R v Ruggiero No. Sccrm-98-233, Sccrm-98-234 Judgment No. S6989

[1998] SASC 6989

R V RUGGIERO

[1998] SASC 6989

Court of Criminal Appeal:  Cox, Prior and Olsson JJ

1 COX J.            In each of these cases I would make the following order - give the Crown leave to appeal against sentence and allow the appeal; set aside the sentence of the District Court; impose a single sentence of imprisonment for two years, with the sentence beginning when the respondent is taken into custody;  the respondent to be released after serving six months in custody upon the respondent entering into a bond in the sum of $500 to be of good behaviour for eighteen months.  I agree with the reasons of Olsson J.
2 PRIOR J.         I agree with the orders proposed by Cox J for the reasons given by Olsson J.
3 OLSSON J.     This is an application by the Director of Public Prosecutions (Cth) for leave to appeal against sentences imposed upon the two respondents, consequent upon their entry of pleas of guilty to three counts of imposition on the Commonwealth.  The respondents Assunto Ruggiero and Elena Ruggiero were each sentenced to two years imprisonment, but were released forthwith upon entry into a bond in the amount of $500 to be of good behaviour for two years.
4 In his application the Director relies on the following proposed grounds of appeal:-
.        The head sentence of two years in respect of each respondent was manifestly inadequate;

.        the orders for release of each respondent forthwith rendered each sentence manifestly inadequate;

.        the learned sentencing Judge failed to give sufficient weight to the following matters:

(a)     the gravity of the offending which occurred over three financial years and involve the omission of $880,000 gross income and the avoidance of a total of $146,000 income tax;

(b)     the difficulty in detecting frauds of this type; and

(c)     the primary importance of general deterrence.

.        The learned sentencing Judge erred in law in imposing one sentence in respect of three offences rather than three separate sentences.

5 It should, at once, be noted that the last ground is foreclosed by the judgment of the Court of Criminal Appeal in R v Jackson [1998] SASC 6932. It is therefore unnecessary to return to it.
6 The information to which the respondents pleaded charged each count against Ruggiero Catering Service Proprietary Limited as the principal offender and the two respondents as persons who allegedly aided, abetted, counselled, or procured the offences in question.  In essence, the counts allege the same type of offending in respect of successive periods of time and in relation to differing sums of money.
7 Count one relates to the period from 1 July 1989 to 29 March 1991.  It asserts that the company imposed on the Commissioner of Taxation by making an untrue representation in an income tax return for the financial year 1989/1990 that the gross income of that company was $462,256 when, in fact, it was about $682,395.  It was alleged that the untrue representation was made with a view to obtaining a benefit, namely a lower tax assessment.
8 Count two concerns the period from 1 July 1990 to 3 April 1992.  It arises from an income tax return for the financial year 1990/1991 and asserts that it was represented that the gross income of the company was $451,826, when in fact it was about $745,310.
9 The final count concerns the period from 1 July 1991 to 16 April 1993.  The representation related to the income tax return for the financial year 1991/1992.  The company claimed that the gross income was $479,312 when in fact it was about $853,172.
10 The Director tendered a fairly full prosecution statement of relevant facts to the learned sentencing Judge.  The latter also had before him a bundle of supporting documentation, including copies of certain tax audit reports.
11 It will suffice, for present purposes, to give the following summary of relevant facts.
12 The above named Company at all material times operated and still operates a business known as the Ruggiero Reception Centre at Hendon.  The relevant land and the building upon which the reception Centre is located is owned by Ruggiero Nominees Proprietary Limited, as trustee for the Ruggiero Trust.  At all material times the directors and shareholders of the principal offender and of Ruggiero Nominees Proprietary Limited were the present respondents.
13 The reception Centre opened in about 1979 and catered for wedding receptions, conventions and other social functions.
14 According to information supplied by the respondents to tax auditors it was quite common for the business to operate on verbal agreements with clients without any written contracts and to receive quite substantial payments in cash (either by way of deposit or final payment in full), there being no questions asked concerning the source of such monies and, I infer, no receipt being issued.  Much of the cash so received was expended by the respondents in making cash purchases for the business;  and not all of the residue was banked.  No entries were made in the books of the business in relation to such purchases or any residue not banked.
15 The Australian Taxation Office conducted a series of audits of the principal offender commencing in October 1983.  In the course of each of these taxation auditors interviewed the respondents.
16 In the case of the 1983 audit the respondents, in the presence of their taxation agent, informed the auditor that the principal offender had four full-time employees.  These comprised themselves and their two children.  They admitted that they had periodically employed some casual staff, who were paid in cash; and that no records were maintained, nor taxation instalments retained, in relation to such employees.  They were informed by the taxation auditor, at that time, that this was a contravention of the legislation.  They agreed to rectify the situation for the future.  In the course of interview the respondents stated, unequivocally, that income was always banked intact and gross banking was shown as income (that is, without cash being taken out before banking).  It is to be borne in mind that notes made by the auditor during that audit were shown to and signed by the respondent Assunto Ruggiero.
17 In October 1990 the Australian Taxation Office inspected the records of the principal offender.  The auditor noted that such records indicated that the only employees of the business were the respondents, their two children and their daughter’s husband.
18 The Australian Taxation Office re-visited the situation in 1991.  An examination of the principal offender’s records at that time revealed that the total remuneration for directors shareholders and associates for each financial year up to that point was identical to the total wages paid by the company.  The records did not disclose any group certificates being issued, or wages paid, to employees other than the five persons above referred to.
19 This situation triggered off a wider investigation, in relation to which the Australian Federal Police were involved.  The reception Centre premises were kept under observation during the period from early December 1991 to 30 June 1992.  It was established that many more staff, in addition to the five persons referred to, worked at the reception Centre.
20 The taxation returns of the principal offender for the 1992 year were lodged in late April 1993.  These asserted that the only employees paid by the principal offender were the five persons already referred to.  No casual employees were listed in the company records.
21 On 19 January 1993 a series of search warrants were executed on premises of the Ruggiero family and that of their taxation agent.  A large number of records and documents concerning the operation of the reception Centre were seized.  This was followed by a detailed investigation in respect of the financial years the subject of the three counts.  In the course of it interviews were conducted with a very large number of people who had held functions at the reception Centre, all of which were catered for by the respondents using their own staff.  A significant number of interviews were also conducted with casual staff employed at the reception Centre.  It appeared that these persons were employed by the respondents and paid in cash at the end of the night.  No employment declarations were completed, no tax instalments were deducted and no group certificates were issued.
22 A calculation was made by the Australian Taxation Office of the total income actually received from functions, from which it was then possible to calculate omitted income and unpaid tax.  This led to the charges as summarized above.  In the result it was calculated that each of the two respondents had, themselves, under paid tax to the extent of $62,871.
23 It is to be noted that, during the three year period under review, a total of about $1,049,195 was received by the principal offender in cash, of which only about 14 percent was banked.  At times significant amounts of cash were received over a period of several months, none of which were banked.  It was emphasized by the Director to the learned sentencing Judge that, at all material times, the respondents were active parties in the irregularities referred to and that they deliberately gave false information to departmental auditors.  They themselves signed false taxation returns on behalf of the principal offender.
24 In the course of his sentencing remarks the learned sentencing Judge had this to say:-
"For some time now, through your solicitors, you have been engaged in negotiations with the Commissioner of Taxation as to the amount of tax and penalties due by you for the three years the subject of the charges against you and for the year ended 30 June 1993 as well.  The amount of tax, including penalties, which it is agreed will be paid by the company and you for those four years is $522,000; to be paid by an initial payment of $200,000 and, after that, at a rate of $5,925 each month until the full amount has been paid.

So that these payments can be made, it is necessary that the business continue to operate.  Although you have the assistance of members of your family to run the business, it is my understanding that you are an integral part of the business, and it could not operate, or operate effectively, without you.  As best I can tell, the only other way he you could pay the money due would be to close down the business and realise assets; a not altogether attractive proposition."

25 The learned sentencing Judge accepted submissions to the effect that, with the assistance of their solicitors, the respondents have put the affairs of the business in order and that the days of conducting a cash type business have been over for some time.  He was also prepared to accept that, when the respondents commenced the business, they did not get involved in a cash operation with a specific view to understating income for taxation purposes.  Rather, what happened was that, because their customers largely paid in cash, an opportunity presented itself for them to understate the income of the business and so avoid the payment of tax.  They succumbed to the temptation to do this.  He pointed out that they had participated in and made it easy for others to participate in the so-called "black economy".  That economy, he said, is a burden on the economy of Australia.  It is also difficult and expensive to detect.
26 In imposing sentence the learned sentencing Judge took into account the respondents’ pleas of guilty, notwithstanding that they did not come as early as they might have.  On the other hand he noted that they had originally been charged with more serious offences;  and that their pleas, which had ultimately been accepted by the prosecution, had been the result of negotiations.  He was prepared to accept that the ultimate pleas were an indication that the respondents regretted their conduct and involvement in the offences.  He also noted that the pleas had saved the community of the expense of a long trial.
27 As to the personal situation of the two respondents the learned sentencing Judge had this to say:-
"You are both now over 60.  Assunto, you are 63 and Elena you are 61.  You both came to this country from Italy as young people.  You were poor.  You had no formal education.  You are unable to read and write English.  I accept that this contributed to the poor record keeping of the business.  You married in 1959 and there are two children of the marriage both of whom are associated, in one way or another, with the business.  When you came to this country, you worked hard to establish yourself and you have continued to work hard.  The establishment of the business and its development has been due to your hard work.  Since the police investigation began and you were charged with these offences, there has been a downturn in the business because of rumour and speculation about your future and the future of the business.

Evidence has been given as to your previous good character and I take that into account; however such evidence should be discounted to some extent, because of the period over which the offending occurred: when you were thought to be of good character, you were actually in the process of offending.

You have no previous convictions.  Since these offences came to light, you have gone about rehabilitating yourselves and I think it is unlikely that you will offend in this or any other way again."

28 So it was that the learned sentencing Judge imposed the sentences earlier referred to.
29 It is in respect of those sentences that the Director now seeks leave to appeal.
30 It is trite to say that leave to appeal of the type here sought ought only to be given in rare and exceptional cases - to correct a manifest inadequacy of sentence or patent departure from sentencing standards which constitutes a plain error in point of principle (Everett v The Queen (1994) 181 CLR 295 at 300).
31 It is not an undue simplification of the Director’s submissions to say that he contends that -
(1)  taxation imposition cases ought not to be treated any differently from general Social Security imposition situations;

(2)  in each of these situations the factors of both personal and general deterrence are very important considerations;

(3)  in absence of exceptional circumstances a person convicted of sustained Social Security imposition involving deliberate fraud would normally be sentenced to a period of imprisonment and actually be required to serve some portion of it;

(4)  the sentence imposed in the instant case was unduly lenient, given the deliberate nature of the offending, the period of time over which it extended and the substantial sums of tax evaded; and

(5) there is a need to establish an appropriate standard of punishment for tax offences under s29B of the Crimes Act 1914.

32 In the course of his submissions, Mr Rice, of counsel for the Director, argued that there is no material difference between wrongfully obtaining payments of social security benefits to which a payee is not entitled, on the one hand, and failing to disclose income and pay appropriate income tax, on the other. As he put the proposition, one is depleting the revenue to the detriment of potential beneficiaries lawfully entitled, whilst the other is failing to contribute to the revenue in a manner which operates to the prejudice of other members of society. So it is that the reasoning in authorities such as R v Cameron and Simounds (1993) 171 LSJS 305, Fischer v Director of Public Prosecutions (1995) 183 LSJS 234 and Laxton v Justice (1985) 38 SASR 376 is apposite to taxation impositions.
33 From that point he argued that, on the facts before the learned sentencing Judge, it could not be said that there were any circumstances which could warrant the grant of leniency which was actually afforded to the respondents.  This was the more so as the offending was inherently serious.  It was deliberate and sustained and the product of greed rather than need.
34 Mr Rice sought to impeach both the quantum of the head sentence and also the suspension of it. Indeed, he argued, in his outline, that, because the three offences were quite separate and arose in respect of successive financial years, three separate, cumulative sentences of imprisonment ought to have been ordered. A single head sentence of two years’ imprisonment was inadequate to mark the inherent seriousness of the respondent’s conduct. Its suspension was simply not warranted. This sentencing package was, he said, out of step with national norms indicated by dicta in cases such as Morris (1992) 61 A Crim R 233, Director of Public Prosecution v Whitnall (1993) 68 A Crim R 119 and Wright (1994) 74 A Crim R 152.
35 In general terms I agree with the submission that there is little reason to differentiate, in principle, between taxation imposition offences and those related to Social Security cases.  In both scenarios there is a direct impact upon the revenue; the offences are difficult to detect; and the imposition has the practical effect of shifting undue financial burden on taxpayers at large.  Indeed, in relation to taxation matters there is a further consideration.  Whilst Social Security compliance investigation activities deflect resources from other, more productive areas, taxation compliance investigations are, in general, notoriously expensive to the community, as this very case illustrates.
36 In so concluding I by no means ignore the point made by Mrs Shaw QC, of senior counsel, for the respondent. Intent to defraud is not an element of the offence enacted by s29B of the Crimes Act 1914. None-the-less offences of the nature of these here under consideration are essentially offences of dishonesty, just as is the case of Social Security offences. It is for that reason that the Court of Appeal generically referred to them as cases involving serious fraud on the revenue in Director of Public Prosecutions v Wright (1994) 74 A Crim R 152 ("Wright").
37 It seems to me that the considerations discussed in the authorities related to Social Security cases are certainly no less apposite to taxation imposition situations. Considerations of both personal and general deterrence must necessarily loom large as considerations in the sentencing process. Absent substantial mitigating circumstances, actual service of a custodial sentence must be seen as a norm in cases involving deliberate and sustained evasion of taxation, especially when an offence is motivated by greed rather than need. This was the view expressed in Wright (supra) and I consider it compelling. The fact that an offender has no relevant antecedent history will, usually, not serve to avoid such a result. Good character will have been lost where there has been a sustained offending over a significant period of time (R v Schneider (1988) 37 A Crim R 395 at 397, R v Venn (1988) 164 CLR 465).
38 I do not, however, agree with the submission made by Mr Rice in his outline that the separate offences in this case mandated imposition of separate sentences in respect of the three charges against the respondents.  Key purposes of the power to impose a single sentence in such cases as this were considerations of administrative convenience and the creation of a sentencing regime in which due allowance could be made for the recognition of the totality principle without having to resort to artificial "juggling" with individual sentences in an artificial manner, to achieve the same result.
39 There was nothing improper, in the instant case, with the imposition of a single sentence, provided that the ultimate result was one which adequately reflected the various (and, to some extent,) conflicting considerations to be taken into account.
40 The real issue in this matter is whether it can fairly be said that the sentence imposed was the product of some error which has led to the consequence that proper sentencing standards have not been adhered to; there has been some idiosyncratic approach to sentencing; or the sentence imposed is so disproportionate to the seriousness of the offending as to shock the public conscience (R v Mangelsdorf & Ors (1995) 66 SASR 60, R v Osenkowski (1982) 30 SASR 212).

41 It seems to me that an issue of principle which arises is as to whether the learned sentencing Judge ought to have taken into account, as an issue bearing on whether no part of any custodial sentence ought to be served, the question of the likely impact on the profitability of the catering business, if the respondents were required to serve that sentence.  This is particularly so when, in full knowledge of the possible impact on capacity to make timely restitution, the Director strongly opposed any discharge forthwith in relation to the sentence imposed.
42 There can be little doubt that the potential impact of any sentence on the business and its capacity to fund restitution played a significant part in the reasoning of the learned sentencing Judge.
43 There are clear dicta in Director of Public Prosecutions v Whitnall (1993) 68 A Crim R 119 (albeit that this related to a prosecution pursuant to s29D of the Crimes Act 1914) to the effect that this type of consideration can validly be taken into account in the sentencing process (see, for example, Higgins J at p122). I am not persuaded that we should dissent from that point of view.
44 It is to be noted that, in Whitnall (supra) relied on by the Director (and also the case of Carter (1997) 91 A Crim R 222, which was also a s29D case), Courts of Appeal were not prepared to interfere with the exercise of a discretion invoking a release forthwith, despite the fact that the Director advanced arguments not dissimilar to those put to this Court. However, it is fair to say that each of those cases exhibited some features different from these now under consideration.
45 In the instant case there is no suggestion that the offences were essentially the product of ineptitude on the part of the respondents, or that they were, in some manner, misled by professional or other advice given to them.  The plain fact of the matter is that, as I have pointed out, they succumbed to temptation on the basis of greed and knowingly and deliberately embarked on a scheme to evade their proper tax liability to the extent of very considerable sums of money over a long period of time.  There is no suggestion that they did not appreciate that what they were doing was wrong and, notwithstanding what was said to them by tax auditors on the initial audit, they wilfully persisted in their unlawful conduct.  This was a clear circumstance of aggravation.
46 Whilst their subsequent actions to regularise the mode of conduct of their business and to organise progressive restitution are mitigatory matters to be taken into account in relation to the offences, along with their lack of prior antecedents and eventual pleas, nevertheless these were very serious offences of this type.  Indeed, the steps taken by the respondents were as much borne of necessity as they constituted any evidence of rehabilitation.
47 Whilst I accept that a requirement actually to serve a specified period of a custodial sentence before release will no doubt have an adverse effect on their business, the other side of the coin is that an immediate release in a situation such as this sends entirely the wrong message to other persons who may be tempted to evade their due tax liability.
48 Mrs Shaw QC sought to draw a distinction between the present case and those in which elaborate schemes of deception are embarked on.  There was, she said, no relevant scheme here involved.
49 True it is that the inclusion of a sophisticated and elaborate scheme must be seen as a circumstance of aggravation.  However, it is not correct to say that no scheme existed in this case.  There clearly was one.  Its effectiveness lay in its simplicity.
50 Whilst I consider that the head sentences imposed were too modest, bearing in mind the gravity of the offending, nevertheless, I am unable to say that they were so outside a proper exercise of discretion as to have departed from proper sentencing standards.  On the other hand, it seems to me that, given the circumstances of the offences, not to require any portion of those sentences actually to be served constituted a manifest departure from proper sentencing standards which plainly requires the intervention of this Court.  It is one which, quite properly, would attract community outrage and constitute a most undesirable signal to other like minded persons.  I would therefore give leave to the Director to prosecute the appeal.
51 Whilst I would not alter the head sentences imposed, in my view orders for release forthwith simply cannot be justified.  They are manifestly so disproportionate to the seriousness of the offending as to demand correction.  At least some modest period must be served in recognition of the inherent gravity of the offences and the blatant persistence of the respondents in their criminal activity over a lengthy period of time, despite the initial discussions which they had with the taxation auditor.  After giving due recognition of the factors of mitigation personal to them identified by the learned sentencing Judge and the fact that it is unlikely that they will re-offend, I would set aside the orders made and, in lieu, order that they each be released after serving six months in custody, upon entry into a bond of the nature of that directed by the learned sentencing judge.