company at the outset, between 4 August 2002 and 7 January 2005 the appellant submitted 11 BAS forms to ATO in respect of the company. On each occasion a refund was claimed, and ATO made the payment. In all, the amounts claimed and paid amounted to $38,155.
But the company was conducting no business in that period, and the claims were fraudulent. In each instance, the refund having been credited directly to a nominated bank account, the appellant drew a cheque on the company account payable to himself, the cheque being nearly equivalent to the amount of the refund.
The false claims for GST refunds were the subject matter of count 1.
At all times between July 2000 and February 2005 ATO had a strict policy, known to the appellant, that an employee must not search the computerized tax records of others. But in that period he accessed ATO computerized records of (a) the company which he had set up in May 2000; (b) Australian Chinese Events Committee (ACEC), of which he was a director; (c) Melbourne Community Television Consortium Ltd, of which he was a director; (d) two private companies of which the chairman of ACEC was the effective principal; (e) the trust of which one of the two private companies was the trustee. On none of the occasions on which those records were accessed was the appellant authorized to access them.
The activity just described was the subject of counts 2 and 3.
The appellant and his wife were divorced on 17 October 2003. In April 2004, the appellant’s former wife left the marital home and commenced family law proceedings against him. The proceedings related to child and property issues.
In the period August to December 2004 the appellant accessed the tax records of his former wife, and the tax records of her solicitor (and related entities) on a number of occasions.
That conduct was the subject of count 4.
The proceedings below
Before the learned sentencing judge, counsel for the appellant accepted that a sentence of imprisonment must be imposed. But he submitted that his client should be released immediately upon entering into a recognizance under s 20(1)(b) of the Crimes Act.
Counsel acknowledged, at the outset, aggravating factors – a degree of planning in the execution of the offence comprehended by count 1, the period of that offending, the breach of honesty thereby involved, and the fact that the appellant was an employee of ATO.
Counsel then turned to matters in mitigation. The appellant, he submitted, was a man -
· Aged 47, without any criminal history.
· Who, since arriving in Australia in 1987, had served the community, particularly the Chinese Community, well, in a variety of time-consuming and positions. That service had been honorary.
· Who, until the offending comprehended by count 1, had been a solid and honest worker – having been employed by ATO from not long after he arrived in Australia.
· For whom a conviction for dishonesty would spell the end of his professional life.
Counsel further submitted, inter alia, that –
· The root problem which had given rise to the offending was financial hardship associated with an unhappy first marriage. His former wife had demanded more than he had in order to “keep up with the joneses”.
· Regard must be had to his client’s plea of guilty – although it was the fact that his client had not co-operated with investigators at the outset.
· The amount of money acquired by his client’s deception was not, in absolute terms, very large.
· Access had to the records of others – excepting in the case of the conduct embraced by count 4 – was not dishonourable. It was, often, access to material which he could have obtained in any event.
· The number of instances of recorded access represented the number of “windows” that the appellant inspected – not the number of occasions that he opened up a taxpayer’s file. In that sense, the number of instances of access, as recorded, tended to exaggerate the offending.
· On his instructions, the appellant was remorseful.
· It was not the case that the appellant had embarked on fraudulent conduct from the beginning; that is, it was not the case that the company had been incorporated to facilitate the fraud. Originally, its objective had been legitimate.
The last-mentioned matter, which I have mentioned already, was common ground.
Sentencing remarks
The learned sentencing judge accurately recorded the circumstances of the various offences, and the appellant’s personal history.
Next, her Honour expressed reservations about accepting the submission that the $38,155 the subject of count 1 had been acquired to appease demands for a better lifestyle made by the appellant’s then wife. But even had that been the case, the judge understandably said, it would have been vastly different from taking money in order to pay for food or other necessary living expenses.
As to the appellant’s accessing of the records of his company and ACEC, the judge expressed conclusions to which I must later refer in some detail. In the broad, she made findings of circumstances which aggravated the offence alleged by count 1.
The conduct which was the subject of count 4, the judge concluded, struck “at the very integrity of the system.” Her Honour referred to the appellant having made an “apparent endeavour to gain an advantage over [his] wife”, and to an “apparently vengeful act” in accessing the solicitor’s records.
The appellant, her Honour observed, had developed “a fairly elaborate scheme”, which had “required some thought” on his part. The ATO system had not detected the fraud. Detection had only come about as a result of the appellant failing to disclose financial information in the family law proceeding. So the appellant did “not have the advantage of having voluntarily ceased [his] deceptive conduct.”
The learned judge identified as sentencing considerations –
· A high need for general deterrence.
· Significant denunciation of the appellant’s conduct.
· Punishment. In that connection the judge recognized that the appellant had lost his job and would find it “almost impossible” to obtain employment in his profession. She also recognized that he had lost the confidence and respect of the Chinese community.
· The absence of any need for specific deterrence.
· Mitigating circumstances –
o The appellant’s work history and lack of prior convictions.
o The plea of guilty.
o The appellant’s good work over the years.
The most important sentencing considerations, the judge said, were general deterrence and denunciation. In that context she referred – before this Court, it was claimed inappropriately – to DPP v Page and Ors.[3]
[3][2006] VSCA 224.
Her Honour identified the only point of distinction between the submissions for the appellant and the Crown in respect of count 1 as being whether the circumstances required the imposition of a period of immediate imprisonment. Her Honour concluded that there was no option, in the circumstances, but to so require.
Concerning counts 2 and 3, her Honour decided, in effect, to treat the offending as connected with the offence comprehended by count 1; and so as justifying concurrency of sentence.
But the contrary was the case in respect of count 4. It was a separate offence, and sentence imposed should be cumulated.
Ground 3
Only ground 3 raised a complaint of specific error. In my opinion, for the reasons which follow, it was made out. In consequence, I considered, the appeal should be allowed, and the appellant re-sentenced.
The gist of the submission made for the appellant was that the judge below relied heavily upon the appellant’s employment by ATO as having been an aggravating factor in respect of the deception count. The concept of “breach of trust” has been invoked. The catchwords to the judge’s sentencing remarks highlighted the point: “Theft from employer”.
But her Honour’s reliance, counsel submitted, was misplaced. There was no nexus between the thing entrusted to the offender by the victim, and the subsequent betrayal of that trust. The appellant was not entrusted with any material control of the tax revenue, or of funds belonging to ATO. The money obtained by the appellant was revenue of the Commonwealth, not the employer. At its highest, the case against the appellant was that he would have had access to ATO’s procedures and routines. But information about GST and BAS statements was generally available, and there was no evidence that the appellant possessed any special knowledge that enabled him to offend as he did. Further, and contrary to the judge’s approach, the case was not akin to the secret commission case of Page.
Counsel for the Crown submitted, in response, that the judge had not erred in sentencing the appellant on the basis that the deception charged in count 1 had been aggravated by nature of his employment. His offending “was in effect a stealing by a servant from his master”. It was “akin to a security guard stealing the property he had a duty to protect”. This conduct “necessarily constituted a breach of trust”. Appellant’s then counsel had made a relevant concession more than once at the plea hearing. The judge had been entitled to find that the appellant had accessed records of the company and ACEC to facilitate his monitoring of the false claims and in doing so had “used his position of trust”. Further, the judge had not treated the case as being of the kind considered in Page.
With deference to the breadth and ingenuity of the arguments advanced for the appellant, I considered that a simpler approach, particularly canvassed in the course of the submissions of counsel for the respondent, provided the answer to the issue raised by ground 3. In my view it was apparent that the learned judge treated the offence alleged by count 1 as having been aggravated by two circumstances which had to do with the appellant’s employment by ATO, it being the payee of the GST refunds.[4] I considered, however, that the material which was before her Honour did not enable an inference to be drawn, adverse to the appellant, as to the presence of one at least of those circumstances.
[4]Albeit that it disbursed the Commonwealth’s money.
The first circumstance to which her Honour referred was that the appellant, “a trusted user of the system”, used his position as an ATO employee to “watch, monitor and generally follow the progress of the [false] claims”; to “endeavour to be forewarned” if such a claim became “a subject of an investigation or even a query.”
The second circumstance was that the appellant had used his position “to understand the systems in place to detect frauds; to understand the routines and structures of the ATO itself and to understand in particular the business activity statement system”.
That the two circumstances were distinct seemed to me to be plain enough. For the latter was apparently directed to the making of fraudulent claims informed by special knowledge; whereas the former was concerned with the use of unauthorized access to follow the progress of those claims.
That the judge should have concluded that both circumstances were present is consistent with submissions which were advanced on behalf of the Crown on the plea. Counsel referred to the appellant’s ability, by unauthorized access to records, to monitor the BAS claims. But he also submitted[5] that the appellant “would have had access to ATO’s procedures and routines, for instance, whether the level of the fraudulent claim” was such as would not trigger alarm bells; this being information an outsider would not have.
[5]Though he laid no basis in the material before her Honour for doing so.
It might be argued, her Honour’s reference to what I have described as the second circumstance being prefaced by the words “as I have said”, that she was not identifying a second circumstance in what followed, but was simply re–expressing the first circumstance in different words. The language which her Honour used, however, was considerably broader, and even if it was intended to include the first circumstance, I cannot accept that it was so limited.
In the event, the question which arose was whether it was open to the learned judge to make the findings which she did to the required standard of proof. In that connection, I interpolate, counsel for the respondent rightly conceded that there must be proof to the criminal standard.
In my opinion such a finding was not available at least in respect of what I have called the second circumstance. The conclusion depended upon inference, which had to be the only inference reasonably available. Moreover, the inference depended upon there being a necessary substratum of fact. As I perceived it, the substratum was lacking, and any inference drawn was in truth speculation.
As to the substratum, there was a deficiency of material before the judge concerning ATO systems to detect BAS statement fraud. Whether there were any such systems at relevant times, and, if so, whether the appellant was in a position to know anything about them, was not revealed. So also with respect to relevant “routines and structures”. Without knowing what if any systems, routines and structures existed, there was no basis for inferring relevant knowledge on the part of the appellant, still less that he used his position to acquire and use such knowledge in effecting his fraud.
But, it might be said, the existence of what I have called the factual substratum could itself have been inferred - indeed, it should have been inferred as a matter of near certainty. Accepting for purposes of argument that this was so, I did not accept that an inference could properly have been drawn in turn that the appellant knew of those matters, and made fraudulent claims informed by that special knowledge.
I should mention the concessions made by appellant’s counsel on the plea. First, apparently referring to count 1, counsel identified the fact that the appellant was an employee of the ATO as an aggravating factor. He did not specify how it came to be so. Second, he reiterated the concession just noted, observing that “[t]his is the thing that puts him in the real desperate situation”. Third, and speaking of counts 2 and 3, he submitted several times that the appellant was an ATO officer, knew what the rules and protocols were, and should have known better than to engage in the unlawful conduct. Fourth – this evidently related to count 1 – he conceded that the appellant “was an ATO employee and certainly him getting money from the government by fraudulent GST claims involves a breach of trust.”
In all, and assuming that counsel could have admitted the existence of what I have called the second circumstance, he did not do so. His concessions concerning count 1 were non-specific. Their rationale was not probed.[6]
[6]It may be added, not that it is immediately in point, that the concessions made by counsel with respect to the conduct encompassed by counts 2 and 3 were well-justified.
Before this Court, counsel for the respondent initially submitted that it was an inevitable inference that the appellant had knowledge of systems and issues which might give rise to an ATO challenge to a claim. But pressed whether the judge had made any such finding, counsel’s response was simply that there were revealed circumstances – he referred to the fact that the appellant was an ATO auditor, that the GST claims became increasingly larger, and that the appellant had access to so-called CVOC screens – which enabled such an inference to be drawn. That did not answer the question which the Court posed.
Counsel then frankly stated, in answer to a question put to him by the President, that it could not be submitted that it was “likely” or “probable” that the appellant had used his assumed special knowledge to advance his fraud. But later he seemed to resile from the concession, referring to what he had submitted on the plea about the appellant’s access to the CVOC screen.
I have already referred to certain of the submissions made for the respondent on the plea. I should add the following. On the plea, counsel’s reference to the CVOC screen only mentioned the appellant accessing the records of his company, this being said to “support the Crown view that [the appellant] was keeping tabs on how the ATO was reacting to the submission of those BAS forms.”
In the event, in my opinion, the concession which counsel made – but then seemingly resiled from - was correctly made.
It was not necessary, in the circumstances, to decide whether the judge’s conclusion with respect to what I have called the first circumstance was a conclusion which could safely be inferred. I say no more about it.
Grounds 1 and 2
In light of my conclusion that ground 3 was made out, it was unnecessary to pass upon grounds 1 and 2. I say only that, as presently advised, I do not consider that either ground was made good. That is not gainsaid by my conclusion – as to which, see below - that on re-sentencing a lesser period of immediate imprisonment should be imposed.
Re-sentencing the appellant
The appellant fell to be re-sentenced on the footing that he undertook fraudulent activity for a quite lengthy period, although on a relatively small scale; and that he accessed the computerized tax records of his company, and of other entities and individuals, on a considerable number of occasions over a period of years.
The appellant also fell to be re-sentenced on the footing that the accessing of tax records was known by him to be unauthorized; and that, in respect of such conduct, the appellant’s status as an employee of ATO was relevant - the phrase “breach of trust” to describe that conduct being not inapposite.
Also to be borne in mind, in re-sentencing the appellant, was the nature of the offending comprehended by count 4. Given that there was no evidence that the appellant made direct use of information disclosed to advance his position in the family law proceeding, it was wholly unacceptable that the appellant use his privileged position to look into the tax affairs of his former wife, her solicitor, and entities associated with the solicitor. There is a public interest in denouncing and in deterring such conduct generally.
Again, I agree with the learned sentencing judge that important considerations in the particular sentencing process were general deterrence, denunciation, and punishment.
Notwithstanding the matters, personal to the appellant, to which I refer below, I considered that no different sentence should be imposed on each of counts 1 to 4 than was imposed by the judge below; and I considered that, in effect, the sentence on count 4 should be cumulated on the sentence on count 1. So I concluded that a total effective, or aggregate, sentence of 20 months’ imprisonment should be imposed.
On the other hand, I considered that a number of matters of substance did run in mitigation of penalty; and that they called for a substantially shorter period of immediate imprisonment than was imposed in the first instance. The matters which I considered most important were these: The appellant’s age; his previously law-abiding life; his uninterrupted employment over many years – albeit that he latterly
offended; his good works, pro bono, in the Chinese community; the likelihood that he will now be precluded from work in his profession; and his plea of guilty.
On the date on which the Court made its orders, the appellant had served 177 days imprisonment. I was of opinion, given the circumstances of his offending, his plea of guilty, and his personal circumstances, that the appellant should not be required to serve any longer period of actual imprisonment, but that he should be immediately released on a recognizance, pursuant to s 20(1)(b) of the Crimes Act 1914 (Cth), in the sum of $1,000, and upon a condition that he be of good behaviour for a period of 12 months.
NEAVE JA:
Unfortunately I find it necessary to differ from the conclusion of the learned President and Ashley JA that the learned sentencing judge erred in finding that the appellant used his position as an ATO employee “to understand the systems in place to detect frauds; to understand the routines and structures of the ATO itself and to understand in particular the business activity statement system.”
In making this finding her Honour was, in my view, doing no more than restating her earlier conclusion that the appellant used his position as an ATO employee to “watch, monitor and generally follow the progress of the [false] claims”; to “endeavour to be forewarned if either of those claims became a subject of an investigation or even a query.” I am fortified in this conclusion by the fact that her Honour referred explicitly to that conclusion, when she said later in her reasons that he used his position to “understand the systems in place to detect frauds.”
Even if I am wrong on this matter and her Honour regarded the appellant’s use of his knowledge as an ATO employee “to understand the systems in place to detect frauds; to understand the routines and structures of the ATO itself and to understand in particular the business activity statement system” as a distinct aggravating factor, in my view she did not err in doing so. The evidence was that the appellant was an ATO auditor, that the fraudulent BAS forms lodged by the appellant on behalf of his company were virtually identical to six of the BAS forms lodged on behalf of ACEC,[7] which were accessed by the appellant, and that the appellant accessed the Compliance View of Client system in relation to the R & D company. According to the deposition of Ms Weston that system includes inter alia “key alerts/indicators.”
[7]Except that they did not indicate there were any export sales during the relevant periods.
The system, including the “compliance client header screen” was accessed by the appellant on separate days in January, February, April, July and October 2003 and January, March, May, June, July and September 2004 and in January 2005. In my view her Honour was entitled to treat this evidence as raising an irresistible inference that the appellant’s fraudulent claims were informed by his special knowledge of the systems used by the ATO.
I would therefore dismiss the appeal.
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