R v McPhee
[2001] VSCA 40
•4 April 2001
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 259 of 2000
| THE QUEEN |
| v. |
| JOHN McPHEE |
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JUDGES: | PHILLIPS and BATT, JJ.A. and COLDREY, A.J.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 22 March 2001 | |
DATE OF JUDGMENT: | 4 April 2001 | |
MEDIUM NEUTRAL CITATION: | [2001] VSCA 40 | |
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CRIMINAL LAW – Sentencing – Theft and falsification of accounts – False invoices representing payment for goods – To conceal payments to controller out of company funds – Payments allegedly due by another company participating in the concealment – No loss to paying company – Whether properly brought to account in sentencing – Offender re-sentenced.
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| APPEARANCES: | Counsel | Solicitors |
| For the Crown | Mr. G. Silbert | Solicitor for Public Prosecutions |
| For the Appellant | Mr. M.A. Tovey, Q.C. with Mr. M.J. O’Brien | Clarkson & Socio |
PHILLIPS, J.A.:
This is an appeal brought by leave granted by a single Judge of Appeal on 10 November 2000. The appeal is against sentence passed in the County Court on 11 September 2000 when the appellant was sentenced to a term of imprisonment of four years and six months on two counts, one of theft and the other of false accounting. Half of that term of imprisonment was to be served before the appellant became eligible for parole. There were no days of pre-sentence detention. The appellant appeals on a number of grounds, including manifest excess, but he alleges too that in sentencing the judge fell into a number of significant errors of fact.
In late 1996 the Australian Securities Commission was alerted to possible offences by the appellant in relation to his activities as a director of McPhee Meat Packing Pty. Ltd. (“MMP”). The investigation resulted in charges being laid against the appellant in respect of moneys stolen from MMP and used by the appellant to purchase race horses or to service mares. These charges were laid in December 1997 and on 2 April 1998 the appellant pleaded guilty in the Magistrates’ Court at Wangaratta to 16 charges of failing to act honestly (contrary to s.232(2) of the Corporations Law) and to 16 charges of falsification of books (contrary to s.1307(1) of the Corporations Law). The appellant was convicted and sentenced to 12 months’ imprisonment, but released upon giving security by recognisance in the sum of $1,000 to be of good behaviour for a period of 12 months. He was ordered to pay the Commonwealth a pecuniary penalty in the sum of $30,000 by 30 July 1998 and was ordered to pay compensation of $102,887.50.
The Australian Securities Commission then commenced further investigation of the affairs of MMP. This led to further charges being laid against the appellant on 2 February 1999. On 15 April 1999, after a hearing which proceeded by way of hand-up brief, the appellant was committed to stand trial. The appellant was granted bail. The matter was mentioned then in the County Court more than once and there was a change of venue from Wangaratta to Melbourne. On 29 September 1999 three presentments were filed with a view to there being three separate trials. On 7 October 1999 the appellant was arraigned before the Chief Judge and he pleaded not guilty to all counts on the three presentments. Again the matter was mentioned more than once and eventually, after some negotiation between the parties, one presentment was filed in place of the earlier three and on 31 July 2000 the appellant pleaded guilty to the counts on that presentment.
The first of the earlier three presentments contained four counts of theft, being the theft of four cheques of MMP which had been applied to the purchase by Poowong Pastures Pty. Ltd. of land known as Houlihan’s Lane. The second of those three presentments contained 92 counts of theft relating to cash withdrawn from the bank account of MMP and allegedly used by the appellant for his own purposes. The third contained two counts of theft, being the theft of two cheques of MMP which were applied to pay for refrigeration repair work done by Tri-Tech Refrigeration. (MMP was a joint venture company and did not have any plant of his own.) The presentment which was filed in lieu on 31 July 2000 contained only two counts, but, as opened on the plea, they appear to have arisen out of the same events as the offences alleged in the earlier three presentments. Count 1 charged the appellant with the theft between 22 March 1995 and 8 May 1995 of certain moneys, amounting to $250,328, belonging to MMP. This was the amount which, it was alleged, had been taken from MMP to fund the purchase of land by Poowong Pastures. Count 2 charged the appellant with falsifying the records of MMP between 30 November 1994 and 29 January 1996, with a view to showing – falsely - that cheques drawn on the bank account of MMP, totalling $643,143, were payments to various livestock suppliers – and in quantum count 2 comprehended the counts of theft which had been charged on the second and third of the earlier presentments.
On 14 and 15 August 2000 a plea in mitigation was made on behalf of the appellant by senior counsel. Bail was extended and on 11 September 2000 sentence was passed. On count 1 the appellant was sentenced to be imprisoned for three years and on count 2 also he was sentenced to be imprisoned for three years, 18 months of that sentence to be served cumulatively upon the sentence on count 1. Thus the total effective sentence was four years and six months and, as I have said, the non-parole period was fixed at two years and three months. It is from those sentences that the appellant now appeals.
Background
The background to the charges in question is somewhat complicated. For many years the appellant, who is a self-made man, operated in business in the meat industry in and around Wodonga. He was given to conducting his business activities through companies. In 1982, through a private company, the appellant and his wife purchased an abattoir complex in Wodonga which soon became operated by Associated Meat Processors Unit Trust (“AMPUT”), the trustee of which was McPhee Export Meats Pty. Ltd. (“MEM”). AMPUT operated the Wodonga abattoir; MEM was also a trading company, its business being the purchase of livestock for slaughter and the sale of frozen meat. In 1988, the appellant acquired the Blayney abattoir in New South Wales. In July 1988, Blayney Abattoirs Pty. Ltd. was established and appointed corporate trustee for the Blayney Unit Trust, which now became the operator of the Blayney abattoir. A year later, on 23 June 1989, Wodonga Meats Pty. Ltd. was established to take over the operation of the Wodonga abattoir, AMPUT to operate the trading arm.
In October 1992, a joint venture was entered into between the McPhee group of companies and ANZCO International (Australia) Pty. Ltd. The McPhee companies which were involved in this joint venture were MEM, as trustee for AMPUT, Wodonga Meats and Blayney Abattoirs. ANZCO was not a McPhee company and traded at arm’s length. McPhee Meat Packing Pty. Ltd. (which I am calling “MMP”) was established to carry on the business of the joint venture, the only business of which was to purchase livestock from independent suppliers and then to contract out to Blayney Meats Pty. Ltd. and Wodonga Meats Pty. Ltd. the processing of that livestock at their abattoirs coupled with (as I understand it) the wholesaling of meat in Australia and overseas and the sale of skins and hides. The directors of MMP were three: two directors of ANZCO and the appellant. The appellant was appointed managing director and the business of MMP operated out of the Wodonga abattoir. The other two directors of MMP remained in Sydney and did not take any role in the day to day administration of MMP. MMP did not itself have any staff, the staff of the McPhee companies conducting the business and administration for MMP. Office holders of MMP were to be paid by their parent companies.
In essence, ANZCO financed the operations of the joint venture; the working capital requirements of MMP were to be met through borrowings from ANZCO. Under the Joint Venture Agreement, MMP’s operations were to achieve a profit of between $60,000 and $66,000 per half year: clause 18. The fees charged by the Wodonga and Blayney abattoirs to MMP for slaughter and processing of livestock were to be adjusted on a monthly basis in order to arrive at that profit – that is, a profit of between $10,000 and $11,000 per month. If the profit fell below that level, the McPhee group, and essentially this meant Wodonga Meats and Blayney Abattoirs, would pay a "rebate" to MMP to bring the profit up to scratch. If the profit rose above that level, Wodonga Meats and Blayney Abattoirs would adjust the kill fees in favour of themselves, also by means of a "rebate", to bring the profit of MMP down to the agreed level. The financial controllers of the McPhee companies calculated the rebate.
In 1994 there was a “positive” rebate, leading to the payment of more than $1 million by MMP back to the McPhee group – a sort of distribution of surplus profit. But between 1995 and August 1996, MMP made losses and by May 1996 the rebate owed by the McPhee group of companies had blown out to more than $6 million. Between May and August 1996 the joint venture was wound up and then MMP, Wodonga Meats and Blayney Abattoirs all went into liquidation. As I apprehend it, the rebate owed by the McPhee group of companies was left unpaid.
The charges
Against that general background, it is convenient to deal first with the events giving rise to count 1. The appellant was a director of Poowong Pastures Pty. Ltd. from March 1995 until May 1996. In March 1995, Poowong Pastures purchased the land referred to as Houlihan’s Lane for $622,800. The deposit, one tenth of the purchase price, was paid by way of an MMP cheque made payable to the estate agents handling the sale of the property. But the cheque butt described the cheque as payable, not to those agents, but to T & R Pastoral Pty. Ltd. which, I think, was one of the MMP’s regular suppliers of meat. To support such a payment, two false invoices were created, purporting to be from T & R Pastoral. Further cheques were later drawn on MMP in the same way and put towards the purchase of Houlihan’s Lane. The total amount taken from MMP in this fashion was $250,328.
Unfortunately, the events giving rise to count 2 are not so easily described. From December 1994 to January 1996 weekly cash amounts, first of $10,000 and then later of $15,000, were drawn from the MMP bank account. These drawings were made on the instructions of the appellant and $612,227 was drawn in this fashion over 92 occasions. This was done by a bookkeeper, one Maloney, who was told by the appellant that these drawings were to be supported by false MMP remittance advices and invoices from creditors, which were to be fabricated, purporting to reflect or require the payment by MMP for livestock purchases. The false documentation was to be prepared in varying amounts, the appellant instructed, so as not to match the cash amounts.
According to the prosecution, Maloney was told these cash drawings were for Liberty Meat Exports (Aust.) Pty. Ltd. (“Liberty”), a company once called Obena Hall Pty. Ltd. but by now run by one Rudolph Boehm with whom the appellant had regular business dealings and with whom, it seems, he was on friendly terms. According to company searches, for a while (including the period from 1994 to 1996) both men were directors of L.B. Trading Co. Pty. Ltd., a company which had once been called Liberty Meat Exports Pty. Ltd. and which is not to be confused with Liberty Meat Exports (Aust.) Pty. Ltd., the company with we which are presently concerned. The appellant told Maloney that Liberty (that is, Liberty Meat Exports (Aust.) Pty. Ltd.) would be repaying the money to MMP, usually the following week, and that Maloney was to justify the repayment by making false delivery dockets, purporting to show that MMP had sold goods (presumably meat) to Liberty to cover the return of the money. The appellant told Maloney that creditors and debtors invoices were not to match up but that they were to average out every couple of weeks. Maloney maintained a manilla folder in which he kept the false remittance advices, invoices and delivery dockets and he kept also a handwritten tally of the moneys passing to and fro - payments which he was told by the appellant were being made by MMP to Liberty and then being repaid by Liberty to MMP - but he destroyed that document when ANZCO, the joint venture partner, insisted early in 1996 that an ANZCO representative co-sign all MMP cheques and the arrangement put in place by the appellant came to an end.
It is necessary to say a little more about the system that was in place until early in 1996. As it developed, each week a false MMP remittance advice was prepared by an employee. The MMP cheque butt purported to show that the relevant cheque was drawn in relation to the supplier nominated on the remittance advice or, sometimes, named in the fabricated invoice. The MMP cheque would be made payable to cash or wages and would be cashed at the local bank. That money would then be placed in an envelope and given to the appellant or placed on his desk. He usually travelled to Melbourne every Friday, and Liberty was located in Melbourne. On one occasion at least the money was sent from MMP to Liberty in Melbourne in a package marked “computer parts” and marked to the attention of “Norbert”. (Norbert Boehm was a relative of Rudolph Boehm.) On another occasion an MMP employee took the money down to Melbourne in an envelope and arranged for someone at Liberty to collect it. The appellant said in evidence that the staff all laboured under the belief that the moneys drawn from MMP were for Liberty, and he did not disabuse them.
Mr. Tovey, for the appellant, insisted that whether money went directly to the appellant or via Liberty, the moneys drawn from the MMP bank account in the way I have just described went to the appellant, not Liberty – and that is a very important step. When Liberty “repaid” the money to MMP it did so by cheque, a cheque which was not only in payment for genuine purchases made by Liberty from MMP but also for “payment” according to false documentation of further “purchases” by Liberty from MMP. The bookkeeper at Liberty made a statement denying any knowledge of the arrangement that was put in place by the appellant and, if Mr. Tovey is correct, it follows that when Liberty paid money to MMP it did so (so far as is known) out of its own funds; it was not “repaying” money first “lent” to it by the appellant out of the funds of MMP.
Before going to the grounds of appeal, there is one other aspect to mention of the events underlying count 2. In May 1995 MMP paid a company, Tri-Tech, the sum of $30,926. Two cheques were used and the payment was for refrigeration repairs. The invoice from Tri-Tech was addressed to McPhee Meats, Wodonga but MMP did not own any plant. The Tri-Tech invoice was sent to MMP from Liberty by fax, with a request to “bring cheque for that amount and book it out to meat”. In like fashion to that described above, false invoices were fabricated purporting to be for meat supplied to MMP and false cheque butts were prepared by Maloney to cover these two cheques totalling $30,926. This was on instructions from the appellant. Maloney did not know for whom the refrigeration work was done. When the sum of $30,926 paid to Tri-Tech is added to the $612,227 paid to the appellant from the funds of MMP (over the 92 occasions previously mentioned), the total is $643,143, the sum mentioned in count 2.
The appeal on count 2
As amended, there are five grounds of appeal, the first of which is that the sentences imposed were each manifestly excessive, the others alleging specific error in the course of sentencing.
It is convenient to deal first with count 2. Ground 5, in part, alleges that the learned sentencing judge was in error in that he –
“(b)considered it to be irrelevant that there was no loss to [MMP];
(c)considered it to be an aggravating feature that [Liberty] had reimbursed MMP by using false invoices;
(d)rejected the Applicant’s evidence as to the debt owed by Boehm to him and that the false invoicing scheme was initiated by Boehm;
(e)concluded and took into account that there might be further offences charged and that a fraud had been committed on Liberty”.
There are other paragraphs in ground 5 but there is no need to refer to them.
As is apparent from ground 5(d), in the course of the plea in mitigation the appellant himself gave evidence, although he was only one of a number of witnesses called on his behalf. According to the appellant, there was an underlying agreement between him and Rudolph Boehm which had led to the extraordinary arrangements by which he himself withdrew $10,000 or $15,000 per week from the funds of MMP against false documentation. That underlying agreement went back to the other Liberty company earlier mentioned, Liberty Meat Exports Pty. Ltd. which, according to the appellant, operated a boning room and became dormant in 1992, it having ceased trading upon the sale of its business to Boehm. The company searches in evidence indicate that Liberty Meat Exports Pty. Ltd. continued to make returns and that the appellant and Boehm were its directors for more than five years until July 1996, but that may not matter; the essential fact recounted by the appellant was the sale of that company's business in 1992, by one means or another. Again according to the appellant in evidence, Liberty (that is, Liberty Meat Exports (Aust.) Pty. Ltd.) took over the business which was sold and, for his interest in it the appellant claimed that he was entitled from Boehm to something in the order of $2.25 million. There was, too, to be a payment to the appellant of $1 million over a period of five years for his assistance in the running of the business - all this (according to the appellant) by way of oral agreement made by the appellant with Rudolph Boehm and his office manager, Ray Hunter.
The appellant described the agreement as having been made in 1992, but, he said, he began to be paid only in about 1994 when the parties came to “an arrangement as to the way in which those payments should be made”. Of that the appellant said this:-
"What was that arrangement?---The arrangement was this, they wanted it charged – the amount we agreed to, a weekly payment – charged them as meat.
In any particular amount?---We agreed originally to a figure of approximately $10,000.
Was that varied?---It was varied.
HIS HONOUR: Per week?---Per week, Your Honour, yes. That figure was varied to make it so it was never a round $10,000, it was $9,900 and something or slightly over $10,000 to make the transaction look more legitimate.
MR. WILLEE: Why did you agree to – whose idea was it to pay money in this way?---It was mutually agreed by the parties.
What was the purpose of having it paid in this way?---I believe it suited Liberty Meat and I certainly could do with the money at the time.
Yes.
HIS Honour: Tax free for you too?---Yes, Your Honour.
Have they got it for stock that didn’t exist, I take it?---That’s correct.
So they could write it off as well?---They no doubt would have written it off as purchases.
MR. WILLEE: What did you do with the money?---The money was used in various businesses of mine. Some was used to buy plant and equipment, some was used to pay overtime to different employees. With the size of the business it wasn’t hard to dispose of the $10,000 a week.
What was the state of the businesses at that time?---We were struggling, yes.
Did any of that money go to any private interest of yours?---No, it did not, it all went back into my businesses.”
Having so described the arrangements whereby money was drawn each week for him from the funds of MMP, the appellant went on to explain the methodology:-
"In relation to that, that is, that you gave instructions to MMP employees to make sure that you were given $10,000 and later $15,000 a week in cash and that it be accounted for - documents which showed that it had in fact been expended in the purchase of livestock; is that correct? --- I gave my employees – actually MMP didn’t have employees, they were employees of mine – instructions that I required the $10,000 a week originally and then 15,000 and I wanted it - a separate book to be kept on it, that it balanced each fortnight. As the money was drawn down an invoice would be raised to correspond with that amount and sent to Liberty which Liberty would pay. They then disguised the payments as livestock purchases, that is correct.
Did you understand that that was what was happening? --- Yes, I wasn’t greatly concerned, as long as it was cash neutral, I was, I guess I was naive in that respect. As long as MMP didn’t lose any money over the transactions, I wasn’t greatly concerned.”
The appellant said something more about the books balancing. Thus:-
"MR. WILLEE: Were you aware that was happening?---To be honest with you I wasn’t a hundred per cent sure of the methodology they were using. I am aware now. I was only interested in the books balancing, that is all.
HIS HONOUR: How did you expect it to balance?---I believe they, Liberty paid, and we took the money. Liberty paid us a sum of money. That they, that Liberty paid MMP an amount of money that actually they didn’t owe and we took that money.
But you must have known they were paying on documents ---?---I knew they had paperwork to back it up.
There was paper work?---Yes.
And you knew that paperwork was crook?---Yes, yes, Your Honour.”
There was no cross-examination which challenged the appellant’s account of the underlying agreement between him and Boehm or his claim that the whole thing was at the request of those who were responsible for seeing to the payment to him of more than $2 million. On the appellant’s version, it could well have flowed from a desire on the part of Boehm to convert what otherwise would have been a capital payment to or for the appellant into a revenue outgoing, at least on paper. Liberty, making payments to MMP, purported to make such payments for meat purchased, while the appellant was drawing the money from MMP on account (he said) of the capital sum owed to him by virtue of the earlier 1992 agreement; and in the books of MMP, the payments to the appellant were being masked by fictitious delivery documentation or fabricated invoices from their ordinary suppliers.
It is convenient at this point to refer to the judge’s sentencing remarks in the course of which his Honour said:
“5.It was asserted by Mr. Willee that no moneys had in fact been paid and that the false accounting was a ruse prepared by McPhee and Liberty Meat Exports Pty. Ltd. to enable payment to be made of the sums asserted to be owing to McPhee. This arrangement is not verified, as I have understood the depositions, by anybody from Liberty Meat Exports Pty. Ltd.
This background is the excuse created by Mr. Willee on behalf of the prisoner for the criminal activities conducted by him.”
With great respect, to attribute this “excuse” to counsel seems unwarranted. Whether the judge was prepared to accept the appellant’s evidence or not was of course a matter for him, but in the absence of cross-examination by the prosecutor, or indeed any dissent at all expressed in the course of the plea, if the evidence was to be rejected it deserved a little better than being dismissed as an “excuse created by” counsel.
The arrangements for the drawing of funds from MMP against false documentation linking the payments to the purchase of meat by MMP from suppliers in the ordinary course and then the making of payments by Liberty to MMP against false documentation purporting to represent sales by MMP to Liberty, all demanded some explanation from the appellant and he purported to give one. If it was wrong, some other explanation was called for, if only by way of possibility – and yet none was ever suggested, either by the prosecutor or otherwise. The judge’s references to "Liberty Meat Exports Pty. Ltd." must, I think, be read as references to Liberty Meat Exports (Aust.) Pty. Ltd. (the company which I am calling simply "Liberty"). As we were told from the Bar table, no-one connected with Liberty was prepared to speak to the investigators from the Australian Securities Commission, which is scarcely surprising if, as the judge himself speculated in the course of his sentencing remarks, the whole thing stemmed from a desire to convert what was a capital payment for Liberty into a revenue outgoing – something which, one may suppose, was of primary interest only to Liberty and the Tax Office. So far as MMP was concerned, its so-called “purchase” of meat from its ordinary suppliers and the “sale” of product to Liberty, presumably for processing, must have balanced its books, and it is at least credible that the payments by Liberty went to fund the drawings being made from the funds of MMP in favour of the appellant.
There are no doubt a lot of unanswered questions about the underlying agreement said by the appellant to have been made in 1992 and which, it was submitted on the plea (according to the judge's sentencing remarks), led to the joint venture agreement. It must be source of wonder that the sale was agreed orally, without supporting documentation, but Boehm was a co-owner of the business that was sold (we were told) and perhaps that led to the informality. How the sale fitted with the joint venture agreement was another question, and any confusion between the two Liberty companies can only compound the problem. But in the end I do not think that the detail matters much. It was no more than background to the assertion made by the appellant, in evidence, that he was not concerned with the false documentation so long as there was no loss to MMP. On his version of events - and no other was suggested - there was no loss to MMP; whatever was paid to him from the funds of MMP came back in the form of cheques from Liberty to MMP. That, I think, was the significant part of this evidence and, as will be seen, in sentencing the judge appears to have accepted that at the end of the day it was indeed Liberty which was out of pocket, not MMP.
In his sentencing remarks the judge said this of counsel's submission (and in what follows references to Liberty Meat Exports Pty. Ltd. should again be understood as meaning Liberty Meat Exports (Australia)) Pty. Ltd.):-
"[Mr. Willee submitted that] there was no actual loss suffered by any company associated with the false accounting concerning Count 2. This is true. The money came from [MMP]. [MMP] had a false invoice from its supplier supporting the paying out of that money – money paid in cash to McPhee in lieu of the false supplier. [MMP] in turn in a transaction which does not form part of Count 2 rendered a false invoice for precisely the same amount to Liberty Meat Exports Pty Ltd and got paid on that false invoice. Accordingly, the body out of pocket in the sum of $643,143.19 was Liberty Meat Exports Pty Ltd [MMP] books tallied exactly. Although the submission that [MMP] suffered no actual loss is true as an accounting fact, it does the prisoner no credit, in my opinion, to only put forward part of the picture as a mitigating circumstance for sentencing purposes. Whether in due course any charges may be laid with respect to the invoicing between [MMP] and Liberty Meat Exports Pty Ltd in which there was an actual loss incurred by Liberty Meat Exports Pty Ltd I am at the moment unable to say and the Crown has not advised me in that regard.”
This last sentence is perhaps open to more than one interpretation, but the judge’s view is put beyond doubt when a little later on his Honour made specific findings which included the following:
"The fact that money disbursed was fraudulently recovered from Liberty Meat Exports Pty Ltd so [MMP] was not in fact out of pocket is not to the point, in my opinion. This fact merely demonstrates further the planned and calculated nature of the criminal activities involved.”
Indeed, the judge mentioned the fraud on Liberty again, when, immediately after imposing sentence, he noted that "at this stage" no order for restitution was required, "the secondary fraud upon Liberty Meat Exports Pty Ltd not being part of this presentment".
As Mr. Tovey submitted, it is clear from all this that the judge proceeded upon the footing that, if MMP was not out of pocket, that was so only because of a fraud practised on Liberty - and such a fraud, if practised on Liberty, must have been very relevant to the sentencing of the appellant. I accept Mr. Tovey’s submission that in so proceeding his Honour was acting upon a basis of fact not established on the plea before him, or not established to the required standard. It is one thing to say that the appellant must show that there was no loss to MMP if he wants that taken into account in mitigation; it is another thing altogether to say that, while there was no loss to MMP, that was solely due to a fraud practised on Liberty. The prosecutor never claimed that there had been such a fraud and in my respectful view the evidence that was led on the plea did not establish it. To pass sentence otherwise was a step which betokened specific sentencing error.
In saying that, I do not mean to be unduly critical of the sentencing judge; for, in my opinion, his Honour may well have been inadvertently led into this error by appellant's counsel on the plea. At the conclusion of the prosecutor’s opening on the plea, the judge asked whether there was any link between the taking of the money from MMP and the ultimate liquidation of that company. It was agreed that there was no such link. Counsel then rose to open for the appellant and commenced in this fashion:
"MR. WILLEE: Just on that point, Your Honour, such a conclusion would also assume that either the money was out MMP for a considerable period of time, or never came back at all. The material before Your Honour in the depositions shows that in fact false invoices were being raised to ensure that the money came back from Liberty Meats and there was a balancing and a careful checking of the balancing process to match the outgoings from the – there is plenty of evidence that in fact the whole process was nothing more than a round robin.
HIS HONOUR: That is to say what came out of MMP to Liberty matched what Liberty was putting back into MMP? For what purpose, though?
MR. WILLEE: The purpose of the round robin was to enable my client to obtain from Liberty Meats money to which he was entitled, that is to say, moneys - and I’ll come to this in more detail, Your Honour, later on – moneys which were partly from the sale of a 50 per cent interest that he had in Liberty Meats back to Liberty Meats and partly to cover a package arrangement that was made up at the same time.”
The reference to a “round robin” was, I think, misleading. In itself it suggested that the payments drawn from MMP went to Liberty and then found their way back from Liberty to MMP. If they were so regarded, the appellant’s version of events, which was that he was being paid by Liberty from its own funds on account of a debt owing to him by those in control of Liberty, becomes fanciful – but by the same token so too does the allegation that by means of this false documentation the appellant was extracting money from MMP. It seemed to be common ground before us that the reference to a “round robin” was inaccurate and on reflection, it seems to me that it may well have been critical to the judge’s whole approach to the evidence which was led before him. However that may be, the evidence before the judge was not of any “round robin”, but of payment to the appellant by MMP indirectly out of moneys provided to MMP by Liberty. According to the evidence on the plea MMP was not out of pocket (and the judge so found), but the evidence did not establish that that was only by reason of a fraud practised on Liberty. There was therefore significant sentencing error along the lines suggested by paragraphs (b), (c) and (d) of ground 5. On that score the appeal against the sentence imposed on count 2 should be allowed and it is unnecessary to consider any of the other grounds relevant to that count.
The appeal on count 1
I turn now to count 1. Again, specific error is alleged, as well as manifest excess. In respect of count 1, it is said, in grounds 3 and 4, that the sentencing judge “failed to take into account the circumstances which led to the applicant requiring the funds ultimately stolen” and that his Honour was “in error in taking into account as an aggravating feature the fact that the Poowong property was still owned by a McPhee company”.
The appellant’s evidence on the plea was that he had recourse to the funds of MMP because of sudden emergency. The land purchased was next door to the site of the Poowong abattoirs. How those abattoirs fitted into the overall corporate structure is not clear, at least to me, but it does not matter. The site of, or for, the Poowong abattoirs had been purchased, according to the appellant, on behalf of three different individuals of which he was one. He gave this evidence of what followed:
"Yes. In relation to the effluent from that site was there any arrangement in place at the time you agreed to purchase it?---Yes, there was an arrangement in place with a neighbour but unfortunately after we purchased the place the neighbour cancelled the arrangement.
What did you do as a result of that?---We were in a great deal of bother and we had to try and buy another neighbour’s land so we could operate.”
That is what they then did: they purchased the adjacent property known as Houlihan’s Lane through the medium of a company which was formed, Poowong Pastures Pty. Ltd. This was a company partly owned by the McPhee interests and partly by one or other of the Liberty companies. (The appellant was not himself clear, he said, which Liberty company was involved). On the purchase, some of the funds were provided by the vendor, but the appellant had to find the balance of about $240,000. As to that, he gave this evidence:
"How did you propose to fund that?---I spoke to our group accountant, Mike Halsey and said to Mike, ‘It is up to us to find this deposit, this deposit money or the 240,000.’ And left him to find it.
You were aware that his method of finding it was to use the same methodology that was used for the Liberty Meats transaction?---I must admit I was very surprised when I found out that he did use that method.
When did you find out he used that method?---I really only found out when the ASC came to see us.”
This, then, was the evidence about the pressing emergency which led to the use of MMP funds for the purchase of the property known as Houlihan’s Lane. The judge did not mention this in his sentencing remarks, and hence ground 3. I need not decide whether that in itself betokens error, for in my opinion it is overtaken by the more significant error mentioned in ground 4, that of the so-called “aggravating feature” in “that the Poowong property was still owned by a McPhee company”.
It was common ground that Houlihan’s Lane was, at the time of sentencing still owned by Poowong Pastures Pty. Ltd. and, in one way or another, the appellant still had some interest in that company. But it was also common ground that on 23 February 2000, all that had been stolen from MMP to make the purchase of that land was repaid. We were told that after MMP went into liquidation the liquidator instituted proceedings to recover both title to the land and the money paid by MMP for its purchase, and in the result a Deed of Settlement and Release was entered into under which the amount taken from MMP was repaid to it. It must then follow that the land had indeed been purchased by Poowong Pastures Pty. Ltd., or at all events it could no longer be said to represent money stolen from MMP. Repayment of the funds taken should have stood to the credit of the appellant in sentencing, but that appears not to have been so; for the judge said in his sentencing remarks:
"Regarding Count 1 Poowong Pastures Pty. Ltd. still exists as a McPhee Company. It still owns the property it purchased using the money stolen by McPhee. The stolen money has only recently, on 23 February 2000, been repaid by or on behalf of McPhee. Accordingly the property purchased by the stolen money remains within the remnants of the McPhee empire. This is of general benefit to the McPhee family.”
In later making specific findings, the judge said:
"2.The ingredients of Count 1 demonstrate a deliberate theft of money from McPhee Meat Packing Pty. Ltd. to purchase a property to assist the McPhee empire. Without the purchase of land, the Poowong Abattoirs could not proceed as planned by McPhee. True, there is no specific personal gain, but without the theft the land purchase could not take place, McPhee’s plans would be thwarted and his empire could not continue to expand. The corporate veil does not, in my opinion, protect McPhee in this regard. Indeed, the subject land remains in the possession of Poowong Pastures Pty. Ltd - a McPhee company.”
The repetition of the fact that the land in question was still with Poowong Pastures, “a McPhee company”, serves to demonstrate, in my opinion, that his Honour regarded that as significant to the sentencing of the appellant and, to the extent that the money had already been repaid, I should have thought it irrelevant; and the very reference to that fact, irrelevant though it was, seems to have led the judge to place no weight on the repayment of the funds stolen. It is true of course that the appellant (through Poowong Pastures) had had the use of MMP funds for four years without interest, but that is not how the case was put against him; nor is there anything in the sentencing remarks to suggest that that is how the matter was approached in sentencing.
Accordingly, I conclude that there was error below in the way in which the fact was brought to account that the land at Houlihan’s Lane was still held by the company, Poowong Pastures. Again its significance really turns on what follows from that; for if it is put to one side as irrelevant, there is nothing to gainsay the conclusion that in respect of this transaction, too, there was no loss suffered by MMP. (In saying that I am disregarding the loss of interest because it formed no part of the case mounted by the prosecution.) By reason of his concentration on the present ownership of Houlihan’s Lane land, the judge failed, I think, to give credit to the appellant for the fact that there was no loss – in much the same way as, for the reasons I have given, the judge failed, with respect, to give credit to the appellant for the fact that there was no loss to MMP under count 2. I accept the appellant’s submission that that was specific sentencing error in respect of count 1. Again it becomes unnecessary to consider any other ground of appeal.
Indeed, it may be that the specific error earlier identified in relation to the sentencing on count 2 is enough in itself to taint the exercise of the sentencing discretion on count 1, but I need not decide that. Specific error has been identified in relation to his Honour’s treatment of each of the two counts. Accordingly, the appeal should be allowed and the sentences on both counts set aside.
Re-sentencing
It falls then to this Court to re-sentence the appellant. In the course of the very helpful addresses we have heard on this appeal, we have become familiar with the circumstances of the offending and no cavil was made with the judge’s sentencing remarks in other respects. Bearing in mind all that can be put in favour of the appellant including his ultimate plea of guilty, his considerable record in the community and his achievements as a self-made man, I am still not persuaded that anything but a custodial sentence is appropriate. The maximum penalty on count 1 was 10 years’ imprisonment and on count 2 seven and a half years. It is relevant that the falsification of these records was done deliberately over a significant period and it was done to conceal what, on any view, was the misapplication of the funds of MMP. It was agreed, as I said earlier, that these offences did not lead to the liquidation of MMP and I do not therefore have regard to its present state. None the less, the offences are serious ones and, having regard to all of the circumstances both of the offender and the offending, I think that only a gaol term will suffice. But I think that something less than that imposed below is appropriate. In my opinion, on
count 1 the appellant should be sentenced to a term of imprisonment of 18 months and on count 2 to a term of imprisonment of two years. I would order that six months of the term imposed on count 1 be served cumulatively on the sentence imposed on count 2. In the result, the total effective sentence is of two and a half years’ imprisonment of which I would suspend fifteen months. From what was said on the plea, one can expect that there will be no re-offending.
BATT, J.A.:
I agree with Phillips, J.A.
COLDREY, A.J.A.:
I also agree.
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