R v Mai

[1995] QCA 451

[1995] QCA 451

COURT OF APPEAL

McPHERSON JA
THOMAS J
MOYNIHAN J

CA No 257 of 1995

THE QUEEN

v

THO KHANH MAI  Respondent

and

COMMONWEALTH DIRECTOR OF
PUBLIC PROSECUTIONS  Appellant

BRISBANE

DATE 25/08/95

JUDGMENT

McPHERSON JA:  This is an appeal by the Commonwealth Director of Public Prosecutions in respect of the inadequacy of sentence imposed in the District Court upon the respondent, Tho Khanh Mai, for three counts of the offence of defrauding the Commonwealth contrary to section 29D of the Crimes Act.

The defrauding consisted of understating income in tax returns on three occasions, count 1 being related to a period between November 1989 and March 1990, count 2 to a period in February 1991, and count 3 to a period between October and November 1991.

The total amount by which the tax was understated for those three years was of the order of $153,000.  The business, to which I will refer in a moment, was carried on as a partnership between the respondent and his wife, and that factor as well, of course, as the fact that the rate of tax is not yet one hundred cents in the dollar, meant that the actual amount of which the Commonwealth was defrauded by way of unpaid tax was considerably less.  If one takes the partnership business as one for this purpose and aggregates the total tax unpaid for the three years, it appears to have been of the order of some $64,000.  But in addition to that, there was, of course, interest payable, and penalties which the Commissioner imposed in respect of the non-payment.

The result was that the respondent became liable or agreed to pay a total of some $176,000 in satisfaction of his obligation to the Commonwealth.  To that end he entered into a deed with the Commonwealth which provides for payment of an initial lump sum and then a series of instalments thereafter by way of satisfaction of his liability.

The sentencing Judge was, of course, made aware of this at the time the matter was before him.  The deed had not yet been finally executed but there is evidence in the form of an affidavit of the respondent's solicitor to the effect that has since been done.  Nothing turns on that point.

His Honour's reasons for the sentence he imposed and the terms of the sentence itself are briefly stated and it is sufficient if I quote them in full.  He said:

"I have been told that an arrangement has been entered into regarding the payment of moneys which the Commonwealth alleges has been avoided as a result of your activities.  I sentence you to two and a half years imprisonment to be released forthwith upon entering into a recognisance without surety in the sum of $4,000 to be of good behaviour for a period of four years."

The ground of the appeal to us is based essentially on the fact that His Honour did not, so far as can be gathered from the reasons he gave, give any or sufficient weight to sentencing principles that have been laid down and applied in other cases of this general description.  It may be, of course, that His Honour took them into account; but the result of his sentence in this case strongly suggests that he did not.

For that reason, and for other reasons that will emerge from my statement of the facts and principles, it seems to me that this is a case which falls outside the general rule in R v. Melano requiring us to act with great caution or reluctance in reviewing sentences with a view to increasing them.

The circumstances in which the offence was committed can be briefly but sufficiently stated as follows.  The applicant came to Australia from Vietnam in about 1981.  It is right to say that he has, since he left his original country, lived under conditions of considerable hardship, including some 18 months in a prison camp of a kind in Hong Kong.  He and his wife operated in partnership the sewing business, to which I have referred, from their home at Durack.  The business commenced in the 1988 financial year and it appears to have been extremely successful.

Not very long afterwards, the respondent came in touch with an unregistered tax agent named Napthine.  Napthine, it may be said, was himself charged and convicted with defrauding the Commonwealth and also of being knowingly concerned in defrauding the Commonwealth.  There is, however, nothing to suggest that it was he who specifically promoted the offence with which we are concerned here, or that it was not the respondent himself who actively pursued the idea of defrauding the Commonwealth by failing to disclose the true amount of the partnership income.

Indeed, Napthine, when he gave evidence on behalf of the prosecution at the hearing in the District Court, said that he warned the respondent very strongly each year that the income figures they were reducing could be checked by the Australian Taxation Office through the factories from which the respondent was obtaining his income; and further that if this was done the respondent would be in serious trouble.

In the result, in about 1992 the Australian Taxation Office carried out an inspection and ultimately an audit of the books of the business.  The resulting audit revealed differences between the income actually received by the partnership, the income shown in the partnership income books and the income declared in the partnership returns.  The difference between the partnership tax returns and the audit figures are as I have said of the order of some $153,000.

Circumstances that were relied on by the appellant, both in the Court below and before us, are that they the Commonwealth was defrauded of a significant amount of partnership income which was not declared in each of three successive years; and that the respondent and his wife were able by this means substantially to reduce their personal taxable incomes and also to avoid payment of some part of the Medicare levy that was due.  The conduct was deliberate and calculated on the part of a man who was obviously a successful and intelligent business man, and it was a case in which, so far as one can see, the only motive was greed and not need or financial pressure upon the respondent at the time the offences were initiated.  It is also right to say that, so far as one can see, it was only because of the intervention of the Australian Taxation Office investigation that the process of understatement and defrauding of the Commonwealth came to light and was stopped.

On the other side of the line, of course, there are mitigating factors to be considered.  The respondent is a man of 38.  He has, as I have already mentioned, undergone a good deal of hardship before arriving in Australia.  He has three children, one of them still of primary school age.

The deed into which he has entered will throw a good deal of financial stress upon him, his family and, needless to say, his business.  However, in response to that, one can only point out that he entered into the fraudulent scheme with a full knowledge of the risks involved and with a deliberate intention of undertaking those risks.

When one turns to the principles upon which Courts have acted in matters of this kind, the most relevant and cogent authority for the purposes of this appeal and the hearing in this Court is certainly the decision of the Court of Appeal in the case of Mark Wright (1994) 74 A.Crim.R. 152.  The Court, in that case, consisted of Davies and Pincus JJA and White J.  Davies JA and White J delivered joint reasons in which they considered, at length and in detail, many of the cases of this general kind which have come before the Courts in recent years.

Having done so at page 160 of the Australian Criminal Report to which I have referred, their Honours said:

"We think that where a calculated and systematic tax fraud involves a substantial sum of money the offender should usually be required to serve a term of imprisonment, particularly where, as in this case, it is not an isolated act but is persisted in for some time."

Their Honours went on to describe the transactions in that case as, in effect, "sophisticated" and added:

"The critical question in the present cases is whether, having regard to the matters to which we have referred, there were considerations which, notwithstanding the seriousness of the fraud and the substantial amount involved, justified a wholly suspended sentence.  In our view there were not."

It was sought before us to distinguish the case of Wright essentially on the ground that the scheme in that case was more sophisticated than this and also that the amount involved was larger.  In the particular instance before the Court on that occasion the amount by which the income was said to have been misstated was some $211,000 as compared to $153,000 in this instance.  The distinction, such as it is between those two figures, is however largely reduced to vanishing point when one discovers that in Wright's case there was, on the part of the offender there, a right which may fairly be described as one of set-off, which greatly reduced the loss which the Commonwealth in the event suffered as a result of the accused's activities in that instance.

Returning to the decision in Wright, what their Honours on the appeal in that case did was to set aside the term of imprisonment of 12 months which the sentencing Judge had ordered to be wholly suspended, and to substitute for it a term of 18 months.  Because of other facts to which they referred, they ordered that the offender be released upon his giving security by recognisance that he would be of good behaviour for two years after he had served three months of the sentence term.

The decision in Wright's case did, as I have said, involve a careful examination of decisions of courts in various parts of Australia, dealing not only with taxation frauds of the kind with which we are confronted here but also with social security frauds of various kinds.  The latter are, in general, offences which involve smaller amounts of money than are at issue in this case, but it is right to say that the offenders in most of those cases are individuals who do not have access to the kinds of income and funds which people who commit tax frauds often have.

It would, I think, be a serious step if we were to create an invidious distinction between the social security frauds in which the offenders are often sentenced to short periods of imprisonment, and offences of this kind where the amounts involved and the intelligence, responsibility and general status in society of the offenders is usually such that one would not expect them to have a need to resort to dishonesty of this nature.

For my part, I would tend to regard the decision in Wright as an authority that lays down a principle from which we ought ordinarily not depart unless there are special circumstances, usually of a personal kind, which justify such a departure.  So much was indeed said in the case of Wright itself.

When this factor is borne in mind, it seems to me that it is really impossible to sustain the decision of the sentencing judge in the court below.  The decision in Wright required, in my respectful opinion, that he give an explanation for his departure from the general principle, as I have stated it to be, and to identify the special circumstances which took the case before him out of that general rule.

In the absence of some such explanation, and not having been persuaded in this Court that there were circumstances sufficiently special to except the respondent here from the general rule, I have come, not without reluctance, to the conclusion that the decision below cannot stand; and that a sentence of detention, even if only for a short period, is essential to maintain the deterrent effect that may be expected to follow in cases involving fraud of this kind.

In the result, I would allow the appeal and set aside the sentence of the Court below, and impose instead a sentence to the following effect; that is to say, I would sentence the respondent to two and a half years' imprisonment, ordering that he be released upon his giving security by way of recognisance that he will be of good behaviour after serving three months of that term.  The effect of what I have said is, of course, that the sentence will in reality be varied by the imposition of a requirement that three months' imprisonment be served before he be released under the recognisance which the judge had in mind.

The provisions of the Commonwealth Crimes Act, in one form or another, require that we explain this sentence that we are now imposing to the respondent so as to ensure that he properly understands it.  I am for the moment assuming, not I think without reason, that my brothers will agree with the conclusion I have reached; but perhaps before giving directions as to how the new sentence is to be explained to the respondent, I should confirm that my impression is right.

THOMAS J:  I agree with the reasons given and the outcome proposed by the presiding Judge.

MOYNIHAN J:  I also agree.

McPHERSON JA:  The Court orders that a warrant issue for the arrest of the respondent but directs that the warrant lie in the Registry and not until further order be executed until the expiration of 14 days from this date.

I think the best way of disposing of this matter might be if I say that the Court will make orders in the form of the draft that has been handed to us by Mr Irwin, completed in accordance with the matters that I have stated and the order which I have expressed.  We will alter the second paragraph to say that upon the solicitor acting for the respondent consenting the Court requires that the solicitor - within how many days, Mr Irwin - cause to be explained.

MR IRWIN:  Your Honour, if he's to be given two weeks leeway to come back to Queensland, I think 14 days would be the appropriate time.

McPHERSON JA:  Very well.  Will you fill that form in in accordance with what I have said.  Let Mr Lynch see it and I will initial it in a form which can be properly entered.

MR IRWIN:  Your Honour, could I just clarify one more thing.  As I understand Your Honour's order, the recognisance and the period of the recognisance after his release is intended to be in the same terms as those imposed by the sentencing Judge.

McPHERSON JA:  That is the intention, yes.