R v Ronen

NEW SOUTH WALES COURT OF CRIMINAL APPEAL

CITATION: R v Ida Ronen, Nitzan Ronen, Izhar Ronen [2006] NSWCCA 123

FILE NUMBER(S):
2005/2126
2006/574
2005/2127
2006/571
2005/2128
2006/565

HEARING DATE(S): 28/03/2006

DECISION DATE: 19/04/2006

PARTIES:
Regina v Ida Ronen, Nitzan Ronen, Izhar Ronen

JUDGMENT OF: Spigelman CJ Kirby J Howie J

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): 70222/03, 70002/03, 70223/03

LOWER COURT JUDICIAL OFFICER: Whealy J

COUNSEL:
T. Game SC with S. McNaughton - Crown
D.F. Jackson QC with H. Buscombe - Respondent/Applicant

SOLICITORS:
Commonwealth DPP - Crown
Gilbert & Tobin - Respondent/Applicant

CATCHWORDS:
Criminal Law - Sentencing - Applicants convicted after trial of two offences of defrauding the tax revenue of the Commonwealth under provisions of the Crimes Act (Cth) - provisions repealed and new offences created under the Criminal Code (Cth) with reduced maximum penalties - Leave to appeal - whether the maximum penalty for the Crimes Act offences reduced - relevance of payment of penalty tax prior to sentencing - whether partially cumulative sentences appropriate where one conspiracy alleged - whether sentences manifestly excessive - Crown Appeal - whether the creation of new offences with reduced penalties relevant - whether sentences manifestly inadequate for offence within worst category.

LEGISLATION CITED:
Crimes Act 1914 (Cth) - ss 4F(2), 29D, 86A, 86(2)
Financial Transaction Reports Act 1988 (Cth) - s 31
Criminal Code Amendment (Theft, Fraud, Bribery and Related Offences) Act 1999
Criminal Code (Cth) - s 135.4
Acts Interpretation Act 1901 - s 8, 45A
Crimes Legislation Amendment Act 1987 (Cth)
Criminal Code (WA)
Sentencing Act (WA) - s 10
Excise Act (Cth)
Income Tax Assessment Act 1936 (Cth) - s 226J
Tax Laws Amendment Self-Assessment Act 1992 - ss 226G, 226H, 226J
Criminal Appeal Act 1912 - s 6(3)

DECISION:
Leave to appeal granted but the appeal is dismissed. The Crown appeal is dismissed.

JUDGMENT:

IN THE COURT OF
CRIMINAL APPEAL

2005/2126, 2006/574
2005/2127, 2006/571
2005/2128, 2006/565
SPIGELMAN CJ
KIRBY J
HOWIE J
WEDNESDAY 19 APRIL 2006

REGINA v IDA RONEN, NITZAN RONEN, IZHAR RONEN

Judgment

SPIGELMAN CJ: I agree with Howie J.
KIRBY J: I agree with Howie J.
HOWIE J: After a lengthy trial before Whealy J (the Judge) and a jury, Ida Ronen and her two sons, Nitzan Ronen and Izhar Ronen, were convicted of two offences contrary to the Crimes Act 1914 (Cth) (the Act) arising from a conspiracy between them to defraud the Commonwealth of taxation revenue. They were sentenced to terms of imprisonment on 7 October 2005; [2005] NSWSC 991. By notices dated 26 October 2005 the Commonwealth Director of Public Prosecutions has appealed against what is asserted to be the inadequacy of the sentences imposed. The Ronens have sought leave to appeal against the sentences and for convenience I shall refer to them as the applicants.
The first charge alleged a conspiracy between about 1 October 1991 and 15 September 1995 contrary to s 86A of the Act. The second charge alleged a conspiracy between 16 September 1995 and 6 February 2001 to commit an offence against s 29D of the Act contrary to s 86(2) of the Act. Although there were two counts on the indictment, it was the Crown’s allegation that there was a single conspiracy on foot over the period from 1991 to 2001. The two counts reflected the fact that during the period of the conspiracy there was a change to the statutory provisions prescribing the offences charged. According to the relevant provision at the time of the commission of each of the offences, the prescribed maximum penalty for each offence was relevantly imprisonment for 20 years. However, after the offences were committed but before the appellants were sentenced, there was another legislative change and a question arises as to the effect of that change on the maximum penalty prescribed for the offences.
Mrs Ronen also pleaded guilty at the commencement of the sentencing proceedings to an offence contrary to s 31 of the Financial Transaction Reports Act 1988 (Cth). That offence alleged that between 7 and 10 April 2000 she was knowingly concerned in conducting 11 cash transactions each of less than $10,000 in value which were structured so as to avoid reporting requirements under that Act. The maximum penalty for that offence is relevantly five years imprisonment.
Mrs Ronen was sentenced as follows:
Count 1:Imprisonment for five years to commence on 28 January and to expire on 27 January 2010.
Count 2:Imprisonment for six years and six months to commence on 28 January 2007 and to expire on 27 July 2009.
S 31 offence: Imprisonment for eight months to commence on 28 January 2005 and to expire on 27 September 2005.
This is a total sentence of imprisonment for eight years and six months from 28 January 2005. The Judge specified a non-parole period of four years and six months to expire on 27 July 2009.
Nitzan Ronen and Izhar Ronen were each sentenced as follows:
Count 1:Imprisonment for five years to commence on 28 January 2005
Count 2: Imprisonment for six years six months to commence on 28 January 2007.
This is a total sentence of eight years and six months from 28 January 2005. The Judge specified a non-parole period of five years and six months to expire on 27 July 2010.
The facts
The facts upon which the Judge sentenced the applicants were not in dispute and can be summarised briefly. The offences arose during the course of the operation of a clothing business that involved a number of companies trading in the retail and wholesale clothing industry. Each of the applicants was a director of, and shareholder in, these companies. There were a number of factory outlets selling clothing manufactured by the companies to the public at discount prices. These shops were operated by Ida Ronen. They had a large cash turnover. The applicants agreed to defraud the Commonwealth of income tax by concealing a substantial proportion of the cash income from these shops.
The Judge stated when sentencing the applicants that he was satisfied beyond reasonable doubt that over the period of about a decade that this conspiracy was in operation the amount concealed was somewhere between 15 and 17 million dollars.
The agreement was that Ida Ronen on behalf of herself and her sons took most, if not all, of the cash received at the shops and distributed it to herself and her sons for their own purposes. Much of it was sent overseas. At the time of their arrest there was a sum of $209,525.00 in a safe in Mrs Ronen’s unit ready for distribution to Nitzan Ronen. Mrs Ronen meticulously recorded the actual takings from each of the shops and the amounts distributed by her. None of the cash taken by the applicants was declared as income in their personal tax returns or those of the companies.
After 1 July 2000 the Goods and Services Tax was introduced. The applicants had to devise a system for overcoming this hurdle. Mrs Ronen, secretly from her sons, involved her then de facto husband in the conspiracy in order that he could devise calculations to take into account the GST. These calculations were recorded in a computer kept at Mrs Ronen’s unit. Mrs Ronen also set about creating a set of false till rolls that would show a reduced amount of cash received at the shops. These false records were created on a cash register kept at Mrs Ronen’s unit for this purpose. By this method no more than ten per cent of the cash takings was banked.
The conspiracy came to light by chance during the lawful interception of a phone service in connection with an unrelated matter. Conversations alerted the authorities to the fact that the applicants were sending large amounts of money overseas. Surveillance was then undertaken on Mrs Ronen’s home where eventually a search warrant was executed on 7 February 2001. On that date the three applicants were arrested.
The additional offence to which Mrs Ronen pleaded guilty related to the amount of $99,395 sent to a bank in Israel to accounts of which she was the beneficiary. This was cash taken from the retail shops and had not been declared as income. On 7 April 2000 the money was collected by a chartered accountant on Mrs Ronen’s behalf and banked into a number of different banks by way of amounts structured so as to avoid the reporting conditions under the relevant legislation. The Judge held that this was part and parcel of the conspiracy in which the applicants were involved.
Following their convictions but before the sentencing proceedings, the appellants entered into a settlement of civil proceedings between them, their companies and the Commissioner of Taxation (the Commissioner). The settlement followed mediation sought by the applicants. I shall refer to this matter in more detail later as one of the applicant’s grounds of appeal relates to the weight to be given to the fact that the applicants had paid a considerable amount of money to the Commissioner as a penalty for their failure to divulge all of their income during the period of the conspiracy.
Subjective considerations
Mrs Ronen was aged 72 at the date of sentencing and was not in good physical health. She suffered from osteoporosis, lower back pain and osteoarthritis of both knees. She had conjunctivitis and bilateral cataracts. She also suffered high blood pressure and at the time of sentencing was anxious and depressed. There was a psychiatric report in evidence that set out her background but it is unnecessary to repeat it here, as it has no particular relevance to the outcome of the appeals. Mrs Ronen learned the clothing trade in Israel and established a business there before coming to Australia in the 1970s with her two sons. The Judge accepted that, as well as being a successful business woman, she worked hard to establish her business and was a good mother to her sons.
Because of her age and poor physical and mental health, the Judge concluded that Mrs Ronen would find the prison experience more difficult than it would be for a younger woman in good health. The psychiatrist recommended that she be referred to the Prison Psychiatric Services if she were sentenced to imprisonment.
There were a large number of references and testimonials placed before the sentencing court attesting to Mrs Ronen’s qualities as a mother, grandmother and friend. They noted her charitable works and the assistance she had provided to Bulgarian immigrants arriving in this country. They also referred to her contrition and the responsibility she felt towards her two sons in relation to the offending.
Nitzan Ronen was 47 years of age at the date of sentencing. He was married and had four children ranging from six and a half years to one year of age. The children were having difficulties coping with the loss of their father to prison. There was a psychiatric report in evidence stating that he admitted his guilt and regretted his conduct and the effect of it upon his children. He was depressed and angry.
There were also a number of references placed before the Court relating to this applicant. The Judge said of these:
The picture created is of a philanthropic man with strong feelings for his own family and for other families with difficulties. He is also depicted, as is undoubtedly the case, as a hard and industrious worker with considerable skill and experience in the clothing industry.
Izhar Ronen was 46 years of age at the date of sentencing. He was born in Israel and came to Australia at the age of 15. Like his brother he became involved in the clothing business shortly after completing his Higher School Certificate. He was married with two children aged 17 and 16. His younger child, a son, had been particularly affected by his father’s imprisonment. The applicant told the psychiatrist that he believed he had brought shame on the family. There were also in evidence testimonials as to his generosity and hard work.
The Judge said this about the general subjective circumstances of the applicants:
There is an obviously tragic aspect to the situation in which each of the offenders now finds himself or herself. Each offender is a person of previous unblemished good character. Each has worked very hard in the establishment and continuance of a highly successful business. Each offender is well regarded in the community especially in the Jewish community where they have practiced philanthropy at a high level. Each is regarded as an outstanding family member and is well regarded by friends and acquaintances in the business world and generally. Yet, each is imprisoned awaiting sentence for crimes of the most serious content.
The Judge noted the impact of a sentence of imprisonment would have on the families of the brothers but could not find that there was anything exceptional that would permit him to impose a lesser sentence on that account.
Although the applicants had pleaded not guilty to the offences on the indictment and the trial had been a lengthy one, the Judge found that contrition and remorse had been demonstrated by them. He noted that after they were convicted “the realisation of their wrongdoing came home to each offender in a markedly emphatic manner”. The Judge also noted that the settlement of the civil actions with the Commissioner was a practical demonstration of remorse. Notwithstanding that remorse and contrition came late in the day, the Judge held that it was a matter that he could and should take into account in assessing their likelihood of re-offending and their prospects of rehabilitation.
The application for leave to appeal
There were four grounds argued on behalf of the applicants as follows:
Ground 1:The sentencing judge erred in finding that the maximum penalty for the offences under s 86A and s86(2) of the Crimes Act 1914 (Cth), (the conspiracy offences), was 20 years imprisonment.
Ground 2:The sentencing judge failed to have proper regard to:
(a) the imposition of penalty tax upon the applicant's prior to the sentencing proceedings;
(b) the general and specific deterrence attached to the imposition of penalty tax, and
(c) the level of punishment inherent in the imposition of penalty tax.
Ground 3:The sentencing judge was in error in partially accumulating the sentence he imposed on count 2 with the sentence imposed in relation to count 1.
Ground 4:The sentences imposed in relation to the conspiracy offences were manifestly excessive.
The maximum penalty
The Judge found that the maximum penalty for each of the counts in the indictment was imprisonment for 20 years. As has already been noted, that was the penalty prescribed in respect of each of the offences charged by the provision creating the offence. However, s 86(2) of the Act, the most recent provision in the Act dealing with defrauding the Commonwealth, was repealed on 24 May 2001 by the Criminal Code Amendment (Theft, Fraud, Bribery and Related Offences) Act 1999 (the Amendment Act). In its place a series of offences were created in the Criminal Code (CTH) (the Code) by s 135.4. The maximum penalty prescribed for offences falling within that section is imprisonment for ten years.
When introducing the bill containing the new Code provisions on 24 November 1999, the Attorney General described the amendments as providing “a wide range of modern offences to protect the Commonwealth Government and public officials from criminals who would cause them financial harm or seek to obstruct, threatened or harm them”. The Attorney also stated, “The bill……replaces existing Crimes Act 1914 offences with a modern and transparent scheme for preventing and punishing theft, fraud, bribery, forgery and related offences”. He also noted that the bill “brings about uniformity in penalties for key offences, which have long differed between state and federal jurisdictions, and between different acts” and referred to the maximum penalty of 10 years for the fraud offence.
The Explanatory memorandum in relation to the Bill contained the following:
Like proposed s135.1, proposed s135.4 is a series of general dishonesty offences. Proof of deception is not required. Indeed it has all the same components as proposed s 135.1 except there must be a conspiracy. …… The other difference is that the maximum penalty is 10 years imprisonment. While conspiracy usually carries the same penalty as the primary offence, the proposed penalty reflects what was recommended for the Model Criminal Code (May 1997 report) and by the Gibbs Committee. Proposed s 135.1 will replace sub-s 86(2) of the Crimes Act 1914 which has a maximum penalty of 20 years imprisonment. This is far too high and is inconsistent with the penalty for similar offences in other jurisdictions. The usual maximum penalty is 10 years imprisonment.
The repeal of the previous provisions of the Act in relation to conspiracy to defraud was effected by items 149 and 158 of Schedule 2 of the Amendment Act. There was a transitional provision contained in item 418 of Schedule 2 as follows:
418. Transitional - pre-commencement of offences
1. Despite the amendment or repeal of a provision by this Schedule, that provision continues to apply, after the commencement of this item, in relation to:
(a)an offence committed before the commencement of this item; or
(b)proceedings for an offence alleged to have been committed before the commencement of this item; or
(c)any matter connected with, or arising out of, such proceedings
as if the amendment or repeal had not been made.
2. Subitem (1) does not limit the operation of section 8 of the Acts Interpretation Act 1901
Section 8 of the Acts Interpretation Act is as follows:
8 Effect of repeal
Where an Act repeals in the whole or in part a former Act, then unless the contrary intention appears the repeal shall not:
(a) revive anything not in force or existing at the time at which the repeal takes effect; or
(b) affect the previous operation of any Act so repealed, or anything duly done or suffered under any Act so repealed; or
(c) affect any right privilege obligation or liability acquired accrued or incurred under any Act so repealed; or
(d) affect any penalty forfeiture or punishment incurred in respect of any offence committed against any Act so repealed; or
(e) affect any investigation legal proceeding or remedy in respect of any such right privilege obligation liability penalty forfeiture or punishment as aforesaid;
and any such investigation legal proceeding or remedy may be instituted continued or enforced, and any such penalty forfeiture or punishment may be imposed, as if the repealing Act had not been passed.
A further statutory provision relevant to the argument arising from this ground of appeal is s 4F(2) of the Crimes Act which relevantly provides:
Where a provision of a law of the Commonwealth reduces the penalty or maximum penalty for an offence, the penalty or the maximum penalty as reduced extends to offences committed before the commencement of that provision, but the reduction does not affect any penalty imposed before that commencement.
This provision was inserted into the Act by the Crimes Legislation Amendment Act 1987 (Cth) and a similar provision had been contained in s 45A of the Acts Interpretation Act. The Explanatory Memorandum in relation to the amendments made by s 4F(2) and related provisions states:
The intention of those sub sections is to ensure that a change in a penalty will not be to the detriment of a person convicted of an offence committed before, but for which he or she was sentenced subsequent to, the change.
The applicants argue that s 4F(2) operates in respect of the provisions under which they were charged such that the repeal of those offences from the Crimes Act and the creation of replacement offences in the Code with a maximum penalty of imprisonment for 10 years resulted in the applicable maximum penalty to which the applicants were liable being 10 years and not 20 years as prescribed by the repealed provisions.

The argument was that, because the offences in the Code are in substance the same as those with which the applicants were charged, it should be taken that the maximum penalty for an offence of defrauding or conspiring to defraud the Commonwealth has been reduced regardless of the particular statutory basis for such an offence. It was submitted that the term “an offence” for the purposes of s 4F(2) should be considered broadly in order to achieve the beneficial purpose of the provision rather than denying its effect by a too formalistic or technical approach. The argument was that, although item 418 of the transitional provisions in the Amendment Act does not affect the application of s 8 of the Acts Interpretation Act, s 8 only applies “unless the contrary intention appears” and s 4F(2) evinces a contrary intention displacing s 8.
In my opinion the argument should be rejected for very much the same reasons as the sentencing Judge rejected it. The simple fact is that the maximum sentence prescribed by the repealed Crimes Act provisions were not reduced in any real sense. It is artificial in my view to describe the repeal of one offence and the enactment of a different offence as a reduction in the sentence for the repealed offence. Although the offences in s 135.4 of the Code may cover the same criminal activity as did the repealed Crimes Act provisions, they are different offences with different elements and are affected by the Code’s provisions in relation to criminal responsibility in Chapter 2. The provisions of the Crimes Act were interpreted according to common law principles that are not completely identical to those that apply to the Code offences. For example, there is no requirement under the Code that the prosecution prove that the offender used dishonest means in carrying out the fraud as there was under the provision in the Act: see Peters v The Queen (1998) 192 CLR 493. It is clear from the second reading speech of the Attorney General that the new offences in the Code were not seen by the legislature as being simply a re-enactment of the offences in the Crimes Act and they should not be treated as if they were.
Had the legislature intended that the penalty for the repealed offences should be reduced in line with the new Code offences, it could have said so in plain language within the transitional provisions. I doubt that the legislature intended that this result should be derived from the somewhat convoluted path argued for by the applicants. To the contrary, the specific transitional provision in item 418 on its face and by its preservation of the operation of s 8 of the Acts Interpretation Act contemplates that the repealed provisions would continue to apply to offences committed before 24 May 2001 in all their aspects including the prescribed maximum penalties.
Of course it should be borne in mind that it was not just the fraud provisions of the Crimes Act that were being repealed and replaced with new offences in the Code. The Attorney noted in the second reading speech that the bill “simplifies and reduces the size of the Commonwealth statute book by repealing over 250 offences which cover conduct dealt with by the new offences”. The fraud offences were only part of the scheme of offences that was introduced into the Code by the amending legislation.
Section 4F is a general provision concerned not only with the reduction in penalty for an offence but also with the situation where the penalty for an offence is increased. In my opinion it is concerned with variations in penalties for existing offences and not with the creation of new offences, whether or not they happen to correspond in some general, unspecific way with offences that they replace.
The applicant’s relied upon R v Melville (2003) 27 WAR 224. That was a case where the offence of rape under a provision of the Criminal Code (WA) had been repealed and replaced by an offence of sexual assault in the same Act. The penalty for rape was life imprisonment but the penalty for sexual assault was imprisonment for 14 years. The new offence was broader than the offence of rape because of the expanded definition of “sexual penetration”. Section 10 of the Sentencing Act (WA) stated:
If the statutory penalty for an offence changes between the time when the offender committed it and the time when the offender is sentenced for it the lesser statutory penalty applies for the purposes of sentencing the offender.
The question arose whether the statutory penalty for rape had been reduced to 14 years imprisonment. A majority of the Court, Murray and Anderson JJ, thought that it had by reason of s 10. They interpreted the words “offence” in that section to mean “an act or omission committed in circumstances which make it punishable as an offence”; per Murray J. There was an identity between the act and the circumstances in both the old offence of rape and the new offence of sexual assault: all of the ingredients of the offence of rape having been included in the offence of sexual assault: per Anderson J.
McKechnie J was in the minority. He held that the offence of rape had not become the offence of sexual assault because the elements of the two offences were different. His Honour interpreted s 10 to read in the case before the Court, “If the statutory penalty for rape changes between the time when the offender committed it (ie prior to 1 April 1986) and the time the offender is sentenced for it (ie 2003) the lesser statutory penalty applies for the purpose of sentencing the offender.”
With respect I prefer the reading of the section adopted by McKechnie J. As did his Honour, I believe that such a provision is intended to operate only where the actual penalty for the precise offence is amended and not where an existing offence is replaced with another offence even though the two offences may have some common features or may be addressing similar prohibited conduct. In any event, the present is a different situation than that which was being considered by the Court in Melville because here, as I have already noted, it was not simply the replacement of one offence in one statute with another offence in the same statute. There were specific transitionary provisions contained in the amending legislation that in my view operated according to their terms. Section 4F(2) did not in my opinion evince a contrary intention to s 8, a provision that was specifically applied by the transitional provisions.
The Crown relied upon Chief Executive Officer of Customs v Derbas (2002) 167 FLR 269 a decision of this Court dealing with offences under the Excise Act (Cth). In that case there was an increase in the prescribed pecuniary penalty for an offence after the commission of the offence by the respondent. In the District Court, and contrary to the view taken by the sentencing magistrate, it was held that the increase in penalty did not apply. A case was then stated to this Court. The section being considered was s 4F(1) that in effect provides that an increased penalty does not apply to an offence committed before the increase came into effect. The Court held that the transitional provision relating to the increased penalty was specific and prevailed over the general provision in s 4F(1) so that the increased penalty was to apply to the respondent. Although this is an example of a specific provision over-riding the general provision, that was a much clearer case than the present and I do not believe it assists significantly in determining the present ground of appeal.
However, notwithstanding that I am of the opinion that the maximum penalty was imprisonment for 20 years for the conspiracy offences, it may not necessarily follow that the fact that the maximum penalty for the fraud offences in the Code is imprisonment for 10 years is totally irrelevant. The Judge in the present case, as a matter of fairness and justice, took into account the change in attitude of the Parliament to the seriousness of the type of offences committed by the applicants when determining the appropriate sentences to impose upon them. The Crown has argued on its appeal that the Judge was in error in his approach in this regard and I will address this matter when dealing with the Crown appeal.
The relevance of penalty tax
As was noted earlier, the applicants were prepared to enter into mediation with the Commissioner in relation to outstanding civil proceedings in respect of unpaid taxes and, before the sentencing proceedings commenced, had entered into terms of settlement with the Commissioner. Those terms are to remain secret but some reference can be made to the result of the settlement. It has been noted that the Judge took into account the conduct of the applicants in this regard as being evidence of contrition on their part.
The Judge had evidence before him that the Commissioner had imposed penalties under s 226J of the Income Tax Assessment Act 1936 (Cth) (the Tax Act) of $7,180.508.00. By the time that the appeal was heard the whole of that amount had been paid.
Section 226J is as follows:
226J Penalty tax where shortfall caused by intentional disregard of law
Subject to this Part, if:
(a) the taxpayer has a tax shortfall for a year; and
(b)the shortfall or part of that was caused by the intentional disregard by the taxpayer or by a registered tax agent of this Act or the regulations;
the taxpayer is liable to pay, by way of penalty for the additional tax equal to 75% of the amount of the shortfall or part.
Relevant definitions in the Tax Act are:
“Tax shortfall", in relation to a taxpayer and a year, means the amount, if any, by which the taxpayer's statement tax for that year at the time at which it was lowest is less than the taxpayer’s proper tax for that year.
"Proper tax", in relation to a taxpayer and a year, means the tax properly payable by the taxpayer in respect of that year on the taxpayer’s taxable income after allowing credits property available to the taxpayer.
In the course of the sentencing remarks the Judge referred to the principles applicable to sentencing for offences of fraud on the revenue as set out in R v O’Connor (2002) 129 A Crim R 505 at 537. It is unnecessary to set them out in this judgment because, except in respect of one matter, there was no suggestion by the applicants that the Judge had erred in relation to the sentencing principles he applied. The only matter that was in dispute before the Judge and in this Court was the effect to be given to the fact that the applicants had paid a considerable amount by way of penalty tax.
The Judge quoted with approval from a passage in Sheller JA’s judgment in DPP v Hamman (NSWCCA, unreported, 1 December 1998). That was a Crown appeal against a sentence imposed in the District Court for offences under s 29B and s 29D of the Crimes Act. Sheller JA stated (my underlining):
General deterrence is a predominate consideration when sentencing for offences of defrauding the revenue.
Appeal Courts have discussed and emphasised the seriousness of frauds committed to the detriment of the public revenue. Inevitably, the Australian system of tax collection depends upon the honesty of taxpayers and, in particular, upon their fully declaring in each year of income what their gross income is. In a free society, such as Australia, the tax collector cannot check that every taxpayer has done so. The effect of dishonesty and non-disclosure of income increases the burden on all other taxpayers and particularly those who have truly disclosed their gross income. This demonstrates the serious nature of the offences charged against the respondent and the importance when punishing such offences to put in the forefront of the principles to be applied that of general deterrence.
While undoubtedly it is a matter to be taken into account, it is, in my opinion, of small account, that when caught out the offender pays the tax due and additional tax by way of penalty for which the offender is liable to a greater or lesser extent, according to the Commissioner's discretion, whatever the reason for non-disclosure. Past integrity and good character, devotion to family and work and contributions to the community, impeccable though they have been, carry little weight against the confession by a plea of guilty that over a period of three years which ended only when the respondent was caught out, the respondent knowingly on three occasions understated his income by very large amounts for his own benefit or advantage.
It was submitted to the Judge and to this Court on behalf of the applicants that the underlined passage was no longer good law in light of the decision of the High Court in Rich v Australian Securities and Investment Commission (2004) 220 CLR 129 because it pays too little regard to the significance that a penalty has been imposed upon the offender independent from, and additional to, that imposed by the court in respect of the same conduct. In Rich the Court held that there was no clear distinction between “protective” and “punitive” orders so that an order disqualifying a person from acting as a director of any company should be considered to be a penalty regardless of the purpose for which the order was made. The blurring of the distinction between the criminal and civil law in relation to penalties was recognised in Grey v Motor Accident Commission (1998) 196 CLR 1 at [16].
It was argued on behalf of the applicants that the Judge had too much regard to general deterrence and gave insufficient weight to the imposition of an extra-curial penalty arising from the same conduct as that with which the Judge was concerned. It was submitted that the Judge overlooked the fact that civil penalties have a deterrent effect, as was recognised by Hayne J in Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Limited (2003) 216 CLR 161 at [114]. It was argued that significant weight should have been given to the payment of the penalty tax in order to avoid double punishment because the Commissioner imposed the penalties and chose not to remit them under s 227 of the Tax Act notwithstanding that the applicants had been convicted of the conspiracy offences with respect to the same subject matter.
Reliance was placed on behalf of the applicants upon statements of members of the Federal Court in R v Whitnall (1993) 42 FCR 512 as to the impact of a penalty administratively imposed by the Commissioner upon a court’s discretion to sentence an offender. Drummond J referred to the court’s discretion being to an extent fettered by the imposition of the penalty tax and thought that there was “an element of oppression involved in asking the court to deal severely with an offender who has already been heavily punished by the Commissioner”.
Reference was also made to the judgment of Hulme J in R v Gay [2002] NSWCCA 6 at [23] where his Honour expressed his disagreement with the statement made by Sheller JA in Hamman. After quoting from the passage in Hamman set out above, Hulme J wrote:
[23]    So far as these remarks relate to payment of the tax due, I agree. An offender can claim small credit for performing his legal obligations in common with most of the community. The same may be said of so much of the additional tax as represents interest on tax not paid, certainly if this interest is at more or less a commercial rather than a punitive rate. However, I am unable to agree that payment of additional tax is necessarily to be regarded as of small account. If, of course, the amount of additional tax is small, or perhaps even if large, is of little consequence to a particular offender, this may be an appropriate view but otherwise it seems to me that the significance of the payment of additional tax should be assessed on its merits. If it amounts to a significant punishment in its own right, then it may well be that it should significantly mitigate the punishment which would otherwise be imposed.
[24]    Sheller JA gave no authority or reasoning for his view. In Whitnall (at 125) Higgins J, with whom Drummond J agreed, said that the degree of hardship imposed by a pecuniary penalty imposed administratively was relevant. Drummond J went on to say that if a heavy penalty has been imposed by administrative action, there is an element of oppression involved in asking a court to then deal severely with the offender. It may be that that is not necessarily so in every case but it clearly is a distinct possibility. The preferable approach is to consider every case on its own merits recognising that, even though Parliament may have provided for 2 punishments, it has nowhere said that the quantum of the first should not be fairly taken into account in any determination of the second.
[25]    Furthermore, it must also be relevant to consider all of the consequences to an offender of his criminality……..
The other members of the Court in Gay did not expressly approve of these views although Mason P, with whom Hidden J agreed, noted the punitive element in the amended assessments and took into account delay in prosecution and the payment of penalty tax as reasons for reducing the sentence.
The principles set out in Hamman were applied by this Court in R v Cappadona (2001) 122 A Crim R 52. However, the sentences under review in that case were considered on the basis that no penalty tax had been, or was to be, paid by the respondents to the Crown appeal. Cappadona was applied in O’Connor but there was no reference in that case to any payments having been made to the Commissioner by way of penalty or otherwise. In seems to me that, in light of the decision in Rich, the statement in Hamman in relation to the weight to be given to the payment of penalty tax ought not to be followed if it is regarded as an inflexible sentencing principle. I favour the approach of Hulme J to the effect that each case should be considered on its own merits, but recognising that the payment of penalty tax is a form of punishment that has been imposed upon the offender in addition to that which the Court imposes by way of sentence. This is consistent with the approach that courts have taken to extra-curial punishments generally: see Application by the Attorney General under Section 37 of the Crimes (Sentencing Procedure) Act for a Guideline Judgment Concerning the Offence of High Range Prescribed Concentration of Alcohol Under Section 9(4) of the Road Transport (Safety and Traffic Management) Act 1999 (No. 3 of 2002) (2004) 60 NSWLR 305 at [114].
In many cases the extra-curial penalty might not be given great weight having regard to the need to denounce the criminal conduct by the imposition of a prison sentence and the importance of general deterrence that might not be reflected sufficiently in the payment of the penalty tax. Much might depend upon the capacity of the offender to pay the penalty or the effect that the penalty has had in real terms upon the offender. Hardship arising from the imposition of the tax penalty might be important in determining what further punishment is required to achieve its purpose of protecting the community. But the absence of hardship does not mean that little regard should be had to the additional penalty imposed administratively.
The Crown argued that the Commissioner does not impose the penalty at all and that the only discretion the Commissioner retains is to remit the payment. Material was placed before this Court to show that the Commissioner had no discretion to determine the rate of penalty tax under the different sections of the Tax Act because that was to be determined by the facts of the particular case. On the facts of the present matter s 226J applied so that the rate had to be 75 per cent. But that does not seem to me to be a matter of any great relevance. Even if the penalty was imposed by legislation, it does not mean that the court cannot or should not have regard to it and give it what weight it deserves in the particular case. Similarly the fact that there was nothing to show in the present case that the discretion of the Commissioner to remit the tax had been enlivened does not detract from the fact that the applicants had paid a not insignificant penalty before the Court imposed sentence.

There has been considerable debate, particularly by written submissions after the Court reserved its decision, as to the weight to be given in this case to `the penalty payment made having regard to the terms of settlement and other benefits the applicants might have received, such as by the remission of some part of their obligations under the Tax Act. Some account should be given of the history of the proceedings regarding reassessment and the settlement between the Commissioner and the applicants.
In 2001, as a result of material obtained from the execution of search warrants, the Commissioner issued amendment assessments of income-tax to the applicants and a company that they operated called On Fovo Pty Limited (On Fovo) under s 170(2)(a) of the Tax Act. The amended assessments related to the years of income ending 30 June 1993 to 30 June 1999 inclusive for Mrs Ronen and the years 30 June 1994 to 30 June 1999 inclusive for the company and the brothers. The assessments included assessments of primary tax, shortfall interest, and additional tax by way of penalty. Because the tax assessed was not paid by the due date, the company and the applicant became liable to pay the General Interest Charge (GIC) until the tax was paid. In 2001 the applicants paid part of the personal tax claimed by the Commissioner and the Commissioner accordingly reduced the rate at which GIC was levied.
Under the Tax Act penalty tax is payable under s 226G, s 226H and s226J of the Tax Act respectively at three rates:

25% when the tax shortfall is caused by lack of reasonable care.
50% when the shortfall is caused by recklessness.
75% when the shortfall is caused by intentional disregard of the law.
The present case was held to fall within the maximum rate of 75 per cent. There was a dispute between the parties about the exercise of discretion to remit the whole or part of the penalty tax payable under s 226J. I do not find it necessary to resolve this dispute for present purposes.

The Deed of Settlement sets out the amounts that it was agreed that the applicants and On Fovo would pay for primary tax, shortfall interest and penalty tax. It was agreed that, if the applicants and the company paid these amounts, the Commissioner would remit the GIC payable on post assessment amounts. There was an argument as to whether, in taking into account the amounts paid by the applicants, the Court should have regard to the remission of the GIC to offset the impact of the tax penalties. The Crown submitted that the Court should have regard to the payments of penalty tax in context of the settlement as a whole and, therefore, view the penalty paid against the amount of GIC waived. The applicants argued that the Commissioner obtained a benefit in the compromise between the parties by recovering from On Fovo and remitted the GIC for commercial reasons. Therefore, it was argued, it should not be taken into account to negate the impact of the penalties imposed. The Crown disputed that this inference could be drawn from the material before the Court. It points out that GIC has been considered as penal in nature: see Elias v Commissioner of Taxation (2002) 199 ALR 246 at [23].
Shortfall interest is payable under s 1709AA of the Tax Act and is calculated in accordance with s 214A of that Act at a rate of 4 percent points above the 13 week Treasury Note. Shortfall interest is referrable to the period up to the date of the amended assessment. GIC is payable under s 204(3) of the Tax Act and relates to the post assessment period. To some degree it would appear that the applicants have received the benefit of interest free use of funds for some period and the victim of the fraud, being the Commonwealth, has not been fully compensated for being out of funds for that period. Nevertheless, the waiver of the GIC amounts was a consensual settlement. There can be no doubt that the amount of compensation paid to the victim of the fraud was a very substantial proportion of the loss incurred and this is entitled to weight in the exercise of the sentencing discretion. The Judge gave it such weight.
The Crown submitted that the weight to be given to the payment of the additional tax by way of penalty under s 226J of the Tax Act is affected by the fact that the taxpayers were not required to pay post assessment GIC. In my view this matter goes principally to the question of the degree of compensation paid and does not detract from the fact that a very substantial penalty has been imposed upon the applicants.
It should be accepted that the parties to the settlement each saw a benefit to be derived from the terms agreed upon. No doubt the applicant’s were legitimately seeking to obtain as much benefit as they could in the sentencing proceedings on the basis of the amount of penalty tax they were required to pay under the terms of settlement. However, it is difficult to assess the relevance of this amount as an extra-curial penalty when nothing is known about the ability of the applicants to pay it. There is no real suggestion of hardship other than that Mrs Ronen sold her unit in order to meet the tax liability. However, it remains unclear how much money was sent overseas or what was done with it. The applicant’s gave no evidence on the sentencing proceedings and there was no information as to the financial position of the companies in which the applicants were involved, other than On Fovo, or what assets the applicants had either in this country or overseas. If the applicants wish the Court to take into account the full impact of the penalty tax as a matter in mitigation of the sentence to be imposed by the Court, they have an onus of demonstrating the impact of the penalty upon them. Nevertheless on any view the amount paid by way of penalty tax was a very substantial amount indeed. Although its precise impact on the financial position of the applicants is not known, its very size will serve the purpose of personal and general deterrence to some degree.
Although the approach of the Judge to the taxation penalty was in accordance with binding authority of this Court, it seems to me with respect to have been erroneous when expressed as an immutable sentencing principle. However, before determining what should be the outcome of this error, I will deal with the remaining grounds of appeal.
The accumulation of sentences
The applicants argue that the Judge erred in imposing partially cumulative sentences having regard to the fact that it was a technicality that there were two offences and not one. The Crown had always accepted that there was a single course of criminal conduct throughout the period of the offending. It was submitted that in those circumstances it was erroneous for the Judge to do other than impose completely concurrent sentences.
The Judge indicated that, according to Pearce v The Queen (1998) 194 CLR 610, “it is the duty of the sentencing court to fix an appropriate sentence for each offence and then consider questions of cumulation or concurrence, as well as questions of totality”. After indicating the sentence for each offence, the Judge said, “I have concluded that a degree of accumulation is necessary in relation to the sentences because I consider that the criminality in the second offence cannot comprehend the total of the criminality in the two offences”.
It has been made clear that, generally speaking, it is a matter for the discretion of a sentencing judge whether to make sentences concurrent or cumulative: R v Hammoud (2000) 118 A Crim R 66. But one circumstance where that discretion must be exercised against imposing concurrent sentences is where the appropriate sentence for one offence cannot comprehend or reflect the criminality involved in all offences. It was well open to the Judge to determine that in this case the sentence for either one of the offences could not reflect the criminality involved in the entire conspiracy. If there had been one offence encompassing the whole of the criminality involved in the conspiracy, the penalty for that offence ought to have been greater than that imposed by the Judge for each of the offences. In my opinion it would have been an error for the Judge to have imposed purely concurrent sentences, as that course would have required him to inappropriately inflate the sentence for one of the offences in order to comprehend the total criminality of them both.
Manifestly excessive sentence
In my opinion the sentences were not manifestly excessive having regard to the criminality involved in the applicants’ offending. In my opinion the Judge was correct to consider that the offending was within the worst category given the length of time over which the conspiracy operated, the amount of money defrauded from the Commonwealth and the manner in which the fraud was carried out. There was little mitigation due to the subjective features of the applicants having regard to the period of the offending and its systematic nature.
The only error in the sentencing Judge’s reasoning that was disadvantageous to the applicants that I can identify was the error as to the weight to be given to the payment of the taxation penalties. But in my opinion the criminality of the applicants was so great that the payment of the penalty tax, particularly in the absence of any evidence as to what it meant in real terms to the applicants, could be given limited weight having regard to the purposes of punishment for this type of offending. It has been stated time and time again and in all jurisdictions that the most important aspect of punishment in relation to frauds on the Commonwealth’s revenue is general deterrence. Although I accept that the payment of a penalty tax can have a deterrent effect, it is not usually of the same magnitude in white collar crime as that arising from the imprisonment of persons who are otherwise of good character and are well respected in the community. Further, it was particularly important in this case to denounce almost a decade of persistent, fraudulent conduct in contempt of the taxation laws and motivated by pure greed. The payment of the penalty tax could not sufficiently achieve that purpose. A heavy personal penalty in addition to the financial penalties imposed upon the applicants and On Fovo was called for in this case.
Even giving full weight to the payment of the taxation penalty I am not persuaded that any lesser sentences are warranted so serious was the offending by the applicants: see s 6(3) of the Criminal Appeal Act 1912 and R v Simpson (2001) 53 NSWLR 704. The non-parole period imposed upon Mrs Ronen adequately reflected her particular subjective circumstances and the difficulty she would face serving a sentence of imprisonment.
I would grant the applicants leave to appeal but dismiss the appeal.
The Crown appeal
The Crown relied upon two grounds of appeal as follows:
Ground 1:The sentences imposed were manifestly inadequate.
Ground 2: The level of accumulation was inadequate
Manifest inadequacy
The Crown argued that the Judge should not have taken into account the maximum penalty for the offences under the Code or what was said about the maximum penalty for the repealed offences in the Executive Memorandum. The Crown submitted that to take into account the 10 year maximum penalty for the Code offences was to act contrary to the legislature’s wishes as evidenced by the transitional provisions that preserved the maximum penalty for the repealed offences for prosecutions of those offences after their repeal. The Crown alternatively submitted that, if the Judge was entitled to take into account the legislative changes, this could only result in a “modest reduction in the sentence”.
It is unusual in my experience to find a parliament acknowledging by act or statement that a legislatively prescribed penalty was excessive for the criminality inherent in the offence to which it related. Yet that is what occurred in the present case. In the future offenders, such as the applicants, will face a maximum penalty under the Code that is half of that which applied under the Act. The Executive Memorandum contains a clear acknowledgment that the penalty under the Act was “far too high”. It is impossible in my opinion for a court, sentencing persons such as the applicants for offences under the Act, to ignore these two indications of Parliament’s change of mind as to the seriousness with which it views the kind of conduct that was committed by the applicants.
The courts have always treated the maximum penalty for an offence as a pronouncement of the policy of the legislature: R v Oliver (1980) 7 A Crim R 174 at 177. The maximum penalty reflects the seriousness of the crime in the mind of the public as given voice through parliament: R v H (1980) 3 A Crim R 53 at 65. In the joint judgment in Markarian v The Queen (2005) 79 ALJR 1048 at [30], their Honours wrote:
[30] Legislatures do not enact maximum available sentences as mere formalities. Judges need sentencing yardsticks. It is well accepted that the maximum sentence available may in some cases be a matter of great relevance. In their book Sentencing, Stockdale and Devlin. observe that:
A maximum sentence fixed by Parliament may have little relevance in a given case, either because it was fixed at a very high level in the last century … or because it has more recently been set at a high catch-all level … At other times the maximum may be highly relevant and sometimes may create real difficulties …
A change in a maximum sentence by Parliament will sometimes be helpful [where it is thought that the Parliament regarded the previous penalties as inadequate].
[31] It follows that careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick. ………………
I find it impossible, consistently with this approach, to ignore legislative acts or statements that indicate that Parliament’s view of the seriousness of particular criminal conduct, as reflected in the maximum penalty for an offence punishing that conduct, has changed. This is particularly so where the offending occurs at a time relatively proximate to the expression of the change of view. The applicants’ criminal conduct came to an end in 2001 the same year that the legislation was amended.
In my opinion the Judge was correct to take into account the change in the legislature’s attitude to this type of offending and to reduce the impact of the maximum penalty accordingly. Even though the transitional provisions retained the maximum penalty, those provisions applied to all the offences that were being repealed and not simply the offence with which the applicants had been charged. That general provision as it applied to the applicants had to be considered against the specific indications of Parliament’s change of attitude with respect to fraud offences such as those with which the applicants had been charged.
For my part I believe this to have been a very significant matter indeed and could convert a sentence that might otherwise have appeared to be manifestly inadequate as against the theoretical maximum penalty to one within the range of an available sentencing discretion having regard to the practical effect of the change of view of the seriousness of such offending expressed by Parliament both in the statement contained in the Executive Memorandum and by its action in reducing the penalties for the new fraud offences. The significance is not watered down simply because the new fraud offences were different to the offences for which the applicants were to be sentenced. They were to be in the future the offences that would protect the Commonwealth’s revenue against frauds of the nature of that committed by the applicants. The Judge was bound to take the change of legislative policy into account, not simply as a matter of fairness to the applicant, but also because it maintains consistency in the way that the courts are guided in sentencing by the legislature’s view of the seriousness of the offending expressed through the maximum penalty prescribed for an offence.
I accept that, had it not been open to the Judge to take into account the change of the legislature’s policy toward fraud offences, the sentences imposed as against a maximum penalty of imprisonment for 20 years would have been inadequate in light of the Judge’s finding that the offences fell into the worst category of their type. But it seems to me that the situation was one where the Judge was entitled to take into account that the maximum penalty prescribed was no longer an appropriate yardstick to the sentence to be imposed and had little relevance as a guide to the seriousness of the applicants’ conduct. That approach is consistent with the passage quoted from Markarian above.
In my opinion the individual sentences were within his Honour’s discretion having regard to the subjective factors taken into account by him and in light of the penalty tax paid by the applicants.
Level of accumulation
The Crown argued that, because the individual sentences were so low, it was not open to the Judge to make them partially concurrent. It was submitted that a total sentence of eight and a half years was manifestly inadequate as against the statutory maximum of 20 years.
As I have already indicated, I believe that the Crown submission oversimplifies the situation in which the Judge found himself because the maximum penalty was not a reliable guide to the legislature’s view of the seriousness of the offending and did not have the relevance it might have had but for the change in legislative policy to this type of crime. The overall sentence imposed was in my opinion within the Judge’s legitimate discretion in the unusual circumstances of this particular sentencing exercise.
I would dismiss the Crown’s appeal.
The orders I propose are as follows:
1. Leave to appeal granted but the appeal is dismissed.
2. The Crown appeal is dismissed.

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LAST UPDATED: 19/04/2006

[2006] NSWCCA 123

19 April 2006